As Adopted May 4, 2010
 

 
TEMPUR-PEDIC INTERNATIONAL INC.
 
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
 
EFFECTIVE MAY 4, 2010
 
1. Purpose; Effective Date; Sub-Plan; Definitions.
 
(a)           Purpose.  The Board of Directors (the “Board”) of Tempur-Pedic
International Inc. (the “Company”) has approved compensating Directors (as
defined below) in part in the form of deferred restricted stock units
(“DSUs”).  The Board has further authorized Directors to make certain elections
as to the time of payment under any such DSUs as well as the form of payment of
any part of their compensation otherwise payable in cash (which alternative
forms may include the grant of additional DSUs or payment in the form of shares
of the Company’s common stock, $0.01 par value per share (“Common Stock”)).  The
Board has adopted this Non-Employee Director Deferred Compensation Plan (the
“Plan”) to set out the terms and conditions of the elections available to
Directors, and the terms of payment of any such DSUs.
 
(b)           Effective Date.  This Plan is effective as of May 4, 2010.
 
(c)           Relationship to Amended and Restated 2003 Equity Incentive Plan.
This Plan is established under the Company’s Amended and Restated 2003 Equity
Incentive Plan, as amended from time to time (the “2003 EIP”), and any shares of
Common Stock to be delivered pursuant to this Plan shall be issued under the
2003 EIP.
 
(d)           Definitions.  Capitalized terms used but not defined herein shall
have the meaning assigned under the 2003 EIP.  As used in this Plan, the
following terms shall have the following meanings:
 
(i)           “Award Agreement” shall mean an award agreement under the 2003 EIP
in substantially the form attached hereto as Exhibit A, or such other form
approved from time to time by the Committee.
 
(ii)           “Board Year” shall mean the term of service for a member of the
Board commencing upon election or re-election at the Company’s Annual Meeting of
Stockholders or upon appointment of a Director during a calendar year, and
ending at the next Annual Meeting of Stockholders.
 
(iii)           “Committee” shall mean the Compensation Committee of the Board.
 
(iv)           “Director” shall mean a non-employee director of the Company.
 
(v)           “Effective Date” shall mean May 4, 2010.
 
(vi)           “Election Form” shall mean the election form in substantially the
form attached hereto as Exhibit B, or such other form approved from time to time
by the Committee.
 
(vii)           “Fees” shall mean all retainer and committee fees payable to a
Director for service on the Board for any Board Year beginning on or after the
Effective Date.
 
(viii)           “Participant” shall mean any Director.
 
(ix)           “Separation from Service” shall mean a Participant’s death,
retirement or other termination of association with the Company; provided that
such separation constitutes a separation from service for purposes of
Section 409A of the Code.
 
2. Eligibility.  Only Directors shall be eligible to participate in this Plan.
 
3. Deferral Election.  Each DSU granted to a Director for service for an
upcoming Board Year or, for a Director appointed during a calendar year, for the
balance of the then current Board Year, including any DSU granted pursuant to a
Director’s election under Section 4, is subject to vesting as set forth in the
applicable Award Agreement.  All such DSUs which become vested shall be paid
under the terms of this Plan and the 2003 EIP on the third (3rd) anniversary of
the Grant Date applicable to each DSU, as specified in the applicable Award
Agreement, unless a Director elects to defer payment until the later of:
 
(i)           the third (3rd) anniversary of the Grant Date; and
 
(ii)           the earlier of the Director’s Separation from Service, and a
fixed date after the third (3rd) anniversary of the Grant Date, which must be
May 1 of the year designated by the applicable Director.
 
This election shall be made by submitting an Election Form to the Company in
accordance with Section 5 hereof.  Election Forms shall not carry over from year
to year but instead a new Election Form must be submitted by the applicable
deferral deadline in Section 5 hereof.
 
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4. Equity Election.
 
(a)           Fee Election.  With respect to Fees otherwise payable for services
performed during a Board Year, a Participant may elect to receive all or a
portion of his or her Fees otherwise payable in cash either:
 
(i)           in cash, to be paid as determined by the Board over the Board Year
and subject to the Director’s continued service;
 
(ii)           in shares of Common Stock equal to the dollar value of the Fees
to be paid in the form of Common Stock at any time divided by the closing price
of the Company’s Common Stock on the New York Stock Exchange (the “NYSE”) on the
date of payment, rounded down to the nearest whole share, plus a cash payment in
the amount of any fractional share of Common Stock then otherwise distributable,
and payable as determined by the Board over the Board Year and subject to the
Director’s continued service; or
 
(iii)           as DSUs granted under an Award Agreement awarded at the
beginning of the applicable Board Year (or portion thereof) equal to the dollar
value of the Fees to be paid in the form of DSUs divided by the closing price of
the Company’s Common Stock on the NYSE on the Grant Date under the Award
Agreement, subject to the Director’s continued service.
 
