exhibit104.htm


    TEMPUR-PEDIC
INTERNATIONAL INC.

     

    AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN

     

    Stock
Option Agreement

     

    [Insert
Employee Name]

     

    This
Stock Option Agreement dated as of ________ __, 20__this “Agreement”), 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 Amended and
Restated 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 _____ shares (the “Option Shares”) of
the Company’s common stock, par value $0.01 per share (the “Stock”), at a price
of $_____ per share.  The ”Grant Date” of this
Option is
_______ __, 20__

     

    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 next sentence, this Option shall expire
at 11:59 p.m. (Lexington, KY local time) on the date immediately preceding the
tenth anniversary of the Grant Date.  However, this Option is subject
to earlier termination as provided in Section 5 below.

     

    4. Exercise of
Option.  Until the expiration of this Option pursuant to
Section 3 or Section 5 of this Agreement, the Optionee may exercise it as to the
number of Option 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, subject to Section 5 of this Agreement, during any
period that this Option remains outstanding after the Optionee’s employment with
the Company and its Affiliates ends, the Optionee may exercise it only to the
extent it was exercisable immediately prior to the end of the Optionee’s
employment.

     

    
      	
              Number
      of Shares

              in Each Installment

            	
              Percentage
      of

              Option Shares

            	
              Initial
      Exercise Date

              for Shares in
Installment

            
	
              ________

              ________

              ________

            	
                    
                ________

                ________

                ________

              

            	
              _________
      __, ___


              _________
      __, ___

              _________
      __, ___

               

            


    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
7.1(e) of the Plan sets forth the procedure for exercising this Option by paying
cash or a check made payable to the order of the Company in an amount equal to
the aggregate exercise price of the Stock to be purchased, or by delivering
other shares of Stock of equivalent Market Value, provided the Optionee has
owned such shares of Stock for at least six (6) months.  The Optionee
may also exercise this Option pursuant to a formal cashless exercise program as
referred to in Section 7.1(e) of the Plan, subject to the terms and conditions
referred to in Section 7.1(e) of the Plan.

     

    5. Termination or Acceleration in
Certain Cases.  The Option shall be subject to early
termination prior to the tenth anniversary of the Grant Date and accelerated
vesting in certain circumstances, as described below. Notwithstanding anything
contained in this Section 5 to the contrary, however, in no event shall the
Option become or remain exercisable to any extent after the expiration date set
forth in Section 3.

     

     

    (a)           By the Optionee’s Voluntary
Resignation Without Good Reason.  If the Optionee’s employment
with the Company or its Affiliates is terminated by the Optionee’s voluntary
resignation without Good Reason, including by any Retirement that is not an
Approved Retirement or the Optionee’s other voluntary departure, (i) the Option
shall remain exercisable for that number of Option Shares for which this Option
shall have become exercisable pursuant to Section 4 above (i.e., the “vested”
Option Shares) as of the date of such termination of employment through the last
day of the three (3) month period commencing on the later of (y) the expiration
of any applicable Blackout Period (as defined below) in which such termination
of employment occurs and (z) the date of such termination of employment; and
(ii) the Option Shares that have not yet become vested Option Shares pursuant to
Section 4 above as of the date of such termination of employment shall
irrevocably expire, and the Optionee shall have no right to purchase any such
unvested Option Shares.

     

     

    (b)           Termination by the Company
other than For Cause or By the Optionee for Good Reason.  If
the Optionee’s employment with the Company or its Affiliates is terminated by
the Company or an Affiliate, other than For Cause, or by the Optionee for Good
Reason or by reason of Optionee’s employer ceasing to be an Affiliate (in the
absence of a Change of Control), the Option shall remain outstanding and be or
become exercisable to the extent otherwise provided in Section 4 for a three (3)
year period commencing on the date of such termination of employment; provided, that in the
event the Optionee’s employment is terminated prior to the end of the twelve
(12) month period immediately following the Grant Date, the number of Option
Shares otherwise subject to the Option shall be pro-rated downward based on the
actual number of calendar months that elapsed during such twelve (12) month
period prior to such termination of employment.  For example, if the
Optionee is granted an Option to purchase 600 Option Shares on March 1, 2010 and
Optionee’s employment is terminated by the Company or any of its Affiliates
other than For Cause on September 1, 2010, the Option Shares subject to the
Option will be adjusted downward by 50% to total 300 Option Shares (and the
number of Option Shares that become vested Option Shares in each of the three
(3) years specified in Section 4 shall be correspondingly reduced by fifty
percent (50%)).  No pro-ration shall be made to the Option Shares for
a termination of employment described in this Section 5(b) that occurs after the
twelve (12) month anniversary of the Grant Date, and the Option shall remain
outstanding and be or become exercisable to the extent provided in Section 4 for
the three (3) year period commencing on the date of such termination of
employment.  Notwithstanding the foregoing, no Stock shall be issued
and all of Optionee’s rights to the Option and the Option Shares hereunder shall
be forfeited, expire and terminate unless (i) the Company shall have received a
release of all claims from the Optionee in a form reasonably acceptable to the
Company (and said release shall have become irrevocable in accordance with its
terms) prior to the date on which all of the Option Shares become vested Option
Shares (or if earlier the deadline established in the form of release delivered
by the Company to Optionee for execution) and (ii) the Optionee shall have
complied with the covenants set forth in Section 10 of this
Agreement.

