Document:

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                                                                   EXHIBIT 10.26

                           THL BEDDING HOLDING COMPANY

                              EQUITY INCENTIVE PLAN

                        EFFECTIVE AS OF DECEMBER 19, 2003

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                                TABLE OF CONTENTS

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SECTION 1.  PURPOSE..................................................................................          1

SECTION 2.  ADMINISTRATION...........................................................................          1

            a.       Committees......................................................................          1
            b.       Authority of the Board of Directors.............................................          1

SECTION 3.  ELIGIBILITY..............................................................................          1

SECTION 4.  STOCK SUBJECT TO PLAN....................................................................          2

            a.       Basic Limitation................................................................          2
            b.       Additional Shares...............................................................          2

SECTION 5.  AWARDS...................................................................................          2

            a.       Types of Awards.................................................................          2
            b.       Award Agreements................................................................          2
            c.       No Rights as a Shareholder......................................................          3

SECTION 6.  OPTIONS..................................................................................          3

            a.       Option Agreement................................................................          3
            b.       Special ISO Rules...............................................................          3

SECTION 7.  STOCK APPRECIATION RIGHTS................................................................          4

            a.       Generally.......................................................................          4
            b.       Stock Appreciation Rights Award Agreement.......................................          4

SECTION 8.  Stock Awards.............................................................................          4

            a.       Generally.......................................................................          4
            b.       No Purchase Price Necessary.....................................................          5

SECTION 9.  STOCK UNITS..............................................................................          5

            a.       Generally.......................................................................          5
            b.       Settlement of Stock Units.......................................................          5

SECTION 10. DIVIDEND EQUIVALENT RIGHTS...............................................................          5

            a.       Generally.......................................................................          5
            b.       Settlement of Dividend Equivalent Rights........................................          5

SECTION 11. PAYMENT FOR SHARES.......................................................................          5

            a.       General Rule....................................................................          5
            b.       Surrender of Shares.............................................................          5
            c.       Services Rendered...............................................................          5
            d.       Promissory Note.................................................................          6
            e.       Net Exercise....................................................................          6
            f.       Exercise/Sale...................................................................          6
            g.       Exercise of Discretion..........................................................          6
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SECTION 12. TERMINATION OF SERVICE...................................................................          6

            a.       Termination of Service..........................................................          6
            b.       Leave of Absence................................................................          7

SECTION 13. ADJUSTMENT OF SHARES.....................................................................          7

            a.       General.........................................................................          7
            b.       Mergers and Consolidations......................................................          7

SECTION 14. SECURITIES LAW REQUIREMENTS..............................................................          8

            a.       Shares Not Registered...........................................................          8
            b.       California Participants.........................................................          8

SECTION 15. GENERAL TERMS............................................................................          8

            a.       Nontransferability of Awards....................................................          8
            b.       Restrictions on Transfer of Shares..............................................          8
            c.       Withholding Requirements........................................................          9
            d.       No Retention Rights.............................................................          9
            e.       Unfunded Plan...................................................................          9

SECTION 16. DURATION AND AMENDMENTS..................................................................          9

            a.       Term of the Plan................................................................          9
            b.       Right to Amend or Terminate the Plan............................................          9
            c.       Effect of Amendment or Termination..............................................         10
            d.       Modification, Extension and Assumption of Awards................................         10

SECTION 17. DEFINITIONS..............................................................................         10

            a.       "Affiliate" ....................................................................         10
            b.       "Award".........................................................................         10
            c.       "Board of Directors"............................................................         10
            d.       "Cause".........................................................................         10
            e.       "Change in Control".............................................................         11
            f.       "Code"..........................................................................         11
            g.       "Committee".....................................................................         11
            h.       "Company".......................................................................         11
            i.       "Disability"....................................................................         11
            j.       "Dividend Equivalent Right".....................................................         11
            k.       "Fair Market Value".............................................................         11
            l.       "Good Reason"...................................................................         11
            m.        "Initial Public Offering"......................................................         12
            n.       "ISO"...........................................................................         12
            o.       "Nonstatutory Option"...........................................................         12
            p.       "Option"........................................................................         12
            q.       "Parent"........................................................................         12
            r.       "Person"........................................................................         12
            s.       "Plan"..........................................................................         12
            t.       "Recapitalization"..............................................................         12
            u.       "Service".......................................................................         12
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            v.       "Share".........................................................................         12
            w.       "Stock Appreciation Right"......................................................         12
            x.       "Stock Award"...................................................................         12
            y.       "Stock Unit"....................................................................         13
            z.       "Subsidiary"....................................................................         13
            aa.      "THL"...........................................................................         13

SECTION 18. MISCELLANEOUS............................................................................         13

            a.       Choice of Law...................................................................         13
            b.       Execution.......................................................................         13

APPENDIX I CALIFORNIA SECURITIES LAW REQUIREMENTS....................................................          1
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                           THL BEDDING HOLDING COMPANY
                              EQUITY INCENTIVE PLAN

SECTION 1. PURPOSE.

The purpose of the Plan is to attract and retain the best available personnel,
to provide additional incentive to persons who provide services to the Company
and its Subsidiaries, and to promote the success of the Company's business.
Unless the context otherwise requires, capitalized terms used herein are defined
in Section 17.

SECTION 2. ADMINISTRATION.

a. COMMITTEES. The Plan shall be administered by the Board of Directors or, at
its election, by one or more committees consisting of one or more members who
have been appointed by the Board of Directors. Each committee shall have such
authority and be responsible for such functions as may be delegated to it by the
Board of Directors, and any reference to the Board of Directors in the Plan
shall be construed as a reference to the committee with respect to functions
delegated to it. If no Committee has been appointed, the entire Board of
Directors shall administer the Plan.

b. AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors shall have full
authority and sole discretion to take any actions it deems necessary or
advisable for the administration and operation of the Plan, including, without
limitation, the right to construe and interpret the provisions of the Plan or
any Award, to provide for any omission in the Plan, to resolve any ambiguity or
conflict under the Plan or any Award, to accelerate vesting of or otherwise
waive any requirements applicable to any Award, to extend the term or any period
of exercisability of any Award, to modify the purchase price or exercise price
under any Award, to establish terms or conditions applicable to any Award and to
review any decisions or actions made or taken by the Committee. All decisions,
interpretations and other actions of the Board of Directors or, in the absence
of any action by the Board of Directors, any Committee shall be final and
binding on all participants and other persons deriving their rights from a
participant. Notwithstanding anything to the contrary herein, no action taken by
the Board of Directors shall adversely affect in any material respect the rights
granted to any participant under any outstanding Award without the participant's
written consent.

SECTION 3. ELIGIBILITY

The Board of Directors is authorized to grant Awards to directors, employees and
consultants of the Company or any direct or indirect corporate or other
Subsidiary in which the Company owns at least 50% of the outstanding equity
interests thereof. Employees who have been granted Awards shall be participants
in the Plan with respect to such Awards.

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SECTION 4. STOCK SUBJECT TO PLAN.

a. BASIC LIMITATION. Subject to the following provisions of this Section and
Section 13(e), the maximum number of shares of Class B common stock, $.01 par
value per share, of the Company that may be issued pursuant to Awards under the
Plan is 688,235 Shares.

b. ADDITIONAL SHARES. In the event that any outstanding Award expires, is
cancelled or otherwise terminated, any rights to acquire shares allocable to the
unexercised or unvested portion of such Award shall again be available for the
purposes of the Plan. In the event that Shares issued under the Plan are
reacquired by the Company pursuant to any forfeiture provision, right of
repurchase, right of first offer or withholding requirements, such Shares shall
again be available for the purposes of the Plan. In the event a participant pays
for any Award through the delivery of previously acquired Shares, the number of
Shares available shall be increased by the number of shares delivered by the
participant.

SECTION 5. AWARDS.

a. TYPES OF AWARDS. The Board of Directors may, in its sole discretion, make
Awards of one or more of the following: Options, Stock Appreciation Rights,
Stock Awards, Stock Units and Dividend Equivalent Rights. The Company shall make
Awards directly or cause one or more of its Subsidiaries to make Awards;
provided, however, that the Company shall be responsible for causing any such
Subsidiary to comply with the terms of any Award and the Plan.

b. AWARD AGREEMENTS. Each Award made under the Plan shall be evidenced by a
written agreement between the participant and the Company, and no Award shall be
valid without any such agreement. An Award shall be subject to all applicable
terms and conditions of the Plan and to any other terms and conditions which the
Board of Directors in its sole discretion deems appropriate for inclusion in the
Award agreement provided such terms and conditions are not inconsistent with the
Plan. Accordingly, in the event of any conflict between the provisions of the
Plan and any such agreement, the provisions of the Plan shall prevail. Awards
made to California participants shall also be subject to the applicable
requirements set forth in Appendix I. Each agreement evidencing an Award shall
provide, in addition to any terms and conditions required to be provided in such
agreement pursuant to any other provision of this Plan, the following terms:

         (i)      Number of Shares. The number of Shares subject to the Award,
                  if any, which number shall be subject to adjustment in
                  accordance with Section 13 of the Plan.

         (ii)     Price. Where applicable, each agreement shall designate the
                  price, if any, to acquire any Shares underlying the Award,
                  which price shall be payable in a form described in Section 11
                  and subject to adjustment pursuant to Section 13.

         (iii)    Vesting. Each agreement shall specify the dates and events on
                  which all or any installment of the Award shall be vested and
                  nonforfeitable. Such provisions, may include, without
                  limitation, a provision that Awards vest upon a Change in
                  Control.

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c. NO RIGHTS AS A SHAREHOLDER. A participant, or a transferee of a participant,
shall have no rights as a shareholder with respect to any Shares covered by an
Award until Shares are actually issued in the name of such person (or if Shares
will be held in street name, to a broker who will hold such Shares on behalf of
such person).

SECTION 6. OPTIONS.

a. OPTION AGREEMENT. The Board of Directors, may in its sole discretion, grant
Options. Each agreement evidencing an Award of Options shall contain the
following information, which shall be determined by the Board of Directors, in
its sole discretion:

         (i)      ISO/Nonstatutory Option. Each agreement shall designate an
                  Option as either an ISO or a Nonstatutory Option.

         (ii)     Exercisability. Each agreement shall specify the dates and
                  events when all or any installment of the Option becomes
                  exercisable.

         (iii)    Term. Each agreement shall state the term of each Option
                  (including the circumstances under which such Option will
                  expire prior to the stated term thereof), which shall not
                  exceed ten (10) years from the date of grant or such shorter
                  term as may be required by Section 6(b)(iii) below for Ten
                  Percent Shareholders.

b. SPECIAL ISO RULES. The following rules apply to ISO grants in addition to any
other rule that may apply under this Plan:

         (i)      ISO Participants. ISOs may only be granted to employees of the
                  Company, a Parent or a Subsidiary.

         (ii)     Exercise Price. The exercise price of an ISO shall not be less
                  than one hundred percent (100%) of the Fair Market Value of a
                  Share on the date of grant or such higher price as may be
                  required by Section 6(b)(iii) below for Ten Percent
                  Shareholders.

         (iii)    Ten Percent Shareholders. An individual who owns more than ten
                  percent (10%) of the total combined voting power of all
                  classes of outstanding stock of the Company, its Parent or any
                  of its Subsidiaries shall not be eligible for designation as a
                  participant under an ISO unless (A) the exercise price is at
                  least one hundred ten percent (110%) of the Fair Market Value
                  of a Share on the date of grant and (B) the ISO is not
                  exercisable after the expiration of five (5) years from the
                  date of grant. In determining stock ownership for purposes
                  hereof, the attribution rules of Section 424(d) of the Code
                  shall apply.

         (iv)     Dollar Limitation. The aggregate Fair Market Value of Shares
                  (determined as of the respective date or dates of grant) for
                  which one or more Options granted to any participant under the
                  Plan (or any other option plan of the Company or any Parent or
                  Subsidiary) may for the first time become exercisable as ISOs
                  during any one (1) calendar year shall not exceed the sum of
                  One Hundred Thousand

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                  Dollars ($100,000). To the extent a participant holds two (2)
                  or more Options which become exercisable for the first time in
                  the same calendar year, such Options shall qualify as ISOs on
                  the basis of the order in which such Options were granted.

         (v)      Failure to Qualify. If all or a portion of an Award granted as
                  an ISO fails (or later ceases to) qualify as an ISO, such
                  Option or portion thereof shall be treated as a Nonstatutory
                  Option.

SECTION 7. STOCK APPRECIATION RIGHTS.

a. GENERALLY. The Board of Directors may, in its sole discretion, grant Stock
Appreciation Rights, including a concurrent grant of Stock Appreciation Rights
in tandem with any Option. A Stock Appreciation Right means a right to receive a
payment in cash, Shares or a combination thereof in an amount equal to the
excess of (i) the Fair Market Value, or other specified valuation, of a number
of Shares on the date the right is exercised over (ii) the Fair Market Value, or
other specified valuation, of such Shares on the date the right is granted. If a
Stock Appreciation Right is granted in tandem with or in substitution for an
Option, the designated Fair Market Value in the Award agreement shall reflect
the Fair Market Value of the Shares underlying the Awards on the date the Option
is granted.

b. STOCK APPRECIATION RIGHTS AWARD AGREEMENT. Each agreement evidencing an Award
of Stock Appreciation Rights shall contain the following information, which
shall be determined by the Board of Directors, in its sole discretion:

         (i)      Base Value. Each agreement shall specify the base value of the
                  Shares above which a participant shall be entitled to share in
                  the appreciation in the value of such Shares.

         (ii)     Exercisability. Each agreement shall specify the dates and
                  events when all or any installment of the Stock Appreciation
                  Rights becomes exercisable.

         (iii)    Term. Each agreement shall state the term of each Stock
                  Appreciation Right (including the circumstances under which
                  such Stock Appreciation Right will expire prior to the stated
                  term thereof), which shall not exceed ten (10) years from the
                  date of grant.

SECTION 8. STOCK AWARDS.

a. GENERALLY. The Board of Directors may, in its sole discretion, make Stock
Awards by granting or selling Shares under the Plan. A Restricted Stock Award
shall be an Award of Shares that is subject to a substantial risk of forfeiture,
as determined by the Board of Directors in its sole discretion, and set forth in
the Restricted Stock Agreement. Payment in Shares of all or a portion of any
bonus under any other arrangement may be treated by the Board of Directors as an
Award of Shares under the Plan. A Stock Award shall not be deemed made until
accepted by a participant in a manner described by the Board of Directors at the
time of grant.

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b. NO PURCHASE PRICE NECESSARY. In lieu of a purchase price, a Stock Award may
be made in consideration of services previously rendered by a participant to the
Company or its Subsidiaries.

SECTION 9. STOCK UNITS.

a. GENERALLY. The Board of Directors may, in its sole discretion, grant Stock
Units, which in each case shall be a notional account representing Shares.

b. SETTLEMENT OF STOCK UNITS. Stock Units shall be settled in Shares unless the
agreement evidencing the Award expressly provides for settlement of all or a
portion of the Stock Units in cash equal to the value of the Shares that would
otherwise be distributed in settlement of such units. Shares distributed to
settle a Stock Unit may be issued with or without payment or consideration
therefor, except as may be required by applicable law or the Board of Directors
in its sole discretion as set forth in the agreement evidencing the Award. The
Board of Directors may, in its sole discretion, establish a program to permit
participants to defer payments and distributions made in respect of Stock Units.

SECTION 10. DIVIDEND EQUIVALENT RIGHTS.

a. GENERALLY. The Board of Directors may, in its sole discretion, grant Dividend
Equivalent Rights with respect to any Award.

b. SETTLEMENT OF DIVIDEND EQUIVALENT RIGHTS. Dividend Equivalent Rights may be
settled in cash, Shares, or other securities or property, all as provided in the
Award agreement. The Board of Directors may, in its sole discretion, grant stock
units, which in each case shall be a notional account representing Shares. The
Board of Directors may, in its sole discretion, establish a program to permit
participants to defer payments and distributions made in respect Dividend
Equivalent Rights.

SECTION 11. PAYMENT FOR SHARES.

a. GENERAL RULE. The purchase price of Shares issued under the Plan shall be
payable in cash or personal check at the time when such Shares are purchased,
except as otherwise provided in this Section 11.

b. SURRENDER OF SHARES. At the sole discretion of the Board of Directors, all or
any part of the purchase price and any applicable withholding requirements may
be paid by surrendering, or attesting to the ownership of, Shares that are
already owned by the participant. Such Shares shall be surrendered to the
Company in good form for transfer and shall be valued at their Fair Market Value
on the date when the Award is exercised. The participant shall not surrender, or
attest to the ownership of, Shares in payment of any portion of the purchase
price (or withholding) if such action would cause the Company or any Subsidiary
to recognize a compensation expense (or additional compensation expense) with
respect to the applicable Award for financial reporting purposes, unless the
Board of Directors consents thereto.

c. SERVICES RENDERED. At the sole discretion of the Board of Directors, Shares
may be awarded under the Plan in consideration of services rendered to the
Company, a Parent or a Subsidiary prior to or after the Award.

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d. PROMISSORY NOTE. At the sole discretion of the Board of Directors, all or a
portion of the purchase price under an Award under the Plan and any applicable
withholding requirements may be paid with a full-recourse promissory note.
However, the par value of the Shares, if newly issued, shall be paid in cash.
The Shares shall be pledged as security for payment of the principal amount of
the promissory note and interest thereon. The interest rate payable under the
terms of the promissory note shall not be less than the minimum rate (if any)
required to avoid the imputation of additional interest under the Code. Subject
to the foregoing, the Board of Directors (at its sole discretion) shall specify
the term, interest rate, amortization requirements (if any) and other provisions
of such note.

e. NET EXERCISE. At the sole discretion of the Board of Directors on or after an
Initial Public Offering, payment of all or any portion of the purchase price
under any Award under the Plan and any applicable withholding requirements may
be made by reducing the number of Shares otherwise deliverable pursuant to the
Award by the number of such Shares having a Fair Market Value equal to the
purchase price.

f. EXERCISE/SALE. At the sole discretion of the Board of Directors on or after
an Initial Public Offering, payment may be made in whole or in part by the
delivery (on a form prescribed by the Company) of an irrevocable direction (i)
to a securities broker approved by the Company to sell Shares and to deliver all
or part of the sales proceeds to the Company, or (ii) to pledge Shares to a
securities broker or lender approved by the Company as security for a loan, and
to deliver all or part of the loan proceeds to the Company, in each case in
payment of all or part of the purchase price and any withholding requirements.

g. EXERCISE OF DISCRETION. Should the Board of Directors exercise its sole
discretion to permit the participant to pay the purchase price under an Award in
whole or in part in accordance with Subsections (b) through (f) above, it shall
not be bound to permit such alternative method of payment for the remainder of
any such Award or with respect to any other Award or participant under the Plan.

SECTION 12. TERMINATION OF SERVICE.

a. TERMINATION OF SERVICE. If a participant's Service terminates for any reason
other than for Cause, then unless the Award Agreement provides otherwise:

         (i)      Options/Stock Appreciation Rights. Any outstanding Options
                  shall expire on the earlier of: (A) the expiration of their
                  term, (ii) twelve (12) months following termination of the
                  participant's Service as a result of death or Disability, or
                  participant's termination of Service without Cause,
                  resignation for Good Reason (iii) three (3) months following
                  termination Service for any other reason. However, in the case
                  of Options a participant (or in the case of the participant's
                  death or Disability, the participant's representative) may
                  exercise all or a part of the participant's Options at any
                  time before the expiration of such Options under the preceding
                  sentence only to the extent that such Options had become
                  exercisable for vested Shares (in accordance with the terms of
                  such Option or otherwise under the Plan) on or before the date
                  the participant's Service terminates. The balance of the
                  Options (which are not exercisable and vested on

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                  the date participant's Service terminates) shall lapse when
                  the participant's Service terminates.

                  If by virtue of this provision, an ISO is not exercised within
                  three (3) months after a participant's employment terminates,
                  then unless such participant's employment termination is due
                  to his death or Disability, the ISO shall be treated as a
                  Nonstatutory Option.

         (ii)     Stock Awards/Stock Units. The terms of the applicable
                  Restricted Stock Agreement shall govern the terms and
                  conditions of a participant's Award with respect to
                  termination of service.

b. LEAVE OF ABSENCE. For purposes of this Section, Service shall be deemed to
continue while a participant is a bona fide leave of absence, if such leave is
approved by the Company in writing or if continued crediting of service for this
purpose is expressly required by the terms of such leave or by applicable law
(as determined by the Board of Directors).

SECTION 13. ADJUSTMENT OF SHARES.

a. GENERAL. If there shall be a Recapitalization, an adjustment shall be made to
each outstanding Award such that each such Award shall thereafter be exercisable
or payable, as the case may be, in such securities, cash and/or other property
as would have been received in respect of Shares subject to (or referenced by)
such Award had such Award been exercised and/or settled in full immediately
prior to such Recapitalization and such an adjustment shall be made successively
each time any such change shall occur. In addition, in the event of any
Recapitalization, to prevent dilution or enlargement of participants' rights
under the Plan, the Board of Directors shall, and will have the authority to
adjust, in a fair and equitable manner, the number and kind of Shares that may
be issued under the Plan, the number and kind of Shares subject to outstanding
Awards, and the purchase price applicable to outstanding Awards. Should the
vesting of any Award be conditioned upon the Company's attainment of performance
conditions, the Board of Directors may make such adjustments to the terms and
conditions of such Awards and the criteria therein to recognize unusual and
nonrecurring events affecting the Company or in response to changes in
applicable laws, regulations or accounting principles. Notwithstanding the
foregoing, the Board of Directors shall not without a participant's consent make
any adjustment to an ISO that does not comply with the rules of Section 424(a)
of the Code or would otherwise cause the ISO to fail to qualify as an ISO for
purposes of Section 422 of the Code.

b. MERGERS AND CONSOLIDATIONS. In the event that the Company is a party to a
merger or consolidation, outstanding Awards shall be subject to the agreement of
merger or consolidation. Such agreement, without the participants' consent, may
provide for:

         (i)      The continuation or assumption of such outstanding Awards
                  under the Plan by the Company (if it is the surviving
                  corporation) or by the surviving corporation or its parent;

         (ii)     The substitution by the surviving corporation or its parent of
                  stock awards with substantially the same terms for such
                  outstanding Awards;

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         (iii)    The acceleration of the vesting of or right to exercise such
                  outstanding Awards immediately prior to or as of the date of
                  the merger or consolidation, and the expiration of such
                  outstanding Awards to the extent not timely exercised or
                  purchased by the date of the merger or consolidation or other
                  date thereafter designated by the Board of Directors; or

         (iv)     The cancellation of all or any portion of such outstanding
                  Awards by a cash payment of the excess, if any, of the fair
                  market value of the Shares subject to such outstanding Awards
                  or portion thereof being canceled over the purchase price with
                  respect to such Awards or portion thereof being canceled.

SECTION 14. SECURITIES LAW REQUIREMENTS.

a. SHARES NOT REGISTERED. Shares shall not be issued under the Plan unless the
issuance and delivery of such Shares comply with (or are exempt from) all
applicable requirements of law, including (without limitation) the Securities
Act of 1933, as amended, the rules and regulations promulgated thereunder, State
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company's securities may then be traded.
The Company shall not be obligated to file any registration statement under any
applicable securities laws to permit the purchase or issuance of any Shares
under the Plan, and accordingly any certificates for Shares may have an
appropriate legend or statement of applicable restrictions endorsed thereon.
Each participant and any person deriving its rights from any participant shall,
as a condition to the purchase or issuance of any Shares under the Plan, deliver
to the Company an agreement or certificate containing such representations,
warranties and covenants as the Company may deem necessary or appropriate to
ensure that the issuance of Shares is not required to be registered under any
applicable securities laws.

b. CALIFORNIA PARTICIPANTS. If an Award shall be made to a participant based in
California, then such Award shall meet the additional requirements set forth in
Appendix I.

SECTION 15. GENERAL TERMS.

a. NONTRANSFERABILITY OF AWARDS. No Award (other than vested Awards of Shares)
may be transferred, assigned, pledged or hypothecated by any participant during
the participant's lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process, except by beneficiary
designation, will or the laws of descent and distribution. Subject to the
limitations contained in this Section, an Option or other right to acquire
Shares under the Plan, may be exercised during the lifetime of the participant
only by the participant or by the participant's guardian or legal
representative. Such Option or other right shall not be transferable and shall
be exercisable only by the participant to whom such right was granted, except in
the case of a transfer by the participant to its affiliate with the prior
written consent of the Board of Directors in its sole discretion.

b. RESTRICTIONS ON TRANSFER OF SHARES. Any Shares issued under the Plan shall be
subject to such vesting and special forfeiture conditions, repurchase rights,
rights of first offer and other transfer restrictions as the Board of Directors
may determine. Such restrictions shall be set forth

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in the applicable Restricted Stock Agreement or Stock Option Agreement, and
shall apply in addition to any restrictions that may apply to holders of Shares
generally.

c. WITHHOLDING REQUIREMENTS. As a condition to the receipt or purchase of Shares
pursuant to an Award, a participant shall make such arrangements as the Board of
Directors may require for the satisfaction of any federal, State, local or
foreign withholding obligations that may arise in connection with such receipt
or purchase. The participant shall also make such arrangements as the Board of
Directors may require for the satisfaction of any federal, State, local or
foreign withholding obligations that may arise in connection with the
disposition of Shares acquired pursuant to an Award.

d. NO RETENTION RIGHTS. Nothing in the Plan or in any Award granted under the
Plan shall confer upon a participant any right to continue in Service for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company (or any Parent or Subsidiary employing or retaining
the participant) or of the participant, which rights are hereby expressly
reserved by each, to terminate his or her Service at any time and for any
reason, with or without Cause.

e. UNFUNDED PLAN. Participants shall have no right, title or interest whatsoever
in or to any investments which the Company may make to aid it in meeting its
obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of
any kind, nor a fiduciary relationship between the Company and any participant,
beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company under the Plan,
such right shall be no greater than the rights of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts. The Plan
is not intended to be subject to the Employee Retirement Income Security Act of
1974, as amended.

SECTION 16. DURATION AND AMENDMENTS.

a. TERM OF THE PLAN. The Plan, as set forth herein, shall become effective on
the date of its adoption by the Board of Directors, subject to the approval of
the majority of the Company's shareholders. If a majority of the shareholders
fail to approve the Plan within 12 months of its adoption by the Board of
Directors, any Awards that have already been made shall be rescinded, and no
additional Awards shall be made thereafter under the Plan. The Plan shall
terminate automatically on the day preceding the tenth anniversary of its
adoption by the Board of Directors unless earlier terminated pursuant to
Subsection (b) below.

b. RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may amend,
suspend or terminate the Plan at any time and for any reason; provided, however,
that any amendment of the Plan (except as provided in Section 13) which
increases the maximum number of Shares issuable to any person or available for
issuance under the Plan in the aggregate, changes the legal entity authorized to
make Awards under this Plan from the Company (or its successor) to any other
legal entity or which materially changes the class of persons who are eligible
for the grant of

                                       9

<PAGE>

ISOs, shall be subject to the approval of the Company's shareholders.
Shareholder approval shall not be required for any other amendment of the Plan.

c. EFFECT OF AMENDMENT OR TERMINATION. Any amendment of the Plan shall not
adversely affect in any material respect any participant's rights under any
Award previously made or granted under the Plan without the participant's
consent. No Shares shall be issued or sold under the Plan after the termination
thereof, except pursuant to an Award granted prior to such termination. The
termination of the Plan shall not affect any Awards outstanding on the
termination date.

d. MODIFICATION, EXTENSION AND ASSUMPTION OF AWARDS. Within the limitations of
the Plan, the Board of Directors may modify, extend or assume outstanding Awards
or may provide for the cancellation of outstanding Awards in return for the
grant of new Awards for the same or a different number of Shares and at the same
or a different price. The foregoing notwithstanding, no modification of an
Awards shall, without the consent of the participant, materially impair the
participant's rights or increase the participant's obligations under such Award
or impair the economic value of any such Award.

SECTION 17. DEFINITIONS.

a. "AFFILIATE" of any particular Person means any other Person controlling,
controlled by or under common control with such particular Person or, with
respect to any individual, such individual's spouse and descendants (whether
natural or adopted) and any trust, partnership, limited liability company or
similar vehicle established and maintained solely for the benefit of (or the
sole members or partners of which are) such individual, such individual's spouse
and/or such individual's descendants.

b. "AWARD" shall mean the grant of an Option, Stock Appreciation Right, Stock
Award, Stock Unit, or Dividend Equivalent Right under the Plan.

c. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company, as
constituted from time to time.

d. "CAUSE" shall mean with respect to a participant "Cause" as defined in any
employment agreement between the participant and the Company (or, if applicable,
the Subsidiary employing the participant) or if the participant is not a party
to an employment agreement or "cause" is not defined therein, the following
unless another meaning is specifically provided by the Board of Directors or in
the participant's Award agreement:

         (i)      Any conviction or plea of guilty or nolo contendere to a
                  felony,

         (ii)     Any willful misconduct, or

         (iii)    Any willful breach of any written policy or any confidential
                  or proprietary information, non-compete or non-solicitation
                  covenant for the benefit of the Company or any of its
                  affiliates.

                                       10

<PAGE>

e. "CHANGE IN CONTROL" shall mean the consummation of a transaction, whether in
a single transaction or in a series of related transactions that are consummated
contemporaneously (or consummated pursuant to contemporaneous agreements), with
any other party or parties, other than an Affiliate of THL, on an arm's-length
basis, pursuant to which (a) a party or group (as defined under Rule 13d under
the Securities Exchange Act of 1934, as amended) who is not a stockholder of the
Company on December 19, 2003, acquires, directly or indirectly (whether by
merger, stock purchase, recapitalization, reorganization, redemption, issuance
of capital stock or otherwise), more than 50% of the voting stock of the
Company, (b) such party or parties, directly or indirectly, acquire assets
constituting all or substantially all of the assets of the Company and its
subsidiaries on a consolidated basis, or (c) prior to an initial public offering
of the Company common stock pursuant to an offering registered under the
Securities Act, Thomas H. Lee Equity Fund V, L.P., a Delaware limited
partnership, and its affiliates, cease to have the ability to elect, directly or
indirectly, a majority of the Board of Directors.

A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.

f. "CODE" shall mean the Internal Revenue Code of 1986, as amended.

g. "COMMITTEE" shall mean a committee of the Board of Directors, as described in
Section 2(a).

h. "COMPANY" shall mean THL Bedding Holding Company, a Delaware corporation.

i. "DISABILITY" shall mean with respect to a participant, (i) "disability" as
defined in any employment agreement between the between the participant and the
Company (or, if applicable, the Subsidiary employing the participant) or (ii) if
the participant is not a party to an employment agreement or "disability" is not
defined therein, the participant's inability to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment, as determined by the Board of Directors in its sole discretion,
unless another meaning is specifically provided in the participant's Award
agreement; provided, however, that in either case and solely for purposes of
determining whether an Option continues to qualify as an ISO, Disability shall
have the meaning described in Section 22(e)(3) of the Code.

j. "DIVIDEND EQUIVALENT RIGHT" shall mean an Award that entitles the holder to
receive for each eligible Share that is subject to (or referenced by) such Award
an amount equal to the dividends paid on one Share at such time as dividends are
otherwise paid to shareholders of the Company or, if later, when the Award
becomes vested.

k. "FAIR MARKET VALUE" shall mean the fair market value of a Share, as
determined by the Board of Directors in good faith. Such determination shall be
conclusive and binding on all persons

l. "GOOD REASON" shall mean with respect to a participant "Good Reason" as
defined in any employment agreement between the participant and the Company (or,
if applicable, the Subsidiary employing the participant) or if the participant
is not a party to an employment

                                       11

<PAGE>

agreement or "good reason" is not defined therein, the following unless another
meaning is specifically provided by the Board of Directors or in the
participant's Award agreement:

         (i)      Any reduction in a participant's base salary;

         (ii)     Any requirement that a participant be required to relocate his
                  place of employment thirty-five (35) or more miles away from
                  his current place of employment, which new location is also
                  thirty-five (35) or more miles away from the participant's
                  residence.

m. "INITIAL PUBLIC OFFERING" shall mean a firm commitment underwritten public
offering of Shares or other event the result of which is that Shares are
tradable on the New York Stock Exchange, American Stock Exchange, NASDAQ
National Market or similar market system.

n. "ISO" shall mean an incentive stock option described in Section 422(b) of the
Code.

o. "NONSTATUTORY OPTION" shall mean a stock option not described in Sections
422(b) of the Code.

p. "OPTION" shall mean an ISO or Nonstatutory Option granted under the Plan and
entitling the holder to purchase Shares.

q. "PARENT" shall mean any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of the corporations other
than the Company owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. A corporation that attains the status of a Parent on a date after
the adoption of the Plan shall be considered a Parent commencing as of such
date.

r. "PERSON" shall be construed broadly and shall include, without limitation, an
individual, a partnership, an investment fund, a limited liability company, a
corporation, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

s. "PLAN" shall mean this THL Bedding Holding Company Equity Incentive Plan.

t. "RECAPITALIZATION" shall mean an event or series of events affecting the
capital structure of the Company such as a stock split, reverse stock split,
stock dividend, distribution, recapitalization, combination or reclassification
of the Company's securities.

u. "SERVICE" shall mean service as an employee, director or consultant.

v. "SHARE" shall mean one share of Class B common stock of the Company, with a
par value of $.01 per Share.

w. "STOCK APPRECIATION RIGHT" shall have the meaning described in Section 7(a).

x. "STOCK AWARD" shall have the meaning described in Section 8(a).

                                       12

<PAGE>

y. "STOCK UNIT" shall have the meaning described in Section 9(a).

z. "SUBSIDIARY" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

aa. "THL" means Thomas H. Lee Equity Fund V, L.P., a Delaware limited
partnership, Thomas H. Lee Parallel Fund V, L.P., Thomas H. Lee Cayman Fund V,
L.P., 1997 Thomas H. Lee Nominee Trust, Thomas H. Lee Investors Limited
Partnership, Putnam Investments Holdings, LLC, Putnam Investments Employees'
Securities Company I LLC, and Putnam Investments Employees' Securities Company
II, LLC.

SECTION 18. MISCELLANEOUS.

a. CHOICE OF LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, as such laws are applied to
contracts entered into and performed in such State.

b. EXECUTION. To record the adoption of the Plan by the Board of Directors, the
Company has caused its authorized officer to execute the same.

                                               THL BEDDING HOLDING COMPANY

                                               By: /s/ William Creekmuir

                                               Title: President

                                       13

<PAGE>

                                   APPENDIX I
                     CALIFORNIA SECURITIES LAW REQUIREMENTS.

The terms of this Appendix I apply only to Awards that would be subject to
Section 25110 of the California Corporations Code or any successor law but for
the exemption contained in Section 25102(o) of the California Corporation Code
(or any successor law). For purposes of determining the applicability of the
California securities law requirements contained in this Subsection, all Awards
shall be deemed made in the State in which the participant is principally
employed by the Company or any Parent or Subsidiary (as determined by the
employer's records) on the date of grant or issuance of the Award. Except as
modified by the provisions of this Appendix I, all the other relevant provisions
of the Plan shall be applicable to such Awards.

                  (i)      Number of Securities. At no time shall the total
         number of securities issuable upon exercise of all outstanding Options
         and the total number of Shares provided for under this or any stock
         bonus or similar plan or agreement of the Company exceed the applicable
         percentage calculated in accordance with Title 10 California Code of
         Regulations, Chapter 3, Subchapter 2, Article 4, Subarticle 4, Section
         260.140.45.,

                  (ii)     Exercise Price. The Exercise Price of an Option shall
         not be less than eighty-five percent (85%) of the Fair Market Value on
         the date of grant (one hundred ten percent (110%) of the Fair Market
         Value on the date of grant for an Option granted to Ten Percent
         Shareholders).

                  (ii)     Purchase Price. The purchase price of an Award of
         Shares shall not be less than eighty-five percent (85%) of the Fair
         Market Value on the date of issuance (one hundred percent (100%) of the
         Fair Market Value on the date of issuance for an Award granted to Ten
         Percent Shareholders).

                  (iv)     Vesting and Exercisability. Except in the case of an
         Option granted to a Consultant, officer of the Company (or any Parent
         or Subsidiary), or any member of the Board of Directors, each Option
         shall become exercisable and vested with respect to at least twenty
         percent (20%) of the total number of Shares subject to such Option each
         year, beginning no later than one (1) year after the date of grant.

                  (v)      Repurchase Rights. Except in the case of an Award
         granted or issued to a Consultant, officer of the Company (or any
         Parent or Subsidiary), or any member of the Board of Directors, any
         rights of the Company to repurchase Shares acquired under the Plan
         applicable to a participant whose Service terminates:

                  (A)      Shall be exercised by the Company (if at all) within
                           ninety (90) days after the date the participant's
                           Service terminates (or for Shares upon the exercise
                           of an Award after Service terminates, within ninety
                           (90) days after the date of such exercise) and shall
                           terminate on the date of an Initial Public Offering,
                           and

                  (B)      Shall lapse at the rate of at least twenty percent
                           (20%) of the Shares subject to such Award per year
                           (regardless of the portion of the Award exercised or
                           exercisable), with the initial lapse to occur no
                           later than one (1) year after the date of grant, to
                           the extent the repurchase right permits repurchase at
                           less than

                                       1
<PAGE>

                           Fair Market Value. Any repurchase right shall not
                           be exercisable for less than the original purchase
                           price paid by a participant.

                  (v)      Limited Transferability Rights.

                  (A)      A Nonstatutory Option or other right to acquire
                           shares (other than an ISO) may, to the extent
                           permitted by the Board of Directors, be assigned in
                           whole or in part during the participant's lifetime
                           (1) as a gift to one or more members of the
                           participant's immediate family or (2) by instrument
                           to an inter vivos or testamentary trust in which such
                           Award is to be passed to beneficiaries upon the death
                           of the trustor (settlor). The terms applicable to the
                           assigned portion shall be the same as those in effect
                           for the Award immediately prior to such assignment
                           and shall be set forth in such documents issued to
                           the assignee as the Board of Directors may deem
                           appropriate.

                  (B)      Except as provided in Subsection (A) above, an Award
                           may not be assigned or transferred other than by will
                           or by the laws of descent and distribution following
                           the participant's death.

         (vi)     Financial Reports. The Company shall deliver a financial
                  statement at least annually to each participant holding Awards
                  or Shares issued under the Plan, unless such participant is a
                  key employee whose duties in connection with the Company
                  assure such individual access to equivalent information.

                                       2<PAGE>

                                                                   EXHIBIT 10.27

                           THL BEDDING HOLDING COMPANY

                           DEFERRED COMPENSATION PLAN

1.0      PURPOSE. THL Bedding Holding Company, a Delaware corporation ("THL
         Bedding"), (herein, together with its successors, referred to as the
         "Company") by means of this nonqualified deferred compensation plan
         (the "Plan") desires to grant certain employees of THL Bedding or its
         subsidiaries (the "Participants") the right to participate in a deemed
         investment in Class A Common Stock, $.01 par value per share, of the
         Company, and under certain circumstances, Class B Common Stock, $0.01
         par value per share, of the Company, in exchange for the cancellation
         of certain stock options granted to Participants under the Simmons
         Holdings, Inc. 1999 Stock Option Plan, as amended, the Simmons
         Holdings, Inc. Management Stock Incentive Plan, the Simmons Holdings,
         Inc. 2002 Stock Option Plan and the Stock Appreciation Rights Plan
         ("Options") as reflected in those certain Option Cancellation
         Agreements, dated as of December 19, 2003. The Plan shall be effective
         as of December 19, 2003 (the "Effective Date"). This Plan is a
         compensatory benefit plan within the meaning of Rule 701 of the
         Securities Act of 1933, as amended (the "Securities Act") and the
         issuance of Common Stock pursuant to the Plan is intended to qualify
         for the exemption from registration under the Securities Act provided
         by Rule 701.

2.0      DEFINITIONS

The following terms shall have the following meanings unless the context
indicates otherwise:

2.1      "Affiliate" shall mean, as to any Person, a person that directly, or
         indirectly through one or more intermediaries, controls, or is
         controlled by, or is under common control with, such Person.

2.2      "Board" shall mean the Board of Directors of the Company.

2.3      "Call Amount" shall mean (A) with respect to any Senior Manager or any
         Participant who is not a Senior Manager who has been terminated by the
         Company without Cause, the Fair Market Value of the number of shares of
         Class A Common Stock (or following a Public Offering, Common Stock)
         that such Senior Manager or Participant is deemed to own under Section
         4.1 hereof, measured as of the date of such Senior Manager's or
         Participant's termination of employment, which amount shall represent
         the total amount then deemed held in the Deferred Compensation Account,
         (B) with respect to any Participant who is not a Senior Manager who has
         been terminated by the Company for Cause or voluntarily leaves the
         Company, the lesser of (i) the Fair Market Value of the number of
         shares of Class A Common Stock (or following a Public Offering, Common
         Stock) that such Participant is deemed to own under Section 4.1 hereof,
         measured as of the date of such Participant's termination of
         employment, and (ii)

<PAGE>

         the Deferred Amount, which amount, in either case, shall represent the
         total amount then deemed held in the Deferred Compensation Account.

2.4      "Cause" with respect to any Participant who is not a Senior Manager
         shall mean any one or more of the following: (a) the Participant shall
         have been convicted of, or shall have pleaded guilty or nolo contendere
         to, any felony or a crime involving fraud, personal dishonesty or moral
         turpitude (whether or not in connection with his employment); (b) the
         Participant shall have repeatedly or consistently failed or refused to
         perform his or her duties or fulfill his or her responsibilities to the
         Company, after verbal notice and ten (10) days opportunity to cure; (c)
         the Participant shall have breached any nondisclosure or other
         restrictive covenants to which the Participant is subject; or (d) the
         Participant shall have committed any fraud, embezzlement,
         misappropriation of funds, breach of fiduciary duty or other act of
         dishonesty against the Company.

2.5      "Change of Control" shall mean the consummation of a transaction,
         whether in a single transaction or in a series of related transactions
         that are consummated contemporaneously (or consummated pursuant to
         contemporaneous agreements), with any other party or parties, other
         than an Affiliate of any of the THL Holders, on an arm's-length basis,
         pursuant to which (a) a party or group (as defined under Rule 13d under
         the Securities Exchange Act of 1934, as amended) who is not a
         stockholder of the Company on the Effective Date, acquires, directly or
         indirectly (whether by merger, stock purchase, recapitalization,
         reorganization, redemption, issuance of capital stock or otherwise),
         more than 50% of the voting stock of the Company, (b) such party or
         parties, directly or indirectly, acquire assets constituting all or
         substantially all of the assets of the Company and its subsidiaries on
         a consolidated basis, or (c) prior to an initial public offering of the
         Company common stock pursuant to an offering registered under the
         Securities Act, Thomas H. Lee Equity Fund V, L.P., a Delaware limited
         partnership, and its affiliates cease to have the ability to elect,
         directly or indirectly, a majority of the Board of Directors of the
         Company.

2.6      "Class A Common Stock" shall mean the Class A Common Stock, $0.01 par
         value per share, of the Company.

2.7      "Committee" shall mean, as the case may be, the Board of Directors of
         the Company or a committee appointed by the Board of Directors of the
         Company.

2.8      "Common Stock" shall mean the Class B Common Stock of the Company or
         other securities issued in exchange for or upon conversion of Class A
         Common Stock in accordance with Section 3.6 of the Securityholders
         Agreement.

2.9      "Deferred Amount" shall have the meaning set forth in Section 4.1.

                                       2

<PAGE>

2.10     "Deferred Compensation Account" shall mean a notional account
         established and maintained by the Company for a Participant which shall
         record the deemed investment in Class A Common Stock or Common Stock,
         as the case may be, with respect to each Participant under Section 4.1
         below. This notional account shall be established by the Company for
         bookkeeping purposes only, and no separate funds shall be segregated by
         the Company for the benefit of the Participant.

2.11     "Employee Put Amount" shall mean the lesser of (a) Fair Market Value of
         the number of shares of Class A Common Stock (or following a Public
         Offering, Common Stock) that the Participant is deemed to own under
         Section 4.1 hereof, measured as of the date of such Participant's
         termination of employment, and (b) the Deferred Amount, which amount,
         in either case, shall represent the total amount then deemed held in
         the Deferred Compensation Account.

2.12     "Fair Market Value" shall be determined by the Board of Directors in
         good faith. Upon such determination, the Company shall promptly provide
         the Participant with notice of the Fair Market Value so determined (the
         "Notice"). In the event of a determination of Fair Market Value with
         respect to Class A Common Stock or Common Stock owned by a Senior
         Manager, such Senior Manager shall have the right to contest such
         determination in good faith, by delivery of a written notice to the
         Company within ten (10) days after the Notice is delivered. If the
         Senior Manager does not notify the Company of his or her disagreement
         with the Fair Market Value determination set forth in the Notice, then
         the Fair Market Value shall be as set forth in the Notice. If the
         Senior Manager does notify the Company of his or her disagreement with
         the Fair Market Value set forth in the Notice within such 10-day time
         period, then the Company must retain an independent third party
         appraiser to make such Fair Market Value determination (the "Final
         Determination"), and such Final Determination shall govern; provided,
         however, that if the Final Determination of Fair Market Value equals
         less than 110% of the Fair Market Value set forth in the Notice, then
         the Senior Manager shall pay for all costs and expenses of the third
         party appraiser retained by the Company.

2.13     "Financing Default" shall mean any event of default or breach under (i)
         that certain Credit and Guaranty Agreement, dated as of December 19,
         2003 by and among THL-SC Bedding Company, certain of its subsidiaries,
         as Guarantors, Goldman Sachs Credit Partners, L.P., as sole bookrunner,
         joint lead arranger and co-syndication agent, certain Lenders, UBS
         Securities LLC, as joint lead arranger and co-syndication agent, and
         Deutsche Bank, A.G., Cayman Islands Branch, as administrative agent for
         Lenders, as amended, modified, restated or refinanced from time to
         time, (ii) that certain senior unsecured floating rate facility by and
         among THL-SC Bedding Company, certain of its subsidiaries, certain
         lenders, party thereto and Deutsche Bank, A.G., Cayman Islands Branch,
         as

                                       3

<PAGE>

         administrative agent, as amended, modified, restated or refinanced from
         time to time, (iii) the covenant contained in Section __ of the
         Indenture which permits repurchases by the Company of employee stock
         not exceeding a specified amount in the aggregate, or (iii) any other
         similar notes or instruments that the Company or its Subsidiaries may
         issue from time to time.

2.14     "Indenture" shall mean that certain Indenture dated as of December 19,
         2003 governing the Company's Senior Subordinated Notes due 2013, as
         amended, modified, restated or refinanced from time to time.

2.15     "Options" shall have the meaning set forth in the preamble.

2.16     "Option Cancellation Agreement" shall mean an agreement between a
         Participant and the Company canceling Options pursuant to the terms of
         the Stock Purchase Agreement made as of November 17, 2003 (the
         "Purchase Agreement"), by and among THL Bedding Company, a Delaware
         corporation, Simmons Holdings, Inc., a Delaware corporation, and the
         sellers party thereto, and providing for the establishment of deferred
         compensation amounts resulting from the cancellation of Options.

2.17     "Person" shall mean any person or entity of any nature whatsoever,
         specifically including an individual, a firm, a company, a corporation,
         a partnership, or a trust.

2.18     "Public Offering" means a sale of Common Stock to the public in an
         offering pursuant to an effective registration statement filed with the
         Securities Exchange Commission pursuant to the 1933 Act, as then in
         effect, provided that a Public Offering shall not include an offering
         made in connection with a business acquisition or combination or an
         employee benefit plan.

2.19     "Public Offering Share Amount" shall mean that number of shares of
         Common Stock equal to (i) the number of shares of Common Stock deemed
         held in such Participant's Deferred Compensation Account, multiplied by
         (ii) a fraction, the numerator of which shall equal the number of
         shares of Common Stock to be sold by THL in a Public Offering and the
         denominator of which shall equal the aggregate number of shares of
         Common Stock held by THL immediately prior to such Public Offering.

2.20     "Registration Rights Agreement" shall mean the Registration Rights
         Agreement, dated as of December 19, 2003, by and among the Company and
         its shareholders.

                                       4

<PAGE>

2.21     Securityholders Agreement" shall mean the Securityholders' Agreement,
         dated as of December 19, 2003, by and among the Company and the other
         parties thereto.

2.22     "Senior Manager" shall mean each of Charles Roy Eitel, William S.
         Creekmuir, Robert W. Hellyer and Rhonda C. Rousch, and/or any other
         Persons designated by the Board as Senior Managers (collectively, the
         "Senior Managers").

2.23     "Senior Manager Put Amount" shall mean the Fair Market Value of the
         number of shares of Class A Common Stock (or following a Public
         Offering, Common Stock) that the Senior Manager is deemed to own under
         Section 4.1 hereof, measured as of the date of such Senior Manager's
         termination of employment, which amount shall represent the total
         amount then deemed held in the Deferred Compensation Account.

2.24     "Subsidiary" shall mean a corporation of which the Company directly or
         indirectly owns more than 50% of the voting stock or any other business
         entity in which the Company directly or indirectly has an ownership
         interest of more than 50%.

2.25     "THL Holders" shall mean, collectively, Thomas H. Lee Equity Fund V,
         L.P., a Delaware limited partnership, Thomas H. Lee Parallel Fund V,
         L.P., Thomas H. Lee Cayman Fund V, L.P., 1997 Thomas H. Lee Nominee
         Trust, Thomas H. Lee Investors Limited Partnership, Putnam Investments
         Holdings, LLC, Putnam Investments Employees' Shares Company I LLC and
         Putnam Investments Employees' Shares Company II, LLC.

2.26     "THL Sale" shall have the meaning set forth in Section 4.2(c) of this
         Plan.

3.0      ELIGIBILITY AND PARTICIPATION. Any employee of the Company or any of
         its Subsidiaries as of the Effective Date who has entered into an
         Option Cancellation Agreement.

4.0      DEFERRED COMPENSATION ACCOUNT.

4.1      ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNT. In connection with a
         Participant's entering into an Option Cancellation Agreement, the
         Company shall make an initial credit, in the form of a deemed
         investment in Class A Common Stock, to the Participant's Deferred
         Compensation Account, in an amount equal to that as set forth in the
         Participant's Option Cancellation Agreement as a result of the
         cancellation of Options (the "Deferred Amount"). Following a Public
         Offering, the Company shall credit the Participant's Deferred
         Compensation Account as set forth in Section 4.2(d) below.

4.2      CREDITS AND PAYOUTS.

                                       5

<PAGE>

         (a) General. With respect to the Deferred Compensation Account, each
         Participant's Deferred Amount shall be deemed invested (i.e., an actual
         investment will not be made), as of the Effective Date through the
         effective time of a Public Offering, in Class A Common Stock of the
         Company. The Company shall credit a Participant's Deferred Compensation
         Account with, and make payments with respect to, amounts that would be
         received by the Deferred Compensation Account if such Deferred
         Compensation Account were actually invested in the manner set forth in
         the preceding sentence in Class A Common Stock. Upon a Public Offering,
         payments will be distributed to the Participant and the Participant's
         Deferred Compensation Account shall be credited, in each case as set
         forth in Section 4.2(d) below. All amounts in a Participant's Deferred
         Compensation Account shall be subject to the claims of the creditors of
         the Company. The Participants shall have no rights as a stockholder
         with respect to their Deferred Compensation Accounts deemed invested in
         Class A Common Stock or Common Stock until such time as shares of
         capital stock are distributed to the Participants in accordance with
         the terms hereof. Any time a distribution (other than a distribution
         described in Section 4.2(b)), either in cash or other property, is made
         to a Participant with respect to such Participant's Deferred
         Compensation Account hereunder, the number of shares of capital stock
         deemed held by the Deferred Compensation Account shall be reduced (or
         terminated, if applicable) to the extent of such distribution.

         (b) Charter. The Company shall credit the Participant's Deferred
         Compensation Account and make distributions to such Participant (at the
         same time as such distributions are made to holders of Class A Common
         Stock) in the amount per share of Class A Common Stock deemed held in
         such Participant's Deferred Compensation Account of any distribution
         made with respect to each share of Class A Common Stock pursuant to or
         in accordance with the terms of the Company's then existing Amended and
         Restated Certificate of Incorporation, as such may be amended from time
         to time (the "Charter"). In the event the Company distributes non-cash
         property to holders of Class A Common Stock pursuant to the Charter,
         the Company shall distribute the same form of consideration to the
         Participant.

         (c) Tag-Along. In the event that the THL Holders sell any shares of
         Class A Common Stock to a buyer in a transaction that triggers
         "tag-along" rights under Section 3.2(a) of the Securityholders'
         Agreement, the Company shall credit a Participant's Deferred
         Compensation Account and make a distribution to such Participant, in an
         amount equal to the result of (x) the fraction of outstanding Class A
         Common Stock being purchased by an unrelated buyer (including, for
         purposes of this percentage calculation, the number of shares of Class
         A Common Stock deemed held in all Deferred Compensation Accounts)
         multiplied by (y) the number of shares of Class A Common Stock deemed
         held in such Participant's Deferred Compensation Account multiplied by
         (z) the amount per share of Class A Common Stock of cash or fair market
         value of any property, as determined by the Board of Directors of the
         Company, received by the THL Holders in exchange for their Class A
         Common Stock. Distributions to a Participant pursuant to this

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<PAGE>

         Section 4.1(c) shall be in the same form of consideration (whether cash
         or non-cash consideration) paid to the THL Holders by the buyer in such
         sale.

         (d) Public Offering. Upon a Public Offering approved by the holders of
         a majority of the Class A Common Stock, the Company shall (i) credit
         each Participant's Deferred Compensation Account and make a payment in
         cash to such Participant in an amount equal to the amount such
         Participant would be entitled to receive in cash, if any, under Section
         3.6(c) of the Securityholders' Agreement if such Deferred Compensation
         Account were actually invested in Class A Common Stock (the "IPO Cash
         Payment"), and (ii) credit such Participant's Deferred Compensation
         Account, in the form of a deemed investment in Common Stock, in an
         amount equal to the same number of shares of Common Stock the
         Participant would have been entitled to receive in exchange for shares
         of Class A Common Stock pursuant to Section 3.6(b) of the
         Securityholders' Agreement if such Participant actually owned Class A
         Common Stock (the "Class B Common Credit"). Thereafter, the Company
         shall distribute to the Participant such number of shares of Class B
         Common Stock from his or her Deferred Compensation Account equal to the
         number of shares that such Participant would be able to register under
         Section 2.1 or 2.2 of the Registration Rights Agreement, as the case
         may be, if Participant were an Employee holder under the Registration
         Rights Agreement and actually held all of the shares of Class B Common
         Stock deemed held in his or her Deferred Compensation Account, if any.
         Any such distribution of shares of Class B Common Stock shall be made
         immediately prior to the effective date of any registration in which
         the Participant would be entitled to participate under Section 2.1 or
         2.2 of the Registration Rights Agreement. Following the IPO Cash
         Payment, if any, and the Class B Common Credit, the Participant's
         Deferred Compensation Account shall be deemed invested only in Common
         Stock and there will no longer be any deemed investment in Class A
         Common Stock.

         (e) Change of Control. Upon a Change of Control, the Company shall
         credit to each Participant's Deferred Compensation Account and make a
         distribution to such Participant in an amount equal to the result of
         (x) the percentage of proceeds to the holders of the class of stock
         deemed held in the Participant's Deferred Compensation Account
         (including, for purposes of this percentage calculation, the
         Participants as holders of deemed shares of such class of stock)
         multiplied by (y) the number of shares of the applicable class of stock
         deemed held in such Participant's Deferred Compensation Account
         multiplied by (z) the amount per share of the applicable class of stock
         of cash or fair market value of any property, as determined by the
         Board of Directors of the Company, received by the holders of the
         applicable class of stock, in exchange for shares of the applicable
         class of stock. Distributions to a Participant pursuant to this Section
         4.1(e) shall be in the same form of consideration (whether cash or
         non-cash consideration) paid to the holders of Class A Common Stock in
         connection with such Change of Control, or if such Change of Control
         occurs after a Public Offering, by the holders of the Common Stock.
         Each Participant shall be required to make to the same representations,
         warranties, covenants, indemnities and agreements as THL agrees

                                       7

<PAGE>

         to make in connection with the Change of Control (except that in the
         case of representations and warranties pertaining specifically to, or
         covenants made specifically by, THL, the Participants shall make
         comparable representations and warranties pertaining specifically to
         (and, as applicable, covenants by) themselves), and must agree to bear
         his or its ratable share (which shall be proportionate based on the
         proceeds received) of all liabilities to the acquirer arising out of
         representations, warranties and covenants (other than those
         representations, warranties and covenants that pertain specifically to
         a given stockholder), indemnities or other agreements made in
         connection with Change of Control. Each Participant will be required to
         bear its, his or her pro-rata share (based upon the proceeds received)
         of all reasonable and customary costs of the Change of Control, to the
         extent such costs are not otherwise paid by the acquirer.

         (f) Put Right.

                  (i)      If any Senior Manager's employment with the Company
         and its subsidiaries is terminated by the Company without "cause" or
         for by the Senior Manager for "good reason" (as such terms are defined
         in his or her employment agreement with the Company), such Senior
         Manager shall have the right, exercisable within thirty (30) days of
         his or her termination of employment and subject to the provisions of
         Section 4.3 hereof, to require a distribution by the Company of an
         amount equal to the Senior Manager Put Amount (subject to the
         provisions of Section 4.3 hereof).

                  (ii)     In the case of a Participant who is not a Senior
         Manager, if such Participant's employment with the Company and its
         subsidiaries is terminated by the Company without Cause, such
         Participant shall have the right, exercisable within thirty (30) days
         of his or her termination of employment and subject to the provisions
         of Section 4.3 hereof, to require a distribution by the Company of an
         amount equal to the Employee Put Amount (subject to the provisions of
         Section 4.3 hereof).

                  (iii)    If such Participant desires to exercise such put
         right, such Participant shall send a written notice to the Company
         setting forth such demand within the period described above. The
         Company shall make such distribution on the later of the 30th day after
         the giving of such notice and the date that is 10 business days after
         the final determination of Fair Market Value. Subject to the provisions
         of Section 4.3, such distribution shall be made in cash, by cashier's
         or certified check or by wire transfer of immediately available funds
         to an account designated by such Senior Manager; provided, however,
         that if the Senior Manager Put Amount exceeds such Senior Manager's
         Deferred Amount, then the amount of such excess (the "Excess Amount")
         shall be payable by the Company in three equal installments without
         interest on the first, second and third anniversary of the Termination
         Date.

         (g) Call Rights. If any Participant's employment on a full-time basis
         with the Company or its subsidiaries ceases for any reason, within 120
         days after such date

                                       8

<PAGE>

         (or if a Cash Deferral Condition exists, then within 120 days after the
         first date no such Cash Deferral Condition exists), the Company shall
         have the right and option (the "Call Right") to distribute to such
         Participant, the Call Amount. If the Company desires to exercise its
         option to distribute the Call Amount, the Company shall, not later than
         the expiration of the applicable period described above, send written
         notice to the Participant. Subject to the provisions of Section 4.3,
         such distribution shall occur on the later of the 30th day after the
         giving of the Call Notice and the date that is 10 business days after
         the final determination of Fair Market Value. Subject to the provisions
         of Section 4.3, the Company shall make such distribution in cash, by
         cashier's or certified check payable to such Participant by wire
         transfer of immediately available funds to an account designated by
         such Participant. Notwithstanding the foregoing, the Company shall not
         have a Call Right in connection with a termination of employment due to
         the Participant's retirement as long as such Participant has reached
         the age of 59-1/2 as of such retirement date; provided, that such
         Participant shall have entered into a non-competition covenant
         acceptable to the Company in its sole discretion.

         (h) Term. Upon the tenth anniversary of the date hereof, Participant
         shall receive a total distribution of the amount then deemed held in
         the Deferred Compensation Account. Such distribution shall be in shares
         of Class A Common Stock.

4.3      RESTRICTIONS ON PAYMENT. If at any time the Company elects or is
         required to make a distribution under Sections 4.2(f) or (g) above, the
         Company shall pay the Put or Call Amount (i) first, by offsetting
         indebtedness, if any, owing from such Participant, to the Company and
         (ii) then, by the Company's delivery of cash (or other consideration
         with respect to payment of any Excess Amount) for the remainder of the
         purchase price, if any; provided that, if any such cash payment at the
         time such payment is required to be made would result (A) in a
         violation of any law, statute, rule, regulation, policy, order, writ,
         injunction, decree or judgment promulgated or entered by any federal,
         state, local or foreign court or governmental authority applicable to
         the Company or any of its subsidiaries or any of its or their property
         or (B) after giving effect thereto, a Financing Default, or (C) if the
         Board determines in good faith that immediately prior to such purchase
         there shall exist a Financing Default which prohibits such purchase,
         dividend or distribution ((A) through (C) collectively the "Cash
         Deferral Conditions"), the portion of the cash payment so affected may
         be made by the Company's delivery of a promissory note or senior
         preferred shares of the Company with a liquidation preference equal to
         the balance of the purchase price. The promissory note or senior
         preferred shares shall accrue interest or yield, as the case may be,
         annually at the "prime rate" published in The Wall Street Journal on
         the date of issuance, which interest or yield, as the case may be,
         shall be payable at maturity or upon payment of distributions by the
         Company. The value of each such senior preferred share shall as of its
         issuance be deemed to equal to (A) the portion of the cash payment paid
         by the issuance of such preferred shares divided by (B) the number of
         senior preferred shares so issued. Any senior preferred shares or the
         promissory note shall be redeemed or payable when and to

                                       9

<PAGE>

         the extent the Cash Deferral Condition which prompted their issuance no
         longer exists.

4.4      AWARD AGREEMENT. The establishment of a Deferred Compensation Account
         for any Participant shall be evidenced by an Option Cancellation
         Agreement that shall be signed by the Committee or its authorized
         delegate and the Participant. Such Option Cancellation Agreement shall
         set forth the deemed investment in Class A Common Stock initially
         credited to the Participant's Deferred Compensation Account.

5.0      ADMINISTRATION

5.1      RESPONSIBILITY. The Committee shall have the responsibility to
         administer the Plan in accordance with its terms and shall have the
         authority that may be necessary or helpful to enable it to discharge
         its responsibilities with respect to the Plan.

5.2      DELEGATION OF AUTHORITY. The Committee may delegate to one or more of
         its members, or to one or more agents, such administrative duties as it
         may deem advisable; provided, however, that any such delegation shall
         be in writing. In addition, the Committee, or any person to whom it has
         delegated duties under this Section 5.2, may employ one or more persons
         to render advice with respect to any responsibility the Committee or
         such person may have under the Plan. The Committee may employ such
         legal or other counsel, consultants and agents as it may deem desirable
         for the administration of the Plan and may rely upon any opinion or
         computation received from any such counsel, consultant or agent.

6.0      WITHHOLDING TAXES. The Company may require a Participant to reimburse
         the Company for any taxes required by any governmental authority to be
         withheld or otherwise deducted and paid by the Company or any
         Subsidiary in respect of the payment of any amounts paid under the
         Plan. In lieu thereof, the Company or Subsidiary shall have the right
         to withhold the amount of such taxes from any other payments due or to
         become due from the Company or the Subsidiary to the Participant upon
         such terms and conditions as the Committee shall prescribe.

7.0      AMENDMENT AND TERMINATION

7.1      TERMINATION AND AMENDMENT OF PLAN. The Board may amend, suspend or
         terminate the Plan at any time with or without prior notice; provided,
         however, that no action authorized by this Section 7.1 shall be
         effective with respect to any Participant without such Participant's
         express written consent.

8.0      MISCELLANEOUS

8.1      TRANSFERABILITY. Each Deferred Compensation Account under the Plan and
         any interest therein shall not be transferable otherwise than by will
         or the laws of

                                       10

<PAGE>

         descent and distribution. Any purported transfer of an award or any
         interest therein to a creditor of a Participant shall be void.

8.2      NO RIGHT, TITLE, OR INTEREST IN COMPANY ASSETS. Participants shall have
         no right, title, or interest whatsoever in or to any investments that
         the Company may make to aid it in meeting its obligations under the
         Plan. Nothing contained in the Plan, and no action taken pursuant to
         its provisions, shall create a trust of any kind, or a fiduciary
         relationship between the Company and any Participant, beneficiary,
         legal representative or any other person. Unless otherwise agreed in
         writing by the Company, a Participant shall not take any position
         inconsistent with such treatment by the Company. All payments to be
         made hereunder shall be paid from the general funds of the Company, and
         participants' right to payment is unsecured. The Plan is not intended
         to be subject to the Employee Retirement Income Security Act of 1974,
         as amended.

8.3      NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. The Participant's rights,
         if any, to continue to serve the Company as an employee shall not be
         enlarged or otherwise affected by his or her designation as a
         Participant under the Plan, and the Company or the applicable
         Subsidiary reserves the right to terminate the employment of any
         employee at any time.

8.4      GOVERNING LAW. The Plan, all awards granted hereunder, and all actions
         taken in connection herewith shall be governed by and construed in
         accordance with the laws of the State of Delaware without reference to
         principles of conflict of laws, except as superseded by applicable
         federal law.

8.5      OTHER BENEFITS. No award granted under the Plan shall be considered
         compensation for purposes of computing benefits under any retirement
         plan of the Company or any Subsidiary nor affect any benefits or
         compensation under any other benefit or compensation plan of the
         Company or any Subsidiary now or subsequently in effect.

                                       11

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