Document:

SERVICES AGREEMENT

                                     BETWEEN

                        CITIGROUP FINANCIAL PRODUCTS INC.

                                       AS

                                    INVESTOR

                                       AND

                                CHINAWE.COM INC.

                                       AS

                                SERVICE PROVIDER

                           DATED AS OF APRIL 29, 2004

                               SERVICES AGREEMENT

         THIS AGREEMENT is made and entered into as of the 29th day of April,
2004, but effective as of the Effective Date, by and between Citigroup Financial
Products Inc., a Delaware corporation ("Investor") and ChinaWe.Com Inc., a
California corporation ("Service Provider").

                                    RECITALS

         WHEREAS, Investor will acquire a portfolio of Assets, composed
primarily of commercial, industrial loans and residential loans and potentially
commercial, industrial and residential real estate and from Great Wall Asset
Management Company (the "Seller") pursuant to the Loan Sale and Purchase
Agreement dated as of April 27, 2004 (the "Effective Date") by and between Great
Wall Asset Management Company and the Investor (the "Purchase Agreement"), which
portfolio is described in Exhibit A attached hereto,

         WHEREAS, Service Provider has experience and skill in the reporting,
servicing and asset management of commercial, industrial loans and residential
loans and potentially commercial, industrial and residential real estate and
leases; and

         WHEREAS, based on Service Provider's experience and skill in the
servicing and asset management of commercial, industrial loans, residential
loans, leases and potentially commercial, industrial and residential real
estate, Investor desires to engage Service Provider for the period from the
Effective Date until the Closing Date (the "Interim Period") to provide (i)
certain reporting, advisory, consultation, management and disposition services
with respect to ownership, management, marketing and disposition of the Assets
and (ii) certain loan servicing services with respect to servicing the Assets,
and Service Provider has agreed to provide such services upon the terms and
conditions hereinafter set forth. Investor intends enter into an agreement with
Service Provider on or after the Closing Date pursuant to which Service Provider
will provide substantially the same services as the services set forth herein;

         NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         Whenever used herein, the following words and phrases, unless the
context otherwise requires, shall have the following meanings, applicable
equally to the singular and plural nouns and verbs of any tense:

         AGREEMENT: This Services Agreement and all amendments hereof and
supplements hereto.

                                                                          Page 2

         AFFILIATE: With respect to any Person (the "First Person"), any Person
or group of Persons that, directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with
such First Person. For the purposes of this definition, "control" (including,
with correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person or group of Persons, shall mean
possession, directly or indirectly, through one or more intermediaries, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.

         ASSETS: The term Assets shall mean:

         (i) the loans described on Exhibit A-1;
         (ii) any assets that the parties agree in writing to add to Exhibit A
during the Term.

         AUDIT REPORT: is defined in Section 8.4.

         BUSINESS DAY: Any day other than (i) a Saturday or Sunday, or (ii) a
day on which banking institutions in PRC, Hong Kong or New York [all of our cash
flows via NY] are authorized or obligated by law or executive order to be
closed.

         BUSINESS PLANS: The plans initially prepared by Service Provider for
the management and disposition of the Assets pursuant to Section 5.2, as the
same may be amended or modified from time to time by Investor and Service
Provider pursuant to this Agreement.

         CLOSING DATE: Has the meaning ascribed to it in the Purchase Agreement.

         DEFAULTING PARTY:  The "Defaulting Party" is defined in Section
12.1(a).

         DISPOSITION PLAN:  A written request for approval submitted by Service \
Provider to Investor for resolution of an Asset.

         EFFECTIVE DATE: The date that the Purchase Agreement is executed by all
parties thereto.

         EVENT OF DEFAULT: Any event of default as specified in Article 12 hereof.

         INSURANCE AND CONDEMNATION PROCEEDS: Amounts received with respect to a
particular Asset pursuant to the related hazard insurance policy or any related
title or other insurance policy, or as a condemnation award or settlement or
payment in lieu thereof, or pursuant to any fidelity bond.

         INVESTOR:  The term Investor is defined in the Preamble hereof.

                                                                          Page 3

         LIMITATIONS ON AUTHORITY is defined in Section 5.4.

         LOAN: Each loan which is included within the Assets and which are the
subject of this Agreement as identified on Exhibit A attached hereto.

         LOAN DOCUMENTS: With respect to each Loan and any other Related
Security Documents evidencing and securing such Loan.

         LOAN FILE: With respect to each Loan and any Related Security Documents
pertaining to such Loan, any other Loan Documents obtained from Seller and any
additional documents required from time to time by the Loan Documents and as the
same may be added to the Loan File pursuant to this Agreement.

         MORTGAGE: With respect to any Loan, the mortgage, deed of trust or
other instrument creating a first, second or other priority of lien on an estate
in real property, if any, and securing such Loan.

         MORTGAGED PROPERTY: With respect to any Loan secured by real property,
the property subject to the related Mortgage.

         MORTGAGOR: With respect to any Loan secured by real property, the Obligor.

         NON-DEFAULTING PARTY:  The "Non-Defaulting Party" is defined in Section
12.1(a).

         OBLIGOR: (i) With respect to a Loan secured by real property, the
Mortgagor and/or borrower or Related Security Document and, with respect to any
other Loan, the borrower, and (ii) any guarantor, co-signer or other person
liable or otherwise obligated under a Related Security Document.

         PERSON: Any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, entity, unincorporated organization or
government or any agency or political subdivision thereof.

         PURCHASE AGREEMENT is defined in the Recitals.

         RELATED SECURITY DOCUMENTS: With respect to each Loan, each instrument,
contract or other document securing such Loan including, without limitation, any
Mortgage, any assignment of lease and/or rents, security agreement, financing
statement, chattel mortgage, guaranty, letter of credit, certificate of deposit
or other pledged account, key employee insurance policy or other insurance
policy, power(s) of attorney, loan agreement, credit line agreement, deeds,
change agreement, Keun-mortgage related document, receipts, resolutions,
certificates, debt redemption or transfer document, pledge, or other instrument,
contract or document securing such Loan.

                                                                          Page 4

         REMITTANCE DATE: The 1st Business Day of any calendar month, beginning
on the 1st Business Day of the calendar month next following the calendar month
during which the purchase of the Assets under the Purchase Agreement closes.

         REO PROPERTY: Individually or collectively, (i) each individual
property which is the subject of this Agreement on the Effective Date identified
in Exhibit A as an REO Property; attached hereto, (ii) each Mortgaged Property
the ownership of which, or a ground leasehold estate in which, as the case may
be, is acquired by or on behalf of Investor or any Affiliate thereof through
foreclosure or deed in lieu of foreclosure or otherwise after the Effective Date
at which time such property will cease to come within the definition of
"Mortgaged Property", and (iii) any real estate asset which is acquired by or on
behalf of Investor or any Affiliate thereof as part of the settlement of any
Loan.

         SELLER: The term Seller is defined in the Recitals hereof.

         SERVICE PROVIDER: The term Service Provider is defined in the Preamble
hereof.

         SERVICING FEE: The term Servicing Fee is defined in Section 8.1 hereof.

         SERVICING STANDARD: The term Servicing Standard is defined in Section
5.3 hereof.

         TERM:  The Initial Term and any Renewal Terms.

         THIRD PARTY CONTRACTS is defined in Section 7.1.

                                   ARTICLE II

                          RETENTION OF SERVICE PROVIDER

                  (a) Investor hereby retains Service Provider as its agent for
         the purpose of performing the services described in this Agreement with
         respect to the Assets. Service Provider will ensure that each of Vivian
         Chu and Ken Wai (or such other persons agreed to in writing by
         Investor) work on a full time basis to provide the services set forth
         herein. Service Provider agrees that if it is contacted by or contacts
         an investor ("Third Party Investor") other than the Investor to provide
         services similar to the services Service Provider is to provide
         hereunder, it will offer Investor a right to engage Service Provider on
         substantially the same terms as the Third Party Investor and if
         Investor does not exercise its right within ten (10) business days,
         Service Provider may offer its services to such Third Party Investor
         without Investor's consent.

                  (b) Subject to the terms and conditions set forth herein,
         Service Provider agrees to provide advisory, consultation, reporting
         and management services in accordance with this Agreement.

                                                                          Page 5

                  (c) The parties to this Agreement acknowledge that Service
         Provider will not acquire title to, any security interest in, or any
         rights of any kind in or to the Assets (or any income, receipts or
         revenues therefrom except to the extent of the fees described in
         Article VIII).

                                   ARTICLE III

                                TERM OF AGREEMENT

         This Agreement shall continue in force through the last day of the
Interim Period unless terminated in accordance with Article XII or unless
extended by Investor in accordance with this Agreement;

                                   ARTICLE IV

                             ASSET MANAGEMENT DUTIES

         4.1 Service Provider's Duties and Responsibilities. Subject to the
Purchase Agreement, the Service Provider's duties under this Agreement shall be
to provide reporting and asset management services for the Assets. Service
Provider's asset management duties shall include, without limitation, liaising
with the Seller relating to Asset resolution decisions, advising Investor in
relation to the management, disposition and servicing on the manner Service
Provider deems best consistent with the Servicing Standard. Service Provider's
duties and responsibilities are subject in all events to the Limitations on
Authority Service Provider's duties shall include, but not be limited to, the
following:

                  (a) Service Provider shall promptly gather (with reasonable
         third-party costs including, without limitation, charges for
         photocopying expenses, being at the cost and expense of Investor)
         review of the Loan Files and other written materials and other
         appropriate sources, all reasonably available information regarding the
         Assets and any property acquired with respect thereto;

                  (b) Service Provider shall promptly undertake site inspections
         of Mortgaged Property and REO Property as Service Provider deems
         appropriate or upon the written request of Investor (with reasonable
         out-of-pocket and third-party costs including, without limitation,
         reasonable travel expenses, being at the cost and expense of Investor);

                  (c) Service Provider shall assist Investor in analyzing and
         evaluation information regarding the Assets;

                  (d) Upon reasonable prior written request by Investor, Service
         Provider shall consult with Investor by telephone or by meetings during
         Service Provider's normal and customary business hours, in connection
         with their duties hereunder ;

                  (e) Service Provider shall prepare or provide documents
         relative to the delegation of authority as provided in Section 4.4;

                                                                          Page 6

                  (f) Subject to the provisions hereof, Service Provider shall
         monitor all necessary filings to be made and use its best efforts to
         ensure that such filings are within the required time limits necessary
         from time to time to maintain perfection of the security interests of
         Investor evidenced by each Loan (provided, however, that the actual
         recording fees and filing fees shall be at Investor's expense) are
         made;

                  (g) Service Provider shall prepare monthly reports as provided
         in Section 8.2;

                  (h) With respect to Assets which are or become REO Property,
         Service Provider shall engage third parties, at the cost and with the
         prior consent of Investor, to provide, to Investor, property management
         services and leasing or brokerage services;

                  (i) Service Provider shall assist Investor with due diligence
         on the Assets and analyzing information relating to the Assets;

                  (j) Service Provider shall assist Seller to prepare for the
         transition of the servicing function from Seller to Service Provider or
         other service providers to be determined by Investor after the end of
         the Interim Period including, without limitation, the transfer of loan
         files and the preparation of all necessary documents and schedules;

                  (k) Service Provider will assist with the preparation of
         Business Plans.

                  (l) Service Provider shall assist with the closing of the
         purchase of the Assets as set forth in the Purchase Agreement.

                  (m) Service Provider will liaise with Seller as requested by
         Investor.

         4.2      Business Plans.

                  The Business Plans will contain strategies with different
         resolution plans, collection efforts and treatments for appropriate
         groups of the Loans and individual Loans as appropriate and for each
         REO Property, including a budget(s) for projected expenses to be
         incurred in conjunction with each such group of Loans, individual Loan
         or REO Property, as applicable.

         4.3 Servicing Standard. In performing its obligations under this
Agreement including those duties set forth in this Article IV and in Article V,
Service Provider shall at all times act in good faith and in the best interests
of Investor with respect to the Assets and, using its reasonable efforts, shall
carry out all of its obligations under this Agreement in a commercially
reasonable manner and in accordance with normal and prudent practices in the
distressed asset management and loan servicing businesses and consistent with
Service Provider's duties to Investor hereunder (the "Servicing Standard").

                                                                          Page 7

         4.4 Limitations on Service Provider's Authority. Service Provider shall
not have the authority, without obtaining Investor's prior written approval, to:

         (i)   enter into a commitment to dispose, sell, transfer, finance,
               pledge or hypothecate any Asset;

         (ii)  take any material action, including to resolve or dispose of any
               Asset.

         (iii) incur any costs on behalf of Investor;

         (iv)  enter into an agreement modifying or waiving the material terms
               of any Loan or related document or releasing any Obligor on any
               Loan from liability;

         (v)   exercise any right to accelerate the maturity of any Loan (except
               as contemplated within an approved Business Plan); or

         (vi)  act on behalf of, or hold itself out as having the authority to
               act on behalf of, Investor.

                                   ARTICLE V

                                SERVICING DUTIES

         5.1      General.

                  (a) Service Provider shall service and administer the Assets
         in accordance with the terms of this Agreement pursuant to the standard
         set forth in Section 4.3. In servicing the Assets, Service Provider
         shall use automated data processing services in support of the
         reporting and servicing functions, which will organize, retain and
         permit retrieval of data in an accurate, efficient and immediate
         manner.

                  (b) In performing its obligations hereunder, Service Provider
         shall at all times act pursuant to the standard set forth in Section
         4.3 and, subject to the Limitations on Authority, shall carry out its
         obligations hereunder. Service Provider shall employ adequate suitably
         experienced personnel in Hong Kong and elsewhere to perform its duties
         hereunder and shall maintain an efficient system for the monitoring of
         collection of all amounts due to Investor under the Loans and shall
         service the Assets in accordance with all applicable state, federal and
         other governmental laws, rules and regulations including without the
         limitation the Foreign Corrupt Practices Act.

         5.2 Monitoring of Collection of Payments. With respect to all Assets,
beginning on the Effective Date, Service Provider shall continuously monitor all
payments due to Investor attributable to the Assets, including but not limited
to principal, interest, late fees (if any), proceeds of liquidation of defaulted
Loans (whether through foreclosure or otherwise), insurance and condemnation
proceeds (other than proceeds which are required by applicable Loan

                                                                          Page 8

Documents to be applied to the repair or restoration of the applicable
property), rentals, security deposits, license fees, lease payments and securing
deposits. Service Provider shall use its best efforts (to the extent available
for any Mortgaged Property) to obtain from time to time and forward to Investor
current operating statements on a monthly basis for REO Property and no less
frequently than annually for Mortgaged Property. In each monthly report, Service
Provider shall notify Investor of any new material monetary default by an
Obligor or a tenant for REO Property.

         5.3 Satisfaction and Release of Loans. Upon the payment in full of any
Loan, Service Provider will notify Investor.

         5.4 No Obligation to Make Advances. Service Provider has no obligation
to advance its own funds to (a) make any payments of taxes or other charges as
set forth in this Agreement, purchase any insurance required to be maintained
pursuant to this Agreement pay or reimburse any Third Parties retained pursuant
to Article VII, or (d) make any other payments which may be required of
Investor, including without limitation for any Loan advances, asset related
expenses or any tenant finish, but shall promptly notify Investor in the event
there are insufficient funds in the Operating Account from which to make such
payment.

         5.5 Processing of Invoices. All expenses, including without limitation
Third Party costs, to be paid by Service Provider or for which Service Provider
desires reimbursement from Investor must, subject to the Limitation on
Authority, be authorized pursuant to this Agreement and the prior written
approval of Investor. If an expense is so authorized, Investor shall pay or
reimburse those amounts to such third party(s) or Service Provider, as
applicable, upon Service Provider's request within thirty (30) days of
Investor's receipt of such invoices and documentation. Notwithstanding the
foregoing, the parties understand and agree that the Service Provider shall have
no obligation to pay any fees or expenses, including without limitation to Third
Party Contractors, from its own funds and any decision by it to do so shall be
within Service Provider's sole and absolute discretion. Notwithstanding the
foregoing, however, the obligation to promptly pay hereunder shall be suspended
in the event Investor or Service Provider is validly contesting or otherwise
reasonably objecting to the payment of such item.

                                                                          Page 9

                                   ARTICLE VI

                      BOOKS, RECORDS, REPORTS AND ACCOUNTS

         6.1      Books and Records.

                  (a) At all times during the term of this Agreement, Service
         Provider shall maintain at the Contract Office, a complete and accurate
         set of files, books and records of all business activities and
         operations conducted by Service Provider in connection with Service
         Provider's performance under this Agreement. Service Provider shall
         make its files, books and records relating solely to the Assets
         available during normal business hours to Investor.

                  (b) Service Provider's records and accounts shall reflect,
         with respect to each Asset and with respect to all operations of
         Investor, all items of income and expense with respect to each such
         Asset, as well as information regarding the status of each such Asset,
         including appropriate appraisal, marketing, environmental, engineering
         and other information.

                  (c) Service Provider shall maintain and prepare all accounts
         required under this Agreement on a cash basis in accordance with US
         Generally Accepted Accounting Principles (or, upon written request from
         Investor in accordance with PRC GAAP) consistently applied. Upon
         written request from Investor, Service Provider shall provide Investor
         for the last calendar quarter of a year with the information necessary
         to satisfy such cash accounting needs as Investor may have.

                  (d) Service Provider must ensure that it maintains a copy of
         all of Service Provider's books, records and other Service Provider
         generated documents, including documents generated by Third-Party
         Contractors retained by Service Provider and will procure if Investor
         so requests, at Investor's cost and expense, an English translation of
         such documents.

         6.2      Reports; Audit.

                  (a) As soon as practicable but in any event by the fifteenth
         (15th) day of each month, Service Provider shall prepare and deliver to
         Investor reports substantially in the form attached hereto as Exhibit B
         (as amended from time to time upon written agreement of both Investor
         and Service Provider) with respect to the prior month. Further, the
         parties acknowledge that during this period, Investor may request minor
         changes in the reports that shall be performed at no cost to Investor.
         In addition, Service Provider shall promptly inform in writing Investor
         of all material developments regarding any Asset with an without
         waiting for the monthly reports. The forms of the reports specified in
         Exhibit B may be reasonably amended by the Investor, from time to time
         and in such event Service Provider shall be entitled to a reasonable
         time period before it is required to provide reports on such amended
         forms.

                                                                         Page 10

                  (b) At Investor's request and expense, Service Provider shall
         cause a firm of independent public accountants reasonably acceptable to
         Investor to furnish to Investor a statement to the effect that such
         firm has examined certain documents and records relating to the
         servicing of the Loans and is of the opinion that, on the basis of such
         examination, Service Provider's servicing is and has been conducted in
         compliance with the provisions of this Agreement, except for (i) such
         exceptions as such firm shall believe to be immaterial and (ii) such
         other exceptions as shall be set forth in such statement.

                  (c) Upon Investor's request, Service Provider shall provide
         for the electronic transfer of all reports required pursuant to
         subsection (a) of this Section 6.2 and any servicing or other data
         regarding the Assets as Investor shall request.

         6.3 Investor's and Service Provider's Rights to Examine the Other's
Records. From time to time during the term of this Agreement and during the
twelve (12) month period following the expiration or termination of this
Agreement, each party and their duly authorized agents, representatives or
employees may, upon three (3) Business Days reasonable prior notice to the
other, examine, audit and copy, during business hours or at such other times as
might be reasonable under applicable circumstances, any and all of the books,
records, files, or other information which was produced to perform this
Agreement or was received from third parties relating to the Assets, whether
held by such party or by another on its behalf. Investor and Service Provider
shall each treat as confidential any non-public information obtained during such
examination or in performing any obligations hereunder; provided, however, that
Investor or Service Provider may disclose such information if required to do so
by law or by any regulatory authority after giving notice to the other that it
is required to make such disclosure.

         6.4 Service Provider Shall Provide Information as Required by Investor.
Service Provider shall furnish to Investor, during the term of this Agreement,
such periodic, special or other reports or information in relation to the
Assets, whether or not provided for herein, as shall be necessary or reasonable,
all such reports or information to be provided by, and in accordance with, such
applicable instructions and directions as Investor may reasonably require

         6.5 Records Pertaining to Particular Assets. Service Provider's records
and accounts shall reflect, with respect to each Asset, all items of expense
incurred by Service Provider with respect to the management of such Asset, as
well as information regarding the status of each such Asset, including
appraisal, marketing, environmental, engineering and other information.

         6.6 Retention of Records. Unless returned to the other party or
otherwise disposed of in accordance with the direction of the other party, for a
period of not less than thirty six (36) months after the date of termination or
expiration of this Agreement, each party shall continue to maintain all files
and records pertaining to the performance of this Agreement.

                                                                         Page 11

                                   ARTICLE VII

                              THIRD PARTY CONTRACTS

         7.1 Third-Party Agreements. Service Provider shall advise Investor as
to the necessity or desirability of entering into agreements (whether identified
pursuant to this Section 7.1, "Third-Party Contracts"), at with Investor's prior
written consent and at Investor's expense, with third parties (whether
identified pursuant to this Section 7.1 or in the Business Plans, "Third-Party
Contractors") to perform the duties specified in this Section 7.1 and other
duties Service Provider reasonably deems necessary with respect to the Assets
and which duties are customarily performed by a third party. With Investor's
prior written consent, Service Provider may enter into Third Party Contracts
meeting the criteria set forth in (a) through (k) below:

                  (a) Legal/Audit/Valuation/Tax Services;

                  (b) Title Work;

                  (c) Financial Investigation Services;

                  (d) Commission Brokerage Services for Sales and Leasing of REO
                      Property;

                  (e) Marketing, Signage, Advertising and Printing Services for
REO Property;

                  (f) Surveying Services;

                  (g) Environmental Consulting Services;

                  (h) Property Management and Maintenance Services;

                  (i) Real estate tax challenge counsel, consultants or other
                      services;

                  (j) General Construction and Construction Subcontracting
                      Services; and

                  (k) Architectural/Engineering/Construction Consulting
                      Services.

Service Provider shall not be liable for:

                  (a) the misconduct of the third parties it is entitled to
         engage as provided above in this Section 7.1 if :

                           (1) such third parties were approved by Investor or

                           (2) Service Provider was not negligent in the
                  selection of such third parties; or

                                                                         Page 12

                  (b) anything done, suffered or omitted in good faith by it in
         accordance with the advice or opinion of such third parties which are
         attorneys, accountants or other independent experts;

provided that Service Provider procures the services for the benefit of
Investor, such that Investor has an enforceable cause of action against the
third party for any breach of contract, misconduct, negligence or default by
such third party. The provisions of the foregoing sentence shall not relieve
Service Provider of any obligations to otherwise perform in accordance with the
Servicing Standard.

7.2 Approval of Third-Party Contractors. Prior to Service Provider engaging a
Third-Party Contractor, Service Provider shall submit to Investor for its review
and approval (i) the name of the Third-Party Contractor, (ii) a description of
the Third-Party Contractor's company, (iii) a description of the services to be
rendered and (iv) the fees or rate to be charged by the Third-Party Contractor.

                                  ARTICLE VIII

                         SERVICE PROVIDER'S COMPENSATION

         8.1 Asset Management and Servicing Fee. As compensation for its
services hereunder Service Provider shall be entitled to be paid a fee by
Investor each month in arrears during the term of this Agreement, beginning on
the Effective Date, in an amount equal [redacted pursuant to confidentiality
request] (US$[ ]) per month; pro-rated for the first and last month of this
Agreement (the "Servicing Fee") and a fee in an amount equal to [redacted
pursuant to confidentiality request] percent ([ ]%) of all collections and
recoveries relating to the Assets received by Investor (as determined by
Investor in its reasonable discretion) from the Effective Date until Closing
Date less all fees, costs and expenses incurred by or on behalf of Investor in
respect of such recoveries during such period (the "Collection Fee").

         8.2 Payment of Compensation. Service Provider shall deliver to Investor
an invoice for the Servicing Fee on or around the 15th each month relating to
the preceding calendar and Investor shall pay to Service Provider the Servicing
Fee, no later than 10 Business Days after receipt of such invoice. Investor
shall pay the Collection Fee promptly after the Closing Date.

                                                                         Page 13

         8.3 Due Diligence Costs and Other Fees. Promptly upon receipt of an
invoice from Service Provider, Investor shall pay Service Provider (i) on or
after the Effective Date, a fee of One Hundred Thousand and no/100 Dollars
(US$100,000.00) , (ii) on or after the Effective Date, a fee of [redacted
pursuant to confidentiality request] (US$[ ]) representing [redacted pursuant to
confidentiality request] percent ([ ]%) of all of all collections and recoveries
relating to the Assets received by Investor (as determined by Investor in its
reasonable discretion) from March 31, 2002 to and including the Effective Date
less all fees, costs and expenses incurred by or on behalf of Investor in
respect of such recoveries on the Effective Date and (iii) On or after the
Closing Date, One Hundred Thousand and Fifty Thousand and no/100 Dollars
(US$150,000.00).

         8.4      Audit Report.

                  (a) During the term of this Agreement, Investor may at any
         time during the Term cause Investor's Auditors to prepare a written
         report ("Audit Report") and internal control letter at Investor's
         expense, stating whether any costs incurred under Third-Party Contracts
         paid for by Service Provider during the fiscal year was inaccurate in
         any material respect, and if so, specifying the inaccuracies and the
         effect of such inaccuracies on any amounts previously paid to Service
         Provider.

                                   ARTICLE IX

                                INVESTOR'S DUTIES

         9.1 Designate Representatives. On the date of this Agreement, and as
necessary from time to time thereafter, Investor shall designate in writing at
least two representatives (and continue to have designated at least two
representatives at all times during the Term of this Agreement) with whom
Service Provider shall communicate, request consent or approval and provide
notice as required under this Agreement, regarding all issues pertaining to the
Assets. Investor's initial representatives shall be John Redick and Patrick
Chui. Service Provider shall contact all of the Investor representatives to
submit a notice or request for approval. It shall be the obligation of such
representatives to communicate on the matter with the Investor and/or other
representatives and, in the case of a consent or approval item, to secure the
written consent or approval (or disapproval as the case may be) from the
remainder of the representatives and provide Service Provider with Investor's
written consent or approval (or disapproval as the case may be) on the matter.
Unless Investor notifies Service Provider otherwise in writing, an action of
Investor as contemplated by this section shall require the written authorization
of two (2) representatives of Investor; notwithstanding this, however, Service
Provider may rely on a communication from any one Investor Representative as
being unanimous authorization unless such communication indicates otherwise.
Such representatives, acting as provided herein, shall have authority to act on
behalf of Investor on any and all matters requiring Investor's consent or
approval or receipt of notice hereunder.

                                                                         Page 14

         9.2 Furnish Loan Files, Information and Cooperation with Service
Provider. As of the date of execution of this Agreement or as soon thereafter as
may be practicable, Investor shall use its reasonable best efforts to deliver or
otherwise provide to Service Provider original or copies of all Loan Files,
documents, correspondence, data, reports, information and items in its
possession or control pertaining to the Assets received from Seller. Investor
shall thereafter furnish Service Provider material information required of
Investor and otherwise provide cooperation and assistance to Service Provider to
permit the orderly performance of Service Provider's duties under this
Agreement. Service Provider shall not be liable for any of its failures or
delays in performance under this Agreement to the extent caused by the failure
to receive or a delay in receiving the information or cooperation described
above in this Section 9.2.

         9.3 Compensate Service Provider. Investor shall timely compensate
Service Provider for its services under this Agreement in accordance with the
provisions of this Agreement.

         9.4 Requests for Approval by Investor. Investor shall act promptly with
respect to any written request by Service Provider for approval of any action
proposed to be taken by Service Provider recommendation of the action, which
should be taken, and reasonable alternative courses of action, requesting
Investor's approval of the action recommended by Service Provider.

                                    ARTICLE X

                                 INDEMNIFICATION

         10.1 Service Provider's Indemnity. As a material inducement to Investor
to enter into this Agreement, Service Provider hereby unconditionally and
irrevocably covenants and agrees to indemnify and hold harmless Investor, its
Affiliates, successors and assigns, and all of its and their officers,
directors, shareholders, partners, agents, employees (including "contract"
employees) and controlling Persons (collectively, "Investor Indemnitees")
against any and all claims, losses, penalties, fines, forfeitures, judgments,
reasonable attorneys' fees and related litigation costs, fees and expenses and
amounts paid in settlement (collectively, "Investor Losses") actually and
reasonably incurred in connection with any claim(s) against any Investor
Indemnitee which are finally determined to have been caused by Service
Provider's negligence, bad faith or willful misconduct in connection with
Service Provider's performance under this Agreement, unless the relevant actions
were taken with the express consent of Investor; provided, however, if and to
the extent that such Investor Losses are covered and actually paid by insurance,
the Investor Indemnitees shall not also be entitled to recover that amount under
this indemnity. For the avoidance of doubt, neither the Investor nor any
Investor Indemnitee shall be required to first claim under insurance in respect
of any Investor Losses covered by this indemnity.

                                                                         Page 15

Service Provider further covenants and agrees to make full and timely payment to
each and every Investor Indemnitee of any reasonable expenses (including
reasonable attorneys' fees) which such Investor Indemnitee may incur in the
enforcement of this Section against Service Provider.

         10.2 Investor's Indemnity. As a material inducement to Service Provider
to enter into this Agreement, Investor hereby unconditionally and irrevocably
covenants and agrees to indemnify and hold harmless Service Provider, its
Affiliates, successors and assigns, and all of its and their officers,
directors, shareholders, agents, employees (including "contract" employees) and
controlling persons (collectively, "Service Provider Indemnitees") against any
and all claims, losses, penalties, fines, forfeitures, judgments, reasonable
attorneys' fees and related litigation costs, fees and expenses and amounts paid
in settlement (collectively, "Service Provider Losses") actually and reasonably
incurred in connection with any claim(s) against any Service Provider Indemnitee
which result from or are based upon actions taken with the express consent to
Investor or which otherwise arise from or relate to the Assets, this Agreement
or Service Provider's performance (or lack of performance) under this Agreement,
unless and to the extent such Service Provider Losses are finally determined to
have been caused by Service Provider's negligence, bad faith or willful
misconduct in connection with Service Provider's performance under this
Agreement or Service Provider's breach of or default under this Agreement;
provided, however, that if and to the extent that such Service Provider Losses
are covered and actually paid by insurance the Service Provider Indemnitees
shall not be also entitled to recover that amount under this indemnity. For the
avoidance of doubt neither the Service Provider nor any Service Provider
Indemnitee shall be required to first claim under insurance in respect of any
Service Provider Losses covered by this indemnity.

Investor further covenants and agrees to make full and timely payment to each
and every Service Provider Indemnitee of any reasonable expense (including
reasonable attorney's fees) which such Service Provider Indemnitee may incur in
the enforcement of this Section against Investor.

         10.3 Indemnity Procedures. If any claim shall be asserted, or any
action, suit or other proceeding shall be instituted, by a third party against
any Indemnitee (each an "Indemnified Party"), with respect to any occurrence as
to which the other party (an "Indemnifying Party") shall have any indemnity
obligation under this Agreement, such Indemnified Party shall promptly notify
Indemnifying Party of the assertion of such claim, action, suit or proceeding
and shall tender the defense and, subject to this Section 10.3, settlement or
compromise of any such claim, action, suit or proceeding to Indemnifying Party
for conduct thereof by Indemnifying Party. In respect of a third party claim
against Service Provider, pending a final determination between the parties with
respect to a particular matter, Service Provider shall be presumed to be the
Indemnified Party with respect to such matter, unless Investor has determined in
good faith that it is not liable to indemnify Service Provider under this
Agreement and has provided a written notice to Service Provider to this effect
including a brief summary of the reasons for this position. Indemnifying Party
shall timely commence and diligently continue such defense, settlement or
compromise at Indemnifying Party's sole expense.