These elections shall be made by submitting an Election Form to the Company in
accordance with Section 5.  Election Forms shall not carry over from year to
year but instead a new Election Form must be submitted by the applicable
deferral deadline in Section 5 hereof.
 
(b)           Treatment of DSUs.  If a Participant elects to take all or a
portion of his or her Fees as DSUs pursuant to Section 4(a), the provisions of
Section 3 (including any election as to the time of payment) shall apply to his
or her respective DSUs.
 
5. Election Form Deadlines.
 
(a) General Rule.  Except as provided in Section 5(b) below, the deadline for
any election under Sections 3 and 4 shall be the last day of the calendar year
prior to the Board Year which starts in the following calendar year.
 
(b) Special Rule for Initial Elections.
 
(i) Any Director who becomes a Participant on the Effective Date may make an
initial election under Sections 3 and 4 with respect to Fees payable for the
2010-2011 Board Year.  This Election must be made within thirty (30) days after
the Effective Date.
 
(ii) Any Director who first becomes a Director after the Effective Date may make
initial elections under Sections 3 and 4 with respect to (i) Fees payable for
the Board Year in which he or she becomes a Director and (ii) Fees payable for a
Board Year that begins after but in the same calendar year as he or she becomes
a Director.  These elections may be made within thirty (30) days after becoming
a Director.  However, no election under Section 3, and no election under Section
4 to convert Fees otherwise payable in cash to DSUs, shall be allowed under
these timing rules if the Director has been eligible to participate in any other
nonqualified deferred compensation plan of the Company or any entity treated as
a single employer with the Company under Sections 414(b) or (c) of the Code
other than as an employee, which other nonqualified deferred compensation plan
is an account balance plan allowing the deferral of compensation at the election
of the Director (each, an “Aggregated Plan”). An Aggregated Plan shall not be
taken into account for purposes of this Section 5(b)(ii) after the Director
ceased to be eligible to defer compensation thereunder (other than through the
accrual of earnings), provided either (i) all amounts due the Director under the
Aggregated Plan have been paid to him or her, or (ii) he or she has not been
eligible to defer compensation thereunder (other than through the accrual of
earnings) for a period of at least twenty-four (24) months.
 
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(iii) Elections made pursuant to the special rules of this Section 5(b) either
(A) to change the time of payment of vested DSUs or (B) to convert any part of
the Director’s Fees otherwise payable in cash into DSUs, may only apply to those
Fees for the Director’s services attributable to the portion of the Board Year
remaining after the Company’s receipt of the Director’s Election Form (including
for this purposes the date the Company receives the Election Form, the
“Post-Election Period”).  For a Board Year which begins prior to but ends
subsequent to the Company’s receipt of a Director’s initial Election Form under
this Section 5(b) the Fees payable with respect to the Post-Election Period will
be an amount equal to (i) the total Fees payable to such Director for the
applicable Board Year times (ii) a fraction, the numerator of which is the total
number of days in the Post-Election Period and the denominator of which is the
total number of days in the relevant Board Year after the Effective Date or
after the Director is elected (including for purposes of this sentence the date
the Director is elected with respect to such Board Year, and assuming that the
applicable Board Year will end 356 days after the prior Annual Meeting of
Stockholders).  The proration rule set forth in the preceding sentence does not
apply to a Director’s election to convert any part of the Director’s Fees
otherwise payable in cash into shares of Common Stock and instead any such
election pursuant to the special rule of this Section 5(b) shall apply to all
amounts of his or her Fees the Director has timely elected to convert into
shares of Common Stock.
 
(c)           Election Forms Not Returned.  If no Election Form is timely
submitted by a Director with respect to his or her compensation for any Board
Year or part thereof, he or she shall be deemed to have elected (i) to receive
payment for any DSUs granted for his or her services for such period which vest
in accordance with the terms of the applicable Award Agreement on the third
(3rd) anniversary of the applicable Grant Date and (ii) to receive in cash all
of his or her Fees otherwise payable in cash for such period, to be paid as
determined by the Board over the Board Year and subject to the Director’s
continued service.
 
(d)           Elections Irrevocable.  Elections under Sections 3 and 4 and made
pursuant to the general rule of Section 5(a) shall become irrevocable on the
last day on which a valid election could be made pursuant to
Section 5(a).  Elections under Sections 3 and 4 and made pursuant to the special
rule of Section 5(b) shall become irrevocable on the Company’s receipt of the
Director’s Election Form, duly completed.
 
6. Accounts.
 
(a) Accounts.  The Company shall establish on its books an account (an
“Account”) for each Participant, denominated in DSUs, each representing a
conditional right to a share of Common Stock.  DSUs granted under an Award
Agreement shall be credited to the Participant’s Account based on the number of
shares of Common Stock specified in the Award Agreement.  For the avoidance of
doubt, it is not intended that the Account would be maintained as a record of
any shares of Common Stock the Director has elected to receive in lieu of Fees
otherwise payable in cash.
 
(b) Dividend Credits.  As of each date for payment of any dividend or other
distribution on the Company’s Common Stock, each Participant’s Account shall be
credited with a number of shares of Common Stock equal to (i) the total amount
of any such dividend or distribution that would have been paid on the number of
vested DSUs recorded in  the balance of that Participant’s Account as of the
record date for such dividend divided by (ii) the value of a share of Common
Stock on the payment date for such dividend, based on the closing price of
Company Common Stock on the NYSE on such payment date.  Shares credited in lieu
of dividends or distributions shall be subject to the same vesting provisions,
and time of payment determinations, as the DSUs in respect of which such
additional credits are made.
 
(c) Vesting of DSUs.  DSUs credited to a Participant’s Account shall remain
subject to a Risk of Forfeiture in accordance with the terms and conditions of
the applicable Award Agreement as well as the provisions of Section 10 below
(including any provision for accelerated vesting on certain changes of control
pursuant to Section 9 of the 2003 EIP).  Notwithstanding any provision of this
Plan to the contrary, no Participant or other person shall have any right or
claim under this Plan with respect to a DSU credited to the Participant’s
Account but forfeited in accordance with the terms and conditions of the
applicable Award Agreement.
 
(d) Effect of Corporate Transaction on Stock Accounts.  If at any time
subsequent to the Effective Date, the outstanding shares of Common Stock (or any
other securities covered by this Plan by reason of the prior application of this
Section) are adjusted, modified, increased, decreased, or exchanged for a
different number or kind of shares, securities or other property (including
cash), as a result of a merger or consolidation, reorganization,
recapitalization, reclassification, or stock dividend, stock split, or reverse
stock split, an appropriate and proportionate adjustment will be made in
accordance with Section 8 of the 2003 EIP in the number DSUs credited to
Accounts under this Plan.
 
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(e) Statement of Account.  At the end of each Board Year, and at such other date
or dates during a year as the Company may determine, the Company shall issue or
shall cause to be issued to each Participant a statement setting forth the
balance of the Participant’s Account under this Plan.
 
7. Payment of Benefits.
 
(a) In General.  Subject to the balance of Section 7, distributions of a
Participant’s Account under this Plan shall be made in accordance with the time
of distribution applicable to each DSU credited thereto, either in accordance
with the elections of the Director timely made under Section 3 or under the
default rule provided in Section 5(c) if applicable.
 
(b) Timing of Distribution to Satisfy Applicable Law.  The Committee or Board
may delay any distribution from an Account if it reasonably anticipates that the
making of the distribution will violate federal securities laws or other
applicable laws until the earliest date that the Committee or Board reasonably
anticipates that the making of such distribution will not cause such a
violation.  If advisable to avoid exposing a Participant to a claim for recovery
of short swing profits under Section 16(b) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), prior to the payment of the amount
reflected in the Participant’s Account, such payment must be approved in advance
by the Board or a committee comprised solely of “non-employee directors” as
defined in Rule 16(b)-3(b)(3) under the Exchange Act.
 
(c) Form of Payments.  Distribution shall be made in the form of whole shares of
Common Stock equal to the number of DSUs credited to the Participant’s Account
as of the relevant date and a cash payment in the amount of any fractional share
of Common Stock then otherwise distributable (based on the closing price of the
Company’s Common Stock on the NYSE on the date of distribution).  Each
Participant or beneficiary agrees that prior to any distribution under this
Plan, he or she will make such representations and execute such documents as are
deemed by the Committee or Board to be necessary to comply with applicable laws.
 
(d) Delays or Acceleration in Payments.  The Company may elect to accelerate the
payment of any Account, in respect of vested DSUs, in the circumstances allowed
by, and subject to the conditions required by Treas. Reg. §1.409A-3(j)(4),
including but not limited to in connection with the issuance of domestic
relations orders, for payment of employment taxes or upon income inclusion under
Section 409A of the Code, as an offset for indebtedness or in settlement of bona
fide disputes as to a right to a payment.
 
(e) Designation of Beneficiaries; Death.  Each Participant shall have the right,
at any time, to designate any person or persons as the Participant’s beneficiary
or beneficiaries (both primary as well as secondary) to whom shares in respect
of DSUs under this Plan shall be delivered in the event of the Participant’s
death prior to complete distribution of the benefits due under this Plan.  Each
beneficiary designation shall be in written form prescribed by the Company and
will be effective only if filed with the Company during the Participant’s
lifetime.  Such designation may be changed by the Participant at any time
without the consent of a beneficiary.  If no designated beneficiary survives the
Participant, the balance of the Participant’s shares in respect of vested DSUs
shall be delivered to the Participant’s surviving spouse or, if no spouse
survives, to the Participant’s estate.  Upon the death of a Participant, any
shares in respect of DSUs shall be delivered, within forty-five (45) days after
the Participant’s death, in a single distribution.
 
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8. Administration.
 
(a) Committee Duties.  This Plan shall be administered by the Committee, which
shall have all of the authority expressly granted to the Committee and the
Company under this Plan; provided, however, that at any time and on any one or
more occasions the Board may itself exercise any of the powers and
responsibilities assigned to the Committee under this Plan and when so acting
shall have the benefit of all of the provisions of this Plan pertaining to the
Committee’s exercise of its authorities hereunder.  The Committee shall have
responsibility for the general administration of this Plan and for carrying out
its intent and provisions.  The Committee shall have plenary authority in its
discretion to interpret this Plan; to prescribe, amend and rescind rules and
regulations relating to it; to determine the terms of the Election Forms and
Award Agreements executed and delivered under this Plan, including such terms
and provisions as shall be requisite in the judgment of the Committee to conform
to any change in any law or regulation applicable thereto; and have such powers
and duties as may be necessary to discharge its responsibilities.  The Committee
may, from time to time, employ other agents and delegate to them such
administrative duties as it sees fit, and may from time to time consult with
counsel, who may be counsel to the Company.
 
(b) Binding Effect of Decisions.  The decision or action of the Committee in
respect of any question arising out of or in connection with the administration,
interpretation and application of this Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in this Plan.
 
9. Amendment and Termination of this Plan.
 
(a) Amendment.  The Committee may at any time amend this Plan in whole or in
part subject to any restrictions on modifications or amendments as provided in
the 2003 EIP; provided, however, that no amendment shall affect the terms of any
previously deferred DSUs or the terms of any irrevocable Election Form or Award
Agreement of any Participant.
 
(b) Termination.  The Committee or Board may at any time terminate this Plan,
provided the termination does not occur proximate to a downturn in the financial
health of the Company and there are then being terminated nonqualified deferred
compensation plans which would be Aggregated Plans if the same non-employee
individual were eligible to participate in this Plan and all such plans. In the
event of a termination of this Plan under this Section 9(b), this Plan shall
continue to operate for a period selected by the Board or Committee of at least
twelve (12) months from the date the Board or Committee takes irrevocable action
to terminate this Plan and this Plan shall continue to pay benefits otherwise
payable under the terms of this Plan absent termination of this Plan. On a date
selected by the Board or Committee that is more than twelve (12) months from the
date the Board or Committee took irrevocable action to terminate this Plan, this
Plan shall cease to operate and the Company shall determine the balance of each
Participant’s Account as of the close of business on such date and the Company
shall pay out such Account balances to the Participants in a single distribution
as soon as practicable after such date, but in no event shall such distribution
be made later than twenty-four (24) months after the date the Board or Committee
took action to terminate this Plan.  In the event of termination of this Plan
under this Section 9(b), the Company shall not establish another nonqualified
deferred compensation plan which would be an Aggregated Plan if the same
non-employee individual were eligible to participate in this Plan and such plan
within three (3) years of the Board or Committee taking irrevocable action to
terminate this Plan.
 
(c)           Termination on Change in Control.   The Committee or Board may
also terminate this Plan by irrevocable action at any time within thirty (30)
days prior to or within twelve (12) months following a “change of control” (as
defined for purposes of Section 409A of the Code), provided there are then being
terminated all Aggregated Plans as to any Participant affected by the change of
control.  In the event of a termination of this Plan under this Section 9(c), on
a date selected by the Board or Committee that is no more than twelve (12)
months from the date the Board or Committee took action to terminate this Plan,
this Plan shall cease to operate, the Company shall determine the balance of
each Participant’s Account as of the close of business on such date and the
Company shall pay out such Account balances to the Participants in a single
distribution as soon as practicable after such date, but in no event later than
twelve (12) months after the date the Board or Committee took action to
terminate this Plan.
 
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10. Certain Remedies.
 
(a) If at any time within two (2) years after termination of a Participant’s
association with the Company and its Affiliates any of the following occur:
 
(i) the Participant unreasonably refuses to comply with lawful requests for
cooperation made by the Company, its Board, or its Affiliates;
 
(ii) the Participant accepts employment or a consulting or advisory engagement
with any Competitive Enterprise (as defined in Section 10(c)) of the Company or
its Affiliates or the Participant otherwise engages in competition with the
Company or its Affiliates;
 
(iii) the Participant acts against the interests of the Company and its
Affiliates, including recruiting or employing, or encouraging or assisting the
Participant’s new employer to recruit or employ an employee of the Company or
any Affiliate without the Company’s written consent;
 
(iv) the Participant fails to protect and safeguard while in his or her
possession or control, or surrender to the Company upon termination of the
Participant’s association with the Company or any Affiliate or such earlier time
or times as the Company or its Board or any Affiliate may specify, all
documents, records, tapes, disks and other media of every kind and description
relating to the business, present or otherwise, of the Company and its
Affiliates and any copies, in whole or in part thereof, whether or not prepared
by the Participant;
 
(v) the Participant solicits or encourages any person or enterprise with which
the Participant has had business-related contact, who has been a customer of the
Company or any of its Affiliates, to terminate its relationship with any of
them; or
 
(vi) the Participant breaches any confidentiality obligations the Participant
has to the Company or an Affiliate, the Participant fails to comply with the
policies and procedures of the Company or its Affiliates for protecting
confidential information, the Participant uses confidential information of the
Company or its Affiliates for his or her own benefit or gain, or the Participant
discloses or otherwise misuses confidential information or materials of the
Company or its Affiliates (except as required by applicable law); then
 
(1) All of the DSUs credited to the Participant’s Account shall terminate and be
cancelled effective as of the date on which the Participant entered into such
activity, unless terminated or cancelled sooner by operation of another term or
condition of this Plan or the 2003 EIP;
 
(2) any Stock acquired and held by the Participant pursuant to this Plan during
the Applicable Period (as defined below) may be repurchased by the Company at a
purchase price of $0.01 per share; and
 
(3) any gain realized by the Participant from the sale of Stock acquired
pursuant to this Plan during the Applicable Period shall be paid by the
Participant to the Company.
 
(b) The term “Applicable Period” shall mean the period commencing on the later
of the date of an Award Agreement or the date which is one year prior to the
Participant’s termination of association with the Company or any Affiliate and
ending two years from the Participant’s termination of association with the
Company or any Affiliate.
 
(c) The term “Competitive Enterprise” shall mean a business enterprise that
engages in, or owns or controls a significant interest in, any entity that
engages in, the manufacture, sale or distribution of mattresses or pillows or
other bedding products or other products competitive with the Company’s
products.  Competitive Enterprise shall include, but not be limited to, the
entities set forth on Appendix A hereto, which may be amended by the Company
from time to time upon notice to the Participant.  At any time the Participant
may request in writing that the Company make a determination whether a
particular enterprise is a Competitive Enterprise.  Such determination will be
made within fourteen (14) days after the receipt of sufficient information from
the Participant about the enterprise, and the determination will be valid for a
period of ninety (90) days from the date of determination.
 
11. Right of Set Off. The Company may deduct from any amounts the Company or any
Affiliate owes the Participant from time to time, any amounts the Participant
owes the Company under Section 10 above, provided that this set-off right may
not be applied against wages, salary or other amounts payable to the Participant
to the extent that the exercise of such set-off right would violate any
applicable law.  If the Company does not recover by means of set-off the full
amount the Participant owes the Company, calculated as set forth above, the
Participant agrees to pay immediately the unpaid balance to the Company upon the
Company’s demand.
 
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12. Nature of Remedies.
 
(a) The remedies set forth in Sections 10 and 11 above are in addition to any
remedies available to the Company and its Affiliates in any non-competition,
employment, confidentiality or other agreement, and all such rights are
cumulative.  The exercise of any rights hereunder or under any such other
agreement shall not constitute an election of remedies.
 
(b) The Company shall be entitled to place a legend on any certificate
evidencing any Stock acquired upon this Plan referring to the repurchase right
set forth in Section 10(a) above.  The Company shall also be entitled to issue
stop transfer instructions to the Company’s stock transfer agent in the event
the Company believes that any event referred to in Section 10(a) has occurred or
is reasonably likely to occur.
 
13. Compliance with Laws.
 
(a) Government Regulations.  This Plan, and the election of securities in lieu
of Fees and the deferral of DSUs thereunder, and the obligation of the Company
to issue, sell and deliver shares, as applicable, under the 2003 EIP, shall be
subject to all applicable laws, rules and regulations.
 
(b) Compliance with Section 409A of the Code.  To the extent applicable, it is
intended that this Plan comply with the provisions of Section 409A of the
Code.  This Plan shall be administered in a manner consistent with this intent,
and any provision that would cause this Plan to fail to satisfy Section 409A of
the Code shall have no force and effect until amended to comply with Section
409A of the Code (which amendment may be retroactive to the extent permitted by
Section 409A of the Code and may be made by the Board without the consent of the
Participants in this Plan).  Notwithstanding the foregoing, no particular tax
result for a Participant with respect to any income recognized by the
Participant in connection with this Plan is guaranteed under this Plan, and the
Participant shall be responsible for any taxes imposed on the Participant in
connection with this Plan.
 
14. Miscellaneous.
 
(a) No Interest in Assets.  The Accounts shall be established solely for the
purpose of  determining the number of DSUs owed to Participants or beneficiaries
under this Plan.  Participants and their beneficiaries, heirs, successors and
assigns shall have no legal or equitable rights, interest or claims in any
property or assets of the Company.  No assets of the Company shall be held under
any trust for the benefit of the Participants, their beneficiaries, heirs,
successors or assigns, or held in any way as collateral security for the
fulfilling of the obligations of the Company under this Plan.  The Company’s
obligation under this Plan shall be that of an unfunded and unsecured promise to
deliver shares in respect of DSUs in the future, and the rights of Participants
and beneficiaries shall be no greater than those of unsecured general creditors
of the Company.  Nothing in this Plan shall be deemed to give any member of the
Board any right to participate in this Plan, except in accordance with the
provisions of this Plan.
 
(b) Non-assignability.  Neither a Participant nor any other person shall have
the right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the shares in respect of any DSUs, if any, deliverable hereunder, or any part
thereof, which are, and all rights to which are, expressly declared to be
non-assignable and nontransferable.  No part of the shares deliverable in
respect of any DSUs  shall, prior to actual delivery, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant’s or any other person’s
bankruptcy or insolvency.
 
(c) Governing Law.  The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Delaware, without regard to
the conflicts of law principles thereof.
 
(d) Validity.  In case any provision of this Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as if such
illegal and invalid provisions had never been inserted herein.
 
(e) Notice.  Any notice or filing required or permitted to be given to the
Company or the Committee under this Plan shall be sufficient if in writing and
hand delivered, or sent by registered or certified mail, to the Secretary of the
Company.  Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
 
(f) Successors.  The provisions of this Plan shall bind and inure to the benefit
of the Company and its successors and assigns. The term “successors” as used
herein shall include any corporate or other business entity which shall, whether
by merger, consolidation, purchase or otherwise acquire all or substantially all
of the business and assets of the Company, and successors of any such
corporation or other business entity.
 
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Exhibit A

TEMPUR-PEDIC INTERNATIONAL INC.

AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN

Acknowledgement and Award Agreement
[Insert Board Member]

This Acknowledgement and Award Agreement (the “Agreement”), dated as of
[_______ __, 20__], is between Tempur-Pedic International Inc., a corporation
organized under the laws of the State of Delaware (the “Company”), and the
individual identified below, residing at the address there set out (the
“Recipient”).
 
1.           Award of Deferred Stock Units.  Pursuant and subject to the
Company’s Amended and Restated 2003 Equity Incentive Plan, as amended (as the
same may be amended from time to time, the “2003 EIP”) , the Company grants the
Recipient an award (the “Award”) for [Insert total of Mandatory DSUs and/or
Elective DSUs, if any] deferred stock units  (“DSUs”) of the common stock, par
value $0.01 per share, of the Company (the “Stock”) as compensation for the
Recipient’s service as a member of the board of directors of the Company (the
“Board”).  This Award is granted as of [_______ __, 20__] (the “Grant Date”).
 
2.           Rights of Deferred Stock Units.  The DSUs granted in this Agreement
shall be credited to the Recipient’s account under the Company’s Non-Employee
Director Deferred Compensation Plan (as the same may be amended from time to
time, the “Deferred Compensation Plan”).  All of the Recipient’s rights in or as
a consequence of this grant of DSUs, to the extent the DSUs vest as determined
in accordance with Section 3 below, shall thereafter be determined under the
Deferred Compensation Plan.  As provided in the Deferred Compensation Plan, the
Recipient shall have no rights to receive shares of Common Stock in or as a
consequence of DSUs which do not vest as determined accordance with Section 3
below, except as provided in Section 4 below.
 
3.           Vesting Period and Rights; Delivery Date; and Filings.  The Award
will vest in [four] installments as follows:
 
Number of Shares
in Each Installment
Percentage
of the Award
 
Vesting Date
[______]
[25]%
________ __, 20__
[______]
[25]%
________ __, 20__
[______]
[25]%
________ __, 20__
[______]
[25]%
________ __, 20__

 
Subject to the provisions of Section 4 below, the vesting is subject to the
Recipient’s continued service on the Board of the Company on the applicable
vesting date as set forth above (the “Vesting Date”).
 
The Recipient is responsible for any filings required under Section 16 of the
Securities Exchange Act of 1934 and the rules thereunder.
 
4.           Termination of Service.  If the Recipient’s membership with the
Board of the Company ends for any reason, the Recipient forfeits all rights and
interest in any unvested DSUs; provided, however, if the Recipient dies or the
Recipient’s membership with the Board ends due to the Recipient’s long-term
disability (within the meaning of Section 409A of the Code), all of the DSUs
that have not become vested pursuant to Section 3 as of the date of death or
disability shall immediately vest.
 
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5.           Incorporation of Plan Terms; Acknowledgements.  This Award is
granted subject to all of the applicable terms and provisions of the 2003 EIP
and the Deferred Compensation Plan.  Without limiting the generality of the
foregoing, the Recipient acknowledges that under the terms of the 2003 EIP and
Deferred Compensation Plan:
 
(a)           The Company may recover any payment under the Deferred
Compensation Plan if within two years of the Recipient’s termination of service
with the Company he or she fails comply with certain covenants (including but
not limited, competing with the Company and its Affiliates).  By executing this
Agreement, the Recipient consents to a deduction from any amounts the Company or
any Affiliate owes the Recipient from time to time, to the extent of the amounts
the Recipient owes the Company under said Section 11 of the Deferred
Compensation Plan (provided that the set-off right will not be applied against
wages, salary or other amounts payable to the Recipient to the extent that the
exercise of such set-off right would violate any applicable law) and agrees that
if the Company does not recover by means of set-off the full amount the
Recipient owes the Company, calculated as set forth above, the Recipient will
pay immediately the unpaid balance to the Company upon the Company’s demand.
 
(b)           The Company is not liable for the non-issuance or non-transfer,
nor for any delay in the issuance or transfer of any shares of Stock due to the
Recipient with respect to vested DSUs which results from the inability of the
Company to obtain, from each regulatory body having jurisdiction, all requisite
authority to issue or transfer shares of Stock of the Company if counsel for the
Company deems such authority necessary for the lawful issuance or transfer of
any such shares. Acceptance of this Award constitutes the Recipient’s agreement
that the shares of Stock subsequently acquired hereunder, if any, will not be
sold or otherwise disposed of by the Recipient in violation of any applicable
securities laws or regulations.
 
(c)           The DSUs are subject to this Agreement and Recipient’s acceptance
hereof shall constitute the Recipient’s agreement to any administrative
regulations of the Compensation Committee of the Company’s Board (the
“Committee”).  In the event of any inconsistency between this Agreement and the
provisions of the 2003 EIP or Deferred Compensation Plan, the provisions of such
plans shall prevail.
 
(d)           All decisions of the Committee upon any questions arising under
the 2003 EIP or Deferred Compensation Plan or under these terms and conditions
are conclusive and binding.
 
(e)           During the Recipient’s lifetime, no rights under the Deferred
Compensation Plan related to the Award, the DSUs or any underlying Stock payable
in satisfaction of vested DSUs, shall be transferable except by will or the laws
of descent and distribution.
 
(f)           The Company makes no representation or warranty as to the tax
treatment of this Award, including upon the issuance of the Stock or upon the
Recipient’s sale or other disposition of the Stock.  The Recipient should rely
on his own tax advisors for such advice.
 
(g)           All Stock earned and delivered pursuant to this Agreement and the
Deferred Compensation Plan are intended to be paid in compliance with, or on a
basis exempt from, Section 409A of the Code. This Agreement, and all terms and
conditions used herein, shall be interpreted and construed consistent with that
intent. However, the Company does not warrant all such payments will be exempt
from, or paid in compliance with, Section 409A of the Code. The Recipient bears
the entire risk of any adverse federal, state or local tax consequences and
penalty taxes which may result from payments made on a basis contrary to the
provisions of Section 409A or comparable provisions of any applicable state or
local income tax laws.
 
 
7.           Miscellaneous.  Capitalized terms used but not defined herein shall
have the meaning assigned under the 2003 EIP and the Deferred Compensation
Plan.  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 the Recipient.  This Agreement may be executed in
one or more counterparts all of which together shall constitute one instrument.
 
[Remainder of page intentionally left blank]

 
 
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In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
 
TEMPUR-PEDIC INTERNATIONAL INC.
By:     Name:          
RECIPIENT
     
Name:
    Recipient’s Address:                      

 
 
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Exhibit B
 
TEMPUR-PEDIC INTERNATIONAL INC.
 
NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN
 
ELECTION FORM
 
Director Information
          Director Name:            Last  First   Initial             Director
Address:            Street      
 
                     City State   Zip             Director SSN:         

Background and Purpose

The Board of Directors (the “Board”) upon recommendation of the Compensation
Committee of Tempur-Pedic International Inc. (the “Company”), has approved
payment of part of the compensation for the service of non-employee directors of
the Board in the form of deferred restricted stock units (“Mandatory DSUs”).
Mandatory DSUs are subject to the terms of the Company’s Non-Employee Director
Deferred Compensation Plan (as the same may be amended from time to time, the
“Deferred Compensation Plan”) and the Company’s Amended and Restated 2003 Equity
Incentive Plan, as amended (the “2003 EIP”).  Mandatory DSUs vest in accordance
with the terms of an Award Agreement issued under the 2003 EIP and under and
subject to the terms of the Deferred Compensation Plan and are payable, if
vested, three (3) years after the date of grant unless the director elects a
later date of payment under the Deferred Compensation Plan.  The Board has also
approved the issuance of shares of the Company’s Common Stock, or the grant of
additional deferred stock units (“DSUs”) subject to the terms of the Deferred
Compensation Plan and the 2009 EIP (the “Elective DSUs”), at the election of the
non-employee director and in lieu of some or all of the cash compensation
otherwise approved by the Board as compensation for the non-employee director’s
service.  The purpose of this Election Form is to solicit the foregoing
elections, as follows:

·  
A “Deferral Election,” enabling a non-employee director to elect to defer
payment of any Mandatory DSUs and any Elective DSUs to the later of:

(i)           the third (3rd) anniversary of the Grant Date; and

(ii)           the earlier of his or her Separation of Service (as defined in
the Deferred Compensation Plan) and a fixed date after the third (3rd)
anniversary of the Grant Date, which must be May 1 of the year designed by the
Director; and/or

·  
An “Equity Election,” enabling a non-employee director to elect to receive some
or all of his or her compensation otherwise payable in cash in the form of
either shares of Common Stock, or Elective DSUs.

Capitalized terms used but not defined herein shall have the meaning assigned
such terms under the 2003 EIP and Deferred Compensation Plan.

Deferral Election

 By checking the box, I hereby elect to defer any payment in respect of
Mandatory and Elective DSUs granted to me during the [2010-2011] Board Year,
until the later of

(i)           the third (3rd) anniversary of the Grant Date specified in the
Award Agreement pertaining to those DSUs; or

(ii)           the earlier of my Separation of Service and the following fixed
date: May 1, 20__.1

I understand that if I do not make the deferral election set forth above,
payment of Mandatory and Elective DSUs will be made on the third (3rd)
anniversary of the applicable Grant Date.  I further understand these DSUs will
vest as determined under the applicable Award Agreement and my receipt of vested
DSUs is subject to my continued service on the Board during the Board Year and
the other terms and conditions of the Deferred Compensation Plan.  I understand
if my service on the Board ends during the [2010-2011] Board Year, I will
forfeit any unvested DSUs, except as provided in Section 4 of the applicable
Award Agreement.
 
1 Insert a May 1 that falls after the third (3rd) anniversary of the Grant Date.

 
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Equity Election

I hereby elect to take my annual cash fees (including both Board and committee
fees, as applicable) that would otherwise be payable to me for services rendered
during the [2010-2011] Board Year:

____% in cash payable as determined by the Board in the action approving such
compensation; and

____% in shares of common stock of the Company, in a number equal to the
percentage of the cash otherwise payable that I have indicated  divided by the
closing price of the Company’s common stock on the NYSE on the date or dates as
such cash would otherwise be payable, rounded down to the nearest whole share,
plus a cash payment in the amount of any fractional share of Common Stock then
otherwise distributable, issuable as determined by the Board in the action
approving such compensation; and

 
____% in Elective DSUs, in a number equal to the percentage of the cash
otherwise payable that I have indicated divided by the closing price of the
Company’s common stock on the NYSE on the Grant Date under the applicable Award
Agreement (which will be a date on or abut the beginning of the applicable Board
Year).

I understand receipt of either cash fees or Common Stock is subject to my
continued service on the Board during the Board Year, and that any Elective DSUs
will vest, if ever, as determined under the applicable Award Agreement.  I
understand my receipt of vested DSUs is subject to my continued service on the
Board during the Board Year and the other terms and conditions of the Deferred
Compensation Plan.  I understand if my service on the Board ends during the
[2010-2011] Board Year, I will forfeit any unearned or unvested cash, Common
Stock, or DSUs, except as provided in Section 4 of the applicable DSU Award
Agreement.

Acknowledgement and Authorization

I understand that any elections on this Form will apply only to compensation
payable for services as a non-employee director to be rendered in the portion of
2010 following the effective date of the Deferred Compensation Plan (or my
submission of this election, if later) and subject to the adoption of the
Deferred Compensation Plan by the Board.  I further understand that all
elections on this Form are irrevocable.  I hereby certify that the above
participant information is true, accurate and complete.2

I understand that any elections on this Form will apply only to compensation
payable for services as a non-employee director to be rendered in the portion of
[insert specific Board Year] following my submission of this election.  I
further understand that all elections on this Form are irrevocable.  I hereby
certify that the above participant information is true, accurate and complete.3

I understand that any elections on this Form will apply only to compensation
payable for services as a non-employee director to be rendered in the [insert
specific Board Year] Board Year.  I further understand that all elections on
this Form will become irrevocable on the December 31 preceding that Board
Year.  I hereby certify that the above participant information is true, accurate
and complete.4
 

Director   Date               Accepted         Plan Administrator  
Date
   

 
2 NTD: Paragraph to include for the initial election.
3 NTD: Paragraph to include for new directors.
4 NTD: Paragraph to include for subsequent elections.
 
 
 
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Appendix A
 
Competitive Enterprises of the Company and its Affiliates
 
Boyd
Carpenter
Classic Sleep Products (“Dormia”)
Comforpedic
Duxiana
Englander
Foamex
IBC
KayMed
King Koil (“Comfort Solutions”)
Kingsdown
Lady Americana
Land and Sky
Liggett & Platt
Natura
Natures Rest
Park Place
Restonic
Sealy
Select Comfort
Serta
Spring Air
Sterling
Stobel
Therapedic
Bedding Holdco Incorporated and Simmons Company (“Simmons”)

 
 
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