Document:

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                                                                   EXHIBIT 10.16

                                AGREEMENT BETWEEN
                                SIMMONS COMPANY,
                          LOS ANGELES, CALIFORNIA PLANT

                                       AND

                 UNITED STEEL WORKERS OF AMERICA,
                                 AFL, CIO, CLC

                     OCTOBER 16, 2001 UNTIL OCTOBER 15, 2005

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                                      INDEX
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ARTICLE           TITLE                                                                                       PAGE
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    I             RECOGNITION AND UNION SECURITY..........................................................      7
                  Employees Covered.......................................................................      7
                  Union Security..........................................................................      7
                  Check-Off...............................................................................      8

    II            DISCIPLINARY PROCEDURE..................................................................      9
                  Just Cause..............................................................................      9
                  Interview and Hearing...................................................................      9
                  Good Faith Duties.......................................................................     10
                  Correction of Offense...................................................................     10
                  Disciplinary Policy.....................................................................     10

    III           GRIEVANCE PROCEDURE AND ARBITRATION.....................................................     10
                  Grievance Procedure.....................................................................     10
                  Grievances - Step 1.....................................................................     11
                  Grievances - Step 2.....................................................................     11
                  Grievances - Step 3.....................................................................     11
                  Resolution by Default...................................................................     11
                  Shop Steward Time.......................................................................     11
                  Arbitration of Disputes.................................................................     12
                  Selection of Arbitrators................................................................     12
                  Authority of Arbitrator.................................................................     12
                  Expedited Arbitration...................................................................     13

    IV            HOURS OF WORK AND PREMIUM PAY...........................................................     13
                  Work Week...............................................................................     13
                  Overtime Hours..........................................................................     13
                  Saturday and Sunday Work................................................................     14
                  Availability for Scheduled Work.........................................................     14
                  No Pyramiding...........................................................................     15
                  Shift Premiums..........................................................................     15
                  Reporting Pay...........................................................................     15
                  Shift Change............................................................................     15
                  Temporary Employees.....................................................................     15

    V             NO STRIKE - NO LOCKOUT..................................................................     15

    VI            MANAGEMENT RIGHTS CLAUSE................................................................     15
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ARTICLE           TITLE                                                                                       PAGE
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    VII           SENIORITY...............................................................................     16
                  Accumulation of Seniority...............................................................     16
                  Termination of Seniority................................................................     16
                  Work Share Hours........................................................................     17
                  Furlough................................................................................     17
                  Recall From Furlough....................................................................     17
                  Layoffs.................................................................................     17
                  Job Bidding ............................................................................     18
                  Promotions Outside Bargaining Unit .....................................................     19
                  Seniority Accumulation During Leave of Absence..........................................     19
                  Overtime Procedures.....................................................................     19
                  Steward Seniority.......................................................................     19
                  Surplus Labor List......................................................................     19
                  Recall..................................................................................     19
                  Notice of Recall........................................................................     20
                  Change of Address.......................................................................     20
                  Probationary Period.....................................................................     20
                  War Emergency...........................................................................     20
                  Seniority Bonus.........................................................................     20
                  Severance Notice........................................................................     20
                  Inventory...............................................................................     21

    VIII          WAGES...................................................................................     21
                  Wage Agreement..........................................................................     21
                  Incentive Compensation Plans............................................................     21
                  Work Wait...............................................................................     21
                  Incentive Pay Computation...............................................................     21
                  Hiring Rate.............................................................................     22
                  Incentive Employee Progression and Training.............................................     22
                  General Wage Increases..................................................................     22
                  Reactivation of Old Classifications.....................................................     23
                  Establishment of New Classifications....................................................     23
                  Rate of Borrowed Man....................................................................     23
                  Average Rate Computation................................................................     23
                  Injured During Work.....................................................................     24
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    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
                  Holiday Pay or Sick Leave...............................................................     29
                  Pay For Holidays Worked.................................................................     29
                  Holidays on Saturday....................................................................     29
                  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
                  Scheduling..............................................................................     31
                  Plant Shutdown and Staggered Vacation...................................................     31
                  Eligibility.............................................................................     31
                  Scheduling of Staggered Vacations.......................................................     31
                  No Accumulation.........................................................................     32
                  Shift Premium...........................................................................     32

    XII           LEAVE OF ABSENCE .......................................................................     32
                  Purpose.................................................................................     32
                  Leave for UNION Business................................................................     32

    XIII          REST PERIODS............................................................................     32

    XIV           UIU PENSION TRUST.......................................................................     33
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ARTICLE           TITLE                                                                                       PAGE
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    XV            HEALTH AND WELFARE FUND.................................................................      34
                  Benefit Plan(s).........................................................................      34
                  Contribution Rates......................................................................      34
                  Eligibility.............................................................................      35
                  Employee Contributions..................................................................      35
                  Life Insurance..........................................................................      35
                  Payment of Contributions................................................................      35
                  Coverage................................................................................      35
                  Election of Category of Coverage and Right to Change....................................      36
                  Requirements............................................................................      36
                  Hold Harmless...........................................................................      36
                  Reinstatement of Coverage...............................................................      36
                  Part Time Employees.....................................................................      36
                  Availability of Benefits................................................................      37

    XVI           JURY SERVICE............................................................................      37

    XVII          BEREAVEMENT PAY.........................................................................      37
                  Definition..............................................................................      37
                  Payment.................................................................................      37

    XVIII         BULLETIN BOARDS.........................................................................      37
                  Bulletin Boards.........................................................................      37
                  Posting of Notices......................................................................      38

    XIX           MILITARY CLAUSE.........................................................................      38

    XX            PICKET LINE CLAUSE......................................................................      38

    XXI           EMPLOYEE BIRTHDAY PAY...................................................................      38

    XXII          GENERAL CONDITIONS .....................................................................      39
                  Business Representative.................................................................      39
                  Stewards................................................................................      39

    XXIII         EQUAL EMPLOYMENT OPPORTUNITY............................................................      39

    XXIV          SAVING CLAUSE...........................................................................      39
                  Separability............................................................................      39
                  Federal and State Laws..................................................................      39
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ARTICLE           TITLE                                                                                       PAGE
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    XXV           SEVERANCE AND PLANT CLOSINGS............................................................     40

    XXVI          CONTRACT RE-OPENER  ....................................................................     40

    XXVI          DURATION AND TERMINATION OF AGREEMENT...................................................     41
                  Effective Dates.........................................................................     41
                  Entire Agreement........................................................................     41
                  Modification or Termination ............................................................     41

                  SIGNATURES..............................................................................     42

                  APPENDIX "A"............................................................................     43

                  APPENDIX "B"............................................................................     44

                  PAY PLUS BONUS ADDENDUM.................................................................     48

                  APPENDIX "C"............................................................................     58
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                                    AGREEMENT

This Agreement, made this 25th day of October, 2001 by and between Simmons
COMPANY, Los Angeles, California (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 No. 515U, for and on behalf of itself and the
employees of said COMPANY at its plant located at Los Angeles, California.

                                   WITNESSETH

NOW, THEREFORE, in consideration of the promises and of mutual covenants and
Articles 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 COMPANY hereby recognizes the UNION as the sole
         and exclusive collective bargaining agent for all the COMPANY employees
         employed by it in connection with its operations in the Los Angeles,
         California plant covered by this Working Agreement. This excludes
         executives, sales employees, office workers and supervisors.

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.

     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

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          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 concurrence 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
          7.16 of this Agreement.

     F.   Whenever the COMPANY requires additional employees, it will notify the
          UNION, and the UNION agrees that it will use its best efforts to find
          skilled candidates. Such notice does not preclude the COMPANY from
          securing employees from other sources and the COMPANY may select
          employees without discrimination as to UNION or non-UNION status,
          race, color, religion, national origin, gender, age or disability.

     G.   After new employees are hired, the COMPANY agrees to provide to the
          UNION the employee's name, address, date of birth, social security
          number, date of hire, rate of pay, classification assignment, and
          clock number.

     H.   Whenever employees are transferred, granted a leave of absence,
          terminated, rehired or quit, such information will be made available
          to the UNION.

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

     J.   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

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          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.

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 a shop steward or an officer of the
          UNION must represent him.

          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.

          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 and
          provided further that once thirty (30) calendar days lapse following
          the discharge, the action of the COMPANY shall be deemed final and
          there shall be no further appeal by either the UNION or the employee.

          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.

          In the event an employee is disciplined, suspended or discharged, such
          action shall be subject to the grievance and arbitration procedure as
          provided in Article III of this Agreement. In exchange for the thirty
          (30) calendar day period described above, it is

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         agreed that the COMPANY shall not be liable for any retroactivity,
         should the employee be subsequently reinstated.

2.03     GOOD FAITH DUTIES. No employee acting in the capacity of a UNION
         officer, UNION representative, Shop Steward, Department Steward or Shop
         Committee member shall be disciplined for carrying out in good faith
         his duties under the provisions of this Agreement or as permitted by
         applicable law provided those duties do not interfere with normal
         business operations, except in matters which require immediate
         attention, under the provisions of this Agreement or as permitted by
         applicable law. The UNION agrees to notify the COMPANY in writing when
         it designates stewards and shop committee members.

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. SIMMONS 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 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 should 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)
         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

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         endanger his 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 3.01(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
         designated UNION representative. The designated UNION representative
         shall present the grievance form to the HR Manager or their designee
         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 HR Manager or
         their designee has three (3) workdays 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) workdays 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. 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 workdays exclusive of Saturdays,
         Sundays, and holidays recognized by this Agreement.

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3.06     SHOP STEWARD TIME. The COMPANY will only pay for lost time of any shop
         steward or shop committee when the COMPANY calls such persons to a
         conference during working hours.

3.07     ARBITRATION OF DISPUTES. If the grievance is subject to arbitration as
         provided herein and all conditions 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.

3.08     SELECTION OF ARBITRATORS. (Please see Pay Plus Bonus Addendum dated
         10-14-98) Within ten (10) calendar days after the UNION files its
         written request for arbitration pursuant to Section 3.07 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 that 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 8.12, 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.

3.09     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.

         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 that is not expressly made subject to
         arbitration by the terms of this Agreement. No decision of the
         arbitrator shall require the

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         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.

3.10     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 through
         Friday inclusive, shall constitute a week's work.

4.02     OVERTIME HOURS.

    A.   Authorized time worked in excess of forty (40) hours in one (1) week or
         eight (8) hours in one (1) day, 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 8.14
         reflecting the earnings for the week in which the overtime is worked.
         This paragraph will not prevent payment of double time wherever such
         payment is specified. Any exception to the above shall only be upon
         mutual agreement between the COMPANY and the UNION.

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    B.   Anyone reporting to work after his or her 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 on
         Sunday and continuing into Monday. Sunday is defined as the 24-hour
         period starting midnight Saturday through midnight 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.  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 months defined below. In
         those five (5) months, employees will 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.  If overtime is required to meet the shipment requirements and
         sufficient volunteers will not stay, the COMPANY can require overtime
         starting with the least senior person who is qualified and working up
         in seniority until the required number of people is reached. Overtime
         preference is determined by seniority within classification and
         department. Employees who have a valid reason shall be excused by the
         COMPANY from working regular or overtime work at any particular time.

     C.  When employees are required for overtime work outside their regular
         classification, such overtime will be offered to senior qualified
         employees in the department involved. Should qualified employees not
         be available in the department, then insofar as possible, senior
         qualified employees in the plant will be utilized in the assignment of
         such overtime.

     D.  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.

     E.  If a holiday falls on Friday then Saturday work shall be performed by
         volunteers.

                                       14
<PAGE>

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

4.07     REPORTING PAY. When an employee reports for work at the regular
         starting time of his shift without previous notice not to report and
         his regular work is not available, he will receive a minimum of three
         (3) hours work or pay at the base rate of the job he is assigned,
         provided, however, at the COMPANY'S option, he may be assigned to
         another classification for any portion of said three (3) hours. The
         COMPANY shall have no liability regarding the above paragraph, in the
         event of a breakdown of power outside of the plant, act of public
         enemy or because of conditions beyond the control of the COMPANY.

4.08     SHIFT CHANGE. Based upon seniority, an employee is allowed to change
         shifts four (4) times within the contract year on the following dates:
         January 1, April 1, July 1 and October 1.

4.09     TEMPORARY EMPLOYEES. The COMPANY may utilize up to ten (10) temporary
         employees (temps) for four (4) months. No benefits, pension, holidays
         or vacation will be paid. At the time the COMPANY determines that the
         position is full-time or at the end of four (4) months (whichever
         comes first), the job will be filled in accordance with the contract.

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.

The UNION recognizes the rights and responsibilities belonging solely to the
COMPANY prominent among which, but by no means wholly inclusive, are the rights
to hire, direct, promote, discharge, or discipline for cause and to maintain
discipline and efficiency of employees, to decide the products to be
manufactured, the location of plants, the schedule of

                                       15
<PAGE>

production, the methods, processes, and means of manufacturing and the control
and selection of raw materials, semi-manufactured, and finished parts which may
be incorporated into the products manufactured. Such authority will not be used
for the purpose of discriminating against any employee nor will it be applied in
manner inconsistent with any of the other provisions of this contract.

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 7.16 and
                  the leave request must be in writing.

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

         A.       When an employee resigns,

         B.       When an employee is discharged for just cause,

         C.       When an employee is laid off longer than twelve (12) months,
                  except for right of recall,

         D.       When an employee's absence due to disability or illness
                  exceeds five (5) years,

                                       16
<PAGE>

         E.       When an employee is recalled to work and does not return to
                  work as provided in Section 7.13,

         F.       If an employee falsifies any information given in connection
                  with a leave of absence,

         G.       When an employee obtains other employment while on an approved
                  leave of absence,

         H.       For failure to progress in learning within reasonable time
                  limits set by the COMPANY,

         I.       Employees shall not have their seniority breached if they are
                  absent due to any injury on the job and shall upon return be
                  reinstated with full seniority rights provided they are
                  physically capable of satisfactorily performing available
                  work.

7.03     WORK SHARE HOURS. In the event of a one (1) day shortage of work, the
         available hours of work will be shared between the first and second
         shifts. This can occur no more than four (4) times within the contract
         year. After four (4) work shares, a senior employee may change shifts
         but must remain on that shift until their quarterly shift change
         (Article 4.08).

7.04     FURLOUGH. If a shortage of work extends beyond one (1) day employees
         are furloughed by classification, department, and shift for up to six
         (6) weeks. Senior employees are given the right of refusal for a
         furlough, however, if they change shifts they must remain on that shift
         until their quarterly shift change (Article 4.10).

7.05     RECALL FROM FURLOUGH. If recalled from a voluntary furlough an employee
         has five (5) days to return to work. If recalled from an involuntary
         furlough an employee has three (3) days to return to work.

7.06     LAYOFFS.

     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 7.06.

     B.   When decreases in the working force become necessary for a period of
          time longer than six (6) weeks, they should be made on the basis of
          seniority by classification within department. Material Handler
          decreases will be made on the basis of plant-wide seniority. All
          decreases to be effected by applying the following factors:

                  1.       Length of service
                  2.       Training, skill and physical ability

                                       17
<PAGE>

         Length of continuous service as pertaining to employees with more than
         six (6) months seniority shall govern where as between two (2) or more
         employees, the factors in item 2 above are relatively equal. Laid off
         employees who have seniority rights will be recalled in accordance with
         their job experience and seniority before new employees are hired.
         Preference shall be given to employees who are laid off because of a
         lack of work before hiring new employees, provided such laid off
         employees are capable of performing the available work, except as
         provided in Section 7.14.

         Before an employee with more than six (6) months seniority is laid off,
         the COMPANY will make every reasonable effort to transfer him/her to
         another job if there is such a job open and available and the employee
         is qualified to do the work.

7.07     JOB BIDDING. (Please see Pay Plus Bonus Addendum dated 10-14-98) The
         COMPANY will provide an opportunity for qualified employees seeking
         promotion to higher rated incentive classifications by posting open
         jobs for bid for a twenty-four (24) hour period. Posted jobs may be bid
         on only within the department in which the opening occurs. If there is
         no bid in the department, bidding will be open to qualified employees
         from any other departments of the plant. The job bidding procedure will
         be as follows:

         A.       In order for an employee to be eligible to bid for a posted
                  opening the employee must:

                  1.       Have been on the active payroll for a period of nine
                           (9) months preceding the date of bid,

                  2.       Have not been awarded a job by means of successful
                           bidding for a period of nine (9) months preceding
                           date of bid,

                  3.       Be actively working at the time the job bid is
                           posted.

         B.       Posted bid job will be awarded to the most qualified eligible
                  bidder with the most seniority.

         C.       1.       Any employee who is a successful  bidder will be
                           reclassified in accordance with the job he/she bid
                           for and will be paid the Labor Grade Rate for such
                           classification.

                  2.       The successful bidder will be allowed the established
                           learner's time for that particular classification.
                           If, at the completion of the established learner's
                           time, the employee's earnings are not exceeding the
                           Labor Grade Rate, he/she will be returned to his/her
                           original job.

                  3.       When openings occur in the following classifications,
                           bidding will be open only to those employees of
                           proven mechanical aptitude and excellent attendance
                           records:

                           a.       Pocket Machine Operators

                                       18
<PAGE>

                           b.       Closers

                  4.       The COMPANY reserves the right to hire at any time
                           qualified candidates from outside sources for the
                           closing and pocket machine operations

         D.       Incentive employees with a combined age and years of service
                  equal to or in excess of 75 will be considered for hourly
                  non-incentive job openings. The incentive employee must have
                  worked for at least 12 years in an incentive classification to
                  be eligible for a job change. If the position were filled in
                  this manner the incentive employee would transfer to the
                  hourly job once a replacement is trained in the incentive
                  position. If an eligible incentive employee does not fill the
                  hourly job the COMPANY reserves the right to hire hourly
                  employees in the manner they choose. The job change of a
                  senior incentive employee would not result in the transfer of
                  another senior employee within the same occurrence. The senior
                  employee would be expected to work in the hourly position with
                  equal or greater effort.

7.08     PROMOTIONS OUTSIDE BARGAINING UNIT. In the event that an employee
         covered by this Agreement is promoted to a position outside of the
         bargaining unit, and such employee is subsequently transferred back
         into his/her classification within the bargaining unit, he/she shall be
         credited with the amount of seniority that he/she had acquired before
         his/her transfer. He/she shall not be eligible to replace any employee
         other than the one with the least seniority in the department to which
         he/she returned.

         After an employee has been transferred out of the bargaining unit for a
         period in excess of six (6) months, he shall not have any seniority
         rights under Article VII, unless the COMPANY and the UNION in writing
         mutually agree to such.

7.09     SENIORITY ACCUMULATION DURING LEAVE OF ABSENCE. Leaves of absence
         granted in accordance with the terms of this Agreement, unless herein
         otherwise specifically provided, shall be considered as service for
         seniority purposes.

7.10     OVERTIME PREFERENCE. Senior employees will be given preference on
         available overtime in their particular job assignment. However, if only
         one shift is needed for production on Saturday then the first shift
         employees will work.

7.11     STEWARD SENIORITY. The Chief Shop Steward shall have top seniority
         during his term of office provided this employee has at least one (1)
         year of service with the COMPANY.

7.12     SURPLUS LABOR LIST. Any employee laid off for lack of work shall have
         his/her name placed on a surplus labor list. If an employee's seniority
         has been broken, his/her name shall be removed from such list.

7.13     RECALL. If an employee is laid off longer than twelve (12) months,
         he/she shall have recall rights for an additional six (6) months period
         without loss of seniority. This additional six

                                       19
<PAGE>

         (6) months grace period for recall purposes only may not be extended
         for any other purpose and shall not be credited toward accumulation of
         seniority.

7.14     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.

7.15     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. Employees will provide the COMPANY
         with a current telephone number where they may be reached as well as
         any new telephone number should a change occur. Failure to provide a
         telephone number will not result in a loss of rights described in this
         Article 7.

7.16     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, all 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.

7.17     WAR EMERGENCY. In the event of a war emergency, the parties agree to
         discuss revision of the seniority provisions of this Agreement for the
         purpose of providing for such revision as may be necessary because of
         the employment conditions then existing.

7.18     SENIORITY BONUS. All employees with eighteen (18) years or more of
         continuous seniority will be granted a seniority bonus of one (1)
         week's pay either at Christmas or at the time of their vacation, as the
         employee chooses.

7.19     SEVERANCE NOTICE. Employees who have been employed with the COMPANY one
         (1) year or longer and who are dismissed from employment as a result of
         discontinuance of business or as a result of permanent reduction in
         production, shall be entitled to one (1) week notice of discontinuance
         of employment or one (1) week severance pay lieu of

                                       20
<PAGE>

         notice, and prorated vacation pay. The foregoing provisions shall not
         apply to normal layoffs resulting from temporary or seasonal variations
         in production requirements.

7.20     INVENTORY. (Please see Pay Plus Bonus Addendum dated 10-14-98)
         Employees will be selected for inventory on the basis of qualifications
         with preference given to day workers over incentive workers. Day
         workers if selected will receive the rate of their classification.
         Incentive workers when selected will receive base rate of their
         classification.

ARTICLE VIII. - WAGES, SKILL GROUP CLASSIFICATIONS AND LABOR GRADE RATE.

8.01     WAGE AGREEMENT. (Please see Pay Plus Bonus Addendum dated 10-14-98) The
         COMPANY and the UNION have agreed to Labor Grade Rates and relative job
         values as described in this Agreement.

8.02     INCENTIVE COMPENSATION PLANS. (Please see Pay Plus Bonus Addendum dated
         10-14-98) 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
         earnings opportunity to experienced average employees twenty-five
         percent (25%) higher than the labor grade rate. It is further agreed
         that the COMPANY may at any time revise all or part of any incentive
         compensation plan where in its judgment the incentives have proven
         unsound. The current Los Angeles Standard Allowed Hour System will be
         maintained. There is nothing in the contract to prohibit the COMPANY
         from paying incentives to day workers if the COMPANY finds it feasible.

8.03     WORK WAIT. (Please see Pay Plus Bonus Addendum dated 10-14-98) If due
         to lack of materials, components, supplies or other reasons
         controllable by the COMPANY, an incentive worker is required to wait
         for any continuous period of more than ten (10) minutes after he has
         notified his Supervisor, he shall be compensated at 75% of his average
         hourly earnings from the first minute.

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

         Other than paying for up to one (1) hour at base pay if employees are
         not sent home, 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.

8.04     INCENTIVE PAY COMPUTATION. (Please see Pay Plus Bonus Addendum dated
         10-14-98) Individual average hourly earnings rate for employees working
         on inventive

                                       21
<PAGE>

         classifications will be computed quarterly by dividing the total number
         of hours that the incentive employee has worked into the total straight
         time earnings of that individual. The hours shall include the total
         hours of any incentive worker except those hours when he is in a
         holiday or vacation status, or time working on any classification other
         than his own.

         When an incentive employee is used on a classification other than the
         one to which he is normally assigned, his incentive earnings and hours
         on such classification will be marked "special" so as not to affect the
         computation of his individual average hourly rate.

8.05     HIRING RATE. The hiring rate for new employees is $9.00 per hour. Upon
         completion of their Probationary Period, they will receive an increase
         to the minimum of relevant Level 1 or 2 or the rate of the job for
         Level 3. Employees do not receive Pay Plus bonus during their
         Probationary Period.

8.06     INCENTIVE EMPLOYEE PROGRESSION AND TRAINING. (Please see Pay Plus Bonus
         Addendum dated 10-14-98) The COMPANY and the UNION agree that there
         shall be no ceiling on production or incentive earnings, and that the
         highest degree of efficiency and productivity will be encouraged at all
         times. It is understood that if an incentive employee acquires the
         skill needed to earn incentive pay while still in his sixty-day (60)
         probationary period, he or she will receive such incentive pay. In the
         event a probationary incentive employee has not acquired the necessary
         skills to earn incentive pay, upon the first sixty (60) days he or she
         may be terminated from the COMPANY.

         The UNION and the COMPANY agree that all incentive employees will be
         encouraged and expected to produce to the full extent of their
         capabilities and that this productivity must exceed the Labor Grade
         Rate. Based on progressive disciplinary action, those employees who are
         unable to exceed the Labor Grade Rate may be terminated at any time.
         Notice of such COMPANY action shall be given to the UNION with a copy
         to the shop steward five (5) working days prior to the employee's
         termination.

8.07     GENERAL WAGE INCREASE. Effective October 16, 2001, there will be a
         thirty-five (.35) cent per hour across the board general wage increase.
         The increase will be applied to the previous quarterly average and paid
         effective November 1, 2001. All basic rates, all hourly rates and all
         labor grades will be increased to reflect the increase.

8.08     GENERAL WAGE INCREASE. Effective October 16, 2002, there will be a
         thirty (.30) cent per hour across the board general wage increase. The
         increase will be applied to the previous quarterly average and paid
         effective November 1, 2002. All basic rates, all hourly rates and all
         labor grades will be increased to reflect the increase.

8.09     GENERAL WAGE INCREASE. Effective October 16, 2003, there will be a
         thirty (.30) cent per hour across the board general wage increase. The
         increase will be applied to the previous quarterly average and paid
         effective November 1, 2003. All basic rates, all hourly rates and all
         labor grades will be increased to reflect the increase.

                                       22
<PAGE>

8.10     GENERAL WAGE INCREASE. Effective October 16, 2004, there will be a
         thirty (.30) cent per hour across the board general wage increase. The
         increase will be applied to the previous quarterly average and paid
         effective November 1, 2004. All basic rates, all hourly rates and all
         labor grades will be increased to reflect the increase.

8.11     REACTIVATION OF OLD CLASSIFICATIONS. (Please see Pay Plus Bonus
         Addendum dated 10-14-98) Whenever an obsolete classification is
         reactivated, it is understood that all intervening wage adjustments
         shall automatically be added to the original rate thereof.

8.12     ESTABLISHMENT OF NEW CLASSIFICATIONS. (Please see Pay Plus Bonus
         Addendum dated 10-14-98) 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 Section 7.07.

8.13     RATE OF BORROWED MAN. (Please see Pay Plus Bonus Addendum dated
         10-14-98) When an employee still has work on his normal assignment and
         is borrowed for the convenience of the COMPANY to another job and given
         a type of work to perform other than the type of work at which he is
         (normally) employed, then his rate shall be his average hourly earnings
         rate, provided such quarterly average hourly rate is greater than his
         earnings at incentive or the labor grade for the work being performed.
         It is understood that in consideration for this premium rate the
         borrowed employee is to apply himself with the same effort and skill he
         used in order to develop the quarterly average hourly rate. Borrowed
         man would carry seniority to borrowed classification for overtime
         purposes.

8.14     AVERAGE RATE COMPUTATION. (Please see Pay Plus Bonus Addendum dated
         10-14-98) 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 that determine the period of
         earnings on which averages are based.

                                       23
<PAGE>

         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.

8.15     INJURED DURING WORK.

     A.   (Please see Pay Plus Bonus Addendum dated 10-14-98) 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 average rate if an incentive
          worker or his 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
          scheduled shift at his average rate for incentive worker and hourly
          rate for hourly worker. If the doctor requests subsequent visit(s)
          during his 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 H.R.
          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 incur in addition to or pyramiding on disability
          payments or workers' compensation payments.

ARTICLE IX. - STANDARD ALLOWED HOURS.

9.01     INCENTIVE COMPENSATION PLAN. (Please see Pay Plus Bonus Addendum dated
         10-14-98) 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 that existed prior to
         the implementation of the new

                                       24
<PAGE>

         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 earnings 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.

9.02     NEW OR VARIED JOBS AND OPERATIONS. (Please see Pay Plus Bonus Addendum
         dated 10-14-98) If a new job, new operation, or variation of an
         existing operation is set up, the supervisor 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.

          COMPANY shall select an average operator or as close to average as
         possible, for time and 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. (Please see Pay Plus Bonus Addendum dated
         10-14-98) 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%)).
<TABLE>
<S>                                                                    <C>
                  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)
</TABLE>

                                       25
<PAGE>
<TABLE>
<S>                     <C>                                          <C>
                  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

                  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
</TABLE>

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.

         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. (Please see Pay Plus Bonus
         Addendum dated 10-14-98) Current standards are guaranteed unless the
         COMPANY makes a change in method, means, process, equipment, production
         conditions, or product design. Where

                                       26
<PAGE>

         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 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. The Time Study Department must initiate
         all changes and resulting standards, in order to become effective and
         binding, in writing. For identification purposes, the COMPANY, on
         October 15, 1973, installed an administrative procedure on all new time
         studies that 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.   (Please see Pay Plus Bonus Addendum dated 10-14-98) 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.   (Please see Pay Plus Bonus Addendum dated 10-14-98) 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

                                       27
<PAGE>

          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 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, not to exceed ninety (90) days of
          liability.

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 the plant 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.

                                       28
<PAGE>

     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. - PAID HOLIDAYS.

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

                                    New Years Day
                                    Martin Luther King's Birthday
                                    Washington's Birthday
                                    Good Friday
                                    Memorial Day
                                    Independence Day
                                    Labor Day
                                    Thanksgiving Day
                                    Friday after Thanksgiving Day
                                    Day before Christmas
                                    Christmas Day

10.02    ELIGIBILITY. In order to be eligible for the holiday payment, an
         employee must have completed thirty (30) days or more of service on the
         day of the holiday and have worked the last scheduled work day before
         and the first scheduled work day after the holiday. If the COMPANY
         excuses the employee from such work, or if it is proved that his
         absence was due to illness he will be paid for such holiday.

10.03    HOLIDAY PAY ON SICK LEAVE. When an eligible employee goes on sick leave
         within thirty (30) days prior to or the day following a holiday he
         shall receive pay for one such holiday.

10.04    PAY FOR HOLIDAY WORKED. In the event work is performed on any of the
         Agreement holidays, double time the rate of pay shall be paid in
         addition to the holiday pay. This will not apply to Article XXI
         Birthday Pay.

10.05    HOLIDAYS ON SATURDAY. The COMPANY agrees that whenever a holiday falls
         on Saturday it shall, at the discretion of the Plant Manager, be
         celebrated on either the preceding Friday or the following Monday.
         Notice of the date selected will be posted two

                                       29
<PAGE>

         (2) weeks in advance. In the above situation, no work will be scheduled
         on such Saturday to avoid holiday premium pay.

10.06    HOLIDAY PAY. Holiday pay shall be included in the paycheck for the pay
         period in which the holiday falls.

10.07    HOLIDAYS DURING APPROVED VACATION. When any of the above holidays falls
         within an eligible employee's approved vacation period and the employee
         is absent from work during his regularly scheduled workweek because of
         such vacation, the employee shall be paid for such holiday in addition
         to vacation pay and shall have such day off.

10.08    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.

10.09    PAY RATE. (Please see Pay Plus Bonus Addendum dated 10-14-98) Holiday
         pay will be at eight (8) times the employee's average hourly earnings
         rate as computed in Section 8.14 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.

10.10    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 continuous service shall
          have the option of taking a fourth week of vacation in lieu of the
          seniority bonus (Section 7.18) if otherwise eligible. Selection of the
          fourth week will be at a time convenient to the COMPANY.

                                       30
<PAGE>

     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;

         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.

     G.  Commencing in 1998, employees with eighty (80) hours or more vacation,
         may take one week (forty (40) hours) of vacation at eight (8) hour
         intervals (by days) with notice and seniority permitting.

11.02    PAY RATE. (Please see Pay Plus Bonus Addendum dated 10-14-98) 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 Labor Grade Rate if paid on an hourly
         rate, including shift differential but excluding overtime premiums.

11.03    SCHEDULING. Vacation time will be scheduled at the first of the year
         and consideration will be given to allow employee preference as often
         as possible. In conflicts arise between two employees scheduling a
         vacation at the same time; the employee with the most seniority will be
         given preference.

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. 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 are discharged, or quit. Those employees will be paid on a pro-rata
         basis of 1/12 for each month worked five (5) working days will be
         considered a month worked (1/12 credit).

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

                                       31
<PAGE>

         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 or Shop Steward 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.

ARTICLE XII. - LEAVE OF ABSENCE.

12.01    PURPOSE. The COMPANY may grant to any employee who has been in
         continuous service with the COMPANY for one (1) year or more, a leave
         of absence not to exceed sixty (60) days. In the case of illness a
         leave of absence shall be granted extending through a reasonable period
         of convalescence, but not to exceed one (1) year. Proof of illness
         shall be submitted to the COMPANY upon request.

         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 or others, the COMPANY
         may require such returning employee to submit medical proof of his/her
         recovery, including a physical examination and drug screen by a COMPANY
         doctor if desired by the COMPANY.

12.02    LEAVE FOR UNION BUSINESS. The job of no employee shall be jeopardized
         should he/she be called from work on authorized UNION business,
         providing such absence does not exceed thirty (30) days. In all cases,
         the UNION shall give the COMPANY at least one (1) day notice of such
         authorized UNION business.

ARTICLE XIII. - REST PERIODS.

Every employee shall be allowed two (2) ten (10) minute rest periods each day
worked without deduction in pay; one (1) of said rest periods shall be in the
morning and the other in mid-afternoon. At least thirty (30) minutes (unpaid)
shall be allowed for the lunch period.

                                       32
<PAGE>

ARTICLE XIV. - STEELWORKERS PENSION TRUST.

Steelworkers 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 Steelworkers 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 how have been previously covered under the Steelworkers 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

                                       33
<PAGE>

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.

ARTICLE XV. - HEALTH AND WELFARE FUND.

15.01    BENEFIT PLAN(S). The parties to this Agreement desire that certain HMO
         Health, Dental, Vision and Prescription Benefits, as well as life
         insurance coverage as designated by Maxicare, be provided to the
         employees employed in the UNION'S Bargaining Unit with contributions
         being made to Pacific Federal Benefit Administrators.

15.02    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 October 16, 2001 the monthly contribution rates for
         employees will be as follows:

                  Single                                          $30.00
                  Single Plus One                                 $60.00
                  Family                                          $90.00

         The COMPANY 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 COMPANY 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. The cost sharing
         ratios for any increase in premiums up to twelve percent (12%) the
         first three (3) years and up to five percent (5%) the fourth year will
         be determined by the contributions listed above. Any increase in total
         insurance premium costs in the first three years which exceeds twelve
         percent (12%) or five percent (5%) in the fourth year will give the
         COMPANY the option to cease participation in the

                                       34
<PAGE>

         Fund. 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.

15.03    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,

         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.

15.04    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 it to the Fund. When supplied with such a written
         authorization, the COMPANY agrees to make the required deductions and
         to promptly transmit it 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.

15.05    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 $5.00 for life insurance
         coverage as provided by Pacific Federal Benefit Administrators.

15.06    PAYMENT OF CONTRIBUTIONS. The COMPANY will send contributions on the
         first (1st) Thursday of each benefit month, commencing with the month
         of November 1997, and each and every month thereafter so long as this
         agreement is in force.

15.07    COVERAGE.

      A.    Coverage for newly hired employees and any named dependents will
            begin on the first day of the month following completion of thirty
            (30) days of employment. Previously

                                       35
<PAGE>

         covered employees shall be covered the first day of the calendar
         month following their return to work.

      B. 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.

15.08    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.

15.09    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.

15.10    HOLD HARMLESS. The COMPANY agrees solely to make the contributions
         required by the terms of this Agreement. The UNION agrees to hold
         harmless and indemnify the COMPANY from any and all claims, grievances,
         lawsuits, and 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 Fund to which
         the COMPANY is not a signatory party.

15.11    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.

15.12    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 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.

                                       36
<PAGE>

15.13    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 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 XVI. - JURY SERVICE.

(Please see Pay Plus Bonus Addendum dated 10-14-98) 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 8.14 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 XVII. - BEREAVEMENT PAY.

17.01    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, father-in-law,
         grandparents, 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.

17.02    PAYMENT. (Please see Pay Plus Bonus Addendum dated 10-14-98) 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 XVIII. - BULLETIN BOARDS.

