exhibit101.htm


    TEMPUR-PEDIC
INTERNATIONAL INC.

    Amended
and Restated Annual Incentive Bonus Plan for Senior Executives

    Terms and
Conditions

    


    Adopted:
February 22, 2010

     

    


     

    I. Compensation
Philosophy

     

    The
intent of this Amended and Restated Annual Incentive Bonus Plan (the “Incentive Plan”) of
Tempur-Pedic International Inc. (“Tempur-Pedic” or the
“Company”) is
to provide highly competitive total cash compensation through an annual variable
pay program that reflects the Company’s performance and the participant’s
performance against goals and objectives.

     

    Tempur-Pedic’s
compensation philosophy is to attract, motivate, retain and reward its
management talent with base salary, annual incentive bonuses and equity
compensation that competitively targets its market.  Tempur-Pedic’s
compensation programs are designed to reward its management for strong company
performance and successful execution of key business plans and strategies, based
on Tempur-Pedic’s and the senior manager’s achievement of pre-established
performance targets.   Tempur-Pedic believes that its
compensation philosophy aligns management incentives with the long-term
interests of Tempur-Pedic’s stockholders.

     

    This
Incentive Plan is an important variable component of the total compensation
package for the Chief Executive Officer (“CEO”), Executive Vice
Presidents (“EVPs”) and other
senior managers who may be designated from time to time for participation in
this Incentive Plan (collectively, the “Senior Executives”).
Tempur-Pedic believes that senior management who hold positions affording them
the authority to make critical decisions affecting Tempur-Pedic’s overall
performance should have a material percentage of their annual compensation
contingent upon Tempur-Pedic’s performance.

    
      
        
        

      

      
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    II.           Plan
Overview

     

    This
Incentive Plan is a cash bonus plan for Senior Executives, designed to reward
them for their roles in the achievement of Tempur-Pedic’s annual goals, as
established by the Board of Directors or Compensation
Committee.  Incentive Plan awards are determined on an annual basis,
based on whether and to what extent Tempur-Pedic achieves any applicable Company
Goals and each participant achieves any applicable Individual Goals for the
relevant Performance Period. The annual incentive bonus is a lump-sum cash
payment for each Senior Executive (the “Bonus”).

     

    Administration.  This Incentive
Plan shall be administered by the Compensation Committee (“Compensation
Committee”) of the Board of Directors of the Company; 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 Compensation Committee under this
Incentive Plan and when so acting shall have the benefit of all of the
provisions of this Incentive Plan pertaining to the Compensation Committee’s
exercise of its authorities hereunder.  The Compensation Committee
shall have the full power and authority to administer this Incentive
Plan.  In applying and interpreting the provision, of this Incentive
Plan, the decision of the Compensation Committee shall be final.

     

    As used
in this Incentive Plan, the term “Administrator” refers
to either the Board or the Compensation Committee exercising its authority under
this Incentive Plan as described above.

     

    Performance
Period.  Unless otherwise
determined by the Administrator with respect to any Target Bonus, the Incentive
Plan year runs from January 1 – December 31 (the “Performance
Period”).

     

    Participants.  The CEO, the
EVPs and other Senior Executives designated from time to time by the
Administrator shall be entitled to participate in this Incentive
Plan.

     

    Target
Bonus. With
respect to any Performance Period and any Senior Executive, the Administrator
shall create a target Bonus for such Senior Executive, expressed as a percentage
of such Senior Executive’s base salary as in effect at the end of the
Performance Period (the “Target
Bonus”).

     

    Within
ninety (90) days of the commencement of each Performance Period, but in any event prior to
the expiration of twenty-five percent (25%) of the applicable Performance
Period, the Administrator shall set the targeted annual Bonus for each
Senior Executive.

    
      
        
        

      

      
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    Components
of Bonus.  Unless otherwise
determined by the Administrator with respect to any Performance Period, each
participant’s Target Bonus shall be comprised of two or more
components:  one or more components based on the achievement of
Company-wide goals (the “Company Goals”) and
one or more components based on the achievement of individual goals created for
any particular Senior Executive (the “Individual
Goals”).

     

    If any of
the Company Goals components of a Target Bonus or any of the Individual Goals
components of a Target Bonus for any Senior Executive for any Performance Period
is intended to constitute “qualified performance-based compensation” within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the
“Code”, with
any such compensation referred to as “Qualified Performance-Based
Compensation”) then (i) such component of the Company Goals or Individual
Goals, as applicable, selected by the Administrator shall be limited to the
specific otherwise illustrative goals identified below, (ii) each component of
the Bonus must be assessed separately to determine whether the Senior Executive
has achieved the Company Goals or Individual Goals applicable to that component,
and (iii) the Company Goals and Individual Goals shall be selected and evaluated
in such a manner that in no event shall the achievement or failure to achieve
any level of any of the selected Company Goals or Individual Goals in any
component shall have any bearing or effect on whether the Company Goals or
Individual Goals in any other component have been achieved.

