Sealy Benefit Equalization Plan

SEALY BENEFIT EQUALIZATION PLAN


Effective Date: December 1, 1994 2
TABLE OF CONTENTS
----------------- Article Page - ------- ----
ARTICLE I PRELIMINARY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE III ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV PROFIT SHARING CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V ACCOUNTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VI PAYMENTS AND BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII BENEFICIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII RIGHTS OF PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX CLAIMS PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE X ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XI AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE XII PARTICIPATING COMPANIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38


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SEALY BENEFIT EQUALIZATION PLAN
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This Declaration of Plan is hereby made by SEALY CORPORATION, a corporation organized and existing under and by virtue of the laws of the State of Delaware (the "Company");


WITNESSETH:


WHEREAS, the Company wishes to establish an unfunded deferred compensation plan to be known as the Sealy Benefit Equalization Plan (the "Plan") to provide unfunded deferred compensation to a select group of management and highly compensated employees of Participating Companies; and


WHEREAS, the Board of Directors of the Company has approved adoption of the Plan by the Company;


NOW, THEREFORE, effective as of December 1, 1994, the Company hereby adopts the Plan as follows:


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ARTICLE I
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PRELIMINARY PROVISIONS
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1.1 NAME. The name of this Plan shall be the SEALY BENEFIT EQUALIZATION PLAN.


1.2 EFFECTIVE DATE. The provisions of the Plan are effective December 1, 1994.


1.3 PURPOSE. This Plan is hereby established in order to provide unfunded deferred compensation to a select group of management and highly compensated employees of Participating Companies, under certain conditions specified herein.


1.4 PLAN FOR A SELECT GROUP. This Plan shall only cover employees of Participating Companies who are members of a "select group of management or highly compensated employees" as provided in Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA. This Plan shall be administered in such a manner, and benefits hereunder shall be so limited, notwithstanding any contrary provision of this Plan, that this Plan shall constitute such a plan.


1.5 NOT A FUNDED PLAN. It is the intention and purpose of the Company, other Participating Companies and Participants that this Plan shall be deemed to be "unfunded" for tax purposes as well as being such a plan as would properly be described as "unfunded" for purposes of Title I of ERISA. This Plan shall be administered in such a manner, notwithstanding any contrary provision of this Plan, that it will be so deemed and would be so described.


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ARTICLE II
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DEFINITIONS
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The use of neuter, masculine and feminine pronouns shall each be read to include the others and the use of the singular shall be read to include the plural and vice versa. Unless the context otherwise indicates, the following words shall have the following meanings when used in this Plan:


2.1 ACCOUNTS. The word "Accounts" shall mean "Deferred Compensation Accounts" established pursuant to Article V hereof.


2.2 ADOPTION DATE. The words "Adoption Date" shall mean the date as of which the Company or a Subsidiary became or becomes a Participating Company under this Plan.


2.3 AFFILIATE. The word "Affiliate" shall mean a corporation which would be defined as a member of a controlled group of corporations which includes a Participating Company or any business organization which would be defined as a trade or business (whether or not incorporated) which is under "common control" with a Participating Company within the meaning of Sections 414(b) and (c) of the Code, and any member of an "affiliated service group," as defined in Section 414(m) of the Code, or which is a member of an arrangement described in Section 414(o) of the Code, which includes a Participating Company but, in each case, only during the periods any such corporation, business organization or member would be so defined or described.


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2.4 BENEFIT APPEALS COMMITTEE. The words "Benefit Appeals Committee" or "Committee" shall mean the Benefit Appeals Committee established pursuant to Article IX of this Plan.


2.5 BOARD. The word "Board" shall mean the Board of Directors of the Company.


2.6 BREACH OF NONCOMPETITION REQUIREMENT. The words "Breach of Noncompetition Requirement" shall mean the occurrence of an event in which a Participant, at any time prior to his payment in full hereunder:

(a) either while he is employed by the Company and/or any
Subsidiary or after his Termination of Employment; and


(b) without the prior written permission of the Company;
and


(c) either directly or indirectly operates or performs
any advisory or consulting services for, invests in
(other than an investment in Publicly Traded stock of
a corporation, provided that the ownership of such
equity interest does not give the Participant the
right to control or substantially influence the
policy or operational decisions of such corporation),
or otherwise becomes employed by or associated with,
in any capacity, a Competitive Entity.


2.7 CAUSE. The word "Cause" shall mean for purposes of this Plan, either:
(a) the Participant's willful violation of any written
policies of the Company which violations are
materially detrimental to the Company;


(b) the Participant's conviction of (or written,
voluntary and freely given confession to) a felony
involving moral turpitude;


(c) the Participant's conviction of (or written,
voluntary and freely given confession to) a felony in
connection with his employment;


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(d) a Participant's theft, fraud, embezzlement, material
willful destruction of property (including any
operating system of the Company or any Subsidiary) or
material disruption of the operations of the Company
or any Subsidiary;


(e) a Participant's being under the influence of illegal
drugs or habitually under the influence of alcohol
while on the job or on Company or any Subsidiary
property;


(f) a Participant's engaging in conduct, in or out of the
workplace, which has a material adverse effect on the
reputation or business prospects of the Company or
one of its Subsidiaries;


(g) a Participant's willfully engaging in conduct while
an employee of the Company or any of its Subsidiaries
which caused the Company or any of its Subsidiaries
to be found, in a final judgment of a court of law,
to have a material civil or criminal liability under
any federal or state law;


(h) a Participant's disclosure of trade secrets, customer
lists or other confidential information if the
Company or any Subsidiary has taken measures designed
to prevent such disclosure; or


(i) a Participant's Breach of the Noncompetition
Requirement.


2.8 CHANGE OF CONTROL. The words "Change of Control" shall mean:
(a) a change in the composition of the Board of the
Company such that a majority of such Board members
are not the same persons who were directors twelve
(12) months earlier;


(b) approval by the corporate members of the Company (as
defined in the By Laws of the Company) of a
reorganization, merger or consolidation with respect
to which, in any such case, the persons who were the
corporate members of the Company immediately prior to
such reorganization, merger or consolidation do not,
immediately thereafter, own more than 51% of the
combined voting power entitled to vote in the
election of the directors or trustees of the
reorganized, merged or consolidated company; or


(c) liquidation or dissolution of the Company; or


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(d) a sale of all or substantially all of the assets of
the Company.
2.9 CODE. The word "Code" shall mean the Internal Revenue Code of 1986, as such may be amended from time to time, and lawful regulations and pronouncements promulgated thereunder. Whenever a reference is made to a specific Code Section, such reference shall be deemed to include any successor Code Section having the same or a similar purpose.


2.10 COMPANY. The word "Company" shall mean Sealy Corporation, a Delaware corporation, and any successor corporation or business organization which shall assume the duties and obligations of Sealy Corporation by operation of law or otherwise under this Plan.


2.11 COMPENSATION. The word "Compensation" shall mean all Profit Sharing Plan Compensation:


(a) in excess of One Hundred Fifty Thousand Dollars
($150,000.00), subject to adjustments for increases
in the cost of living as shall be prescribed by the
Secretary of the Treasury pursuant to Section 401(a)
(17) of the Code;


(b) but not in excess of Two Hundred Thousand Dollars
($200,000.00), subject to adjustments for increases
in the cost of living as shall be prescribed by the
Secretary of the Treasury pursuant to Section 415 of
the Code and calculated as if Section 401(a)(17) of
the Code had not been amended either (i) to replace
Two Hundred Thousand Dollars ($200,000.00) with One
Hundred Fifty Thousand Dollars ($150,000.00) or (ii)
to change the method of cost of living adjustment of
the dollar amount [and which was last increased prior
to such amendment to Two Hundred Thirty-Five Thousand
Eight Hundred Forty Dollars ($235,840.00) for plan
years beginning in 1993];


paid by Participating Companies to a Participant during a Plan Year for services rendered to Participating Companies. The amount of a


5 9 Participant's Compensation for any Plan Year shall be determined as of the last day of such year.


In determining the floor and ceiling on Compensation set forth in the preceding paragraph, the family aggregation rules contained in Section 414(q)(6) of the Code shall apply, except that in applying such rules, the term "family" shall include only the spouse of the Employee and any lineal descendants of the Employee who have not attained age nineteen (19) before the close of the Plan Year. If, as a result of the application of such family aggregation rules, the limit on Compensation set forth above is exceeded, the amount of each family member's Compensation which shall count toward the limit shall equal that portion of the limit which bears the same relationship to the limit as such family member's Compensation, determined under this Section 2.11 prior to the application of such Compensation limit ("unlimited compensation"), bears to the total unlimited compensation of all the family members.


2.12 COMPETITIVE ENTITY. The words "Competitive Entity" shall mean any company, partnership, organization, proprietorship, or other entity (including any independent trademark licensee of the Company or one or more of its Subsidiaries) which (as determined by the Plan Administrator) develops, manufactures, prepares, sells (other than on a retail basis) or distributes (other than on a retail basis):


(a) in the case of all Participants, bedding, bedding
components or related bedding products including but
not limited to mattresses, boxsprings, foundations,
bedding equipment, innerspring bedding products,
sofabeds, waterbeds, futons and wire


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formed metal parts and other components used in the
manufacturing of bedding;


(b) in the case of a Participant who is employed as
corporate staff immediately prior to his Termination
of Employment, other products or components of such
products where such product line or lines in the
aggregate constitute ten percent (10%) of gross sales
of the Company and its Subsidiaries; or


(c) in the case of a Participant who is employed by a
Subsidiary or division immediately prior to his
Termination of Employment, other products or
components of such products developed, manufactured,
prepared, sold or distributed by such Subsidiary or
division.


Notwithstanding anything in this Article II to the contrary, a company, partnership, organization, proprietorship, or other entity which purchases the stock or assets of a business unit directly from the Company or any Subsidiary shall not be deemed a Competitive Entity solely with respect to the products developed, manufactured, prepared, sold, or distributed by and the individuals employed by such business unit as of the date of such stock or asset purchase.


2.13 CONTINUOUS SERVICE. The words "Continuous Service" shall mean for an Employee of a Participating Company, his length of service from the later of his Date of Hire to his date of Termination of Employment which follows such Date of Hire, even if such company was not a Participating Company at the time of the Participant's Date of Hire.


2.14 COVERED EMPLOYEE. The words "Covered Employee" shall mean an Employee of a Participating Company who:


(a) is an "active participant" in the Profit Sharing
Plan as the term "active participant" is defined
in that plan;


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(b) receives remuneration from one or more Participating
Companies which, in the aggregate for the Plan Year,
exceeds the limit on remuneration which may be taken
into account by a tax qualified retirement plan in
accordance with Section 401(a)(17) of the Code;


(c) is a senior management employee of a Participating
Company, as determined in the discretion of the Plan
Administrator; and


(d) is designated as a Covered Employee in the discretion
of the Plan Administrator.


An Employee shall become a Covered Employee as of the first day on which he satisfies all of the requirements of (a), (b), (c) and (d) above. An Employee shall cease to be a Covered Employee as of the first day thereafter on which he ceases to satisfy any one of such requirements. With respect to requirement (b) relating to remuneration, an Employee will be deemed to first satisfy such requirement on the first day as of which his remuneration exceeds the limits referred to in (b) relating to remuneration; an Employee will be deemed to cease to satisfy such requirement on the last day of the first Plan Year for which his remuneration is not so limited. With respect to requirements (c) and (d) above relating to determination of senior management status or designation as a Covered Employee, the determination or designation may be current, prospective or retroactive, provided it cannot be made retroactive more than the Plan Year preceding the Plan Year in which the determination or designation is made; an Employee shall not cease to be designated as a Covered Employee pursuant to (d) above unless he ceases to satisfy any one of the requirements in (a), (b) or (c) above.


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2.15 DATE OF HIRE. The words "Date of Hire" shall mean the date on which an Employee commences employment and works at least one (1) Hour for a Participating Company or any Affiliate, even if such company was not a Participating Company at the time of such Date of Hire, and shall mean, in the case of a rehired Employee, the first date following his previous Termination of Employment on which he works at least one (1) Hour for a Participating Company or any Affiliate, even if such company was not a Participating Company on such date.


2.16 DEFERRED COMPENSATION ACCOUNT. The words "Deferred Compensation Account" shall mean for each Participant the bookkeeping account maintained on his behalf to reflect profit sharing contributions made on his behalf and all earnings and losses thereon.


2.17 DISABILITY. The word "Disability" shall mean any disability which prevents an Employee from performing each of the material duties of his regular occupation.


2.18 EFFECTIVE DATE. The words "Effective Date" shall mean the effective date of this Plan which is December 1, 1994.


2.19 EMPLOYEE. The word "Employee" shall mean any common-law employee of a Participating Company. The word "Employee" shall not include any person who renders service to a Participating Company solely as a director, independent contractor or Leased Employee.


2.20 ERISA. The acronym "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and lawful regulations and pronouncements


9 13 promulgated thereunder. Whenever a reference is made to a specific ERISA Section, such reference shall be deemed to include any successor ERISA Section having the same or a similar purpose.


2.21 HOURS. The word "Hours" shall mean for any Employee who is covered by the Fair Labor Standards Act, as amended, the actual number of Hours for which he is directly or indirectly paid or entitled to payment by a Participating Company or any Affiliate, including payments pursuant to an award or agreement requiring a Participating Company or an Affiliate to pay back wages, irrespective of mitigation of damages. Hours under this paragraph shall be calculated and credited pursuant to Section 2530.200b-2(b) and (c) of the Department of Labor Regulations which are incorporated herein by reference. For any Employee who is not covered by the Fair Labor Standards Act, as amended, such an Employee shall be credited with the equivalent of one hundred ninety (190) Hours for each month he is paid or entitled to payment by the Company or any Affiliate for at least one (1) Hour pursuant to Section 2530.200b-3(e)(ii) of the Department of Labor Regulations which are incorporated herein by reference.


Notwithstanding the foregoing, ...