18.01    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,
         C.       Notice of UNION appointment,
         D.       Notice of UNION meetings,

                                       37
<PAGE>

         E.       Notices pertaining to The USWA Health & Welfare and UIU
                  Pension Programs.

18.02    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 that does not conform to the
         requirements of this article.

ARTICLE XIX. - MILITARY CLAUSE.

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

ARTICLE XX. - PICKET LINE CLAUSE.

It shall not be considered a violation of this Agreement if USWA employee
members fail to report to work because of refusal to cross a legitimate
authorized picket line established by the TEAMSTERS UNION representing the truck
drivers or warehouse employees of the Los Angeles plant provided such UNION is
the recognized bargaining agent for said employees and provided such authorized
picket line is at the plant location where the USWA employees work only when
such picket line is in connection with a strike over contract negotiations and
provided said picket line has been recognized by the USWA and such picket line
has been sanctioned by the Joint Council of Teamsters Local #42.

ARTICLE XXI.- EMPLOYEE BIRTHDAY PAY.

Each employee who meets the requirements for holiday eligibility will receive an
additional eight (8) hours pay (computed as per Section 10.09) 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.

                                       38
<PAGE>

ARTICLE XXII. - GENERAL CONDITIONS.

22.01    BUSINESS REPRESENTATIVE. It is agreed that the Business Representative
         of the UNION is permitted on the premises for the purpose of discussing
         with the employees at any time any business pertaining to the functions
         of the UNION after making his presence known to the COMPANY.

22.02    STEWARDS. A shop steward, shop committee or department steward may be
         established in the plant. The shop steward, department steward and shop
         committee shall be selected by the UNION members in said plant in
         accordance with the rules of the UNION. It shall be the duty and
         function of the shop steward, department steward, and shop committee to
         assist in carrying out the terms and provisions of the Agreement,
         including the right to adjust grievances and complaints as herein
         designated for that purpose. When a new employee is hired, his/her
         supervisor to the department steward shall introduce him.

ARTICLE XXIII. - 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
that 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.

ARTICLE XXIV. - SAVING CLAUSE.

24.01    SEPARABILITY. If any provision of this Agreement is invalid or illegal
         in any state, then such provision will 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.

24.02    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

                                       39
<PAGE>

         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 XXV. - 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
Fund benefits as outlined in Article XV 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  XXVI. - 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 Pay Plus at the Los Angeles 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 COMPANY plants where Pay Plus 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.

The parties agree that a Pay Plus plan was implemented under Article XXVI of the
Labor Agreement with a term of October 16, 1997 until October 15, 2001. The
parties further recognize that a new but yet unnamed Pay Plan is being designed
and will not be completed prior to conclusion of negotiations or the expiration
of the prior. Therefore, the parties will continue to abide by the provisions of
Article XXVI Contract Re-Opener and the "October 14, 1998 Los Angeles Plant Pay
Bonus Addendum" language during the term of the new successor agreement

                                       40
<PAGE>

and when a new Pay Plan is introduced the parties will abide by the terms and
conditions of Article XXVI in the same manner as they did when the Pay Plus Plan
was introduced.

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

ARTICLE XXVII. - DURATION AND TERMINATION OF AGREEMENT.

27.01    EFFECTIVE DATES. This agreement shall be in full force and effect from
         October 16, 2001 until October 15, 2005.

27.02    ENTIRE AGREEMENT. The parties agree that there shall be no reopening of
         this agreement unless expressly provided in this agreement and that
         this agreement constitutes the entire between the parties on the
         subjects of 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.

27.03    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 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.

                                       41
<PAGE>

IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated.

UNITED STEELWORKERS OF AMERICA          SIMMONS COMPANY

-----------------------------           ------------------------------
Leo W. Gerard                           Rhonda Rousch
International President                 Senior Vice President, Human Resources

-----------------------------           ------------------------------
James English                           Robert Carstens
International Secretary/Treasurer       V.P. Operations Western Region

-----------------------------           ------------------------------
Richard H. Davis                        Marjanna Garvin
International V.P. Administration       Director HR, Western Region

-----------------------------
Leon Lynch
International V.P. Human Affairs

-----------------------------
David Caldwell
Chairman of USWA Negotiating Committee

-----------------------------
Terry L. Bonds, Director District 12

-----------------------------
Wayne A. Clary, Sub-District Director

-----------------------------
Raymond E. Valdez, Staff Rep.

-----------------------------
Robert L. Cox, Business Rep.

-----------------------------
Jose Ruiz, Local 515-U Committee

-----------------------------
Otis Strong, Local 515-U Committee

-----------------------------
F. Ledesma,. Local 515-U Committee

-----------------------------
Juan Ibarra, Local 515-U Committee

-----------------------------
Angel Villa, Local 515-U Committee

-----------------------------
Jose Ruano, Local 515-U Committee

                                       42
<PAGE>

APPENDIX "A" - ARBITRATORS FOR EXPEDITED ARBITRATION

                               GENERAL ARBITRATORS

                                 Richard Adelman
                                   Jack Clarke
                                  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

                                       43
<PAGE>

APPENDIX B. - SPECIALIZED MAINTENANCE MECHANIC.

QUALIFICATIONS. The expectation is that mechanics will be qualified in four
skill areas: Sewing Machine, HMB/Coil Machine, Packing Machine, and Quilt
Machine. For the first skill the mechanic would receive no additional pay. The
COMPANY will pay an additional fifty (.50) cents per hour for each of the three
additional skills. The COMPANY and the Union will develop the certification for
the above skills within 60 days based on the seven items listed in Appendix B -
Specialized Maintenance Mechanic.

JOB DESCRIPTION.

         1)       Plan and maintain in a state of good repair and efficient
                  running order of complicated and expensive plant machinery
                  (machines valued up to $50,000).

         2)       Make parts involving intricate setups and rigid tolerances and
                  finish requirements extremely difficult to meet.

         3)       Diagnose and correct complex machine trouble involving
                  dismantling and reassembly operations requiring a high degree
                  of mechanical skill, fitting and aligning.

         4)       Also affixes special attachments, sets dies, oils and greases
                  machinery, repairs belts, and performs other similar duties as
                  necessary.

         5)       Is required to have knowledge of the operation of the machines
                  he/she repairs.

         6)       Must be able, when required, to train machine operators.

         7)       Work from machine drawings, sketches, and samples.

The above job outline includes only the main functions of the job and shall not
be considered a detailed description of all work requirements of the job
pertaining to specialized maintenance mechanics.

QUALIFICATIONS FOR MAINTENANCE APPRENTICE.
------------------------------------------
         I.     Must have good mechanical aptitude.
         II.    Must be good in mathematics (especially decimals and fractions).
         III.   Must be able to read operating and/or maintenance manuals.
         IV.    Apprenticeship thirty (30) months minimum duration

APPRENTICESHIP TRAINING SCHEDULE AND PAY PROGRESSION SCALE.

                  EFFECTIVE                          RATE
                  ---------                          ----
                  Hiring Rate                        10.05
                  After 30 Days                      10.30
                  After 90 Days                      10.45
                  After 6 months                     10.60
                  After 9 months                     10.75
                  After 12 months                    10.90
                  After 24 months                    11.15
                  After 30 months                    Base rate of the job

                                       44
<PAGE>

The COMPANY reserves the right to disqualify any apprentice at any point in the
training schedule, should that apprentice fail to satisfactorily progress in
learning the skills of the Specialized Maintenance Mechanic.

                                       45
<PAGE>

APPENDIX B. - IMPLEMENTING UTILITY CLASSIFICATION FLEXIBILITY IN OPERATIONS.

A.       In order to ensure flexibility in operations including balancing of
         work flow, the COMPANY has the right to install Utility classifications
         which are designed to blend a variety of jobs into a single grouping so
         that specific individuals will be required to perform a multiplicity of
         job functions as described in the attached appendix on a piecework
         basis.

B.       The Utility classification will be exempt from any and all bumping with
         the exception of senior employees who have previously successfully
         performed on one or more of the job functions now embraced by the
         utility designation and who can satisfactorily perform the range of
         work contained in any particular utility grouping. Such senior
         employees will be granted an opportunity to perform in the utility
         classification, and should they prove to be unsuccessful, will be given
         the opportunity of bumping the least senior employee in the plant.

C.       The COMPANY will determine the number of employees required in any
         particular Utility grouping. Once such determination is made, the jobs
         will be posted for bid. In the event no eligible bids are received
         within twenty four (24) hours of posting, management is free to hire
         appropriate candidates from whatever source it chooses.

D.       The COMPANY will train the Utility employees on all jobs assigned to
         them and will ensure maintenance of skills by utilizing such. The
         COMPANY will review the assignment of Utility personnel each quarter to
         make certain that these employees have had an opportunity to exercise
         the utility skills for which they were trained.

E.       Each Utility base rate will be equal to the highest base rate of its
         particular classification grouping in each local plant supplement.
         Utility workers must first succeed on the job paying the highest base
         rate before they will be given an opportunity to learn other jobs.

         During the training period, the Utility employees will be paid at the
         agreed upon base rate. On those rare occasions when utility personnel
         are assigned hourly work, they will be paid at their average hourly
         earnings rate.

F.       The COMPANY will not abuse the use of such classifications, but rather
         will determine the number of utility workers by its operational and
         marketing needs.

It is the desire of the parties that the foregoing language will have a positive
effect upon the regular employees in the regular classification in the utility
grouping as contained in the local plant supplement Agreements.

                                       46
<PAGE>

APPENDIX B. - PENSION AND WAGES.

A.       U.I.U. PENSION TRUST. The COMPANY shall make contributions to the
         Steelworkers Pension Trust for all of the employees at the Los Angeles
         plant. Such employees shall be eligible for benefits as set forth in
         the U.I.U. Pension.

B.       WAGES. Listed below are the Job Titles and Labor Grade Rates for the
         various classifications of work at the Los Angeles plant.

INCENTIVE JOBS
<TABLE>
<CAPTION>

JOB TITLE                            10/16/01       10/16/02         10/16/03          10/16/04
---------                            --------       --------         --------          --------
<S>                                    <C>           <C>               <C>              <C>
Closer                                 12.41         12.71             13.01            13.31
Upholster Box Spring Units             11.48         11.78             12.08            12.38
Nailing Machine Operator               11.05         11.35             11.65            11.95
Box Spring Frame Assembler             11.05         11.35             11.65            11.95
Assemble Box Spring Units              11.05         11.35             11.65            11.95
Misc. Borders                          10.95         11.25             11.55            11.85
Mattress and Box Spring Sewer          10.95         11.25             11.55            11.85
Quilting Machine Operator              11.05         11.35             11.65            11.95
Ultrasonic Coil Operator               11.05         11.35             11.65            11.95
HMB Operator                           11.05         11.35             11.65            11.95
Hog-Ring Operator                      10.78         11.08             11.38            11.63
Border Machine Operator                10.73         11.03             11.33            11.63
Miscellaneous Sewers Quilt             10.73         11.03             11.33            11.63

HOURLY RATED JOBS
Cutting                                10.53         10.83             11.13            11.43
Material Handler                       11.20         11.50             11.80            12.10
Material Coordinator                   11.40         11.70             10.75            11.05
Janitor                                11.20         11.50             11.80            12.10
Inspector                              11.20         11.50             11.80            12.10
Quilt Repair Operator                  11.35         11.65             11.95            12.25
Packer & Inspector                     11.20         11.50             11.80            12.10
Stock Clerk                            11.40         11.70             12.00            12.30
Specialized Maintenance Mechanic       15.10         15.40             15.70            16.00
Repairman                              12.28         12.58             12.88            13.18
Flotation Assembler                    11.50         11.80             12.10            12.40
</TABLE>

LEAD PERSON. - The COMPANY reserves the right to designate employees as Lead
Person. Lead Persons will receive a $.50 per hour increase upon designation.

                                       47
<PAGE>

PAY PLUS BONUS ADDENDUM. - October 14, 1998

In accordance with Article XXXI of the collective bargaining agreement between
the parties, the COMPANY and the UNION agree to change the individual incentive
plan to a group incentive to be known hereinafter as the Pay Plus Bonus plan
(PPB). It is agreed that this new system will take effect on date to be
determined.

ESTABLISHMENT OF BASE RATES FOR MOVEMENT BETWEEN JOB CLASSIFICATIONS AND LEVELS:

An existing employee who changes his/her classification that involves a drop
from one pay level to another would retain his/her current base rate or the
midpoint of the new range, whichever is lower.

An existing employee who changes his/her classification that involves moving up
from one pay level to another would receive a $.50 increase to their current
base rate or the minimum of the new range (whichever is higher), when the
employee qualifies on the new job per page 8 of this addendum.

An existing employee who moves from classification to classification within a
pay level (Levels 1 & 2) would remain at their current base rate.

Any employee who fails to qualify on a job that was bid and bumps back into
his/her most previous job will maintain his/her existing base rate. The rates
for an employee bumping into a job other than his/her previous job will be set
according to the rate of the job, if Level 3 classification.

DEFINITIONS.

CLASSIFICATION. - defined by the current job titles as listed in the new
Appendix B & C under this addendum.

LEVEL. - established payroll groupings defined in the PPB proposal as 1, 2, 3, 4
& MI - Appendix C.

RANGE. - defined minimum, mid-point and maximum pay rates for each level (except
for level 3 and M1).

DROP. - means moving from level 1 to 2, 1 to 3, and 2 to 3.

MOVING UP. -means moving from level 2 to 1, 3 to 1, and 3 to 2.

BASE RATE CHANGES FOR NEWLY HIRED, TRANSFERRED OR EXISTING EMPLOYEES.

LEVEL 1 & 2 employees may petition the COMPANY for a base evaluation. A request
should be submitted to the COMPANY by the UNION for a performance evaluation
that will involve a

                                       48
<PAGE>

review of that individual's performance based upon the individual skills defined
in the P.P.B. (Quality, Productivity, Customer Service).

An individual's base rate can be adjusted based on the following: Achieving a
productivity rate of the next higher rate for that classification for sixty
days. A rate will be listed for the top three employees in a classification that
was used in the initial establishment of base rates in Pay Plus.

All requests for reevaluation may be made no more than three times during the
year with no less than three (3) months between requests.

CHANGES TO EXISTING CONTRACT.

3.08     SELECTION OF ARBITRATORS. Within ten (10) calendar days after the UNION
         files its written request for arbitration pursuant to Section 3.06, 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 on the job
         level or rate on a new classification as provided in Section 8.04, the
         dispute may be appealed to arbitration for determination by a qualified
         time study arbitrator.

         Appeals relative to an SAH change, job level or rate 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.

7.07     JOB BIDDING. The COMPANY will provide an opportunity for qualified
         employees seeking promotion to jobs in a higher level or to a higher
         level 3 classification by posting open jobs for bid for a twenty-four
         (24) hour period. Posted jobs may be bid on only within the department
         in which the opening occurs. If there is no bid in the department,
         bidding will be open to qualified employees from any other departments
         of the plant. The job bidding procedure will be as follows:

         1.       In order for an employee to be eligible to bid for a posted
                  opening the employee must:

                  (a)      Have been on the active payroll for a period of nine
                           (9) months preceding the date of bid

                  (b)      Have not been awarded a job by means of successful
                           bidding for a period of nine (9) months preceding
                           date of bid.

                  (c)      Be actively working at the time the job bid is
                           posted.

                                       49
<PAGE>

         2.       Posted bid job will be awarded to the most qualified eligible
                  bidder with the most seniority.

         3.       (a)      Any employee who is a successful bidder will be
                           reclassified in accordance with the job he/she bid
                           for and will be paid according to the Los Angeles PPB
                           Addendum #1.

                  (b)      The successful bidder will be allowed the established
                           learner's time for that particular classification.
                           If, at the completion of the established learner's
                           time, the employee has not at minimum productivity
                           levels for the job, he/she will be returned to
                           his/her original job.

                  (c)      When openings occur in the following jobs, bidding
                           will be open only to those employees of proved
                           mechanical aptitude and excellent attendance records:

                           1.       Pocket Machine Operators

                           2.       Closers

                  (d)      The COMPANY reserves the right to hire at any time
                           qualified candidates from outside sources for the
                           closing and pocket machine operations.

         4.       Level 1 and 2 employees with a combined age and years of
                  service equal to or in excess of 75 will be considered for
                  Level 3 job openings. The Level 1 or 2 employee must have
                  worked for at least 12 years in a direct classification to be
                  eligible for a job range. If the position is filled in this
                  manner the direct employee would transfer to the level 3 job
                  once a replacement is trained in the direct position. If an
                  eligible direct employee does not file the Level 3 job the
                  COMPANY reserves the right to hire level 3 employees in the
                  manner they choose. The job change of a senior direct employee
                  would not result in the transfer of another senior employee
                  within the same occurrence. The senior employee would be
                  expected to work in the level 3 position with equal or greater
                  effort.

7.20     INVENTORY. Employees will be selected for inventory on the basis of
         qualifications with preference given to indirect workers over direct
         workers. All employees when selected will receive their current base
         rate.

                                       50
<PAGE>

8.01     WAGE RATES. The COMPANY and the UNION have agreed upon the pay ranges
         that are hereto annexed and a part hereof. Job Levels 1 and 2 and
         classification rates in Levels 3, 4 and M1 are as outlined in Schedule
         A & B.

8.02     INCENTIVE COMPENSATION PLANS. Delete.

8.03     WORK WAIT. Delete paragraph 1 and 2. Paragraph 3 remains the same.

8.04     INCENTIVE PAY COMPUTATION. Delete and refer to 8.14.

8.05     HIRING RATE.

         A.       The hiring rate for new employees will be the rate defined in
                  level 4. Experienced new hires maybe paid at the minimum of
                  Levels 1 or 2; or the rate of the job if in level three.

         B.       If the employee is retained, he/she will be paid at the
                  minimum of job levels 1 or 2, or the classification rate of
                  level 3 after 60 days of employment.

8.06     DIRECT EMPLOYEE PROGRESSION AND TRAINING. The COMPANY and the UNION
         agree that the highest degree of efficiency and productivity will be
         encouraged at all times.

         It is understood that if a Level 1 or 2 employee acquires the skill
         needed to satisfy minimum productivity levels as set for the job, while
         still in his sixty (60) day probationary period, he or she will receive
         the minimum of the job level pay plus plant-wide bonus.

         In the event a probationary Level 1 or 2 employee has not acquired the
         necessary skills to meet minimum productivity levels upon the first
         sixty (60) days he or she may be terminated from the COMPANY.

         The UNION and the COMPANY agree that all Level 1 or 2 employees will be
         encouraged and expected to produce to the full extent of their
         capabilities and that this productivity must meet minimum productivity
         levels. Based on progressive disciplinary action, those employees who
         are unable to exceed the minimum standards may be terminated at any
         time. Notice of such COMPANY action shall be given to the UNION with a
         copy to the shop steward five (5) working days prior to the employee's
         termination.

8.07     GENERAL WAGE INCREASE. A general wage increase of thirty (30) cents per
         hour for all employees will be granted effective October 16, 1997. 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.

                                       51
<PAGE>

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

8.09     GENERAL WAGE INCREASE. A general wage increase of thirty (30) cents per
         hour for all employees will be effective October 16, 1999. The increase
         will be applied to the previous quarterly average and paid effective
         November 1, 1999. All base rates, all hourly rates and all labor grades
         will be increased to reflect the increase.

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

8.11     REACTIVATION OF OLD CLASSIFICATIONS. Whenever an obsolete
         classification is reactivated, the job will be placed in the
         appropriate skill level and the prevailing pay range will apply.

8.12     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 too the job level and 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 job level or 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
         current base rate plus bonus 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 Article 7.07.

8.13     RATE OF BORROWED MAN. Delete and replace with Pay for Skill, as agreed
         upon for LA Plant.

8.14     AVERAGE RATE COMPUTATION: Individual average hourly earnings rates for
         all employees will be computed quarterly by dividing the total amount
         of earnings, (excluding overtime premium), and including the Pay Plus
         Bonus, of that worker by the total number of hours worked excluding
         when the worker is in a holiday or vacation status. 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 that
         determine the period of earnings on which averages are based.

                                       52
<PAGE>

         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.

8.15     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 average rate. 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 scheduled shift at his average rate. If the
                  doctor requests subsequent visit(s) during his 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. 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 Human Resources Department at a
                  time consistent with the treating doctor's office hours.

         B.   No change

         C.   No change

         D.   No change

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
         that existed prior to the implementation of the new incentive program.
         Effective January 1, 1999, the Standard Allowed Hour system used to
         establish individual incentive earnings opportunities was replaced with
         the Pay Plus Bonus program which provides for a plant-wide incentive
         opportunity based on quality, productivity, and customer service
         performance. SAH calculations will continue to be used to compute plant
         wide productivity under this program.

         With not less than a forty-five (45) day written notice to the UNION,
         the COMPANY may change back to the 1997 contract's Incentive
         Compensation language.

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

                                       53
<PAGE>

         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 COMPANY shall select an average operator, or as close to average as
         possible, for time study methods analysis. Average is defined as an
         operator working at a normal pace, under normal working conditions,
         with the skills required for other specific job.

9.03     STANDARD ALLOWED HOUR. Replace with PPB information packet labeled
         "Exhibit A."

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 proportionally 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 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.

         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. The Time Study Department must initiate
         all changes and resulting standards, in order to become effective and
         binding, in writing. For identification purposes, the COMPANY, on
         October 15, 1973, installed an administrative procedure on all new time
         studies that enables a departmental shop

                                       54
<PAGE>

         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     GRIEVING CHANGES IN STANDARD.
         (Replaces A & B)

         A.   If there is a change in any standard, the COMPANY will provide the
              UNION with the methods description at the time the change is made
              effective. The UNION has thirty (60) days to grieve the new
              standard and if not grieved within thirty days, the UNION will
              lose the right to grieve and/or arbitrate the new standard. A
              resolution of grievances over incentive standards shall be
              retroactive to the date the protested standard was originally
              submitted.

         C & D (unchanged)

10.09    PAY RATE. Holiday pay will be at eight (8) times the employee's average
         hourly earnings rate as computed in Section 8.14.

11.02    PAY RATE. Pay for each week of vacation will be figured at 40 times an
         employee's average hourly earning rate, as computed in section 8.14.

ARTICLE XVI. - 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
8.14. 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.

17.02    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 rate.

NEW
---

APPENDIX B. - Classification Designation

APPENDIX C - Rate Schedule

MISCELLANEOUS
-------------

M1 AND LEVEL 3 PAY.

         Under the Pay Plus Bonus program, a bonus will be paid to each person
         in M1 and Level 3 on an incentive calculation of their current base
         rate, provided the overall weekly productivity exceeds 19.5%. However,
         in the event that the weekly productivity level falls below 19.5%, the
         employee is guaranteed to receive his/her current base rate as
         established.

                                       55
<PAGE>

PAY PLUS PRODUCTIVITY IMPROVEMENT COMMITTEE.

         The UNION and COMPANY agree to form a committee consisting of five
         UNION and five COMPANY representatives, those members selected by the
         UNION and COMPANY respectively at their discretion. This committee will
         meet as needed. The purpose of this committee is to present and discuss
         issues concerning communication, problem resolution, opportunities for
         improvement and the like.

                           COMPANY agrees to sixty-day guarantee of rates.

                           COMPANY agrees to all 1997 contract language not
                                   specifically changed herein will remain
                                   intact as written.

                                       56
<PAGE>

APPENDIX B. - NEW CLASSIFICATION STRUCTURE UNDER PPB PLAN

         LEVEL                      CLASSIFICATION DESIGNATION
         -----------------------------------------------------
              I.                    A.   Quilt Machines  - Panel
                                    B.   Close Mattress
                                    C.   Ultrasonic Coil Operator

             II.                    A.   Matt and Box Spring Sewer
                                    B.   Miscellaneous Sewer/Quilt
                                    C.   Miscellaneous Borders
                                    D.   Border Machine Operator
                                    E.   Hog Ring
                                    F.   HMB
                                    G.   Top Off Assembler-Nailing Machine
                                         Operator
                                    H.   Assemble Box Spring Frames
                                    I.   Upholster B/S
                                    K.   Assemble Box Spring Units

            III.                    A.   Cutting
                                    B.   Material Handler
                                    C.   Material Coordinator
                                    D.   Janitor
                                    E.   Inspector
                                    F.   Quilt Repair Operator
                                    G.   Packer/ Inspector
                                    H.   Stock Clerk
                                    I.   Repairman
                                    J.   Flotation Assembler

             IV.                    .    Trainee - New hires

             M-1                         Mechanics

                                       57
<PAGE>

APPENDIX C. - PAY PLUS BONUS - CLASSIFICATION RATE SCHEDULE
<TABLE>
<CAPTION>

                       Entry                       Mid                  Max
                       -----                       ---                  ---
Level 1                $9.50                       $12.00               $14.50

Level 2                $9.00                       $10.75               $12.50

Level 3        As defined by position

Level 3 will be paid at the rate of the classification as follows:

                                    EFFECTIVE

Classifications                                    10/16/01         10/16/02         10/16/03          10/16/02
---------------                                    --------         --------         --------          --------
<S>                                                 <C>              <C>              <C>               <C>
Cutting                                             $10.53           $10.83           $11.13            $11.43
Material Handler                                    $11.20           $11.50           $11.80            $12.10
Material Coordinator                                $11.40           $11.70           $12.00            $12.30

Janitor                                             $11.20           $11.50           $11.80            $12.10

Inspector                                           $11.20           $11.50           $11.80            $12.10

Quilt Repair                                        $11.35           $11.65           $11.95            $12.25

Packer/Inspector                                    $11.20           $11.50           $11.80            $12.10

Stock Clerk                                         $11.40           $11.70           $12.00            $12.30

Repairman                                           $12.28           $12.58           $12.88            $13.18

Flotation Assembler                                 $11.50           $11.80           $12.10            $12.40
</TABLE>

                                       58
<PAGE>

APPENDIX C.

M1.        Mechanics - Defined as follows:

<TABLE>
<CAPTION>

                                       10/16/01             10/16/02              10/16-03            10/16/04
                                       --------             --------              --------            --------
<S>                                     <C>                   <C>                  <C>                 <C>
           Specialized Mechanic         15.10                 15.4                 15.70               16.00
</TABLE>

APPRENTICESHIP TRAINING SCHEDULE AND PAY PROGRESSION SCALE.

Hiring Rate                  $11.00

After 30 Days                $11.25

After 90 Days                $11.50

After 6 Months               $11.55

After 9 Months               $11.85

After 12 Months              $11.85

After 24 Months              $12.10

After 30 Months              Base Rate of Job

(NOTE: THIS SCALE IS INCREASED BY $.30 FOR THE SECOND, THIRD AND FOURTH YEAR OF
THE CONTRACT.)

                                       59
<PAGE>

APPENDIX C. - PAY FOR ADDITIONAL SKILLS - MULTI SKILLED EMPLOYEE

   Any one employee can have up to a maximum of three (3) additional skills.
   Each additional skill will receive a twenty-five (.25) cents premium applied
   to their current base rate and shall remain a permanent part of their base
   rate as long as the employee is deemed a "Multi Skilled Employee." The
   COMPANY will allow the maximum of ten (10) individuals that may be eligible
   for this additional benefit.

   A bid shall be posted for a "Multi-skilled Employee" for a particular job.
   Bidding procedures will be followed as defined in the Los Angeles contract.

   All bidders shall be required to establish competency and the final selection
   of successful bidder(s) will be based upon seniority. Competency will be
   determined by the COMPANY and may require the employee to physically perform
   the job in question for a period of time not to exceed two (2) weeks.

   UNION Proposes - if more than 10 qualified employees respond to posting,
COMPANY will use rule of seniority for selection.

                                       60
<PAGE>
                      MEMORANDUM OF UNDERSTANDING REGARDING
             THE SUBSTITUTION OF THE SIMMONS MANUFACTURING CO., LLC,
             FOR SIMMONS COMPANY IN COLLECTIVE BARGAINING AGREEMENT
             ------------------------------------------------------

         WHEREAS, the United Steelworkers of America, AFL-CIO, CLC, and its
Local Union No. 515, and Simmons Company have entered into a collectively
bargained Labor Agreement commencing October 15, 2001 through October 15, 2005,
for certain employees at its plant located at Los Angeles, California;

         WHEREAS, effective December 31, 2001, the Simmons Company employees
represented by Local No. 515 will, for corporate tax purposes, become employees
of The Simmons Manufacturing Co., LLC, and;

         WHEREAS, because said represented employees will, on December 31, 2001,
become employees of The Simmons Manufacturing Co., LLC, The Simmons
Manufacturing Co., LLC shall be substituted for Simmons Company in said Labor
Agreement, and shall therefore, be bound by the terms and conditions of said
Labor Agreement.

         NOW THEREFORE BE IT RESOLVED; that effective December 31, 2001, The
Simmons Manufacturing Co., LLC shall be substituted for Simmons Company in the
Labor Agreement, and The Simmons Manufacturing Co., LLC shall recognize and
assume the legal obligations of the Labor Agreement, and;

         FURTHER RESOLVED; that effective December 31, 2001, on behalf of
Simmons Company, The Simmons Manufacturing Co., LLC, and the United Steelworkers
of America, AFL-CIO, CLC, and its Local Union No. 515, the undersigned
acknowledge their agreement as to the binding nature of their collectively
bargained Labor Agreement on The Simmons Manufacturing Co., LLC.

------------------------------------------
Daniel P. Murphy

Counsel for Simmons Company and The Simmons Manufacturing Co., LLC

Dated this _____ day of February 2001.

------------------------------------------
David Caldwell
The United Steelworkers of America, AFL-CIO, CLC, and its Local Union No. 515

Dated this _____ day of February 2001.

                                       1<PAGE>
                                                                   EXHIBIT 10.17

                                AGREEMENT BETWEEN
                                SIMMONS COMPANY,
                          PISCATAWAY, NEW JERSEY PLANT

                                       AND

                        UNITED STEEL WORKERS OF AMERICA,
                                  AFL, CIO, CLC

                     October 16, 2001 until October 15, 2004

<PAGE>

                                      INDEX
<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                        PAGE
-------           -----                                                                                        ----
<S>                                                                                                             <C>
    I             RECOGNITION AND UNION SECURITY..........................................................      1
                  Employees Covered.......................................................................      1
                  Union Security..........................................................................      2
                  Check-Off...............................................................................      3
                  Information Furnished to the Union Office by Personnel..................................      3
                  Union Representatives' Seniority........................................................      4
                  Leaves of Absence for UNION Business....................................................      4
                  Change in Membership-Officers and Shop Steward of UNION.................................      4
                  Payment for Union Officials Time Spent in Conference
                       With Management....................................................................      4

    II            DISCIPLINARY PROCEDURE..................................................................      4
                  Just Cause..............................................................................      4
                  Interview and Hearing...................................................................      4
                  Good Faith Duties.......................................................................      5
                  Correction of Offense...................................................................      5
                  Disciplinary Policy.....................................................................      5
                  Automatic Discharge - Three (3) Warning Notices.........................................      5
                  Retention of Documentation..............................................................      5

    III           GRIEVANCE PROCEDURE AND ARBITRATION.....................................................      6
                  Grievance Procedure.....................................................................      6
                  Grievances - Step 1.....................................................................      6
                  Grievances - Step 2.....................................................................      6
                  Grievances - Step 3.....................................................................      7
                  Resolution by Default...................................................................      7
                  Arbitration of Disputes.................................................................      7
                  Selection of Arbitrators................................................................      7
                  Authority of Arbitrator.................................................................      8
                  Expedited Arbitration...................................................................      8

    IV            HOURS OF WORK AND PREMIUM PAY...........................................................      9
                  Work Week...............................................................................      9
                  Overtime Hours..........................................................................      9
                  Saturday and Sunday Work................................................................      9
                  Availability for Scheduled Work.........................................................      9
                  Overtime................................................................................     10
                  No Pyramiding...........................................................................     10
                  Shift Schedule..........................................................................     11
                  Changes in Shift Schedule...............................................................     11
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                        PAGE
-------           -----                                                                                        ----
<S>                                                                                                             <C>
                  Lunch Periods...........................................................................     12
                  Payment for Work During Lunch Period....................................................     12
                  Rest Periods............................................................................     12
                  Requests to Report to Work Without Prior Scheduling.....................................     12
                  Shift Preferences.......................................................................     12
                  Employees Sent Home Early or Absent Due to Lack of Orders...............................     13
                  Shift Premiums..........................................................................     13
                  Reporting Pay...........................................................................     13

    V             NO STRIKE - NO LOCKOUT..................................................................     13

    VI            MANAGEMENT RIGHTS CLAUSE................................................................     13

    VII           SENIORITY...............................................................................     14
                  Accumulation of Seniority...............................................................     14
                  Termination of Seniority................................................................     14
                  Layoff..................................................................................     15
                  Furlough................................................................................     15
                  Return to Former Classification.........................................................     16
                  Changes in Return to Former Classification..............................................     16
                  Interviews at Personnel for Employees Involved in a Layoff..............................     16
                  Presence of UNION Delegate During Layoff Interviews.....................................     16
                  Requests Not to be Returned to Certain Types of Work....................................     16
                  Determination of Layoffs................................................................     17
                  Layoff Notices..........................................................................     17
                  Notice of Recall........................................................................     17
                  Change of Address.......................................................................     17
                  Reasons for Absence to be Reported to Personnel by Employees............................     17
                  Probationary Period.....................................................................     18
                  Procedure on Filing Open and New Jobs...................................................     18
                  Procedure on Filling Temporary Jobs.....................................................     20
                  Temporary Employees.....................................................................     21
                  One (1) Year Freeze After Return to Former Classification...............................     21
                  Refusal to Accept Return to Former Classification When Opening Occurs...................     21
                  Refusal to Accept Job After Having Bid Successfully.....................................     21
                  Seniority of Employees Who Bid or Transfer Prior to Layoff .............................     21
                  Employees Who Bump Into a Classification When a Layoff Occurs ..........................     22
                  Increases and Decreases in Production - Notification to Shop Stewards ..................     22
                  New and Transferred Employees - Training Period And Rate ...............................     22
                  Training Program on New Jobs............................................................     22
                  War Emergency...........................................................................     22
</TABLE>

                                     -iii-

<PAGE>

<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                        PAGE
-------           -----                                                                                        ----
<S>                                                                                                             <C>
                  Seniority Bonus.........................................................................     23

    VIII          WAGES...................................................................................     23
                  Reactivation of Old Classifications.....................................................     23
                  Establishment of New Classifications....................................................     23
                  Rate for Borrowed Man...................................................................     24
                  Average Rate Computation................................................................     24
                  Work Wait Compensation..................................................................     24
                  Conditions Beyond Control of COMPANY....................................................     26
                  Employees Borrowed as a Lead Person.....................................................     26
                  Inventory...............................................................................     27
                  Rehiring on Unfamiliar Work.............................................................     27

    IX            STANDARD ALLOWED HOURS..................................................................     27
                  Incentive Compensation Plan.............................................................     27
                  New or Varied Jobs and Operations.......................................................     28
                  Standard Allowed Hour...................................................................     28
                  Written Confirmation and Effective Date of SAH..........................................     29
                  Procedural Interpretation of Section....................................................     29
                  Grievances Regarding Incentive Standards................................................     30
                  Availability of Time Study Data.........................................................     31
                  Union Time Study Engineer...............................................................     31
                  Standard Data...........................................................................     31

    X             PAID HOLIDAYS...........................................................................     32
                  Holidays Observed.......................................................................     32
                  Eligibility for Holiday Pay.............................................................     32
                  Holiday Pay - Employees Absent Due to Illness or Accident...............................     33
                  Holiday Pay.............................................................................     33
                  Holidays During Approved Vacation.......................................................     33
                  Multiple Holidays on Same Day...........................................................     33
                  Holidays on Sunday......................................................................     33
                  Holidays on Saturday....................................................................     33
                  Pay Rate................................................................................     33
                  Overtime and Premium Pay................................................................     33
                  Monday Holidays.........................................................................     34

    XI            PAID VACATIONS..........................................................................     35
                  Vacation................................................................................     35
                  Scheduling of Staggered Vacations.......................................................     36
                  Eligibility.............................................................................     36
</TABLE>

