UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. __)
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
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o Preliminary
Proxy Statement
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o Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x Definitive
Proxy Statement
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o Definitive
Additional Materials
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o Soliciting
Material Pursuant to § 240.14a-12
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TEMPUR-PEDIC
INTERNATIONAL INC.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
x No
fee required.
o Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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(5)
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Total
fee paid:
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o
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Fee
paid previously with preliminary materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its
filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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2009
PROXY STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
The 2009
Annual Meeting of Stockholders of Tempur-Pedic International
Inc.
will be
held at the offices of Bingham McCutchen LLP, 13th
Floor,
One
Federal St., Boston, MA 02110
May 5,
2009 at 10:00 A.M.
PROXY VOTING
OPTIONS
YOUR VOTE IS
IMPORTANT!
Important
Notice Regarding Availability of Proxy Materials:
The 2009
Proxy Statement and 2008 Annual Report are available at www.ProxyVote.com.
Whether
or not you expect to attend in person, we urge you to vote your shares by phone,
via the Internet, or by signing, dating, and returning the proxy card enclosed
with the paper copy of your voting materials at your earliest convenience. This
will ensure the presence of a quorum at the meeting. Promptly voting your shares
will save us the expense and extra work of additional solicitation. Submitting
your proxy now will not prevent you from voting your stock at the meeting if you
want to do so, as your vote by proxy is revocable at your
option.
Voting by
the Internet or telephone is fast and
convenient, and your vote is immediately confirmed and tabulated. Most
important, by using the Internet or telephone, you help us reduce postage and
proxy tabulation costs. Or, if you prefer, you can vote by mail by returning the
enclosed proxy card in the addressed, prepaid envelope
provided.
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VOTE BY INTERNET
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VOTE BY TELEPHONE
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VOTE BY MAIL
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http://www.proxyvote.com
24 hours
a day/7 days a week
Use
the Internet to vote your
proxy.
Have your proxy card
in
hand when you access the
web
site.
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1-800-690-6903
toll-free
24 hours
a
day/7 days a week
Use
any touch-tone telephone
to
vote your proxy. Have your
proxy
card in hand when you call.
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Sign
and date the proxy card and
return
it in the enclosed postage-
paid
envelope.
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If you vote your proxy by
Internet or by telephone, please do NOT mail back the proxy card. You can
access, view and download this year’s Annual Report on Form 10-K and Proxy
Statement at
http://www.proxyvote.com.
March 25,
2009
To our
Stockholders:
I am
pleased to invite you to attend the annual meeting of stockholders of
Tempur-Pedic International Inc. to be held on Tuesday, May 5, 2009 at
10 a.m., local time, at the offices of Bingham McCutchen LLP, 13th Floor,
One Federal Street, Boston, Massachusetts.
Details
regarding admission to the meeting and the business to be conducted are more
fully described in the accompanying notice of annual meeting and Proxy
Statement.
We are
mailing to many of our stockholders a Notice of Availability of Proxy Materials
instead of a paper copy of this Proxy Statement, our 2008 Annual Report on Form
10-K and proxy card, as permitted by the rules of the Securities and Exchange
Commission. The Notice contains instructions on how to access those documents
over the Internet. The Notice also contains instructions on how each of those
stockholders can receive a paper copy of our proxy materials, including this
Proxy Statement, our 2008 Annual Report on Form 10-K and a form of proxy card or
voting instruction card. All stockholders who do not receive this Notice will
receive a paper copy of the proxy materials by mail. We believe that this
process conserves natural resources and reduce the costs of printing and
distributing our proxy materials.
Your vote
is important. Whether or not you plan to attend the annual meeting, we hope you
will vote as soon as possible. You may vote by proxy over the Internet or by
telephone, or, if you received paper copies of the proxy materials by mail, you
can also vote by mail by following the instructions on the proxy card or voting
instruction card. Voting over the Internet, by telephone or by written proxy or
voting instruction card will ensure your representation at the annual meeting
regardless of whether you attend in person.
Thank you
for your ongoing support of and continued interest in Tempur-Pedic
International.
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Sincerely,
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MARK
SARVARY
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President,
Chief Executive Officer and Director
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2009
ANNUAL MEETING OF STOCKHOLDERS
TUESDAY,
MAY 5, 2009
10:00 A.M.
NOTICE
OF MEETING AND PROXY STATEMENT
YOUR
VOTE IS IMPORTANT
Tempur-Pedic
International Inc. (Company) will hold its 2009 Annual Meeting of Stockholders
at the offices of Bingham McCutchen LLP, 13th Floor,
One Federal Street, Boston, Massachusetts 02110 on Tuesday, May 5,
2009, at 10:00 a.m. At the Annual Meeting, stockholders will:
(1) elect ten directors to each serve for a one-year term and until the
director’s successor has been duly elected and qualified, (2) approve the First
Amendment to the Company’s Amended and Restated 2003 Equity Incentive Plan, (3)
ratify the appointment of Ernst & Young LLP as the Company’s independent
auditors for the year ending December 31, 2009, and (4) transact such other
business as may properly come before the meeting or any adjournment
thereof.
If you
are a stockholder of record, you may vote in any one of four ways: in person by
attending the Annual Meeting, by Internet, by telephone, or by mail using the
proxy card enclosed in the paper copy of your voting materials. Specific voting
information is included under the caption “Voting Procedures.” Only stockholders
of record at the close of business on March 6, 2009, are entitled to vote. On
March 6, 2009, 74,894,718 shares of the Company’s common stock were outstanding.
Each share entitles the holder to one vote.
Our Board
of Directors asks you to vote in favor of the director nominees, the approval of
the First Amendment to our Amended and Restated Equity Incentive Plan and the
ratification of Ernst & Young LLP as the Company’s independent auditors.
This Proxy Statement provides you with detailed information about each of these
matters. We encourage you to read this Proxy Statement
carefully.
Important Notice Regarding the
Availability of Proxy Materials
for
the Stockholder Meeting to be Held on May 5, 2009
The Proxy
Statement and Annual Report on Form 10-K and the means to vote by Internet
are available at http://www.proxyvote.com.
We have
sent to you the notice of availability of proxy materials. If you would like to
receive a paper copy or e-mail copy of the voting materials, you may elect to do
so following the instructions on the notice of availability. Instead of
receiving paper copies of our annual reports and Proxy Statements in the mail,
we encourage you to elect to receive an e-mail that will provide an electronic
link to these documents. Choosing to receive your proxy materials online will
save us the cost of producing and mailing documents to you as well as conserve
natural resources. With electronic delivery, we will notify you by e-mail as
soon as the annual report and Proxy Statement are available on the Internet, and
you can easily submit your stockholder votes online. If you are a stockholder of
record, you may enroll in the electronic delivery service at the time you vote
by marking the appropriate box on your proxy card, by selecting electronic
delivery if you vote on the Internet, or at any time in the future by going
directly to www.proxyvote.com,
selecting the “Investor Service Direct” option, and following the enrollment
instructions. If you are a beneficial holder, you may also have the opportunity
to receive annual meeting materials electronically. Please check the information
provided in the proxy materials mailed to you by your brokerage firm, bank or
trustee.
All of
our stockholders are cordially invited to attend the Annual
Meeting.
By Order of the Board of
Directors,
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Dale
E. Williams
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Executive
Vice President, Chief Financial Officer, and Secretary
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Lexington,
Kentucky
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March
25, 2009
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Picture identification will be
required to enter the Annual Meeting. Cameras and recording equipment will not
be permitted at the Annual Meeting.
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TEMPUR-PEDIC
INTERNATIONAL INC.
1713
Jaggie Fox Way
Lexington,
Kentucky 40511
Annual
Meeting of Stockholders To Be Held on Tuesday, May 5, 2009
Our
Board of Directors is soliciting proxies for the 2009 Annual Meeting of
Stockholders. The 2009 Annual Meeting of Stockholders of Tempur-Pedic
International Inc. will be held at 10:00 a.m., local time on May 5, 2009 at the
offices of Bingham McCutchen LLP, 13th Floor,
One Federal Street, Boston, Massachusetts 02110. This Proxy Statement
contains important information for you to consider when deciding how to vote on
the matters brought before the meeting. Please read it carefully.
Notice
of the meeting and Notice of Availability of the voting materials, which include
this Proxy Statement and a proxy card, were mailed to stockholders on or about
March 25, 2009. Our principal executive offices are located at
1713 Jaggie Fox Way, Lexington, Kentucky 40511. Our telephone number is
(800) 878-8889. As used in this Proxy Statement, the term “Tempur-Pedic
International,” refers to Tempur-Pedic International Inc. and the terms “we,”
“our,” “ours,” “us,” and “Company” refer to Tempur-Pedic International Inc. and
its consolidated subsidiaries.
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Q:
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Who may vote at the meeting? | |
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A:
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Our
Board set March 6, 2009 as the record date for the meeting. All
stockholders who owned Tempur-Pedic International common stock of record
at the close of business on March 6, 2009 may attend and vote at the
meeting. Each stockholder is entitled to one vote for each share of common
stock held on all matters to be voted on. On March 6, 2009, 74,894,372
shares of Tempur-Pedic International common stock were
outstanding.
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Q:
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How
many votes does Tempur-Pedic International need to be present at the
meeting?
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A:
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A
majority of Tempur-Pedic International’s outstanding shares of common
stock as of the record date must be present at the meeting in order to
hold the meeting and conduct business. This is called a quorum. Shares are
counted as present at the meeting if you:
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•
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Are
present and vote in person at the meeting; or
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•
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Have
properly submitted a proxy card, by submitting the proxy card via the
Internet, telephone or in writing.
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What
proposals will be voted on at the meeting?
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There
are three proposals scheduled to be voted on at the
meeting:
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•
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Election
of ten (10) directors to each serve for a one-year term and until the
director’s successor has been duly elected and qualified (Proposal
One).
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•
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Approval
of the First Amendment to our Amended and Restated 2003 Equity Incentive
Plan (Proposal Two).
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•
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Ratification
of the appointment of the firm of Ernst & Young LLP as
Tempur-Pedic International’s independent auditors for the year ending
December 31, 2009 (Proposal Three).
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Q:
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What
is the voting requirement to approve the proposal?
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A:
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In
Proposal One for the election of directors, those ten nominees who receive
the highest number of affirmative “FOR” votes of the shares present or
represented and entitled to vote at the meeting will be elected. Proposals
Two and Three require the affirmative “FOR” vote of a majority of the
shares of common stock present or represented and entitled to vote at the
Annual
Meeting.
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Q:
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How
would my shares be voted if I do not specify how they should be
voted?
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A:
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If
you sign and return your proxy card without indicating how you want your
shares to be voted, the Proxy Committee appointed by the Board will vote
your shares as follows:
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Proposal
One: “FOR” the election of ten directors to each serve for a one-year term
and until the director’s successor has been duly elected and
qualified.
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Proposal Two:
“FOR” the approval of the First Amendment to our Amended and Restated 2003
Equity Incentive Plan
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Proposal
Three: “FOR” the ratification of the appointment of the firm of Ernst
& Young LLP as Tempur-Pedic International’s independent auditors for
the year ending December 31, 2009.
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Q:
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How
are the votes counted?
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A:
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Proposal
One, you may vote “FOR” or “WITHHOLD” with respect to each specific
nominee. For Proposal Two, you may vote “FOR,” “AGAINST,” or “ABSTAIN.”
Abstentions and broker “non-votes” are counted as present and entitled to
vote for purposes of determining a quorum. A broker “non-vote” occurs when
a nominee holding shares for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting
power with respect to that item and has not received instructions from the
beneficial owner.
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Proposal
One - Election of Directors
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Abstentions
and broker non-votes are not counted for purposes of the election of
directors.
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Proposal
Two –Approval of the First Amendment to our Amended and Restated 2003
Equity Incentive Plan
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An
abstention is counted as a vote against the approval of the First
Amendment to our Amended and Restated 2003 Equity Incentive Plan (Proposal
Two). A broker “non-vote” is not considered as a vote cast
under the rules of the NYSE, but the underlying shares are considered
shares entitled to vote on the proposal. As a result, under the rules of
the NYSE, the passage of the First Amendment to our Amended and Restated
2003 Equity Incentive Plan (Proposal Two) may not pass if the number of
votes actually cast did not constitute a majority of our outstanding
shares of common stock represented at the meeting.
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Proposal
Three –Ratification of Auditors
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An
abstention is counted as a vote against the ratification of the
independent auditor (Proposal Three). A broker non-vote is not
counted for purposes of ratification of the independent auditor and all
other matters to properly come before the meeting.
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Voting
results will be tabulated and certified by Broadridge Financial
Solutions.
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Q:
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How
may I vote my shares in person at the meeting?
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A:
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Shares
held directly in your name as the stockholder of record may be voted in
person at the meeting. If you choose to attend the meeting, please bring
the enclosed proxy card and proof of identification for entrance to the
meeting. If you hold your shares in street name, you must request a legal
proxy from your stockbroker in order to vote at the
meeting.
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Q:
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How
can I vote my shares without attending the meeting?
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A:
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You
may vote in person at the meeting or by proxy. We recommend you vote by
proxy even if you plan to attend the meeting. You can always change your
vote at the meeting. Giving us your proxy means you authorize us to vote
your shares at the meeting in the manner you direct.
If
your shares are held in your name, you can vote by proxy in three
convenient ways:
Via
Internet: Go to http://www.proxyvoting.com
and follow the instructions. You will need to enter the control
number printed on your proxy card.
By
Telephone: Call toll-free 1-800-690-6903 and follow the
instructions. You will need to enter the control number printed on your
proxy card.
In
Writing: Complete, sign, date and return your proxy card
in the enclosed envelope (if you have received a paper copy of the voting
materials).
If
your shares are held in street name, you may vote by submitting voting
instructions to your stockbroker or nominee. In most cases, you will be
able to do this by mail. Please refer to the summary instructions included
on your proxy card. For shares held in street name, the voting instruction
card will be included by your stockbroker or nominee.
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You
may submit your proxy by mail by signing your proxy card or, for shares
held in street name, by following the voting instruction card included by
your stockbroker or nominee and mailing it in the enclosed, postage-paid
envelope. If you provide specific voting instructions, your shares will be
voted as you have instructed.
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Q:
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How
can I change my vote after I return my proxy card?
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A:
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You
may revoke your proxy and change your vote at any time before the final
vote at the meeting. You may do this by signing and submitting a new proxy
card with a later date or by attending the meeting and voting in person.
Attending the meeting will not revoke your proxy unless you specifically
request it.
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Q:
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What
is Tempur-Pedic International’s voting recommendation?
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A:
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Our
Board of Directors recommends that you vote your shares “FOR” each of the
nominees to the Board (Proposal One), “FOR” the approval of the First
Amendment to our Amended and Restated 2003 Equity Incentive Plan (Proposal
Two) and “FOR” the ratification of the appointment of Ernst & Young
LLP as Tempur-Pedic International’s independent auditors for the year
ending December 31, 2009 (Proposal Three).
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Q:
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Where
can I find the voting results of the meeting?
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A:
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The
preliminary voting results will be announced at the meeting. The final
results will be published in our quarterly report on Form 10-Q for
the second quarter of 2009.
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ELECTION
OF DIRECTORS
Tempur-Pedic
International’s Board of Directors currently consists of ten members, each
serving a one-year term. The nominees for this year’s election of directors
include: H. Thomas Bryant, Francis A. Doyle, John Heil, Peter K. Hoffman, Sir
Paul Judge, Nancy F. Koehn, Christopher A. Masto, P. Andrews McLane, Mark
Sarvary and Robert B. Trussell, Jr. The nominees, if elected, will each serve a
one-year term until Tempur-Pedic International’s annual meeting in 2010 or until
his or her respective successor is elected and qualified. Each of the nominees
has consented to serve a one-year term. There are no family relationships among
our executive officers and directors.
All of the
nominees are standing for re-election by our stockholders, except for Mr.
Sarvary. Upon the recommendation of the Board’s Nominating and
Corporate Governance Committee, our Board of Directors elected Mr. Sarvary to
the Board of Directors on June 30, 2008, effective as of August 4, 2008, the
date he became our Chief Executive Officer and President of Tempur-Pedic
International Inc.
VOTE
REQUIRED
The
ten persons receiving the highest number of votes represented by outstanding
shares of common stock present or represented by proxy and entitled to vote at
the Annual Meeting will be elected.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION TO THE
BOARD OF DIRECTORS OF EACH OF THE FOLLOWING NOMINEES:
H. Thomas
Bryant, 61, has
served as a member of Tempur-Pedic International’s Board of Directors since
April 2006. Mr. Bryant served as President and Chief Executive
Officer of Tempur-Pedic International Inc. from April 2006 until his retirement
from this position on August 4, 2008. From December 2004 to April 2006, Mr.
Bryant served as President of Tempur-Pedic International. From July 2001 to
December 2004, Mr. Bryant served as Executive Vice President and President of
North American Operations. Prior to joining Tempur-Pedic International, from
1998 to 2001, Mr. Bryant was the President and Chief Executive Officer of
Stairmaster Sports & Medical Products, Inc. From 1989 to 1997, Mr. Bryant
served in various senior management positions at Dunlop Maxfli Sports
Corporation, most recently as President. Prior to that, Mr. Bryant spent 15
years in various management positions at Johnson & Johnson. Mr. Bryant
received his B.S. degree from Georgia Southern University.
Francis A. Doyle, 60, has served as a member
of Tempur-Pedic International’s Board of Directors since April 2003.
Mr. Doyle has served as President and Chief Executive Officer of Connell
Limited Partnership, a global manufacturer of industrial products, since 2001.
From 1972 to 2001, he was a partner at PricewaterhouseCoopers LLP, where he was
Global Technology and E-Business Leader and a member of the firm’s Global
Leadership Team. He currently serves on the Board of Directors of Liberty Mutual
Holding Company, Inc. and Citizens Financial Group. He is a trustee of Boston
College. Mr. Doyle is a certified public accountant and holds a
B.S. degree and an M.B.A. degree from Boston College.
John Heil, 56,
has served as a member of Tempur-Pedic International’s Board of Director since
March 2008. Mr. Heil currently serves as President of United Pet
Group, Inc., a global manufacturer and marketer of pet supplies and subsidiary
of Spectrum Brands, Inc. Mr. Heil also serves on Spectrum Brands' Executive
Committee as Chief Operating Officer. Mr. Heil also has been a member of the
board of directors of VA Antech, Inc., a NYSE listed company, since February
2002, and previously served as a director from 1995 to 2000. Prior to
joining United Pet Group, Mr. Heil spent twenty-five years with the H. J. Heinz
Company in various executive and general management positions including
President and Managing Director of Heinz Pet Products and President of Heinz
Specialty Pet Foods. Mr. Heil holds a BA degree in economics from Lycoming
College.
Peter K. Hoffman,
60, has
served as a member of Tempur-Pedic International’s Board of Directors since
October 2006. From January 1, 2000, Mr. Hoffman served as President of
Global Grooming for The Procter & Gamble Company (formerly The Gillette
Company) until his retirement at the end of 2006. Mr. Hoffman spent over 34
years with The Gillette Company and Procter & Gamble in executive positions
both in North America and Europe, including roles as President, Global Blades
and Razors; President, Duracell North Atlantic; and President, Braun North
America. Mr. Hoffman received an A.B. degree in Economics from Columbia
University and an M.B.A. degree with distinction from the Tuck School of
Business, Dartmouth College, where he was elected an Edward Tuck
Scholar.
Sir Paul
Judge, 59, has served as a member of Tempur-Pedic International’s Board
of Directors since July 2004. Sir Paul Judge is chairman of
the British-North American Committee and Deputy Chairman of the
American Management Association. After thirteen years working for Cadbury
Schweppes, Sir Paul led the buyout of that company’s food operations to form
Premier Brands, becoming its chairman. Sir Paul Judge was subsequently chairman
of Food from Britain, director general of the Conservative Party and a
ministerial adviser at the UK Cabinet Office. Sir Paul Judge has served on the
board of Standard Bank Group Ltd of Johannesburg since June 2003 and Schroder
Income Growth Fund plc since December 1995, and as a member of the Advisory
Board for Barclays Private Bank. In 1996, he became a Knight Bachelor in
recognition of his public and political service. He was an Open Scholar at
Trinity College, University of Cambridge, graduating in 1971, and received an
M.B.A. in 1973 from the Wharton Business School.
Nancy F.
Koehn, 49, has served as a member of Tempur-Pedic International’s Board
of Directors since March 2004. Ms. Koehn has been a Professor of Business
Administration at Harvard Business School since July 1991. From July 1997
through June 2001, Ms. Koehn was an Associate Professor at Harvard Business
School. From July 1991 through June 1997, she was an Assistant Professor
at Harvard Business School. She is the author of a number of books on various
business topics, including her most recent book, Brand New: How Entrepreneurs Earned Consumers’
Trust from Wedgwood to Dell, and has written and supervised numerous case
studies. Ms. Koehn consults with many companies and speaks frequently before
business leaders on a range of subjects including strategic branding, leading in
turbulent times, visionary entrepreneurs—past and present—and competing on the
demand side in the Information Revolution. In 2001, Business 2.0 named Ms. Koehn
one of 19 leading business gurus in the United States. Ms. Koehn holds a B.A.
degree from Stanford University, an M.A. degree in Public Policy from the
Harvard University Kennedy School of Government and an M.A. degree and a Ph.D.
degree in European History from Harvard University.
Christopher A. Masto,
41, has
served as a member of Tempur-Pedic International’s Board of Directors since
November 2002. Mr. Masto is a Managing Senior Director of Friedman
Fleischer & Lowe, LLC, which he co-founded in 1997. Prior to 1997, he
worked as a management consultant with Bain & Company. Prior to that,
Mr. Masto was employed at Morgan Stanley & Co., where he worked in
the investment banking department. He currently serves on the board of
Archimedes Technology Group and Speedy Cash Holdings Corp. Mr. Masto
graduated magna cum laude
from Brown University with an Sc.B. in Electrical Engineering and
received his M.B.A. degree from Harvard Business School.
P. Andrews
McLane, 61, has
served as Chairman of Tempur-Pedic International’s Board of Directors since
November 2002. His career began in 1973 with the State Street
Bank. Mr. McLane joined TA Associates, Inc. in 1979, became
a Managing Director in 1982 and Senior Managing Director in 1997, and served on
TA Associate’s Executive Committee for 20 years. He became a Senior Advisor of
the firm in 2008. Mr. McLane is a director of Advisory Research, Inc.,
Numeric Investors Arnhold and S. Bleichroeder Advisers. Mr. McLane
serves on the board of St. Paul’s School and on the board of overseers of the
Museum of Fine Arts, Boston. Mr. McLane graduated from Dartmouth College
with an A.B. degree and from the Tuck School of Business at Dartmouth with
an M.B.A. degree.
Mark Sarvary,
49, joined Tempur-Pedic International in June 2008 and serves as
President and Chief Executive Officer of Tempur-Pedic International Inc. Prior
to joining Tempur-Pedic, Mr. Sarvary served as an Industrial Partner with CVC
Capital Partners, a global private equity firm. Prior to CVC, from 2004 to 2007,
Mr. Sarvary was the President of Campbell Soup Company’s North America division,
including Campbell Soup, Pepperidge Farm, Pace, Prego and V8 as well as Godiva’s
global business. From 2002 until 2004, Mr. Sarvary was the President of
Campbell’s Pepperidge Farm division. Prior to joining Campbell’s, from 1999 to
2002, Mr. Sarvary was the CEO of J. Crew Group, Inc., and from 1993 to 1999 he
worked for Nestle, most recently as the President of the Stouffer’s Frozen Food
division. Earlier in his career, Mr. Sarvary worked as a strategy consultant
with Bain & Company and in sales and marketing roles with IBM in Europe. Mr.
Sarvary received his BSc in Physics from Kent University in the United Kingdom
and an MBA from INSEAD Business School in France.
Robert B. Trussell,
Jr., 57, has served as a member of Tempur-Pedic International’s Board of
Directors or its predecessors since 1992, and has served as Vice Chairman of the
Board of Directors since April 2006. Mr. Trussell served as Chief Executive
Officer of Tempur-Pedic International until May 2006, and served in that
capacity at Tempur-Pedic International or its predecessor since November 2002.
From 1994 to December 2004, Mr. Trussell served as President of Tempur-Pedic
International or one of the predecessors to Tempur-Pedic International. Prior to
joining Tempur-Pedic International, Mr. Trussell was general partner of several
racing limited partnerships that owned racehorses in England, France and the
United States. He was also the owner of several start-up businesses in the
equine lending and insurance business. Mr. Trussell received his B.S. degree
from Marquette University.
|
Name
|
Age
|
Position
|
||||
|
Mark
Sarvary
|
49
|
President
and Chief Executive Officer
|
||||
|
Matthew
D. Clift
|
49
|
Executive
Vice President of Global Operations
|
||||
|
David
Montgomery
|
48
|
Executive
Vice President and President of International
Operations
|
||||
|
Richard
W. Anderson
|
49
|
Executive
Vice President and President, North America
|
||||
|
Dale
E. Williams
|
46
|
Executive
Vice President, Chief Financial Officer, and Secretary
|
||||
|
Bhaskar
Rao
|
43
|
Chief
Accounting Officer and Vice President of Strategic
Planning
|
||||
Matthew D.
Clift joined Tempur-Pedic International in December 2004 and serves as
Executive Vice President of Global Operations, with responsibilities including
manufacturing and research and development. From 1991 to December 2004, Mr.
Clift was employed by Lexmark International where he most recently served as
Vice President and General Manager of the consumer printer division. From 1981
to 1991, Mr. Clift was employed by IBM Corporation and held several management
positions in research and development and manufacturing. Mr. Clift obtained his
B.S. degree in chemical engineering from the University of
Kentucky.
David
Montgomery joined Tempur-Pedic International in February 2003 and serves
as Executive Vice President and President of International Operations, with
responsibilities including marketing and sales. From 2001 to November 2002, Mr.
Montgomery was employed by Rubbermaid, Inc., where he served as President of
Rubbermaid Europe. From 1988 to 2001, Mr. Montgomery held various management
positions at Black & Decker Corporation, most recently as Vice President of
Black & Decker Europe, Middle East and Africa. Mr. Montgomery received his
B.A. degree, with honors, from L’ Ecole Superieure de Commerce de Reims, France
and Middlesex Polytechnic, London.
Richard
W. Anderson joined Tempur-Pedic International in July 2006 and
serves as Executive Vice President and President, North America. From
1983 to 2006, Mr. Anderson was employed by The Gillette Company, which became a
part of Procter & Gamble in 2005. Mr. Anderson most recently served as the
Vice President of Marketing for Oral-B and Braun in North America.
Previously, Mr. Anderson was the Vice President of Global Business
Management for Duracell. Mr. Anderson has held several management
positions in marketing and sales as well as overseeing branding, product
development and strategic planning. Mr. Anderson obtained B.S. and M.B.A.
degrees from Virginia Tech.
Dale E.
Williams joined Tempur-Pedic International in July 2003 and serves as
Executive Vice President, Chief Financial Officer and Secretary. From November
2001 through 2002, Mr. Williams served as Vice President and Chief Financial
Officer of Honeywell Control Products, a division of Honeywell International,
Inc. From 2000 to 2001, Mr. Williams served as Vice President and Chief
Financial Officer of Saga Systems, Inc./Software AG, Inc. Prior to that, Mr.
Williams spent 15 years in various management positions at General Electric
Company, most recently as Vice President and Chief Financial Officer of GE
Information Services, Inc. Mr. Williams received his B.A. degree in finance from
Indiana University.
Bhaskar
Rao joined
Tempur-Pedic International in January 2004 as Director of Financial Planning and
Analysis. In October 2005, Mr. Rao was promoted to Vice President of Strategic
Planning. In May 2006, Mr. Rao was promoted to the position of Chief Accounting
Officer and continues to serve as Vice President of Strategic Planning. From
2002 until December 2003, Mr. Rao was employed by Ernst & Young as a Senior
Manager in the assurance and business advisory group. Mr. Rao was
employed by Arthur Anderson from 1994 until 2002. Mr. Rao graduated
from Bellarmine University with B.A. degrees in Accounting and Economics.
Mr. Rao is also a Certified Public Accountant.
AND
RELATED MATTERS
The following
materials related to our corporate governance and related matters are available
on our website at: http://investor.tempurpedic.com/
under the caption “Corporate Governance”:
| • |
Mission
Statement
|
|
| • |
Core
Values
|
|
| • |
Corporate
Governance Guidelines
|
|
| • |
Code
of Business Conduct and Ethics for Employees, Executive Officers and
Directors
|
|
| • |
Policy
on Complaints of Accounting, Internal Accounting Controls and Auditing
Matters
|
|
| • |
Audit
Committee Charter
|
|
| • |
Compensation
Committee Charter
|
|
| • |
Nominating
and Corporate Governance Committee Charter
|
|
| • |
Committees
Membership
|
|
| • |
Contact
the Presiding
Director
|
Copies may also be
obtained, free of charge, by writing to: Tempur-Pedic International
Inc., 1713 Jaggie Fox Way Lexington, Kentucky 40511, Attention: Investor
Relations. Please specify which document you would like to
receive.
The Board of
Directors held nine (9) meetings in 2008, and acted by written consent six (6)
times. Each director attended 75% or more of the combined total number of
meetings of the Board of Directors and its committees held in 2008 during the
period in which they served as directors or committee members.
Our corporate
governance guidelines provide that a majority of the Board of Directors shall
consist of independent directors within the meaning of the New York Stock
Exchange Rules governing the composition of the Board of Directors and its
committees (NYSE Independence Rules). The Board of Directors has
determined that none of Francis A. Doyle, John Heil, Peter K. Hoffman, Sir Paul
R. Judge, Nancy F. Koehn, Christopher A. Masto or P. Andrews McLane have a
material relationship with the Company (either directly or as a partner,
stockholder or officer of an organization that has a relationship with the
Company) within the meaning of the NYSE Independence Rules and accordingly are
“independent” for purposes of the NYSE Independence Rules.
The Board of
Directors has determined that Mark Sarvary does not qualify as an independent
director under the NYSE Independence Rules because he serves as President and
Chief Executive Officer of Tempur-Pedic International. The Board of Directors
has also determined that H. Thomas Bryant does not qualify as an independent
director under the NYSE Independence Rules as he was employed as the President
and Chief Executive Officer of Tempur-Pedic International within the last three
years and Robert B. Trussell, Jr. does not qualify as an
independent director under the NYSE Independence Rules as he was employed as the
Chief Executive Officer of Tempur-Pedic International within the last three
years. We expect that this three year period will lapse with respect to Mr.
Trussell on May 5, 2009, and therefore he will be considered “independent” for
purposes of the NYSE Independence Rules after the 2009 Annual Meeting of
Stockholders.
The standing
committees of the Board of Directors are the Audit Committee, the Compensation
Committee, and the Nominating and Corporate Governance Committee.
|
The
Audit Committee
|
The members
of the Audit Committee are Francis A. Doyle (Chair), Peter K. Hoffman, Sir Paul
Judge and Nancy F. Koehn. The Board has determined that each member of the Audit
Committee is independent as defined in the NYSE Independence Rules and the rules
of the Securities and Exchange Commission (SEC). The Board has also determined
that Mr. Doyle is an audit committee financial expert within the meaning of
Item 407 (d) (5) (ii) of Regulation S-K of the Securities and Exchange Act of
1934, as amended, (Exchange Act) and has “accounting or related financial
management expertise” within the meaning of the applicable New York Stock
Exchange rules. The Audit Committee was established in accordance with Section
3(a)(58) of the Exchange Act.
The Audit
Committee of the Board of Directors is responsible for providing independent,
objective oversight with respect to Tempur-Pedic International’s accounting and
financial reporting functions, internal and external audit functions, and
systems of internal controls over financial reporting and legal, ethical, and
regulatory compliance. Some of the Audit Committee’s responsibilities
include:
|
•
|
reviewing
the scope of internal and independent audits;
|
|
|
•
|
reviewing
the Company’s quarterly and annual financial statements and annual report
on Form 10-K;
|
|
|
•
|
reviewing
the adequacy of management’s implementation of internal
controls;
|
|
|
•
|
reviewing
the Company’s accounting policies and procedures and significant changes
in accounting policies;
|
|
|
•
|
reviewing
the Company’s business conduct and ethics policies and
practices;
|
|
|
•
|
reviewing
the Company’s policies with respect to risk assessment and risk
management;
|
|
|
•
|
reviewing
information to be disclosed and types of presentations to be made in
connection with the Company’s earnings press releases, as well as
financial information and earnings guidance provided to analysts and
rating agencies;
|
|
|
•
|
preparing
an annual evaluation of the committee’s performance;
|
|
|
•
|
reporting
regularly to the Board on the committee’s activities;
and
|
|
|
•
|
appointing
the independent public accountants and reviewing their independence and
performance and the reasonableness of their
fees.
|
|
The Audit
Committee has established whistle blower procedures, which provide for the (a)
the receipt, retention, and treatment of complaints received regarding
accounting, internal accounting controls, or auditing matters; and (b) the
confidential, anonymous submission by employees of the issuer of concerns
regarding questionable accounting or auditing matters. Tempur-Pedic
International also has a confidential, anonymous reporting system which is
web-based and available to all employees. All reports are treated
confidentially.
The Audit
Committee met eleven (11) times and acted by written consent once in 2008. A
copy of the Audit Committee charter as adopted by our Board of Directors is
available on Tempur-Pedic International’s website at http://investor.tempurpedic.com/,
under the caption “Corporate Governance.”
|
The
Compensation Committee
|
The members
of the Compensation Committee are Peter K. Hoffman (Chair), John A. Heil, Sir
Paul Judge, and Francis A. Doyle. The Board of Directors has determined
that each member of the Compensation Committee is independent as defined in the
NYSE Independence Rules. The committee’s responsibilities include:
|
•
|
reviewing
and approving on an annual basis the corporate goals and objectives with
respect to compensation for the chief executive officer, evaluating at
least once a year the chief executive officer's performance in light of
these established goals and objectives and, based upon these evaluations,
determining and approving the chief executive officer's annual
compensation, including salary, bonus, incentive and equity
compensation;
|
|
•
|
|
reviewing
on an annual basis the Company's compensation structure for officers and
employees other than the chief executive officer and making
recommendations to the Board regarding the compensation of these officers
and employees;
|
|
•
|
|
oversee
the development of executives succession plans and the leadership
development and training of the Company’s executive
team;
|
|
•
|
|
reviewing
on an annual basis the Company’s compensation structure for its directors
and making recommendations to the Board regarding the compensation of
directors;
|
|
•
|
|
reviewing
the Company's incentive compensation and other stock-based plans and
recommending changes in such plans to the Board as needed, having and
exercising all the authority of the Board with respect to the
administration of such plans;
|
|
•
|
|
reviewing
executive officer compensation for compliance with Section 16 of the
Exchange Act and Section 162(m) of the Internal Revenue Code of 1986, as
amended (Code), and other applicable laws, rules and
regulations;
|
|
•
|
|
reviewing
and approving employment agreements, severance arrangements and change in
control agreements and provisions when, and if, appropriate, as well as
any special supplemental benefits;
|
|
•
|
|
reviewing
with management the “Compensation Discussion and Analysis” section in the
Company’s Proxy Statement;
|
|
•
|
|
preparing
and publishing an annual executive compensation report in the Company's
Proxy Statement;
|
|
•
|
|
preparing
an annual evaluation of the committee's
performance;
|
|
•
|
|
reporting
regularly to the Board on the committee's
activities;
|
|
•
|
|
performing
any other activities consistent with the committee’s charter, the
Company's by-laws and governing law, as the committee or the Board deems
appropriate; and
|
|
•
|
|
with
respect to any reference in the committee’s charter to NYSE or SEC
requirements, complying with these requirements when listed by the NYSE or
subject to the requirements of the
SEC.
|
The
Compensation Committee, in its role as administrator under the Company’s Amended
and Restated 2003 Equity Incentive Plan, has delegated authority to the
Company’s President and Chief Executive Officer to grant certain options within
certain specified parameters.
In
determining the compensation of our executive officers, our President and Chief
Executive Officer recommends performance objectives to the Compensation
Committee, and assists the Compensation Committee to determine if the
performance objectives have been achieved.
Since 2005,
the Compensation Committee has periodically engaged Frederick W. Cook & Co.,
Inc., an executive compensation consultant, to evaluate the Company’s overall
compensation structure and equity compensation for the Company’s executive
officers. In May 2008, the Compensation Committee engaged Cook to
advise us in determining and preparing an initial compensation package for Mark
A. Sarvary. In November 2008, the Compensation Committee engaged Cook
to reevaluate our peer group companies and provide an overall analysis of the
compensation structure of the Company’s Named Executive Officers for
2008. For a further description of the services Cook has provided,
see “Executive Compensation – Compensation Discussion and
Analysis.”
The
Compensation Committee met five (5) times in 2008 and acted by written consent
seven (7) times. A copy of the Compensation Committee charter as
adopted by our Board of Directors is available on Tempur-Pedic International’s
website at
http://investor.tempurpedic.com/, under the caption “Corporate
Governance.”
No member of
our Compensation Committee serves as a member of the Board of Directors or
Compensation Committee of any entity that has one or more executive officers
serving as members of our Board of Directors or Compensation
Committee.
|
The
Nominating and Corporate Governance
Committee
|
The
members of the Nominating and Corporate Governance Committee are P. Andrews
McLane (Chair), Nancy F. Koehn and Christopher A. Masto. The Board of Directors
has determined that each member of the Nominating and Corporate Governance
Committee is independent as defined in the NYSE Independence Rules. The
committee’s responsibilities include:
|
•
|
identifying
individuals qualified to become members of the Board;
|
|
|
•
|
recommending
to the Board director nominees to be presented at the annual meeting of
stockholders and to fill vacancies on the Board;
|
|
|
•
|
developing
appropriate criteria for identifying properly qualified directorial
candidates;
|
|
|
•
|
reviewing
and recommending to the Board annual members to each standing committee of
the Board;
|
|
|
•
|
preparing
an annual evaluation of the committee’s performance and reporting
regularly to the Board concerning actions and recommendations of the
committee;
|
|
|
•
|
establishing
procedures to assist the Board in developing and evaluating potential
candidates for executive positions, including the chief executive
officer;
|
|
|
•
|
reviewing
and evaluating related party transactions; and
|
|
|
•
|
developing
and recommending to the Board corporate governance guidelines for the
Company.
|
|
The
Nominating and Corporate Governance Committee met two (2) times and acted by
written consent two (2) times in 2008. A copy of the Nominating and
Corporate Governance Committee charter as adopted by our Board of Directors is
available on Tempur-Pedic International’s website at http://investor.tempurpedic.com/
under the caption “Corporate Governance.”
