Document:

Exhibit 10.(iii)

 

INVESTMENT ADVISORY AGREEMENT

 

THIS AGREEMENT is entered into this 9th day of June, 2009 by and between EAGLE LIFE
INSURANCE COMPANY, a life insurance company domiciled in the State of Iowa (the
“Client”) and AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY, an Iowa
corporation (the “Advisor”).

 

WHEREAS, the Client is an indirect subsidiary of Advisor; and

 

WHEREAS, the Advisor has agreed to provide such investment advisory
services on the terms and conditions set forth herein; and

 

WHEREAS, the Client and Advisor acknowledge that all investment
advisory services provided under this Agreement are subject to the applicable
investment provisions of the Iowa Insurance Law and regulations and
interpretations thereunder as well as oversight by the Investment Committee of
the Client’s Board of Directors;

 

NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, agreements and conditions set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

 

1.               Retention of
Advisor.

 

a.               Client hereby
retains Advisor to act as investment advisor for Client’s general account investments,
including all earnings thereon, proceeds therefrom or in substitution therefore
(the “Account”) for a period of five (5) years and on the terms set forth
in this Agreement, including the attached Schedules.

 

b.              The Advisor hereby
accepts such appointment and agrees during such period to render the services
and to assume the obligations set forth in this Agreement.  The Advisor’s compensation is provided for
under this Agreement, and Advisor shall neither be entitled to nor receive any
additional compensation under this Agreement.

 

2.               Advisor
Authority.

 

a.               In compliance with
the guidelines, limitations and restrictions set forth in Section 2b and
Schedule B of this Agreement, the Advisor shall furnish a continuous investment
program for the Account and shall have full investment discretion as the Client’s
agent and attorney-in-fact to carry out the client’s decisions with respect to:

 

i.                  The acquisition
(by purchase, exchange, subscription or otherwise), the holding and the
disposition (by sale, exchange

 

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or otherwise) of Account assets;

 

ii.                                       What
portion, if any, of the Account assets shall be held in cash, cash equivalents
or other temporary investments;

 

iii.                                    Conversion
provisions, subscription rights and other rights or privileges which pertain to
the Account;

 

iv.                                   The
exercise of any voting or consent rights pertaining to any Account assets.

 

b.              In carrying out its
responsibilities under this Agreement, the Advisor acknowledges that its
management of the Account is expressly subject to the following guidelines,
limitations and restrictions:

 

i.                                          All
Account investments shall be made in compliance with the relevant investment
provisions of the Iowa Insurance Laws, including all qualitative and quantitative
limitations set forth therein;

 

ii.                                       All
Account investments are, in addition, subject to the Investment Policy and
Guidelines adopted by the Investment Committee of the Client’s Board of
Directors.  A copy of such Investment
Policy and Guidelines is attached as Schedule B hereto.

 

iii.                                    To
the extent necessary to comply with applicable law or to properly document
transactions, the Client may appoint officers of Advisor (or Advisor’s
designee) acceptable to the Client to be investment officers of the Client to
make investment decisions in accordance with this Agreement.  Upon not less than two (2) days prior
written notice to Advisor, the Client shall have the right, at Advisor’s
expense, to override any investment decisions as the Client reasonably determines
is not in conformity with this Agreement.

 

iv.                                   The
Advisor shall, within the guidelines, limitations and restrictions set forth in
this Agreement, have the exclusive right to manage the Account and may use and
rely upon such information and materials as it may deem pertinent (including
seeking advice from its affiliates).

 

v.                                      The
assets of the Account may be held by the bank, trust company or unaffiliated
broker-dealer acceptable to Advisor and appointed by the Client as custodian of
the Account.  The custodian shall at all
times be responsible for the physical

 

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custody of the assets of the Account and for
the collection of interest, dividends and other income attributable to the
assets of the Account.

 

vi.                                   The
Client does hereby authorize and empower the Advisor, and any officer of the
Advisor and any other individual or entity so designated by any officer of the
Advisor, to execute any and all documents and instruments which (s)he or it may
deem appropriate regarding the acquisition, holding or disposition of any
account asset, including without limitation executing proxies, consents,
endorsing securities, taking action with regard to class actions, plans or
reorganization or similar corporate transactions requiring shareholder vote and
generally exercising rights, power and privileges of the Client unless
otherwise directed by the Client; provided, however, that neither the Advisor
nor any such individual or entity shall have any power or authority by virtue
of the foregoing clause or otherwise under this Agreement to direct any
custodian for the Account (the “Custodian”), any broker, dealer or issuer, or
any of their respective agents, to deliver securities or other property or pay
cash to the Advisor or any of its agents except that Advisor may cause cash to
be withdrawn from the Account in accordance with this Agreement and mutually
agreed written procedures.

 

vii.                                The
Client agrees to provide the Advisor with any additional documentation
reasonably necessary to evidence the authority contemplated by this Agreement.

 

3.               Standard of Care.  In carrying out its duties hereunder, the
Advisor shall comply with all laws and regulatory requirements applicable to
the Client, including without limitation the other requirements of this
Agreement.  The Advisor shall be liable
and solely responsible for all of its actions and omissions, including without
limitation all activities and omissions constituting violations of any
applicable law or regulatory requirement.

 

4.               Compensation and
Expenses.

 

a.               The Client shall
pay Advisor for the services to be rendered by Advisor under this Agreement in
accordance with the fee schedule attached hereto as Schedule A.

 

b.              The Client shall pay
all expenses related to the Account including, but not limited to, any costs of
safekeeping, transport and acquisition and disposition, such as brokerage and
other transaction costs including, without limitation execution costs, custody
fees and margin costs.

 

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c.               Notwithstanding
anything herein to the contrary, compensation is limited to the actual costs
incurred without any profit factor included in said cost.

 

5.               Brokerage Orders

 

a.               Advisor shall place
orders for the execution of transactions with or through such brokers, dealers
or issuers as Advisors may select, unless the use of any particular
broker/dealer would adversely affect the Client’s other business or operations.

 

b.              Advisor may execute
brokerage transactions for the Account through brokers or dealers who also
provide Advisor with “research services”, as defined in section 28(e)(3) of
the Securities Exchange Act of 1934.  The
commission paid to such brokers may be in excess of the amount of commission
another broker would charge for the same transaction.  Such research services, moreover, may be
available to Advisor on a cash basis. 
Before effecting any such transaction, Advisor will determine in good
faith that the amount of such commission is reasonable, in relation to the value
of the brokerage and research services provided by such broker.

 

6.               Non-Exclusive
Advisory Services.  Subject to any
applicable legal or regulatory requirements, the Client agrees that the Advisor
may give advice and take action with respect to itself or any of its other
affiliates which may differ from the advice given or the timing or nature of
action taken with respect to the Account. 
Nothing in this Agreement shall limit or restrict the Advisor or any of
its directors, partners, officers, affiliates or employees from buying, selling
or trading in any securities or other assets for its or their own account or
accounts and the Client acknowledges that the Advisor may at any time acquire,
increase, decrease or dispose of positions in investments which are at the same
time being acquired, held or disposed of for the Account.

 

7.               Aggregation.  The Advisor is authorized in its discretion
to aggregate purchases and sales and other transactions made for the Account
with purchases and sales and other transactions in the same or similar
securities or instruments of the same issuer or counterparty with affiliates of
the Advisor.  In certain instances, the
execution broker/dealer may not deliver to the Account a separate confirmation
slip with respect to its participation in the aggregated transactions and, in
such event, the Advisor will advise the Client in writing of any purchase or
disposition of instruments for the Account with respect to any such aggregated
transaction.

 

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8.               Confirmation of
Trades.  The Client and the Advisor
will direct that confirmation of any transactions effected for the Account will
be sent in conformity with applicable law to the Client, with a copy to the
Advisor.

 

9.               Representations.

 

a.               The Client hereby
represents and warrants that it is authorized to enter into this Agreement and
that the employment of the Advisor as described herein is permitted by the Iowa
Insurance Laws and authorized by corporation action.  The Client shall provide the Advisor from
time to time with such information as the Advisor may reasonably request in
order to discharge its duties under this Agreement

 

b.              The Advisor hereby
represents and warrants that it is authorized to enter into this Agreement and
that the performance of its duties described herein is permitted by the
applicable law and authorized by corporate action.

 

10.         Indemnity and
Liability.

 

a.               The Client shall
indemnify and hold Advisor, its officers, directors, employees and agents
harmless from and against all losses, claims, liabilities, demands and expenses
of any kind (including reasonable attorneys’ fees and expenses) and amounts
paid in satisfaction of judgments, in compromise or as fines or penalties
resulting from any breach or default under this Agreement.  The Client agrees that any indemnity or
release of liability provided hereunder shall survive termination of this
Agreement.

 

b.              The Advisor shall
indemnify and hold Client, its officers, directors, employees and agents
harmless from and against all losses, claims, liabilities, demands and expenses
of any kind (including reasonable attorneys’ fees and expenses) and amounts
paid in satisfaction of judgments, in compromise or as fines or penalties
resulting from any breach or default under this Agreement.  The Advisor agrees that any indemnity or
release of liability provided hereunder shall survive termination of this
Agreement.

 

11.         Dispute Resolution.

 

a.               In the event any
dispute or difference shall arise with reference to the applicable
interpretation or effect of this Agreement, or any part hereof between the
parties, whether such dispute arises before or after termination of this
Agreement (hereinafter referred to as a 

 

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“Controversy”), the parties shall negotiate
in good faith to reach a mutually agreeable resolution to such Controversy.

 

b.              If the Controversy
has not been resolved by negotiation as provided in Section 11a above,
either party hereto may elect to submit the Controversy to binding arbitration
conducted in Des Moines, Iowa upon written notice to the other party.  The parties hereto, by entering into this
Agreement, are expressly waiving their rights to have any Controversy decided
in a court of law and/or equity before a judge or jury, and instead are
accepting the use of binding arbitration in accordance with this Section 11b.  Such arbitration shall be governed by the
provisions of the Commercial Arbitration Rules of the American Arbitration
Association, to the extent that such provisions are not inconsistent with the
provisions of this Section 11. 
Within thirty (30) days of the receipt of written notice of arbitration
described above, each party hereto shall appoint one (1) arbitrator and
the two (2) arbitrators so appointed shall appoint a third arbitrator
within ten (10) days of the later of the two arbitrators being appointed
(the three arbitrators, the “Arbitration Panel”).  If any of the two initial arbitrators are not
appointed within the specified period by the party hereto which had the right
to appoint such arbitrator the other party hereto may appoint both such
arbitrators who shall then appoint the third arbitrator.  If the two (2) initial arbitrators fail
to appoint the third arbitrator within ten (10) working days of the later
of the two arbitrators being appointed, each arbitrator shall name three (3) candidates,
of whom the other shall decline two (2), and the decision between the final two
(2) candidates shall be made by drawing lots.  Each of the three arbitrators shall act as
neutral arbitrators.  In the event of the
death, disability or incapacity of any arbitrator a replacement shall be named
pursuant to the process which resulted in the selection of the arbitrator to be
replaced.

 

c.               If the Arbitration
Panel or the parties determine, at any stage of the proceedings, that
specialized expertise is necessary to fully evaluate and decide the
Controversy, a neutral advisor with the experience and qualification necessary
to assist the Arbitration Panel to decide the Controversy may be selected;
provided, however, that the use of an expert neutral advisor is approved in
writing by the parties to this Agreement. 
Once the determination to utilize an expert neutral advisor is made, the
Arbitration Panel shall propose such a neutral advisor.  Either party to this Agreement may veto the
neutral advisor proposed by the Arbitration Panel within five (5) working
days of receiving written notice of the proposal.  Absent such a veto, the neutral advisor
proposed by the Arbitration Panel shall be retained.  If the neutral advisor proposed by the
Arbitration Panel is vetoed by one or both of the parties to this Agreement,
the Arbitration Panel shall

 

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continue to propose neutral advisors until
one is accepted by the parties to this Agreement.  If no neutral advisor is selected after a
total of three (3) vetoes in the aggregate have been exercised by one or
both parties to this Agreement, no neutral advisor shall be utilized and the
arbitration shall proceed as though the parties had not initially agreed to the
use of a neutral advisor.

 

d.              The arbitration
hearing shall be held within thirty (30) days following appointment of the
third arbitrator to the Arbitration Panel, unless otherwise agreed to by the
parties to this Agreement.  If either
party to this Agreement refuses or otherwise fails to participate in such an
arbitration hearing, such hearing shall proceed and shall be fully effective in
accordance with this Section 11, notwithstanding the absence of such
party.  The Arbitration Panel shall
determine the Controversy in accordance with the substantive law of the State
of Iowa, without giving effect to any laws that might otherwise govern under
applicable principles of conflicts of laws thereof.  The Arbitration Panel may abstain from
following the strict rules of evidence. 
The Arbitration Panel shall render an arbitration award in writing
within thirty (30) days after the termination of the arbitration hearing.

 

12.         Miscellaneous.

 

a.               This Agreement
shall terminate automatically if it is assigned (as such term is defined in the
Advisers Act and the rules thereunder) by the Advisor without the written
consent of the Client.  This Agreement
may be terminated at any time by either party by written notice to the other
party, such termination to be effective thirty (30) days after receipt of such
notice.  Client shall retain the right to
terminate this Agreement in the event that the Advisor does not perform
satisfactorily.

 

b.              Client shall have
ultimate control and responsibility of the functions that it has delegated.

 

c.               Client shall own
and have custody of its general corporate accounts and records.

 

d.              Except as
contemplated by this Agreement or applicable law, all information and advice
furnished by either party to the other hereunder, including their respective
agents and employees, shall be treated as confidential and shall not be
disclosed to unaffiliated parties except as required by applicable law or
except upon the prior written approval of the other party.  The Advisor is authorized to acknowledge its
relationship with the Client in appropriate materials such as a representative
client list.

 

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e.               This Agreement may
not be amended, modified or waived except by an instrument or instruments in
writing signed and delivered on behalf of each of the parties hereto and with a
filing with the Insurance Department for its non-disapproval.

 

f.                 This Agreement
shall not be assigned.

 

g.              This Agreement
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and verbal, among the parties or any of them with respect to the
subject matter hereof.

 

h.              All notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by telecopy (which is confirmed), by registered
or certified mail (postage prepaid, return receipt requested) or by overnight
delivery service to the respective parties to this Agreement as follows:

 

If to the Advisor:

 

American Equity Investment Life Holding Company

John Matovina, Chief Financial Officer

5000 Westown Parkway

West Des Moines, Iowa 50266

 

If to the Client:

 

Eagle Life Insurance Company

Marla G. Lacey, Vice President

5000 Westown Parkway

West Des Moines, Iowa 50266

 

Or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth
above.  In no event shall the provision
of notice pursuant to this Section 12g constitute notice for service of
any writ, process or summons in any suit, action or other proceeding.

 

i.                  The Client
acknowledges and agrees that it shall have no right hereunder or pursuant to
law to offset any amounts due and owing (or to become due and owing) to the
Advisor under this Agreement against any amounts due and owing by Client or any
of its subsidiaries or affiliates to the Advisor or any of its subsidiaries or
affiliates under any other agreement, contract or understanding.  In the event that 

 

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settlement for amounts which may be due
pursuant to this Agreement is not made in a timely manner as set forth on
Schedule A, interest shall accrue on said amounts from the due date until paid
in the amount of .5% monthly, compounded annually.

 

j.                  The descriptive
article and section headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement

 

k.               This Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective permitted successors.

 

l.                  Nothing in this
Agreement, express or implied, is intended to or shall confer upon any person
other than the parties hereto any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.

 

m.            Any term or provision
of this Agreement which is invalid or unenforceable in any jurisdiction shall,
as to that jurisdiction be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other
jurisdiction.  If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only as broad as would be enforceable.

 

n.              Each of the parties
hereto, as reasonably requested from time to time by the other party hereto,
shall take all reasonably appropriate action and execute any additional
documents, instruments or conveyances of any kind which may be reasonably
necessary to carry out any of the provisions of the Agreement.

 

o.              This Agreement may
be executed in counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same Agreement.

 

p.              Each of the parties
hereto irrevocably and unconditionally submits to the non-exclusive
jurisdiction of The United States District Court for the Southern District of
Iowa, or, if such court will not accept jurisdiction, any court of competent
civil jurisdiction sitting in Polk County, Iowa.  In any action, suit or other proceeding, each
of the parties hereto irrevocably and unconditionally waives and agrees not to
assert by way of motion, as a defense or otherwise any claims that it is not
subject to the jurisdiction of the above courts, that such action or 

 

9

 

suit is brought in an inconvenient forum or
that the venue of such action, suit or other proceeding is improper.  Each of the parties hereto also agrees that
any final and unappealable judgment against a party hereto in connection with
any action, suit or other proceeding shall be conclusive and binding on such
party and that such award or judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States.  A certified or exemplified copy of such award
or judgment shall be conclusive evidence of the fact and amount of such award
or judgment.

 

q.              It is a condition to
this Agreement becoming effective that all necessary insurance regulatory
filings shall have been made and all necessary insurance regulatory approvals
shall have been obtained.

 

IN WITNESS WHEREOF, each of the parties has caused this Investment
Advisory Agreement to be executed on its behalf by its officer thereunto duly
authorized, all as of the day and year first above written.

 

 

	
  AMERICAN EQUITY INVESTMENT

  
	
  LIFE HOLDING COMPANY

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Wendy J. Carlson

  	
   

  
	
   

  	
  Wendy J. Carlson, CEO and President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EAGLE LIFE INSURANCE COMPANY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ James M. Gerlach

  	
   

  
	
   

  	
  James M. Gerlach, Senior Vice President

  	
   

  

 

10

 

SCHEDULE A

INVESTMENT ADVISORY AGREEMENT

DATED 6/9, 2009

 

BETWEEN

 

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY

(“Advisor”)

 

AND

 

EAGLE LIFE INSURANCE COMPANY

(“Client”)

 

1.  This Schedule of Compensation
can be amended only upon the written agreement of Advisor and Client and only
after receiving all necessary approvals from the Iowa Insurance Division.

 

2.  The Client shall pay, at the
beginning of each quarterly period, a fee (to be prorated and a refund made to
the Client for any period of less than a quarter) based on the market value of
the Account, including cash and securities, taken on the last business day of
the preceding quarter, as follows:

 

(a)  $1,000.00 per quarter on the first $25,000,000.00, plus

(b)  0.20% on the amount above $25,000,000.00 up to
$100,000,000.00, plus

(c)  0.15% on the amount in excess of $100,000,000.00.

 

Date: 6/9, 2009

 

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SCHEDULE B

 

Statement of Investment Objectives and Policy

For

Eagle Life Insurance Company

 

The purpose of this Statement is to establish a framework and
organization for the regular and continuous management of the invested assets
of Eagle Life Insurance Company (the “Company”).  The Company’s assets will be invested
accordance with the investment policy, objectives and guidelines stated
herein.  The Board of Directors and the
Investment Committee will assume responsibility of reviewing the performance to
ascertain current and long-term absolute levels of achievement toward the
stated goals and to review compliance with policy guidelines and objectives.

 

It is intended that these objectives and guidelines provide meaningful
guidance in the management of the Company’s assets and not be overly
restrictive given changing economic business and capital market conditions.

 

Investment Objectives

 

The Company’s assets are to be invested in a portfolio composed of
fixed income, preferred and convertible stock and cash equivalent
securities.  The Investment Objective of
the Company is to meet the obligations of the liabilities and maximize
investment income while maintaining a high quality portfolio.  The primary focus is to manage a portfolio
which (a) provides for safety of principal, (b) ensures liabilities
are fully funded by the invested assets in an efficient manner, (c) produces
a portfolio return which provides satisfactory return on assets and surplus
growth, and (d) achieves these investment goals while minimizing the need
for capital reserves.

 

Investment Policies

 

A.  The Assets must be invested
in compliance with the Iowa Insurance Code, any bank or lending agreements and
investment objectives of the Company.

 

The Investment Officer(s) is (are) granted full investment
discretion consistent with the investment objectives, described herein,
regarding the purchase and sale of individual securities.

 

Realization of gains and losses should be reviewed solely in terms of
investment merits.

 

B.  Fixed income securities may
include U.S. Treasury obligations, obligations of government-sponsored
enterprises, Federal Agency obligations, notes, debentures, preferred stock and
commercial paper.

 

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Fixed Income securities are to be selected so as to assure the proper
balance of quality, maturity and coupons consistent with current money market
and economic conditions.

 

All investments in interest bearing nonconvertible obligations of
corporations must be rated within the highest ratings of the National
Association of Insurance Commissioners (NAIC).

 

C.  The diversification of fixed
income assets will be at the discretion of the Investment Officer(s) subject
to compliance with the Iowa Insurance Code, Asset/Liability constraints and any
other applicable regulatory guidelines.

 

D.  The Investment Committee will
meet at least weekly.

 

The Investment Committee will report the status of investments to the
Board of Directors at least quarterly or as requested by the Board of
Directors.  Reporting shall include but
not be limited to a complete listing of securities held, current valuations and
transaction summaries.

 

Any significant change in the investment strategy by the Investment
Officer(s) will be communicated to the Investment Committee.

 

The Board of Directors may request that performance reports be prepared
to ascertain current and long term levels of achievement toward stated goals.

 

The Board of Directors may make changes in this Statement, from time to
time, independently or upon recommendation of the Investment Officer(s).  It shall be the responsibility of the Board
of Directors to communicate such revisions, in writing, to the Investment Officer(s) immediately.

 

13Exhibit 10.2

 

SEALY CORPORATION

PERFORMANCE RESTRICTED STOCK
UNIT AWARD AGREEMENT

 

THIS AGREEMENT (the “Agreement”)
is made, effective as of the date set forth on Appendix A of this Agreement
(such date, the “Grant Date”), between Sealy
Corporation, a Delaware corporation (hereinafter called the “Company”), and  the individual
named on Appendix A of this Agreement who is an employee of the Company or a
Subsidiary (hereinafter referred to as the “Employee”).  For purposes of this Agreement, capitalized
terms not otherwise defined above or below or in the Amended and Restated
Equity Plan for Key Employees of Sealy Corporation and its Subsidiaries,
effective December 16, 2008, as it may be amended from time to time (the “Plan”) shall have the meanings set forth in Section 17
of this Agreement.

 

WHEREAS, the Company desires to grant the Employee
restricted stock unit awards as provided for hereunder (collectively, the “RSUs”), ultimately payable in Common Stock pursuant to the
terms of the Plan which terms are hereby incorporated by reference and made a
part of this Agreement; and

 

WHEREAS, the Committee has determined that it would
be to the advantage and best interests of the Company and its shareholders to
grant the shares of Common Stock provided for herein to the Employee as an
incentive for increased efforts during his or her employment with the Company
or a Subsidiary, and has advised the Company thereof and instructed the
undersigned officer to grant said RSUs.

 

NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable consideration, receipt
of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

1.             Grant of the RSUs.  Subject to the terms and conditions of the
Plan and the additional terms and conditions set forth in this Agreement, the
Company hereby grants to the Employee the opportunity to vest in up to the
number of RSUs set forth on Appendix A of this Agreement (the “Target RSU Award Amount”). 
An RSU represents the right to receive one
share of Common Stock,
such that the maximum number of shares of Common Stock payable under the terms
of this Agreement equals the Target RSU Award Amount.  The RSUs shall become earned and vested and
become nonforfeitable in accordance with Section 2 hereof.

 

2.             Vesting.

 

(a)           General Rule.  Unless otherwise provided in this Agreement,
so long as the Employee continues to be employed by the Company or any of its
Subsidiaries through the Required Employment Date (as such term is defined on
Appendix A of this Agreement, the Employee shall, on the Required Employment
Date, become vested in a number of RSUs, if any, representing the total
percentage of the Target RSU Award Amount earned by the Employee under Section 6
of Appendix A of this Agreement.  Whether
and to what extent the RSUs have become vested under this Section 2(a) shall
be determined by the Committee at its first meeting after the Financial
Statement Approval Date following the end of the Applicable Fiscal Year (such
date, the “Determination Date”), upon the
Committee’s certification of achievement of the applicable Performance Goals as
set forth on Appendix A of this Agreement. 
For the avoidance

 

 

of
doubt, if all or a portion of the RSUs become earned based on the achievement
of one or more Performance Goals at the end of one of the Applicable Fiscal
Years, the failure of the Company to meet or exceed such Performance Goal in a
subsequent Applicable Fiscal Year shall not result in the RSU failing to be
earned hereunder.

 

(b)                                 Resignation of
Employment; Any Termination by the Company.  Notwithstanding the general rule set
forth in Section 2(a) above, if, prior to the Required Employment
Date (and absent the occurrence of any Change in Control), the Employee’s
employment with Company and its Subsidiaries is terminated for any reason (x) by
the Employee (other than due to the Employee’s death, Disability or Qualified
Retirement) or (y) by the Company or any of its Subsidiaries, then all
RSUs granted hereunder shall be forfeited by the Employee without consideration
as of such termination date.

 

(c)                                  Death of
Employee. 
Notwithstanding anything herein to the contrary, if, prior to the
Required Employment Date (and absent the occurrence of any Change in Control),
the Employee’s employment with the Company and its Subsidiaries is terminated
by the Employee due to the Employee’s death (the date of such termination, the “Death Termination Date”), then the entire Target RSU Award
Amount shall immediately become earned and vested on the Death Termination
Date, and the Employee shall be entitled to receive a distribution of a number
of shares of Common Stock equal to the Target RSU Award Amount no later than
the later of (x) ninety (90) days following the Death Termination Date and
(y) December 31 of the year in which the Death Termination Date
occurs.

 

(d)                                 Disability of
Employee. 
Notwithstanding anything herein to the contrary, if, prior to the
Required Employment Date (and absent the occurrence of any Change in Control),
the Employee’s employment with the Company and its Subsidiaries is terminated
by the Employee due to the Employee’s Disability (such termination date, the “Disability Termination Date”), then the entire Target RSU
Award Amount shall immediately become earned and vested on the Disability
Termination Date, and the Employee shall be entitled to receive, a distribution
of a number of shares of Common Stock equal to the Target RSU Award Amount as
soon as administratively feasible following the Disability Termination Date
(but in no event more than ninety (90) days following such date).

 

(e)                                  Qualified
Retirement of Employee. 
Notwithstanding anything herein to the contrary, if, prior to the
Required Employment Date (and absent the occurrence of any Change in Control),
the Employee’s employment with the Company and its Subsidiaries is terminated
by the Employee due to the Employee’s Qualified Retirement (such date, the “Retirement Termination Date”), then the Employee shall be
entitled to receive the following:

 

(i)            a distribution of a number of shares
of Common Stock, if any, representing the total percentage of the Target RSU
Award Amount earned by the Employee pursuant to Section 2(a) above in
respect of any Applicable Fiscal Year that ended prior to the year in which the
Retirement Termination Date occurs, which Shares will be distributed as soon as
administratively feasible following the Retirement Termination Date (but in no
event more than ninety (90) days following such date); and

 

2

 

(ii)           a distribution of a number of shares
of Common Stock, if any, equal to the product of (i) the number of shares
representing the percentage of the Target RSU Award Amount earned by the
Employee pursuant to Section 2(a) above for the Applicable Fiscal
Year in which the Retirement Termination Date occurs (such year, the “Retirement Fiscal Year”) and (ii) a fraction, the
numerator of which is equal to the number of days between (and including) the
first day of the Retirement Fiscal Year and the Retirement Termination Date,
and the denominator of which is equal to 365, which Shares will be distributed
as soon as administratively feasible following the applicable Determination
Date (but in no event more than ninety (90) days following such date).

 

Any RSUs that do not become
earned and vested pursuant to this Section 2(e) shall be forfeited by
the Employee without consideration as of the applicable Determination Date.

 

(f)                                    Change in
Control.  Notwithstanding anything
herein to the contrary, if there occurs a Change in Control prior to the
Required Employment Date, and the Employee is still employed with the Company
or any of its Subsidiaries upon the occurrence of such Change in Control (such
date, the “Change in Control Date”), then the
entire Target RSU Award Amount shall immediately become earned and vested on
the Change in Control Date, and the Employee shall be entitled to receive a
distribution of a number of shares of Common Stock equal to the Target RSU
Award Amount as soon as administratively feasible after the Change in Control
Date (but in no event later than ninety (90) days following such date).

 

3.                                       Settlement of
RSUs.  Subject to earlier
distribution pursuant to Section 2(c), (d), (e) or (f) above, on
the Required Employment Date, the Company shall distribute to the Employee a
number of shares of Common Stock representing the total percentage of the
Target RSU Award Amount earned by the Employee pursuant to Section 2(a) above.  Any number of RSUs that do not become earned
and vested in accordance with Section 2(a) hereof (to the extent not
already previously forfeited pursuant to Section 2(b) above) shall,
effective as of the Required Employment Date, be forfeited by the Employee
without consideration.

 

4.                                       No Dividend
Equivalents.  Unless and
until the Employee is the record holder of the Common Stock subject to the
RSUs, he or she is not entitled to the payment of any dividends (or dividend
equivalents) with respect to the RSUs or the shares of Common Stock subject
thereto.

 

5.                                       Limitation on
Obligations.  The Company’s
obligation with respect to the RSUs granted hereunder is limited solely to the
delivery to the Employee of shares of Common Stock on the date when such Shares
are due to be delivered hereunder, and in no way shall the Company become
obligated to pay cash in respect of such obligation, unless as otherwise
provided for herein.  The RSUs granted
hereunder shall not be secured by any specific assets of the Company or any of
its Subsidiaries, nor shall any assets of the Company or any of its
Subsidiaries be designated as attributable or allocated to the satisfaction of
the Company’s obligations under this Agreement.

 

6.                                       Rights as a
Stockholder.  The
Employee shall not have any rights of a common stockholder of the Company
unless and until the Employee becomes entitled to receive 

 

3

 

the shares of Common Stock
pursuant to Section 2 or 3 above. 
As soon as practicable following the date that the Employee becomes
entitled to receive the shares of Common Stock pursuant to Section 2 or 3
above, certificates for the Common Stock shall be delivered to the Employee or
to the Employee’s legal guardian or representative.

 

7.             Transferability.  The RSUs shall not be subject to alienation,
garnishment, execution or levy of any kind, and any attempt to cause any such
awards to be so subjected shall not be recognized.  The shares of Common Stock acquired by the
Employee pursuant to Section 2 or 3 of this Agreement may not at any time
be transferred, sold, assigned, pledged, hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition complies with applicable securities laws.

 

8.             No Right to Continued Employment
or Other Equity Awards. The granting of the RSUs evidenced hereby and this
Agreement shall impose no obligation on the Company or any Subsidiary to (a) continue
the employment of the Employee and shall not lessen or affect the Company’s or
any Subsidiary’s right to terminate the employment of such Employee or (b) make
any future Share or Share-based awards to the Employee, and this grant of RSUs
does not constitute any increase of annual compensation or benefits to be
provided to the Employee.

 

9.             Restrictive Covenants.  The content, terms and conditions of the provision/section
entitled Confidential Information; Covenant
Not to Compete in the Management Stockholder’s Agreement entered
into between the Company and the Employee, dated as of the date set forth on
Appendix A of this Agreement  (the “MSA”)
are hereby incorporated by reference into this Agreement.  Additional terms and conditions in the MSA
related to non-competition, non-solicitation and confidentiality, including the
terms relating to breach or conflict, are also expressly incorporated herein.

 

10.           Change in Capitalization.  If there occurs an event as described in Section 8
of the Plan, the provisions of Section 8 of the Plan shall govern the
treatments of the RSUs granted hereunder.

 

11.           Withholding.   Upon vesting of the RSUs in accordance with Section 2
above, the Company will be required to withhold the employment taxes due with
respect to such vesting.  In addition, it
shall be a condition of the obligation of the Company upon delivery of Common
Stock to the Employee pursuant to Section 2 or 3 above that the Employee
pay to the Company such amount as may be requested by the Company for the
purpose of satisfying any liability for any federal, state or local income or
other taxes required by law to be withheld with respect to such Common Stock.  The Company shall be authorized to take such
action as may be necessary, in the opinion of the Company’s counsel (including,
without limitation, withholding Common Stock otherwise deliverable to the
Employee hereunder and/or withholding amounts from any compensation or other
amount owing from the Company to the Employee), to satisfy the obligations for
payment of the minimum amount of any such taxes.  In addition, if the Company reasonably
determines that there would be (x) no adverse accounting implications to the
Company and (y) no adverse tax consequences to the Employee, the Company
may permit the Employee to elect to use Common Stock otherwise deliverable to
the Employee hereunder to 

 

4

 

satisfy any such obligations,
subject to such procedures as the Company’s accountants may require.  The Employee is hereby advised to seek his
own tax counsel regarding the taxation of the grant of RSUs made hereunder.

 

12.           Securities Laws.  Upon the delivery of any Common Stock to the
Employee, the Company may require the Employee to make or enter into such
written representations, warranties and agreements as the Committee may
reasonably request in order to comply with applicable securities laws or with
this Agreement.  The delivery of the
Common Stock hereunder shall be subject to all applicable laws, rules and
regulations and to such approvals of any governmental agencies as may be
required.

 

13.           Section 409A of the Code.  In the event that it is reasonably determined
by the Company that, as a result of the deferred compensation tax rules under
Section 409A of the Code (and any related regulations or other
pronouncements thereunder) (the “Deferred Compensation Tax
Rules”), payments or benefits that the Employee is entitled to under
the terms of this Agreement may not be made or provided at the time
contemplated by the terms hereof or thereof, as the case may be, without
causing the Employee to be subject to tax under the Deferred Compensation Tax
Rules, the Company shall, in lieu of providing such payment or benefit when
otherwise due under this Agreement, instead provide such payment or benefit on
the first day on which such provision would not result in the Employee
incurring any tax liability under the Deferred Compensation Tax Rules; which
day, if the Employee is a “specified employee” (within the meaning of the
Deferred Compensation Tax Rules), may, in the event the payment or benefit to
be provided is due to the Employee’s “separation from service” (within the
meaning of the Deferred Compensation Tax Rules) with the Company and its
Subsidiaries, shall be the first day following the six-month period beginning
on the date of such separation from service. This Agreement is intended to
comply with the Deferred Compensation Tax Rules and will be interpreted
accordingly.  References under this
Agreement to the Employee’s termination of employment shall be deemed to refer
to the date upon which the Employee has experienced a “separation from service”
within the meaning of the Deferred Compensation Tax Rules.

 

14.           Notices.  Any notice to be given under the terms of
this Agreement to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Employee shall be addressed to him
or her at the address appearing in the personnel records of the Company for the
Employee.  By a notice given pursuant to
this Section 14, either party may hereafter designate a different address
for notices to be given to him/her or it. 
Any notice which is required to be given to the Employee shall, if the
Employee is then deceased, be given to the Employee’s personal representative
if such representative has previously informed the Company of his or her status
and address by written notice under this Section 14.  Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service

 

15.           Governing Law.  The laws of the State of Delaware (or if the
Company reincorporates in another state, the laws of that state) shall govern
the interpretation, validity and performance of the terms of this Agreement
regardless of the law that might be applied under principles of conflicts of
laws.

 

5

 

16.           RSUs
Subject to Plan.   The RSUs shall be
subject to all applicable terms and provisions of the Plan, to the extent
applicable to the Common Stock.   In the
event of any conflict between this Agreement and the Plan, the terms of the
Plan shall control.

 

17.           Definitions.

 

(a)           “Applicable Fiscal Years”
shall have the meaning set forth on Appendix A of this Agreement.

 

(b)           “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

(c)           “Change in Control”
shall mean “Change in Control” as defined in the Plan.  Notwithstanding the foregoing, a Change in
Control shall not be deemed to occur unless such transaction or occurrence
constitutes a change in ownership or effective control within the meaning of Section 409A(a)(2)(A)(v) of
the Code.

 

(d)           “EBITDA” shall
mean “Adjusted EBITDA” as defined in the SECOND AMENDMENT dated as of November 14,
2008 among SEALY MATTRESS COMPANY, an Ohio corporation (the “Borrower”), SEALY
CANADA LTD./LTEE, a company organized under the laws of Canada (the “Canadian
Borrower”), SEALY MATTRESS CORPORATION, a Delaware corporation (“Holdings”),
SEALY CORPORATION, a Delaware corporation (“Parent”), the subsidiaries of
Borrower listed on the signature pages thereto, as guarantors, and
JPMORGAN CHASE BANK, N.A., as administrative agent (in such capacity, “Administrative
Agent”) on behalf of the Required Lenders to the Third Amended and Restated
Credit Agreement dated as of August 25, 2006 (as amended, supplemented,
amended and restated or otherwise modified from time to time) among Borrower,
Canadian Borrower, Holdings, Parent and certain Subsidiaries of Borrower, as
Guarantors, each lender from time to time party thereto, the Administrative Agent
and the other Agents and the Arrangers named therein, which agreement generally
provides that “EBITDA” is defined as net income plus interest, taxes,
depreciation and amortization and “Adjusted EBITDA” is defined as “EBITDA”
further adjusted to exclude unusual items and other adjustments permitted in
calculating covenant compliance under the agreement.

 

(e)            “Fiscal Year”
shall mean each fiscal year of the Company (which, for the avoidance of doubt,
ends on or about November 30 of any given calendar year).

 

(f)            “Financial Statement
Approval Date” shall mean the date on which the audited financial
statements of the Company for any of the Applicable Fiscal Years have been
finally approved by the auditing firm engaged by the Company to review such
statements (which approval shall in no event occur later than February 28
of the calendar year immediately following the Applicable Fiscal Year).

 

(g)            “Permanent Disability”
shall mean the Employee becomes physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months to perform
substantially all of the material elements of the Employee’s duties with the
Company or any Subsidiary or Affiliate thereof. 
Any question as to the existence of the Permanent Disability 

 

6

 

of
the Employee as to which the Employee and the Company cannot agree shall be
determined in writing by a qualified independent physician mutually acceptable
to the Employee and the Company.  If the
Employee and the Company cannot agree as to a qualified independent physician,
each shall appoint such a physician and those two physicians shall select a
third who shall make such determination in writing.  The determination of Permanent Disability
made in writing to the Company and the Employee shall be final and conclusive
for all purposes of this Agreement (such inability is hereinafter referred to
as “Permanent Disability” or being “Permanently Disabled”).

 

(h)           “Performance Goals”
shall mean the financial targets for the Company as set forth on Appendix A to
this Agreement.

 

(i)            “Qualified Retirement”
shall mean a retirement from the Company meeting all of the following criteria:
(a) the Employee has been continually employed by the Company or any
Subsidiary or Affiliate thereof from the date hereof through the end of the
Company’s Fiscal Year that the Grant Date occurs, (b) the Employee is at
least 58 years of age and (c) the Employee has reached a total
combined years of age and service (since such Employee’s most recent hire date)
which totals at least 73 (calculated on a monthly basis).

 

18.           Signature in Counterparts.  This Agreement may be signed in counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

 

[Remainder of page intentionally
blank.]

 

7

 

Appendix A - Major Terms

 

1.                                       “Grant
Date” for purposes of this Agreement shall mean:                                         .

 

2.                                       “Employee”
for purposes of  this
Agreement shall mean:                                              .

 

3.                                       The Target RSU
Award Amount subject to the terms of this Agreement is:                                     
..

 

4.                                       “Required
Employment Date”  for purposes of  this Agreement shall mean:
                                                     .

 

5.                                       The “Performance Goals”, which goals are
to be met or exceeded by the Company at the end of any of the Applicable Fiscal
Years are as follows:

 

a.               “First
Performance Goal”: 

 

b.              “Second
Performance Goal”:

 

c.               “Third
Performance Goal”:

 

6.                                       “Applicable
Fiscal Years”  for purposes of  this Agreement shall mean the Company’s Fiscal Years                                  .

 

7.                                       The Employee
will have the opportunity to earn the Target RSU Award Amount as follows:

 

a.               33 1/3% of the
Target RSU Award Amount shall become earned if and to the extent that, at the
end of any of the Applicable Fiscal Years, the First Performance Goal is met or
exceeded;

 

b.              An additional
33 1/3% of the Target RSU Award Amount shall become earned if and to the extent
that, at the end of any of the Applicable Fiscal Years, the Second Performance
Goal is met or exceeded; and

 

c.               An additional
33 1/3% of the Target RSU Award Amount shall become earned if and to the extent
that, at the end of any of the Applicable Fiscal Years, the Third Performance
Goal is met or exceeded.

 

8.                                       “Management
Stockholders Agreement” for purposes of this
Agreement shall mean the Management Stockholders Agreement previously entered into
between the Employee and the Company.

 

8

 

IN WITNESS WHEREOF, the parties hereto have
executed this Agreement effective as of the date hereof.

 

	
  SEALY CORPORATION

  	
   

  	
  EMPLOYEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
  [Name]

  
	
  Title:

  	
   

  	
   

  
				

 

9

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