Exhibit 10.3

 

TEMPUR-PEDIC INTERNATIONAL INC.

2003 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

(Bhaskar Rao)

 

THIS AGREEMENT dated as of May 2, 2005, between Tempur-Pedic International Inc.,
a corporation organized under the laws of the State of Delaware (the “Company”),
and Mr. Bhaskar Rao, residing at the address identified below (the “Optionee”).

 

1.    Grant of Option. Pursuant and subject to the Company’s 2003 Equity
Incentive Plan as attached hereto (as the same may be amended from time to time,
the “Plan”), the Company grants to you, the Optionee, an option (the “Option”)
to purchase from the Company all or any part of a total of 25,000 shares (the
“Optioned Shares”) of the common stock, par value $.01 per share, of the Company
(the “Stock”), at a price per share equal to $19.22. The Grant Date of this
Option is as of May 2, 2005.

 

2.    Character of Option. Subject to the limitations set forth in
Section 7.1(f) of the Plan, this Option is to be treated as an “incentive stock
option” within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended.

 

3.    Duration of Option. Subject to the following sentence, this Option shall
expire at 5:00 p.m. on May 2, 2015. However, if your employment or other
association with the Company and its Affiliates ends before that date (including
because your employer ceased to be an Affiliate), this Option shall expire at
5:00 p.m. on May 2, 2015 or, if earlier, the date specified in whichever of the
following applies:

 

(a)    If the termination of your employment or other association is on account
of your death or disability, the first anniversary of the date your employment
ends.

 

(b)    If the termination of your employment or other association is due to any
other reason, three (3) months after your employment or other association ends.

 

4.     Exercise of Option.

 

(a)    Until this Option expires, you may exercise it as to the number of
Optioned Shares identified in the table below, in full or in part, at any time
on or after the applicable exercise date or dates identified in the table.
However, during any period that this Option remains outstanding after your
employment or other association with the Company and its Affiliates ends,
including because your employer ceased to be an Affiliate, you may exercise it
only to the extent it was exercisable immediately prior to the end of your
employment or other association. The procedure for exercising this Option is
described in Section 7.1(e) of the Plan. You may pay the exercise price due on
exercise by delivering other shares of Stock of equivalent Market Value provided
you have owned such shares of Stock for at least six months.

 

Number of Shares
in Each Installment

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Initial Exercise Date
for Shares in Installment

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6,250

  May 2, 2006

1,562

  August 2, 2006

1,563

  November 2, 2006

1,562

  February 2, 2007

1,563

  May 2, 2007

1,562

  August 2, 2007

1,563

  November 2, 2007

1,562

  February 2, 2008

1,563

  May 2, 2008

 

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1,562

  August 2, 2008

1,563

  November 2, 2008

1,562

  February 2, 2009

1,563

  May 2, 2009

 

5.    Transfer of Option. Except as provided in Section 6.4 of the Plan, you may
not transfer this Option except by will or the laws of descent and distribution,
and, during your lifetime, only you may exercise this Option.

 

6.    Incorporation of Plan Terms. This Option is granted subject to all of the
applicable terms and provisions of the Plan, including but not limited to the
limitations on the Company’s obligation to deliver Optioned Shares upon exercise
set forth in Section 10 (Settlement of Awards).

 

7.    Miscellaneous. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to the
conflict of laws principles thereof and shall be binding upon and inure to the
benefit of any successor or assign of the Company and any executor,
administrator, trustee, guardian, or other legal representative of you.
Capitalized terms used but not defined herein shall have the meaning assigned
under the Plan. This Agreement may be executed in one or more counterparts all
of which together shall constitute but one instrument.

 

8.    Tax Consequences. The Company makes no representation or warranty as to
the tax treatment to you of your receipt or exercise of this Option or upon your
sale or other disposition of the Optioned Shares. You should rely on your own
tax advisors for such advice. In particular, you acknowledge that in any event,
as a result of the limitations set forth in Section 7.1(f) of the Plan, a
significant portion of this Option will not be treated as an Incentive Option.

 

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

 

TEMPUR-PEDIC INTERNATIONAL INC.

 

By:

    /s/ ROBERT B. TRUSSELL         /s/ BHASKAR RAO

Title:

    Chief Executive Officer         Signature of Optionee               Bhaskar
Rao               Name of Optionee            

  Optionee’s Address:

                                         

 

 

 

 

 

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