     

     

    (c)           Termination by the Company
For Cause.  If the Company or any of its Affiliates terminates
the Optionee’s employment For Cause, the Option and all of the Option Shares
(whether or not then vested) shall be forfeited and shall expire and terminate
immediately as of the date of such termination of employment.

     

     

    (d)           Death or Long-Term
Disability.  If the Optionee dies or the Company or any of its
Affiliates terminates the Optionee’s employment due to the Optionee’s long-term
disability (within the meaning of Section 409A of the Code), all of the Option
Shares that have not become vested Option Shares pursuant to Section 4 as of the
date of death or such termination of employment shall immediately become vested
Option Shares, and the Option shall remain outstanding and exercisable until the
one (1) year anniversary of the date of Optionee’s death or such termination of
employment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (e)           Approved
Retirement.  In the event of the Optionee’s Retirement, the
Committee may consent to the continued vesting of the Option in accordance with
the annual vesting schedule specified in Section 4 and the extended
exercisability of the vested Option Shares until the earlier of (i) the three
(3) year anniversary of the date on which the Option becomes fully vested, and
(ii) the three (3) year anniversary of the date of such Retirement (an “Approved
Retirement”); provided, that in the
event the date of the Optionee’s Approved Retirement occurs prior to the end of
the twelve (12) month period immediately following the Grant Date, the number of
Option Shares otherwise subject to the Option shall be pro-rated downward based
on the actual number of calendar months that elapsed during such twelve (12)
month period prior to such Approved Retirement (and, for the avoidance of doubt,
no pro-ration shall be made in the event of an Approved Retirement to the Option
Shares awarded more than twelve (12) months prior to the date of the Approved
Retirement).  Notwithstanding the foregoing, no Stock shall be issued
and all of Optionee’s rights to the Option and the Option Shares hereunder shall
be forfeited, expire and terminate unless (i) the Company shall have received a
release of all claims from the Optionee in a form reasonably acceptable to the
Company (and said release shall have become irrevocable in accordance with its
terms) prior to the date on which all of the Option Shares become vested Option
Shares (or if earlier the deadline established in the form of release delivered
by the Company to Optionee for execution) and (ii) the Optionee shall have
complied with the covenants set forth in Section 10 of this
Agreement.  If the Committee shall for any reason decline to consent
to continued vesting on the Recipient’s Retirement, then the provisions of
subsection (a) above shall instead apply.

     

     

    (f)           Change of
Control.  In lieu of the Change of Control provisions of
Section 9 (a) - (c) of the Plan and notwithstanding anything herein to the
contrary, if a Change of Control occurs this Agreement shall remain in full
force and effect in accordance with its terms subject to the
following.  In the event of such Change of Control:

     

     

    (i)    if the Optionee’s
employment is terminated by the Company or any of its Affiliates other than For
Cause or if the Optionee resigns for Good Reason within twelve (12) months after
the occurrence of a Change of Control, all of the Optionee’s Option Shares which
have not become vested Option Shares pursuant to Section 4 as of the date of
such termination of employment shall immediately become vested Option Shares and
the Option Shares shall remain outstanding and exercisable until the date that
is the one (1) year anniversary of the date of such termination of employment;
and

     

     

    (ii)           if
the Option or the Option Shares are not assumed, converted or replaced by a
successor organization following such Change of Control, all of the Optionee’s
Option Shares which have not become vested Option Shares pursuant to Section 4
as of the date of such Change of Control shall immediately become vested Option
Shares and the Option Shares shall remain outstanding and exercisable until the
date that is the one (1) year anniversary of the date of such Change of
Control.

     

     

    (g)           For
the purposes of this Agreement:

     

     

    (i)           “Blackout Period”
shall mean any period when employees are prohibited from making purchases and
sales of the Company’s securities.

     

     

    (ii)           “Change of Control”
shall have the meaning set forth in the Plan, provided, that no
event or transaction shall constitute a Change of Control for purposes of this
Agreement unless it also qualifies as a change of control for purposes of
Section 409A of the Code.

     

     

    (iii)           “Employee”, “employment,” “termination of
employment” and “cease to be
employed,” and other words or phrases of similar import, shall mean the
continued provision of substantial services to the Company or any of its
Affiliates (or the cessation or termination of such services) whether as an
employee, consultant or director.

