Exhibit 10.1

 

EMPLOYMENT AND NON-COMPETITION AGREEMENT

(Tom Bryant)

 

THIS EMPLOYMENT AND NON-COMPETITION AGREEMENT (the “Agreement”) is executed as
of this 29th day of June, 2006, and effective as of April 28, 2006 (the
“Effective Date”), by and between Tempur-Pedic International, Inc., a Delaware
corporation (the “Company”), and Tom Bryant, an individual (“Employee”).

 

RECITALS

 

The Employee is currently a party to an Amended and Restated Employment
Agreement, dated as of October 4, 2002 with a subsidiary of the Company (the
“Former Agreement”). Prior to the Effective Date the Employee had held the
position of President of the Company, and on the Effective Date the Employee was
also named the Chief Executive Officer of the Company. The Company and the
Employee are entering into this Agreement in order to evidence the terms under
which the Employee will be employed by the Company from and after the Effective
Date. This Agreement supersedes and replaces the terms of the Former Agreement.

 

In consideration of the premises and the mutual agreements and covenants
contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the Company and Employee,

 

IT IS HEREBY AGREED AS FOLLOWS:

 

ARTICLE I

 

EMPLOYMENT

 

1.1 Term of Employment. As of the Effective Date, the Company agrees to employ
Employee as the President and Chief Executive Officer of the Company, and
Employee accepts employment by the Company, for the period commencing on the
Effective Date and ending on April 30, 2008 (the “Initial Term”), subject to
earlier termination as set forth in Article III below. Unless earlier terminated
in accordance with Article III, following the expiration of the Initial Term,
this Agreement shall be automatically renewed for successive one-year periods
(collectively, the “Renewal Terms”; individually, a “Renewal Term”) unless, at
least ninety (90) days prior to the expiration of the Initial Term or the then
current Renewal Term, either party provides the other with a written notice of
intention not to renew, in which case the Employee’s employment with the
Company, and the Company’s obligations hereunder, shall terminate as of the end
of the Initial Term or said Renewal Term, as applicable. Except as otherwise
expressly provided herein, the terms and conditions of this Agreement during any
Renewal Term shall be the same as the terms in effect immediately prior to such
renewal, subject to any such changes or modifications as mutually may be agreed
between the parties as evidenced in a written instrument signed by both the
Company and Employee.

 

1.2 Position and Duties. Employee shall be employed in the position of President
and Chief Executive Officer. In such capacity, Employee shall be subject to the
authority of, and shall report to, the Company’s Board of Directors Employee
shall devote Employee’s entire business time, loyalty, attention and energies
exclusively to the business interests of the Company while employed by the
Company, and shall perform his duties and responsibilities diligently and to the
best of his ability.

 

ARTICLE II

 

COMPENSATION AND OTHER BENEFITS

 

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2.1 Base Salary. The Company shall pay Employee an annual salary of $600,000
(“Base Salary”), payable in accordance with the normal payroll practices of the
Company. The Employee’s Base Salary will be reviewed and be subject to
adjustment by the Board of Directors or its Compensation Committee on or about
January 1 of each year beginning with January 1, 2007.

 

2.2 Performance Bonus. Employee will be eligible to earn an annual
performance-based bonus based on a formula approved by the Company’s Board of
Directors or its Compensation Committee and incorporated herein by this
reference for 2006 and each subsequent full or pro-rata portion of the fiscal
year during which Employee is employed by the Company (a “Bonus Year”), the
terms and conditions of which as well as Employee’s entitlement thereto shall be
determined annually in the sole discretion of the Company’s Board of Directors
or its Compensation Committee (the “Performance Bonus”). The amount of the
Performance Bonus will vary based on the achievement of performance criteria in
the formula established by the Company’s Board of Directors or Compensation
Committee, but the formula will be set to target a Performance Bonus equal to
100% of Base Salary as of January 1st of the Bonus Year ($600,000 for 2006) if
the performance criteria in the formula are met, and the actual bonus awarded
based on the performance criteria may be more or less than the target amount of
100%.

 

2.3 Benefit Plans. Employee will be eligible to participate in the Company’s
retirement plans that are qualified under Section 401(a) of the Internal Revenue
Code of 1986, as amended, and in the Company’s employee welfare benefit plans
that are generally applicable to all executive employees of the Company (the
“Plans”), in accordance with the terms and conditions thereof.

 

2.4 Expenses. The Company shall reimburse Employee for all authorized and
approved expenses incurred in the course of the performance of Employee’s duties
and responsibilities pursuant to this Agreement and consistent with the
Company’s policies with respect to travel, entertainment and miscellaneous
expenses, and the requirements with respect to the reporting of such expenses.

 

2.5 Automobile Allowance. The Company shall pay to Employee an automobile
allowance of $600.00 per month.

 

2.6 Vacation. Employee shall be entitled to vacation in any calendar year in
accordance with the Company’s general vacation policies for senior executive
employees.

 

2.7 Grant of Stock Options. Not later than June 30, 2006 the Company will grant
Employee options to purchase 700,000 shares of the Company’s common stock on
terms to be determined by the Compensation Committee, which will include the
terms outlined on Annex A.

 

ARTICLE III

 

TERMINATION

 

3.1 Right to Terminate; Automatic Termination.

 

(a) Termination by Company Without Cause. Subject to Section 3.2, the Company
may terminate Employee’s employment and all of the Company’s obligations under
this Agreement at any time and for any reason.

 

(b) Termination by Employee for Good Reason. Subject to Section 3.2, Employee
may terminate his employment obligation hereunder (but not his obligation under
Article IV hereof) for “Good Reason” (as hereinafter defined) if Employee gives
written notice thereof to the Company within thirty (30) days of the event he
deems to constitute Good Reason (which notice shall specify the grounds upon
which such notice is given) and the Company fails, within 30 days of receipt of
such notice, to cure or rectify the grounds for such Good Reason termination set
forth in such notice. “Good Reason” shall mean any of the following:
(i) relocation of Employee’s principal workplace over 60 miles from the
Company’s existing workplaces without the consent of Employee (which consent
shall not be unreasonably withheld, delayed or conditioned), (ii) the Employee
is demoted from the position of Chief Executive Officer of the Company or
(ii) the Company’s

 

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material breach of this Agreement which is not cured within 30 days after
receipt by the Company from Employee of written notice of such breach.

 

(c) Termination by Company For Cause. Subject to Section 3.2, the Company may
terminate Employee’s employment and all of the Company’s obligations under this
Agreement at any time “For Cause” (as defined below) by giving notice to
Employee stating the basis for such termination, effective immediately upon
giving such notice or at such other time thereafter as the Company may
designate. “For Cause” shall mean any of the following: (i) Employee’s willful
and continued failure to substantially perform the reasonably assigned duties
with the Company which are consistent with Employee’s position and job
description referred to in this Agreement, other than any such failure resulting
from incapacity due to physical or mental illness, after a written notice is
delivered to Employee by the Board of Directors of the Company which
specifically identifies the manner in which Employee has not substantially
performed the assigned duties, (ii) Employee’s willful engagement in illegal
conduct which is materially and demonstrably injurious to the Company,
(iii) Employee’s conviction by a court of competent jurisdiction of, or his
pleading guilty or nolo contendere to, any felony, or (iv) Employee’s commission
of an act of fraud, embezzlement, or misappropriation against the Company,
including, but not limited to, the offer, payment, solicitation or acceptance of
any unlawful bribe or kickback with respect to the Company’s business. For
purposes of this paragraph, no act, or failure to act, on Employee’s part shall
be considered “willful” unless done, or omitted to be done, in knowing bad faith
and without reasonable belief that the action or omission was in, or not opposed
to, the best interests of the Company. Any act, or failure to act, expressly
authorized by a resolution duly adopted by the Board of Directors or based upon
the written advice of counsel for the Company shall be conclusively presumed to
be done, or omitted to be done, in good faith and in the best interests of the
Company. Notwithstanding the foregoing, Employee shall not be deemed to have
been terminated For Cause unless and until there shall have been delivered to
Employee a copy of a resolution, duly adopted by the Board of Directors at a
meeting of the Board called and held for such purpose (after reasonable notice
to Employee and an opportunity for Employee, together with Employee’s counsel,
to be heard before the Board at a duly called meeting at which a quorum is
present), finding that in the good faith opinion of the Board of Directors
Employee committed the conduct set forth above in (i), (ii), (iii) or (iv) of
this Section 3.1 (c) and specifying the particulars thereof in detail.

 

(d) Termination Upon Death or Disability. Subject to Section 3.2, Employee’s
employment and the Company’s obligations under this Agreement shall terminate:
(i) automatically, effective immediately and without any notice being necessary,
upon Employee’s death; and (ii) in the event of the disability of Employee, by
the Company giving notice of termination to Employee. For purposes of this
Agreement, “disability” means the inability of Employee, due to a physical or
mental impairment, for 90 days (whether or not consecutive) during any period of
360 days, to perform, with reasonable accommodation, the essential functions of
the work contemplated by this Agreement. In the event of any dispute as to
whether Employee is disabled, the matter shall be determined by the Company’s
Board of Directors in consultation with a physician selected by the Company’s
health or disability insurer or another physician mutually satisfactory to the
Company and the Employee. The Employee shall cooperate with the efforts to make
such determination or be subject to immediate discharge. Any such determination
shall be conclusive and binding on the parties. Any determination of disability
under this Section 3.1 is not intended to alter any benefits any party may be
entitled to receive under any long-term disability insurance policy carried by
either the Company or Employee with respect to Employee, which benefits shall be
governed solely by the terms of any such insurance policy. Nothing in this
subsection shall be construed as limiting or altering any of Employee’s rights
under State workers compensation laws or State or federal Family and Medical
Leave laws.

 

3.2 Rights Upon Termination.

 

(a) Section 3.1(a) and 3.1(b) Termination. If Employee’s employment terminates
pursuant to Section 3.1(a) or 3.1(b) hereof, Employee shall have no further
rights against the Company hereunder, except for the right to receive, following
execution of a release and waiver in form satisfactory to the Company, (i) any
unpaid Base Salary, the value of any accrued but unused vacation, a pro-rata
portion (based on the number of days of the Bonus Year prior to the effective
date of termination) of any Performance Bonus that would be payable with respect
to the Bonus Year in which the termination occurs, calculated based on the 100%
target amount referred to in Section 2.2, and any stock options to which the
Employee is entitled under his stock option agreements, (ii) payment of Base
Salary for the duration of the Initial Term or the Renewal Term, as

 

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applicable, but in any event not less than a period of one year from the
effective date of termination (the “Severance Period”), payable in accordance
with the normal payroll practices of the Company, (iii) reimbursement of
expenses to which Employee is entitled under Section 2.4 hereof, and
(iv) continuation of the welfare plans of the Company as detailed in Section 2.3
hereof for the duration of the Severance Period.

 

(b) Section 3.1(c) and 3.1(d) Termination; Voluntary Termination by Employee not
for Good Reason. If Employee’s employment is terminated pursuant to Sections
3.1(c) or 3.1(d) hereof, or if Employee quits employment (other than for Good
Reason) notwithstanding the terms of this Agreement, Employee or Employee’s
estate shall have no further rights against the Company hereunder, except for
the right to receive, following execution of a release and waiver in form
satisfactory to the Company, (i) any unpaid Base Salary, (ii) reimbursement of
expenses to which Employee is entitled under Section 2.4 hereof, and (iii) in
the case of a termination pursuant to Section 3.1(d) hereof, the value of any
accrued but unused vacation, a pro-rata portion (based on the number of days of
the Bonus Year prior to the effective date of termination) of any Performance
Bonus that would be payable with respect to the Bonus Year in which the
termination occurs, calculated at the 100% target level referred to in
Section 2.2, and any stock options to which the Employee is entitled under his
stock option agreements.

 

(c) Non-Renewal. In the event that either the Company or the Employee elect not
to renew the term of this Agreement as provided in Section 1.1, then the
Employee shall have no further rights against the Company hereunder, except the
right to receive, following execution of a release and waiver in form
satisfactory to the Company, the items described in clauses (i)-(iii) of
paragraph (b) above.

 

ARTICLE IV

 

CONFIDENTIALITY; NON-COMPETITION; NONSOLICITATION

 

4.1 Covenants Regarding Confidential Information, Trade Secrets and Other
Matters. Employee covenants and agrees as follows:

 

(a) Definitions. For purposes of this Agreement, the following terms are defined
as follows:

 

(1) “Trade Secret” means all information possessed by or developed for the
Company or any of its subsidiaries, including, without limitation, a
compilation, program, device, method, system, technique or process, to which all
of the following apply: (i) the information derives independent economic value,
actual or potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain economic value
from its disclosure or use and (ii) the information is the subject of efforts to
maintain its secrecy that are reasonable under the circumstances.

 

(2) “Confidential Information” means information, to the extent it is not a
Trade Secret, which is possessed by or developed for the Company or any of its
subsidiaries and which relates to the Company’s or any of its subsidiaries’
existing or potential business or technology, which information is generally not
known to the public and which information the Company or any of its subsidiaries
seeks to protect from disclosure to its existing or potential competitors or
others, including, without limitation, for example: business plans, strategies,
existing or proposed bids, costs, technical developments, existing or proposed
research projects, financial or business projections, investments, marketing
plans, negotiation strategies, training information and materials, information
generated for client engagements and information stored or developed for use in
or with computers. Confidential Information also includes information received
by the Company or any of its subsidiaries from others which the Company or any
of its subsidiaries has an obligation to treat as confidential.

 

(b) Nondisclosure of Confidential Information. Except as required in the conduct
of the Company’s or any of its subsidiaries’ business or as expressly authorized
in writing on behalf of the Company or any of its subsidiaries, Employee shall
not use or disclose, directly or indirectly, any Confidential Information during
the period of his employment with the Company. In addition, following the
termination for any reason of Employee’s employment with the Company, Employee
shall not use or disclose, directly or indirectly, any

 

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Confidential Information. This prohibition does not apply to Confidential
Information after it has become generally known in the industry in which the
Company conducts its business. This prohibition also does not prohibit
Employee’s use of general skills and know-how acquired during and prior to
employment by the Company, as long as such use does not involve the use or
disclosure of Confidential Information or Trade Secrets.

 

(c) Trade Secrets. During Employee’s employment by the Company, Employee shall
do what is reasonably necessary to prevent unauthorized misappropriation or
disclosure and threatened misappropriation or disclosure of the Company’s or any
of its subsidiaries’ Trade Secrets and, after termination of employment,
Employee shall not use or disclose the Company’s or any of its subsidiaries’
Trade Secrets as long as they remain, without misappropriation, Trade Secrets.

 

(d) The provisions of paragraphs (b) and (c) above will not be deemed to
prohibit any disclosure that is required by law or court order, provided that
Employee has not intentionally taken actions to trigger such required disclosure
and the Company is given reasonable prior notice and an opportunity to contest
or minimize such disclosure.

 

4.2 Non-competition.

 

(a) During Employment. During Employee’s employment hereunder, Employee shall
not engage, directly or indirectly, as an employee, officer, director, partner,
manager, consultant, agent, owner (other than a minority shareholder or other
equity interest of not more than 1% of a company whose equity interests are
publicly traded on a nationally recognized stock exchange or over-the-counter)
or in any other capacity, in any competition with the Company or any of its
subsidiaries.

 

(b) Subsequent to Employment. For a two year period following the termination of
Employee’s employment for any reason or without reason, Employee shall not in
any capacity (whether in the capacity as an employee, officer, director,
partner, manager, consultant, agent or owner (other than a minority shareholder
or other equity interest of not more than 1% of a company whose equity interests
are publicly traded on a nationally recognized stock exchange or
over-the-counter), directly or indirectly advise, manage, render or perform
services to or for any person or entity which is engaged in a business
competitive to that of the Company or any of its subsidiaries within any
geographical location wherein the Company or any of its subsidiaries produces,
sells or markets its goods and services at the time of such termination or
within a one-year period prior to such termination.

 

4.3 Nonsolicitation. For a two year period following the termination of
Employee’s employment for any reason or without reason, Employee shall not
solicit or induce any person who was an employee of the Company or any of its
subsidiaries on the date of Employee’s termination or within three months prior
to leaving his or her employment with the Company or any of its subsidiaries.

 

4.4 Return of Documents. Immediately upon termination of employment, Employee
will return to the Company, and so certify in writing to the Company, all the
Company’s or any of its subsidiaries’ papers, documents and things, including
information stored for use in or with computers and software applicable to the
Company’s and its subsidiaries’ business (and all copies thereof), which are in
Employee’s possession or under Employee’s control, regardless whether such
papers, documents or things contain Confidential Information or Trade Secrets.

 

4.5 No Conflicts. To the extent that they exist, Employee will not disclose to
the Company any of Employee’s previous employer’s confidential information or
trade secrets. Further, Employee represents and warrants that Employee has not
previously assumed any obligations inconsistent with those of this Agreement and
that employment by the Company does not conflict with any prior obligations to
third parties.

 

4.6 Agreement on Fairness. Employee acknowledges that: (i) this Agreement has
been specifically bargained between the parties and reviewed by Employee,
(ii) Employee has had an opportunity to obtain legal counsel to review this
Agreement, and (iii) the covenants made by and duties imposed upon Employee
hereby are fair, reasonable and minimally necessary to protect the legitimate
business interests of the Company, and

 

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such covenants and duties will not place an undue burden upon Employee’s
livelihood in the event of termination of Employee’s employment by the Company
and the strict enforcement of the covenants contained herein.

 

4.7 Equitable Relief and Remedies. Employee acknowledges that any breach of this
Agreement will cause substantial and irreparable harm to the Company for which
money damages would be an inadequate remedy. Accordingly, notwithstanding the
provisions of Article V below, the Company shall in any such event be entitled
to obtain injunctive and other forms of equitable relief to prevent such breach
and the prevailing party shall be entitled to recover from the other, the
prevailing party’s costs (including, without limitation, reasonable attorneys’
fees) incurred in connection with enforcing this Agreement, in addition to any
other rights or remedies available at law, in equity, by statute or pursuant to
Article V below.

 

ARTICLE V

 

AGREEMENT TO SUBMIT ALL EXISTING OR FUTURE DISPUTES

TO BINDING ARBITRATION

 

The Company and Employee agree that any controversy or claim arising out of or
related to this Agreement or Employee’s employment with or termination by the
Company that is not resolved by the parties shall be settled by arbitration
administered by the American Arbitration Association under its National Rules
for the Resolution of Employment Disputes. Said arbitration shall be conducted
in Lexington, Kentucky. The parties further agree that the arbitrator may
resolve issues of contract interpretation as well as law and award damages, if
any, to the extent provided by the Agreement or applicable law. The parties
agree that the costs of the arbitrator’s services shall be borne by the Company.
The parties further agree that the arbitrator’s decision will be final and
binding and enforceable in any court of competent jurisdiction. In addition to
the A.A.A.’s Arbitration Rules and unless otherwise agreed to by the parties,
the following rules shall apply:

 

(a) Each party shall be entitled to discovery exclusively by the following
means: (i) requests for admission, (ii) requests for production of documents,
(iii) up to 15 written interrogatories (with any subpart to be counted as a
separate interrogatory), and (iv) depositions of no more than six individuals.

 

(b) Unless the arbitrator finds that delay is reasonably justified or as
otherwise agreed to by the parties, all discovery shall be completed, and the
arbitration hearing shall commence within five months after the appointment of
the arbitrator.

 

(c) Unless the arbitrator finds that delay is reasonably justified, the hearing
will be completed, and an award rendered within 30 days of commencement of the
hearing.

 

The arbitrator’s authority shall include the ability to render equitable types
of relief and, in such event, any aforesaid court may enter an order enjoining
and/or compelling such actions or relief ordered or as found by the arbitrator.
The arbitrator also shall make a determination regarding which party’s legal
position in any such controversy or claim is the more substantially correct (the
“Prevailing Party”) and the arbitrator shall require the other party to pay the
legal and other professional fees and costs incurred by the Prevailing Party in
connection with such arbitration proceeding and any necessary court action.

 

Notwithstanding the foregoing provisions of this Article V, the parties
expressly agree that a court of competent jurisdiction may enter a temporary
restraining order or an order enjoining a breach of Article IV of this Agreement
without submission of the underlying dispute to an arbitrator. Such remedy shall
be cumulative and nonexclusive, and shall be in addition to any other remedy to
which the parties may be entitled.

 

ARTICLE VI

 

GENERAL PROVISIONS

 

6.1 Notices. Any and all notices provided for in this Agreement shall be given
in writing and shall be

 

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deemed given to a party at the earlier of (i) when actually delivered to such
party, or (ii) when mailed to such party by registered or certified mail (return
receipt requested) or sent to such party by courier, confirmed by receipt, and
addressed to such party at the address designated below for such party as
follows (or to such other address for such party as such party may have
substituted by notice pursuant to this Section 6.1):

 

(a) If to the Company:

   Tempur-Pedic International, Inc.     

1713 Jaggie Fox Way

    

Lexington, KY 40511

    

Attention: Board of Directors

(b) If to Employee:

   Tom Bryant     

c/o Tempur-Pedic International, Inc.

    

1713 Jaggie Fox Way

    

Lexington, KY 40511

 

6.2 Entire Agreement. This Agreement contains the entire understanding and the
full and complete agreement of the parties and, effective as of the Closing
Date, supersedes and replaces any prior understandings and agreements among the
parties with respect to the subject matter hereof (including, without
limitation, the Former Agreement). The Employee hereby acknowledges and agrees
that (a) no amounts are owed to him under the Former Agreement, and
(b) effective as of the Effective Date, the Former Agreement shall terminate and
be of no further force or effect.

 

6.3 Amendment. This Agreement may be altered, amended or modified only in a
writing, signed by both of the parties hereto. Headings included in this
Agreement are for convenience only and are not intended to limit or expand the
rights of the parties hereto. References to Sections herein shall mean sections
of the text of this Agreement, unless otherwise indicated.

 

6.4 Assignability. This Agreement and the rights and duties set forth herein may
not be assigned by either of the parties without the express written consent of
the other party. This Agreement shall be binding on and inure to the benefit of
each party and such party’s respective heirs, legal representatives, successors
and assigns.

 

6.5 Severability. If any court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then such invalidity or
unenforceability shall have no effect on the other provisions hereof, which
shall remain valid, binding and enforceable and in full force and effect, and
such invalid or unenforceable provision shall be construed in a manner so as to
give the maximum valid and enforceable effect to the intent of the parties
expressed therein.

 

6.6 Waiver of Breach. The waiver by either party of the breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.

 

6.7 Governing Law; Construction. This Agreement shall be governed by the
internal laws of the State of Kentucky, without regard to any rules of
construction concerning the party responsible for the drafting hereof.

 

6.8. Tax Compliance. The Company may withhold from any amounts payable hereunder
any amounts required to be withheld under federal, state or local law and any
other deductions authorized by Employee. If any other payment otherwise due
hereunder would be, when otherwise due, subject to additional taxes and interest
under Section 409A of the Internal Revenue Code of 1986, as amended, then such
payment shall be deferred to the extent required to avoid such additional taxes
and interest.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year written above.

 

COMPANY:

 

TEMPUR-PEDIC INTERNATIONAL, INC.

 

EMPLOYEE: /s/    H. THOMAS BRYANT

WITNESSED BY:

 

Date:

 

 

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