         10.4 Recovery of Costs in Resolving Disputes. In the event any
dispute between the parties to this Agreement shall result in litigation,
arbitration or other proceeding, the court shall

                                                                         Page 16

have the discretion to award to the prevailing party all reasonable costs and
expenses, including without limitation reasonable attorneys' fees and
disbursements, incurred by the prevailing party in connection with such
litigation or other proceeding and any appeal thereof. Such costs, expenses,
fees and disbursements shall be included in and made a part of the judgment
recovered by the prevailing party, if any.

                                   ARTICLE XI

                                    INSURANCE

         11.1 Liability Insurance. Service Provider shall obtain and maintain at
all times during the term of this Agreement comprehensive general liability,
professional liability, automobile liability, workers' compensation and other
insurance to protect the interest of Service Provider in connection with the
performance of this Agreement. As soon as practicable after the date of this
Agreement, Service Provider shall cause to be delivered to Investor a statement
from the insurance company that such policy shall in no event be terminated or
materially modified by the insurance company without 30 days' prior written
notice to Investor.

         11.2 Issuer; Policy Terms; Notice of Cancellation. The issuer, policy
terms and forms, and coverage with respect to all insurance required pursuant to
this Article shall be subject to the reasonable approval of Investor. Service
Provider agrees to notify Investor, or to cause Investor to be notified, in
writing immediately and in addition to the notice to Investor provided for in
Section 11.1, and in no event within more than ten (10) days, of the notice of
cancellation or termination of any such coverage by the issuer and shall
immediately obtain new insurance in accordance with this Article XI.

         11.3 Evidence of Insurance. On the effective date of this Agreement,
Service Provider shall provide to Investor for approval copies of policies,
certificates of insurance or other proof evidencing its insurance coverage as
required under this Article XI.

                                                                         Page 17

                                   ARTICLE XII

                    TERMINATION OF AGREEMENT: PROCEDURES UPON
                     TERMINATION OR EXPIRATION OF AGREEMENT

         12.1     Termination.

                  (a) Events of Default. Each party ("Non-Defaulting Party) may
         terminate this Agreement by written notice to the other party
         ("Defaulting Party") at any time following the occurrence of an Event
         of Default by the Defaulting Party. As used herein, the term "Event of
         Default" by the Defaulting Party shall mean the occurrence of one or
         more of the following:

                           (1) the failure of the Defaulting Party to maintain
                  insurance as required by Article XI and the other provisions
                  of this Agreement;

                           (2) the failure by the Defaulting Party to pay or
                  transfer monies when and as payment shall be required pursuant
                  to the terms of this Agreement;

                           (3) the failure by the Defaulting Party to perform
                  any of its non-monetary obligations in accordance with the
                  terms of this Agreement or breach of a representation or
                  warranty hereunder;

                           (4) the filing of a petition in bankruptcy or for
                  reorganization pursuant to bankruptcy, insolvency or any
                  similar law, US, Hong Kong or other jurisdiction by the
                  Defaulting Party, or the adjudication by decree of a court of
                  competent jurisdiction that any party is a bankrupt, or is
                  declared insolvent, or if the Defaulting Party shall make an
                  assignment for the benefit of creditors, or is unable to pay
                  its debts generally as they become due, or shall consent to
                  the appointment of a receiver or receivers of all or any part
                  of its property;

                           (5) the filing of a petition in bankruptcy against
                  the Defaulting Party or for reorganization of the Defaulting
                  Party to this Agreement pursuant to bankruptcy, insolvency or
                  any similar law, federal or state, and if such petition shall
                  not be discharged or dismissed within sixty (60) days after
                  the date on which such petition was filed or if a receiver or
                  trustee is appointed for or attachment is made by a creditor
                  of the Defaulting Party upon substantially all of or a
                  material portion of the assets of the Defaulting Party and
                  such receivership or attachment is not discharged within sixty
                  (60) days of such appointment;

                           (6) a creditor executes upon, forecloses or otherwise
                  involuntarily acquires, otherwise receives in satisfaction of
                  an obligation or obtains a judgment lien against substantially
                  all of or a material portion of the assets of the Defaulting
                  Party;

                                                                         Page 18

                           (7) any fraud, material dishonesty or material
                  misconduct of the Defaulting Party;

                           (8) a change in the ownership of fifty percent (50%)
                  of the Service Provider without the prior written consent of
                  the Investor; or

                           (9) the Defaulting Party regularly or habitually
                  commits a breach of this Agreement and has received its third
                  written notice of such breach from the Non-Defaulting Party
                  setting out in reasonably specificity the details of the
                  breach and stating that it intends to exercise its right to
                  terminate this Agreement under this Section if any further
                  breaches occur.

                  (c) Termination If Purchase Agreement Does Not Close. This
         Agreement shall terminate in the event that the Purchase Agreement is
         terminated.

         12.2  Notice of Default. In the event of the occurrence of an Event of
         Default, the Non-Defaulting Party shall provide the Defaulting Party
         written notice setting forth the nature of such Event of Default and
         that the Non-Defaulting Party may terminate this Agreement by written
         notice, which termination shall be effective upon receipt of the notice
         or upon the date specified in the notice.

         12.3  Effect of Termination.

               (a)  Upon the termination of this Agreement, Investor's
                    appointment of Service Provider shall terminate, but the
                    termination of this Agreement for any reason shall not
                    affect any right, obligation or liability that has accrued
                    under this Agreement prior to the date of termination except
                    for any obligation which cannot reasonably be performed by
                    Service Provider if Service Provider is no longer employed
                    by Investor (i.e., no access to files and records of Assets,
                    etc.) provided Service Provider notifies Investor promptly
                    upon learning that any such obligation has arisen and that
                    Service Provider cannot reasonably perform such obligation
                    for such reason.

               (b)  In the event of an Investor termination pursuant to Section
                    12.1, Investor shall pay Service Provider (i) on or before
                    ten (10) days following the date of termination, a sum of
                    money equal to the Servicing Fee and Collection Fee for the
                    month of the termination, pro rated to the date that the
                    notice of termination was given.

                                                                         Page 19

               (c)  In the event Service Provider terminates this Agreement
                    under Section 12.1, Service Provider agrees that if the
                    Investor has used its best efforts in good faith prior to
                    termination to locate a substitute Service Provider, and has
                    been unable to do so prior to the date for termination,
                    Investor may, not less than thirty (30) days prior to that
                    date, serve a notice on Service Provider requiring Service
                    Provider to continue the services under this Agreement for a
                    further 60 days. Service Provider shall comply with such
                    notice and the Agreement shall continue until the end of the
                    60 day extension.

         12.4 Procedures upon Expiration or Termination. Upon the expiration or
termination of this Agreement, Service Provider, as directed by Investor, either
(a) will within ten (10) Business Days immediately deliver all documents, files,
books, paper, accounts, and computer files relating to the Assets (the
"Records") that are in Service Provider's possession or control to the control
of Investor who shall be deemed Investor of all such materials throughout this
Agreement and thereafter, which Records shall be transported in the manner
requested by Investor and at the cost of Investor. Service Provider shall
prepare and deliver notices to all borrowers and tenants of such change in
payment instructions, if any, as Investor shall direct and to all other parties
(including tax authorities) affected by such termination of any change in
billing address as Investor shall in writing direct.

         12.5 Duty of Cooperation. Upon the expiration or termination of this
Agreement, the parties will cooperate with each other to effect an efficient and
smooth transition of responsibility with respect to the Assets and the Loans.

         12.6 Termination and Arbitration. The Service Provider and Investor
agree that if either party challenges the termination or expiration of this
Agreement under the dispute resolution procedures set forth in Section 14, this
shall not postpone or delay the termination or expiration of this Agreement
beyond the time periods set out in this Agreement.

                                  ARTICLE XIII

          REPRESENTATIONS, WARRANTIES AND COVENANT OF SERVICE PROVIDER

          13.1 Representations and Warranties. Service Provider represents and
warrants to Investor that as of the date of this Agreement:

                  (a) Service Provider (A) is a corporation, duly organized,
         validly existing and in good standing under the laws of Hong Kong;

                  (b) Service Provider has the full power and authority to
         execute, deliver and perform all transactions contemplated by this
         Agreement, and Service Provider has duly authorized the execution,
         delivery and performance of this Agreement, and has duly executed and
         delivered this Agreement;

                                                                         Page 20

                  (c) The execution and delivery of this Agreement, the
         consummation of the transactions contemplated hereby, and the
         performance of or compliance with the terms and conditions of this
         Agreement will not conflict with or result in a breach of or default
         under any of the terms, conditions or provisions of Service Provider's
         articles of incorporation or by-laws or any agreement or instrument to
         which Service Provider is now a party or by which it is bound, or any
         applicable law, the breach or violation of which would materially
         impair Service Provider's ability to perform under this Agreement;

                  (d) Service Provider can perform each and every covenant to be
         performed by it contained in this Agreement in all material respects
         and the obligations expressed to be assumed by it in this Agreement are
         legal and valid obligations binding on it and enforceable against it in
         accordance with the terms of this Agreement;

                  (e) There is no litigation pending against Service Provider,
         or, to Service Provider's knowledge, threatened, which, if determined
         adversely to Service Provider, would adversely affect the ability of
         Service Provider to service the Loans or any REO Property hereunder in
         accordance with the terms hereof or which would have a material adverse
         effect on the financial condition of Service Provider;

                  (f) Service Provider has or will have at the time of
         performance all licenses, authorizations, consents, approvals and
         permits required by applicable laws in order to perform its obligations
         under this Agreement, and otherwise complies with all laws material and
         applicable to the performance of those obligations;

                  (g) No representation, warranty or statement of Service
         Provider in this Agreement is untrue or inaccurate in any material
         respect; and

                  (h) Service Provider has not taken any corporate action nor
         have any other steps been taken or legal proceedings been started or
         (to the best of its knowledge and belief) threatened against Service
         Provider for its winding-up, dissolution, administration or
         re-organization (whether by voluntary arrangement, scheme of
         arrangement or otherwise) or for the appointment of a receiver,
         administrator, administrative receiver, conservator, custodian, trustee
         or similar officer of it or of any or all of its assets or revenues.

         13.2 Covenant. Service Provider shall obtain, maintain and comply with
the terms of all licenses, authorizations, consents, approvals and permits
required by applicable laws the violation of which would materially impair its
ability to perform its obligations under this Agreement.

                                                                         Page 21

                                   ARTICLE XIV
                            MISCELLANEOUS PROVISIONS

         14.1 No Partnership Intended. Nothing in this Agreement shall be deemed
or construed to create a co-partnership or joint venture between the parties
hereto.

         14.2 Entire Agreement. This Agreement embodies the entire Agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, representations, warranties,
covenants or undertakings other than those expressly set forth or referred to
herein. This Agreement supersedes any and all prior agreements and
understandings between the parties or either of the parties and any Affiliate of
any party with respect to such subject matter save that the memorandum entered
into by the Investor and the Service Provider on May 22, 2003 shall continue to
remain in full force and effect and binding on the parties so long as the
Service Provider performs its obligations hereunder. Upon a breach by the
Service Provider of its obligations hereunder, the Investor shall have the
right, upon notice in writing to the Service Provider, to terminate the
memorandum.

         14.3 Amendment; Counterparts. This Agreement may only be amended in
writing signed by both of the parties. This Agreement and any amendment hereto
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

         14.4     Benefit and Burden.

                  (a) This Agreement shall inure to the benefit of and be
         binding upon the parties hereto and their respective successors and
         assigns; provided, however, that neither party may assign this
         Agreement without the prior consent of the other party hereto except to
         an Affiliate of the assigning party (which Affiliate shall expressly
         assume the obligations of the assigning party), provided such Affiliate
         assignment shall not relieve the assigning party from any liability
         hereunder and such Affiliate has all requisite license(s) required, if
         any, to perform its obligations under this Agreement and has obtained
         any and all authorizations from relevant authorities (including with
         respect to maintenance of ABS Plan approval) required for such
         assignment. For purposes of this provision, the sale or transfer of a
         controlling interest in Service Provider or its parent shall not
         constitute an assignment or transfer of rights or benefits under this
         Agreement.

                  (b) Notwithstanding any provision to the contrary, Investor
         shall have the right to assign this Agreement to a lender to secure
         Investor's obligation to repay a loan from such lender to Investor,
         provided that any such assignment shall provide that Service Provider
         shall not be required to perform any of its obligations hereunder
         unless the obligations of Investor have been and are being fully
         performed in all material respects.

                  (c) Except as may otherwise be expressly provided herein,
         nothing contained in or referred to in this Agreement is intended or
         shall be construed to give any Person

                                                                         Page 22

         other than parties hereto any legal or equitable right, remedy or
         claim under or in respect of this Agreement or any provisions hereof,
         it being the intention of the parties hereto that this Agreement, the
         assumption of obligations and statements of responsibilities in this
         Agreement and all other conditions and provisions of this Agreement
         are for the sole and exclusive benefit of the parties hereto and for
         the benefit of no other Person.

         14.5 Transactions with Affiliates. Service Provider may enter into
transactions with or otherwise deal with any of its Affiliates in carrying out
its obligations under this Agreement; provided, however, that Investor shall
have given prior written consent to such transactions or dealings and the terms
thereof if Investor will be expected to bear the expenses of such Affiliates.
All such transactions under the proviso in this Section shall be on an
arm's-length basis and at market rates.

         14.6 Notices. Any report, demand, notice or other communication
required or permitted to be given hereunder shall be in writing, and shall be
delivered personally, by facsimile transmission or telecopy (with a hard copy
and a transmission confirmation sent by a recognized overnight national carrier
service (such as Federal Express) for next Business Day delivery) or by a
recognized overnight national courier service (such as Federal Express) for next
Business Day delivery or shall be sent by certified or registered mail, return
receipt requested, first-class postage prepaid to the parties at the addresses
set forth below (or to such other addresses as the parties may specify by due
notice to the other):

If to Investor:               Citigroup Financial Products Inc.
                              18th Floor
                              3 Exchange Square, Hong Kong
                              Attn: John Redick/Patrick Chui
                              Fax:   852-2537-4239

If to Service Provider:       ChinaWe.com Inc.
                              Room 1307, 13th Floor
                              Block A, Fuk Keung Industrial Building
                              66-68 Tong Mi Road, Kowloon, Hong Kong
                              Attn: Ken Wai / Vivian Chu
                              Fax.:    852-2395-5728

Any notice delivered to a party's designated address by (a) personal delivery,
(b) recognized overnight national courier service, or (c) registered or
certified mail, return receipt requested, shall be deemed to have been received
by such party at the time the notice is delivered to such party's designated
address. Confirmation by the courier delivering any notice given pursuant to
this Section shall be conclusive evidence of receipt of such notice. Each party
hereby agrees that it will not refuse or reject delivery of any notice given
hereunder, that it will acknowledge, in writing, receipt of the same upon
request by any other party and that any notice rejected or refused by it shall
be deemed for all purposes of this Agreement to have been received by the
rejecting party on the date so refused or rejected, as conclusively established
by the records of the U.S. or Korean Postal Service or the courier service. Any
notice delivered to a party's

                                                                         Page 23

designated address by facsimile or telecopy (with a hard copy confirmation as
required above) shall be deemed received by such party on the date sent, unless
the time of receipt by the recipient is other than normal business hours in
which case it shall be deemed received on the next Business Day.

         14.7 Severability. The invalidity or unenforceability of any provision
of this Agreement shall not impair the validity or enforceability of any other
provision.

         14.8 Governing Law. This Agreement shall be governed by, and shall be
construed in accordance with Hong Kong law..

         14.9 Headings. The headings in this Agreement are intended solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.

         14.10 No Waiver. No waiver of breach shall be effective against either
party unless it is in writing, signed by that party. No waiver by either party
of any breach of any term or covenant contained in this Agreement shall operate
as a waiver of such term or covenant itself, or of any subsequent breach
thereof.

         14.11 Survival. The terms, conditions and covenants contained in this
Agreement which, by their terms, require their performance after the expiration
or termination of this Agreement shall be enforceable notwithstanding the
expiration or other termination of this Agreement, including without limitation
(a) the parties' respective indemnity and other obligations under Article X, (b)
the representations and warranties of the Service Provider set forth in Articles
XIII to the extent necessary for either party's discharge of its
post-termination payment and performance obligations and to the extent the
breach of the same by a party creates any third party liability of the other
party which arises or is pursued after the expiration or termination of this
Agreement, (c) provisions of this Agreement relating to the availability and
maintenance of books and records, and to resolution of disputes; (d) Service
Provider's right to amounts earned or reimbursable prior to or concurrent with
termination; and (e) the confidentiality obligation contained in Section 14.13.

         14.12 Limitation of Recourse. There shall be no liability under this
Agreement of, nor any recourse under this Agreement to, any officer, director,
shareholder, affiliate, employee or agent of either party to this Agreement
except as set forth herein.

         14.13 Confidentiality. Service Provider agrees not to disclose any of
the acquisition prices, values or disposition prices relating to the Assets to
be serviced pursuant to the terms of this Agreement, or other non-public
information which relates to Investor which Service Provider obtains in the
course of performing its obligations or receiving the benefits under this
Agreement and Investor agree not to disclose any of Service Provider's servicing
fees, methods or software or other technology or other non-public information
which relates to Service Provider which Investor obtains in the course of
Service Provider performing its obligations or receiving the benefits under this
Agreement; provided that such disclosure may be made by a party (a) to any
person who is a partner, officer, director of employee of such party or counsel
to

                                                                         Page 24

or accountants of the disclosing party, provided they agree to comply with
the confidentiality obligations hereunder (b) with the prior consent of the
other party, (c) pursuant to a statute, rule or regulation or subpoena or order
issued by a court, arbitrator or governmental body, agency or official or (d)
following a time after which such information has become publicly available
other than by an act of, or failure to act by, the disclosing party.

In the event that the Service Provider shall receive a request to disclose any
of the terms of this Agreement under a subpoena or order, it shall (i) promptly
notify Investor thereof, (ii) consult with Investor on the advisability of
taking steps to resist or narrow such request and (iii) if disclosure is
required or deemed advisable, cooperate with Investor in any attempt it may make
to obtain an order or other assurance that confidential treatment will be
accorded those terms of this Agreement that are disclosed.

         14.14 Cooperation in Good Faith. Notwithstanding anything to the
contrary contained herein, each party hereto agrees that it will deal with the
other party fairly and in good faith in all matters under this Agreement.

         14.15 Further Assurances. Each Party agrees to execute and deliver such
additional documents and to take such additional actions as may be necessary or
appropriate to effect the provisions of this Agreement and all transactions
contemplated hereby, including, without limitation, any amendments to the Asset
Securitization Plan that may be necessary or appropriate from time to time to
reflect the transactions contemplated hereby.

          14.16 Interpretation. In this Agreement headings and boldings are for
convenience only and do not affect the interpretation of this agreement and,
unless the context otherwise requires:

                  (a) other parts of speech and grammatical forms of a word or
         phrase defined in this Agreement have a corresponding meaning;

                  (b) words importing the singular include the plural and vice
         versa, words importing a gender include any gender and any expression
         importing a natural person includes any company, partnership, joint
         venture, association or corporation;

                  (c) a reference to a document includes all amendments or
         supplements to, or replacements or novations of, that document and a
         reference to a party to a document includes that party's successors and
         permitted assigns;

                  (d) a reference to a body other than a party to this Agreement
         (including an institute, association or authority), whether statutory
         or not which ceases to exist or whose powers or functions are
         transferred to another body is a reference to the body which replaces
         it or which substantially succeeds to its powers or functions;

                  (e) the use of the word includes or including (or similar) in
         a clause as an introduction to a list of things, does not limit the
         clause to that list or to things of a similar type;

                                                                         Page 25

                  (f) a reference to a part, section, clause, party, annex,
         exhibit or schedule is a reference to a part, section and clause of,
         and a party, annex, exhibit and schedule to, this Agreement;

                  (g) a reference to any statute or regulation includes all
         statutes and regulations amending, consolidating or replacing them, and
         a reference to a statute includes all regulations, proclamations,
         ordinances and by-laws issued under that statute; and

                  (h) a reference to a notice or written consent shall include
         communications via e-mail.

                           [Signature Page(s) follows]

                                                                         Page 26

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.

                                            INVESTOR:

                                            CITIGROUP FINANCIAL PRODUCTS INC.

                                            By: /s/ Joseph T. Draper
                                                --------------------------------
                                                Name:  Joseph T. Draper
                                                Title: Managing Director

                                                                         Page 27

                                            SERVICE PROVIDER:

                                            CHINAWE.COM INC.

                                            By: /s/ Ken Wai
                                               --------------------------------
                                               Name:  Ken Wai
                                               Title: Director

                                                                         Page 28

                          LIST OF EXHIBITS AND SCHEDULE

         Exhibit A                          Description of Assets

         Exhibit B                          Business Plan Template

         Exhibit C                          Monthly Reports

                                    EXHIBIT A

               Description of Assets and Allocated Purchase Price

To be mutually agreed upon by the Effective Date based on the assets purchased
and purchase price paid under the Purchase Agreement.

                                   EXHIBIT A-1

                              DESCRIPTION OF LOANS

                                    EXHIBIT B

                             Business Plan Template

                                    EXHIBIT C

                                 Monthly Reports<PAGE>
                                                                    EXHIBIT 10.1

                                    AGREEMENT

                                     BETWEEN

                     THE SIMMONS MANUFACTURING COMPANY, LLC

                                       AND

                 INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL,
                   SALARIED, MACHINE & FURNITURE WORKERS AND
                            COMMUNICATION WORKERS OF
                                AMERICA, AFL-CIO

                                 LOCAL 89262 FW

                                  APRIL 1, 2004

                                       TO

                                  APRIL 1, 2006

<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                              <C>
ARTICLE I         RECOGNITION AND UNION SECURITY..................................................................1

         1.01     Purpose.........................................................................................1
         1.02     Exclusive Bargaining Representative.............................................................1
         1.03     UNION Security..................................................................................2
         1.04     UNION Representative Seniority..................................................................3
         1.05     Check Off.......................................................................................3

ARTICLE II        GRIEVANCE AND ARBITRATION PROCEDURE.............................................................3

         2.01     ................................................................................................3
         2.02     ................................................................................................6

ARTICLE III                GRIEVANCE COMMITTEE....................................................................7

         3.01     ................................................................................................7

ARTICLE IV                 HOURS OF WORK AND PREMIUM PAY..........................................................8

         4.01     Working Hours...................................................................................8
         4.02     Lunch Periods...................................................................................8
         4.03     Rest Periods....................................................................................9
         4.04     Overtime........................................................................................9

ARTICLE V                  WAGES.................................................................................11

         5.01     Hiring Rate and Progression....................................................................11
         5.02     Wage Rates.....................................................................................12
         5.03     Mechanics......................................................................................13
         5.04     Inventory......................................................................................16
         5.05     Shift Premium..................................................................................16
         5.06     Report-In-Pay..................................................................................16
         5.07     Cross Training Incentive.......................................................................16
         5.08     Computation of Quarterly Average Hourly Earnings Rates.........................................17
         5.09     ...............................................................................................18
         5.10     ...............................................................................................18
         5.11     Payment During Treatment of Work Related Accident..............................................19

ARTICLE VI                 STANDARD ALLOWED HOURS
                           (S.A.H.) SETTING FORMULA..............................................................20

         6.01     ...............................................................................................20
         6.02     Productivity...................................................................................21
         6.03     ...............................................................................................22

ARTICLE VII       SENIORITY......................................................................................23

         7.01     Purpose........................................................................................23
</TABLE>

<PAGE>
<TABLE>
<S>                                                                                                              <C>
         7.02     Seniority......................................................................................23
         7.03     Establishment of New Classification............................................................24
         7.04     Associate Training.............................................................................25
         7.05     Lay Offs.......................................................................................25
         7.06     Furlough.......................................................................................27
         7.07     Reduction of Hours.............................................................................28
         7.08     Open Positions.................................................................................30
         7.09     Personnel Action...............................................................................31
         7.10     Classification Phase Out.......................................................................31

ARTICLE VIII      ...............................................................................................32

         8.01     Leave of Absence...............................................................................32
         8.02     Jury Duty......................................................................................32

ARTICLE IX                 PAID VACATIONS........................................................................33

         9.01     ...............................................................................................33
         9.02     ...............................................................................................33
         9.03     ...............................................................................................34
         9.04     ...............................................................................................34
         9.05     ...............................................................................................35
         9.06     ...............................................................................................36
         9.07     ...............................................................................................36
         9.08     ...............................................................................................36
         9.09     ...............................................................................................36

ARTICLE X                  PAID HOLIDAYS.........................................................................36

         10.01    ...............................................................................................36

ARTICLE XI                 MILITARY CLAUSE.......................................................................38

         11.01    ...............................................................................................38

ARTICLE XII                INSURANCE PROGRAM.....................................................................38

         12.01...................................................................................................38

ARTICLE XIII               PENSION...............................................................................39

         13.01    ...............................................................................................39

ARTICLE XIV                MANAGEMENT RIGHTS CLAUSE..............................................................40

         14.01    ...............................................................................................40

ARTICLE XV                 NO STRIKE  --  NO LOCKOUT.............................................................41
</TABLE>

                                                                              ii
<PAGE>

<TABLE>
<S>                                                                                                              <C>
         15.01    ...............................................................................................41

ARTICLE XVI       BULLETIN BOARDS................................................................................43

         16.01    ...............................................................................................43

ARTICLE XVII      SAFETY AND SANITATION..........................................................................44

         17.01    ...............................................................................................44

ARTICLE XVIII     LEGAL CONFORMITY...............................................................................44

         18.01    ...............................................................................................44
         18.02    ...............................................................................................44

ARTICLE XIX       MISCELLANEOUS..................................................................................45

         19.01    Sick Days......................................................................................45

ARTICLE XX        COMPLETE AGREEMENT

         20.01 ..................................................................................................45

ARTICLE XXI       TERMINATION, MODIFICATION AND RENEWAL..........................................................46

         21.01    ...............................................................................................46
         21.02    ...............................................................................................46
</TABLE>

                                                                             iii

<PAGE>
         This agreement, entered into this 1st day of April 2004, by and between
THE SIMMONS MANUFACTURING COMPANY, LLC, a Delaware corporation, for and on
behalf of its plant in San Leandro, California, hereinafter referred to as the
COMPANY,

                                       and

         The INTERNATIONAL UNION OF ELECTRONIC, ELECTRICAL, SALARIED, MACHINE &
FURNITURE WORKERS AND COMMUNICATION WORKERS OF AMERICA, A.F.L.-C.I.O, on behalf
of the COMPANY's associates in the San Leandro facility, hereinafter referred to
as the UNION

                                   WITNESSETH

         NOW, THEREFORE, in consideration of the promises 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 Purpose The intent and purpose of the parties is to promote efficiency,
improve productivity and provide for the safety, health and well being of our
associates through a mutually beneficial working relationship. To that end the
parties express their intention to fully cooperate in fulfilling their mutual
obligations in this agreement covering wages, hours of work and other terms and
conditions of employment applicable to the associates covered by this collective
bargaining agreement.

         A.       The Company and the Union agree that neither party will
                  intentionally misuse the intent or Articles of this agreement

1.02     Exclusive Bargaining Representative

The COMPANY recognizes the UNION as the exclusive bargaining representative for
all production and maintenance associates working at its San Leandro, California
plant, covered by this agreement for the purpose of collective bargaining,
excluding executives, sales associates,

<PAGE>

office associates and supervisors, In as much as practical in running the
business of the company, Supervisors will not perform any production or
maintenance work. However, this provision shall not be construed in such fashion
as to deny any associate the right to instruct, experiment, check or test
equipment to determine fitness or do critically necessary work when required to
meet customer demands limited to no more than sixty (60) minutes per day. This
clause applies to normal production work and does not apply to product
development, engineering projects or other activities associated with business
development.

1.03     UNION Security

         A.       It is further understood and agreed that all such associates
                  shall, after 30 days, become members of the UNION and, as a
                  condition of continued employment, maintain such membership in
                  good standing for the life of this agreement.

         B.       The Company shall have the sole and exclusive right to hire
                  its associates. The Company will determine the minimum
                  qualifications necessary to perform any function including but
                  not limited to education, training, experience and ability.

         C.       New associates shall be considered probationary associates
                  until they have completed the probationary period of sixty
                  (60) days. The parties agree that the Company may extend the
                  probationary period for no more than (30) additional days for
                  proper reason given to the union in writing. During the
                  probationary period, or any extension thereof, an associate
                  may be discharged at the sole discretion of the COMPANY with
                  or without cause. Such discharged associates shall not have
                  recourse through the grievance and arbitration provision of
                  this agreement.

         D.       The COMPANY may request assistance from the UNION in
                  recruiting Associates whenever needed.

1.04     UNION Representative Seniority

Any associate leaving their employment to accept elective or appointive
positions with the UNION lasting longer than twenty four (24), consecutive
weeks, other than elected offices in the local union, will continue to accrue
seniority and benefits as an associate of the COMPANY for

                                                                               2
<PAGE>

up to three (3) years. Should the associate not return after three (3) years
their seniority and employment with the COMPANY will terminate effective the
third anniversary of the date the associate left the company for the UNION
position.

1.05     Check Off

         A.       The COMPANY agrees to deduct (upon receipt of a properly
                  executed written authorization for such deductions) the
                  initiation fees of new members, the regular monthly dues of
                  all such members, and any assessment authorized by the UNION
                  in accordance with its by-laws. Such deductions shall be made
                  the first payday of each month and shall be remitted to the
                  Financial Secretary of the UNION not later than the fifteenth
                  (15th) day of the current month. In the event that an
                  individual is off and dues are not deducted for the month, the
                  COMPANY agrees upon written authorization from the member to
                  deduct the monthly dues the second month.

                  The COMPANY agrees to deduct (upon receipt of a properly
                  executed written authorization for such deduction) from the
                  associate's salary an annual deduction for C.O.P.E. The
                  COMPANY shall remit to the Financial Secretary of the UNION
                  within fifteen (15) days all monies collected.

ARTICLE II        GRIEVANCE AND ARBITRATION PROCEDURE

2.01

         A.       Grievance Procedure

                  The Company shall have the right to discharge or assess
                  disciplinary action for just cause. It is the intent of the
                  parties to this Agreement that the grievance procedure within
                  the agreement will serve as a means for the prompt disposition
                  and amicable settlement of such grievances as may arise
                  between the Company and its associates or the Company and the
                  Union. The COMPANY recognizes that UNION stewards will conduct
                  investigations and have discussions concerning and
                  investigations of grievances and will not interfere by
                  unreasonably denying permission for such conduct

                  Article XV, Section A additionally provides for Expedited
                  Arbitration designed to ensure speedy resolution of certain
                  grievances, including discharge and suspension of associates.

                                                                               3
<PAGE>

         B.       Should any grievance arise between the Company and any of the
                  Company's associates involving work assignment, the associate
                  involved will continue to perform the assignment in question
                  while the grievance is being processed unless it will endanger
                  their life, limb, safety or that of other associates.

                  An associate shall have the right to have a UNION
                  representative present at a meeting with the COMPANY when the
                  associate reasonably believes such a meeting may result in
                  disciplinary action.

         C.       The UNION, as the exclusive bargaining representative of
                  associates in the bargaining unit, has the sole and exclusive
                  right to file, pursue, withdraw or resolve grievances at any
                  step of the procedure on behalf of any associate.

                  Verbal Discussions

                  1.       The associate and/or the UNION steward, if requested
                           by the associate, may discuss the matter with the
                           associate's immediate supervisor in an effort to
                           resolve the issue.
                  2.       The parties may resolve at any step, including the
                           verbal discussion, of this procedure by mutual
                           written agreement to include retroactivity, if
                           applicable.