     

    The
Administrator shall have the discretion to include or exclude extraordinary
items, restructuring charges, accounting changes or any other unusual or
nonrecurring items in its determination of whether a Company Goal or Individual
Goal has been satisfied; provided, that in the case of any Qualified
Performance-Based Compensation, the extent, if any, to which any such
adjustments shall be made shall be determined by the Administrator at the time
of establishing the relevant Company Goal or Individual Goal.  At the time any Company
Goals or Individual Goals are established, the outcome as to whether the
Performance Measures will be met must be substantially uncertain with respect to
any component of a Bonus intended to qualify as Qualified Performance-Based
Compensation.

     

    The
purpose of any Company Goals component, represented by financial targets and
other Company-wide performance metrics, and the purpose of the Individual Goals
component, represented by the achievement of targets based on a specific
segment, division or business unit or individual targets, are designed to focus
the Senior Executives on behaviors that support the overall performance and
success of the Company.

    
      
        
        

      

      
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    Company
Goals.  The Company
Goals component will be tied to Tempur-Pedic’s achievement of specific financial
targets and other Company-wide performance metrics. The Company Goals component
metrics may include, but are not limited to, one or more of the following, 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:

    
       

      
        	
                • debt
      reduction

              	
                • pre-
      or after-tax net earnings

              
	
                • earnings
      before interest and taxes (EBIT) or EBIT margin

              	
                • price
      per share of stock

              
	
                • earnings
      before interest and taxes, depreciation and amortization (EBITDA) or
      EBITDA margin

              	
                • return
      on assets

              
	
                • earnings
      per share 

              	
                • return
      on capital

              
	
                • gross
      or net profit margin

              	
                • return
      on net assetss

              
	
                • market
      share

              	
                • return
      on stockholders' equity

              
	
                • net
      sales

              	
                • sales
      or net sales growth

              
	
                • operating
      cash flow

              	
                • stock
      price growth

              
	
                • operating
      earnings 

              	
                • stockholder
      returns

              


      

       

    

    These metrics are referred to as the
“Specific Company
Metrics.”

     

    Any
Company Goals component of the Bonus may be established using a matrix to allow
for maximum and minimum payments of the Target Bonus, depending on the level of
specified factors for the applicable Performance Period.  A failure to
meet the minimum requirement may result in no Bonus payment with respect to the
applicable Company Goals component of the Incentive Plan.

     

    Individual
Goals.  Each year,
individual incentive performance metrics and targets may be established as
Individual Goals for one or more of the Senior Executives. Any Individual Goals
component of a Target Bonus for a Senior Executive may be based on the
performance of a segment, division or business unit or goals unique to the
particular Senior Executive.  The Individual Goals are expected to
have a significant component based on the successful completion of individual
objectives.

     

    An
Individual Goals component will target 100% payout of the applicable portion of
the Target Bonus for the achievement of a Senior Executive’s Individual Goal or
Goals.  Payments can range from no bonus payment to more than 100% of
the targeted Individual Goals component, based on individual performance. Except
as required in the case of Qualified Performance-Based Compensation, the
determination of whether an Individual Goals component of the Bonus has been met
and to what degree will be based on the subjective determination of the
Administrator, and in exercising this discretion the Administrator will review
each Senior Executive’s performance against individual objectives and the
overall performance of the applicable Senior Executive within his or her
specific area of responsibility.

    
      
        
        

      

      
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    Individual Goals may be based on any of
the Specific Company Metrics, as applied to any specific segment, division or
business unit, and may also include any one or more of following, as applicable
to a specific segment, division or business unit or an individual:

     

    
      
        	
                •
      Cost reduction initiatives

              	
                • H.R.
      management metrics

              
	
                •
      Enhance financial planning process

              	
                • Improve
      customer service metrics

              
	
                • Execution
      of Investor Relations plan

              	
                • New
      product launches

              
	
                • Expanding
      slots per stores

              	
                • Sales
      targets

              
	
                • Expand
      brand awareness

              	
                • Strategic
      planning and growth initiatives

              


      

       

    

    If the Individual Goals component of a
Target Bonus for any Senior Executive for any Performance Period is intended to
constitute Qualified Performance-Based Compensation, then the Individual Goals
component metrics shall be based on one or more objectively determinable
measures of performance, from which an independent third party with knowledge of
the facts could determine whether the performance goal or range of goals is met
and from that determination could calculate the Bonus to be paid.

     

    III.           Designation
of Participants

     

    For any
Performance Period, not later than the end of February of such Performance
Period, the Administrator shall determine whether any senior managers other than
the CEO and EVPs will participate in this Incentive Plan for that Performance
Period, in which case any of these other senior managers will constitute “Senior
Executives” under this Incentive Plan for that Performance
Period.  With respect to any other senior managers hired during the
course of a fiscal year, the Administrator shall determine within thirty (30)
days after the employment of such senior manager whether or not such senior
manager shall participate in this Incentive Plan for such year.  In
the event that the Administrator does not decide that such newly-hired senior
manager will participate in this Incentive Plan, such senior manager will not
participate in the Incentive Plan for such Performance Period.  In the
event that the Administrator determines that a newly-hired senior manager will
participate in this Incentive Plan for the remainder of the current Performance
Period, the Administrator will promptly determine the terms of the Bonus for
such Senior Executive, including with respect to the matters referred to in
Section IV below.

     

    Participation
in this Incentive Plan in one year does not automatically guarantee
participation in a future year.  Compliance with all Tempur-Pedic
policies, guidelines and applicable laws is a prerequisite to receiving an award
pursuant to this Incentive Plan.

    
      
        
        

      

      
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    IV.           Creation
of Bonus Terms for Any Fiscal Year

     

    For any
Performance Period, within ninety (90) days after the commencement of that
Performance Period, but in any event prior to
the expiration of twenty-five percent (25%) of the applicable Performance
Period, the Administrator shall determine the following for the Senior
Executives participating in the Incentive Plan for that Performance
Period:

     

    
      	
                  • the
      Target Bonus for such Senior Executive, expressed as a percentage of his
      or her base salary as of the end of the Performance
      Period;

            


    

    
      
        
          
             

            
              	
                          • whether
      there will be Company Goals for the Performance Period, and the type of
      Company Goals that will
apply;

                    


            

            
              
                
                   

                  
                    	
                                • for
      each Senior Executive, whether there will be Individual Goals for that
      Senior Executive;

                          


                  

                  
                    
                      
                        
                           

                          
                            	
                                        • the
      relative weighting between Company Goals and Individual Goals for any
      Senior
Executive;

                                  


                          

                          
                            
                              
                                
                                   

                                  
                                    	
                                                • any
      maximum or minimum payout with respect to any of the Company Goals or
      Individual
Goals;

                                          


                                  

                                  
                                    
                                      
                                         

                                        
                                          	
                                                      • whether
      any component of the Bonus is intended to qualify as Qualified
      Performance-Based Compensation;
  and

                                                


                                        

                                        
                                          
                                            
                                              
                                                 

                                                
                                                  	
                                                              • any
      other terms applicable to the Bonuses for any Senior Executives for that
      Performance
Period.

                                                        


                                                

                                                
                                                  
                                                     

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

        If the Bonus
is intended to constitute Qualified Performance-Based Compensation, then the
maximum amount payable under this Incentive Plan in respective of any one person
for any one Performance Period as Bonuses shall not exceed an amount equal to 1%
of the Company’s net sales for the fiscal year in which the Performance Period
ends.

     

    V.           Payment
Criteria

     

    Unless
otherwise provided in any employment agreement between the Senior Executive and
the Company or otherwise determined by the Administrator, a participant must be
employed by Tempur-Pedic on the Bonus payment date with respect to the
applicable Performance Period to be eligible to receive payment of an Award
pursuant to this Incentive Plan.

    
      
        
        

      

      
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    Except as
noted above, all Bonus payments will be based on a participant’s base salary as
in effect at the end of the Performance Period, subject to the maximum amount
that may paid for awards intended to constitute Qualified Performance-Based
Compensation as set forth above.  Bonus payments will be made by March
15 of the year following the Performance Period.  Bonus payments will
be subject to all withholding required by applicable law.

     

    Nothing
in this Incentive Plan guarantees any Bonus payment will be made to any
individual.  Receipt of a Bonus payment in one year does not guarantee
eligibility in any future year.

     

    VI.           Termination,
Suspension or Modification and Interpretation of this Incentive
Plan

     

    Tempur-Pedic
may terminate, suspend or modify and if suspended, may reinstate with or without
modification all or part of this Incentive Plan at any time, with or without
notice to the participant.  Tempur-Pedic reserves the exclusive right
to determine eligibility to participate in this Incentive Plan and to interpret
all applicable terms and conditions, including eligibility
criteria.

     

    VII.           Other

     

    This
document sets forth the terms of this Incentive Plan and is not intended to be a
contract or employment agreement between the participant and
Tempur-Pedic.  As applicable, it is understood that both any
participant and Tempur-Pedic have the right to terminate the participant’s
employment with Tempur-Pedic at any time, with or without cause and with or
without notice, in acknowledgement of the fact that their employment
relationship is “at will.”

     

    This
Amended and Restated Incentive Plan amends and restates the Annual Incentive
Bonus Plan for Senior Executives originally adopted on February 18, 2009 (the
“Original
Plan”).  Any Target Bonuses created prior to the approval by
the stockholders of the Company of this Incentive Plan will be governed by the
Original Plan.

      
        
           


        

        
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