                                      -iv-

<PAGE>

<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                        PAGE
-------           -----                                                                                        ----
<S>                                                                                                             <C>
                  No Accumulation.........................................................................     36
                  Shift Premium...........................................................................     36
                  Pay For Quits And Discharges............................................................     36
                  Rate to be Used for Computing Vacation Pay..............................................     36
                  Vacation Pay - Leaves of absence - Layoff...............................................     36

XII UIU PENSION TRUST.....................................................................................     37

XIII              UNITED STEELWORKERS HEALTH AND WELFARE FUND.............................................     38
                  Benefit Plan(s).........................................................................     38
                  Contribution Rates......................................................................     38
                  Eligibility.............................................................................     39
                  Employee Contributions..................................................................     39
                  Sickness and Health and Life Insurance..................................................     40
                  Payment of Contributions................................................................     40
                  Coverage................................................................................     40
                  Election of Category of Coverage and Right to Change....................................     40
                  Requirements............................................................................     40
                  Hold Harmless...........................................................................     41
                  Reinstatement of Coverage...............................................................     41
                  Part Time Employees.....................................................................     41
                  Audit Rights............................................................................     41
                  Availability of Benefits................................................................     41

XIV JURY SERVICE  ........................................................................................     42

XV  BEREAVEMENT PAY.......................................................................................     42
                  Definition..............................................................................     42
                  Payment.................................................................................     42

XVI BULLETIN BOARDS.......................................................................................     42
                  Bulletin Boards.........................................................................     42
                  Posting of Notices......................................................................     42

XVII              MILITARY CLAUSE.........................................................................     43

XVIII             EMPLOYEE BIRTHDAY PAY...................................................................     43

XIX EQUAL EMPLOYMENT OPPORTUNITY..........................................................................     43

XX  LEAVES        ........................................................................................44
</TABLE>

                                      -v-
<PAGE>

<TABLE>
<CAPTION>
ARTICLE           TITLE                                                                                        PAGE
-------           -----                                                                                        ----
<S>                                                                                                             <C>
                  Sick Leave..............................................................................     44
                  Injury in Course of Employment..........................................................     44
                  Employees on Leaves of Absence - Seniority Rights.......................................     44

XXI MISCELLANEOUS ........................................................................................     45
                  Foul Weather Clothing...................................................................     45
                  New Piece of Equipment - Displacement of Personnel......................................     45
                  Supervisor's Working....................................................................     45
                  Premium Payment - Successful Bidders Not Assigned to New Jobs...........................     45
                  Pay Shortages...........................................................................     45
                  Rotation of Employees - Overtime and Department Shutdown................................     46

XXII              MODIFIED DUTY WORK HARDENING PROGRAM....................................................     46

XXIII             SAVING CLAUSE...........................................................................     46
                  Separability............................................................................     46
                  Federal and State Laws..................................................................     47

XXIV              SEVERANCE AND PLANT CLOSINGS............................................................     47

XXV               DURATION AND TERMINATION AGREEMENT......................................................     47
                  Effective Date..........................................................................     47
                  Entire Agreement........................................................................     47
                  Modification or Termination.............................................................     47

XXVI              CONTRACT RE-OPENER......................................................................     48

                  SIGNATURES..............................................................................     49

                  APPENDIX I..............................................................................     50

                  APPENDIX II.............................................................................     51

                  APPENDIX III............................................................................     52

                  APPENDIX IV.............................................................................     53

</TABLE>

                                      -vi-

<PAGE>

                              PISCATAWAY AGREEMENT

                                          Language from Piscataway Supplement
                                          Language from Master Agreement

                                    AGREEMENT

                  This Agreement, made and entered into this 16th day of
October, 2001, by and between Simmons Company, 365 Randolphville Road
Piscataway, New Jersey, 08854, signatory hereto, party of the first part,
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. 420, hereinafter referred to as the Union.

                                   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 EMPLOYER
and the UNION and, therefore, all AGREEMENTS or understandings concerning hours,
wages and working conditions between the EMPLOYER and the employees covered by
this contract are to be made by the EMPLOYER 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 the employees described in Appendix I and II which is made a part hereof who
are production employees of the Company employed in its Piscataway, NJ Plant
excluding watchmen, office janitors, maintenance department employees, truck
drivers, tool makers, machinists, supervisors, porters, matrons, main office,
clerical, and maintenance helpers.

<PAGE>

         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.

                  (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 concurrence 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 7.15
                           of this AGREEMENT.

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

                                      -2-
<PAGE>

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

         1.04 CHECK-OFF. The COMPANY, where so authorized and directed by an
employee in writing, not less than thirty (30) days from the effective date of
this agreement for present employees, and not less than fifty (50) working days
from start of employment for new employees, upon an authorization form, will
deduct monthly dues, including initiation fees and lawful assessments, as
designated by the constitution and by the International Secretary/Treasurer The
initiation fee for newly hired employees, after the probationary period shall be
$10.00.

                  Monthly dues for a member shall be an amount equal to $1.3% of
the said member's total earnings during the month, provided that monthly dues
shall not be less than $5.00 and provided further that monthly dues shall not be
more than 2.5 times the member's average hourly earnings. For lump sum payments,
dues shall be calculated separately by applying the 1.3% to such payments.

                  All dues remittance shall be mailed to the International
Secretary/Treasurer, at United Steelworkers of America, Five Gateway Center,
Department 1880, Pittsburgh, Pennsylvania 15278. Each remittance shall be
accompanied by a list setting forth the names of those from whom the amounts of
dues and initiation fees were deducted.

         1.05     INFORMATION FURNISHED TO THE UNION OFFICE BY PERSONNEL

                  (a)      All jobs posted for bid purposes on the Bulletin
                           Board and the results of bidding thereon.

                  (b)      A copy of the Personnel Action Form each time such
                           list issues.

                  (c)      The results in writing of each layoff interview.

                  (d)      Copies of all completed "Return to Former
                           Classification Form."

                  (e)      The UNION shall receive copies of all bulletins
                           posted on the COMPANY bulletin boards for the general
                           information of the employees.

                  (f)      The COMPANY will give the UNION a copy of the various
                           average rates when such lists are presented to the
                           various employees.

                  (g)      The COMPANY will, semi-annually, on demand, publish a
                           Plant Seniority List which will include
                           classifications and provide a copy of such list to
                           the Local Union.

                                      -3-
<PAGE>

                  (h)      PERSONNEL TURNOVER. The Company will continue to
                           provide the UNION with labor turnover sheets in the
                           manner they presently do.

         1.06 UNION REPRESENTATIVES' SENIORITY. For the purpose of layoff only,
Officers of the UNION and UNION Stewards, where they have departmental
jurisdiction shall head the seniority list during their respective term of
office. Limit the appointment of department stewards to one steward per shift.

         1.07 LEAVES OF ABSENCE FOR UNION BUSINESS. An employee, while on a
leave of absence for UNION business, shall be included in any personnel changes,
in line with their seniority, and shall have the same right of job selection as
if they were working. While on such leave of absence they shall be replaced by a
temporary employee.

         1.08 CHANGE IN MEMBERSHIP-OFFICERS AND SHOP STEWARD OF UNION. It is
agreed that the COMPANY will be notified immediately of any change in membership
of the officers and Shop Stewards of the UNION. In the event it becomes
necessary to lay off employees, the COMPANY will give the layoff list to the
particular Shop Steward involved before posting same on bulletin board.

         1.09 PAYMENT FOR UNION OFFICIALS TIME SPENT IN CONFERENCE WITH
MANAGEMENT. Union Officials shall be paid at their previous quarter average
hourly rate as computed in Section 8.08 of this AGREEMENT. Time spent in
conference with the Company pertaining to negotiations of a new contract or
subsequent hearings before any Federal or Governmental Agencies pertaining to
such contract, shall be compensated for by the Union. Two Union Representatives
will be paid by the Company at each's average rate for Steps 2 & 3 for time lost
for the first 12 grievances in a contract year.

                                   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,

                                      -4-
<PAGE>

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.

                  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. SIMMONS 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 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.

         2.06 AUTOMATIC DISCHARGE - THREE (3) WARNING NOTICES. The parties agree
to a progressive disciplinary program by where an employee may be automatically
discharged after receipt of three (3) written reprimands of same offense in a
continuous twelve (12) month period.

         2.07 RETENTION OF DOCUMENTATION. The COMPANY agrees to retain all
warning notices or memos or disciplinary action for a reasonable length of time
for UNION inspection. Evidence of

                                      -5-
<PAGE>

poor workmanship must be retained for UNION inspection whenever feasible, but in
no event to exceed forty-eight (48) hours after a copy of the warning notice of
bad works is given to the UNION. Reprimands must be issued and the UNION copied
no later than one (1) week after the infraction.

                                   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) 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 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 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) workdays 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

                                      -6-
<PAGE>

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.

                  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 8.06 the dispute may
be appealed to arbitration for determination by a qualified time study
arbitrator.

                                      -7-
<PAGE>

                  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.

                  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 parties
will each select three (3) arbitrators who are either American Arbitration
Association or FMCS arbitrators to serve on an expedited arbitration panel. Two
of the six arbitrators SHALL BE QUALIFIED TIME-STUDY ENGINEERS AND ALL
ARBITRATORS selected for the panel must be willing to accept the contractual
conditions for expedited arbitration. 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 the pre-agreed panel of six (6) arbitrators (see Appendix III)
who can hear the case within seven (7) calendar days of the request.

                  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.

                                      -8-
<PAGE>

                  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 through
Friday inclusive, shall constitute a week's work.

         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 8.08 reflecting the earnings for the week in
                           which the overtime is worked.

                  B.       Anyone reporting to work after their regular staring
                           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, and 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)
                           peak months IDENTIFIED BY THE COMPANY. In those five
                           (5) peak months, employees shall be available for
                           Saturday work when production schedules so require. A
                           tentative schedule for these five (5) peak months
                           will be given by December 15th. In

                                      -9-
<PAGE>

                           the event any of these five peak months need to be
                           changed, a sixty (60) day notice will be given.

                  B.       During the months described above the 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.

                  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     OVERTIME.

                  A.       Time and one-half shall be paid for the first four
                           (4) hours overtime on any of the weekdays of the
                           regular work week, Monday to Friday inclusive. Any
                           overtime beyond four (4) hours in the regular work
                           day shall be paid for at the rate of double time. All
                           work performed on Saturday shall be compensated for
                           at time and one-half such rate of pay for the first
                           eight (8) hours. Double time shall be paid for all
                           work performed on Saturday, in excess of eight (8)
                           hours. All work performed on Sunday shall be
                           compensated at double time. Pieceworkers shall be
                           paid for these irregular hours at the average hourly
                           earnings for the week during which the overtime
                           occurs.

                  B.       Friday Overtime - Employees can be scheduled for no
                           more than two hours overtime on Fridays provided:

                           (1)      notification is received on the previous
                                    shift;

                           (2)      the employee is not compelled to work on
                                    Saturday; and

                           (3)      Peak Activity Overtime - At times of peak
                                    production requirements, Saturday overtime
                                    may be necessary. Twice per calendar year
                                    the Company can require working no more than
                                    six (6) consecutive Saturdays. The Company
                                    will notify the Union at the earliest
                                    possible moment of the need for working more
                                    than two (2) consecutive Saturdays.

                                      -10-
<PAGE>

         4.06 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.

         4.07 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 seven (7) 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
seven (7) 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 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.

                  Three (3) shifts - When three (3) shifts are to be worked in
any Department, the following schedule shall be observed.

                  A.       On the first shift, all workers will report at 7:00
                           a.m. and work until 3:00 p.m. with a half-hour lunch
                           period.

                  B.       The second shift shall be from 3:00 p.m. to 11:00
                           p.m. with a half-hour lunch period.

                  C.       The third shift shall be from 11:00 p.m. until 7:00
                           a.m. with a half-hour lunch period.

                  Two (2) shifts - When two (2) shifts are to be worked in any
Department, the following schedule shall be observed.

                  A.       On the first shift, all workers will report at 7:00
                           a.m. and work until 3:30 p.m. with a half-hour lunch
                           period.

                  B.       The second shift shall be from 3:30 p.m. to 12:00
                           midnight with a half-hour lunch period.

                  One (1) shift - When one (1) shift is to be worked in any
Department, the following schedule shall be observed.

                  A.       Workers will report at 7:00 a.m. and work until 3:30
                           p.m. with a half-hour lunch period.

                                      -11-
<PAGE>
         4.08 CHANGES IN SHIFT SCHEDULE. In the event it becomes necessary to
deviate from the above stated starting or quitting times, the COMPANY and the
UNION shall by mutual AGREEMENT decide such change in shifts as might become
necessary for their mutual welfare. The COMPANY and the UNION will also by
mutual AGREEMENT decide when it becomes necessary to change the shift of an
employee or group of employees in any emergency.

                  It is the AGREEMENT of the parties that no change in shifts
can be established until seven (7) days after said change has been mutually
agreed upon by both parties.

         4.09     LUNCH PERIODS.

                  ONE SHIFT:       On a one-shift schedule there shall be a
                                    lunch period from 12:00 noon to 12:30 p.m.
                                    without pay.

                  TWO SHIFTS:       On a two-shift schedule, the lunch period
                                    for the first shift shall be from 12:00 noon
                                    to 12:30 p.m. The lunch period for the
                                    second shift shall be from 7:30 p.m. to 8:00
                                    p.m. Both lunch periods on a two-shift
                                    schedule are without pay. If the start time
                                    for the second shift is 4:30 p.m., then the
                                    lunch period will be from 8:30 p.m. to 9:00
                                    p.m.

                  THREE SHIFTS:     On a three-shift schedule, the lunch period
                                    for the first shift shall be from 12:00 noon
                                    to 12:30 p.m.; second shift from 7:30 p.m.
                                    to 8:00 p.m.; third shift from 3:00 a.m. to
                                    3:30 a.m.

Whenever three (3) shifts in department by classification are necessary, each
shift shall be paid for eight (8) hours work with one half-hour lunch period
included. Pieceworkers shall be paid at their weekly average hourly rate for
one-half hour lunch period. Hourly workers shall be paid their hourly rate for
the one-half hour lunch period.

         4.10 PAYMENT FOR WORK DURING LUNCH PERIOD. In the event that an
employee is asked to work through their normal lunch period, they will receive
time and one-half payment for such time.

         4.11 REST PERIODS. It is agreed that two (2) rest periods of ten (10)
minutes will be given during any shift. The schedule for rest periods is as
follows:

                  1st Shift:        9:20 a.m. to 9:30 a.m. - 2:20 p.m. to 2:30
                                    p.m.

                  2nd Shift:        5:30 p.m. to 5:40 p.m. - 10:00 p.m. to 10:10
                                    p.m. If the second shift begins at 4:30
                                    p.m., the first break will be from 6:30 p.m.
                                    to 6:40 p.m.

                  3rd Shift:       1:00 a.m. to 1:10 a.m. - 5:00 a.m. to
                                   5:10 a.m.

         4.12 REQUESTS TO REPORT TO WORK WITHOUT PRIOR SCHEDULING. In the event
that an employee is requested to report to work on a day when they are not
regularly scheduled to work they shall receive compensation from the regular
reporting time of their assigned shift, even though they may be required to
report at a later time. However, in the event that an employee is requested to
report at

<PAGE>

a time earlier than the regular starting time of his assigned shift, they shall
be compensated from his actual starting time, as outlined in this agreement.

         4.13 SHIFT PREFERENCES. Shift preference will be given to employees
presently working on a classification before requisitions for additional
employees are sent to Personnel Department.

         4.14 EMPLOYEES SENT HOME EARLY OR ABSENT DUE TO LACK OF ORDERS. In the
event an employee has been sent home before the normal end of their shift, or
told not to report for work because of lack of orders, and other employees,
nevertheless, perform operations normally assigned to their classification, the
COMPANY will compensate the employee who worked short hours the amount of
earnings lost because of substitute performing work in his absence.

         EXAMPLE           #1: If substitute closed three (3) mattresses,
                           employee who lost work will receive the three (3)
                           piecework tickets.

         EXAMPLE #2:       If a substitute dayworker worked one (1) hour,
                           employee who lost work will receive one (1) hour's
                           pay.

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

         4.16 REPORTING PAY. When an employee reports for work at the regular
starting time of his shift without previous notice not to report and his regular
work is not available for him, he 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 will be
paid at average rate as computed in Section 8.08 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

                                      -13-
<PAGE>

                  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.

                                   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 7.15 and the leave request must be in
                           writing.

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

                  (a)      When an employee resigns;

                  (b)      When an employee is discharged for just cause;

                  (c)      When the employee is laid off longer than twelve (12)
                           months, except for right of recall as described
                           below. If an employee is laid off longer than the
                           twelve (12) months, he/she shall have recall rights
                           for an additional six (6) month period without loss
                           of seniority. This additional six (6) month grace

                                      -14-
<PAGE>

                           period for recall purposes only may not be extended
                           for any other purpose and shall not be credited
                           toward accumulation of seniority;

                  (d)      When an employee's absence due to disability or
                           illness exceeds five (5) years;

                  (e)      When an employee is recalled to work and does not
                           return to work as provided in section 7.12;

                  (f)      If an employee falsifies any information given in
                           connection with a leave of absence; and

                  (g)      When an employee obtains other employment while on an
                           approved leave of absence.

         7.03 LAYOFF. When a layoff occurs the youngest employee in point of
service, in the classification, shall be laid off. That employee may apply their
seniority against the youngest employee in point of service provided he/she is
qualified. In the event this option is not available and less senior employees
are still working, this employee shall have the option of applying his/her
seniority against the youngest employees in point of service in their department
or in the plant. Any employee laid off for lack of work shall have his/her name
placed on a surplus labor list. If an employee's seniority has been broken,
his/her name should be removed from such list.

         7.04 FURLOUGH. In order to provide a more reasonable work schedule for
senior employees when hours are shortened due to lack of orders, the plant or
operations manager will have the responsibility of placing on furlough those
junior employees who are not needed to fill the daily production schedule. 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. It
is understood that a furlough may be for any length of time provided such does
not exceed four (4) continuous weeks at any given time, unless the furlough
occurs on the first work day of a given month, in which case the furlough cannot
exceed three (3) consecutive weeks. For recordkeeping purposes, the president
for Local #420 or his appointee will be notified of such furlough by letter
signed by the involved plant or operations manager.

                  In the event variation in customer demands requires employees
to return from furlough earlier than announced, such return shall be by
seniority unless the senior employees are unavailable. In such event, the
COMPANY liability shall be limited to notification to the UNION that such
employee either 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 the furlough to begin Wednesday and continue through for a continuous
minimum of five (5) working days.

                                      -15-
<PAGE>

         7.05 RETURN TO FORMER CLASSIFICATION. Employees who are laid off and
maintain employment in work other than their regular classification will be
given preference to their regular type of work by filling in the application
"Return to Former Classification." This application will be honored in line with
seniority before "Bids" are accepted by the COMPANY.

                  Employees laid off, who desire to be returned to their regular
classification, must request their return to that particular type of work at the
time of the layoff and applications covering same must be forwarded to the
Personnel Office.

         7.06 CHANGES IN RETURN TO FORMER CLASSIFICATION. Employees desiring a
change in their Return to Former Classification may do so, provided they
previously have held or have had proven ability in that classification and
provided that no requisitions have been sent to the Personnel Department
indicating vacancies currently exist in that classification.

         7.07 INTERVIEWS AT PERSONNEL FOR EMPLOYEES INVOLVED IN A LAYOFF.

                  A.       Employees who are interviewed at the Personnel Office
                           in the course of a regularly scheduled layoff shall
                           be paid in the following manner:

                           (1)      Those who come from home, whether they be
                                    pieceworkers or dayworkers shall be granted
                                    the half hour pay at their average hourly
                                    rate.

                           (2)      Employees who leave their jobs to go to the
                                    Personnel Office shall be paid full average
                                    rate from five (5) minutes before the time
                                    indicated on the posted interview schedule
                                    until five (5) minutes following the end of
                                    the interview.

         7.08 PRESENCE OF UNION DELEGATE DURING LAYOFF INTERVIEWS. The President
(or their designee) of Local 420 will be the single designated member of the
UNION in all layoff counseling regardless of size. The representative of the
Personnel Office who will do the interviewing shall determine where they want to
conduct the layoff interviews. In view of the fact that the UNION is furnished
complete copies of all layoff and bump lists as soon as they are compiled, no
grievance over layoffs or bumps will be entertained if the grievance is not
submitted at least eight (8) working hours before the interviewing will
commence.

                  The COMPANY will agree to the UNION request for presence of a
translator during the interview of an employee considering job change, provided
such translator has the necessary language skill and the cost to the COMPANY as
well as absence of employees from work is de minimis. COMPANY suggests ten (10)
minutes as adequate.

         7.09 REQUESTS NOT TO BE RETURNED TO CERTAIN TYPES OF WORK. An employee
being laid off who is eligible to bump or take an open job may have the option
of taking the available job or taking a layoff. This option shall be expressed
in writing at the time of layoff and at that time the employee

                                      -16-
<PAGE>

may elect not to be called for specific types of work or a specific shift and
they shall be by-passed when employees are needed for those named occupations or
shift. If an employee elects to take a layoff, the COMPANY will not protest
their claim for unemployment benefits. Once an employee who exercised any of the
above options is on layoff, he/she may not change this option during the period
of layoff and shall be recalled only to the jobs indicated in the option. If
he/she did not exercise an option at the time of layoff, the employee must
accept the first open job he/she is recalled to in line with seniority. Any
employee on layoff who refuses a job he/she previously indicated acceptance of
recall to, will be terminated as not available for employment.

                  A form will be developed to indicate the employee will accept
any job for which he/she is recalled in line with seniority, except as otherwise
indicated in writing. The UNION will receive a copy of exceptions. Recognizing
language problems and the possibility of misunderstanding a layoff recall
status, it is agreed that any employee who desires to change his recall option
may do so providing such change of option is expressed in writing with
acknowledgment by the UNION President and the Labor Relations MANAGER no later
than thirty (30) working days following the notice of layoff.

         7.10 DETERMINATION OF LAYOFFS. When the hours of work fall below
thirty-two (32) hours per week for four (4) consecutive weeks subsequent to a
furlough and when the UNION Executive Board requests a layoff the layoff shall
take place in accordance with Section 7.03.

         7.11 LAYOFF NOTICES. On a permanent layoff the COMPANY will give a
notice of five (5) working days. A permanent layoff is when an employee is laid
off for more than five (5) working days.

         7.12 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 receipt of notice to report will terminate
seniority.

                  Overnight letters to the employee 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 his last known address shall
                  solely be that of the COMPANY.

         7.13 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 7.12 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 him/her within the above five (5) days will mean forfeiture of
all seniority rights by the employee involved.

         7.14 REASONS FOR ABSENCE TO BE REPORTED TO PERSONNEL BY EMPLOYEES. It
is the responsibility of each employee to immediately report the reasons for
their absence to the Personnel

                                      -17-
<PAGE>

Office. Any employee who does not report for work and does not report the reason
for their absence to the Personnel Office for three (3) consecutive working days
will be terminated. After the second day of no report, the COMPANY will notify
the UNION of the pending termination. Extenuating circumstances will be reviewed
by the COMPANY on an individual basis.

         7.15 PROBATIONARY PERIOD. New employees shall be considered
probationary employees during the first sixty (60) calendar days of service with
the COMPANY and may be discharged for any reason during this period with or
without cause. 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.

         7.16 PROCEDURE ON FILLING OPEN AND NEW JOBS.

              A.     REQUISITION SENT TO PERSONNEL OFFICE: Requisition showing
                     number of employees required, department and classification
                     is filed with the Personnel Office.

              B.     RETURNS TO FORMER CLASSIFICATION HONORED FROM ACTIVE
                     PAYROLL: Personnel Office honors "Return to Former
                     Classification" claims involving employees presently on the
                     payroll.

              C.     RETURNS TO FORMER CLASSIFICATION HONORED FROM SURPLUS LABOR
                     LIST: Failing to find applications from Step B, the
                     Personnel Office will go to the surplus labor list and
                     select employees by Return to Former Classifications and
                     seniority to fill the open job.

              D.     JOB POSTINGS: Failing to find applicants for Step C, the
                     COMPANY will then post the job available and the method of
                     compensation on the Bulletin Board located in non-smoking
                     and smoking cafeteria bulletin boards, but bids must be
                     hand delivered to human resources office. Selection will
                     then be open for bid by eligible employees in line with
                     seniority. The above notice is to appear on the Bulletin
                     Board for a period of thirty-three (33) hours. All
                     applications unless otherwise provided will be considered
                     on basis of seniority. If, after expiration of thirty-three
                     (33) hours, no employee has applied for the open job, the
                     COMPANY shall hire from the Surplus Labor List. COMPANY
                     agrees to make every effort to notify the UNION of
                     successful bidders as promptly as possible after bids have
                     been received for the job posted. Any employee assigned to
                     a job under the above procedure does not have seniority
                     rights for the purpose of layoff unless such employee has
                     demonstrated his ability to work piecework for five (5)
                     consecutive days before that expiration date.

              E.     EMPLOYEES LAID OFF PRIOR TO THIRTY (30)-DAY WORKING PERIOD
                     ON NEW CLASSIFICATION: It is understood that in the event
                     that there shall be no "Return

                                      -18-
<PAGE>

                     to Former Classification" submitted by eligible employees,
                     preference shall be given to employees who have written a
                     Return to Former Classification who were not eligible
                     because they were laid off or bumped prior to having served
                     the thirty (30) day working period required on that
                     classification. Failing to find applicants by the above
                     outlined procedure, the COMPANY will then contact employees
                     from the Surplus Labor List in line with their seniority,
                     regardless of classification except as provided in Section
                     8.09(g).

              F.     EMPLOYEES WITH LESS THAN TWELVE (12) MONTHS SENIORITY:
                     Employees with less than twelve (12) months seniority:

                     (1)    are not eligible to bid for open jobs, and

                     (2)    may only remain on the surplus labor list for a
                            period not to exceed length of service. If the
                            Company should call back the laid off employee
                            within one year after the original hire date, the
                            employee will maintain their original hire date.

              G.     NEW EMPLOYEES ON PAYROLL: Employees not eligible to bid
                     will be given preference on open jobs as against newly
                     hired employees, provided they have had six (6) months
                     service with the COMPANY; provided further that they
                     indicate in writing an interest in changing their job to
                     the Employment Office and they now work. An open job shall
                     be deemed to exist when a requisition for help is unfilled
                     by the Employment Office through Return to Former
                     Classification or bid or by preference of the employees on
                     the Surplus Labor List when interviewed.

              H.     JOB FREEZE: Any employee accepting a job through the
                     above-outlined procedure must remain on that particular job
                     for a period of one (1) year before they may apply for
                     another type of work.

              I.     NEW EMPLOYEES NOTIFIED OF LAYOFF: Employees currently on
                     the payroll who are otherwise frozen to their
                     classification shall be eligible to bid provided they have
                     been officially notified of a layoff or are on the subject
                     to bump list. Employees on a sick leave are eligible to
                     bid. There is no obligation to give such employee any
                     notice other than that posted above.

              J.     CHOICE OF JOBS IN CONJUNCTION WITH BIDDING PROCEDURE:
                     Eligible employees when bidding for posted jobs will be
                     allowed up to three (3) choices of jobs in any one day.
                     When two (2) or more jobs appear on the board open for
                     bidding, eligible employees will be allowed to make three
                     (3) choices, Choice 1, 2, and 3. The bid forms will be
                     clearly marked in print: Choice 1, Choice 2 and Choice 3.

              K.     WITHDRAWAL OF BIDS: Any employee having bid and desiring to
                     withdraw his/her bid may do so by dropping a written notice
                     at the human resources

                                      -19-
<PAGE>

                     office before the final posting of the successful bidder.
                     This written notice shall consist of the special form
                     indicating the change by the employee.

              L.     COMBINATION OF CLASSIFICATIONS: Upon mutual AGREEMENT
                     between the COMPANY and the UNION, there shall be a
                     combination of classifications as warranted by production
                     schedules. When daywork classifications are involved in
                     this combination, the employee will receive the pay of the
                     highest classification. In the event that an employee bumps
                     into a dual or combined classification he may request as
                     his "Return to Former Classification" the classification of
                     the employee he replaced. Failing to reach an AGREEMENT on
                     the combining of jobs the layoff will be held in abeyance.

              M.     DISQUALIFICATION OF EMPLOYEES: Any employee disqualified
                     three (3) times as incapable of performing a job shall be
                     terminated from employment. Physical disqualifications are
                     counted for this purpose unless: if the third
                     disqualification is the employee's first PHYSICAL
                     disqualification, then that employee will be placed on
                     surplus labor.

              N.     JOB CANCELLATIONS BY DIVISIONAL SUPERINTENDENT: In the
                     event posted jobs have been bid for and are canceled by the
                     plant or operations manager, preference shall be given to
                     the successful bidders at the next job opening provided the
                     next job opening occurs within a period of one hundred
                     eighty (180) days from the original posting. The successful
                     bidder shall be entitled to sign a "Return to Former
                     Classification" which shall be effective for a one hundred
                     eighty (180) day period. Their thirty (30) day qualifying
                     period shall begin with the first day they are assigned to
                     the job bid for. Should the employee successfully bid on
                     another job within the one hundred eighty (180) day period,
                     they shall relinquish all rights to the first job bid for.

              O.     CANCELLATION OF BID BY SUCCESSFUL BIDDER: In the event a
                     successful bidder cancels their bid prior to having worked
                     on the job, preference shall be given to the remaining
                     unsuccessful bidders.

      7.17  - 1      PROCEDURE ON FILLING TEMPORARY JOBS

              A.     Where an employee obtains a temporary job by bid and the
                     job is made a permanent job, preference will be given to
                     the aforesaid employee.

              B.     In selection of employees for temporary jobs, it is
                     understood that if a job shall last for a period of less
                     than sixty (60) working days, any employees from Surplus
                     Labor may be assigned to the job. However, the Company may
                     mandate the least senior employee on the surplus list to
                     take the temporary job, if no employee accepts it.

                                      -20-
<PAGE>

              C.     When laid off, all employees filling temporary jobs are to
                     have the right to bump the youngest in the Plant by
                     qualification.

              D.     Company will permit a temporary employee to be bumped if
                     there is a layoff in the classification held by the
                     employee on a leave of absence if the bumping employee has
                     more seniority than the temporary employee and is a
                     qualified employee. Changes when necessary will be made as
                     soon as possible. The Company agrees to note the employees
                     on leave of absence on the record of the substitute in each
                     instance.

       7.17 - 2      TEMPORARY EMPLOYEES

              A.     Temporary employee will receive no benefits, pension,
                     holidays, or vacation payment.

              B.     The Company will not have temporary employee as long as
                     there are permanent employees on surplus.

              C.     If a temporary employee is transferred to a permanent
                     employee, their seniority date will be considered their
                     original hire date, as long as there was no break in
                     service between the transfer.

         7.18 ONE (1) YEAR FREEZE AFTER RETURN TO FORMER CLASSIFICATION. Any
employee returning to their former classification must remain on that particular
job for a period of one (1) year before another bid will be recognized by the
COMPANY. Exception to the preceding sentence: Employees who have two or more
years of continuous service return to a former classification without a freeze
and be free to bid.

         7.19 REFUSAL TO ACCEPT RETURN TO FORMER CLASSIFICATION WHEN OPENING
OCCURS. Any employee who has a "Return to Former Classification" form made out
and refuses to accept the Former Classification when the opening occurs will be
ineligible to bid for a period of one (1) year.

         7.20 REFUSAL TO ACCEPT JOB AFTER HAVING BID SUCCESSFULLY. Any employee
who is the successful bidder for an open job and refuses to accept the job will
be ineligible to bid for a period of six (6) months.

         7.21 SENIORITY OF EMPLOYEES WHO BID OR TRANSFER PRIOR TO LAYOFF.
Employees who bid or have been transferred immediately prior to a layoff must
meet the following requirements in order to enjoy regular seniority privileges:

              A.     PIECEWORKERS: An employee must have demonstrated their
                     ability to work piecework for five (5) consecutive days
                     within thirty (30) days. Any partial day or days when an
                     employee is told to go home because of no work shall be
                     considered as working days. This time must be worked prior
                     to the

                                      -21-
<PAGE>

                     date the layoff occurs. Holidays coming within this period
                     of time will be considered as days worked. The effective
                     date in determining when the thirty (30) day trial period
                     starts will be the day the employee files their bid in the
                     Employment Office or in the case of transferred employees,
                     the date on which the employee has been notified they are
                     going to be transferred.

              B.     In addition, a pieceworker must be earning piecework and
                     performing satisfactory work for the payroll week previous
                     to the date on which the layoff notice is given, regardless
                     of the number of days on the classification.

              C.     Dayworkers must have been in an assigned classification for
                     five (5) working days prior to the day on which the layoff
                     occurs. Holidays coming within this period of time will be
                     considered as days worked.

              D.     ALL EMPLOYEES: Employees who bid or were transferred and
                     cannot meet the requirements in items A, B, and C, will be
                     the first employees taken off classification when a layoff
                     occurs and they will have the right to replace the youngest
                     employee in the plant, in accordance with the Labor
                     Agreement unless the bidding employees fail to qualify for
                     said classification.

         7.22 EMPLOYEES WHO BUMP INTO A CLASSIFICATION WHEN A LAYOFF OCCURS. Any
employee who bumps into a classification immediately prior to a layoff on that
classification will not have the seniority privileges of such classification if
he has not made piecework and is not performing satisfactory work for the
payroll week immediately prior to the date on which the layoff notice is given.
In the event such employee is laid off they shall be eligible to bump the
youngest employee in the plant. Employees who exercise this right to bump will
have at least five (5) working days layoff so that sufficient layoff notice can
be given to the employee who is to be bumped. Should the above employee be
subsequently disqualified on the job held by the youngest employee in the plant
they will go to the Surplus Labor List.

         7.23 INCREASES AND DECREASES IN PRODUCTION - NOTIFICATION TO SHOP
STEWARDS. The President of the Local or their appointee will be notified of any
increase or decrease in production. New employees will be introduced to the
departmental Shop Steward.

         7.24 NEW AND TRANSFERRED EMPLOYEES - TRAINING PERIOD AND RATE. All new
and transferred (bid, bump, roll or promoted) employees must earn the training
rate of their jobs within ninety (90) days from the time of their employment and
perform satisfactory work by meeting inspection standards in order to maintain
employment. Those who do not show progressive improvement during the ninety (90)
day period will be laid off. Employees who are recalled, transferred, bid, bump
or roll to another incentive job shall immediately receive the training rate
described in this Agreement where such training rate is provided or his/her
incentive earnings for such job, whichever is higher. Any employee who is
recalled, transferred, bids, bumps or rolls to a day work job shall immediately
receive the top rate for the classification of said job.

                                      -22-
<PAGE>

         7.25 TRAINING PROGRAM ON NEW JOBS. The training program as described in
Appendix II may be extended by mutual AGREEMENT between the UNION and the
COMPANY.

         7.26 WAR EMERGENCY. In the event of a war emergency, the parties agree
to discuss revision of the seniority provisions of this AGREEMENT for the
purpose of providing for such revision as may be necessary because of the
employment conditions then existing.

         7.27 SENIORITY BONUS. All employees with eighteen (18) years or more of
continuous seniority will be granted a seniority bonus of one (1) week's pay
either at Christmas or at the time of their vacation, as the employee chooses.

                                  ARTICLE VIII

                                      WAGES

         8.01 A general wage increase of Thirty-five (35) cents per hour will be
granted effective October 16, 2001. The increase will be applied to the previous
quarterly average and paid effective November 1, 2001. All basic rates, all
hourly rates and all labor grades will be increased to reflect the increase.

         8.02 A general wage increase of Thirty (30) cents per hour will be
granted effective October 16, 2002. The increase will be applied to the previous
quarterly average and paid effective November 1, 2002. All basic rates, all
hourly rates and all labor grades will be increased to reflect the increase.

         8.03 A general wage increase of Thirty (30) cents per hour will be
granted effective October 16, 2003. The increase will be applied to the previous
quarterly average and paid effective November 1, 2003. All basic rates, all
hourly rates and all labor grades will be increased to reflect the increase.

         8.04 A general wage increase of Thirty (30) cents per hour will be
granted effective October 16, 2004. The increase will be applied to the previous
quarterly average and paid effective November 1, 2004. All basic rates, all
hourly rates and all labor grades will be increased to reflect the increase.

                  Effective October 16, 2001, in addition to the general
increases, there will be an adjustment of one-dollar, thirty ($1.30) cents per
hour for the Cutting Type 2 and an adjustment of twenty-five ($.25) cents per
hour for the Truck Loaders.

All retroactive increases will be implemented upon receipt of the signed
executed complete labor agreement.

                                      -23-
<PAGE>

         8.05 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.

         8.06 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 Section 3.09 [Expedited
Arbitration]). 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 as set forth in this AGREEMENT.

         8.07 RATE FOR BORROWED MAN. When an employee is borrowed for the
convenience of the COMPANY and given a type of work to perform other than the
type of work at which he/she is (normally) employed, 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 day work rate for the work being performed.

                  A.       No job may be filled by borrowed personnel for more
                           than sixty (60) days during any twelve (12) month
                           period except by mutual AGREEMENT between the COMPANY
                           and the UNION, except in situations in which the
                           training period exceeds sixty (60) days.

         8.08 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.

                                      -24-
<PAGE>

         8.09 WORK WAIT COMPENSATION

              A.     It is agreed that if, due to absenteeism, mechanical
                     failure, or lack of materials, components, or supplies, a
                     pieceworker is required to wait for any continuous period
                     of more than ten (10) minutes time, he/she shall be
                     compensated in accordance with the following paragraphs for
                     the time lost, except in circumstances covered by paragraph
                     (B) of this section. If, due to absenteeism, mechanical
                     failure, or lack of materials, components, or supplies, a
                     pieceworker is required to wait for any period of less than
                     ten (10) minutes, he/she shall not be compensated for the
                     time lost as hereinafter otherwise provided.

              B.     In all instances, a pieceworker must notify his/her own
                     supervisor, or if his/her is not available, another
                     supervisor, of the fact that he/she cannot work because of
                     absenteeism, mechanical failure, or is waiting for
                     materials, components, or supplies. A pieceworker's work
                     wait status shall commence when he/she notifies a
                     supervisor who shall forthwith record the time. The
                     employee shall be advised of the times recorded by the
                     supervisor. If in exceptional cases a pieceworker requires
                     a period longer than two (2) minutes to locate a
                     supervisor, time spent looking for a supervisor up to a
                     maximum of five (5) minutes shall be added to their
                     compensable work wait time.

              C.     The supervisor shall give the employee a duplicate slip
                     within twenty-four (24) hours.

              D.     Any pieceworker who reports to a supervisor that he/she is
                     in a work wait status within five (5) minutes of the
                     starting of his/her shift rest period (e.g. 9:15 a.m. or
                     5:25 p.m.) will be compensated in accordance with
                     sub-paragraph (E) of this Section only for the duration of
                     time in a work wait status occurring after the end of that
                     rest period.

                     Any pieceworker who reports to his/her supervisor that
                     he/she is in a work wait status within ten (10) minutes of
                     the starting time of his/her shift lunch period (e.g. 11:50
                     a.m. or 7:20 p.m.) will be compensated in accordance with
                     the following paragraphs only for the duration of time in a
                     work wait status occurring after the end of that lunch
                     period. Any pieceworker who reports to a supervisor that
                     he/she is in a work wait status within fifteen (15) minutes
                     of the end of his/her regular shift or overtime quitting
                     hour shall not be compensated for work wait occurring
                     within this last fifteen (15) minute period. A pieceworker
                     who at the beginning of his/her shift discovers that he/she
                     is in a work wait status must notify a supervisor
                     immediately.

              E.     It is agreed that if a pieceworker is required to wait for
                     any period and IS ASSIGNED to another job for the work wait
                     period, he/she shall be compensated for the duration of the
                     time lost on his/her regular job due to

                                      -25-
<PAGE>

                     waiting at one hundred percent (100%) at his/her average
                     hourly rate for the preceding quarter. It is agreed that if
                     a pieceworker is required to wait for any period of more
                     than ten (10) minutes continuous time and IS NOT ASSIGNED
                     to another job, he/she shall be compensated for the
                     duration of time lost due to waiting at eighty-five percent
                     (85%) of his/her average hourly earnings rate. The decision
                     to assign or not to assign a pieceworker in a work wait
                     status to another job for any work wait period shall be
                     made entirely at the COMPANY'S discretion and option.

              F.     Wherever two or more employees are regularly compensated as
                     a group for work performed, and one or more individuals of
                     that group do not report for work and the COMPANY assigns
                     an "experienced employee" as a substitute, all members of
                     the group will be compensated on the established piecework
                     basis. An "experienced employee" shall be one who has
                     worked in that classification within four (4) months prior
                     to the date of substitution and has a minimum of ninety
                     (90) days satisfactory experience in that classification as
                     hereinbefore set forth in Section 7.24. In the event the
                     COMPANY is unable to assign an "experienced employee" as a
                     substitute for an absent member of the regular group, the
                     regular members of the group shall be compensated at their
                     average hourly earnings rate for the preceding quarter, or
                     their actual piecework earnings, whichever is higher.

              G.     When an employee regularly operates more than one machine
                     and one or more of his machines is not operative due to
                     absenteeism, mechanical failure, or lack of materials,
                     components, or supplies and a piecework price has been
                     established for the production of the number of machines
                     remaining in an operative condition, the employee shall be
                     compensated for the value of the production of the
                     operative machine at this same established piecework price
                     with no additional compensation on account of the
                     inoperative machines.

                     When an employee regularly operates more than one machine
                     and one or more of his machines is not operative due to
                     absenteeism, mechanical failure, or lack of materials,
                     components, or supplies and no piecework price has been
                     established for the production of operative machines, the
                     operator will receive the sum total of the piecework value
                     of the production, of the operating machines at the
                     regularly established multi-machine piecework price, plus
                     that production of the total work wait compensation per
                     machine computed in accordance with the provision of this
                     work wait section as that number of machines in an
                     inoperative condition bears to the total number of machines
                     regularly operated by the employee.

         8.10 CONDITIONS BEYOND CONTROL OF COMPANY. It is agreed that the
COMPANY shall have no liability regarding the above provisions in the event of a
breakdown of power outside the Plant or if inside of Plant and not maintained by
the COMPANY, General Plant Fire, Act of God, Act

                                      -26-
<PAGE>

of Public Enemy, or because of conditions beyond the control of the COMPANY. It
is agreed that in the event of power failure employees will stand by until
instructed by the COMPANY to go home or return to work. Employees will be paid
their base rate for up to the first hour of the wait under this Section.

         8.11 EMPLOYEES BORROWED AS A LEAD PERSON

              A.     Any employee who is borrowed as a lead person is to receive
                     his/her average rate plus $1.75 per day in addition to
                     $1.00 per hour, for every hour such employee is engaged in
                     such capacity.

              B.     Any employee appointed by the Company to lead person shall
                     receive a special bonus of fifty cents ($.50) per hour for
                     all such work.

              C.     Pay for lead persons will be included in vacation and
                     holiday pay.

         8.12 INVENTORY.

              A.     In selecting the employees needed for inventory purposes,
                     preference will be given to the dayworkers. Company may
                     assign unqualified dayworkers to material handling,
                     cleaning, etc. Selection of pieceworkers for inventory
                     purposes will be on a volunteer basis by department,
                     provided however that in the event there are insufficient
                     volunteers the COMPANY will assign the least senior
                     pieceworkers on a departmental basis. Pieceworkers while
                     working on inventory will be paid the material handler's
                     rate.

              B.     Dayworkers will be paid the rate of their classification or
                     the inventory rate as indicated on Appendix I, whichever is
                     the higher.

              C.     Pieceworkers will receive the material handler rate
                     indicated on Appendix I. This rate shall be marked
                     "special" so it will not affect the computation of the
                     average rate.

         8.13 REHIRING ON UNFAMILIAR WORK. When an employee is laid off and
rehired on a type of work other than that which he/she normally performed, and
in the event that a standard method has not been established, the employee will
receive his/her average hourly rate for the preceding quarter for the type of
work until such time as the SAH is submitted.

                                   ARTICLE IX

                             STANDARD ALLOWED HOURS

                                      -27-
<PAGE>

         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 earnings 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.

         9.02 NEW OR VARIED JOBS AND OPERATIONS. If a new job, new operation, or
variation of an existing operation is set up, the supervisor 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 and 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 work s 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
                                                                --------------

                                      -28-
<PAGE>
<TABLE>
<S>                                                                  <C>
                                                                        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

                  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
</TABLE>

         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 of 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.

                                      -29-
<PAGE>

              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 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.

                                      -30-
<PAGE>

              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 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.

                                      -31-
<PAGE>

              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

                                    HOLIDAYS

         10.01 HOLIDAYS OBSERVED. It is agreed that the following holidays shall
be granted at the plant of the COMPANY, located in Piscataway, New Jersey:

                                    New Year's Day
                                    Washington's Birthday
                                    Good Friday
                                    Memorial Day
                                    Independence Day
                                    Labor Day
                                    Thanksgiving Day (as proclaimed by the
                                        Governor of the State of New Jersey)
                                    Armistice Day
                                    Christmas Day
                                    M. L. King's Birthday

                   Presidential Election Day - UNPAID HOLIDAY

                                            (1st Tuesday after 1st Monday in
                                    November every fourth year) The day before
                                    or after Christmas

         10.02 ELIGIBILITY FOR HOLIDAY PAY

              A.     Except as otherwise provided the COMPANY will pay every
                     employee who is in their employ thirty (30) days
                     immediately prior to such holiday and who is not required
                     to perform work in the service of the COMPANY on such
                     holiday at eight (8) times the employee's average hourly
                     earnings for the

                                      -32-
<PAGE>

                     previous quarter as computed in Section 8.08 for
                     pieceworkers. Dayworkers will be paid eight (8) times the
                     employees' regular hourly daywork rate.

              B.     Any employee who receive twenty-four (24) hours notice to
                     work on any of the holidays mentioned in the Article and
                     fails to perform such work will receive no compensation for
                     that day.

              C.     That such employee shall have worked eight (8) hours or
                     more during the calendar week in which such holiday occurs
                     and shall have worked the full scheduled day after the
                     holiday unless excused for reasonable cause by management
                     and shall not left the employment of COMPANY or have been
                     discharged prior to such holiday, or on leave of absence.

              D.     Any employee required to work on any of the above mentioned
                     holidays will receive double time for work actually
                     performed plus eight (8) hours at his average hourly
                     straight time earnings.

If for reasons beyond the control of the employees of the SIMMONS PISCATAWAY
WORKS, the entire plant or any part thereof is shut down for a period of one (1)
week during which a paid holiday occurs, in that event eligible employees will
receive compensation for paid holidays involved.

         10.03 HOLIDAY PAY - EMPLOYEES ABSENT DUE TO ILLNESS OR ACCIDENT. Pay
for illness - Eligible employees who are absent from work due to illness or
accident will receive compensation for one (1) paid holiday; those employees
with ten (10) or more years service will be entitled to a second paid holiday,
said holidays being the first and or second (if applicable) coming after the
commencement date of the illness or accident.

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

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

         10.06 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.

         10.07 HOLIDAYS ON SUNDAY. When any of the paid holidays falls on Sunday
and the day following is observed as the holiday, the latter day shall be the
paid holiday.

         10.08 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

                                      -33-
<PAGE>
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.

         10.09 PAY RATE. Holiday pay will be at eight (8) times the employee's
average hourly earnings rate as computed in section 8.08 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.

         10.10 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.

         10.11 MONDAY HOLIDAYS. In conformance with Federal Law enacted in 1968
and effective 1/1/71, certain Mondays shall be observed as legal holidays, i.e.,
Washington's Birthday (3rd Monday in February); Memorial Day (last Monday in
May); Labor Day (1st Monday in September); and Veteran's Day (4th Monday in
October).

                                      -34-
<PAGE>

                                   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 continuous
                     service shall have the option of taking a fourth week of
                     vacation in lieu of the seniority bonus (section 7.27) if
                     otherwise eligible. Selection of the fourth week will be at
                     a time convenient to the Company.

              (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;

                     (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 The COMPANY shall establish the actual vacation dates and
determine whether or not the vacations shall be either staggered or by Plant
shutdown.

                  If the COMPANY decides to stagger vacations they shall be so
arranged as not to cause interference with production or create additional
expense and the COMPANY will, insofar as possible, arrange the vacation of
eligible employees at a time which suits the employee and those having the
greater seniority by classification will be given preference in selection of the
time of their vacation insofar as possible. If vacations are staggered, period
of same will be between January first and December thirty-first. If COMPANY
decides to use a staggered vacation system, in the event the anniversary date of
hiring shall be the determining factor for eligible purposes.

                                      -35-
<PAGE>

                  Any employees eligible for a third week of vacation shall
receive same at a time selected by MANAGEMENT.

         11.03 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.

         11.04 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.

         11.05 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.

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

         11.07 PAY FOR QUITS AND DISCHARGES. Quits and discharges will receive
pro rata share based on the actual number of complete months worked during the
calendar year during which such employee quit or was discharged. Reinstated
discharges will receive full vacation benefits they are otherwise eligible for.

         11.08 RATE TO BE USED FOR COMPUTING VACATION PAY. The rate to be used
to compute vacation pay shall be the employee's quarterly rate which is in
effect at the time of his vacation as computed in Section 8.08.

         11.09 VACATION PAY - LEAVES OF ABSENCE - LAYOFF. Otherwise eligible
employees who are in approved leaves of absence or layoff, will nevertheless
receive their full vacation benefits provided they actually worked sixty (60)
days during the previous calendar year. If the employee did not work sixty (60)
days in the previous year, full vacation benefits will be restored after working
sixty (60) days in the year vacation benefits are sought.

                                   ARTICLE XII

                                      -36-
<PAGE>

                                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 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.

                                      -37-
<PAGE>

                  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.

                                  ARTICLE XIII

                       THE UNITED STEELWORKERS OF AMERICA
                             HEALTH AND WELFARE FUND

                  The company will allow retired employees to continue Health
Benefits until such time as the retiree reaches Medicare eligible age, provided
the Steelworkers Health and Welfare Fund allows such participation, and further
provided the retiree pays the full premium for the coverage, and further
provided the only obligation or responsibility of the company is to accept and
forward the retirees full premium payment to the Fund. The company shall not be
liable or any actions under this provision.

                  The company's only responsibility will be to accept payments
from retirees and send the payment to the Health and Welfare Fund for the next
24 months, at which time the Steelworkers Pension Fund will begin making the
required deduction from the pension payment of the retiree and submitting
payment to the Health and Welfare fund.

         13.01 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.

         13.02 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 11/1/2001, THE HEALTH INSURANCE PREMIUMS FOR EMPLOYEES WILL
BE AS FOLLOWS:

                                      -38-
<PAGE>
<TABLE>
<CAPTION>

                  EMPLOYEE ONLY COVERAGE                  MEMBER PLUS ONE               FAMILY
                  ------------------------------------------------------------------------------
<S>                                                    <C>                           <C>
                  PPO     $32.00/month                    $  65.00/month                $ 90.00/month
                  Plan E   $85.00/month                   $178.00/month                 $234.00/month
</TABLE>

        The cost sharing ratios for any increase in premiums up to the 5% cap
shall be the same as the ratios effective November 1, 2001.

                  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%) percent. 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.

         13.03 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.

         13.04 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

                                      -39-
<PAGE>

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.

         13.05 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 $46.89 for
sickness and accident coverage and life insurance coverage as provided by The
United Steelworkers Of America Health and Welfare Fund Trust.

         13.06 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.

         13.07 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.

              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.

         13.08 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.

         13.09 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

                                      -40-
<PAGE>

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.

         13.10 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.

         13.11 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.

         13.12 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 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.

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

         13.14 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.

                                      -41-
<PAGE>

                                   ARTICLE XIV

                                  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 8.08 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 XV

                                 BEREAVEMENT PAY

         15.01 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, father-in-law, brother, half
brother, sister, half sister, grandparents, 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.

         15.02 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 XVI

                                 BULLETIN BOARDS

         16.01 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.

         16.02 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

                                      -42-
<PAGE>

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 XVII

                                 MILITARY CLAUSE

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

                                  ARTICLE XVIII

                              EMPLOYEE BIRTHDAY PAY

                  Each employee who meets the requirements for holiday
eligibility will receive an additional eight (8) hours pay (computed as per
Section 10.09) 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 XIX

                          EQUAL EMPLOYMENT OPPORTUNITY

                  Simmons 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

                                      -43-
<PAGE>

employment, including recruitment, placement, promotion, training, demotion,
transfer, layoff, recall and termination, rates of pay, employee benefits, and
participation in all Simmons 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.

                                   ARTICLE XX

                                     LEAVES

         20.01 SICK LEAVE. An employee, upon presentation of doctor's
certificate may be granted sick leave upon good cause shown, and upon receiving
such leave shall be replaced by a temporary employee. If sick leave extends for
longer than thirty (30) days then Article 7.17 applies.

         20.02 INJURY IN COURSE OF EMPLOYMENT. Any employee injured in the
course of employment shall be compensated at his/her average hourly rate for any
time spent in treatment of the resulting injury at the First Aid Room. Should
the injured employee work in a team operation, his remaining partner or partners
will also be compensated at average rate or as provided hereinbefore in Section
8.09(F.), and for any resulting lost time.

                  In the event the COMPANY REQUIRES an injured employee to be
treated during hours outside those which work is scheduled, such employee will
be paid at a rate of $7.00 per hour or fraction thereof, with the understanding
that $7.00 will be the minimum in the event that actual treatment is less than
one (1) hour.

         20.03 EMPLOYEES ON LEAVES OF ABSENCE - SENIORITY RIGHTS. An employee
while on an approved leave of absence shall be included in any personal changes,
in line with their seniority, and shall have the same rights of job selection,
as if they were working, provided the COMPANY has been supplied with an accurate
address/phone number by which to contact the employee. While on such leave of
absence, they shall be replaced by a temporary employee. A leave of absence may
be granted for personal reasons for a period not to exceed thirty (30) days upon
application of the employee to and approval by the COMPANY in writing. Such
leave of absence shall not be renewed and seniority will accumulate during the
leave.

                                      -44-
<PAGE>

                                   ARTICLE XXI

                                  MISCELLANEOUS

         21.01 FOUL WEATHER CLOTHING. The COMPANY will provide foul weather
clothing for employees required to fight fires, flood and for use in inclement
weather. Foul weather clothing shall be under the supervision of the foreman in
charge of the department and shall be turned in at the end of each shift.

         21.02 NEW PIECE OF EQUIPMENT - DISPLACEMENT OF PERSONNEL. In the event
that a new piece of equipment is introduced which results in displacement of
personnel covered by this contract, those people that have been displaced by the
new piece of equipment shall be given preference of the classification affected
before the job is posted.

         21.03 SUPERVISOR'S WORKING. Since the primary function of a supervisor
is that of managing a department he/she shall not perform operations that are
not covered in paragraph 1.02 of Article I. However, this clause is not to be
construed in such fashion that the supervisors cannot be used as instructors nor
shall it be used to prohibit a supervisor from testing a piece of equipment in
order to determine its fitness.

         21.04 Leaves of Absence up to three (3) months will be granted to
employees who join the Local City Police or Fire Department to protect them
during their probationary period. It is understood that such employees are
protected only against severance of seniority with no claim on any particular
job classification.

         21.05 PREMIUM PAYMENT - SUCCESSFUL BIDDERS NOT ASSIGNED TO NEW JOBS. It
is understood that when an individual shall have successfully bid for a job, and
shall not be assigned to the new classification within a period three (3) weeks,
the failure to make such an assignment by the end of the third week shall result
in a special bonus payment of an additional fifteen (15) cents per hour
beginning with the fourth week provided he/she still maintains his previous
piecework pace (if a pieceworker) or his/her normal satisfactory job performance
(if a dayworker), and continues until he is transferred.

                  In addition, it is understood that when an individual shall
have successfully bid for a job, the individual shall be assigned to the new
classification within a period of forty-five (45) days, the failure to make such
an assignment by the end of forty-five (45) days shall result in the employee
being paid the rate of the new job or his/her average rate, whichever is higher.

         21.06 PAY SHORTAGES. Employee who establishes a shortage in pay shall
receive a special check provided the amount is in excess of fifty dollars
($50.00) within twenty-four (24) hours after such shortage has been established.
A statement of the reason for payment will accompany the check.

                                      -45-
<PAGE>

                  When an employee requests a listing of the codes and the
values thereof for his/her operation from his/her supervisor, the COMPANY will
see that the employee is provided such listing.

         21.07 ROTATION OF EMPLOYEES - OVERTIME AND DEPARTMENT SHUTDOWN.
Whenever practicable, qualified employees in a classification shall be rotated
for the purpose of:

                  A.       Overtime

                  B.       Department Shutdown

except during inventory. It is intended by the parties that the rotation
schedules for A and B shall be separate and distinct.

         21.08 Where it has been established that an employee's glasses were
broken on COMPANY property during the course of employment, the employee shall
be reimbursed for the replacement. Misrepresentation as to breakage in the
course of employment shall subject offenders to immediate discharge.

                                  ARTICLE XXII

                                  MODIFIED DUTY
                             WORK HARDENING PROGRAM

                  As permitted by law, an employee who suffers a work related
injury and for all such cases receives an appropriate release from the treating
Company physician, and if necessary, corroborated by designated personal
physician will be used in this "modified duty/work hardening" job until such
time as they are once again able to physically perform their regular job. During
the first two (2) weeks of modified duty/work hardening the employee will
receive his/her average rate. Every two (2) weeks thereafter, the employee's pay
will be reduced by 10%. At no point will employee's earnings be less than base
rate. 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" as
corroborated by Company and personal physician, the COMPANY will reimburse the
employee for the difference in pay between their regular rate of pay and the
modified duty/work hardening rate reductions. NOTE: Visit to personal physician
is at employee's own expense.

                                  ARTICLE XXIII

                                  SAVING CLAUSE

         23.01 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

                                      -46-
<PAGE>

which it is illegal or invalid and the remaining provisions of this Agreement
will continue in full force and effect.

         23.02 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 XXIV

                          SEVERANCE AND PLANT CLOSINGS

                  In the event the Company decides to close this facility
presently organized by the United Steelworkers of America, 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 XV 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 XXV

                      DURATION AND TERMINATION OF AGREEMENT

         25.01 EFFECTIVE DATES. This AGREEMENT shall be in full force and effect
from October 16, 2001 until October 15, 2005.

         25.02 ENTIRE AGREEMENT. The parties agree that there shall be no
reopening of this AGREEMENT unless expressly provided in this Agreement and that
this AGREEMENT constitutes the entire AGREEMENT between the parties on the
subjects of 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.

         25.03 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 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.

                                      -47-
<PAGE>

                                  ARTICLE XXVI

                               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 Piscataway 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.

                  The parties agree that a Pay Plus Plan was implemented under
Article XXVI of the Labor Agreement with the term on October 16, 1997 until
October 15, 2001. The parties further recognize that a new but yet unnamed Pay
Plan is being designed and will not be completed prior to conclusion of
negotiations or the expiration of the current agreement. Therefore, the parties
will continue to abide by the provisions of Article XXVI Contract Re-Opener and
Appendix IV, Piscataway Pay Plus Bonus Plan, language during the term of the new
or successor agreement and when a new Pay Plan is introduced the parties will
abide by the terms and conditions of Article XXVI in the same manner as they did
when the Pay Plus Plan was introduced.

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

                                      -48-
<PAGE>

         IN WITNESS WHEREOF, the parties hereunto set their hands and seals as
hereinbefore stated, this   day of   , 2001.

THE UNITED STEELWORKERS OF                  SIMMONS COMPANY

AMERICA, AFL-CIO, CLC
ON BEHALF OF ITS LOCAL UNION #420

-----------------------------------------   -----------------------------------
Leo W. Gerard                               Dan Murphy
International President                     Constangy, Brooks & Smith

----------------------------------------    -----------------------------------
James English                               Andy Cuppia
Secretary/Treasurer                         VP of Operations, Eastern Division

----------------------------------------    -----------------------------------
Richard H. Davis, International             Bob O'Donnell
Vice-President Administration               Operations Manager

----------------------------------------    -----------------------------------
Leon Lynch, International                   Alexandra Conte
Vice-President, Human Affairs               Human Resources Manager

----------------------------------------
Willoughby Sharp, Staff Representative

----------------------------------------
Louis J. Thomas, District 4 Director

----------------------------------------
Dave Caldwell

Chairman of USWA Negotiating Committee

----------------------------------------
Committee

----------------------------------------
Committee

----------------------------------------
Committee

                                      -49-
<PAGE>

                           PISCATAWAY PLANT SUPPLEMENT
                                   APPENDIX I

HIRING RATE       -        $8.65

                                    EFFECTIVE
                                    10/16/01
                                      $8.65
<TABLE>
<CAPTION>
                                          10/16/01          10/16/02          10/16/03          10/16/04
ITEM              JOB TITLE               END RATE          END RATE          END RATE          END RATE

<C>              <C>                        <C>               <C>               <C>              <C>
01                Border Machine            $12.40            $12.70            $13.00           $13.30
8                 Control Room-Matts &B/S   $11.13            $11.48            $11.83           $12.18
11                Cutting Type #2           $12.35            $14.00            $15.65           $17.30
22                Inspector (1st Class)     $11.24            $11.59            $11.94           $12.29
51                Special                   $10.77            $11.12            $11.47           $11.82
62                Storeroom (1st Class)     $11.30            $11.65            $12.00           $12.35
81                General Labor             $11.18            $11.53            $11.88           $12.23
83                Inventory Rate            $10.96            $11.31            $11.66           $12.01
89                Repair                    $11.13            $11.48            $11.83           $12.18
95                Material Handlers         $10.96            $11.31            $11.66           $12.01
101               Truck Loaders             $14.35            $14.95            $15.55           $16.65
                  Conveyor                  $14.10            $14.45            $14.80           $15.15
799               Plastic Wrap Operator     $12.35            $12.70            $13.05           $13.40
***               Sr. 2nd Class Cutter      $12.29            $12.64            $12.99           $13.34
***               Sr. Control Room          $15.16            $15.51            $15.86           $16.21
***               Material Control Analyst  $12.40            $12.75            $13.10           $13.45
****              Specialty Services Team
                    Closer                  $15.55            $15.90            $16.25           $16.60
                    Hog Ring                $15.55            $15.90            $16.25           $16.60
                    Sewing Machine          $14.55            $14.90            $15.25           $15.60
         * To be marked "Special" and not included in average rate.
</TABLE>

         *** The noted (***) classifications will be eliminated via attrition
(bid off, retirement, quit, etc.) and the individuals currently holding the
above classifications will not be replaced in those specific classifications.
This will serve to eliminate memorandums of agreement which created the above
"red circle" rates.

Effective October 16, 2001, in addition to the general increases, there will be
an adjustment of one-dollar, thirty ($1.30) cents per hour for the Cutting Type
2 and an adjustment of twenty-five ($.25) cents per hour for the Truck Loaders.

                                      -50-
<PAGE>

                           PISCATAWAY PLANT SUPPLEMENT

                                   APPENDIX II

HIRING RATE       -        $8.65

                                    EFFECTIVE
                                    10/16/01
                                      $8.65

         Progression Rate: An additional ten cents (10(cent)) per week the
second week of employment and five cents (5(cent)) per week thereafter to be
added to the hiring rate listed above until end-training rate is reached as
indicated.
<TABLE>
<CAPTION>

                                            END

                                                     TRAINING RATES                     BASIC RATES
JOB CLASS                                            EFFECTIVE 10/16/01                 EFFECTIVE 10/16/01
---------                                            ------------------                 ------------------
<C>     <C>                                          <C>                                <C>
02       Bechik                                      $ 9.86                             $10.94
12       Finish Box Spring                           $ 9.86                             $11.04
09       Hog Ring Open Coil                          $ 9.81                             $10.32
24       Hog Ring Beautyrest                         $ 9.81                             $10.32
25       Hog Ring (any type)                         $ 9.81                             $10.32
08       Close Mattress (any type)                   $ 9.96                             $12.50
15       Box Spring Frame and Route                  $ 9.86                             $10.70
07       Run Quilt Machine                           $10.25                             $10.85
03       Sew Labels                                  $ 9.81                             $10.37
06       Overcast                                    $ 9.81                             $10.37
04       Sew Boxspring Panels to Border              $ 9.81                             $10.37
17       Ultrasonsic Operator                        $ 9.56                             $10.93
16       B/R Assembly Machine                        $ 9.51                             $11.33
26       Box Spring Top-Off                          $ 9.86                             $11.05
</TABLE>

                  Above End Training Rates and Base Rates will be increased by
thirty (30(cent)) cents per hour on each of the following dates: 10/16/02;
10/16/03; and 10/16/04.

                                      -51-
<PAGE>

                                   PISCATAWAY

                                  APPENDIX III

                      ARBITRATORS FOR EXPEDITED ARBITRATION

SIX (6) ARBITRATORS WILLING TO ABIDE BY THE TERMS OF THE EXPEDITED ARBITRATION
PROVISION OF THIS AGREEMENT WILL BE SELECTED BY THE PARTIES. EACH PARTY WILL
SELECT THREE (3). OF THE THREE (3), ONE (1) MUST BE A QUALIFIED TIME-STUDY
ENGINEER.

                                      -52-
<PAGE>

                                   APPENDIX IV
                                   PISCATAWAY
                          PAY PLUS BONUS PLAN LANGUAGE

1.  TITLE:  ESTABLISHMENT OF BASE RATES FOR MOVEMENT BETWEEN JOB
       CLASSIFICATIONS: (Addendum to Article VIII - Wages)

       For all employees covered by this contract any movement between
       classifications (i.e. bumping, bidding, RFC, etc.) shall be governed by
       the rules below:

       A.     An existing employee who changes his/her classification that
              involves a DROP* from one pay range to another would retain
              his/her current base rate or the midpoint of the new range,
              whichever is lower. (Revision #1).

       B.     An existing employee who changes his/her classification that
              involves MOVING UP* from one pay range to another would receive
              $.50 increase to their current base rate or the midpoint of the
              next range, whichever is higher. (Revision #1).

       C.     An existing employee who moves from class to class within a pay
              range would remain at their current base rate.

DEFINITIONS:

CLASSIFICATION - defined by the current job titles as defined in the Piscataway
contract in Appendix I & II.

RANGE - the newly established payroll groupings defined in the P.P.B. proposal
as 1D, 2D, 3I, 4T.

DROP - means moving from Range 1D to 2D, 1D to 3I, and 2D to 3I.

MOVING UP - means moving from 2D to 1D, 3I to 1D, and 3I to 2D.

2.  TITLE:  PAY FOR ADDITIONAL SKILLS - MULTI SKILLED EMPLOYEE
         (Addendum to Article VIII - Wages)

Any one employee can have up to a maximum of three (3) additional skills. Each
additional skill will receive a $.25 premium applied to their current base rate
and shall remain a permanent part of their base rate as long as the employee is
deemed a "Multi Skilled Employee". The Company will allow the maximum of 13
individuals that may be eligible for this additional benefit.

A bid shall be posted for a "Multi Skilled Employee" for a particular job.
Bidding procedures will be followed as defined in the Piscataway contract.

                                      -53-
<PAGE>

All bidders shall be required to establish competency and the final selection of
successful bidder(s) will be based upon seniority. Competency will be determined
by the Company and may require the employee to physically perform the job in
question for a period of time not to exceed two (2) weeks.

3.  TITLE:  NEWLY HIRED EMPLOYEES AND ESTABLISHMENT OF JOB RATES

         (Addendum to Article VIII - Wages,; note Article VII Section 7.24 needs
to be modified to omit reference to training rate and his/her incentive
earnings).

All new hires will be paid at the 4T rate and be eligible for the plant bonus
immediately. An additional $.15 per week will be added to their base rate
beginning the second week of employment and each week thereafter until that
employee has reached the lowest rate of the pay range for that job
classification.

4.  TITLE:  BASE RATE CHANGES FOR NEWLY HIRED OR TRANSFERRED EMPLOYEES
         (Addendum to Article VIII - Wages)

During the first year all newly hired or transferred employees may petition the
Company for a base rate evaluation. A request should be submitted to the Company
by the Union for a performance evaluation that will involve a review of that
individuals performance based upon the individual skills defined in the P.P.B.
(Quality, Productivity, Teamwork, etc.). This reevaluation may involve a merit
increase, but will never reduce the current base rate.

Requests for reevaluation may be made no more than twice during the first year
with no less than three (3) months between requests.

GRIEVING CHANGES IN STANDARD:

If there is a change in any standard, the Company will provide the Union with
the methods description at the time the change is made effective. The Union has
thirty (30) days to grieve the new standard and if not grieved within 30 days,
the Union will lose the right to grieve and/or arbitrate the new standard.

CHANGES TO EXISTING CONTRACT:

[Refer to Pay Plus Bonus Addendum] The following clauses will be removed from
the contract as long as the Pay Plus compensation program is in effect. If the
Company and the Union agree to reestablish a piecework system the clauses will
be put back in the contract as they are stated in the contract dated October 15,
1997:

                                      -54-
<PAGE>

                                    Article 3.07 - 2nd &3rd paragraphs
                                    Article 8.07 - all
                                    Article 8.09 - all
                                    Article 8.13 - all
                                    Article IX

PAY PLUS PRODUCTIVITY IMPROVEMENT COMMITTEE

The Union and Company agree to form a committee consisting of 5 Union and 5
Company representatives, those members selected by the Union and Company
respectively at their discretion. This committee will meet as needed not to be
less than once per month. The purpose of this committee is to present and
discuss issues concerning communication, problem resolution, opportunities for
improvement, and the like. This committee will be a standing committee.

                                      -55-
<PAGE>

                      MEMORANDUM OF UNDERSTANDING REGARDING
             THE SUBSTITUTION OF THE SIMMONS MANUFACTURING CO., LLC,
             FOR SIMMONS COMPANY IN COLLECTIVE BARGAINING AGREEMENT

         WHEREAS, the United Steelworkers of America, AFL-CIO, CLC, and its
Local Union No. 420, and Simmons Company have entered into a collectively
bargained Labor Agreement commencing October 15, 2001 through October 15, 2005,
for certain employees at its plant located at Piscataway, New Jersey;

         WHEREAS, effective December 31, 2001, the Simmons Company employees
represented by Local No. 420 will, for corporate tax purposes, become employees
of The Simmons Manufacturing Co., LLC, and;

         WHEREAS, because said represented employees will, on December 31, 2001,
become employees of The Simmons Manufacturing Co., LLC, The Simmons
Manufacturing Co., LLC shall be substituted for Simmons Company in said Labor
Agreement, and shall therefore, be bound by the terms and conditions of said
Labor Agreement.

         NOW THEREFORE BE IT RESOLVED; that effective December 31, 2001, The
Simmons Manufacturing Co., LLC shall be substituted for Simmons Company in the
Labor Agreement, and The Simmons Manufacturing Co., LLC shall recognize and
assume the legal obligations of the Labor Agreement, and;

         FURTHER RESOLVED; that effective December 31, 2001, on behalf of
Simmons Company, The Simmons Manufacturing Co., LLC, and the United Steelworkers
of America, AFL-CIO, CLC, and its Local Union No. 420, the undersigned
acknowledge their agreement as to the binding nature of their collectively
bargained Labor Agreement on The Simmons Manufacturing Co., LLC.

------------------------------------------------
Daniel P. Murphy
Counsel for Simmons Company and The Simmons Manufacturing Co., LLC

Dated this _____ day of February 2001.

------------------------------------------------
David Caldwell
The United Steelworkers of America, AFL-CIO, CLC, and its Local Union No. 420

Dated this _____ day of February 2001.

                                      -1-

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