exhibit1040.htm


    TEMPUR-PEDIC
INTERNATIONAL INC.

     

    AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN

     

    Stock
Option Agreement

     

    [Insert
Name]

     

    (Board of
Directors)

     

    This
Agreement dated as of [_____ __, 20__], 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 [Insert Number (______)] shares (the “Optioned 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 following sentence, this Option shall expire at
5:00 p.m. on the date that is ten years from Grant Date.  However, if
the Optionee’s membership with the Board of Directors of the Company ends before
that date, this Option shall expire on the earlier date specified in whichever
of the following applies:

     

    (a) If the
termination of the Optionee’s membership with the Board of Directors of the
Company is on account of the optionee’s death or disability, the first
anniversary of the date the Optionee’s membership ends; or

     

    (b) If the
termination of the Optionee’s membership with the Board of Directors of the
Company is due to any other reason, three (3) months after the Optionee’s
membership with the Board of Directors ends.

     

    4. Exercise of
Option.

     

    (a) Until
this Option expires, the Optionee may exercise it as to the number of Optioned
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, during any period that this Option remains
outstanding after the Optionee’s membership with the Company’s Board of
Directors ends for any reason, the Optionee may exercise it only to the extent
it was exercisable immediately prior to the end of the Optionee’s membership
with the Company’s Board of Directors.  The procedure for exercising
this Option is described in Section 7.1(e) of the Plan.  The Optionee
may pay the exercise price due on exercise by delivering other shares of Stock
of equivalent Market Value provided the Optionee has owned such shares of Stock
for at least six months.

     

    
      
        	
                Number
      of Shares

                in Each Installment

              	 	
                Percentage
      of

                Optioned Shares

              	 	
                Initial
      Exercise Date

                for Shares in
Installment

              
	
                [________]

              	 	 	25	%	
                July
      31, 20__

              
	
                [________]

              	 	 	25	%	
                October
      31, 20__

              
	
                [________]

              	 	 	25	%	
                January
      31, 20__

              
	
                [________]

              	 	 	25	%	
                April
      30, 20__

              
	 
      	 	 	 	 	 
      


      

    

     

    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. 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.

     

    7. 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.

     

    8. Tax
Consequences.  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 Optioned
Shares.  The Optionee should rely on his/her own tax advisors for such
advice.

     

    9. Certain Remedies.

     

    (a) If at any
time within two years after termination of the Optionee’s association 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 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 association 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;
or

     

    (vi) 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 below) may be repurchased by the Company at a
purchase price of $[____] 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
association with the Company or any Affiliate and ending two years from the
Optionee’s termination of association 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 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 14 days after the
receipt of sufficient information from the Optionee about the enterprise, and
the determination will be valid for a period of 90 days from the date of
determination.

     

    10. 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
Paragraph 9 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.

     

    11. Nature of
Remedies.

     

    (a) The
remedies set forth in Sections 9 and 10 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 9(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 9(a) has
occurred or is reasonably likely to occur.

     

    


     

    [Remainder of page intentionally left
blank]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      	 	
                                                                              TEMPUR-PEDIC
      INTERNATIONAL INC.

                                                                            
	 	
                                                                              By:

                                                                            	 
	 	
                                                                              Name:

                                                                            	 
	 	 	 
	 	 OPTIONEE	 
	 	 	 
	 	 Name:	 [Insert
      Optionee]
	 	 Optionee's
      Address: