Exhibit 10.2

 

TEMPUR-PEDIC INTERNATIONAL INC.

2003 EQUITY INCENTIVE PLAN

 

STOCK OPTION AGREEMENT

(TOM BRYANT)

 

THIS AGREEMENT dated as of June 26, 2006, 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 “Optionee”).

 

1.    Grant of Option. Pursuant and subject to the Company’s 2003 Equity
Incentive Plan (as the same may be amended from time to time, the “Plan”), the
Company grants to the Optionee, an option (the “Option”) to purchase from the
Company all or any part of a total of seven hundred thousand (700,000) shares
(the “Optioned Shares”) of the Company’s common stock, par value $0.01 per share
(the “Stock”), at a price of $13.92 per share. The Grant Date of this Option
shall be June 26, 2006.

 

2.    Character of Option. This Option is not 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 June 26, 2016. However, if the Optionee’s employment ends
before that date (including because the Optionee’s employer ceases to be an
Affiliate), this Option shall expire on the earliest date specified in whichever
of the following applies:

 

(a)    If the Optionee’s employment terminates pursuant to Section 3.1(a)
(“Termination by Company Without Cause”) or 3.1(b) (“Termination by Employee for
Good Reason”) of the Employment and Noncompetition Agreement between the
Optionee and the Company dated as of June 26, 2006 (the “Employment Agreement”),
then ninety (90) days after the date of such termination of employment;

 

(b)    If the Optionee’s employment is terminated pursuant to Section 3.1(c)
(“Termination by the Company for Cause”) of the Employment Agreement, or if
Optionee terminates his employment (other than pursuant to Section 3.1(b) of the
Employment Agreement) or if the Optionee or the Company elects not to renew the
term of the Employment Agreement, as provided in Section 1.1 of the Employment
Agreement, then on the date of the termination of employment; or

 

(c)    If the Optionee’s employment terminates pursuant to Section 3.1(d)
(“Termination Upon Death or Disability”) of the Employment Agreement, then on
the first anniversary of the date employment ends.

 

This Option shall expire as described above based on the Optionee’s termination
of employment notwithstanding that the Optionee continues in association with
the Company or an Affiliate in another capacity. The date of the Optionee’s
termination or cessation of employment with the Company and its Affiliates shall
be referred to herein as the “Termination Date.”

 

4.    Vesting and Exercise of Option.

 

(a)    The Optionee shall have the right to exercise this Option for all or a
portion of the Optioned Shares which have become Vested Optioned Shares as of
the date of exercise in accordance with this Section 4. Initially, none of the
Optioned Shares shall be considered “Vested Optioned Shares” and all of the
Optioned Shares shall be considered “Unvested Optioned Shares”. On the first
anniversary date hereof prior to a Termination Date, twenty five percent
(25%) of the Optioned Shares shall become “Vested Optioned Shares” as

 

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set forth below, and on each quarterly anniversary of the Grant Date thereafter
prior to a Termination Date, an additional six and a quarter percent (6.25%) of
the Optioned Shares shall become “Vested Optioned Shares”, such that all of the
Optioned Shares shall be Vested Optioned Shares as of and after June 26, 2010 if
a Termination Date does not occur prior to such date. The table set forth below
identifies the number of Optioned Shares and the applicable vesting dates
pursuant to which the Optionee may exercise this Option.

 

Date

--------------------------------------------------------------------------------

   Percentage

--------------------------------------------------------------------------------

    Vested Optioned Shares

--------------------------------------------------------------------------------

June 26, 2007

   25 %   175,000

September 26, 2007

   6.25 %   218,750

December 26, 2007

   6.25 %   262,500

March 26, 2008

   6.25 %   306,250

June 26, 2008

   6.25 %   350,000

September 26, 2008

   6.25 %   393,750

December 26, 2008

   6.25 %   437,750

March 26, 2009

   6.25 %   481,250

June 26, 2009

   6.25 %   525,000

September 26, 2009

   6.25 %   568,750

December 26, 2010

   6.25 %   612,500

March 26, 2010

   6.25 %   656,250

June 26, 2010

   6.25 %   700,000

 

(b)    If this Option terminates pursuant to Section 3(a) of this Agreement,
then that number of Unvested Optioned Shares that would otherwise vest and
become Vested Optioned Shares during the one year period after the Termination
Date shall immediately vest and become Vested Optioned Shares as of the
Termination Date, but no additional Unvested Optioned Shares will become Vested
Optioned Shares after such date.

 

(c)    If this Option terminates pursuant to Section 3(c) of this Agreement,
then fifty percent (50%) of any Optioned Shares that were Unvested Optioned
Shares on such date shall immediately vest and become Vested Optioned Shares as
of the Termination Date, but no additional Unvested Optioned Shares shall become
Vested Optioned Shares after such date.

 

(d)    During any period that this Option remains outstanding after the
Termination Date, the Optionee may only exercise such Option to the extent
provided in this Section 4 of this Agreement. The procedure for exercising this
Option is described in Section 7.1(e) of the Plan. The exercise price due on
exercise may be paid by delivering other shares of Stock of equivalent Market
Value provided the Optionee has owned such shares of Stock for at least six
months.

 

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5.    Transfer of Option. Except as provided in Section 6.4 of the Plan, this
Option may not be transferred except by will or the laws of descent and
distribution, and, during the Optionee’s lifetime, only the Optionee may
exercise this Option.

 

6.    Change of Control Acceleration. Section 9 of the Plan (“Change of
Control”) will not apply to this Option. However, as provided in Section 7.1(d)
of the Plan, the Committee retains the right to accelerate this Option in whole
or in part at any time.

 

7.    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 of the Plan (“Settlement of Awards”). Capitalized terms
used but not defined herein shall have the meaning assigned under the Plan.

 

8.    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 the Optionee.
This Agreement may be executed in one or more counterparts all of which together
shall constitute one instrument.

 

9.    Tax Consequences. The Company makes no representation or warranty as to
the tax treatment of this Option or the exercise of this Option or upon the
Optionee’s sale or other disposition of the Optioned Shares. The Optionee should
rely on his own tax advisors for such advice.

 

10.    Certain Remedies.

 

(a)    If at any time within two years after termination of the Optionee’s
employment with the Company and its Affiliates any of the following occur:

 

(i)    the Optionee unreasonably refuses to comply with lawful requests for
cooperation made by the Company, its board of directors, or its Affiliates;

 

(ii)    the Optionee accepts employment or a consulting or advisory engagement
with any Competitive Enterprise of the Company or its Affiliates or the Optionee
otherwise engages in competition with the Company or its Affiliates;

 

(iii)    the Optionee acts against the interests of the Company and its
Affiliates, including recruiting or employing, or encouraging or assisting his
new employer to recruit or employ an employee of the Company or any Affiliate
without the Company’s written consent;

 

(iv)    the Optionee fails to protect and safeguard while in the Optionee’s
possession or control, or surrender to the Company upon termination of the
Optionee’s employment with the Company or any Affiliate or such earlier time or
times as the Company or its board of directors 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 Optionee;

 

(v)    the Optionee solicits or encourages any person or enterprise with which
he 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 Optionee breaches any confidentiality obligations he has to the
Company or an Affiliate, the Optionee fails to comply with the policies and
procedures of the Company or its Affiliates for protecting confidential
information, the Optionee uses confidential information of the Company or its
Affiliates

 

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for his own benefit or gain, or the Optionee discloses or other misuses
confidential information or materials of the Company or its Affiliates (except
as required by applicable law); then

 

(1)    this Option shall terminate and be cancelled effective as of the date on
which the Optionee entered into such activity, unless terminated or cancelled
sooner by operation of another term or condition of this Agreement or the Plan;

 

(2)    any stock acquired and held by the Optionee pursuant to the exercise of
this Option during the Applicable Period (as defined below) may be repurchased
by the Company at a purchase price of $13.92 per share; and

 

(3)    any gain realized by the Optionee from the sale of stock acquired through
the exercise of this Option during the Applicable Period shall be paid by the
Optionee to the Company;

 

(b)    The term “Applicable Period” shall mean the period commencing on the
later of the date of this Agreement or the date which is one year prior to the
Optionee’s termination of employment with the Company or any Affiliate and
ending two years from the Optionee’s termination of employment 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 from time to time
upon notice to the Optionee. At any time the Optionee may request in writing
that the Company make a determination whether a particular enterprise is a
Competitive Enterprise. Such determination will be made within 14 days after the
receipt of sufficient information from the Optionee about the enterprise, and
the determination will be valid for a period of ninety (90) days from the
Termination Date.

 

11.    Right of Set Off. By executing this Agreement, the Optionee consents to a
deduction from any amounts the Company or any Affiliate owes the Optionee from
time to time, to the extent of the amounts the Optionee 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 Optionee 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 Optionee owes the
Company, calculated as set forth above, the Optionee agrees to pay immediately
the unpaid balance to the Company upon the Company’s demand.

 

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 exercise of this Option referring to the
repurchase right set forth in Section 10(a). 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.

 

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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/ JEFFREY S. BARBER      

/s/ H. THOMAS BRYANT

Title:

  Director, Chairman of Compensation Committee      

Signature of Optionee

           

 

H. Thomas Bryant

           

Name of Optionee

           

 

Optionee’s Address:

 

                           

 

 

 

 

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