exhibit101.htm


     

    


    TEMPUR-PEDIC
INTERNATIONAL INC.

    LONG-TERM INCENTIVE
PLAN

    


    Terms
and Conditions

    


    Adopted:  January
13, 2010

     

    I. Purpose
and Plan Overview

     

    The
purpose of this Long-Term Incentive Plan (the “LTI Plan”) of
Tempur-Pedic International Inc. (“Tempur-Pedic” or the
“Company”) is
to attract and retain the best possible executive talent, to motivate the
executive officers and employees of the Company and its Affiliates to attain
long-term objectives and strategic initiatives of the Company, and to further
align their interests with those of the stockholders of the
Company.  This LTI Plan is established under the Company’s Amended and
Restated 2003 Equity Incentive Plan, as amended from time to time (the “2003 EIP”), and
amounts paid under this LTI Plan are generally intended to qualify as
performance-based compensation under Section 162(m) of the Code.

     

    This LTI
Plan is an important variable component of the total compensation package for
the executive officers and certain employees of the Company and its Affiliates
who may be designated from time to time for participation in this LTI
Plan.  Awards under this LTI Plan may be made contingent upon the
achievement of certain financial objectives of the Company over a designated
period, as established by the Committee.

     

    The
primary concept of this LTI Plan is to establish Performance Metrics for each
Designated Period and provide for the payment of a target Award based on the
achievement of those Performance Metrics.  The actual Award paid may
be higher or lower than the target Award, based on actual performance against
the Performance Metrics.  The Designated Periods with respect to
successive Awards may be overlapping.

     

    II. Definitions

     

    Capitalized
terms used but not defined herein shall have the meaning assigned under the 2003
EIP.  As used in this
LTI Plan, the following terms shall have the following meanings:

     

    “Designated Period”
means, with respect to any Award, the period during which the achievement of the
Performance Metrics are measured.

     

    “Determination Date”
means, with respect to any Award, the earliest of (i) the 90th day after the
beginning of the Designated Period applicable to such Award, (ii) the date on
which 25% or more of the Designated Period applicable to such Award will have
been completed and (iii) the last date in the Designated Period applicable to
such Award on which achievement of the applicable Performance Metrics for such
Award remains substantially uncertain to be met.

     

    “Final Award” means a
bonus awarded and paid to a Participant for services to the Company during a
Designated Period that is based upon achievement of pre-established Performance
Metrics by the Company, a Subsidiary, a division or business unit of the Company
or the Participant.

     

    “Performance” means
the level of achievement by the Company, its Subsidiaries, divisions and
business units or the Participant of the Performance Metrics established by the
Committee pursuant to Section 5.2.

     

    “Performance Metrics”
means with respect to any Award, the performance metrics established by the
Committee with respect to such Award pursuant to Section 5.2.

     

    “Settlement Date”
means the date on which the Committee or the Board shall make the final
determination and certification of the Participant’s achievement of the
Performance Metrics for the applicable Designated Period and the amounts payable
under the Award.

     

    “Shares” means shares
of the Stock issued pursuant to a Target Award.

     

    “Subsidiary” means any
corporation or other entity of which 50% or more of the outstanding voting stock
or voting ownership interest is directly or indirectly owned or controlled by
the Company or by one or more Subsidiaries of the Company.

     

    “Target Award” means
the target award, expressed as a number of shares, established by the Committee
or the Board for each Participant under Section 5.1.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    III. Administration

     

    This LTI
Plan shall be administered by the Committee; 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 the Committee under this LTI Plan and
when so acting shall have the benefit of all of the provisions of this LTI Plan
pertaining to the Committee’s exercise of its authorities
hereunder.  Subject to the provisions of this LTI Plan, the Committee
shall also have complete authority to interpret this LTI Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective Award Agreements (which need not be identical),
and to make all other determinations necessary or advisable for the
administration of this LTI Plan. The Committee’s determinations made in good
faith on matters referred to in this LTI Plan shall be final, binding and
conclusive on all persons having or claiming any interest under this LTI Plan or
an Award made pursuant to this LTI Plan.

     

    The
Committee may grant from time to time and at any time prior to the termination
of this LTI Plan one or more Awards, either alone or in combination with any
other Awards, to the chief executive officer, executive officers and any
employee of Company and its Affiliates.

     

    The
Committee shall have the authority under Section 7.8 of the 2003 EIP with
respect to this Plan and Participants outside the United States.

     

    IV. Participation

     

    For each
Designated Period, the Committee shall select the Participants for the
Designated Period.  The Committee may limit the number of executive
officers and employees who will be Participants for a Designated
Period.  Executive officers and employees shall be designated as
Participants by the Determination Date; provided, that an executive
officer or employee who is first employed by the Company during any Designated
Period or who is assigned new duties during any Designated Period may be
designated as a Participant for a Designated Period commencing on the date the
executive officer or employee assumes his new duties through the end of the
Designated Period.

     

    Selection
as a Participant for a Designated Period or part thereof by the Committee is
limited to that Designated Period and does not guarantee or assure any person of
selection as a Participant for any other Designated Period.  An
eligible executive officer and employee will be a Participant for a Designated
Period only if designated as a Participant by the Committee for such Designated
Period.

     

    V. Designation
of Terms of Target Awards and Performance Metrics

     

    5.1 Designation of
Terms.  The Committee shall establish goals for each
Participant or group of Participants for the Designated Period in the manner and
within the time limits specified in this Section V.  For each
Participant or group of Participants for each Designated Period or part thereof,
the Committee shall specify:

              (a) The
Participants for such Designated Period.

          

              (b) The
length of the Designated Period.

     

              (c) The
Performance Metrics for such Designated Period (which may be different for
different Participants for such Designated Period).

     

              (d) Whether
the Final Award will be earned solely based on the Performance measured at the
end of the Designated Period, or will be earned in increments based on
Performance during periods within the Designated Period.

     

              (e) A Target
Award, expressed as a number of Shares, with actual Shares earned based on the
achievement of the Performance Metrics for the applicable Designated
Period.

     

              (f) The Final
Award levels, expressed as a percentage of the Target Award, that shall be paid
to the Participant at specified levels of Performance based on the Performance
Metrics established by the Committee pursuant to paragraph (c)
 above.

     

              (g) Any
specific conditions under which a Final Award specified under (f) above may
be reduced or forfeited (but not increased).

     

              (h)   Any
adjustments that may be applied in the event of change of control, extraordinary
events, death, total disability, and other termination of employment with the
Company or its Affiliates.

     

             (i) The
Participant’s obligation to pay all federal, state, local or other taxes
attributable to Awards under this LTI Plan, and the Participant’s ability to
satisfy such obligations pursuant to a Share withholding, deduction from payroll
or otherwise.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    The Final
Award levels specified under paragraph (f) above may be expressed either as
(i) a matrix of percentages of the Target Award that will be paid at
specified levels of Performance or (ii) a mathematical formula that
determines the percentage of the Target Award that will be paid at varying
levels of Performance.

     

    5.2 Performance Metrics; Measurement of
Performance.  The Performance Metrics shall be the metrics
selected by the Committee by the Determination Date, provided that in selecting
Performance Metrics for Qualified Performance Based Awards, the Committee shall
select the Performance Metrics as specified in the 2003 EIP, from one or more of
the following:  pre- or after-tax net earnings, sales growth,
operating earnings, operating cash flow, return on net assets, return on
stockholders’ equity, return on assets, return on capital, Stock price growth,
stockholder returns, gross or net profit margin, earnings per share, price per
share of Stock, and market share, any of which may be measured either in
absolute terms or as compared to any incremental increase or as compared to
results of a peer group.  These metrics may be measured against
pre-determined levels or the Company’s relative performance when compared to a
pre-established peer group.  The Committee has full discretion to
select the length and kind of any applicable Performance Metrics and whether the
Performance Metrics are to apply to the Company, a Subsidiary or any division or
business unit or to the individual.

     

    5.3 Final Award Conditioned on
Performance.  Payment of a Final Award to a Participant for a
Designated Period or part thereof under this LTI Plan shall be entirely
contingent upon the Performance Metrics established by the Committee pursuant to
this Section V as they may be adjusted pursuant to Section
6.2.  Except as provided in the first paragraph of Section V, the
Performance Metrics and Target Award shall be established not later than the
Determination Date.

     

    5.4 Stock Subject to this LTI
Plan.  At no time shall the maximum number of shares of Stock
granted pursuant to or subject to outstanding Awards granted under this LTI Plan
exceed the number of shares of Stock set forth in Section 4 of the 2003 EIP;
subject, however, to
the provisions of Section 8 of the 2003 EIP.  The maximum payment
to any one person for a Designated Period is the number of shares of Stock set
forth in Section 4 of the 2003 EIP, or if the Award is settled in cash, that
number of shares multiplied by the Market Value of the Stock as the date the
Qualified Performance Based Award is granted.

     

    VI. Determination
and Payment of Final Awards

     

    6.1 Committee Certification. The
Final Award for each eligible Participant for a Designated Period or part
thereof shall be determined on the basis of the Target Award and the Performance
Metrics established by the Committee pursuant to Section V.  The
Committee shall determine on the Settlement Date, and shall certify in writing
prior to payment of any Final Award, the extent to which the Performance for the
Designated Period or part thereof satisfied the Performance Metrics established
by the Committee for the period.  Approved minutes or a written
consent of the Committee shall constitute sufficient written certification for
this purpose.

     

    6.2 Extraordinary
Events.  During the applicable Designated Period, pursuant to
Section 8 of the 2003 EIP, the Committee in its discretion may adjust the
Performance Metrics and Target Award for extraordinary events or accounting
adjustments resulting from significant asset purchases or dispositions, a Change
of Control, or other events not contemplated or otherwise considered by the
Committee or the Board when the Performance Metrics and Target Awards were
established; provided
however, that the Performance Metrics and Target Awards for a Qualified
Performance Based Award shall not be adjusted if the effect would be to increase
the amount of any Final Award other than for events specifically identified in
the Award Agreement at the time of grant.

     

    6.3 Manner of and Time
Payment.  If set forth in the Award Agreement, the Committee
may, in its sole discretion, determine to pay all or part of a Participant’s
Final Award in the form of a cash payment equivalent to the Shares calculated as
set forth in the Award Agreement.  Otherwise each Participant will
receive the applicable Final Award in Shares.  In the event of
settlement in Shares, the Shares will be granted under the 2003
EIP.  The Company will make the payment of Shares or (where relevant)
cash as soon as feasible following the Settlement Date; provided, however, in no
event will the Final Award be paid later than the fifteenth day of the third
month following the end of the last fiscal year in the Designated Period, or
following the end of any earlier fiscal year in the Designated Period in which
any pro rata portion of a Final Award may have been earned based on the terms of
the Award Agreement.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    VII. General
Provisions

     

    7.1 Benefits Not Guaranteed.
Neither the establishment nor maintenance of this LTI Plan nor participation in
this LTI Plan shall provide any guarantee or other assurance that any Final
Award will be payable under the 2003 EIP.

     

    7.2 No Employment Right.
Participation in this LTI Plan shall not be construed as constituting a
commitment, guarantee, agreement or understanding of any kind that the Company
or any Subsidiary will continue to employ any individual and this LTI Plan shall
not be construed or applied as an employment contract or obligation. Nothing in
this LTI Plan shall abridge or diminish the rights of the Company or any
Subsidiary to determine the terms and conditions of employment of any
Participant, officer or other employee or to terminate the employment of any
Participant, officer or other employee with or without reason at any
time.

     

    7.3 No Assignment or Transfer.
Neither a Participant nor any other representative of a Participant shall have
any right to assign, transfer, attach or hypothecate any amount or credit,
potential payment or right to future payments of any amount or credit or any
other benefit provided under this LTI Plan but any Participant may designate a
beneficiary or beneficiaries to receive such shares as the Participant may
designate of any Final Award earned but unpaid at the time of his or her death
by written notice to the Committee.  Payment of any amount due or to
become due under this LTI Plan shall not be subject to the claims of creditors
of the Participant or to execution by attachment or garnishment or any other
legal or equitable proceeding or process.

     

    7.4 No Limit on Other Compensation
Arrangements. Nothing contained in this LTI Plan shall prevent the
Company or any Subsidiary from adopting or continuing in effect other or
additional compensation arrangements. A Participant may have other targets under
other plans of the Company or any Subsidiary.  However, no payment
under any other plan or arrangement shall be contingent upon failure to attain
the Performance Metrics for payment of a Final Award under this LTI
Plan.

     

    7.5 Withholding and Payroll
Taxes. The Company shall be entitled to deduct from any payment made
under this LTI Plan or from any other compensation then or thereafter due any
Participant all amounts required by federal, state, local and foreign tax laws
to be withheld and shall subject any payments made under this LTI Plan to all
applicable payroll taxes and assessments.

     

    7.6 Governing Law. The validity,
construction and effect of this LTI Plan shall be determined in accordance with
the laws of the State of Delaware and applicable federal law.

     

    7.7 Severability. In the event
any provision of this LTI Plan shall be held illegal or invalid for any reason,
the remaining provisions of this LTI Plan shall not be affected and this LTI
Plan shall be construed and enforced as if the illegal or invalid provision had
not been included.

     

    VIII. Termination
and Amendment

     

    The Board
may terminate this LTI Plan at any time or may from time to time amend this LTI
Plan as it deems proper and in the best interests of the
Company.  Except as set forth in Section 6.2, no amendment adopted
after the Determination Date of a Designated Period may directly or indirectly
increase the amount of any Target Award, or alter the objective criteria in a
manner which will increase any Target Award, for that Designated Period or part
thereof.  Unless the Board otherwise expressly provides, the
termination or amendment of this LTI Plan shall not affect the terms of any
Award outstanding on the date of such termination or amendment.  In
any case, no termination or amendment of this LTI Plan may, without the consent
of any recipient of an Award granted hereunder, adversely affect the rights of
the recipient under such Award.

     

    IX. Duration
of this LTI Plan

     

    Unless
this LTI Plan shall have been earlier terminated by the Board, and subject to
the term and duration of the 2003 EIP, Awards may be granted under this LTI Plan
at any time in the period commencing on the date of approval of this LTI Plan by
the Board and ending upon the expiration of the 2003 EIP.  Awards
granted pursuant to this LTI Plan within that period shall not expire solely by
reason of the termination of this LTI Plan.  However, no Award may be
made pursuant to this LTI Plan after the expiration of the 2003
EIP.