     

     

    (iv)           “For Cause” shall mean
any of the following: (A) Optionee’s willful and continued failure to
substantially perform the reasonably assigned duties with the Company or any
Affiliate of the Company which are consistent with Optionee’s position and job
description, other than any such failure resulting from incapacity due to
physical or mental illness, after a written notice is delivered to Optionee by
the Chief Executive Officer or Global Vice President of Human Resources of the
Company, which specifically identifies the manner in which Optionee has not
substantially performed the assigned duties, (B) Optionee’s willful engagement
in illegal conduct which is materially and demonstrably injurious to the Company
or any Affiliate of the Company, (C) Optionee’s conviction by a court of
competent jurisdiction of, or pleading guilty or nolo contendere to, any felony,
or (D) Optionee’s commission of an act of fraud, embezzlement, or
misappropriation against the Company or any Affiliate of the Company, including,
but not limited to, the offer, payment, solicitation or acceptance of any
unlawful bribe or kickback with respect to the business of the Company or any
Affiliate of the Company;1

     

       1 Award agreement for
each CEO and EVP will, if applicable, define such term as it is defined in his
or her employment agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (v)           “Good Reason” shall
mean the relocation of Optionee’s principal workplace over sixty (60) miles from
the existing workplaces of the Company or any Affiliate of the Company without
the consent of Optionee (which consent shall not be unreasonably withheld,
delayed or conditioned);2 and

     

     

    (vi)   “Retirement” shall
have the meaning assigned to such term in the applicable retirement policy of
the Company or its Affiliates as in effect at such time.

     

     

    6. Transfer of
Option.  Except as provided in Section 6.4 of the Plan, neither
this Option nor any Option Shares nor any rights hereunder to the underlying
Stock may
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.

     

    7. Incorporation of Plan
Terms.  Except as otherwise provided herein in Section 5 above,
this Option is granted
subject to all of the applicable terms and provisions of the Plan, including but
not limited to Section 8 of the Plan, “Adjustment Provisions”, and the
limitations on the Company's obligation to deliver Option 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.

     

    (a)           The
Company makes no representation or warranty as to the tax treatment of this
Option, including upon the exercise of this Option or upon the Optionee’s sale
or other disposition of the Option Shares.  The Optionee should rely
on his/her own tax advisors for such advice.

     

    (b)           All
amounts earned and paid pursuant to this Agreement 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.  The Optionee 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.

     

    10. Certain Remedies.

     

    (a) If at any
time prior to the later of (y) the two (2) year period after termination of the
Optionee’s employment with the Company and its Affiliates, and (z) the period
that includes the date (after a termination of Optionee’s employment with the
Company and its Affiliates) on which all of the Option Shares granted hereunder
and capable of becoming vested Option Shares so become vested Option Shares (the
last day of such later period being the “Covenant Termination
Date”), 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 (as defined in Section 10(c)) of the Company or its
Affiliates or the Optionee otherwise engages in competition with the Company or
its Affiliates;

     

       2 Award agreement
for each CEO and EVP will, if applicable, define such term as it is defined in
his or her employment agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (iii) the
Optionee acts against the interests of the Company and its Affiliates, including
recruiting or employing, or encouraging or assisting the Optionee’s 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 his/her 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 the Optionee
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;

     

    (vi) the
Optionee takes any action or makes any statement, written or oral, that
disparages the business, products, services or management of Company or its
Affiliates, or any of their respective directors, officers, agents, or
employees, or the Optionee takes any action that is intended to, or that does in
fact, damage the business or reputation of the Company or its Affiliates, or the
personal or business reputations of any of their respective directors, officers,
agents, or employees, or that interferes with, impairs or disrupts the normal
operations of the Company or its Affiliates; or

     

    (vii) the
Optionee breaches any confidentiality obligations the Optionee 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 for his/her own benefit or gain, or the Optionee discloses or
otherwise 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 in Section 10(b) below) may be repurchased by
the Company at a purchase price of $[insert price equal to exercise price] 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 (1) year prior to the Optionee’s termination of employment
with the Company or any Affiliate and ending on the Covenant Termination
Date.

     

    (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
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  fourteen (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 date of determination.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    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) 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. No Right to
Employment.  This Option does not give the Optionee any right
to continue to be employed by the Company or any of its Affiliates, or limit, in
any way, the right of the Company or any of its Affiliates to terminate the
Optionee’s employment, at any time, for any reason not specifically prohibited
by law.

     

    


     

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    In
Witness Whereof, the parties have executed this Stock Option Agreement as
of the date first above
written.

     

    TEMPUR-PEDIC
INTERNATIONAL INC.

     

    By:       

    Title:                                                        Signature of Optionee

     

                                                               


    [Name of
Optionee]

     

    Optionee’s
Address: