Document:

Exhibit 10.44

 

EXECUTION COPY

 

SEALY

 

BENEFIT EQUALIZATION PLAN

 

Original
Effective Date:   December 1, 1994

 

Restatement Generally
Effective:   December 1, 2008

 

i

 

TABLE OF CONTENTS

 

	
   

  	
  Page

  
	
   

  	
   

  
	
  ARTICLE I PRELIMINARY PROVISIONS

  	
  1

  
	
   

  	
   

  
	
  ARTICLE II DEFINITIONS

  	
  3

  
	
   

  	
   

  
	
  ARTICLE III ELIGIBILITY AND PARTICIPATION

  	
  16

  
	
   

  	
   

  
	
  ARTICLE IV PROFIT SHARING CONTRIBUTIONS

  	
  17

  
	
   

  	
   

  
	
  ARTICLE V ACCOUNTS

  	
  18

  
	
   

  	
   

  
	
  ARTICLE VI PAYMENTS AND BENEFITS

  	
  19

  
	
   

  	
   

  
	
  ARTICLE VII BENEFICIARIES

  	
  21

  
	
   

  	
   

  
	
  ARTICLE VIII RIGHTS OF PARTICIPANTS

  	
  22

  
	
   

  	
   

  
	
  ARTICLE IX NON-ALIENATION

  	
  23

  
	
   

  	
   

  
	
  ARTICLE X ADMINISTRATION

  	
  23

  
	
   

  	
   

  
	
  ARTICLE XI AMENDMENT AND TERMINATION

  	
  25

  
	
   

  	
   

  
	
  ARTICLE XII PARTICIPATING COMPANIES

  	
  27

  
	
   

  	
   

  
	
  ARTICLE XIII
  MISCELLANEOUS PROVISIONS

  	
  28

  

 

ii

 

AMENDMENT AND RESTATEMENT

OF THE

SEALY BENEFIT EQUALIZATION PLAN

 

This Amendment and Restatement of the Sealy Benefit Equalization Plan
is hereby made by SEALY CORPORATION, a corporation organized and existing under
and by virtue of the laws of the State of Delaware (the “Company”);

 

WITNESSETH:

 

WHEREAS, the Company previously established an unfunded deferred
compensation plan known as the Sealy Benefit Equalization Plan (the “Plan”) to
provide unfunded deferred compensation to a select group of management or
highly compensated employees of Participating Companies; and

 

WHEREAS,   it is desirable to amend and restate the Plan
in order to comply with the provisions of Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), and to make other desirable
changes to the Plan; and

 

WHEREAS, the Board of Directors of the Company has approved adoption of
such an amendment and restatement of the Plan by the Company;

 

NOW, THEREFORE, generally effective as of December 1, 2008, the
Company hereby adopts an Amendment and Restatement to the Plan as follows:

 

ARTICLE I

 

PRELIMINARY PROVISIONS

 

1.1                                 Name.  The name of this Plan was and shall remain
the SEALY BENEFIT EQUALIZATION PLAN.

 

1

 

1.2                                 Effective
Date.  The Plan was established
effective December 1, 1994.

 

1.3                                 Restatement
Date.  Except as otherwise stated
herein, the provisions of the amended and restated Plan shall be December 1,
2008.  Provisions required to be effective
as of an earlier date shall be deemed effective as of such date.

 

1.4                                 Purpose.  This Plan was established and is hereby
amended and restated in order to provide unfunded deferred compensation to a
select group of management or highly compensated employees of Participating
Companies, under certain conditions specified in the Plan.

 

1.5                                 Plan
for a Select Group.  This Plan shall
only cover employees of Participating Companies who are members of a “select
group of management or highly compensated employees” as provided in Sections
201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA.  Notwithstanding any apparently contrary
provision of this Plan, this Plan shall be interpreted and administered in such
a manner, and benefits hereunder shall be so limited, that this Plan shall be
deemed to constitute such a plan.

 

1.6                                 Not
a Funded Plan.  It is the intention
and purpose of the Company, other Participating Companies and Participants that
this Plan shall be deemed to be “unfunded” for tax purposes as well as being such
a plan as would properly be described as “unfunded” for purposes of
Title I of ERISA.  Notwithstanding
any apparently contrary provision, this Plan shall be interpreted and
administered in such a manner that it will be so deemed and would be so described.

 

1.7                                 Section 409A
Compliance.  It is the intention and
purpose of the Company, other Participating Companies and Participants that
this Plan shall be deemed at all relevant times to be in compliance with Section 409A
of the Code and lawful guidance thereunder. 
Notwithstanding

 

2

 

any apparently contrary provision, this Plan shall be interpreted and
administered in such manner, so that it will be so deemed.  For periods on an after the effective date of
Section 409A but prior to the Restatement Date, the Plan was administered
in good faith compliance with Section 409A of the Code, but without a
formal compliance amendment for that period, as permitted in applicable
guidance.

 

ARTICLE II

 

DEFINITIONS

 

The use of neuter, masculine and feminine pronouns shall each be read
to include the others and the use of the singular shall be read to include the
plural and vice versa.  Unless the
context otherwise indicates, the following words, when initially capitalized,
shall have the following meanings under this Plan:

 

2.1                                 Account.  The word “Account” shall mean a “Deferred
Compensation Account” established pursuant to Article V hereof.

 

2.2                                 Adoption
Date.  The words “Adoption Date”
shall mean the date as of which the Company or a Subsidiary became or becomes a
Participating Company under this Plan.

 

2.3                                 Affiliate.  The word “Affiliate” shall mean any
corporation which would be defined as a member of a controlled group of
corporations which includes the Company or any business organization which
would be defined as a trade or business (whether or not incorporated) which is
under “common control” with the Company within the meaning of Sections 414(b) and
(c) of the Code but, in each case, only during the periods any such corporation
or business organization would be so defined.

 

3

 

2.4                                 Benefit
Appeals Committee.  The words “Benefit
Appeals Committee” or “Committee” shall mean the Benefit Appeals Committee
established pursuant to Article X of this Plan.

 

2.5                                 Board.  The word “Board” shall mean the Board of
Directors of the Company.

 

2.6                                 Breach
of Noncompetition Requirement.  The
words “Breach of Noncompetition Requirement” shall mean the occurrence of an
event in which a Participant, at any time prior to his payment in full
hereunder:

 

(a)                                  either while he is
employed by the Company or any Subsidiary or after his Termination of
Employment; and

 

(b)                                 without
the prior written permission of the Company;either directly or indirectly operates
or performs any advisory or consulting services for, invests in (other than an
investment in publicly traded stock of a corporation, provided that the
ownership of such equity interest does not give the Participant the right to
control or substantially influence the policy or operational decisions of such
corporation), or otherwise becomes employed by or associated with, in any
capacity, a Competitive Entity.

 

2.7                                 Cause.  The word “Cause” shall mean for purposes of
this Plan, either:

 

(a)                                  the
Participant’s willful violation of any written policies of the Company which
violations are materially detrimental to the Company;

 

(b)                                 the
Participant’s conviction of (or written, voluntary and freely given confession
to) a felony involving moral turpitude;

 

(c)                                  the
Participant’s conviction of (or written, voluntary and freely given confession
to) a felony in connection with his employment;

 

(d)                                 a
Participant’s theft, fraud, embezzlement, material willful destruction of
property (including any operating system of the Company or any Subsidiary or
material disruption of the operations of the Company or any Subsidiary;

 

4

 

(e)                                  a
Participant’s being under the influence of illegal drugs or habitually under
the influence of alcohol while on the job or on Company or any Subsidiary
property;

 

(f)                                    a
Participant’s engaging in conduct, in or out of the workplace, which has a
material adverse effect on the reputation or business prospects of the Company
or one of its Subsidiaries;

 

(g)                                 a
Participant’s willfully engaging in conduct while an employee of the Company or
any of its Subsidiaries which caused the Company or any of its Subsidiaries to
be found, in a final judgment of a court of law, to have a material civil or
criminal liability under any federal or state law;

 

(h)                                 a
Participant’s disclosure of trade secrets, customer lists or other confidential
information if the Company or any Subsidiary has taken measures designed to
prevent such disclosure; or

 

(i)                                     a
Participant’s Breach of the Noncompetition Requirement.

 

2.8                                 Change
of Control.  For purposes of this
Plan, the words “Change of Control” shall mean a change of control of the
Company of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended, as in effect on the Restatement Date (the “Exchange Act”),
whether or not the Company is then subject to such reporting requirements;
provided, that, without limitation, a Change of Control shall be deemed to have
occurred if:

 

(a)                                  any
“person” (as defined in Sections 13(d) and 14(d) of the Exchange
Act), other than KKR Millennium GP LLC and affiliates (collectively, “KKR”),
becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the
Company’s then outstanding securities; provided that a Change of Control shall
not be deemed to occur under this Subsection (a) by reason of (A) the
acquisition of securities by the Company or an employee benefit plan (or any
trust funding such a plan) maintained by the Company, or (B) while KKR
continues to beneficially own more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding securities;

 

(b)                                 during
any period of one (1) year there shall cease to be a majority of the Board
comprised of “Continuing Directors” as hereinafter defined; or

 

5

 

(c)                                  the
stockholders of the Company (A) approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation which
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than
eighty percent (80%) of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or (B) approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of more than
fifty percent (50%) of the Company’s assets.

 

For purposes of this Subsection 2.8(c), a
sale of more than fifty percent (50%) of the Company’s assets includes a sale
of more than fifty percent (50%) of the aggregate value of the assets of the
Company and its Subsidiaries or the sale of stock of one or more of the Company’s
Subsidiaries with an aggregate value in excess of fifty percent (50%) of the
aggregate value of the Company and its Subsidiaries or any combination of
methods by which more than fifty percent(50%) of the aggregate value of the
Company and its Subsidiaries is sold.

 

(d)                                 For
purposes of this Agreement, a “Change of Control” will be deemed to occur:

 

(i)                                     on the day on
which a twenty percent (20%) or greater ownership interest described in
Subsection 2.8(a) is acquired (or, if later, the day on which KKR  ceases to beneficially own more than fifty percent (50%) of
the combined voting power of the Company’s then outstanding securities)
provided that a subsequent increase in such ownership interest after it first
equals or exceeds twenty percent (20%) shall not be deemed a separate Change of
Control;

 

(ii)                                  on
the day on which “Continuing Directors,” as hereinafter defined, cease to be a
majority of the Board as described in Subsection 2.8(b);

 

(iii)                               on
the day of a merger, consolidation or sale or disposition of assets as
described in Subsection  2.8(c); or

 

(iv)                              on
the day of the approval of a plan of complete liquidation as described in
Subsection 2.8(c).

 

6

 

(e)                                  For purposes of this Section 2.8,
the word “Company” means Sealy Corporation, and, any other corporation or
business organization in an unbroken chain of corporations or business
organization ending with Sealy Corporation that owns, directly or indirectly,
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of Sealy Corporation other than KKR.

 

(f)                                    For purposes of
this Section 2.8, the words “Continuing Directors” mean individuals who at
the beginning of any period (not including any period prior to the Restatement
Date) of one (1) year constitute the Board and any new director(s) whose
election by the Board or nomination for election by the Company’s stockholders
was approved by a vote of at least a majority of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved.

 

2.9                                 Code.  The word “Code” shall mean the Internal
Revenue Code of 1986, as such may be amended from time to time, and lawful
guidance promulgated thereunder. 
Whenever a reference is made to a specific Code Section, such reference
shall be deemed to include any successor Code Section having the same or a
similar purpose.

 

2.10                           Company.  The word “Company” shall mean Sealy
Corporation, a Delaware corporation, and any successor corporation or business
organization which shall assume the duties and obligations of Sealy Corporation
by operation of law or otherwise under this Plan.

 

2.11                           Compensation.  The word “Compensation” shall mean with
respect to a Participant for a Plan Year, his Profit Sharing Plan Compensation,
determined without regard to the limitation of Section 401(a)(17) of the
Code, which is in excess of (a) below but which is not in excess of (b) below,
where:

 

(a)                                  is the limitation in
effect for such period pursuant to Section 401(a)(17) of the Code; and

 

(b)                                 is the limitation that
would be in effect for such period if the Two Hundred Thousand Dollar
($200,000.00) compensation limitation amount and cost of

 

7

 

living method as set forth in Section 401(a)(17) of the Code as in
effect for plan years of tax-qualified retirement plans beginning in 1993 had
not been amended effective at any time thereafter (and, for avoidance of doubt,
which limitation for plan years of tax-qualified retirement plans beginning in
1993 was Two Hundred Thirty-Five Thousand Eight Hundred Forty Dollars
($235,840.00)).

 

Therefore, it is intended that Compensation at any time for purposes of
this Plan shall be that band of Profit Sharing Plan Compensation between the
then applicable limit of Section 401(a)(17) and what the limit then would
have been had Section 401(a)(17) of the Code not been amended as referred
to Subsection 2.11(b).  The amount of a
Participant’s Compensation for any Plan Year shall be determined as of the last
day of such year.

 

2.12                           Compensation
Committee.  The words “Compensation
Committee” shall mean the Compensation Committee of the Board or its successor
as determined by the Board.  If the
Compensation Committee has no successor, the duties of the Compensation
Committee shall become duties of the Board. 
The Compensation Committee shall have such duties with respect to the
Plan as shall be determined by the Board.

 

2.13                           Competitive
Entity.  The words “Competitive
Entity” shall mean any of the following mattress manufacturing companies in the
United States or their mattress manufacturing or mattress wholesaling
affiliates:  Simmons, Serta, Spring Air,
Kingsdown, Select Comfort and Tempur-Pedic or any of their successors or any
other mattress manufacturing company or its mattress manufacturing or mattress
wholesaling affiliate which represents 10% or more of the mattress market in the
United States.

 

Notwithstanding
anything in this Section to the contrary, a company, partnership,
organization, proprietorship, or other entity which purchases the stock or
assets of a business unit directly from the Company or any Subsidiary shall not
be deemed a Competitive Entity solely with 

 

8

 

respect to the products developed, manufactured, prepared, sold, or
distributed by and the individuals employed by such business unit as of the
date of such stock or asset purchase.

 

2.14                           Covered
Employee.  The words “Covered
Employee” shall mean an Employee of a Participating Company who:

 

(a)                                  is an “active
participant” in the Profit Sharing Plan as the term “active participant” is
defined in that plan;

 

(b)                                 receives remuneration
from one or more Participating Companies at a rate which, in the aggregate for
a Plan Year, would exceed the limit on Profit Sharing Plan Compensation which
may be taken into account by a tax qualified retirement plan in accordance with
Section 401(a)(17) of the Code;

 

(c)                                  is a senior
management employee of a Participating Company, as determined by the Plan
Administrator;

 

(d)                                 is a member of “a
select group of management or highly compensated employees” as described in Section 1.5
of this Plan;

 

(e)                                  is not a nonresident
alien Employee who receives no earned income (within the meaning of Code Section 911(d)(2))
from a Participant Company or any Affiliate that constitutes income from
sources within the United States (within the meaning of Code Section 861(a)(3)),
except to the extent expressly permitted by this Plan; and

 

(f)                                    is not employed in
a capacity reasonably categorized by the Company, a Participating Company or an
Affiliate as a Leased Person, regardless of whether his status under the Code
subsequently may be determined by a court, the Internal Revenue Service or
other government entity to be a Covered Employee, an Employee or otherwise.

 

An Employee shall become a Covered Employee as of the first day on
which he satisfies all of the requirements of Subsections 2.14(a) through (f) above.  An Employee shall cease to be a Covered
Employee as of the first day thereafter on which he ceases to satisfy any one
of such requirements.  With respect to
the requirement in Subsection 2.14(b) relating to remuneration, an Employee
will be deemed to first satisfy such requirement on the first day as of which
his rate of remuneration exceeds the limits referred to in Subsection 2.14(b) relating
to remuneration; an 

 

9

 

Employee will be deemed to cease to satisfy such requirement on the
last day of the first Plan Year for which his remuneration is not so limited.

 

2.15                           Date
of Hire.  The words “Date of Hire”
shall mean an Employee’s Date of Hire for purposes of the Profit Sharing Plan.

 

2.16                           Deferred
Compensation Account.  The words “Deferred
Compensation Account” shall mean for each Participant the bookkeeping account
maintained on his behalf to reflect hypothetical profit sharing contributions
made on his behalf and all hypothetical investment earnings and losses thereon.

 

2.17                           Disability.  The word “Disability” shall mean (and the
word “Disabled” shall relate to) a disability as determined for purposes of the
Profit Sharing Plan.

 

2.18                           Effective
Date.  The words “Effective Date”
shall mean the original effective date of this Plan which is December 1,
1994.

 

2.19                           Employee.  The word “Employee” shall mean any common law
employee or Leased Person of a Participating Company or an Affiliate.  The word “Employee” shall not include any
person who renders service to a Participating Company or an Affiliate solely as
a director or independent contractor.  In
the event a person renders service to a Participating Company or an Affiliate
as a common law employee and in another capacity as a director, an independent
contractor or otherwise as a self-employed individual, he shall be considered
to be an Employee hereunder only in his capacity as a common law employee.

 

In the event a
person who was not classified by a Participating Company or an Affiliate as a
common law employee is subsequently determined by a court, the Internal Revenue
Service or other governmental entity to be a common law employee, such person
shall only be considered to be an Employee hereunder prospectively from the
date of such determination, or, if later, at the time that 

 

10

 

such person is initially treated as an Employee on the payroll records
of the Participating Company or Affiliate.

 

2.20                           ERISA.  The acronym “ERISA” shall mean the Employee
Retirement Income Security Act of 1974, as amended, and lawful guidance
promulgated thereunder.  Whenever a
reference is made to a specific ERISA Section, such reference shall be deemed
to include any successor ERISA Section having the same or a similar
purpose.

 

2.21                           Leased
Person.  The words “Leased Person”
shall mean, on and after December 1, 1997, any individual who, pursuant to
an agreement between any Participating Company or Affiliate and any leasing
organization, has performed services for the Participating Company, for an
Affiliate or for related persons, as determined in accordance with Code Section 414(n)(6),
on a substantially full time basis for a period of at least one (1) year;
provided, however, that such services are performed under the primary direction
or control of the Participating Company or the Affiliate.

 

In the event a
person who was not classified by a Participating Company or an Affiliate as a
Leased Person is subsequently determined by a court, the Internal Revenue
Service or other governmental entity to be a Leased Person, such person shall
only be considered to be a Leased Person hereunder prospectively from the date
of such determination, or, if later, at the time that such person is initially
treated as a Leased Person by a Participating Company or an Affiliate.

 

2.22                           Normal
Retirement Age.  The words “Normal
Retirement Age” shall mean a Participant’s Normal Retirement Age as determined
for purposes of the Profit Sharing Plan.

 

2.23                           Participant.  The word “Participant” shall mean a Covered
Employee who becomes a Participant in this Plan pursuant to Article III
hereof.  A Participant shall cease to be
a Participant upon his Termination of Employment.  A Participant may be categorized as one of
the following:

 

11

 

(a)                                  In general, a
Participant will be an Active Participant;

 

(b)                                 If he ceases to be a
Covered Employee but does not incur a Termination of Employment, he will be
considered an Inactive Participant; and

 

(c)                                  If he has a
Termination of Employment, he will be considered a former Participant.

 

2.24                           Participating
Company.  The words “Participating
Company” shall mean the Company and any Subsidiary which is a Participating
Company pursuant to the provision of Article XII of this Plan.  The Participating Company as of the
Restatement Date is listed in Article XII of this Plan.

 

2.25                           Plan.  The word “Plan” shall mean the Sealy Benefit
Equalization Plan, as previously established and amended, as set forth herein,
and as it later may be amended.

 

2.26                           Plan
Administrator.  The words “Plan
Administrator” shall mean Sealy, Inc., an Ohio corporation, or such
successor as may be appointed by the Board.

 

2.27                           Plan
Year.  The words “Plan Year” shall
mean the twelve (12) month period commencing on December 1 and ending on
the following November 30.  The Plan
Year of this Plan shall correspond to the plan year of the Profit Sharing Plan.

 

2.28                           Profit
Sharing Plan.  The words “Profit
Sharing Plan” shall mean the Sealy Profit Sharing Plan.

 

2.29                           Profit
Sharing Plan Compensation.  The words
“Profit Sharing Plan Compensation” shall mean, with respect to a Participant in
this Plan for a Plan Year, his “compensation” (as that word is defined in the
Profit Sharing Plan) for such Plan Year, but without regard to the
dollar limitations on such compensation pursuant to Section 401(a)(17) of
the Code.  The amount of a Participant’s
Profit Sharing Plan Compensation for any Plan Year shall be determined as of
the last day of such year.

 

12

 

2.30                           Separation
from Service.  The words “Separation
from Service” shall mean a “separation from service” as defined for purposes of
Section 409A of the Code for purposes of determining when a distribution
may be made under the terms of a non-qualified deferred compensation plan such
as this Plan.  In general, a Separation
from Service for purposes of this Plan occurs when there is a good faith severance
of the employment relationship between the Company and its Affiliates and an
Employee due to the Employee’s death, retirement or other “termination of
employment” (as that term is defined for purposes of identifying a Separation
from Service for purposes of Section 409A).  Specifically, the following shall apply:

 

(a)                                  An Employee will not
be deemed to have a Separation from Service while on military leave, sick
leave, or other bona fide (i.e., where there is a reasonable expectation that
the Employee will return) leave of absence if the period of such leave does not
exceed six (6) months, or, if longer, so long as the Employee retains a
right to reemployment with the Company or an Affiliate by law or contract.  If the leave exceeds six (6) months and
the Employee does not retain such a reemployment right, the Separation from
Service occurs on the first day following such six (6) months.  However, where the leave is due to any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than six (6) months, where such impairment causes the Employee to be
unable to perform the duties of his or her position of employment or any
substantially similar position of employment, twenty-nine (29) months will be substituted
for six (6) months for purposes of this Subsection;

 

(b)                                 An Employee will not
be considered to have a Separation from Service merely due to transfer between
Employee and independent contractor status (including status as a director of
the Company);

 

(c)                                  Whether a “termination
of employment,” as defined for purposes of the definition of Separation from
Service under Section 409A of the Code, has occurred is determined based
on whether the facts and circumstances indicate that the applicable Participating
Company or Affiliate and the Employee reasonably anticipated that:

 

(i)                                     no further
services would be performed after a certain date; or

 

(ii)                                  that the level of
bona fide services the Employee would perform after such date (whether as an
Employee or independent contractor, 

 

13

 

including as a director) would permanently decrease to less than fifty
percent (50%) of the average level of bona fide services provided in the
immediately preceding thirty-six (36) months.

 

This Plan contains definitions of both the words “Termination of
Employment” and the words “Separation from Service.”  The definition of Termination of Employment
is the same as the definition in the Profit Sharing Plan with the intent of providing,
to the extent possible, parallel treatment of individuals who participate in
both plans.  The term Separation from
Service is contained in this Plan, but not the Profit Sharing Plan, because a
Termination of Employment which results in a distribution event under the
Profit Sharing Plan may not constitute a Separation from Service which is
permitted to result in a distribution from this Plan pursuant to the
restrictions of Section 409A of the Code. 
For example, if an Employee were to retire from the Company and thereby
incur a Termination of Employment but become an independent contractor of the
Company:

 

(x)                                   the individual may
be eligible for a distribution from the Profit Sharing Plan (under the rules in
effect as of the Restatement Date); but

 

(y)                                 the individual may not
be eligible for a distribution from this Plan depending on the level of
services the Participant is expected to perform as an independent contractor.

 

2.31                           Subsidiary.  The word “Subsidiary” shall mean any
corporation in which the Company owns, directly or indirectly, stock possessing
at least eighty percent (80%) or more of the total combined voting power of all
classes of stock entitled to vote or at least eighty percent (80%) of the total
value of shares of all classes of stock of such corporation, as determined
pursuant to Section 1563(a)(1) of the Code, but only during the
period any such corporation would be so defined.

 

2.32                           Termination
of Employment.  The words “Termination
of Employment” shall mean for any Employee the occurrence of a termination of
employment as defined in the Profit Sharing Plan.

 

14

 

See the
definition of the words “Separation from Service.”

 

2.33                           Vested
Interest.  The words “Vested Interest”
shall mean with respect to any Participant (a) minus (b), where:

 

(a)                                  equals the sum of:

 

(i)                                     his Deferred
Compensation Account multiplied by his Vested Percentage; plus

 

(ii)                                  any distributions
made to the Participant from his Deferred Compensation Account since his earliest
Date of Hire which has not been followed by five (5) consecutive One (1) Year
Breaks-In-Service, multiplied by his Vested Percentage; and

 

(b)                                 equals the amount of
any distributions made to the Participant from his Deferred Compensation
Account since his earliest Date of Hire which has not been followed by five (5) consecutive
One (1) Year Breaks-In-Service.

 

2.34                           Vested
Percentage.  The words “Vested
Percentage” shall mean for any Participant a percentage determined on the basis
of his number of years of Vesting Service in accordance with the following
table and shall be the same as his Vested Percentage under the Profit Sharing
Plan except as otherwise provided in this Section:

 

	
  Years of Vesting Service

  	
   

  	
  Vested Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less than 2 years

  	
   

  	
  0

  	
  %

  
	
  2 but less than 3 years

  	
   

  	
  20

  	
  %

  
	
  3 but less than 4 years

  	
   

  	
  40

  	
  %

  
	
  4 but less than 5 years

  	
   

  	
  60

  	
  %

  
	
  5 but less than 6 years

  	
   

  	
  80

  	
  %

  
	
  6 or more years

  	
   

  	
  100

  	
  %

  

 

Notwithstanding the foregoing provisions of this Section 2.34, the
Vested Percentage of a Participant shall be zero percent (0%) in each of the
following circumstances:

 

(a)                                  if his employment is
terminated for Cause;

 

(b)                                 if he engages in a
Breach of the Noncompetition Requirement; or

 

15

 

(c)                                  until the last day of
the first Plan Year following the Plan Year in which the Participant’s Account
first is allocated a hypothetical contribution under this Plan (which for this
purpose of determining the Participant’s Vested Percentage will be considered
the date the limited contribution to the Profit Sharing Plan actually is made);
and

 

shall be one hundred percent (100%) if (subject to Subsection (c) above),
the Participant dies, becomes Disabled or attains his Normal Retirement Age
before he incurs a Termination of Employment.

 

2.35                           Vesting
Service.  The words “Vesting Service”
shall mean for any Employee his vesting service as determined under the Profit
Sharing Plan.

 

ARTICLE III

 

ELIGIBILITY AND PARTICIPATION

 

3.1                                 Eligibility.  Each Employee who is or becomes a Covered
Employee shall be eligible to become a Participant under this Plan.

 

3.2                                 Participation.  A Covered Employee who was a Participant on
the Restatement Date shall continue to be a Participant.  On and after the Restatement Date, an
Employee who satisfies the eligibility requirements of Section 3.1 hereof
shall commence participation for the first Plan Year for which his Account
receives the allocation of a hypothetical contribution which generally shall be
as of the later to occur of:

 

(a)                                  the first day of the
first Plan Year coincident with or next following the date as of which he
becomes a participant in the Profit Sharing Plan; or

 

(b)                                 the first day of the
first Plan Year in which his rate of Profit Sharing Plan Compensation is
projected to exceed the limits of Section 401(a)(17) of the Code.

 

3.3                                 Cessation
of Participation.  A Participant
shall cease to be a Participant and shall become a former Participant, as of
his Termination of Employment.

 

16

 

3.4                                 Inactive
Participants.  If a Participant
ceases to be a Covered Employee (because he ceases to be a member of a select
group of management or highly compensated employees or for any other reason),
but remains an Employee, he shall cease to be an Active Participant and shall
become an Inactive Participant.

 

3.5                                 Rehired
Covered Employee.  In the event that
a Participating Company or an Affiliate shall reemploy a former Participant, he
shall be eligible to become a Participant in the Plan as if he were a new
Employee, subject to the restrictions of Section 409A of the Code.

 

ARTICLE IV

 

PROFIT SHARING
CONTRIBUTIONS

 

4.1                                 Active
Participants.  If a Participating
Company makes a discretionary profit sharing contribution to the Profit Sharing
Plan for a plan year of the Profit Sharing Plan which corresponds to a Plan
Year of this Plan, and:

 

(a)                                  if an Active
Participant in this Plan is also a participant in such Profit Sharing Plan for
such plan year; and

 

(b)                                 if such Active
Participant’s account under the Profit Sharing Plan is entitled to share in the
allocation of such contribution; and

 

(c)                                  if the allocation to
such Active Participant’s account under the Profit Sharing Plan is limited due
to the limitation on remuneration which may be taken into account for purposes
of tax qualified retirement plans under Section 401(a)(17) of the Code;
then

 

a hypothetical amount shall be allocated to such Active Participant’s
Account hereunder for the corresponding Plan Year under this Plan.  The amount so allocated to the Participant’s
Account under this Plan shall be the same percentage of such Active Participant’s
Compensation for the Plan Year under this Plan as his allocation under the
Profit Sharing Plan is a percentage of his 

 

17

 

Profit Sharing Compensation (as limited pursuant to Section 401(a)(17)
of the Code) for the corresponding plan year of the Profit Sharing Plan.

 

4.2                                 Inactive
and Former Participants.  A
Participant shall not be entitled to have any hypothetical contribution
allocated to his Account under this Plan for any period during which he is an
Inactive Participant or a former Participant. 
However, this rule shall not prohibit (for example) the Account of
a former Participant who incurs a Termination of Employment from receiving an
allocation under this Plan for his period of active participation during such
year of termination if the requirements of Section 4.1 are satisfied.

 

ARTICLE V

 

ACCOUNTS

 

5.1                                 Establishment
of Accounts.  The Plan Administrator
shall establish a Deferred Compensation Account in its books and records in the
name of each Participant in this Plan. 
All hypothetical amounts credited to the Account of any Active
Participant, Inactive Participant or former Participant shall constitute a
general, unsecured liability of the Participating Companies to such person.

 

5.2                                 Allocation
of Contributions.  Hypothetical
amounts contributed on behalf of a Participant pursuant to Section 4.1
hereof shall be allocated to such Participant’s Account.

 

5.3                                 Crediting
of Earnings.  The Plan Administrator
shall credit the Account of each Active Participant, each Inactive Participant
and each former Participant who has not yet been paid his Account balance
hereunder, with hypothetical earnings and losses for the Plan Year or other
appropriate period equal to the return on the investment in the Participant’s
accounts under the Profit Sharing Plan for such corresponding Plan Year or
other period.  In determining such return
and applying it to the Plan, the Plan Administrator may use rules of
administrative convenience 

 

18

 

provided that the rate of return credited to the Participant’s Account
under the Plan is roughly equal to his rate of return under the Profit Sharing
Plan.  For
purposes of crediting earnings and losses with respect to a hypothetical
contribution under this Plan, such contribution shall be deemed credited to
such Active Participant’s Account under this Plan as of the date the actual
contribution is allocated to his account under the Profit Sharing Plan.  If the Participant has no amount in the
Profit Sharing Plan for a period (e.g. if his Profit Sharing Plan accounts are
distributed before he receives his distribution under this Plan), his hypothetical
investment return under this Plan for such period will be based on the return
of the Profit Sharing Plan fund most protective of principal for that period.

 

ARTICLE VI

 

PAYMENTS AND BENEFITS

 

6.1                                 Plan
Distributions.  Plan distributions
shall be subject to the provisions of this Section 6.1 as follows:

 

(a)                                  Subject to the
provisions of Subsection 6.1(b) hereof:

 

(i)                                     A
Participant who retires or otherwise incurs a Separation from Service on or
after his Normal Retirement Date shall be entitled to receive a distribution of
his Account balance;

 

(ii)           A
Participant who incurs a Separation from Service due to his Disability shall be
entitled to receive a distribution of his Account balance;

 

(iii)          The
beneficiary of a Participant who incurs a Separation from Service due to his
death shall be entitled to receive a distribution of the deceased Participant’s
Account balance; and

 

(iv)                              A
Participant who incurs a Separation from Service prior to attainment of his
Normal Retirement Age shall be entitled to receive a distribution of his Vested
Interest.

 

19

 

(b)                                 The provisions of
Subsection 6.1(a) shall be subject to the following provisions of this
Subsection 6.1(b):

 

(i)                                     A
Participant who receives a distribution of his Vested Interest, which Vested
Interest is less than One Hundred Percent (100%), shall forfeit the remainder
of his Account balance at the time of distribution; and

 

(ii)           A
Participant who either incurs a Separation from Service for Cause or who
engages in a Breach of the Noncompetition Requirement prior to distribution of
his Account balance or Vested Interest, as applicable, shall forfeit his
Account balance.

 

(c)                                  Forfeitures shall be
dealt with as provided in Section 6.2.

 

(d)                                 Distribution shall be
made at the time and in the manner described in Sections 6.3 and 6.4,
respectively.

 

6.2                                 Forfeitures.  A Participant’s Account shall be debited by
the amount of any forfeiture. 
Forfeitures shall not be allocated to the Accounts of other
Participants.

 

6.3                                 Time
of Distribution.  Distributions
pursuant to Section 6.1 shall be made at such time as the Plan
Administrator, in its sole discretion, shall determine, but not earlier than,
nor more than ninety (90) days later than, the applicable date set forth below:

 

(a)                                  If the distribution
is due to any reason other than the Participant’s death, the applicable date is
the date which is the earlier of:

 

(i)                                     the
day which is six (6) months and one (1) day following the date of the
Participant’s Separation from Service; or

 

(ii)           the
date which is thirty (30) days following the date of the Participant’s death if
such date is later than the date of such Participant’s Separation from Service
but earlier than the day which is six (6) months and one (1) day
following the date of such Separation from Service; or

 

(b)                                 If the distribution is
due to the Participant’s death, the applicable date is the date which is thirty
(30) days following the date of the Participant’s death.

 

6.4                                 Form of
Distribution.  Subject to such rules,
procedures, limits and restrictions as the Plan Administrator may establish
from time to time, a Participant or a beneficiary of a deceased 

 

20

 

Participant shall receive any distribution resulting from the Participant’s
Separation from Service or death, as applicable, in the form of a single sum
payment, subject to appropriate withholding.

 

6.5                                 No
Suspension of Benefits.  As of the
Restatement Date, it appears that Section 409A of the Code does not permit
a “suspension of benefits” on rehire. 
Therefore, unless otherwise required by Section 409A, if a
Participant has a bona fide Separation from Service, the distribution resulting
from such Separation from Service shall not be suspended merely because the
Participant is rehired before the distribution is made.

 

6.6                                 Specified
Employee Payment Delay.  It is
intended that all distributions under this Plan, regardless of whether the
recipient is a “Specified Employee” as described in Section 409A or the
Company’s Specified Employee Policy, will be delayed as required for Specified
Employees pursuant to Section 6.3 hereof or as otherwise required to
comply with Section 409A of the Code and the Company’s Specified Employee
Policy.

 

ARTICLE VII

BENEFICIARIES

 

7.1                                 Beneficiary
Designation.  Subject to rules and
procedures promulgated by the Plan Administrator, a Participant or former
Participant may sign a document designating a beneficiary or beneficiaries to
receive any amounts payable under this Plan due to his death.  In the event that a Participant or former
Participant fails to designate a beneficiary in accordance with the provisions
of this Section 7.1, his beneficiary shall be deemed to be the person or
persons in the first of the following classes in which there are any survivors
of the Participant or former Participant:

 

(a)                                  his spouse at the
time of his death;

 

(b)                                 his issue per stirpes;
and

 

(c)                                  the executor or
administrator of his estate.

 

21

 

ARTICLE VIII

 

RIGHTS OF PARTICIPANTS

 

8.1                                 Creditor
Status of Participants.  The
hypothetical profit sharing contributions made on behalf of a Participant
hereunder shall be merely unfunded, unsecured promises of, and joint and
several obligations of, the Participating Companies to make benefit payments in
the future and shall be liabilities solely against the general assets of the
Participating Companies.  The Company and
the other Participating Companies shall not be required to segregate, set aside
or escrow actual amounts to reflect the hypothetical profit sharing
contributions nor any hypothetical earnings credited thereon.  With respect to the hypothetical amounts
credited to any Accounts hereunder and any benefits payable hereunder, a
Participant and his beneficiary shall have the status of general unsecured
creditors of the Participating Companies, and may look only to the
Participating Companies and their general assets for payment of any such
amounts credited to a Participant’s Account.

 

The liability of a Participating Company with respect to Participants
other than its own Employees and former Employees shall be limited to the
extent necessary to prevent this Plan from being considered other than unfunded
as described in Section 1.6 of this Plan or from otherwise adversely
affecting the status of this Plan as described in Article I hereof.  Without limiting the generality of the
foregoing, as of the Restatement Date, it appears that the liability for
amounts accrued with respect to Employees of another Participating Company
would extend to hypothetical contributions but not earnings and only for
hypothetical contributions accrued while the Participating Company was an
Affiliate of the Participating Company by which the Participant was employed
and only while it remains an Affiliate.

 

22

 

ARTICLE IX

NON-ALIENATION

 

9.1                                 Non-Alienation.  No
benefits or hypothetical amounts credited to Accounts under this Plan shall be
subject in any manner to be anticipated, alienated, sold, transferred,
assigned, pledged, encumbered, attached, garnished or charged in any manner
(either at law or in equity), and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber, attach, garnish or charge the same shall be
void; nor shall any such benefits or amounts in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or torts of the
person entitled to such benefits as are herein provided for her or him.  Notwithstanding the foregoing provisions of
this Section to the contrary, the Plan Administrator shall comply with a
qualified domestic relations order to the extent permitted under Section 409A
of the Code.  In furtherance thereof, the
Plan Administrator shall establish a procedure with respect to such orders.

 

ARTICLE X

 

ADMINISTRATION

 

10.1                           Appointment
of Plan Administrator.  The Board of
Directors of the Company shall appoint the Plan Administrator which shall be
any person(s), corporation or partnership, (including the Company itself) as
said Board of Directors shall deem desirable in its sole discretion.  The Plan Administrator may be removed or
resign upon thirty (30) days’ written notice or such lesser period of notice as
is mutually agreeable.  Unless the Board
of Directors appoints another Plan Administrator, Sealy, Inc. shall be the
Plan Administrator.

 

10.2                           Powers
and Duties of the Plan Administrator. 
Except as expressly otherwise set forth herein, the Plan Administrator
shall have the authority and responsibility granted or imposed on an “administrator”
by ERISA.  The Plan Administrator shall
determine any and all questions of fact, resolve all questions of
interpretation of this Plan which may arise under any of the provisions 

 

23

 

of this Plan as to which no
other provision for determination is made hereunder, and exercise all other
powers and discretions necessary to be exercised under the terms of this Plan
which it is herein given or for which no contrary provision is made.  The Plan Administrator shall have full power
and discretion to interpret this Plan and related documents, to resolve
ambiguities, inconsistencies and omissions, to determine any question of fact,
and to determine the rights and benefits, if any, of any Participant or other
applicant, in accordance with the provisions of this Plan.  Subject to the provisions of any claims
procedure hereunder, the Plan Administrator’s decision with respect to any
matter shall be final and binding on all parties concerned, and neither the
Plan Administrator nor any of its directors, officers, employees or delegates
nor, where applicable, the directors, officers or employees of any delegate,
shall be liable in that regard except for gross abuse of the discretion given
it and them under the terms of this Plan. 
All determinations of the Plan Administrator shall be made in a uniform,
consistent and nondiscriminatory manner with respect to all Participants and
beneficiaries in similar circumstances. 
The Plan Administrator, from time to time, may designate one or more
persons or agents to carry out any or all of its duties hereunder.

 

10.3                           Engagement
of Advisors.  The Plan Administrator
may employ actuaries, attorneys, accountants, brokers, employee benefit
consultants, and other specialists to render advice concerning any
responsibility the Plan Administrator or Committee has under this Plan.  Such persons may also be advisors to any
Participating Company.

 

10.4                           Payment
of Costs and Expenses.  The costs and
expenses incurred in the administration of this Plan shall be paid by one or
more of the Participating Companies, as determined by the Company.  Such costs and expenses include those
incident to the performance of the responsibilities of the Plan Administrator
or Committee, including but not limited to, claims administration fees and
costs, fees of accountants, legal counsel and other specialists, bonding
expenses, and other costs of administering this Plan.  Notwithstanding the foregoing, in no event

 

24

 

will any person serving in the
capacity of Plan Administrator, or Committee member who is a full-time employee
of a Participating Company be entitled to any compensation for such services.

 

10.5                           Claims
Procedure.  The Plan Administrator
shall establish and maintain a claims procedure under the Plan and shall
establish and appoint the members of a Benefit Appeals Committee with
appropriate powers in connection therewith.

 

10.6                           Limitation
of Liability.  Except as otherwise
provided in ERISA, the Plan Administrator and the Committee, and their
respective officers, employees and members, and directors, officers and
employees of the Company, the Participating Subsidiaries and Affiliates, shall
incur no personal liability of any nature whatsoever in connection with any act
done or omitted to be done in the administration of this Plan. No person shall
be liable for the act of any other person.

 

ARTICLE XI

AMENDMENT AND TERMINATION

 

11.1                           Power
to Amend or Terminate.  Except as
otherwise provided in this Section following a Change of Control, this
Plan may be amended by the Company at any time, or from time to time, including
an amendment to cease contributions hereunder, and (except as otherwise
provided in Section 11.2 hereof) may be terminated by the Company at any
time, but no such amendment, modification or termination shall reduce a
Participant’s Vested Interest, determined as of the date of such amendment,
modification or termination.  Such
amendment, modification or termination shall be in writing, executed by one or
more officers of the Company who are authorized to do so.  This Plan may not be amended (but except as
otherwise provided in Section 11.2 hereof may be terminated) during the
two (2) year period following a Change of Control except that amendments
may be made as required by law.

 

25

 

11.2                           Restrictions
on Plan Termination.  If this Plan is
terminated then, on and after the effective date of such termination, all
deferrals hereunder shall cease. 
Thereafter, all amounts then credited to each Participant’s Accounts
shall become fully vested.  Distributions
as a result of such plan termination, which shall be in the form of a single
sum payment, shall be made only in compliance with the requirements of Section 409A
of the Code concerning plan terminations and liquidations (or any successor
provision governing permitted distributions upon a plan termination and
liquidation).  For illustrative purposes
only, the general conditions under which distributions upon plan terminations
and liquidations are permitted under such Section 409A are described as
follows:

 

(a)                                  within 12 months of
certain corporate dissolutions or with the approval of the bankruptcy court;

 

(b)                                 in connection with a
change in control event (as defined pursuant to Section 409A of the Code);
or

 

(c)                                  if the Participant’s
employer terminates all nonqualified deferred compensation plans that would be
aggregated, under Section 409A of the Code, with any terminated plan or
agreement for at least three (3) years, and Plan termination distributions
are made after twelve (12) months, but within twenty-four (24) months, of Plan
termination.

 

11.3                           No
Liability for Plan Amendment or Termination.  Neither the Company, nor any other
Participating Company, nor any officer, Employee or director thereof shall have
any liability because this Plan is amended or terminated.  Without limiting the generality of the
foregoing, none of the foregoing shall have any liability due to the Company
discontinuing hypothetical contributions under this Plan or terminating this
Plan notwithstanding the fact that a Participant may have expected to have
benefited from future hypothetical contributions or earnings hereunder had this
Plan remained in effect without such discontinuance of hypothetical
contributions or such termination.

 

26

 

ARTICLE XII

 

PARTICIPATING COMPANIES

 

12.1                           Initial
Participating Company.  The initial
Participating Company and its Adoption Date is as follows:

 

	
  Participating Company

  	
   

  	
  Adoption Date

  
	
   

  	
   

  	
   

  
	
  Sealy, Inc.

  	
   

  	
  December 1, 1994

  

 

12.2                           Designation
of Participating Companies.  A
Subsidiary of the Company will become a Participating Company under this Plan
as of the date an Employee of that Subsidiary becomes a Covered Employee.  Such a Subsidiary’s status as a Participating
Company may be reflected by an amendment to Section 12.1 hereof which
specifies the name of the Subsidiary and its Adoption Date, but such an
amendment shall not be required in order for the Subsidiary to be a
Participating Company.  Any such
amendment need only be executed by the Company.

 

12.3                           Adoption
of Supplements.  The Company may
determine that special provisions shall be applicable to some or all of the
Employees of a Participating Company, either in addition to or in lieu of the
provisions of this Plan, or may determine that certain Employees otherwise
eligible to participate in this Plan shall not be eligible to participate in
this Plan.  In such event, the Company
shall adopt a Supplement with respect to the Participating Company which
employs such individuals which Supplement shall specify the Employees of the
Participating Company covered thereby and the special provisions applicable to
such Employees.  Any Supplement shall be deemed
to be a part of this Plan solely with respect to the Employees specified
therein.

 

12.4                           Amendment
of Supplements.  The Company, from
time to time, may amend, modify or terminate any Supplement; provided, however,
that no such action shall operate so as to deprive any Employee who was covered
by such Supplement of his Vested Interest as of the date of such 

 

27

 

amendment or termination.  Any
such amendment or termination shall be subject to the Plan’s general rules with
respect to amendment or termination of the Plan.

 

12.5                           Termination
of Participation of Participating Company. 
The Company may terminate the status of a Subsidiary as a Participating
Company at any time by administrative action or such status may be terminated
by events, as when a Participating Company ceases to be a Subsidiary.  Distribution of the Accounts of Participants
employed by said Participating Company shall continue to be subject to the
provisions of this Plan unless special provision, permitted by law, shall be
made therefor.

 

12.6                           Delegation
of Authority.  The Company is hereby
fully empowered to act on behalf of itself and the other Participating
Companies as it may deem appropriate in maintaining the Plan.  Without limiting the generality of the
foregoing, such actions include obtaining and retaining the status of the Plan
as described in Article I of the Plan and appointing attorneys-in-fact in
pursuit thereof.  Furthermore, the
adoption by the Company of any amendment to the Plan or the termination
thereof, will constitute and represent, without any further action on the part
of any Participating Company, the approval, adoption, ratification or
confirmation by each Participating Company of any such amendment or
termination.  In addition, the
appointment of or removal by the Company of any member of the Benefit Appeals
Committee, any Plan Administrator or other person under the Plan shall
constitute and represent, without any further action on the part of any
Participating Company, the appointment or removal by each Participating Company
of such person.

 

ARTICLE XIII

 

MISCELLANEOUS PROVISIONS

 

13.1                           Tax
Withholding.  The Company or any other
Participating Company may withhold from a Participant’s Compensation or any
payment made by it under this Plan such amount or amounts as may be required
for purposes of complying with the tax withholding or other provisions

 

28

 

of the Code or the Social
Security Act or any state or local income or employment tax act or for purposes
of paying any estate, inheritance or other tax attributable to any amounts
payable hereunder.

 

13.2                           Incapacity.  If the Plan Administrator determines that any
Participant or beneficiary entitled to payments under this Plan is incompetent
by reason of physical or mental incapacity disability and is consequently
unable to give a valid receipt for payments made hereunder, or is a minor, the
Plan Administrator may order the payments becoming due to such person to be
made to another person for his benefit, without responsibility on the part of
the Plan Administrator to follow the application of amounts so paid.  Payments made pursuant to this Section 13.2
shall completely discharge the Plan Administrator, the Company and the other
Participating Companies and the Benefit Appeals Committee with respect to such
payments.

 

13.3                           Administrative
Forms.  All applications, elections
and designations in connection with this Plan made by a Participant or
beneficiary shall become effective only when received by the Plan Administrator
in a form acceptable to the Plan Administrator.

 

13.4                           Independence
of Plan.  Except as otherwise
expressly provided herein, this Plan shall be independent of, and in addition
to, any other benefit agreement or plan of a Participating Company or any
rights that may exist from time to time thereunder.

 

13.5                           No
Employment Rights Created.  This Plan
shall not be deemed to constitute a contract of employment between the Company
or any other Participating Company and any Participant, nor confer upon any
Participant the right to be retained in the service of the Company or any other
Participating Company for any period of time, nor shall any provision hereof
restrict the right of the Company or any other Participating Company to
discharge or otherwise deal with any Participant.

 

13.6                           Responsibility
for Legal Effect.  Neither the
Company, nor any other Participating Company, nor the Plan Administrator or the
Benefit Appeals Committee, nor any officer, member, delegate or agent of any of
them, makes any representations or warranties, express or implied, or 

 

29

 

assumes any responsibility
concerning the legal, tax, or other implications or effects of this Plan.  Without limiting the generality of the
foregoing, no Participating Company shall have any liability for the tax
liability which a Participant may incur resulting from participation in this
Plan or the accrual or payment of benefits hereunder.

 

13.7                           Successors.  The terms and conditions of this Plan shall
inure to the benefit of and bind the Company, the other Participating
Companies, and their respective successors and assigns, and the Participants,
their beneficiaries, and the personal representatives of the Participants and
their beneficiaries.

 

13.8                           Controlling
Law.  This Plan shall be construed in
accordance with the laws of the State of Delaware to the extent not preempted
by laws of the United States.

 

13.9                           Headings
and Titles.  The Section headings
and titles of Articles used in this Plan are for convenience of reference only
and shall not be considered in construing this Plan.

 

13.10                     General Rules of
Construction.  The masculine gender
shall include the feminine and neuter, and vice versa, as the context shall
require.  The singular number shall
include the plural, and vice versa, as the context shall require.  The present tense of a verb shall include the
past and future tenses, and vice versa, as the context may require.

 

13.11                     Execution
in Counterparts.  This Plan may be
executed in any number of counterparts each of which shall be deemed an
original and said counterparts shall constitute but one and the same instrument
and may be sufficiently evidenced by any one counterpart.

 

13.12                     Severability.  In the event that any provision or term of
this Plan, or any agreement or instrument required by the Plan Administrator
hereunder, is determined by a judicial, quasi-judicial or administrative body
of competent jurisdiction to be void or not enforceable for any reason, all
other provisions or terms of this Plan or such agreement or instrument shall
remain in full force and effect and shall be enforceable as if such void or nonenforceable
provision or term had never been a part of this Plan, or such agreement or
instrument except as to the extent the Plan 

 

30

 

Administrator determines such result would have been contrary to the intent
of the Company in establishing and maintaining this Plan.

 

13.13                     Indemnification.  The Company and its Affiliates shall jointly
and severally indemnify, defend, and hold harmless any officer, Employee or
director of the Company or an Affiliate (hereinafter an “Indemnified Individual”),
for all acts taken or omitted in carrying out the responsibilities of the
Company, Participating Company, Affiliate, Plan Administrator, Board,
Compensation Committee or Benefit Appeals Committee under the terms of this
Plan or other responsibilities imposed upon such Indemnified Individual by
ERISA.  This indemnification for all such
acts taken or omitted is intentionally broad, but shall not provide
indemnification for any civil penalty that may be imposed on such Indemnified
Individual under ERISA Section 502(i), nor shall it provide
indemnification for any liability imposed upon such Indemnified Individual for
his embezzlement or diversion of Plan funds for the benefit of such Indemnified
Individual.  The Company and all
Affiliates shall jointly and severally indemnify any such Indemnified
Individual for expenses of defending a claim brought by a Participant,
beneficiary, service provider, government entity or other person, including all
legal fees and other costs of such defense
and shall advance funds as necessary for such defense on a timely basis.  The Company and all Affiliates shall also
reimburse promptly or advance funds to any such Indemnified Individual for any
monetary payment or obligation to pay of such Indemnified Individual arising
from a successful claim against such Indemnified Individual in any court or
arbitration.  In addition, if a claim is
settled (whether or not in connection with a formal legal action or arbitration)
with the concurrence of the Company, the Company and all Affiliates shall
jointly and severally indemnify any such Indemnified Individual for any
monetary liability under any such settlement, and the expenses thereof.  Such indemnification will not be provided to
any person who is not, at the time of the events for which indemnity is sought,
a present or former officer, Employee or director of the Company or an
Affiliate, nor shall it be provided for any claim by the Company or an
Affiliate against any such Indemnified Individual.

 

31

 

IN WITNESS WHEREOF, SEALY CORPORATION, the Company, by its appropriate
officers duly authorized, has caused this Amendment and Restatement to be
executed as of the 18th day of December, 2008.

 

 

	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
  (“Company”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Kenneth
  L Walker

  
	
   

  	
   

  
	
   

  	
  And

  	
  /s/ Lawrence
  J. Rogers

  
				

 

32Exhibit 10.45

 

EXECUTION
COPY

 

SEALY EXECUTIVE

 

SEVERANCE BENEFIT PLAN

 

Original Effective Date:   December 1, 1992

 

Restatement Generally Effective:   December 1, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  PRELIMINARY PROVISIONS

  	
  1

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  DEFINITIONS

  	
  3

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  ELIGIBILITY AND PARTICIPATION

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  QUALIFICATION FOR BENEFITS

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  BENEFITS AND PAYMENT OF BENEFITS

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  ADMINISTRATION

  	
  23

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  AMENDMENT AND TERMINATION

  	
  25

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  PARTICIPATING SUBSIDIARIES

  	
  27

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  MISCELLANEOUS

  	
  28

  

 

i

 

AMENDMENT AND RESTATEMENT

OF THE

SEALY EXECUTIVE SEVERANCE BENEFIT PLAN

 

This Amendment and Restatement of the Sealy
Executive Severance Benefit Plan is hereby made by Sealy Corporation, a
corporation organized and existing under and by virtue of the laws of the State
of Delaware (the “Company”).

 

W I T N E S S E T H:

 

WHEREAS, the Company previously established a
severance benefit plan for certain of its executive employees and for certain
executive employees of certain of its Subsidiaries in order to provide for such
executive employees an opportunity to receive certain cash and other benefits
in the event of separation from service, under certain conditions specified
therein;

 

WHEREAS, it is desirable to amend and restate
the Plan in order to comply with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), to the extent
applicable, and to make other desirable changes to the Plan; and

 

WHEREAS, the Board of Directors of the
Company has approved adoption of such an amendment and restatement of the Plan
by the Company;

 

NOW, THEREFORE, generally effective as of December 1,
2008, the Company hereby adopts an Amendment and Restatement to the Plan as
follows:

 

ii

 

ARTICLE I

PRELIMINARY
PROVISIONS

 

1.1           Name. 
The name of the Plan as established hereunder is SEALY EXECUTIVE
SEVERANCE BENEFIT PLAN.

 

1.2           Effective Date.  The provisions of the Plan were originally
effective December 1, 1992.

 

1.3           Restatement Date.  Except as otherwise stated herein, the
provisions of the amended and restated Plan shall be December 1,
2008.  Provisions required to be
effective as of an earlier date shall be deemed effective as of such date.

 

1.4           Purpose.  This Plan was established and is hereby
amended and restated in order to provide severance benefits to certain
executive Employees of the Company and its Subsidiaries, under certain conditions
specified in the Plan.

 

1.5           Employee Welfare Benefit Plan.  This Plan is an employee welfare benefit plan
as defined in Section 3(1) of ERISA. 
This Plan shall be administered in accordance with applicable law and
regulations.  Without limiting the
generality of the foregoing, this Plan shall be administered in such a manner,
and benefits hereunder shall be so limited (notwithstanding any apparently
contrary provision of this Plan, specifically including Article V hereof)
that this Plan shall be an employee welfare benefit plan as defined in Section 3(1) of
ERISA and not an employee pension benefit plan as defined in Section 3(2) of
ERISA.

 

1.6           Not a Funded Plan.  It is the intention and purpose of the
Company and its Subsidiaries that this Plan shall be deemed to be “unfunded”
for tax purposes as well as being such a plan as would properly be described as
“unfunded” for purposes of Title I of ERISA.  Notwithstanding any apparently contrary
provision, this Plan shall be interpreted and administered in such a manner
that it will be so deemed and would be so described.

 

1.7           Section 409A Compliance.  It is the intention and purpose of the
Company and its Subsidiaries that this Plan shall be deemed at all relevant
times to be in compliance with Section 

 

1

 

409A of the Code and lawful guidance thereunder to the extent
applicable.  Notwithstanding any
apparently contrary provision, this Plan shall be interpreted and administered
in such manner, so that it will be so deemed. 
For periods on an after the effective date of Section 409A but
prior to the Restatement Date, the Plan was administered in good faith
compliance with Section 409A of the Code to the extent applicable, but
without a formal compliance amendment for that period, as permitted in
applicable guidance.

 

2

 

ARTICLE II

DEFINITIONS

 

The use of neuter, masculine and feminine
pronouns shall each be read to include the others and the use of the singular
shall be read to include the plural and vice versa.  Unless the context otherwise indicates, the
following words, when initially capitalized, shall have the following meanings
under this Plan:

 

2.1           Affiliate.  The word “Affiliate” shall mean any corporation
which would be defined as a member of a controlled group of corporations which
includes the Company or any business organization which would be defined as a
trade or business (whether or not incorporated) which is under “common control”
with the Company within the meaning of Sections 414(b) and (c) of the
Code but, in each case, only during the periods any such corporation or
business organization would be so defined.

 

2.2           Annual Base Compensation.  The words “Annual Base Compensation” shall
mean a Participant’s annualized rate of base compensation from the Company or a
Participating Subsidiary in effect on the date of a Participant’s Separation
from Service.  Base compensation shall
not be deemed to be reduced by any salary reduction or deferral contributions
(as described in Sections 401(k), 125 and similar provisions of the Code)
made by the Participant to any employee benefit plan of the Company or any
Participating Subsidiary.  Base
compensation does not include cash bonus payments, stock bonus payments,
performance share payments, overtime pay, incentive pay, Company or Subsidiary
contributions on behalf of a Participant to any retirement or welfare benefit
plan, imputed income reported for tax purposes or any payments in the nature of
expense reimbursements.

 

3

 

2.3           Breach of Noncompetition Requirement.  The words “Breach of Noncompetition
Requirement” shall mean the occurrence of an event in which a Participant, at
any time prior to his payment in full hereunder:

 

(a)           either while he is employed by the Company
or any Subsidiary or after his Separation from Service; and

 

(b)           without the prior written permission of the
Company;

 

either directly or indirectly operates or performs any advisory or
consulting services for, invests in (other than an investment in publicly
traded stock of a corporation, provided that the ownership of such equity
interest does not give the Participant the right to control or substantially
influence the policy or operational decisions of such corporation), or
otherwise becomes employed by or associated with, in any capacity, a
Competitive Entity.

 

2.4           Cause.  The word “Cause” shall mean for purposes of
this Plan, either:

 

(a)           the Participant’s willful violation of any
written policies of the Company which violations are materially detrimental to
the Company;

 

(b)           the Participant’s conviction of (or written,
voluntary and freely given confession to) a felony involving moral turpitude;

 

(c)           the Participant’s conviction of (or written,
voluntary and freely given confession to) a felony in connection with his
employment;

 

(d)           a Participant’s theft, fraud, embezzlement,
material willful destruction of property (including any operating system of the
Company or any Subsidiary or material disruption of the operations of the
Company or any Subsidiary;

 

(e)           a Participant’s being under the influence of
illegal drugs or habitually under the influence of alcohol while on the job or
on Company or any Subsidiary property;

 

(f)            a Participant’s engaging in conduct, in or
out of the workplace, which has a material adverse effect on the reputation or
business prospects of the Company or one of its Subsidiaries;

 

4

 

(g)           a Participant’s willfully engaging in
conduct while an employee of the Company or any of its Subsidiaries which
caused the Company or any of its Subsidiaries to be found, in a final judgment
of a court of law, to have a material civil or criminal liability under any
federal or state law;

 

(h)           a Participant’s disclosure of trade secrets,
customer lists or other confidential information if the Company or any
Subsidiary has taken measures designed to prevent such disclosure; or

 

(i)            a Participant’s Breach of the
Noncompetition Requirement.

 

2.5             Change of Control.  For purposes of this Plan, the words “Change
of Control” shall mean a change of control of the Company of a nature that
would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended, as in effect on the Restatement Date (the “Exchange Act”), whether or
not the Company is then subject to such reporting requirements; provided, that,
without limitation, a Change of Control shall be deemed to have occurred if:

 

(a)           any “person” (as defined in Sections 13(d) and
14(d) of the Exchange Act), other than KKR Millennium GP LLC and
affiliates (collectively, “KKR”), becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities
of the Company representing twenty percent (20%) or more of the combined voting
power of the Company’s then outstanding securities; provided that a Change of
Control shall not be deemed to occur under this Subsection (a) by reason
of (A) the acquisition of securities by the Company or an employee benefit
plan (or any trust funding such a plan) maintained by the Company, or (B) while
KKR continues to beneficially own more than fifty percent (50%) of the combined
voting power of the Company’s then outstanding securities;

 

(b)           during any period of one (1) year there
shall cease to be a majority of the Board comprised of “Continuing Directors”
as hereinafter defined; or

 

(c)           the stockholders of the Company (A) approve
a merger or consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either
by remaining outstanding or by being converted into voting securities of the 

 

5

 

surviving entity) more than eighty percent
(80%) of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (B) approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of more than
fifty percent (50%) of the Company’s assets.

 

For purposes of this Subsection 2.5(c), a
sale of more than fifty percent (50%) of the Company’s assets includes a sale
of more than fifty percent (50%) of the aggregate value of the assets of the
Company and its Subsidiaries or the sale of stock of one or more of the Company’s
Subsidiaries with an aggregate value in excess of fifty percent (50%) of the
aggregate value of the Company and its Subsidiaries or any combination of
methods by which more than fifty percent(50%) of the aggregate value of the
Company and its Subsidiaries is sold.

 

(d)           For purposes of this Agreement, a “Change of
Control” will be deemed to occur:

 

(i)            on the day on which a twenty percent (20%)
or greater ownership interest described in Subsection 2.5(a) is acquired
(or, if later, the day on which KKR  ceases to
beneficially own more than fifty percent (50%) of the combined voting power of
the Company’s then outstanding securities) provided that a subsequent increase
in such ownership interest after it first equals or exceeds twenty percent
(20%) shall not be deemed a separate Change of Control;

 

(ii)           on the day on which “Continuing Directors,”
as hereinafter defined, cease to be a majority of the Board as described in
Subsection 2.5(b);

 

(iii)          on the day of a merger, consolidation or sale
or disposition of assets as described in Subsection 2.5(c); or

 

(iv)          on the day of the approval of a plan of
complete liquidation as described in Subsection 2.5(c).

 

(e)           For purposes of this Section 2.5, the
word “Company” means Sealy Corporation, and, any other corporation or business
organization in an unbroken chain of corporations or business organization
ending with Sealy Corporation that owns, directly or indirectly, stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock of Sealy Corporation other than KKR.

 

6

 

(f)            For purposes of this Section 2.5, the
words “Continuing Directors” mean individuals who at the beginning of any
period (not including any period prior to the Restatement Date) of one (1) year
constitute the Board and any new director(s) whose election by the Board
or nomination for election by the Company’s stockholders was approved by a vote
of at least a majority of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved.

 

2.6           Code. 
The word “Code” shall mean the Internal Revenue Code of 1986, as such
may be amended from time to time, and lawful guidance promulgated thereunder.  Whenever a reference is made to a specific
Code Section, such reference shall be deemed to include any successor Code Section having
the same or a similar purpose.

 

2.7           Committee.  The word “Committee” shall mean the Benefit
Appeals Committee constituted under the provisions of Article VI of this
Plan.

 

2.8           Company.  The word “Company” shall mean Sealy
Corporation, a Delaware corporation, and any successor corporation or business
organization which shall assume the duties and obligations of Sealy Corporation
by operation of law or otherwise under this Plan.

 

2.9           Compensation Committee.  The words “Compensation Committee” shall mean
the Compensation Committee of the Board or its successor as determined by the
Board.  If the Compensation Committee has
no successor, the duties of the Compensation Committee shall become duties of
the Board.  The Compensation Committee
shall have such duties with respect to the Plan as shall be determined by the
Board.

 

2.10         Competitive Entity.  The words “Competitive Entity” shall mean any
of the following mattress manufacturing companies in the United States or their
mattress manufacturing or mattress wholesaling affiliates:  Simmons, Serta, Spring Air, Kingsdown, Select
Comfort and Tempur-Pedic or any of their successors or any other mattress
manufacturing company or its 

 

7

 

mattress manufacturing or mattress wholesaling affiliate which
represents 10% or more of the mattress market in the United States.

 

Notwithstanding anything in this Section to
the contrary, a company, partnership, organization, proprietorship, or other
entity which purchases the stock or assets of a business unit directly from the
Company or any Subsidiary shall not be deemed a Competitive Entity solely with
respect to the products developed, manufactured, prepared, sold, or distributed
by and the individuals employed by such business unit as of the date of such
stock or asset purchase.

 

2.11         Continuous Employment.  The words “Continuous Employment” shall mean
employment for any uninterrupted period during which a Participant is an
Employee of the Company and/or any Subsidiary and shall include any authorized
Leaves of Absence.

 

2.12         Covered Employee.  The words “Covered Employee” shall mean an
Employee of a Participating Subsidiary who:

 

(a)           is employed by the Company or any
Participating Subsidiary in a supervisory, managerial, sales or administrative
job classification, is paid on a salaried or commission basis and is normally
scheduled for thirty-five (35) or more hours of work per week;

 

(b)           is employed in a position with a Salary
Grade of 12 or higher;

 

(c)           is not a member of a collective bargaining
unit;

 

(d)           is not excluded from coverage by this Plan
pursuant to the terms of his employment agreement;

 

(e)           is not a nonresident alien Employee who
receives no earned income (within the meaning of Code Section 911(d)(2))
from a Participant Company or any Affiliate that constitutes income from
sources within the United States (within the meaning of Code Section 861(a)(3)),
except to the extent expressly permitted by this Plan; and

 

(f)            is not employed in a capacity reasonably
categorized by the Company, a Participating Company or an Affiliate as a Leased
Person, regardless of whether his status under the Code subsequently may be
determined by a court, the Internal Revenue Service or other government entity
to be a Covered Employee, an Employee or otherwise.

 

8

 

An Employee shall become a Covered Employee
as of the first day on which he satisfies all of the requirements of
Subsections 2.12 (a) through (f) above.  An Employee shall cease to be a Covered
Employee as of the first day thereafter on which he ceases to satisfy any one
of such requirements.

 

2.13         Dependent.  The word “Dependent” means any person who
properly can be claimed as a dependent on the Participant’s Federal income tax
return or properly could be claimed as a dependent except for the amount of such
dependent’s earnings.

 

2.14         Employee.  The word “Employee” shall mean any common law
employee or Leased Person of a Participating Subsidiary or an Affiliate.  The word “Employee” shall not include any
person who renders service to a Participating Subsidiary or an Affiliate solely
as a director or independent contractor. 
In the event a person renders service to a Participating Subsidiary or
an Affiliate as a common law employee and in another capacity as a director, an
independent contractor or otherwise as a self-employed individual, he shall be
considered to be an Employee hereunder only in his capacity as a common law
employee.

 

In the event a person who was not classified
by a Participating Subsidiary or an Affiliate as a common law employee is
subsequently determined by a court, the Internal Revenue Service or other
governmental entity to be a common law employee, such person shall only be
considered to be an Employee hereunder prospectively from the date of such
determination, or, if later, at the time that such person is initially treated
as an Employee on the payroll records of the Participating Subsidiary or
Affiliate.

 

2.15         Effective Date.  The words “Effective Date” shall mean the
original effective date of this Plan which is December 1, 1992.

 

9

 

2.16         ERISA. 
The acronym “ERISA” shall mean the Employee Retirement Income Security
Act of 1974, as amended, and lawful guidance promulgated thereunder.  Whenever a reference is made to a specific
ERISA Section, such reference shall be deemed to include any successor ERISA Section having
the same or a similar purpose.

 

2.17         Leased Person.  The words “Leased Person” shall mean, on and
after December 1, 1997, any individual who, pursuant to an agreement between
any Participating Company or Affiliate and any leasing organization, has
performed services for the Participating Company, for an Affiliate or for
related persons, as determined in accordance with Code Section 414(n)(6),
on a substantially full time basis for a period of at least one (1) year;
provided, however, that such services are performed under the primary direction
or control of the Participating Company or the Affiliate.

 

In the event a person who was not classified
by a Participating Company or an Affiliate as a Leased Person is subsequently
determined by a court, the Internal Revenue Service or other governmental
entity to be a Leased Person, such person shall only be considered to be a
Leased Person hereunder prospectively from the date of such determination, or,
if later, at the time that such person is initially treated as a Leased Person
by a Participating Company or an Affiliate.

 

2.18         Leave of Absence.  The words “Leave of Absence” means:

 

(a)                                  that
period of interruption of active employment of an Employee caused by entrance
into the Armed Services of the United States under such circumstances that he
becomes entitled to reemployment rights under the law, such period being deemed
to terminate at the expiration of such reemployment rights;

 

(b)                                 that
period of interruption of active employment of an Employee, without pay,
granted by the Company or any Subsidiary at the Employee’s request with the
understanding that he will return to active employment at the expiration of
such period, provided, that such interruption of active employment (1) does
not exceed six months, and (2) is granted on a nondiscriminatory basis for
a specific reason; and

 

10

 

(c)                                  a
period of jury duty.

 

2.19         Participant.  The word “Participant” means a Covered
Employee who has satisfied, and continues to satisfy, the eligibility
requirements under the provisions of Section 3.1.  A Participant shall cease to be a Participant
upon his Separation from Service, provided that the mere existence of such a
Separation from Service shall not in any way limit a Participant’s right to
benefits which he shall be entitled to receive hereunder as a result of such
Separation from Service.

 

2.20         Participating Subsidiary.  The words “Participating Subsidiary” means a
Subsidiary whose Employees may become eligible to participate in this Plan if
such Employees otherwise satisfy the requirements of Section 3.1
hereof.  As of the Restatement Date, all
Subsidiaries are Participating Subsidiaries other than any Subsidiary not
organized under the laws of the United States of America or one of the States
thereof.

 

2.21         Plan. 
The word “Plan” shall mean the Sealy Benefit Equalization Plan, as
previously established and amended, as set forth herein, and as it later may be
amended.

 

2.22         Plan Administrator.  The words “Plan Administrator” means Sealy, Inc.,
an Ohio corporation, or such successor as may be appointed by the Board of
Directors of Sealy Corporation pursuant to Article VII hereof.

 

2.23         Plan Year.  The words “Plan Year” means the twelve (12)
month commencing on December 1 and ending on the following November 30.

 

2.24         Salary Grade.  The words “Salary Grade” means the
classification grade for an Employee’s job position.  For purposes of this Plan, Salary Grade shall
be determined utilizing the compensation policy of the Company and its
Subsidiaries as in effect on the Effective Date even if that compensation
policy is no longer in effect at the time of the event resulting in the need to
determine benefits.  If the compensation
policy changes and there is no classification grade for an 

 

11

 

Employee’s job position under the policy in effect on the Effective
Date, the Plan Administrator shall, on the basis of the job position’s
characteristics, assign it a classification grade for purposes of this Plan.

 

2.25         Separation
from Service.  The words “Separation
from Service” shall mean a “separation from service” as defined for purposes of
Section 409A of the Code for purposes of determining when a distribution
may be made under the terms of a non-qualified deferred compensation plan such
as this Plan.  In general, a Separation
from Service for purposes of this Plan occurs when there is a good faith
severance of the employment relationship between the Company and its Affiliates
and an Employee due to the Employee’s death, retirement or other “termination
of employment” (as that term is defined for purposes of identifying a
Separation from Service for purposes of Section 409A).  Specifically, the following shall apply:

 

(a)                                  An Employee will not
be deemed to have a Separation from Service while on military leave, sick
leave, or other bona fide (i.e., where there is a reasonable expectation that
the Employee will return) leave of absence if the period of such leave does not
exceed six (6) months, or, if longer, so long as Employee retains a right
to reemployment with the Company or an Affiliate by law or contract.  If the leave exceeds six (6) months and
the Employee does not retain such a reemployment right, the Separation from
Service occurs on the first day following such six (6) months.  However, where the leave is due to any
medically determinable physical or mental impairment that can be expected to
result in death or can be expected to last for a continuous period of not less
than six (6) months, where such impairment causes the employee to be
unable to perform the duties of his or her position of employment or any
substantially similar position of employment, twenty-nine (29) months will be
substituted for six (6) months for purposes of this Subsection;

 

(b)                                 An Employee will not
be considered to have a Separation from Service merely due to transfer between
employee and independent contractor status (including status as a director of
the Company);

 

(c)                                  Whether a “termination
of employment,” as defined for purposes of the definition of Separation from
Service under Section 409A of the Code, has occurred is determined based
on whether the facts and circumstances indicate that the applicable
Participating Company or Affiliate and the 

 

12

 

Employee reasonably anticipated that:

 

(i)                                    no
further services would be performed after a certain date; or

 

(ii)                                 that
the level of bona fide services the Employee would perform after such date
(whether as an Employee or independent contractor, including as a director)
would permanently decrease to less than fifty percent (50%) of the average
level of bona fide services provided in the immediately preceding thirty-six
(36) months.

 

2.26         Subsidiary.  The word “Subsidiary” shall mean any
corporation in which the Company owns, directly or indirectly, stock possessing
at least eighty percent (80%) or more of the total combined voting power of all
classes of stock entitled to vote or at least eighty percent (80%) of the total
value of shares of all classes of stock of such corporation, as determined
pursuant to Section 1563(a)(1) of the Code, but only during the
period any such corporation would be so defined.

 

2.27         Voluntary Termination.  The words “Voluntary Termination” shall mean
a Separation from Service upon a Participant’s resignation or retirement from
the employ of the Company and its Subsidiaries. 
Without limiting the generality of the foregoing, a Participant shall be
deemed to have incurred a Voluntary Termination upon a failure to report to
work for three (3) consecutive working days without reasonable excuse.

 

2.28         Weekly Base Compensation.  The words “Weekly Base Compensation” means
Annual Base Compensation divided by fifty-two.

 

2.29         Years of Service.  The words “Years of Service” means the number
of years and portions thereof of Continuous Employment represented by the
period of time commencing on the Participant’s most recent date of hire with
the Company or any Subsidiary and ending on the date of Separation from
Service.

 

13

 

ARTICLE III

 

ELIGIBILITY AND PARTICIPATION

 

3.1           Eligibility.  Each Employee who, on or after the Restatement
Date:

 

(a)                                  is
a Covered Employee; and

 

(b)                                 has
completed six (6) months of Continuous Employment with the Company or any
Subsidiary, shall be eligible to participate in the Plan.

 

3.2           Participation.  Each Covered Employee who satisfies the
requirements of Section 3.1 on or after the Restatement Date shall
commence participation in the Plan as of the Restatement Date or, if later, as
of the date upon which he first satisfies the aforementioned requirements.  A Participant shall continue to participate
in the Plan as long as he continues to satisfy each and every requirement of Section 3.1
and shall cease to be a Participant immediately upon his failure to satisfy any
of such requirements.  An Employee who
was previously a Participant and ceased to be a Participant, but again
satisfies the requirements of Section 3.1, shall immediately commence
participation in the Plan, except as provided in Section 3.4.

 

3.3           Leave Of Absence.  A Participant shall continue to be a
Participant throughout a Leave of Absence approved by the Company or Subsidiary
by which he is employed.

 

3.4           Rehired Participant.  If a Participant’s employment is terminated
and he is subsequently reemployed by the Company or any Participating
Subsidiary, then subject to any applicable restriction under Section 409A
of the Code, he shall become a Participant upon the completion of six (6) months
of Continuous Employment following such reemployment if he otherwise satisfies
the requirements of Section 3.1; provided, however, that Years of Service
under this Plan shall be counted only from his most recent date of hire.

 

14

 

ARTICLE IV

QUALIFICATION FOR BENEFITS

 

4.1           Entitlement to Benefits.  A Participant shall be entitled to receive
the benefits specified in Article V hereunder if, at any time on or after
the Restatement Date, such Participant experiences a Separation from Service,
other than a Voluntary Termination, from the Company or any Participating
Subsidiary as a result of:

 

(a)                                  a
permanent reduction in the workforce (the elimination of an employment
position, or a reduction in the number of authorized positions at a plant or
other facility) of the Company or any Participating Subsidiary;

 

(b)                                 the
permanent closing of a plant or other facility of the Company or any
Participating Subsidiary;

 

(c)                                  the
Participant’s inadequate job performance for the Company or a Participating
Subsidiary;

 

(d)                                 a
material reduction in the Annual Base Compensation of a Participant (for
purposes of this Section 4.1(d), and subject to lawful guidance under Section 409A
of the Code, a material reduction will be deemed to have occurred if a
Participant’s Annual Base Compensation is reduced by five percent (5%) or more
in any 12-month period);

 

(e)                                  a
reduction in the Salary Grade of a Participant which would have the effect of
materially reducing such Participant’s benefits hereunder (for purposes of this
Section 4.1(e), and subject to lawful guidance under Section 409A of
the Code, a material reduction in a Participant’s benefits hereunder shall be
deemed to have occurred if a Participant’s number of weeks of benefits is
reduced); or

 

(f)                                    an
involuntary transfer of the Participant’s employment location which reasonably
would necessitate the Participant’s relocation of his personal residence.

 

For the purposes of Section 4.1(d), (e) and (f), the
Participant shall be deemed to have incurred a Separation from Service, other
than a Voluntary Termination, only if he shall (x) notify the Company or
Participating Subsidiary of his intent to terminate his employment within
thirty (30) days of the existence of the condition and (y) allow the
Company or Participating 

 

15

 

Subsidiary thirty (30) days to cure the condition and (z) if no
such cure is made, resign his position with the Company or Participating
Subsidiary within the thirty (30) day period next following the end of the
Company’s or Participating Subsidiary’s thirty (30) day cure period.  Subject to the provisions of Section 409A
of the Code, a condition will not be deemed to exist until the later of the
actual existence of the condition or the Participant gaining actual knowledge
of the existence.

 

Notwithstanding the foregoing, the
Participant shall not be so entitled to benefits in the event that:

 

(1)                                  such
Separation from Service is for Cause; or

 

(2)                                  a
permanent reduction in the workforce or permanent closing of a plant or other
facility is effected in connection with the sale of all or a portion of the
Company’s or Participating Subsidiary’s business (or a corporate reorganization
of the Company or Participating Subsidiary) if the Participant is within thirty
(30) days thereafter employed, or offered employment (if the offered employment
is at an annual rate of compensation not less than the Participant’s Annual
Base Compensation and if such offered employment does not reasonably
necessitate the Participant’s relocation of his personal residence), by a
successor enterprise; or

 

(3)                                  the
Participant terminates employment prior to the termination date established by
the Company or Participating Subsidiary in connection with a reduction in force
or plant closing.

 

4.2           Source of Payments.  The benefits under this Plan shall be paid as
needed directly from the general assets of the Company or any Subsidiary as the
Company shall direct.  This Plan is an
unfunded employee welfare benefit plan, and nothing herein shall be interpreted
to require prefunding by the Company or any Subsidiary of the cost of benefits.

 

16

 

ARTICLE V

 

BENEFITS AND PAYMENT OF BENEFITS

 

5.1           Benefits.  A Participant who has become entitled to
benefits as a result of an event specified in Section 4.1 shall receive
the following benefits:

 

(a)                                  Cash
Severance Pay.  Such Participant
shall receive cash severance pay in an amount determined by multiplying his
Weekly Base Compensation by a factor, based upon his Salary Grade and Years of
Service, as set forth herein and subject to the minimum and maximum benefit as
follows:

 

	
   

  	
  Salary

  Grade

  	
   

  	
  Factor

  	
   

  	
  Minimum

  	
   

  	
  Maximum

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12-13

  	
   

  	
  Years of
  Service times 3

  	
   

  	
  13 weeks

  	
   

  	
  26 weeks

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14-17

  	
   

  	
  Years of
  Service times 6.5 for the first 4 Years of Service, 4 times Years of Service
  thereafter

  	
   

  	
  26 weeks

  	
   

  	
  52 weeks

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  18-20

  	
   

  	
  Years of
  Service times 8.75 for the first 4 Years of Service, 4 times Years of Service
  thereafter

  	
   

  	
  35 weeks

  	
   

  	
  70 weeks

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  21 or higher

  	
   

  	
  Years of
  Service times 13 for the first 4 Years of Service, 4 times Years of Service
  thereafter

  	
   

  	
  52 weeks

  	
   

  	
  104 weeks

  	
   

  

 

(b)           Health and Dental
Benefit.  Such Participant shall
receive health and dental benefit coverage for himself and his Dependents, if
any, for the period of six months immediately following his Separation from
Service  under the health benefit plan of
the Company or Subsidiary then in effect for such Participant, such coverage to
be provided on the same terms and conditions applicable to active employees (as
the same may be amended from time to time and subject to any legal limitations,
such as are contained in Section 125 of the Code) in effect for such
Participant on the day before the event specified in Section 4.1;
provided, however, that such coverage shall be counted toward the period of
continuation of coverage under the group health plan continuation coverage
provisions of ERISA 

 

17

 

and the Code; provided further, that such
coverage shall end immediately upon a Participant ceasing to be eligible for
such continuation coverage.

 

(c)           Group Term Life
Insurance Benefit.  Such Participant
and his Dependents, if any, shall receive, for the period of six months
immediately following his Separation from Service under the group term life
insurance plan of the Company or any Subsidiary then in effect for such
Participant, group term life insurance and supplemental and Dependent group
term life insurance upon the same terms, coverage amounts and conditions
(subject to any legal limitations, such as are contained in Section 125 of
the Code) in effect for such Participant on the day before the event specified
in Section 4.1; provided, however, that such coverage shall end
immediately upon a Participant becoming eligible for coverage under any
employer group term life insurance plan as a result of any subsequent
employment.

 

5.2           Welfare Plan; Limitations On Severance
Benefit.  The maximum amount of the
cash severance pay specified in Section 5.1(a) to which a Participant
may otherwise be entitled, and the maximum period over which such payment may
be made, shall be limited to the maximum amount and period, respectively,
permitted under Department of Labor Regulations Section 2510.3-2(b) so
that this Plan will not be considered a “Pension Plan” under such regulations.

 

5.3           Segmentation of Severance Benefit.  For purposes of compliance with Section 409A
of the Code, payments and benefits under this Plan (but only to the extent
taxable) shall be divided into four (4) segments as follows:

 

(a)           Cash Severance.  Effective for Plan Years commencing December 1,
2008, when included with any other amounts payable upon an “involuntary
separation of service” (as defined in Treas. Reg. 1.409A-1(n)) that would be
aggregated with such payment under Treas. Reg. 1.409A-1(b)(9)(iii), the Cash
Severance Segment shall not exceed two (2) times the lesser of:

 

(i)            the
sum of the Participant’s annualized compensation based upon the Participant’s
annual rate of pay for services provided to the Company or any Subsidiary for
the calendar year preceding the calendar year in which the Separation from
Service occurred (adjusted for any increase during such year that was expected
to continue indefinitely if the Participant had not had a Separation from
Service); or

 

18

 

(ii)           the maximum amount that
may be taken into account under a qualified plan pursuant to Section 401(a)(17)
of the Code for the year in which the Participant has a Separation from
Service,

 

and shall be
paid in full not later than the last day of the second (2nd) year following the year in
which the Participant had the Separation from Service;

 

(b)           Deferred
Compensation.  The amount of cash
severance pay in excess of the amount described in Subsection (a) shall be
considered the Deferred Compensation Segment;

 

(c)           Health
Benefits.  The medical and dental
benefits provided under Subsection 5.1(b) shall be the considered the
Health Benefit Segment and, as such, shall not be considered nonqualified
deferred compensation; and

 

(d)           Other
Benefits.  To the extent not
otherwise excluded, group term life insurance provided pursuant to Subsection
5.1(c) (and medical and dental benefits if the status described in
Subsection 5.3(c) is not available) shall be considered the Other Segment
and shall be excluded from the definition of nonqualified deferred compensation
as a reimbursement or in-kind benefit payable for a limited period of time or a
limited payment pursuant to Treas. Reg. 1.409A-1(b)(9)(v)(A) or (D) respectively,
but if not so deemed shall be administered to comply with the provisions of
Treas. Reg. 1.409A-3(i)(iv) with benefits provided as if the Participant
were an Employee.

 

5.4           Payment of Cash
Severance Pay.  Payment of the cash
severance pay specified in Section 5.1(a), as reduced pursuant to Section 5.2,
shall commence to be made within thirty (30) days following the determination
by the Plan Administrator, in accordance with Section 6.1, that the
Participant is entitled to benefits. 
Such payments shall be subject to the following rules:

 

(a)           Payments shall be made
on a semi-monthly basis;

 

(b)           Payments
shall continue, unless benefits are forfeited as provided elsewhere in this
Plan, for a number of semi-monthly payments equal to the Participant’s number
of weeks of cash severance pay (as determined pursuant to Section 5.1(a) hereof)
divided by two and fifteen-hundredths (2.15), with any fractional quotient
rounded up to the next greater integer;

 

(c)           Each
semi-monthly payment shall be equal, unless benefits are further reduced or
forfeited as provided elsewhere in this Plan, to his total cash severance pay
specified in Section 5.1(a), as reduced pursuant to Section 5.2,
divided by the number of payments determined pursuant to Section 5.3(b) above;
and

 

19

 

(d)           Payments
shall be subject to all applicable tax withholding and authorized deductions.

 

For purposes
of this Plan, and in accordance with Treasury Regulation Section 1.409A-2(b)(2)(iii),
each semi-monthly payment is to be treated as one in a series of separate
payments.

 

5.5           Mitigation of Cash
Severance Payments.  The following
mitigation provisions shall apply to:

 

(a)           The
Cash Severance Segment of the Participant’s cash severance pay; and

 

(b)           The
Deferred Compensation Segment of the Participant’s cash severance pay to the
extent such mitigation provisions are permitted under Section 409A of the
Code to apply to such Deferred Compensation Segment.

 

If a
Participant becomes employed by an employer other than the Company or any
Affiliate, as an employee, consultant or other independent contractor, or
otherwise, prior to the completion of the payments described above in this Section 5.4
then his periodic cash severance benefits hereunder shall be forfeited to the
extent of his base compensation (calculated in a manner substantially similar
to the method described herein for calculating Annual Base Compensation) for
the corresponding period from his new employer. 
Such a Participant shall notify the Plan Administrator within thirty
(30) days of any such employment, of his base compensation from such employment
and of any changes thereto.  Failure to
notify the Plan Administrator within thirty (30) days of such employment,
compensation or changes shall result in forfeiture of all benefits hereunder
following the date of such employment or change of compensation, respectively,
and the Plan Administrator may recover amounts paid following such date of
employment or change of compensation plus the costs of such recovery.

 

If a
Participant becomes employed by the Company or any Affiliate, as an Employee,
consultant or other independent contractor, Leased Person or otherwise, prior
to the completion of the payments described above in this Section 5.4,
then his periodic cash severance benefits hereunder shall be forfeited upon the
commencement of such employment.   Such a

 

20

 

Participant shall have the same
obligation to notify the Plan Administrator of such employment as a Participant
hired by an unrelated employer as described above in this Section 5.4; and
the Plan Administrator shall have the same remedies as described above for
breach of such obligation.  Such an
individual may again become a Participant in this Plan following such
employment upon satisfaction of the eligibility requirements contained in Article III
hereof but the forfeiture of benefits shall be permanent.

 

5.6           Recipient Of Cash
Severance Benefit Payments.  Cash
severance payments specified in Section 5.1(a) shall be made to the
Participant or his duly designated representative or guardian.  In the event a Participant dies before being
paid his total cash severance benefit, the remaining benefit shall be paid to
his estate in a single cash lump sum on a date selected by the Plan
Administrator within the ninety (90) day period beginning on the date which is
thirty (30) days following the date of the Participant’s death.

 

5.7           Distributions Subject to 409A.  If the payment of any distribution or
provision of medical, dental or life insurance coverage within six (6) months
following the date of the Participant’s Separation from Service would cause all
or any portion of such distribution or provision to be subject to inclusion in
the Participant’s gross income for federal income tax purposes under Section 409A(a)(1)(A) of
the Code, then the payment of any such amount or such provision shall be
delayed until the first business day after such six (6) month period (or,
if earlier, the date which is thirty (30) days after the date of the
Participant’s death).  Without limiting
the generality of the foregoing, the six (6) month delay would apply to
the Deferred Compensation Segment of benefits under the Plan as described in Section 5.3
hereof.  Following such six (6) month
delay, payment of delayed amounts shall be made in a single sum payment on the
first business day following such six (6) month period and any remaining
payments will be made as previously scheduled. 
If provision of medical, dental or life insurance coverage must be
delayed, the Employee shall be required to pay all relevant costs and premiums
and shall be reimbursed on the first business day after the six (6) month
delay if permitted by law.

 

21

 

ARTICLE VI

 

ADMINISTRATION

 

6.1           Appointment of Plan
Administrator.  The Plan
Administrator shall be appointed by the Board of Directors of the Company, and
may be removed or may resign upon thirty (30) days’ written notice, or such
lesser period of notice as is mutually agreeable.  In the absence of another designation, Sealy, Inc.,
an Ohio corporation, shall be the Plan Administrator.

 

6.2           Powers and Duties of
the Plan Administrator.  Except as
expressly otherwise set forth herein, the Plan Administrator shall be a named
fiduciary of the Plan and shall have the authority and responsibility granted
or imposed on a “plan administrator” by ERISA. 
The Plan Administrator shall be the agent for service of legal process
and presentation of claims for benefits hereunder.  The Plan Administrator shall determine any
and all questions of fact, resolve all questions of interpretation of this Plan
or related documents which may arise under any of the provisions of this Plan
or such documents as to which no other provision for determination is made
hereunder, and exercise all other powers and discretions necessary to be
exercised under the terms of this Plan which it is herein given or for which no
contrary provision is made.  Subject to
the provisions of any claims procedure hereunder, the Plan Administrator’s
decision with respect to any matter shall be final and binding on all parties
concerned, and neither the Plan Administrator nor any of its directors,
officers, employees or delegates nor, where applicable, the directors, officers
or employees of any delegate, shall be liable in that regard except for gross
abuse of the discretion given it and them under the terms of this Plan.  The Plan Administrator may, from time to
time, by action of its appropriate officers, delegate to designated persons or
entities the right to exercise any of its powers or the obligation to carry out
any or all of its duties as Plan Administrator.

 

6.3           Engagement of
Advisors.  The Plan Administrator may
employ actuaries, attorneys, accountants, brokers, employee benefit
consultants, and other specialists to render advice 

 

22

 

concerning any responsibility
the Plan Administrator or Committee has under this Plan.  Such persons may also be advisors to the
Company or any Subsidiary.

 

6.4           Payment of Costs and
Expenses.  The costs and expenses
incurred in the administration of the Plan shall be paid directly by the
Company or one or more of the Subsidiaries, as directed by the Company.  Such costs and expenses include those
incident to the performance of the responsibilities of the Plan Administrator
or Committee, including but not limited to, fees of accountants, legal counsel
and other specialists, and other costs of administering this Plan.  Notwithstanding the foregoing, in no event
will any person serving in the capacity of Plan Administrator, or Committee
member who is a full-time employee of the Company or an Affiliate be entitled
to any compensation for such services.

 

6.5           Claims Procedure.  The Plan Administrator shall establish and
maintain a claims procedure under the Plan and shall establish and appoint the
members of a Benefit Appeals Committee with appropriate powers in connection
therewith.

 

6.6           Limitation of
Liability.  Except as otherwise
provided in ERISA, the Plan Administrator and the Committee, and their
respective officers, employees and members, and directors, officers and
employees of the Company, the Participating Subsidiaries and Affiliates, shall
incur no personal liability of any nature whatsoever in connection with any act
done or omitted to be done in the administration of this Plan. No person shall
be liable for the act of any other person.

 

23

 

ARTICLE VII

 

AMENDMENT AND TERMINATION

 

7.1           Amendment Power.  The Company reserves the right (without the
consent of any Participating Subsidiary, Participant or other person) to amend
this Plan at any time, or from time to time, as evidenced by an instrument in
writing executed in the name of the Company by one (1) or more of its
officers who have the authority to do so. 
Any such amendment may be made retroactively effective and shall be
binding upon the Participants, except that no such amendment shall
retroactively deprive a Participant of a benefit hereunder.

 

7.2           Termination.  The Company reserves the right (without the
consent of any Participating Subsidiary, Participant or other person) to
terminate this Plan at any time as evidenced by an instrument in writing
executed in the name of the Company by three (3) or more of its officers
who have the authority to do so provided such termination shall not be
retroactive.

 

7.3           Result of
Termination.  If the employment of an
Employee terminates, whether voluntarily or involuntarily, after the effective
date of the Plan termination, he shall not be eligible to receive any severance
benefits under this Plan.

 

7.4           Restrictions on
Amendment and Termination. 
Notwithstanding any contrary provision of this Plan, no amendment or
termination of this Plan shall be effective to:

 

(a)           restrict eligibility to
participate in this Plan;

 

(b)           restrict eligibility
for benefits under this Plan;

 

(c)           reduce benefit levels
under this Plan; or

 

(d)           otherwise curtail
benefits under this Plan,

 

without a written notice to
substantially all of the affected Participants, who are employed by the Company
or a Participating Subsidiary on the date of such notice, at least one year
prior to the effective date of such amendment or termination, except for any
amendment necessary to comply with ERISA or other applicable law.

 

24

 

7.5           No Liability for
Plan Amendment or Termination. 
Neither the Company, nor any Participating Subsidiary, nor any officer,
Employee or director thereof shall have any liability because this Plan is
amended or terminated.  Without limiting
the generality of the foregoing, none of the foregoing shall have any liability
due to the Company terminating this Plan notwithstanding the fact that a
Participant may have expected to have benefited from the Plan in a future
Separation from Service had this Plan remained in effect without change until
such time.

 

25

 

ARTICLE VIII

 

PARTICIPATING SUBSIDIARIES

 

8.1           Initial Participating Subsidiaries.  The initial Participating Subsidiaries were
defined as of the Effective Date.

 

8.2           Designation of Participating Subsidiaries.  A Subsidiary of the Company will become a
Participating Subsidiary under this Plan as of the date it becomes a
Subsidiary.  Such a Subsidiary’s status
as a Participating Subsidiary may be reflected by an amendment to Section 9.1
hereof which specifies the name of the Subsidiary and its adoption date, but
such an amendment shall not be required in order for the Subsidiary to be a
Participating Company.  Any such
amendment need only be executed by the Subsidiary.

 

8.3           Adoption of Supplements.  The Company may determine that special
provisions shall be applicable to some or all of the Employees of a
Participating Subsidiary, either in addition to or in lieu of the provisions of
this Plan, or may determine that certain Employees otherwise eligible to
participate in this Plan shall not be eligible to participate in this
Plan.  In such event, the Company shall
adopt a Supplement with respect to the Participating Subsidiary which employs
such individuals which Supplement shall specify the Employees of the
Participating Subsidiary covered thereby and the special provisions applicable
to such Employees.  Any Supplement shall
be deemed to be a part of this Plan solely with respect to the Employees
specified therein.

 

8.4           Amendment of Supplements.  The Company, from time to time, may amend,
modify or terminate any Supplement; provided, however, that any such amendment
or termination shall be subject to the Plan’s general rules with respect
to amendment or termination of the Plan.

 

8.5           Termination of Participation of
Participating Company.  The Company
may terminate the status of a Subsidiary as a Participating Subsidiary or such
status may be terminated by events, as when a Participating Subsidiary ceases
to be a Subsidiary.  Termination of
Participating Subsidiary status by the Company shall be subject to the Plans
general rules with respect to amendment or termination of the Plan.

 

26

 

8.6           Delegation of Authority.  The Company is hereby fully empowered to act
on behalf of itself and the other Participating Subsidiaries as it may deem
appropriate in maintaining the Plan. 
Without limiting the generality of the foregoing, such actions include
obtaining and retaining the status of the Plan as described in Article 1
of the Plan and appointing attorneys-in-fact in pursuit thereof.  Furthermore, the adoption by the Company of
any amendment to the Plan or the termination thereof, will constitute and
represent, without any further action on the part of any Participating
Subsidiary, the approval, adoption, ratification or confirmation by each
Participating Subsidiary of any such amendment or termination.  In addition, the appointment of or removal by
the Company of any member of the Benefit Appeals Committee, any Plan
Administrator or other person under the Plan shall constitute and represent,
without any further action on the part of any Participating Subsidiary, the
appointment or removal by each Participating Subsidiary of such person.

 

27

 

ARTICLE IX

 

MISCELLANEOUS

 

9.1           Exclusive Benefit.  This Plan has been adopted for the exclusive
benefit of the eligible Participants. 
Nothing herein contained shall be construed as giving to any Employee or
any other person any legal or equitable right against the Company or any
Affiliate unless such right shall exist by reason of the express provisions of
this Plan or any action taken pursuant thereto and in compliance therewith.

 

9.2           Right of Discharge
Reserved.  Neither the establishment
of the Plan nor anything herein contained shall be construed to confer upon any
persons the right to be continued in the employ of the Company or any
Subsidiary or to be employed in any particular position therewith nor shall it
in any way affect the right of the Company or any Subsidiary to control its
Employees and to terminate the service of any Employee at any time, for any
reason and with or without notice.

 

9.3           Right of Set Off.  To the extent allowable under applicable law,
in the event that any amount is distributable to a Participant under this Plan
and the Participant owes any amount to the Company or any Subsidiary for any
reason, including, but not limited to, possible embezzlement that can only be
proven through accounting evidence, the Plan Administrator may, in its sole
discretion, deduct from the amount distributable to the Participant an amount
equal to the amount owed to the Company or any Subsidiary.  As of the Restatement Date, such right of set
off shall apply to the Cash Severance Segment as defined in Section 5.3
but shall apply to the Deferred Compensation Segment, as defined in that
Section, only in an amount not to exceed Five Thousand Dollars ($5,000.00).

 

9.4           No Liability.  No liability shall be incurred by the Company
or any Affiliate beyond the specific provisions of this Plan.

 

9.5           Satisfaction of
Claims.  Any payment to any
participant, or to his legal representative in accordance with the provisions
of this Plan shall to the extent thereof be in full 

 

28

 

satisfaction of all claims
hereunder against the Plan Administrator and the Company or any Affiliate, and
the Plan Administrator may require such participant or legal representative as
a condition precedent to such payment, to execute a receipt and release
therefor in such form as shall be determined by the Plan Administrator.

 

9.6           Construction.  The Plan shall be construed in accordance
with, and governed by, ERISA in a manner which will assure compliance of the
Plan’s operation therewith and, to the extent applicable, the laws of the State
of Delaware without respect to conflict of law provisions thereof.

 

9.7           Impossibility.  In the event that it becomes impossible for
the Company, Subsidiary, Committee or Plan Administrator to perform any act
under this Plan, that act shall be performed which, in the judgment of the
Company, Subsidiary, Committee, or Plan Administrator, as the case may be, will
most nearly carry out the intent and purpose of this Plan.

 

9.8           No Assignment.  Except as set forth herein, no rights of any
kind under this Plan shall, without the written consent of the Plan
Administrator, be transferable, assignable or encumberable (including as
collateral or a pledge on any loan) by a Participant or any other person.

 

9.9           Notice.  In the event that the Plan Administrator or
the Committee shall be required under the Plan to notify any Participant of any
occurrence or action taken under the Plan, such notice requirement shall be
satisfied by mailing to the Participant a written notice of such occurrence or
action addressed to the Participant at the last address on file with the
Company, or by delivering such written notice to the Participant at such
address.

 

9.10         Multiple Fiduciary
Capacities.  A person may serve in
more than one fiduciary capacity hereunder.

 

9.11         Tax Withholding.  The Company or any other Participating
Company may withhold from a Participant’s Compensation or any payment made by
it under this Plan such amount or amounts as may be required for purposes of
complying with the tax withholding or other provisions 

 

29

 

of the Code or the Social Security Act or any
state or local income or employment tax act or for purposes of paying any
estate, inheritance or other tax attributable to any amounts payable hereunder.

 

9.12         Incapacity.  If the Plan Administrator determines that any
Participant or beneficiary entitled to payments under this Plan is incompetent
by reason of physical or mental incapacity disability and is consequently
unable to give a valid receipt for payments made hereunder, or is a minor, the
Plan Administrator may order the payments becoming due to such person to be
made to another person for his benefit, without responsibility on the part of
the Plan Administrator to follow the application of amounts so paid.  Payments made pursuant to this Section shall
completely discharge the Plan Administrator, the Company and the other
Participating Companies and the Benefit Appeals Committee with respect to such
payments.

 

9.13         Administrative Forms.  All applications, elections and designations
in connection with this Plan made by a Participant or beneficiary shall become
effective only when received by the Plan Administrator in a form acceptable to
the Plan Administrator.

 

9.14         Independence of Plan.  Except as otherwise expressly provided
herein, this Plan shall be independent of, and in addition to, any other
benefit agreement or plan of a Participating Company or any rights that may
exist from time to time thereunder.

 

9.15         Responsibility for Legal Effect.  Neither the Company, nor any other
Participating Company, nor the Plan Administrator or the Benefit Appeals
Committee, nor any officer, member, delegate or agent of any of them, makes any
representations or warranties, express or implied, or assumes any
responsibility concerning the legal, tax, or other implications or effects of
this Plan.  Without limiting the
generality of the foregoing, no Participating Company shall have any liability
for the tax liability which a Participant may incur resulting from
participation in this Plan or the accrual or payment of benefits hereunder.

 

9.16         Successors.  The terms and conditions of this Plan shall
inure to the benefit of and bind the Company, the other Participating Companies
and Affiliates, their respective successors and

 

30

 

assigns, and the Participants, their
beneficiaries, and the personal representatives of the Participants and their
beneficiaries.

 

9.17         Execution in Counterparts.  This Plan may be executed in any number of
counterparts each of which shall be deemed an original and said counterparts
shall constitute but one and the same instrument and may be sufficiently
evidenced by any one counterpart.

 

9.18         Severability.  In the event that any provision or term of
this Plan, or any agreement or instrument required by the Plan Administrator
hereunder, is determined by a judicial, quasi-judicial or administrative body
of competent jurisdiction to be void or not enforceable for any reason, all
other provisions or terms of this Plan or such agreement or instrument shall
remain in full force and effect and shall be enforceable as if such void or
nonenforceable provision or term had never been a part of this Plan, or such
agreement or instrument except as to the extent the Plan Administrator
determines such result would have been contrary to the intent of the Company in
establishing and maintaining this Plan.

 

9.19         Indemnification.  The Company and its Affiliates shall jointly
and severally indemnify, defend, and hold harmless any officer, Employee or
director of the Company or an Affiliate (hereinafter an “Indemnified Individual”),
for all acts taken or omitted in carrying out the responsibilities of the
Company, Affiliate, Plan Administrator, Benefit Appeals Committee or
Compensation Committee  under the
terms of this Plan or other responsibilities imposed upon such Indemnified
Individual by ERISA.  This
indemnification for all such acts taken or omitted is intentionally broad, but shall
not provide indemnification for any civil penalty that may be imposed on such
Indemnified Individual under ERISA Section 502(i), nor shall it provide
indemnification for any liability imposed upon such Indemnified Individual for
his embezzlement or diversion of Plan funds for the benefit of such Indemnified
Individual.  The Company and all
Affiliates shall jointly and severally indemnify any such Indemnified
Individual for expenses of defending a claim brought by a Participant,
beneficiary, service provider, government entity or other person, including all
legal fees and other costs of such 

 

31

 

defense and shall advance funds as necessary
for such defense on a timely basis. 
The Company and all Affiliates shall also reimburse promptly or advance
funds to any such Indemnified Individual for any monetary payment or obligation
to pay of such Indemnified Individual arising from a successful claim against
such Indemnified Individual in any court or arbitration.  In addition, if a claim is settled (whether
or not in connection with a formal legal action or arbitration) with the
concurrence of the Company, the Company and all Affiliates shall jointly and
severally indemnify any such Indemnified Individual for any monetary liability
under any such settlement, and the expenses thereof.  Such indemnification will not be provided to
any person who is not, at the time of the events for which indemnity is sought,
a present or former officer, Employee or director of the Company or an
Affiliate, nor shall it be provided for any claim by the Company or an
Affiliate against any such Indemnified Individual.

 

9.20         Titles and Headings.  The titles and headings are for reference
only.  In the event of a conflict between
a title or heading and the content of a Section, the content of the Section shall
control.

 

IN WITNESS
WHEREOF, Sealy Corporation, by its duly authorized officers, has executed this
instrument in several counterparts, as of the 18th day of December, 2008.

 

	
   

  	
  SEALY CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kenneth L. Walker

  
	
   

  	
  Its:

  	
  Senior Vice President, General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  And:

  	
  /s/ Lawrence J. Rogers

  
	
   

  	
  Its:

  	
  President & CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  And:

  	
  /s/ Michael Q. Murray

  
	
   

  	
  Its:

  	
  Assistant Secretary

  
							

 

32

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