         Step 1 If the grievance is not settled in verbal discussion described
         above, the grievance shall be reduced to writing on forms to be made
         available for such purpose by the union, with each form signed and
         dated by the aggrieved associate and his designated Union
         representative. The designated Union representative shall present the
         grievance form to the associate's supervisor within five (5) working
         days from the date of the occurrence or knowledge of the occurrence
         giving rise to the grievance. The grievance shall specify the specific
         incident involved, the date of the incident, any and all witnesses to
         the incident, the facts or alleged facts relied upon to support the
         allegation of the employee, the specific section(s) of this Agreement
         allegedly violated and the specific remedy requested by the associate.
         The supervisor has five (5) workdays to answer.

         Step 2. If the answer given to the grievance in Step 1 is not
         acceptable the aggrieved associate and their union representative will
         specify the reasons for rejecting the answer and present the grievance
         form to the Operations Manager and/or the Human Resource Manager within
         five (5) work days from receipt of the Step 1 answer. The Operations
         Manager and/or Human Resource Manager will within five (5) days meet
         and discuss the matter with the associate and a Union representative.
         The Operations Manager and/or Human Resource Manager shall then have
         five (5) work days to answer the grievance from the date of this
         meeting.

         Step 3. If a resolution to the grievance is not reached in Step 2, the
         aggrieved associate or the union representative will specify the
         reasons for rejecting the answer and the grievance will be referred to
         the Company's Director of Human Resources Employee & Labor Relations,
         or their designated representative within five (5) working days from
         the date of receipt of the answer from Step 2. The Secretary/Treasurer
         of the local Union and the Company's Director or their designees

                                                                               4
<PAGE>
                  will meet on the grievance 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 Union within five (5) working days after the
                  meeting.

         D.       If an associate is needed as a witness in the process of Step
                  1, 2 or 3 by the Union, it is understood that any pay lost by
                  the witness or others resulting from their absence from work
                  will be reimbursed by the Union.

         E.       Resolution by Default. For discipline involving suspension
                  and/or discharge 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 automatically
                  elevate the grievance to the next step. The time limits set
                  out in this Article, are understood to be work days exclusive
                  of Saturdays, Sundays and holidays recognized by this
                  Agreement. For all other grievances, failure on the part of
                  either party to respond to any step within the grievance
                  procedure within the time limits established by ths Article
                  will resolve the grievance against the party failing to
                  respond. Time limits may be extended by mutual written
                  agreement.

         F.       Arbitration of Disputes. If the grievance is subject to
                  arbitration as defined above, and all conditions above have
                  been satisfied, including the applicable time limits, then the
                  Union on behalf of the aggrieved associate or aggrieved
                  associates 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.

         G.       Selection of Arbitrators. Within ten (10) calendar days after
                  the Union files its written request for arbitration 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 and
                  the Company shall alternately strike starting with the Company
                  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.

         H.       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 intent and letter of this Agreement and any
                  amendments thereto. 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 which may be
                  applicable. 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 their
                  decision. The decision of the arbitrator shall be in writing
                  and the decision shall be final and binding upon the parties.

         I.       All costs for the hearing and service of the arbitrator shall
                  be shared equally by the parties. Each party will bear the
                  expense of its representatives, witnesses and for the
                  presentation of its own case.

                                                                               5
<PAGE>

2.02     Grievance Procedure for Time Study disputes:

         A.       In the event the Union and the Company are unable to agree to
                  a base rate on a new classification the dispute may be
                  appealed to arbitration for determination by a qualified time
                  study arbitrator.
         B.       In the event that a time study dispute is not resolved at the
                  Operations Manager's level of the present grievance procedure,
                  the UNION shall have the right to retain, at UNION expense, an
                  outside time study engineer, whose credentials will be
                  approved by the COMPANY. Once the COMPANY has agreed upon the
                  credentials of the time study engineer hired by the UNION,
                  that person shall be permitted by the COMPANY to view or study
                  the operation in dispute for the purpose of advising the UNION
                  on the disputed standards. In order to facilitate appropriate
                  arrangements, the UNION shall notify the COMPANY of the date
                  on which its Time Study Engineer will appear at least two (2)
                  weeks in advance.
         C.       It is understood by the parties that following the receipt of
                  the report by the UNION from its Engineer; The UNION will
                  provide a copy of the report for the COMPANY'S Industrial
                  engineer to review. The UNION may request through local
                  management to meet with the COMPANY industrial enginer. The
                  UNION may then confer with COMPANY representatives, other than
                  the local management through the offices of the COMPANYS
                  Director of Human Resources Employee & Labor Relations, for
                  the purpose of attempting resolution at the pre-arbitration
                  level. If the time study dispute is not resolved, then the
                  matter may be appealed to an Arbitrator who must be a
                  qualified Time Study Engineer to be selected by mutual
                  Agreement.
         D.       Appeals under the Standard Allowed Hour Formula if warranted,
                  shall be carried to arbitration under the above-described
                  procedure; however, in this instance, the Arbitrator must be a
                  qualified time study engineer who shall be permitted by the
                  COMPANY to view or study the operation in question with the
                  COMPANY Industrial engineer, if necessary prior to the
                  arbitration hearing.
         E.       All steps of the Grievance and Arbitration Procedure must be
                  initiated (including selection of Arbitrator) within sixty
                  (60) days of the date the grievance is filed, or the grievance
                  will be considered resolved with the COMPANY's last answer.
         F.       The COMPANY has the right to file grievances against the UNION
                  following the procedures outlined in Article II, Section 2.01.

ARTICLE III                GRIEVANCE COMMITTEE

3.01

         A.       The Grievance Committee for the plant shall consist of no more
                  than three associates appointed by the UNION.

                                                                               6
<PAGE>

                  1.       Wednesday afternoons starting at 2:45 p.m. or any
                           other mutually agreeable time determined by the
                           COMPANY shall be designated as the time for the
                           regular grievance meetings with COMPANY
                           representatives. The COMPANY will not pay associates
                           for time spent in this meeting. If overtime is
                           scheduled and the meeting is concluded prior to the
                           scheduled overtime, the associates will return to
                           their jobs and finish the remainder of scheduled
                           overtime if required by the COMPANY.

                  2.       If the above meeting is scheduled by the COMPANY
                           prior to 2:45 p.m., the associates will be paid at
                           average rate for the time spent in the meeting prior
                           to 2:45 p.m.

         B.       Any Union Steward shall have the right to visit departments
                  other than their own for a maximum of twenty (20) minutes a
                  day after requesting and receiving permission from their
                  department supervisor. The visits shall only be for the
                  purpose of investigating or discussing legitimate grievances.

                  Any UNION official shall have the right to visit the plant at
                  all reasonable times and shall notify the COMPANY prior to
                  arriving. A representative of the COMPANY may accompany the
                  UNION official if the COMPANY so desires.

ARTICLE IV                 HOURS OF WORK AND PREMIUM PAY

4.01     Working Hours

         A.       The eight (8) hour day and the forty (40) hour week, Monday to
                  Friday inclusive, shall be established at the plant.

         B.       Normal first shift schedule will be from 6:15 a.m. to 2:45
                  p.m.

                  Normal second shift schedule will be from 2:45 p.m. to 11:15
                  p.m.

                  Normal third shift schedule will be from 10:15 p.m. to 6:15
                  a.m.

                  Associates may be required to start their normal shift up to
                  two (2) hours early.

                                                                               7
<PAGE>

         C.       These hours may be changed by mutual written Agreement between
                  the parties.

4.02     Lunch Periods

         A.       Lunch periods will be scheduled as follows:

                  1st Shift                 11:00 a.m. to 11:30 a.m.

                  2nd Shift                 7:45 p.m. to 8:15 p.m.

                  3rd Shift                 2:15 a.m. to 2:45 a.m.

         B.       These hours may be changed by mutual written agreement.
                  Associates working not more than five hours (5) on any given
                  day will complete the day's work without a lunch period. The
                  meal period may be waived by mutual written consent of the
                  COMPANY and the UNION.

         C.       Flexible schedules for individuals or departments may be
                  established by the COMPANY based on production needs and by
                  mutual written agreement between the UNION and the COMPANY.

4.03     Rest Periods

         A.       There shall be a rest period of ten (10) minutes between the
                  second (2nd) and third (3rd) hours and the sixth (6th) and
                  seventh (7th) hours in each shift.

         B.       Associates working in excess of eight (8) hours on any given
                  shift shall be allowed an additional ten (10) minute rest
                  period.

         C.       The above rest periods may be changed by mutual written
                  agreement.

4.04     Overtime

          A.      1.       All work done on Saturday, up to eight (8) hours or
                           in excess of eight (8) hours in any one (1) day, and
                           in excess of forty (40) hours in any one week, shall
                           be paid at the rate of time- and-one-half (1-1/2).

                                                                               8
<PAGE>

                  2.       Working hours will be based on an eight (8) hour time
                           period which is subject to starting up to 2 hours
                           prior to normal shift start times, as stated above.

                  3.       Double time shall be paid for all hours over eight
                           (8) hours on Saturday, and for all work performed on
                           Sunday and Holidays.

         B.       Associates working in excess of ten (10) hours on one shift
                  shall be allowed twenty (20) minutes mealtime without
                  deduction in pay.

         C.       Associates required to work overtime will be so notified no
                  later than 1:15 pm on the working day before the day of
                  overtime except:

                  1.       In cases of production emergency.

                  2.       Quilt Machine Operators. Quilt Machine Operators
                           shall be notified in case of production emergency
                           before lunch on the day overtime is to occur. The
                           COMPANY shall first seek volunteers to work the
                           overtime. If there are not enough volunteers to
                           provide the necessary amount of work, associates
                           shall be required to work the overtime by rotating
                           the mandatory overtime, beginning with the least
                           senior qualified associates.

                  3.       The Company will notify associates by 11:00 a.m. on
                           Friday if they are required to work on Saturday. If
                           asked after 11:00 a.m., it will be on a volunteer
                           basis.

         D.       The method for notifying associates of overtime hours will be
                  done in any of the following methods:

                           1.       Designated COMPANY marquee

                           2.       Verbal communication by a Supervisor or
                                    Manager

                  1.       If needed, associates will work ten (10) hours the
                           Friday before Labor Day holiday and eight hours at
                           double time on the Saturday before Labor Day holiday.

                                                                               9
<PAGE>

                  2.       On all other Saturdays, except other contract holiday
                           weekends, only eight (8) hours will be mandatory even
                           if ten (10) hours are scheduled on the previous
                           Friday. Sunday and holiday work will not be
                           mandatory.

                  3.       No overtime will be required the day before a
                           holiday.

                  4.       An associate with a reasonable excuse for not working
                           on a particular Saturday, may have the Saturday off
                           with two (2) weeks advance written request to the
                           COMPANY provided that another associate is available
                           to perform the necessary work. It is agreed that no
                           more than two (2) associates per job classification
                           may exercise this option.

                  5.       Rotation of overtime among qualified associates will
                           be discussed between the Shop Steward and the
                           appropriate Supervisor prior to giving notice to the
                           affected associate.

                  6.       Associates shall not be required to work more than
                           three (3) consecutive Saturdays. Associates may be
                           required to work all Saturdays during the month of
                           October.

                  7.       If it is necessary to require an individual to start
                           early he/she will be selected on a voluntary basis.
                           If there are no volunteers, the least senior
                           associate will be assigned.

         E.       1.       If an associate is absent on any day, it is their
                           responsibility to call the designated number provided
                           by the COMPANY and determine their work hours for the
                           next scheduled work day. This includes Saturday work.
                           The COMPANY will not be liable for any lost pay as a
                           result of the associate not contacting the COMPANY
                           and the associate subjects themselves to any and all
                           impact under any applicable COMPANY policies.

                                                                              10

<PAGE>
ARTICLE V                  WAGES

5.01     Hiring Rate and Progression

Regardless of the job classification:

         A.       The hiring rate for new associates will be:

                      4/1/04          4/1/05
                      ------          ------
                       $9.00          $9.00

         B.       Upon qualification on job for two (2) consecutive weeks, new
                  hires will be eligible for Pay Plus Bonus. Under no
                  circumstances is this section meant to shorten the established
                  probationary period for new hires.

5.02     Wage Rates

         A.       Job levels and pay ranges are as follows:

                                JOB LEVEL LISTING
                               PAY PLUS BONUS PLAN

        <TABLE>
        <CAPTION>
        LEVEL 1                                                 LEVEL 3
        -------                                                 -------
        <S>                                      <C>            <C>                                  <C>
        Panel Quilter                            #120           Bechik Operator                      #105
        Cover Cage                               #120           Packer/Inspector                     #130
        Closer                                   #130           Frame Builder                        #165
        Coiler                                   #225           HMB Handler/Hogring                  #225
        Coordinator                              Various        Janitor                              #490
                                                                Handler                              Various

        LEVEL 2                                                 LEVEL 4
        -------                                                 -------
        Border Overlock                          #105           New Hires (see 5.01A)
        Border Quilt                             #105           Light Duty (see 5.11)
        Box Spring Sew                           #115
        Flat Cut                                 #115
        Panel Overlock                           #120
</TABLE>

                                                                              11
<PAGE>

<TABLE>
        <S>                                      <C>            <C>             <C>
        Hog Ring                                 #130                           BASE RATE PAY RANGES
                                                                                --------------------
        Box Spring Upholstery                    #150           Level 1        $10.13  --  $13.67
        Top-Off                                  #160           Level 2        $ 9.11  --   $12.66
        HMB Assembly                             #225           Level 3        $ 9.00  --   $10.13
        Receiving                                #410*
        Warehouse/Loader                         #500

        </TABLE>

         B.       Inventory Rate will be the Associates current base rate.

         C.       All associates will receive the following increases to their
                  base rate

                               4/1/04                4/1/05
                               ------                ------
                                $0.10                 $0.15

         D.       The COMPANY will use Performance Evaluations for the purpose
                  of reviewing new associates' progress or an existing associate
                  who is transferred to a new position. At any time the COMPANY
                  may perform a re-evaluation of an associates base rate An
                  associate has the right to submit a request for a performance
                  re-evaluation twice in a 12 month period.

         E.       The COMPANY may choose to perform more than two performance
                  re-evaluations for an associate in a 12 month period, but
                  reserves the right to reject re-evaluation requests that have
                  been submitted more than two times by the same associate in a
                  12 month period.

         F.       Associates receiving a pay rate adjustment as stated in 5.10
                  will be evaluated no later than 60 days, or sooner if
                  requested, for any rate increase. The results of the
                  evaluation may result in a pay increase, but will in no way
                  replace or reduce the negotiated annual pay increase.

         G.       All associates will be assigned a primary job function,
                  individual position and their corresponding base rate.

                                                                        12
<PAGE>

5.03     Mechanics

         A.       The COMPANY and the UNION agree to the establishment of four
                  mechanic job classifications:

                  1.       Master Journeyman: Must possess all the skills and
                           knowledge of a journeyman, plus additional expertise
                           in electrical, mechanical, ability to train, lead
                           others, and communicate with management and outside
                           sources.

                  2.       Journeyman

                  3.       Technical

                  4.       Entry Level

                  Each job classification will have its own wage rate. The
                  COMPANY will determine the mechanic job classification an
                  individual will be placed in and will meet and confer with the
                  union prior to the individual being placed in the position.
                  All associates presently holding a maintenance mechanic job
                  will receive their current rate of pay or their new job
                  classification rate which ever is higher.

                  The COMPANY agrees to provide maintenance mechanics a tuition
                  reimbursement plan of one hundred percent (100%) for
                  furthering their skills provided that the classes taken are
                  relevant to the mechanics current job function. The COMPANY
                  must approve the curriculum of the class and the mechanics
                  time off to attend the class. The COMPANY will pay the tuition
                  cost upon successful completion of the studies. The cost of
                  books, equipment and tools will be the responsibility of the
                  individual.

                  B. Each job classification will have its own wage rate as
                  defined in the table below. Journeymen and/or Master
                  Journeyman may receive performance reviews, which may enable
                  them to qualify for a higher-level skill. Should they qualify
                  for and be moved to a higher-level skill they will be paid in
                  accordance with the table of established rates below.

                                                                              13
<PAGE>

         C.       The wage rates for the mechanics job classifications are:

<TABLE>
<CAPTION>
                      JOB CLASSIFICATIONS                                         ANNIVERSARY DATES
                                                                          ------------------------------------
                                                                           4/1/04                     4/1/05

<S>                                                                       <C>                        <C>
Entry Level                                                                 16.75                     16.90
After completion of 6 months                                                16.96                     17.11
After completion of 12 months                                               17.16                     17.31
After completion of 18 months                                               17.37                     17.52
After completion of 24 months                                               17.57                     17.72
After completion of 30 months                                               17.78                     17.93
After completion of 36 months                                               17.98                     18.13
After completion of 42 months                                              18.199                     18.34
After completion of 48 months                                              18.399                     18.54
Technical                                                                   18.41                     18.56
Fifth Year                                                                  18.83                     18.98
Journeyman                                                                  19.25                     19.40
</TABLE>

         To be classified under the technical job classification an individual
         must possess (one of the following):

         *        twenty hours of college courses in machine shop technology,
                  electrician, electronics, welding; or any other trade
                  applicable to the COMPANY work environment.

         *        or a certified job skill applicable to the COMPANY work
                  environment.

         *        or 4 years of COMPANY approved work experience.

         D.       Awarding of Maintenance Mechanic jobs through the Job Bidding
                  Procedure will be limited to associates who pass proficiency
                  examinations which show the necessary aptitude and skills
                  needed as determined by the COMPANY.

                                                                              14
<PAGE>

5.04     Inventory

During physical inventory, the COMPANY will select, by seniority, the most
qualified associate to perform inventory duties. If asked, senior associates
must participate in the physical inventory unless they have previously scheduled
time off that falls under the governance of the COMPANY attendance policy (i.e.,
vacation). Associates asked to participate in the physical inventory will
receive their normal base rate. Working hours for the physical inventory will be
governed by Article IV of this contract.

5.05     Shift Premium

Twenty cents (20cents) per hour shall be paid for second shift work. Twenty
cents (20cents) per hour shall be paid for third shift. The third shift shall
receive a paid one-half (1/2) hour lunch.

5.06     Report-In-Pay

         A.       Associates who report for work, and who have not been
                  otherwise instructed, or a reasonable attempt made to contact,
                  on the previous day, shall be paid for a minimum of four (4)
                  hours for such day.

         B.       The COMPANY will not be responsible for wage payments for the
                  time not worked when production is interrupted because of
                  unforeseen emergencies arising from conditions outside of the
                  plant. In the event of such emergency, the COMPANY and the
                  UNION representatives shall meet immediately to determine any
                  necessary change of work schedule.

5.07      Cross-Training Incentive

Associates will be given the opportunity to cross-train in other skill areas.
The COMPANY reserves the right to cross-train any associate, in any skill area,
based on customer requirements. An associate who refuses the opportunity to be
cross-trained will not forego their future right to be cross-trained in any
other skill area.

Once an associate has refused the opportunity to be cross-trained, it is at the
discretion of the COMPANY as to whether or not to allow that associate to be
reconsidered for cross training in the same skill area. Any associate can make a
request to their immediate Supervisor, the

                                                                              15
<PAGE>

Production Manager, Operations Manager, or Human Resources Manager to be
cross-trained in a specific skill area in order to broaden their skills.

Cross-training schedules for associates will be determined by the COMPANY.
Incentive increases for associates who have successfully completed cross
training are as follows:

Direct functions: $.20 per hour per additional skill

Indirect functions: $.10 per hour per additional skill

Successful completion of cross training in a particular skill, for the purposes
of this agreement, is defined as being able to effectively maintain the required
productivity level per the Company's published productivity rates.

Direct functions, for the purposes of this agreement, are those functions that
are measured by COMPANY published productivity rates. Indirect functions, for
the purposes of this agreement, are those functions, which are not measured by
COMPANY, published productivity rates. If someone should become disqualified
from a skill by virtue of the COMPANY productivity requirements , their salary
will be adjusted down according to the scale shown above.

5.08     Computation of Quarterly Average Hourly Earnings Rates

         A.       Average quarterly hourly earnings rates shall be established
                  on a calendar quarter basis and shall change and become
                  effective one month after the close of each calendar quarter.
                  Such average will apply in all cases where quarterly work
                  average hourly earnings rates are referred to in this
                  Agreement. The four calendar quarters of the year shall be as
                  follows:

                  1st Quarter               January, February, March

                  2nd Quarter               April, May, June

                  3rd Quarter               July, August, September

                  4th Quarter               October, November, December

                                                                              16
<PAGE>

         B.       Quarterly work average hourly earnings rates will not be
                  established for associates who have worked less than eighty
                  (80) hours in the preceding quarter except that associates
                  transferred during the last eighty (80) hours of any quarter
                  shall receive a quarterly average rating. If an associate has
                  been legitimately away from work because of illness, accident,
                  or on a leave of absence, and has not been able to establish
                  an quarterly average hourly earnings rate, it is agreed that
                  their average hourly earnings rate for the quarter preceding
                  their absence will be carried forward until such time as
                  he/she is able to return to work.

         C.       Quarterly averages will be computed by using the average bonus
                  for the previous quarter and applying it to the base rate.

         D.       When an associate works without published quarterly average
                  hourly rate is assigned to a job without a work rate he/she
                  will be paid at the average of their hourly earnings rate for
                  the preceding four (4) weeks.

5.09     Associates shall not suffer any reduction in such wages or of benefits
         specifically identified in this contract during the term of this
         contract. The COMPANY will not honor any side agreement on wages or
         benefits unless they are signed by the Sr. VP Human Resources and
         attached to this contract.

5.10     In no case shall any associate be paid less than their established base
         rate except when one or more of the following occur:

                  3.       Associates bidding on or reclassified to another job
                           within the same level;

                  4.       Associates bidding on or reclassified to a lower
                           level job;

                  5.       An associate is disqualified or waives their right to
                           receive additional skill pay.

         When making wage rate adjustments the COMPANY will look at previous
         experience in the new job, their current base rate, and new job salary
         range. All adjustments to salary will be documented and reviewed with
         the associate before changes are enacted.

                                                                              17
<PAGE>

5.11     Payment During Treatment of Work Related Accident

         A.       In the event an associate suffers a work related injury and is
                  referred to the medical office, outside clinic, outside
                  hospital, or outside doctor for treatment during working
                  hours, the COMPANY shall pay for the time spent in treatment
                  of such injury at their base rate only. If the treating agency
                  certifies that such injured associate is unable to continue
                  work because of such injury the COMPANY will pay for the
                  balance of the eight (8) hours. Wage loss will be reported to
                  the COMPANY's Workers' Compensation carrier for possible
                  additional payment. Light duty will be paid at base rate only.

         B.       If the treating agency requests a subsequent visit for
                  treatment of this injury during working hours, and provided
                  the associate has returned to work, the COMPANY will pay for
                  the time spent in this treatment at his or her base rate only.

                  1.       On the above date of this scheduled visit the
                           associate must notify the Supervisor at the beginning
                           of their shift as to the time the appointment is
                           scheduled.

                  2.       The associate will be clocked out in sufficient time
                           to make the scheduled appointment.

                  3.       When the associate leaves the treating agency's
                           office, he/she will receive a release form that will
                           show the completion time of the appointment.

                  4.       Upon returning to their department the associate will
                           present this form to their Supervisor and will be
                           clocked back in for work.

         C.       None of the sections of this paragraph are to be so construed
                  that benefits will incur in addition to or pyramid on
                  disability payments under Workers' Compensation Law.

ARTICLE VI                 STANDARD ALLOWED HOURS (S.A.H.) SETTING FORMULA

6.01     When it becomes necessary to establish a standard on a new job or
variation of an old operation, the following procedure shall be followed:

                                                                              18
<PAGE>

         A.       If possible, normal production will be determined from
                  standard task times, if available, or a time study analysis
                  shall be made of the operation for the purpose of determining
                  the normal hourly or daily production.

                  1.       A UNION representative may be present when the time
                           study of an operation is being made.

                  2.       Prior notice of the time study of an operation shall
                           be given to the interested parties.

                  3.       A time study shall not be made until such job is
                           properly set up and functioning.

         B.       A normal hour or daily production shall be defined as that
                  amount of production attained by a normal proficient operator
                  working at a normal pace which may be consistently followed
                  throughout the working period.

         C.       A written description of the operation, together with the time
                  study results and S.A.H., will then be submitted by the
                  COMPANY to the departmental Shop Steward, the Operator or
                  Operators, and Bargaining Committee.

         D.       Such Standard Allowed Hours shall become effective immediately
                  upon submission as provided above in Paragraph (A) and (C) of
                  this Section.

         E.       Complaints arising as to the accuracy of any time studies
                  shall be handled as grievances in accordance with Article II
                  of this Agreement.

                  1.       Complaints arising from the procedure must be
                           submitted within sixty (60) days on continuous
                           operations, or within thirty (30) production days on
                           broken or short run operations.

                  2.       No grievance on a time study will be recognized until
                           the operation has been performed for forty (40) hours
                           on continuous operations or eight (8) hours on short
                           or intermittent runs.

                                                                              19
<PAGE>

6.02     Productivity

         A.       All associates who have completed the established training
                  period are expected to reach and maintain reasonable
                  productivity as established by the COMPANY for the associate's
                  respective job classification.

         B.       Associates who do not meet the reasonable productivity
                  requirements that have been established by the COMPANY shall
                  be subject to the following corrective disciplinary
                  procedures:

                  1.       Verbal Reprimand

                  2.       Written Reprimand

                  3.       Final Written Warning

                  4.       Discharge

         C.       Base rate is intended as pay for one hundred percent (100%)
                  effort.

                  1.       If after investigation the COMPANY can show, through
                           a demonstration by Supervisors, Simmons Institute for
                           Technology and Education (S.I.T.E.) associates, or
                           operators from a sister plant that the COMPANY
                           standard is achievable the COMPANY will have proved
                           its case against the associate charged with not
                           meeting reasonable productivity requirements.

                  2.       Prior to the time the demonstration takes place, the
                           UNION shall be afforded an opportunity to secure the
                           services of a qualified time study engineer with the
                           necessary background to check the productivity effort
                           of the operator to ensure the fairness of their
                           performance evaluation. The time study engineer
                           secured by the UNION will need to be approved by the
                           COMPANY before their services are utilized.
                           Associates who fail to meet the established base rate
                           may be removed from the operation at the discretion
                           of the COMPANY.

                           a.       Such associates may be placed in a job at
                                    which they can perform at an efficient level
                                    consistent with Section 6.03 below.

                                                                              20
<PAGE>

6.03

         A.       Individuals who consistently fail to produce at one hundred
                  percent (100%) of the established base rate or more, within
                  the period of time provided by the COMPANY's Learning Curves
                  or thereafter, shall be removed from the job on which they are
                  failing to remain qualified. Such associates may then be
                  assigned to a job requiring less dexterity or skill so that
                  they may have an opportunity of being more successful in the
                  future assignments.

                  1.       In making such assignments, the COMPANY will select
                           the position to which the removed associate will be
                           transferred. consistent with all applicable
                           provisions of this agreement and after meeting and
                           conferring with a UNION representative.

                           a.       If no such job is available, the associate
                                    shall be placed on layoff until an opening
                                    exists.

                  2.       Associates with more than one (1) year but less than
                           five (5) years of service shall be limited to one (1)
                           such transfer.

                  3.       Associates with more than five (5) but less than ten
                           (10) years of service shall be limited to two (2)
                           such transfers.

                  4.       Associates with more than ten (10) years of service
                           shall be limited to three (3) such transfers.

                  5.       Subsequent disqualifications will subject the
                           associate involved to termination of employment.

                                                                              21
<PAGE>

ARTICLE VII                SENIORITY

7.01     Purpose

This seniority provision has been developed to provide an equitable means of
enhancing the "Make To Order System," providing the COMPANY with trained
associates that are responsive to production schedule variations and to provide
job security for senior associates.

7.02     Seniority

         A.       Definition: An associate's unbroken service with the COMPANY
                  in years, months, and days, since the associate's most recent
                  date of hire. Seniority shall be established on a plant basis,
                  and separately, within Core and Skill Group areas.

         B.       If two associates have the same amount of unbroken service,
                  the associate with the earliest hire date, will have the
                  greatest seniority.

         C.       Seniority List: The COMPANY will furnish the UNION with a
                  seniority list monthly.

         D.       Seniority shall govern in the following areas:

                  1. Training (by department and by shift)

                  2.       Vacations

                  3.       Overtime, where the COMPANY has made a reasonable
                           attempt to contact qualified associates 4. Lay-offs

                  5.       Job Bidding

                  6.       Recall

                  7.       Job Shift

                  8.       Temporary Transfer

                  9.       Reduction of Hours

                                                                              22
<PAGE>

                  10.      Furlough

         E.       If there is a conflict in any of these areas, the COMPANY and
                  UNION must meet to seek a solution of the conflict.

7.03     Establishment of New Classification

         A.       In the event it becomes necessary to establish a new
                  classification for positions covered under this agreement
                  including part-time and/or temporary positions, the COMPANY
                  and the UNION shall meet for the purpose of discussing the
                  rate for such classification.

                  The COMPANY and the UNION, in an attempt to reach an
                  understanding shall take into consideration similar
                  classifications in the plant previously or presently in
                  existence. The COMPANY may also use a classification that is
                  currently being used by other SIMMONS facilities.

                  The COMPANY will temporarily assign an associate at their base
                  rate, plus bonus until such time as a rate is developed. When
                  the rate of the classification is agreed upon or resolved as
                  provided above, the job will be filled in accordance with the
                  contract.

                  If the parties cannot agree using the above procedure, the
                  grievance and arbitration procedure in the contract will be
                  followed.

7.05     Associate Training

         A.       It is in the interest of the parties to provide training
                  opportunities to the most senior associates. In accordance
                  with Article VII, Section 7.02, D, 1.

                                                                              23
<PAGE>

                  In the event the most senior candidate or candidates refuse
                  selection they must sign a formal waiver form, indicating
                  such, whereby the COMPANY has no further obligation to again
                  offer the same job opportunity to the refusing candidates.

                  It is the intent of both the COMPANY and the UNION to train
                  associates so as not only to provide a bank of substitutes
                  when needed but also a bank of critical skills when the
                  production schedule increases.

         B.       Associates trained shall be selected by the COMPANY based on
                  its business need. Training shall be completed within six (6)
                  moths after selection. Training on individual jobs will be
                  consistent with established learning curves.

         C.       Once an employee has started training he/she shall not be laid
                  off due to the incomplete training, if the completion of that
                  training would allow him/her to displace a less senior
                  employee.

         D.       Cross training will be done as needed as time permits during
                  slow periods.

7.06     Lay Offs

         A.       In the event of a reduction in the work force, associates
                  shall be laid off by classification. Associates with the least
                  seniority within a classification shall be laid off first
                  provided that the remaining associates possess the job
                  knowledge and skills to perform the work required within the
                  classification. Senior associates not possessing the required
                  knowledge of the job function shall be subject to lay off.

         B.       Employees being laid off shall be notified two (2) working
                  days prior to the lay off.

         C.       Associates subject to lay off shall have the following rights:

                  1.       Displace any associate with less seniority provided
                           he/she can do the job

                            without further training.

                  2.       Elect to take a lay off instead of replacing a less
                           senior associate. The COMPANY will not contest the
                           associate filing for unemployment benefits if he/she
                           exercises the lay off option.

                  3.       If an associate refuses recall to an open position or
                           is on layoff for 12 months or more, they will be
                           terminated by the COMPANY. If an

                                                                              24

<PAGE>

                           associate is in town they will be expected to return
                           within 24 hours of notification. If an associate does
                           not report within 24 hours of notification, they will
                           be terminated by the COMPANY. If going out of town
                           the associate must leave a number with the COMPANY
                           prior to leaving so they can be contacted. Associates
                           out of the area will be expected to return within 72
                           hours of notification. If an associate is out of the
                           area and is unable to report within 72 hours of
                           notification, they will be terminated by the COMPANY.

                  4.       It is the responsibility of the associate on layoff
                           to notify the company of any change in their
                           employment status, address and/or telephone number.

         D.       In order to eliminate the shifting of more senior associates,
                  a new associate shall, for one (1) year, according to hiring
                  date, be available for transfer, to any classification needed
                  by changes in the production schedules.

         E.       The COMPANY will not break the continuity of service of any
                  associate who has been placed on furlough status. Associates
                  who have been laid off, will accrue seniority while on layoff
                  for a period not to exceed 12 months. their Associates who are
                  absent for illness or accident shall notify the COMPANY that
                  day, except under extenuating circumstances.

         F.       A maximum of six (6) recognized Shop Stewards with ten (10)
                  years of seniority, or more, shall have super seniority for
                  the purposes of this section. The UNION must periodically and
                  regularly provide the COMPANY with an up-to-date list of Shop
                  Stewards. Current stewards at the time of signing this
                  agreement with less than 10 years seniority will receive super
                  seniority.

         G.       Lay offs shall be conducted in the presence of a UNION
                  Representative. It is the responsibility of the UNION
                  Representative to notify the UNION office as to the results of
                  the meeting.

7.07     Furlough In order to provide a more reasonable work schedule for senior
         associates when hours are shortened due to lack of orders, the
         Operations manager will

                                                                              25
<PAGE>

         have the responsibility of placing on furlough by classification those
         junior associates who are not needed to fill the daily production
         schedule. The COMPANY will not break the continuity of service of any
         associate who has been placed on furlough status. The furloughed
         associates 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 record keeping purposes, the business manager for Local
         89262, AFL-CIO will be notified of such furlough by letter signed by
         the Operations Manager.

         In the event variation in customer demands requires associates to
         return from furlough earlier than announced, such return shall be by
         seniority unless the senior associates are unavailable. In such event,
         the COMPANY liability shall be limited to notification to the UNION
         that such associate 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.

7.08     Reduction of Hours

         A.       In order to retain qualified associates, the parties agree
                  that a reduction of hours may be more equitable rather than to
                  lay off associates.

         B.       When a reduction of hours is necessary, the reduction of hours
                  shall be within a department as outlined in 5.02. Hours within
                  the department shall be shared as equally as possible. Senior
                  associates shall have the first choice of either working or
                  reducing their hours. Should senior associates not volunteer,
                  the least senior associates shall be required to reduce their
                  hours first.

                                                                              26
<PAGE>

         C.       When further retrenchment necessitates a general reduction in
                  hours to a level between thirty (30) and forty (40) hours per
                  week, adjustment shall be made in such a manner that each and
                  every associate in their respective department receive a just
                  and equal share of work as long as reduction in work per
                  associate does not fall below a minimum of thirty (30) hours
                  per week.

                  1.       The COMPANY retains the right at all times to do
                           necessary maintenance work regardless of the number
                           of hours worked.

         D.       If work falls below thirty (30) hours per week, the COMPANY
                  shall reduce the plant work force in accordance with Section
                  7.06, to maintain thirty (30) hours per week for the remaining
                  force.

         E.       In the event that there is an increase in work above the level
                  of thirty (30) hours per week, the COMPANY agrees to recall
                  associates, who are on furlough first, then recall associates
                  on layoff. Recall of associates from furlough or layoff will
                  be done by classification.

         F.       The parties agree that the above provisions shall not apply
                  under the following conditions:

                  1.       A temporary reduction in hours to less than forty
                           (40) but more than thirty (30) may be made provided
                           that during the third (3rd) week of reduced hours it
                           is determined that such reduction is to continue and
                           steps are taken to adjust the number of hours and
                           associates. This adjustment is to be effective not
                           later than Monday of the fourth (4th) week.

                  2.       When there is in effect a reduction in hours per week
                           and it becomes necessary to increase hours in certain
                           departments in order to provide prompt service to
                           customers, the hours may be temporarily increased to,
                           but no more than, forty (40) hours per week for a
                           period of not longer than three (3) consecutive
                           weeks.

                                                                              27
<PAGE>

                  3.       In the event that the general level of hours worked
                           shall remain less than forty (40) hours per week for
                           more than two (2) continuous months the parties
                           hereto agree to renegotiate at the request of either
                           party the terms of Section 7.07.

                  4.       It is also understood that where mutually agreed upon
                           between the COMPANY and the UNION, individuals may be
                           laid off without regard to their seniority rights or
                           rating.

         G.       Work Sharing Program

                  Production associates will be assigned to the following six
                  groups: Mattress, Box Springs, HMB, Mechanics, and General
                  (shipping, receiving and janitorial).

                  Administrators for this program will be the Human Resources
                  Manager and the UNION Chief Steward.

         H.       In the case of a dispute pertaining to who should work on the
                  night shift or on the third shift, plant seniority shall be
                  the deciding factor.

         I.       Any associate assigned to an inspectors' job shall demonstrate
                  their capability to perform the work satisfactorily.

                  1.       Seniority shall govern in the selection of inspectors
                           where there is equal ability.

                  2.       Any dispute over who shall be assigned the job shall
                           be mutually resolved between the UNION Committee and
                           the COMPANY.

7.09     Open Positions When a vacancy occurs or a new position is created, the
         position shall be filled in the following order:

                                                                              28
<PAGE>

         A.       Return to Previous Classification

                  1.       The most senior associate who can perform the job
                           without further training shall be recalled from lay
                           off and placed in the position. The associate should
                           retain rights to their laid off position for one year
                           from the date of the original lay off. This placement
                           shall not be considered a job bid.

         B.       Job Bidding

                  1.       In the event that there is not an associate on the
                           recall list who can perform the job without further
                           training, the COMPANY shall post the position on the
                           bulletin board for 48 hours.

                  2.       The COMPANY will accept a bid by a UNION officer for
                           someone on vacation or lay off.

                  3.       The COMPANY will review the applications from the
                           associates who have submitted their names for
                           consideration and fill the job opening by
                           transferring the applicants, if any, on the basis of
                           plant seniority (min. 1 yr.) and ability to perform
                           the job.

                           Because of the delays inherent in successive job
                           openings, the COMPANY may elect to fill, without
                           posting, job vacancies resulting from the assignment
                           of an applicant to the job originally posted.

                  4.       Any associate transferred pursuant to the above
                           shall, if qualified, remain on that job for a period
                           of twelve (12) months before having the right to bid
                           on another job vacancy. In the event the job is
                           discontinued before the successful applicant
                           completes twelve (12) months on the job, he/she may
                           bid on another vacancy.

                                                                              29
<PAGE>

                  5.       Any associate transferred pursuant to the above and
                           who fails to attain a satisfactory level of progress
                           on their new assignment within the normal limits of
                           the COMPANY's established experience factors, will be
                           given the opportunity to qualify for an open job
                           within the plant.

                  6.       Except for the application of the job bidding
                           procedure, other applications of seniority, such as
                           new hiring's, lay offs, recalls, and job transfers in
                           one Job Skill Area will not affect or be affected by
                           those in another Job Skill Area unless otherwise
                           provided.

7.10     Personnel Action

         A.       The UNION shall receive written notice of all transfers,
                  disciplinary actions, new hires, terminations and lay offs.

7.11     Classification Phase Out It is further agreed that if any of the
         classifications are phased out or closed down permanently, the
         associates affected by such permanent closing will have the following
         options:

                  1.       In the event a classification is permanently phased
                           out, the associate so affected shall have the right
                           to replace any associate within the department with
                           less seniority provided he/she is qualified (without
                           further training) to perform the job.

                  2.       In the event the affected associate cannot or does
                           not exercise the above options, such associate shall
                           have the right to choose an open job or exercise
                           their plant seniority over any associates in the
                           plant with less plant seniority, provided they may
                           perform the duties without further training.

                                                                              30
<PAGE>

ARTICLE VIII

8.01     Leave of Absence

         A.       Personal leaves of absence may be granted to associates for
                  personal reasons of an emergency nature not covered by other
                  leave provisions at the discretion of the COMPANY. The COMPANY
                  will require documentation for such leave.

         B.       This article is not to be used as a supplement to vacation or
                  other approved leaves.

         C.       Associates shall be granted leave without deductions from pay
                  for the purpose of voting on election day, in accordance with
                  the laws of the State of California if necessary.

         D.       Any associate who has been on the payroll one (1) year or more
                  will be entitled to receive three (3) days off with pay in the
                  case of death in their immediate family (husband, wife,
                  natural mother, father, brother, sister, children,
                  step-mother, step-father, step-children) upon presentation of
                  evidence of the above.

         E.       The COMPANY will grant emergency leave without pay for the
                  death of other relatives, or for attendance of a relative's
                  funeral. The associate must provide proof of attendance upon
                  returning to work. Otherwise, these days will be considered
                  unexcused.

8.02     Jury Duty

         A.       The COMPANY will make up differential in pay at their
                  quarterly average for those associates called for jury duty,
                  to their quarterly average; providing the associate was
                  scheduled for work on that day.

         B.       In no event will overtime be paid because of jury duty.

         C.       In order to qualify for jury duty pay the associate must give
                  advance notice of reporting to jury duty and bring in to the
                  COMPANY a signed statement from the Court Clerk showing the
                  amount of time spent on duty and the pay received.

                                                                              31
<PAGE>

         D.       Those reporting for jury duty and who are excused in time to
                  report for their regular work for a minimum of three (3) hours
                  shall do so or forfeit any pay for those hours.

ARTICLE IX                 PAID VACATIONS

9.01     The following vacations shall be granted annually during plant vacation
         period for the duration of the Agreement to associates who are on the
         active COMPANY payroll (active associates are defined as associates who
         worked at least 1000 hours in the previous calendar year and who are
         not currently Terminated, Retired or on Lay Off status) at the time the
         vacation is granted:

         A.       Associates who have between one (1) and three (3) years of
                  service shall receive one (1) week of vacation.

         B.       Associates who have more than three (3) years but less than
                  eight (8) years shall receive two (2) weeks of vacation.

         C.       Associates who have more than eight (8) but less than eighteen
                  (18) years shall receive three (3) weeks of vacation.

         D.       Associates who have more than eighteen (18) years shall
                  receive four (4) weeks of vacation.

         E.       All associates who fall under the terms as stated in article
                  9.01 and who have twenty-five (25) years of service or more,
                  on the date they retire; will be entitled to their 5th week
                  vacation pay on retirement. All other Associates employed as
                  of November 30 of that year and who have twenty-five years of
                  service or more, will receive in December pay for a fifth week
                  of vacation.

9.02     The COMPANY retains the right to determine whether vacations will be
         staggered on the basis of preference by seniority consistent with
         operational needs during the period January 1 through December 31, or
         on the basis of plant shutdown. In the event of plant shutdown, the
         COMPANY has the right to continue operating the Shipping Department as
         well as manning those functions needed to maintain satisfactory
         customer service.

                                                                              32
<PAGE>

9.03

         A.       Plant closing for remaining vacation purposes may be
                  determined by the COMPANY at any time during the calendar
                  year.

                  1.       In determining crews during a plant closing the
                           COMPANY will ask for qualified volunteers.

                  2.       Should there be an inadequate number of volunteers
                           the COMPANY will select its manpower from the least
                           senior qualified associates.

                  3.       Those who work during a plant closing may select
                           vacations on a seniority basis.

9.04

         A.       Vacation schedules for the coming year will be determined
                  during the preceding November/December.

                  1.       Vacations will be staggered throughout the year and
                           selections for specific time will be by job
                           classification and seniority within department, as
                           approved by the COMPANY.

                  2.       Associates eligible for vacation will schedule all of
                           their earned vacation by seniority within a
                           department as indicated in Section 9.01 inclusive.
                           Associates may split their vacation into one (1) week
                           segments.

                  3.       Associates shall indicate, in writing, on a form
                           provided by the COMPANY, their preference for
                           vacation. These forms will be distributed by the
                           COMPANY by November 1st. Associates will have until
                           the last working day in November to submit their
                           vacation schedule request form to their immediate
                           Supervisor. Any associate who submits their vacation
                           request form after the last working day in November
                           will forfeit their seniority for the purposes of
                           vacation scheduling. Said associates will be granted
                           vacation on an availability basis as determined by
                           the COMPANY. Once finalized, the COMPANY will post
                           the approved schedule by December 31.

                                                                              33
<PAGE>

                  4.       Once the vacation schedule has been posted by the
                           COMPANY, associates have the right to request a
                           change in vacation no more than two times during the
                           course of that calendar year. Approval of these
                           requests are at the discretion of the COMPANY.

                  5.       Up to five (5) days of vacation may be held and
                           scheduled one day at a time with two weeks notice and
                           approval.

                  6.       Due to production needs, the COMPANY shall be able to
                           set certain restrictions on the number of associates
                           allowed off at one time.

9.05

         A.       Associates terminated for any reason, laid off, or out of work
                  on a personal leave of absence shall receive prorated vacation
                  based upon number of days worked divided by 260 provided that
                  they have worked at least 1000 hours in the previous calendar
                  year. Associates, employed less than one (1) year are not
                  eligible for pro-rated vacation.

         B.       Vacation hours of pay will be established on the basis of the
                  associates' average number of hours worked during the
                  preceding quarter.

                  1.       It is understood and agreed that their weekly average
                           will not be less than forty (40) hours nor more than
                           forty eight (48) hours times their average straight
                           time hourly earnings rate.

                  2.       Associates shall receive the shift premium in
                           computing vacation pay.

         C.       Vacation pay shall be payable on the Friday preceding the
                  vacation period of the individual.

9.06     Associates will not be required to work the Saturday immediately
         preceding their vacation unless they volunteer to do so.

9.07     If the COMPANY forces early vacation selection, the associate will
         receive full eligibility even though their anniversary date falls later
         in the year.

                                                                              34
<PAGE>

9.08     The COMPANY agrees to pay all vacations and holidays at the associate's
         previous quarter's average rate, even in the event of temporary
         transfer.

9.09     In the event the COMPANY closes the plant for two (2) consecutive weeks
         of vacation, those associates who are not eligible for two (2) weeks
         vacation will be considered for work as part of the skeleton crew. If
         they do not so work, the COMPANY will not contest their right to file
         for unemployment.

ARTICLE X                  PAID HOLIDAYS

10.01

         A.       It is mutually agreed that twelve regular holidays with pay
                  shall be observed annually. All associates working shall
                  receive pay at their respective published average hourly
                  earning rate for eight (8) hours for the following holidays
                  when not worked:

<TABLE>
                   <S>                               <C>
                   New Year's Day                    President's Day

                   Good Friday                       Day After Easter

                   Memorial Day                      Independence Day

                   Labor Day                         Thanksgiving Day

                   Day After Thanksgiving Day        Day Before Christmas

                   Christmas Day                     Day Before New Year's Day
</TABLE>

                  *        It is agreed that Veterans can take off Veteran's Day
                           without pay. The COMPANY must be notified by
                           September 1, if an associate wants that day off. It
                           is also agreed that an associate each year who worked
                           on November 11, (Veteran's Day) has earned holiday
                           pay for the Day before New Year's Day.

                  Associates who do not have a published rate will be paid the
                  base rate. Associates required to work on the above holidays
                  shall be paid double time in addition to the compensation
                  provided in this Section. Associates will receive the shift
                  premium in computing holiday pay if otherwise eligible.

         B.       When a holiday falls on a Saturday, it shall be celebrated on
                  either the preceding Friday, or the following Monday, or some
                  other day as mutually agreed upon by the COMPANY and the
                  UNION.

                                                                              35
<PAGE>

         C.       Any of the above holidays that fall on Sunday shall be
                  observed on Monday, which shall then be considered a holiday
                  under the terms of this Agreement.

                  All holidays prescribed in Article X will be observed in
                  conformance with the Federal Law.

         D.       If one or part of the above holidays occurs during a vacation
                  period, the associate shall be compensated in accordance with
                  Article X Section 10.01, in addition to their regular vacation
                  pay.

         E.       It is agreed that if an associate is absent from their regular
                  scheduled work day before and/or following a regular paid
                  holiday, without the COMPANY's permission, he/she shall not
                  receive pay for that holiday. In cases of illness or accident,
                  they must provide a doctor's note. Any doubtful cases are to
                  be settled according to Article II, of this Agreement. It is
                  further agreed that if an associate is laid off within the
                  preceding five working days before a regular paid holiday,
                  he/she shall receive pay for that holiday.

         F.       To be eligible for holiday pay associates must have been
                  employed by the COMPANY thirty (30) days..

         G.       Except for plant security, continuous shift operations,
                  emergency or maintenance, the COMPANY will not require
                  production associates to work on Saturday when the following
                  Monday is a paid holiday as listed under Section 10.01,
                  Paragraph A.

ARTICLE XI        MILITARY CLAUSE

11.01    The COMPANY and the UNION agree to their mutual obligations under
         USERRA (Uniformed Services Employment and Re-Employment Rights Act).

                                                                              36
<PAGE>

ARTICLE XII                INSURANCE PROGRAM

12.01

         A.       The COMPANY agrees to the continuance of the insurance program
                  for the benefit of its associates covered by this Agreement,
                  such insurance to include group life insurance, group
                  accidental death and dismemberment, medical reimbursement
                  benefit, surgical benefit, hospitalization benefits, vision
                  and dental care.

                  1.       Such insurance will be purchased through and
                           administered by the United Furniture Workers
                           Insurance Fund as established by an Agreement and
                           Declaration of Trust in the State of New York and
                           dated May 28, 1944.

                  2.       The COMPANY will remit to the Insurance Fund a sum
                           equal to 84 1/2% of the total premium not to exceed
                           $550.00 per associate per month in the first year of
                           this agreement and 83% of the total premium not to
                           exceed $550.00 per associate per month in the second
                           year of this agreement.

                           In no event will the COMPANY contribution exceed
                           $550.00 per associate per month. Should premiums be
                           decreased during the life of this Agreement, the
                           parties will share in such decrease based on the
                           schedule contained herein. Associate's contribution
                           will be pre-tax in accordance with Section 125 of the
                           United States Internal Revenue Code.

         B.       It is further agreed that premium payments by the COMPANY for
                  its associates shall be made for the purpose and
                  administration of insurance for SIMMONS associates who are
                  members of I.U.E./C.W.A./F.W. Local 89262, and in the event
                  that the contributions are not used for the benefit of said
                  associates, the COMPANY shall withhold any further payments
                  into the designated insurance fund and shall immediately
                  negotiate with the accredited representatives of Local 89262
                  as to the disposition of contributions of the EMPLOYER and the
                  continuance of insurance coverage. Any insurance plan effected
                  shall conform to all applicable State and Federal laws.

                                                                              37
<PAGE>

         C.       If an associate is off work for an industrial injury for a
                  period in excess of one (1) month and no contribution is owed
                  because of a lack of earned hours, the COMPANY will
                  nevertheless make one (1) monthly contribution in their behalf
                  based on their last working month's earnings.

         D.       If an associate is out on layoff over thirty one (31) days,
                  the COMPANY will make one (1) payment to the U.F.W.A.
                  Insurance Program on their behalf based on the associate's
                  previous month's earnings.

         E.       The Union agrees to have the Fund representative provide
                  current census and experience data to the Company and to meet
                  and confer with the company regarding the plan design of the
                  insurance program each year at least ninety (90) days prior to
                  establishing new premiums subject to any applicable federal,
                  state or local laws or regulations.

         F.       The Company reserves the right to evaluate other insurance
                  programs, which may have a lower cost and implement this new
                  plan provided the coverage in the new plan is comparable to
                  the existing plan.

ARTICLE XIII               PENSION

13.01

         A.       Effective April 1, 2002 the COMPANY shall contribute to the
                  United Furniture Workers Pension Plan A, six percent (6%) of
                  the gross earnings excluding the Zero Waste Bonus of
                  associates covered by this Agreement for this contract period
                  for the purpose of pension benefits. The parties agree,
                  however, that the coverage of a newly employed associate
                  should not begin until the first day of the first calendar
                  month following the expiration of twelve (12) months from the
                  commencement of this employment. In calculating the
                  contribution due for the first twelve (12) months of coverage,
                  their total gross earnings for the entire preceding twelve
                  (12) months shall be considered. Thereafter, the employer will
                  make contributions each calendar month.

                                                                              38
<PAGE>

ARTICLE XIV                MANAGEMENT RIGHTS CLAUSE

14.01

         A.       The UNION agrees that the MANAGEMENT of the COMPANY and the
                  direction of the work force shall be in the sole discretion
                  and is the sole responsibility of the COMPANY. It further
                  agrees that all rights, powers, authority, privileges and
                  prerogatives not expressly abridged or modified by the
                  Agreement including, but not limited to, those exercised
                  unilaterally by the COMPANY in the past, are reserved to
                  COMPANY to exercise unilaterally in its sole discretion
                  without regard to any effect upon the work force; however such
                  rights shall not be exercised arbitrarily or capriciously.

         B.       Prominent among management's rights but by no means wholly
                  inclusive are the right to decide: the number, location and/or
                  relocation of its plants, departments, divisions, and/or
                  subdivisions; the closing down of a plant, department,
                  division, and/or subdivision; the right to rearrange,
                  exchange, combine, transfer, assign, and/or cease any job or
                  service and the movement and interchange of work as a result
                  of such decision; the services to be rendered, the work to be
                  contracted out and/or purchased; the required machinery and
                  equipment; the methods, reasonable schedules, and quantities
                  of service; and the amount of supervision necessary.

         C.       It is further recognized that the management of the Company
                  has the sole responsibility for the selection and direction of
                  the working force, including the right to: hire; lay off;
                  assign; reassign; transfer; promote; determine the
                  qualifications necessary to do a job or jobs; for proper cause
                  discipline, suspend, and/or discharge; combine and/or
                  eliminate positions; determine the appropriate jobs and/or the
                  number of associates within a given job and/or pay level; set
                  shift schedules; set reasonable standards for quantity and
                  quality of work; determine where and when overtime should be
                  worked; establish working hours and work pace; establish,
                  evaluate and/or assess employee performance; and make and
                  enforce, after advance notice to the UNION and associates,
                  such reasonable rules and regulations and policies and
                  procedures as the COMPANY may from time to time deem
                  appropriate to maintain order, safety, and/or effective
                  operation of its facilities.

                                                                              39
<PAGE>

         D.       Management of the COMPANY shall also have the sole right to:
                  determine its suppliers and customers and the prices and terms
                  upon which its materials, equipment, and supplies will be
                  purchased and its products and services will be sold;
                  determine selection, retention, and/or substitution of any
                  vending service; establish and/or administer disability
                  criteria consistent with the Americans with Disabilities Act
                  of 1990; and/or determine need for and administration of
                  physical examinations, mental tests, and/or other tests for
                  the safety of associates and/or security of the premises or
                  property of the COMPANY consistent with the Americans with
                  Disabilities Act of 1990.

         E.       It is agreed that management maintains and retains all of its
                  above enumerated managerial rights and that they are vested
                  solely and exclusively in the COMPANY unless expressly and
                  specifically contracted away in this Agreement and further
                  that this enumeration of management rights shall not be deemed
                  to exclude any other managerial rights.

ARTICLE XV                 NO STRIKE  - -  NO LOCKOUT
----------

15.01    Neither the UNION nor any of the associates 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 lockout any
         of the associates covered by this Agreement.

         A.       In the event that there be such an occurrence or occurrences
                  as described in Article XV, Section 15.01, then either the
                  UNION or the COMPANY may invoke the Expedited Grievance
                  Procedure provided in this section as distinguished from the
                  ordinary Grievance -- Arbitration Procedure.

                                                                              40
<PAGE>

                  1.       Such dispute or grievance shall be asserted by notice
                           in writing by registered mail, return receipt
                           requested, or Federal Express, given to the other
                           party.

                  2.       A copy of such notice shall be sent simultaneously to
                           the person designated as the permanent Arbitrator, or
                           such other person designated as Arbitrator, as
                           hereinbefore set forth.

         B.       The COMPANY and the UNION shall attempt to have drawn up and
                  ready for selection a list of mutually acceptable Arbitrators
                  who may be contacted directly for the Expedited Arbitration.

                  1.       Should this not have been done, or should no
                           Arbitrator on the list be available, and should the
                           parties within twenty-four (24) hours be unable to
                           agree upon an Arbitrator, they shall immediately
                           contact the local office of the American Arbitration
                           Association to request the first available Arbitrator
                           who can hear the case within forty-eight (48) hours.

         C.       In the event of death, disability, or subsequent
                  unavailability of the selected or designated Arbitrator within
                  the time limits prescribed in this provision, the parties
                  shall select another Arbitrator within twenty-four (24) hours,
                  and failing such mutual selection, either party may request
                  that the American Arbitration Association make a designation
                  of an available Arbitrator within forty-eight (48) hours of
                  the request.

         D.       The Arbitrator shall hold an arbitration hearing as
                  expeditiously as possible but in no event later than ten (10)
                  working days after receipt of said notice.

                  1.       The decision of the Arbitrator shall issue forthwith
                           and in no event later than twenty-four (24) hours
                           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.

                  2.       The Arbitrator's WRITTEN opinion will follow within
                           thirty (30) days.

                                                                              41
<PAGE>

         E.       In those situations involving discipline of associates for
                  violation of any provision of this article. it is understood
                  that the Arbitrator will hold an arbitration hearing within
                  five (5) working days after receipt of said notice.

                  1.       The decision of the Arbitrator shall issue forthwith
                           and in no event later than forty-eight (48) hours
                           after the conclusion of the hearing.

                  2.       The Arbitrator's WRITTEN opinion will follow within
                           thirty (30) days.

         F.       The arbitration proceedings pursuant heretofore shall be held
                  in Alameda County, California, but not on the COMPANY's
                  premises.

         G.       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.

         H.       Each party will bear the expense of its representatives and
                  for the presentation of its own case.

ARTICLE XVI                BULLETIN BOARDS

16.01    The COMPANY grants the UNION the right to place bulletin boards in
         agreed upon places in the plant for the purpose of posting UNION
         notices, copies of this Agreement, and other official papers. The UNION
         must obtain COMPANY approval prior to posting anything on the bulletin
         boards. The request will be granted unless the material is derogatory
         or defamatory. All such matters must be posted only upon the authority
         of officially designated representatives of the UNION.

ARTICLE XVII               SAFETY AND SANITATION

17.01

         A.       The COMPANY shall continue to make reasonable provisions for
                  the safety and health of its associates at the plant during
                  the hours of their employment.

         B.       Protective devices and other equipment necessary to protect
                  its associates properly from injury shall be provided by the
                  COMPANY.

                                                                              42
<PAGE>
                  1.       Associates shall cooperate with MANAGEMENT in the
                           proper maintenance and use of these provisions and
                           devices.

          C.      The COMPANY will carry out disciplinary action in accordance
                  with the Collective Bargaining Agreement, and Company Safety
                  Rules and Policies. The Associate's safety record, type and
                  nature of violations, plus endangerment of self and others
                  will be major factors in the determination of the corrective
                  action to be taken.

ARTICLE XVIII              LEGAL CONFORMITY

18.01

         A.       It is the intention and desire of both the COMPANY and the
                  UNION to conform to all laws of the State and Federal
                  government and orders issued by the President of the United
                  States.

         B.       It is intended that such laws or regulations which now exist
                  or may later be enacted or issued shall supersede the
                  requirements of this Agreement while they are in effect, and
                  upon expiration of such laws and regulations, provisions of
                  the Agreement which have been modified shall come into full
                  force and effect.

18.02             It is agreed by the parties that in the employment practices
                  of the COMPANY and in the membership and practices of the
                  UNION, there shall be no discrimination against any person on
                  the basis of race, color, sex, age, religion, creed, national
                  origin, marital status, sexual orientation, disability,
                  veteran's status, or any other protected category.

<PAGE>

ARTICLE XIX                MISCELLANEOUS

19.01

         A.       Sick Days

                  1.       Effective January 1, 2002 associates shall be
                           eligible for one (1) day of pay at $80.00 per day,
                           for lost time, per calendar quarters. Associates
                           cannot receive payment before the quarter begins.

                  2.       Any days earned but unused shall be paid to the
                           associate on the last pay period of December of each
                           year.

         B.       The COMPANY and the UNION agree that the COMPANY will
                  administer its Substance Abuse policy in conformance with the
                  Drug Free Workplace Act and under the standards established by
                  SAMHSA (Substance Abuse and Mental Health Services
                  Administration.

         C.       The Company and the Union understand that from time to time
                  there will be issues of mutual concern to both parties. In
                  order to resolve these issues the Company and the Union agree
                  to form a Common Issues Committee. The committee will consist
                  of 6 members, 3 appointed by the Company and 3 appointed by
                  the Union. This committee will meet on an as needed basis by
                  the call of either party.

ARTICLE XX                 COMPLETE AGREEMENT

20.01             This Agreement constitutes the sole and complete agreement
                  between the parties and embodies all the terms and conditions
                  governing bargaining unit employees. The parties acknowledge
                  that they have had the opportunity to present and discuss
                  proposals on any subject for collective bargaining and that
                  each party for the life of this Agreement voluntarily waives
                  the right, and each agrees that the other shall

<PAGE>

                  not be obligated, to bargain collectively with respect to any
                  subject or matter not specifically referred to or covered in
                  this Agreement unless mutually agreed to in writing.

ARTICLE XXI                TERMINATION, MODIFICATION AND RENEWAL

21.01

         A.       This Agreement shall remain in full force and effect until
                  April 1, 2006, and thereafter annually; provided, however,
                  that either party may terminate this Agreement or give notice
                  of a desire to modify any portion thereof on the date of
                  expiration, or at the end of any subsequent yearly period, by
                  notifying the other party in writing to that effect no less
                  than sixty (60) days prior to the date of expiration, or at
                  the end of any subsequent yearly period.

         B.       Negotiations upon a new or modified Agreement shall commence
                  not later than twenty (20) days next following the receipt of
                  said written notice of termination or modification.

                  1.       Not later than five (5) days after sending such
                           notice the sending party shall present in writing to
                           the other party the proposed new Agreement of
                           modification.

                  2.       Ten (10) days after receipt of said proposals the
                           recipient party shall present in writing to the other
                           party its counter or other proposal.

                  3.       Neither party shall be prevented from presenting any
                           other proposals during negotiations.

         C.       During negotiations this Agreement shall remain in full force
                  and effect.

<PAGE>

20.02    In the event SIMMONS COMPANY closes the plant and the COMPANY cannot
         recognize the I.U.E./C.W.A./F.W., Local #89262 as the bargaining agent
         in the new location, the COMPANY will be willing to sit with the UNION
         to negotiate severance compensation.

<PAGE>

SIGNED THIS _______ DAY OF ____________________, 19_______________.

FOR SIMMONS COMPANY,                          FOR THE INTERNATIONAL UNION OF
                                              ELECTRONIC, ELECTRICAL, SALARIED,
                                              MACHINE & FURNITURE
                                              WORKERS AND COMMUNICATION
                                              WORKERS OF AMERICA, AFL-CIO,
                                              LOCAL 89262 FW

-------------------------------               ---------------------------------
Art Compton                                   Ulises Vergara
Operations Manager                            Secretary / Treasurer
                                              IWE CWA Local #262

-------------------------------               ---------------------------------
Dana Carstensen                               Eric Munoz
Human Resources Manager                       Chief Steward

-------------------------------               ---------------------------------
Evan Boyd                                     Alex Zaragoza
Production Manager                            Assistant Chief Steward

                                              ---------------------------------
-------------------------------               Steve Martinez
Greg Moore                                    Bargaining Committee
Director of Human Resources
Employee & Labor Relations

                                              ---------------------------------
                                              Tom Keane
                                              International Representative
                                              IUE-CWA

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