Policies
Governing Director Nominations
Director
Qualifications
The
Nominating and Corporate Governance Committee of the Board of Directors is
responsible for reviewing with the Board of Directors from time to time the
appropriate qualities, skills and characteristics desired of members of the
Board of Directors in the context of the needs of the business and the
composition of the Board of Directors. This assessment includes
consideration of the following minimum qualifications that the Nominating and
Corporate Governance Committee believes must be met by all
directors:
| • |
|
a
reputation for integrity, honesty and adherence to high ethical
standards;
|
|
•
|
|
the
ability to exercise sound business
judgment;
|
|
•
|
|
substantial
business or professional experience and the ability to offer meaningful
advice and guidance to the Company’s management based on that experience;
and
|
|
•
|
|
to
devote the time and effort necessary to fulfill their responsibilities to
the Company.
|
The
Nominating and Corporate Governance Committee also considers numerous other
qualities, skills and characteristics when evaluating director nominees,
including whether the nominee has specific strengths that would augment existing
skills and experience of the Board of Directors, such as an understanding of and
experience in technology, accounting, governance, finance or marketing and
whether the nominee has leadership experience with public companies or other
sophisticated and complex organizations.
Process for
Identifying and Evaluating Director Nominees
The
Nominating and Corporate Governance Committee has established a process for
identifying and evaluating nominees for director. Although the
Nominating and Corporate Governance Committee will consider nominees recommended
by stockholders, the Committee believes that the process it uses to identify and
evaluate nominees for director is designed to produce nominees that possess the
educational, professional, business and personal attributes that are best suited
to further the Company's mission. The Committee may identify nominees through
the use of professional search firms that may utilize proprietary screening
techniques to match candidates to the Committee's specified qualifications. The
Committee may also receive recommendations from existing directors, executive
officers, key business partners, and trade or industry affiliations. The
Committee will evaluate nominations at regular or special meetings, and in
evaluating nominations, will seek to achieve a balance of knowledge, experience
and capability on the Board and to address the membership criteria set forth
above under "Director Qualifications." The Board itself is ultimately
responsible for recommending candidates for election to the stockholders or for
appointing individuals to fulfill a vacancy.
In 2008, the
Company did not employ a search firm or pay fees any third party to either
search for or evaluate Board nominee candidates.
Procedures
for Recommendation of Director Nominees by Stockholders
The
Nominating and Corporate Governance Committee will consider director candidates
recommended by our stockholders. In evaluating candidates recommended by our
stockholders, the Nominating and Corporate Governance Committee applies the same
criteria set forth above under “Director Qualifications.” Any stockholder
recommendations of director nominees proposed for consideration by the
Nominating and Governance Committee should include the nominee's name and
qualifications for Board membership and should be addressed in writing to the
Committee, care of: Tempur-Pedic International Inc., 1713 Jaggie Fox
Way, Lexington, Kentucky 40511, Attention: Corporate Secretary. In
addition, the Company’s bylaws permit stockholders to nominate directors for
consideration at an annual stockholder meeting in accordance with certain
procedures described in this Proxy Statement under the heading “Stockholder
Proposals for 2010 Proxy Statement.”
The Board of
Directors has designated P. Andrews McLane as the “presiding director” as that
term is defined in applicable NYSE Independence Rules. Stockholders or other
interested parties wishing to communicate with our Board of Directors can call
(859) 514-4605 and leave a message for the presiding director. You may also
contact the presiding director by e-mail at presidingdirector@tempurpedic.com or
by going to Tempur-Pedic International’s website at
http://investor.tempurpedic.com/ under the caption “Corporate
Governance — Contact the Presiding Director.” Regardless of the method you
use, the presiding director will be able to view your unedited message. The
presiding director will determine whether to relay your message to other members
of the Board.
Executive
sessions, or meetings of the outside (non-management) directors without
management present, are held regularly. In 2008, executive sessions
were held after two (2) regularly scheduled meetings of the Board of Directors.
Executive sessions are led by P. Andrews McLane, the presiding
director.
Tempur-Pedic
International has not made any charitable contributions to any charitable
organization in which a director serves as an executive officer in which, within
the preceding three years, such contributions in any single year exceeded the
greater of $1 million, or 2% of such organization’s consolidated gross
revenues.
In accordance
with our Corporate Governance Guidelines, all directors are generally expected
to attend the annual meeting of stockholders. At our last annual meeting, which
was held on May 6, 2008, all of the directors standing for re-election on the
Board attended, except Ms. Koehn.
The
following table sets forth information as of March 6, 2009 regarding the
beneficial ownership of our outstanding equity securities by:
|
•
|
each
person known to beneficially own more than 5% of Tempur-Pedic
International’s outstanding common stock;
|
|
|
•
|
each
of Tempur-Pedic International’s directors and Named Executive Officers (as
defined below in “Executive Compensation and Related
Information”); and
|
|
|
•
|
all
of Tempur-Pedic International’s directors and executive officers as a
group.
|
|
Beneficial
ownership of shares is determined under Rule 13d-3(d)(1) of the Exchange Act and
generally includes any shares over which a person exercises sole or shared
voting or investment power and the number of shares that can be acquired within
sixty (60) days upon exercise of any option. Common stock subject to these
options, warrants and rights is deemed to be outstanding for the purpose of
computing the ownership percentage of the person holding such options, but is
not deemed to be outstanding for the purpose of computing the ownership
percentage of any other person. As of the close of market on March 6,
2009, there were 74,894,372 shares of common stock outstanding, which is used to
calculate the percentages in the table below.
Except as
otherwise indicated, the persons named in the table below have sole voting and
investment power with respect to all shares of common stock held by them. Unless
otherwise indicated, the address of each officer and director listed below is
c/o Tempur-Pedic International Inc., 1713 Jaggie Fox Way, Lexington,
Kentucky 40511.
|
Shares Beneficially Owned
|
|||||||
|
Number
of
|
Percentage
|
||||||
|
Name of Beneficial Owner:
|
Shares
|
of Class
|
|||||
|
5%
Stockholders:
|
|||||||
|
Invesco
Ltd. (1)
|
15,212,002
|
20.3
|
% | ||||
|
FMR
LLC (2)
|
5,274,900
|
7.0
|
% | ||||
|
Kayne
Anderson Rudnick Investment Management LLC (3)
|
4,746,138
|
6.3
|
%
|
||||
|
Friedman
Fleischer & Lowe Funds (4)
|
4,275,425
|
5.7
|
% | ||||
|
Franklin
Resources (5)
|
3,871,460
|
5.2
|
% | ||||
|
Executive
Officers and Directors:
|
|||||||
|
Mark
Sarvary
|
—
|
*
|
% | ||||
|
David
Montgomery (6)
|
637,566
|
*
|
% | ||||
|
Matthew
D. Clift (7)
|
329,834
|
*
|
% | ||||
|
Richard
W. Anderson (8)
|
87,500
|
*
|
% | ||||
|
Dale
E. Williams (9)
|
416,187
|
*
|
% | ||||
|
P.
Andrews McLane (10)
|
738,603
|
1.0
|
% | ||||
|
Christopher
A. Masto (11)
|
211,995
|
*
|
% | ||||
|
Francis
A. Doyle (12)
|
166,522
|
*
|
% | ||||
|
Nancy
F. Koehn (13)
|
91,150
|
*
|
% | ||||
|
Sir
Paul Judge (14)
|
91,150
|
*
|
% | ||||
|
Robert
B. Trussell, Jr. (15)
|
162,385
|
*
|
% | ||||
|
Peter
K. Hoffman (16)
|
52,950
|
*
|
% | ||||
|
John
Heil (17)
|
15,200
|
*
|
% | ||||
|
H.
Thomas Bryant (18)
|
113,836
|
*
|
% | ||||
|
All
executive officers and directors as a group (15 persons)
(19):
|
3,131,753
|
2.1
|
% | ||||
|
*
|
Represents
ownership of less than one percent
|
|
(1)
|
Amounts
shown reflect the aggregate number of shares of common stock held by
Invesco Trimark Ltd, Invesco AIM Advisors, Inc., Invesco PowerShares
Capital Management LLC, Invesco Powershares Capital Management Ireland
Ltd. And Invesco Institutional (N.A.), Inc. based on information set forth
in a Schedule 13G/A filed with the SEC on February 10, 2009. The address
of Invesco Ltd. is 1555 Peachtree Street NE, Atlanta, GA
30309.
|
|
(2)
|
Amounts
shown reflect the aggregate number of shares of common stock held by FMR
LLC based on information set forth in a Schedule 13G filed with the SEC on
February 17, 2009. The address of FMR LLC is 82 Devonshire
Street, Boston, MA, 02109.
|
|
|
(3)
|
Amounts
shown reflect the aggregate number of shares of common stock held by Kayne
Anderson Rudnick Investment Management LLC based on information set forth
in Schedule 13G filed with the SEC on February 11, 2009. The address of
Kayne Anderson Rudnick Investment Management LLC is 1800 Avenue of the
Stars, 2nd
Floor, Los Angeles, CA 90067.
|
|
|
(4)
|
Amounts
shown reflect the aggregate number of shares of common stock held by
Friedman Fleischer & Lowe Capital Partners II, L.P., FFL Executive
Partners II, L.P. and FFL Parallel Fund II, L.P. (the “FFL
Funds”). The general partner of each of the FFL Funds is
Friedman Fleisher & Lowe GP II, L.P. (“FFL GP II”), and the general
partner FFL GP II is Friedman Fleischer & Lowe GP II, LLC (“FFL GP II,
LLC”). David L. Lowe, Spencer C. Fleischer, Tully M. Friedman
and Christopher A. Masto are managing members of FFL GP II,
LLC. Amounts shown and ownership of such shares are based on
information set forth in Schedule 13D filed with the SEC on March 31,
2008. The address of the FFL Funds is One Maritime Plaza, Suite 2200, San
Francisco, CA 94111.
|
|
|
(5)
|
Amounts
shown reflect the aggregate number of shares of common stock held by
Franklin Resources, Inc., Charles B. Johnson, Rupert H. Johnson, Jr. and
Franklin Templeton Investments Corp. based on information set forth in a
Schedule 13G filed with the SEC on February 9, 2009. The
address of Franklin Resources, Inc., Charles B. Johnson, Rupert H.
Johnson, Jr. is One Franklin Parkway, San Mateo, CA
94403-1906. The address of Franklin Templeton Investments Corp
is 200 King Street West, Suite 1500, Toronto Ontario, M5H
3T4.
|
|
|
(6)
|
Includes
175,000 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009.
|
|
|
(7)
|
Includes
300,000 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009.
|
|
|
(8)
|
Includes
87,500 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009.
|
|
|
(9)
|
Includes
175,000 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6,
2009.
|
|
| (10) |
Includes
254,943 shares of common stock which Mr. McLane may be deemed to have an
indirect pecuniary interest as his spouse is the trustee of 10 trusts
holding these shares in the aggregate for the benefit of his children and
grandchildren. Also includes 51,600 shares of common
stock issuable upon exercise of outstanding options exercisable within 60
days of March 6, 2009. The address for Mr. McLane is c/o T.A. Associates,
Inc., John Hancock Tower, 56th Floor, 200 Clarendon Street, Boston, MA 02116.
|
|
|
(11)
|
Includes
172,395 shares of common stock held in revocable trust for the benefit of
Mr. Masto’s children. Also includes 39,600 shares of common
stock issuable upon exercise of outstanding options exercisable within 60
days of March 6, 2009. The address for Mr. Masto is c/o Friedman Fleischer
& Lowe, LLC, One Maritime Plaza, 22nd Floor, San Francisco, CA 94111.
Mr. Masto
disclaims beneficial ownership of any shares held by the FFL Funds in
which he does not have a pecuniary interest.
|
|
|
(12)
|
Includes
66,150 shares of common stock issuable upon exercise of
outstanding options exercisable within 60 days of March 6, 2009. The
address for Mr. Doyle is c/o Connell Limited Partnership, One
International Place, Fort Hill Square, Boston, MA
02110.
|
|
|
(13)
|
Includes
91,150 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009. The
address for Ms. Koehn is Harvard Business School, Rock Center 110, Boston,
MA 02163.
|
|
|
(14)
|
Includes
91,150 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009. The
address for Sir Paul Judge is 88 The Panaromic, 152 Grosvenor Road, London
SW1V 3JL England.
|
|
|
(15)
|
Amount
reflects the aggregate number of shares owned by RBT Investments, LLC and
Robert B. Trussell and Martha O. Trussell, Tenants in Common, and includes
62,285 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009. The address for RBT
Investments, LLC and Robert B. Trussell and Martha O. Trussell, Tenants in
Common, is c/o Tempur-Pedic International Inc. 1713 Jaggie Fox Way,
Lexington, KY 40511.
|
|
|
(16)
|
Includes
52,950 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009. The
address for Mr. Hoffman is c/o Tempur –Pedic International Inc., 1713
Jaggie Fox Way, Lexington, KY 40511.
|
|
|
(17)
|
Includes
15,200 shares of common stock issuable upon exercise of outstanding
options exercisable within 60 days of March 6, 2009. The
address for Mr. Heil is c/o Spectrum Brands, Inc, 7794 Five Mile Road,
Suite 190, Cincinnati, OH 45230.
|
|
|
(18)
|
Includes
9,000 shares of common stock issuable upon exercise of outstanding and
currently exercisable options. The address for Mr. Bryant is
c/o Tempur –Pedic International Inc.,1713 Jaggie Fox Way, Lexington, KY
40511.
|
|
|
(19)
|
Includes
1,282,946 shares of common stock issuable upon exercise of outstanding and
currently exercisable
options.
|
TEMPUR-PEDIC
INTERNATIONAL INC.
The
Compensation Committee of our Board of Directors has responsibility for
establishing, monitoring and overseeing our Company’s compensation philosophy
and objectives. In the paragraphs that follow, we provide an overview and
analysis of our compensation philosophy, the material compensation decisions we
have made with respect to our compensation philosophy and the material factors
that we considered when making those decisions.
Throughout
this Proxy Statement, those persons who served as (i) our principal executive
officer during the year ended December 31, 2008, (ii) our principal financial
officer during the year ended December 31, 2008 and (iii) our other three most
highly compensated executive officers for the year ended December 31, 2008 are
collectively referred to as our “Named Executive Officers”. Effective
August 4, 2008, Mr. Mark Sarvary became our Chief Executive Officer, replacing
Mr. Thomas Bryant upon his retirement. The compensation programs
described below apply in many cases to larger groups of the Company’s employees
other than the six Named Executive Officers.
Our senior
management compensation plan is designed to attract, motivate and retain our
management talent and to reward our management for strong Company performance
and successful execution of our key business plans and strategies. We believe
that our compensation philosophy aligns management incentives with the long-term
interests of our stockholders. We compensate our senior management through a mix
of base salary, annual incentive bonus and equity compensation that ties pay to
performance and is designed to provide pay that is competitive with individuals
holding comparable positions and providing similar results at companies of
similar size, value and complexity. While the mix of these elements
varies by an employee’s level in the organization, a majority of the potential
compensation for senior management, consistent with our compensation philosophy,
is considered “at risk” based on Company and individual
performance. In 2008, approximately 53% of Mr. Bryant’s compensation
was at risk dependent on performance, approximately 52% of Mr. Sarvary’s
compensation was at risk dependent on performance, and approximately 47% - 68%
of the other Named Executive Officers’ compensation was at risk dependent on
performance. We currently provide long-term incentives in the form of
periodic equity compensation grants, but we do not offer deferred compensation
plans, retirement plans (other than our 401K plan) or performance-based equity
awards (other than our equity grants) to any of our employees.
Compensation
Process
The
Compensation Committee reviews our Chief Executive Officer’s compensation
annually and makes determinations regarding annual merit increases and other
changes in salary, annual incentive bonus and equity compensation. Mr. Sarvary’s
initial compensation package as Chief Executive Officer was determined by our
Compensation Committee in connection with the negotiation of his employment
agreement in June 2008. The Chief Executive Officer reviews the
compensation of the other Named Executive Officers annually and makes
recommendations to the Compensation Committee regarding annual merit increases,
annual incentive bonuses and equity compensation, which are further discussed
below. The Board, upon recommendation of the Compensation Committee, reviews and
approves the compensation for our executive officers, other than our Chief
Executive Officer. The Named Executive Officers meet annually to review the
performance of each senior manager and subsequently meet with the appropriate
senior manager to review the performance of each applicable employee of the
Company. The conclusions reached and recommendations made with respect to
employees other than the Named Executive Officers, including salary adjustments
and annual incentive bonuses, are based on the reviews and presented to the
Chief Executive Officer for approval, with any equity awards to be approved by
the Compensation Committee.
Overview
In developing
our Company’s compensation structure, the Compensation Committee has sought to
develop a compensation program for its Named Executive Officers which would also
align with stockholder return. To achieve this goal, the Compensation
Committee has retained outside consultants to provide advice with respect to the
Company’s compensation structure for its Named Executive Officers, including
information regarding the Company’s compensation structure and compensation
levels compared to a peer group.
Use of
Outside Consultants and Peer Groups
Since 2005,
the Compensation Committee has periodically engaged Frederick W. Cook & Co.,
Inc. (Cook), an executive compensation consultant, to assist in the evaluation
of our overall compensation structure. Through these engagements,
Cook has provided comparative analyses of the Company’s overall compensation
structure, specifically reviewed the compensation of our Chief Executive Officer
and has developed a comparative peer group for the Company. The Cook studies
have covered total direct compensation including base salaries, annual incentive
bonuses and long-term incentive compensation, as well as competitive trends and
practices in executive compensation.
In October
2007, the Compensation Committee engaged Cook to review our peer group companies
and provide an overall analysis of the compensation structure for the Company’s
Named Executive Officers. Cook provided the Compensation Committee
with the results of its study in November 2007 (2007 Cook
Report). The 2007 Cook Report confirmed the peer group used in 2006
and focused on the Company’s Named Executive Officers. The 2007 Cook
Report summarized the competitive data and comparisons of the Company’s Chief
Executive and other Named Executive Officers to the comparable competitive
market data for executive officers at comparable levels in the peer
group.
In May 2008,
the Compensation Committee engaged Cook to advise us in determining and
preparing an initial compensation package for Mark A. Sarvary who had been
identified as the Board of Directors’ choice to be appointed Chief Executive
Officer to succeed Mr. Bryant. Cook provided an overall analysis of
the compensation structure for the Chief Executive Officer position of
Tempur-Pedic, competitive trends and practices for Chief Executive Officer
compensation and took into account Mr. Sarvary’s experience and recent
compensation packages. In late June 2008, the Company hired Mr.
Sarvary as its Chief Executive Officer to replace Mr. Bryant. Mr.
Bryant retired as President and Chief Executive Officer of Tempur-Pedic
effective August 4, 2008.
In November
2008, the Compensation Committee engaged Cook to reevaluate our peer group
companies and provide an overall analysis of the compensation structure of the
Company’s Named Executive Officers for 2008. Cook provided the
Compensation Committee with the results of its study in January 2009 (2008 Cook
Report), including an update on trends and practices in executive compensation.
Overall, the 2008 Report concluded that the target direct compensation for the
five Named Executive Officers approximates the median of the peer group
data.
Peer
Group
In its June
2006 report, Cook developed a peer group for the Company. In
selecting the peer group, Cook included branded consumer product companies that
had comparable revenues, net income, and market capitalization. The 2007 Cook
Report confirmed this peer group. While consistency from year to year
is desirable, the Compensation Committee reviews the peer group from year to
year and considers updates to it as appropriate. In the 2008 Cook
Report, Cook recommended that one member of the peer group be deleted because it
was acquired in 2007 and that three other members of the peer group be deleted
because they had become significantly larger than the Company. Cook
also recommended adding to the peer group two new companies meeting the
criteria. Set forth below is the peer group of branded consumer products
companies used by Cook to assess the competitiveness and cost effectiveness of
our executive compensation plan in the 2008 Cook Report.
|
Callaway
Golf
Central
Garden & Pet
Columbia
Sportswear
Deckers
Outdoor
Elizabeth
Arden
Fossil
|
Guess
Herman
Miller
Movado
Group
Nautilus
Nu
Skin Enterprises
Sealy
|
Select
Comfort
Timberland
Tupperware
Brands
Under
Armour
Wolverine
World Wide
|
Compensation
Components
Based on our
compensation philosophy, the three principal components of our compensation
include the following:
• Base
Salary
• Annual
Incentive Bonus
• Equity
Compensation
Overall, the Compensation Committee
seeks to strike a balance among these three components, with an emphasis on
ensuring that a majority of the total potential compensation for the Company’s
Named Executive Officers is significantly at risk and tied to overall Company
performance.
Base
Salary
In
determining the annual base salary for our senior management, including each of
our Named Executive Officers, our goal is to provide a reasonable level of
guaranteed compensation that is set at a competitive level. Each
individual’s initial or starting base salary is a result of the person’s
previous experience, prior compensation history and the current compensation
level of other senior managers within the Company with similar experience and
responsibility.
At the
beginning of each year, all of our employees, including each of our Named
Executive Officers and senior managers, are required to establish individual
objectives. These objectives are used in connection with performance reviews,
salary increases and annual bonuses. Each employee’s set of objectives is
approved by his or her supervising manager, with each of the employee’s
objectives to be consistent with our core values and strategic objectives. In
the case of Mr. Bryant, our former President and Chief Executive Officer, and
Mr. Sarvary, our current President and Chief Executive Officer, the goals and
objectives are approved by the Compensation Committee. All other Named Executive
Officers’ objectives are initially approved by the Chief Executive Officer,
subsequently reviewed by our Compensation Committee and upon recommendation from
the Compensation Committee, approved by the Board. Each employee’s performance
is reviewed annually and merit increases to an individual’s base salary are
aligned with overall Company and individual performance and successful execution
of their individual objectives.
With respect to our employees,
including our Named Executive Officers, the base salary increase in any year is
based on prevailing market practices, economic conditions and individual
performance measurements. In 2008, guided by the results of the 2007 Cook
Report, the Compensation Committee raised base salaries of the Named Executive
Officers to a level near the median of the comparative peer group used in the
2007 Cook Report. The 2008 base salary for Mr. Bryant reflected an 8%
increase based on a peer group adjustment plus a 4% merit increase, and the base
salary for Mr. Williams reflected a 6% increase based on a peer group adjustment
plus a 4% merit increase. The Compensation Committee determined that
no peer group adjustments were required for the other Named Executive Officers
and approved merit increases of 4% to 5%, resulting in base salaries near the
median for these executives.
In
determining the starting annual base salary for Mr. Sarvary, the Compensation
Committee based the salary on the peer group data and Mr. Sarvary’s experience
and prior compensation packages. After reviewing and discussing the foregoing
with the Board of Directors and chief executive officer search committee of the
Board, the Compensation Committee awarded Mr. Sarvary an annual salary of
$750,000, positioning him near the median for chief executive officers in the
peer group.
Based on
the 2008 Cook Report, the salaries for each of our Named Executive officers is
near the median of the peer group. Therefore, their 2008 base salary
levels are being maintained without increase for 2009.
The
amount of each Named Executive Officer’s base salary increase based on his
individual performance and execution of his objectives for the prior year,
expressed as a percentage of his base salary immediately prior to the increase,
is set forth below:
|
Named
Executive Officer
|
Base
Salary Changes
|
|||||||||
|
2009
|
2008
|
|||||||||
|
Mark
Sarvary
|
0 | % | N/A |
(1)
|
||||||
|
H.
Thomas Bryant
|
N/A |
(2)
|
|
12 | % | (3) | ||||
|
Dale
E. Williams
|
0 | % | 10 | % | (4) | |||||
|
Matthew
D. Clift
|
0 | % | 5 | % | ||||||
|
David
Montgomery
|
0 | % | 4 | % | ||||||
|
Richard
W. Anderson
|
0 | % | 4 | % | ||||||
|
(1)
|
Mr.
Sarvary joined us in June 2008 and became Chief Executive Officer
effective August 4, 2008.
|
|
|
(2)
|
In August 2008, Mr. Bryant retired as our President and Chief Executive Officer and remained on our Board of Directors as a non-employee director. | |
|
(3)
|
4% merit increase and 8% adjustment relative to peer group data. | |
|
(4)
|
4% merit increase and 6% adjustment relative to peer group data. | |
Annual
Incentive Bonus
The annual
incentive bonus is a lump-sum cash payment for each eligible senior
manager. The amount of the bonus is linked to the achievement of
specific financial and operating targets or strategic
initiatives. Our senior managers are eligible to receive annual
incentive bonuses set at a targeted percentage of their base salary. The
Compensation Committee believes senior management, such as the Named Executive
Officers, who hold positions affording them the authority to make critical
decisions affecting the Company’s overall performance, should have a material
percentage of their annual compensation contingent upon the Company’s
performance, with the Chief Executive Officer’s percentage at a higher level
than the other Named Executive Officers.
Overview
Since 2008,
the Compensation Committee’s practice has been to set the targeted annual
incentive bonus level for the Chief Executive Officer at 100% of his base salary
and the targeted annual incentive bonus level for each of the other Named
Executive Officers at 55% of his base salary. The Chief Executive Officer’s
targeted annual incentive bonus at 100% of base salary was held constant from
2007 to 2008, while the targeted annual incentive bonus for the Named Executive
Officers, other than the Chief Executive Officer, was increased to 55% from 50%
of the Named Executive Officers’ base salary in 2008 based on the 2007 Cook
Report in order to more closely match the peer group. Based on the
comparison to the peer group in the 2008 Cook Report, the Compensation Committee
decided to maintain the targeted annual incentive bonus percentage in relation
to each executive’s base salary at the same levels in 2009 for all Named
Executive Officers (see table below). For the Chief Executive Officer, this
target bonus percentage took into consideration the Chief Executive Officer’s
overall responsibility for the performance of the Company. Coincident with Mr.
Sarvary’s employment with the Company, the Compensation Committee based the size
of the Chief Executive Officer’s annual incentive bonus target for 2008 at 100%
of his base salary, pro-rated for six months of employment during 2008, with an
actual bonus award based on the achievement of the performance criteria
amounting to more or less than the target amount. The following table
sets forth the targeted annual incentive bonus levels for each Named Executive
Officer shown as a percentage of his base salary:
|
Named
Executive Officer
|
Targeted
Annual Incentive Bonus
|
||||||||
|
2009
|
2008
|
||||||||
|
Mark
Sarvary
|
100 | % | 100 | % | (1) | ||||
|
H.
Thomas Bryant
|
N/A | 100 | % | ||||||
|
Dale
E. Williams
|
55 | % | 55 | % | |||||
|
Matthew
D. Clift
|
55 | % | 55 | % | |||||
|
David
Montgomery
|
55 | % | 55 | % | |||||
|
Richard
W. Anderson
|
55 | % | 55 | % | |||||
|
(1)
|
Mr.
Sarvary’s target bonus was set at 100% of the salary payable to him for
the June 30, 2008 to December 31, 2008
period.
|
For
2008, the annual incentive bonus for our Named Executive Officers was comprised
of two components: (i) a Company goals component and (ii) an
Individual goals component. Two-thirds of the bonus was derived from the Company
goals component and one-third was derived from the Individual goals component.
The Company goals component was tied to the Company’s achievement of specific
financial targets. The Individual goals component relates to the successful
execution of individual objectives established at the beginning of each year as
determined in the discretion of the Compensation Committee or the Board of
Directors, as applicable. For Mr. Sarvary, our Chief Executive
Officer, the 2008 Company goals and his 2008 Individual goals were developed
when he joined the Company and followed the above framework for the period June
30, 2008 to December 31, 2008, with the bonus payout pro-rated for that time
period.
The Company
goals component of the annual incentive bonus for each of our Named Executive
Officers is based on targeted net sales and earnings before interest and taxes
(EBIT). Each year, these performance targets are selected to motivate
the Named Executive Officers to achieve profitable business growth consistent
with the Company’s long-term financial objectives. The Company goals component
of the annual incentive bonus is established using a matrix to allow for
payments between 50% and 200% of their targeted Company goals component,
depending on the level of net sales and EBIT for each year. A failure
to meet the minimum requirement may result in no bonus payment with respect to
the Company goals component of the bonus plan. In calculating the
Company goals payout, the Compensation Committee considers material,
unanticipated or unusual events that affect the financial targets and then makes
a recommendation to the Board for approval.
The
Individual goals component of the annual incentive bonus for the Named Executive
Officers is heavily weighted toward the successful completion of individual
objectives. In the case of the Chief Executive Officer, the goals and
objectives are approved by the Compensation Committee. The goals and objectives
for all of the other Named Executive Officers are initially approved by the
Chief Executive Officer, subsequently reviewed by the Compensation Committee
and, upon recommendation by the Compensation Committee, approved by the Board.
The Individual goals component of the annual incentive bonus targets 100% payout
for the achievement of an executive’s annual objectives. Payments can
range from no bonus payment to 200% of the targeted Individual goals component,
based on individual performance. The determination of whether the Individual
goals component of the bonus has been met and to what degree is based on the
subjective determination of the Compensation Committee, and in exercising this
discretion the Compensation Committee looks broadly at each executive’s
performance against individual objectives and the overall performance of the
applicable Named Executive Officers within their specific area of
responsibility.
The purpose
of the Company goals component, represented by the net sales and EBIT targets of
the Company and the purpose of the Individual goals component, represented by
the achievement of individual targets, are designed to focus the Named Executive
Officers on behaviors that support the overall performance and success of our
Company. Individual and Company goals are set with a reasonable level
of difficulty that require the Company and Named Executive Officers to perform
at a high level in order to meet the goals and objectives, and the likelihood of
attaining these goals and objectives is not assured.
Achievement
of Company Goals for 2008
For Named
Executive Officers, except Mr. Sarvary, the annual incentive bonus plan for 2008
was consistent with the Company’s bonus plan for 2007, with the financial target
matrix updated for new net sales and EBIT targets for 2008. The
matrix expressed a range of targets for total net sales (ranging from $1.195
billion to $1.286 billion) and EBIT (ranging from $269.5 million to $310
million) as established by the Compensation Committee. At the time
the Compensation Committee established the targets for the Company goals
component for 2008, the Compensation Committee believed that these targets were
commensurate with the long-term growth objectives of our business and reflected
a performance that would require strong operating execution. Our
Compensation Committee considered the target levels for 2008 to be challenging
for executives to achieve and believed that they required our management to
significantly increase the Company’s net sales and EBIT from
2007. During 2008, the macroeconomic environment deteriorated
significantly, and the Company achieved net sales of $928 million and EBIT of
$132 million. As a result, none of the Named Executive Officers,
except for Mr. Sarvary, received a bonus payout based on the targeted Company
goals component.
For Mr.
Sarvary, who became our Chief Executive Officer effective August 4, 2008, his
annual incentive bonus plan for 2008 included a financial target matrix that was
updated to reflect the Company’s actual results for the first half of 2008 and
the Company’s goals for the second half of 2008. The matrix for the
maximum and minimum bonus included a range of targets for total net sales
(ranging from $980 million to $1.020 billion) and EBIT (ranging from $144.1
million to $162.9 million). The Compensation Committee established a
maximum cap and a minimum floor on the amount of the bonus based on Company
goals, recognizing that Mr. Sarvary was joining the Company at mid-year and that
during his initial six months, which coincided with an extremely challenging
macroeconomic environment, he should neither be over-rewarded or under-rewarded
for significant variations in Company performance versus target. However, the
Compensation Committee determined that if the Company’s EBIT performance fell
below a certain threshold level, it would not be prudent to pay a Company goals
bonus to Mr. Sarvary. The maximum bonus for Mr. Sarvary based on the
Company goals was capped at 130% of the target bonus and the minimum amount of
Mr. Sarvary’s bonus based on Company Goals was 70% of the target bonus, provided
that if EBIT for 2008 was less than $127.8 million, then Mr. Sarvary would not
receive a bonus based on Company goals. During 2008, the Company achieved net
sales of $928 million and EBIT of $132 million. Accordingly, Mr.
Sarvary received 70% of the targeted Company goals component.
Achievement
of Individual Goals for 2008
The
individual objectives for the Individual goals component of the annual incentive
bonus for 2008 for Mr. Sarvary, our Chief Executive Officer, included the
following: implement a new cost structure; review and strengthen account plans
for top customers; develop new products for 2009; develop quarterly projections
by segment; develop the strategic plan for 2010 and 2011; visit all Company
plants and implement internal communication plan; build on efficiencies of the
senior team; maintain personnel succession plans and personnel development plans
and provide the board with a year-end report, including an evaluation and review
of all key managers; and meet and dialogue with key customers, investors and
analysts. The Compensation Committee established a maximum cap and a
minimum floor on the amount of the bonus based on the Individual goals component
for Mr. Sarvary. The maximum amount of the bonus based on the
Individual goals was capped at 200% of the target bonus allocable to the
Individual goals and the minimum amount of the bonus based on the Individual
goals was set at $0. In reviewing the Chief Executive Officer’s
performance from August 2008 through December 2008, the Compensation Committee
concluded that Mr. Sarvary’s individual achievements had been significant during
this period. The Compensation Committee noted that Mr. Sarvary had
met almost all his Individual goals, with many being achieved at a high level of
achievement in a difficult overall business environment. After the
review of these achievements, the Compensation Committee determined and paid out
95% of Mr. Sarvary’s Individual goals component target, reflecting his
achievements for 2008.
The
individual objectives for the Individual goals component of the annual incentive
bonus for 2008 for Mr. Williams, our Executive Vice President and Chief
Financial Officer, included the following: oversee cost reduction programs;
reduce costs and decrease external professional fees; maintain capital
structure; and establish and implement objectives for our investor relations
department. In 2008, Mr. Williams achieved all of his Individual
goals, including significant cost and headcount reductions, reduced external
professional fees, substantial reduction in debt through the repatriation
initiative, and strong overall management of profitability despite a difficult
business environment. In addition, the Compensation Committee
concluded that Mr. Williams had been very successful in managing the Company’s
capital structure, including working capital improvements and debt reduction,
and the Company’s earnings repatriation, and these efforts were instrumental in
positioning the Company for the current challenging economic
environment. Accordingly, his Individual goals component was paid out
at 110% of his target.
The
individual objectives for the Individual goals component of the annual incentive
bonus for 2008 for Mr. Clift, our Executive Vice President of Global Operations,
included the following: implement order management and network design project
for the domestic supply chain; hit minimum targets for patent disclosures;
launch new products; deliver two new material technologies; improve overall
productivity; and increase IT infrastructure stability. In 2008, Mr.
Clift achieved all of his Individual goals, including supply chain network
redesign with closure of five distribution centers, generation of significant
array of new patents, delivery of technical innovation through a substantial
number of new products and two new material technologies, and improvements in
global productivity and utilization in Tempur-Pedic factories. Accordingly, his
Individual goals component was paid out at 100% of his target.
The
individual objectives for the Individual goals component of the annual incentive
bonus for 2008 for Mr. Anderson, our Executive Vice President of North America,
included the following: expand retail slots; launch new mattress
products; expand pillow programs; expand and increase brand awareness; and grow
market share. In 2008, Mr. Anderson achieved most, but not all of his
Individual goals. Accomplishments included an increase in slots per
retail store, the launch of two new products, increases in pillow retail
programs at key retailers, and an increase in Tempur-Pedic brand
awareness. Due to the macroeconomic environment, growth in market
share was not achieved. Accordingly, his Individual goals component
was paid out at 90% of his target.
The
individual objectives for the Individual goals component of the annual incentive
bonus for 2008 for Mr. Montgomery, our Executive Vice President of International
Operations, included the following: introduce new mattress models in
Europe and Japan and expand distribution and growth internationally; restructure
the retail furniture business in Japan; explore new international markets; and
growth in third party sales channels. In 2008, Mr. Montgomery
achieved most of his Individual goals, including the launch of two new products
in key markets, expansion of infrastructure and retail presence in Japan, and
progress in preparing for expansion into new markets. Third party growth was not
achieved due to the economic slowdown. In addition, Mr. Montgomery responded
quickly to the very challenging business environment through cost reduction and
sales initiatives Accordingly, his Individual goals component
was paid out at 95% of his target.
Annual
Incentive Bonus Plan Payments for 2008
Based on the
relative weight of the Company goals component (two-thirds) and the Individual
goals component (one-third), each Named Executive Officer, received a percentage
of his overall target incentive bonus potential for 2008 as
follows: Mr. Sarvary, 78% (representing 78% of his salary for the
last six months of 2008); Mr. Clift, 33%; Mr. Anderson, 30%; Mr. Williams, 37%;
and Mr. Montgomery, 32%. Mr. Bryant was not eligible to receive a
bonus for 2008 in light of his retirement from the Company. In connection with
his decision to retire, Mr. Bryant elected not to renew his employment agreement
for an additional term. As a result, after April 28, 2008, Mr. Bryant became an
at-will employee and did not receive an annual incentive bonus for
2008.
The remainder
of our senior management team have diverse performance goals and receive annual
incentive bonuses set at a targeted percentage of their base salary that are
tied to the Company’s and business units’ goals. The Named Executive Officers
retain the right to adjust bonus payments for the remaining senior managers
based on individual and Company performance.
Equity
Compensation
Members of
senior management, including our Named Executive Officers, are eligible to
receive equity compensation awards under our equity incentive plans. We believe
that providing equity awards as a component of compensation for senior managers
aligns the interests of senior managers with the interests of our stockholders
by focusing the executive on the long-term growth of the Company, and not
short-term individual performance. In addition, we believe that stock options
provide an additional method of compensation where the return for each senior
manager is directly tied to stockholders’ return on their
investment.
Under our
equity compensation design, the timing and size of awards has differed among
each Named Executive Officer and all other members of senior
management. Historically, our stock option awards for Named Executive
Officers have been intermittent multi-year grants with a four year vesting
period and based on continued employment. The value of these awards
was at or above the median for the peer group after spreading the value of our
four-year option grants across the relevant four years. In contrast,
members of senior management other than Named Executive Officers typically
receive grants on an annual basis based on their job level at the time and their
individual and Company performance for the year.
After
evaluating the analysis and conclusions contained in the 2008 Cook Report, the
Compensation Committee has decided generally to transition away from
intermittent multi-year grants for Named Executive Officers and to move in steps
towards an annual grant cycle, which is consistent with the majority of peer
group companies and which the Compensation Committee believes will provide
superior motivation and retention for key executives, while continuing to cause
executives to maintain a long-term business focus aligned with the interests of
stockholders. As part of this transition, our Named Executive
Officers, other than the Chief Executive Officer (who received a significant
grant in 2008), were awarded a four-year stock option grant in February
2009. The following table sets forth the equity incentive awards for
each Named Executive Officer granted in February 2009.
|
Named
Executive Officer
|
February
2009 Stock Option Award
|
|||
|
Dale
E. Williams
|
180,000 | |||
|
Matthew
D. Clift
|
210,000 | |||
|
David
Montgomery
|
180,000 | |||
|
Richard
W. Anderson
|
150,000 | |||
Each of the
stock option awards granted in February 2009 has an exercise price of $6.14 and
vests in four equal annual installments beginning on the first anniversary date
of the date of the grant and every year thereafter until all the shares are
vested. In addition, if a change of control of the Company occurs and
the Named Executive Officer’s employment is terminated but not for cause or if
he resigns for good reason (in each case as defined in his employment agreement)
within twelve (12) months after the occurrence of a change of control, the Named
Executive Officer’s next annual installment of shares will accelerate and vest
as of the date of his termination of employment.
In January
2008, the Company granted to Mr. Anderson an option award for
100,000 shares of our common stock, at an exercise price of $20.02, subject
to the applicable vesting schedule. This action was based on the conclusions of
the 2007 Cook Report which indicated that Mr. Anderson, who was hired during the
middle of 2006, had the lowest long-term incentive value and number of shares
among the Named Executive Officers. The vesting schedule for the award granted
to Mr. Anderson provides that twenty-five percent (25%) of the option
shares shall vest on the first anniversary date of the date of grant, and
thereafter twenty-five percent (25%) shall vest on every annual anniversary date
until all shares are vested. In addition, if a change of control of
the Company occurs and Mr. Anderson’s employment is terminated but not for cause
or if Mr. Anderson resigns for good reason (in each case as defined in his
employment agreement) within twelve (12) months after the occurrence of a change
of control, Mr. Anderson’s next installment of 25,000 shares will accelerate and
vest as of the date of his termination of employment. Mr. Anderson
received this option grant in order to bring his total option holdings to a
level more similar to the option holdings of the other Named Executive Officers
other than the Chief Executive Officer, based on continued strong performance
since joining the Company in June, 2006.
In May 2008,
the Company granted to the Named Executive Officers, except for the Chief
Executive Officer, option awards for 50,000 shares of our common stock, at an
exercise price of $11.76, subject to the applicable vesting
schedule. The vesting schedule for these awards provides that fifty
percent (50%) of the option shares shall vest on the first anniversary date of
the date of grant, and fifty percent (50%) shall vest on the second anniversary
date until all shares are vested. In addition, if a change of control
of the Company occurs and the Named Executive Officer’s employment is terminated
but not for cause or if he resigns for good reason (in each case as defined in
his employment agreement) within twelve (12) months after the occurrence of a
change of control, the Named Executive Officer’s next installment of 25,000
shares will accelerate and vest as of the date of his termination of
employment. These options were granted as an additional retention
incentive in connection with the search for a new Chief Executive
Officer.
In July 2008,
Mr. Sarvary received a stock option award grant of 900,000 shares upon his
employment with the Company as President and Chief Executive Officer, at an
exercise price of $7.81, subject to the applicable vesting
schedule. The vesting schedule for the award provides that
twenty-five percent (25%) of the option shares shall vest on the first
anniversary date of the date of grant, and thereafter twenty-five percent (25%)
shall vest on every annual anniversary date until all shares are
vested. In addition, if a change of control of the Company occurs and
Mr. Sarvary is terminated but not for cause or if he resigns for good reason (in
each case as defined in his employment agreement) within twelve (12) months
after the occurrence of a change of control, Mr. Sarvary’s next installment of
225,000 shares will accelerate and vest as of the date of his termination of
employment. In awarding this option, the Compensation Committee
reviewed and considered the entire compensation package being offered to Mr.
Sarvary, including his base salary, annual cash bonus, hiring bonus to help
defray certain relocation expenses not covered by the relocation expense
reimbursement policy offered to senior management and the appropriate incentives
to retain and incent him as the Chief Executive Officer.
In setting
the size of these equity awards, the Compensation Committee takes into account a
number of factors, including the Named Executive Officer’s position with the
Company, prevailing market conditions and the overall size of the executive
officer’s compensation package, as well as the studies completed by Cook, the
executive compensation consultant.
The remaining
senior managers typically receive grants on an annual basis based on their
individual and the Company’s performance. Historically, these awards were
granted by the Compensation Committee in December of each year. In 2008, these
awards were made in May 2008 in recognition of upcoming change in leadership at
the Company. Beginning in 2009, these grants will be awarded in the first
quarter, consistent with a revised integrated compensation timetable that
ensures that stock option grants fully recognize an assessment of each
individual’s performance in the prior year and potential for the individual’s
growth within the Company in the future. These stock option awards typically
have ranged between 5,000 and 40,000 shares. In addition, individual stock
option awards are granted throughout the year as needed with respect to hiring
new members of senior management or promotions of employees into senior
management positions. These awards also typically have ranged between 5,000 and
35,000 stock options.
In January
2008, our board of directors adopted minimum stock ownership guidelines for our
executive officers and directors. The principal objective of the guidelines is
to enhance the linkage between the interests of stockholders and our executive
officers and directors through a minimum level of stock
ownership. The guidelines provide that, within 5 years, the Chief
Executive Officer should own a fixed number of shares equal to 5 times his base
salary, and that all other Named Executive Officers should own a fixed number of
shares equal to three times the executive’s base salary. Our
directors also are required to own, within five years, a fixed number of shares
equal to four times the director’s annual retainer. Unexercised
vested stock options count towards an individual’s ownership (based on the
anticipated after tax value), but unvested stock options and unvested restricted
stock are not counted towards an individual’s ownership. Until the
guidelines are met, executive officers and directors are required to retain 50%
of the net after-tax value of any shares obtained by option exercise or
restricted stock unit exercise or sale of vested restricted stock.
Other
Benefits
We offer a
401K plan to all of our employees, including our senior management and Named
Executive Officers. The plan is designed to allow employees to defer current
earnings and recognize them later in accordance with statutory regulations when
their individual income tax rates may be more beneficial. The Company typically
matches 100% of the first three percent of each employee’s salary that is
deferred and 50% of the fourth and fifth percent of salary deferred. However,
the decision to make the match is at the sole discretion of the Company. The
Company made the matching contribution in 2008 for all participating
employees.
The Company
does not have any other defined contribution or any defined benefit pension
plans. There are no alternate plans in place for senior
management. In August 2008, Mr. Bryant retired as President and Chief
Executive Officer of Tempur-Pedic International and remained on the Board of
Directors as a non-employee director.
Mr. Sarvary
received a one-time hiring bonus of $200,000 to help defray certain relocation
expenses in excess of the relocation expense reimbursement policy offered to
senior management in connection with his employment with the
Company. The Company paid $100,000 upon employment and will pay the
remaining $100,000 upon the first anniversary of his employment
agreement. Mr. Sarvary’s employment agreement also provides that he
will receive two years of base salary plus benefits if he is terminated without
cause or if he resigns for good reason.
The Company
also has various broad-based employee benefit plans. Named Executive Officers
participate in these plans on the same terms as eligible, non-executive
employees, subject to any legal limits on the amounts that may apply. The Named
Executive Officers receive an annual car allowance.
Each of our
Named Executive Officers is a party to an employment agreement with the Company.
These employment agreements provide for severance arrangements in the event of
termination of employment in certain circumstances and also provide for
non-competition, non-solicitation and confidentiality agreements. These
severance arrangements are discussed in more detail below under “Potential
Payments Upon Termination Or Change In Control”. The employment agreements for
the Named Executive Officers other than Mr. Bryant were put in place at the time
they became employees with the Company (in certain cases, prior to the Company’s
initial public offering in 2003), Mr. Bryant’s employment agreement was put in
place in 2002 and amended in its entirety when he became Chief Executive Officer
in 2006. We believe that these agreements, including the severance provisions,
are necessary to allow us to be competitive in recruiting and retaining top
talent for executive officer positions. The Compensation Committee has not to
date believed it necessary to revise the severance and related terms in these
employment agreements, except that in March 2008, the Company amended Mr.
Williams’ employment agreement to make the severance and related provisions
better align with the corresponding provisions in the employment agreement for
the other Executive Vice Presidents. However, as part of its analysis
of the reasonableness of each individual element of compensation and each Named
Executive Officer’s compensation package as a whole, the Committee expects that
it will periodically conduct an analysis of each of these arrangements for
reasonableness and market competitiveness.
Tax
and Accounting Implications
Deductibility of
Compensation
Section
162(m) of the Code limits the Company’s deduction for compensation paid to the
executive officers named in the Summary Compensation Table, other than the Chief
Financial Officer, to $1 million unless certain requirements are met. For 2008,
the requirements for deductible compensation under Section 162(m) were met for
all executive officers. The policy of the Compensation Committee with
respect to Section 162(m) is to establish and maintain a compensation program
that will optimize the deductibility of compensation. However, the Compensation
Committee may exercise its right to use judgment, where appropriate, to respond
to changing business conditions or to an executive officer’s individual
performance, to authorize compensation which may not in a specific case be fully
deductible by the Company.
Accounting
for Stock-Based Compensation
As of January
1, 2006, the Company began accounting for stock-based payments, including its
Equity Incentive Plans and Employee Stock Purchase Plan, in accordance with FASB
Statement 123(R), “Share Based Payments.”
The
information contained in this report shall not be deemed to be “soliciting
material” or “filed” or incorporated by reference in future filings with the
Securities and Exchange Commission, or subject to the liabilities of Section 18
of the Exchange Act, except to the extent that Tempur-Pedic International
specifically incorporates it by reference into a document filed under the
Securities Act of 1933, as amended (Securities Act), or the Exchange
Act.
The
Compensation Committee is comprised entirely of independent
directors. The Compensation Committee has reviewed the Compensation
Discussion and Analysis required by Item 402(b) of Regulation S-K with
management and, based on such review and discussions, the Compensation Committee
recommended to the Board that the Compensation Discussion and Analysis be
included in this Proxy Statement and incorporated by reference into the
Company’s Annual Report on Form 10-K for the year ended December 31,
2008.
Submitted
by,
COMPENSATION
COMMITTEE
Peter K.
Hoffman (Chair)
Francis
A. Doyle
John
Heil
Sir Paul
Judge
The following
table sets forth information concerning the annual and long-term compensation
for services in all capacities to Tempur-Pedic International for the year ended
December 31, 2008 of those persons who served as (i) our principal
executive officer during the year ended December 31, 2008, (ii) our
principal financial officer during the year ended December 31, 2008 and
(iii) our other three most highly compensated executive officers for the
year ended December 31, 2008. We refer to our principal executive officers,
principal financial officer and the other three most highly compensated
executive officers collectively as our “Named Executive Officers”.
|
Non-equity
|
||||||||||||||||||||||||||||||||
|
Stock
|
Incentive
Plan
|
All
Other
|
||||||||||||||||||||||||||||||
|
|
Bonus
|
Awards
|
Option
|
Compensation
|
Compensation
|
Total
|
||||||||||||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
($)
(6)
|
($)
|
Awards($)
(7)
|
($)
(6)
|
($)
(8)
|
($)
|
||||||||||||||||||||||||
|
Mark
Sarvary—President and Chief Executive Officer (1)
|
2008
|
$
|
360,577
|
$
|
218,750
|
$
|
—
|
$
|
308,976
|
$
|
175,000
|
$
|
104,115
|
$
|
1,167,418
|
|||||||||||||||||
|
H.
Thomas Bryant—President and Chief Executive Officer (2)
|
2008
|
506,784
|
—
|
—
|
603,811
|
—
|
22,887
|
1,133,482
|
||||||||||||||||||||||||
|
2007
|
623,537
|
290,909
|
—
|
1,025,215
|
799,119
|
22,057
|
2,760,837
|
|||||||||||||||||||||||||
|
2006
|
537,305
|
198,000
|
—
|
571,121
|
311,550
|
21,938
|
1,639,914
|
|||||||||||||||||||||||||
|
Dale
E. Williams—Executive
Vice-President, Chief Financial Officer and
Secretary
|
2008
|
341,601
|
68,567
|
—
|
368,041
|
—
|
17,230
|
795,439
|
||||||||||||||||||||||||
|
2007
|
309,987
|
67,158
|
—
|
326,204
|
198,673
|
17,230
|
919,252
|
|||||||||||||||||||||||||
|
2006
|
294,054
|
48,757
|
—
|
307,525
|
76,718
|
19,441
|
746,495
|
|||||||||||||||||||||||||
|
Matthew
D. Clift—Executive Vice-President, Global Operations (3)
|
2008
|
360,795
|
66,000
|
—
|
266,722
|
—
|
17,230
|
710,747
|
||||||||||||||||||||||||
|
2007
|
344,867
|
86,224
|
438,162
|
202,125
|
221,066
|
17,230
|
1,309,675
|
|||||||||||||||||||||||||
|
2006
|
324,121
|
53,741
|
438,162
|
202,125
|
84,560
|
20,832
|
1,123,541
|
|||||||||||||||||||||||||
|
David
Montgomery —Executive Vice-President, President of International
Operations (4)
|
2008
|
444,613
|
60,439
|
—
|
505,969
|
—
|
81,254
|
1,092,275
|
||||||||||||||||||||||||
|
2007
|
461,455
|
68,671
|
—
|
442,495
|
293,437
|
86,790
|
1,352,848
|
|||||||||||||||||||||||||
|
2006
|
408,798
|
71,635
|
—
|
315,290
|
112,717
|
72,838
|
981,278
|
|||||||||||||||||||||||||
|
Richard
W. Anderson—Executive Vice-President, President North America
(5)
|
2008
|
328,700
|
54,120
|
—
|
696,346
|
—
|
20,645
|
1,099,811
|
||||||||||||||||||||||||
|
2007
|
314,711
|
68,182
|
—
|
296,561
|
201,701
|
8,230
|
889,385
|
|||||||||||||||||||||||||
|
2006
|
132,692
|
34,750
|
—
|
66,143
|
38,944
|
79,043
|
351,572
|
|||||||||||||||||||||||||
|
(1)
|
Mr.
Sarvary joined the Company on June 30, 2008 and became our President and
Chief Executive Officer on August 4, 2008. Mr. Sarvary received a bonus of
$100,000 at the time he accepted employment with us. The remainder of this
amount is representative of annual bonus payouts which were earned in 2008
and paid in February
2009.
|
|
(2)
|
Mr.
Bryant was promoted to the position of Chief Executive Officer at our
Annual Stockholder’s Meeting held on April 28, 2006. He retained the
position of President of Tempur-Pedic International, and was elected as a
member of our Board of Directors. On August 4, 2008, Mr. Bryant retired as
President and Chief Executive Officer and remained on our Board of
Directors. Mr. Bryant’s salary for 2008 is comprised of $437,554 earned
while serving as President and Chief Executive Officer, $59,230 of unused
vacation that was paid-out upon Mr. Bryant’s retirement and $10,000 paid
for serving as a non-employee member of our Board of
Directors.
|
|
|
(3)
|
On
December 1, 2004, Mr. Clift was awarded 70,000 restricted stock units. The
fair market value of Tempur-Pedic International’s common stock on that
date was $19.30, resulting in a restricted stock award of
$1,351,000.
|
|
(4)
|
Mr.
Montgomery’s salary is paid in British Pounds (₤) and is converted to
United States Dollars ($) using the monthly payments translated at the
monthly average rate for each month in the year ended December 31, 2008.
Mr. Montgomery’s Non-Equity Incentive Plan Compensation is denominated in
British Pounds and has been converted to United States Dollar using the
conversion rate for the date paid to Mr. Montgomery.
|
|
|
(5)
|
Mr.
Anderson joined the Company in July 2006 and received a bonus of $10,000
at the time he accepted employment with us. The remainder of this amount
is representative of annual bonus payouts which were earned in 2006 and
paid in February 2007.
|
|
|
(6)
|
Bonus
and Non-equity Incentive Plan Compensation payouts were earned in 2008 and
paid in February 2009 to Mr. Sarvary, Mr. Williams, Mr. Clift, Mr.
Montgomery and Mr. Anderson, pursuant to the 2008 Executive Incentive
Bonus Plan as discussed in the “Compensation Discussion and Analysis”
section of this Proxy Statement. As described in the Compensation
Discussion and Analysis,” the amount paid upon the achievement of the
Individual goals appear in the column “Bonus” and the amounts paid upon
the achievement of the Company performance appear in the column
“Non-equity Incentive Plan Compensation.”
|
|
|
(7)
|
For
stock options granted, the value set forth is also included in the
Company’s financial statements in accordance with FAS 123(R). See the
Company’s Annual Report for the year ended December 31, 2008 for a
complete description of the FAS 123(R) valuation.
|
|
|
(8)
|
Represents
amounts paid on behalf of each of the Named Executive Officers for the
following three respective categories of compensation: (i) premiums
for life, accidental death and dismemberment insurance and long-term
disability benefits, (ii) contributions to our defined contribution
plans and (iii) car allowance. Amounts for each of the Named Executive
Officers for each of the three respective preceding categories is as
follows: Mr. Sarvary: (2008 – $515,$0, $3,600); Mr. Bryant: (2008 –
$687, $18,000, $3,600; 2007 – $1,030, $13,827, $7,200; 2006 – $1,330,
$13,408, $7,200); Mr. Williams: (2008 – $1,030, $9,000, $7,200; 2007
– $1,030, $9,000, $7,200; 2006 – $1,330, $10,911, $7,200); Mr.
Clift (2008 – $1,030, $9,000, $7,200; 2007 – $1,030, $9,000, $7,200; 2006
– $1,330, $12,302, $7,200); Mr. Montgomery: (2008 – $8,357, $44,461,
$27,788; 2007 – $6,492, $46,146, $30,017; 2006 – $5,192, $39,295, $27,647,
); and Mr. Anderson: (2008 – $1,030, $12,415, $7,200; 2007 – $1,030, $0,
$7,200; 2006 – $443, $0, $3,600). Mr. Sarvary received relocation expenses
in the amount of $100,000 which is included in “All Other Compensation.”
Mr. Anderson received relocation expenses in the amount of $75,000 which
is included in “All Other Compensation” for the year ended December 31,
2006. Mr. Montgomery also received tax preparation fees in the amount of
$648, $833 and $705 which is in “All Other Compensation” for the years
ended December 31, 2008, 2007 and 2006,
respectively.
|
Grants
of Plan-Based Awards
The following
table sets forth certain information concerning each grant of an award made to a
Named Executive Officer during 2008 under our equity compensation
plans.
|
Name
|
Grant
Date
(1)
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
Exercise
or Base Price of Option Awards ($/Sh) (1)
|
Grant
Date Fair Value of Stock and Option Awards ($) (2)
|
|||||||||
|
Mark
Sarvary
|
6/30/2008
|
900,000 | $ | 7.81 | $ | 2,412,000 | |||||||
|
H.
Thomas Bryant (3)
|
7/8/2008
|
9,000 | 8.33 | 21,960 | |||||||||
|
Dale
E. Williams
|
5/15/2008
|
50,000 | 11.76 | 204,000 | |||||||||
|
Matthew
D. Clift
|
5/15/2008
|
50,000 | 11.76 | 204,000 | |||||||||
|
David
Montgomery
|
5/15/2008
|
50,000 | 11.76 | 204,000 | |||||||||
|
Richard
W. Anderson
|
1/29/2008
|
100,000 | 20.02 | 698,000 | |||||||||
|
5/15/2008
|
50,000 | 11.76 | 204,000 | ||||||||||
|
(1)
|
The
exercise price for each stock option is the market value on the date of
grant.
|
|
|
(2)
|
For
stock options granted, the value set forth represents the grant date fair
value as determined in accordance with FAS 123(R). See the Company’s
Annual Report for the year ended December 31, 2008 for a complete
description of the FAS 123(R) valuation.
|
|
|
(3)
|
On
July 8, 2008, Mr. Bryant received a grant of 9,000 options for his service
as a non-employee director on our Board. On July 8, 2008, our Compensation
Committee amended the stock option agreement by and between Mr. Bryant and
the Company dated as of June 26, 2006. This option agreement originally
stated that the exercise period for the options would expire on the
effective date of Mr. Bryant’s retirement as an employee of the Company.
The amendment approved by the Compensation Committee allows for a
ninety-day exercise period for the vested options. All other terms of the
option agreement remained the
same.
|
The table
below sets forth the outstanding stock option awards classified as exercisable
and unexercisable as of December 31, 2008 for each of our Named Executive
Officers. There are no unvested stock awards as of December 31,
2008.
|
Option
Awards
|
|||||||||||
|
Number
of
|
|||||||||||
|
Number
of
|
Securities
|
||||||||||
|
`
|
Securities
|
Underlying
|
|||||||||
|
Underlying
|
Unexercised
|
||||||||||
|
Unexercised
|
Options
|
Option
|
Option
|
||||||||
|
Name
|
Options
(#)
Exercisable
|
(#)
Unexercisable
|
Exercise
Price
($)
|
Expiration
Date
|
|||||||
|
Mark
Sarvary
|
—
|
900,000
|
(1)
|
$
|
7.81
|
6/30/2018
|
|||||
|
H.
Thomas Bryant
|
3,000
|
6,000
|
(2)
|
8.33
|
7/8/2018
|
||||||
|
Dale
E. Williams
|
65,625
|
—
|
(3)
|
2.38
|
7/7/2013
|
||||||
|
78,125
|
171,875
|
(4)
|
13.47
|
6/28/2016
|
|||||||
|
—
|
50,000
|
(5)
|
11.76
|
5/15/2018
|
|||||||
|
Matthew
D. Clift
|
225,000
|
—
|
19.30
|
12/1/2014
|
|||||||
|
75,000
|
37,500
|
(6)
|
12.37
|
12/15/2015
|
|||||||
|
—
|
50,000
|
(5)
|
11.76
|
5/15/2018
|
|||||||
|
David
Montgomery
|
153,125
|
196,875
|
(7)
|
13.47
|
6/28/2016
|
||||||
|
—
|
50,000
|
(5)
|
11.76
|
5/15/2018
|
|||||||
|
Richard
W. Anderson
|
25,000
|
50,000
|
(8)
|
13.16
|
7/18/2016
|
||||||
|
37,500
|
37,500
|
(9)
|
20.27
|
12/21/2016
|
|||||||
|
—
|
100,000
|
(10)
|
20.02
|
1/29/2018
|
|||||||
|
—
|
50,000
|
(5)
|
11.76
|
5/15/2018
|
|||||||
|
(1)
|
These
options, granted on June 30, 2008, have a 10-year term and become
exercisable in four equal installments over four years, beginning with the
one-year anniversary date of the grant.
|
|
|
(2)
|
Mr.
Bryant received a grant of 9,000 options to purchase shares of our common
stock on July 8, 2008 for his service as a non-employee director. These
options have a 10-year term and vest in three equal installments on
October 31, 2008, January 31, 2009 and April 30, 2009.
|
|
|
(3)
|
These
options, granted on July 7, 2003, have a 10-year term. Twenty-five percent
(25%) of these options became exercisable on the one-year anniversary date
of grant and the remaining shares become exercisable in equal installments
on a quarterly basis over the subsequent twelve (12)
quarters.
|
|
|
(4)
|
These
options, granted on June 28, 2006, have a 10-year term. Twenty-five
percent (25%) of these options became exercisable on July 7, 2008 and the
remaining shares become exercisable in equal installments on a quarterly
basis over the subsequent twelve (12) quarters.
|
|
|
(5)
|
These
options, granted on May 15, 2008, have a 10-year term and become
exercisable in two equal installments over two years, beginning with the
one-year anniversary date of the grant.
|
|
|
(6)
|
These
options, granted on December 15, 2005, have a 10-year term and become
exercisable in equal installments over four years, beginning
with the one-year anniversary of the grant date.
|
|
|
(7)
|
These
options, granted on June 28, 2006, have a 10-year term. Twenty-five
percent (25%) of these options became exercisable on February 24, 2008 and
the remaining shares become exercisable in equal installments on a
quarterly basis over the subsequent twelve
quarters.
|
|
(8)
|
These
options, granted on July 18, 2006, have a 10-year life and became
exercisable in equal installments over four years, beginning with the
one-year anniversary of the grant date.
|
|
|
(9)
|
These
options, granted on December 21, 2006, have a 10-year life and became
exercisable in equal installments over four years, beginning with the
one-year anniversary of the grant date.
|
|
|
(10)
|
These
options, granted on January 29, 2008, have a 10-year life and became
exercisable in equal installments over four years, beginning with the
one-year anniversary of the grant
date.
|
The following
table sets forth certain information regarding options and stock awards
exercised and vested, respectively,
during the year ended December 31, 2008, for our Named Executive
Officers.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Number
of
|
Number
of Shares
|
|||||||||||||||
|
Shares
Acquired
on
|
Value
Realized on
|
Acquired
on Vesting
|
Value
Realized on
|
|||||||||||||
|
Name
|
Exercise
(#)
|
Exercise
($)
|
(#)
|
Vesting
($)
|
||||||||||||
|
H.
Thomas Bryant
|
13,540
|
$
|
102,098
|
—
|
—
|
|||||||||||
|
Matthew
D. Clift
|
11,666
|
$
|
302,966
|
|||||||||||||
|
David
Montgomery
|
7,966
|
115,959
|
||||||||||||||
Except for
the Named Executive Officers set forth in the table above, no other Named
Executive Officer exercised a stock option award in 2008.
Tempur-Pedic International has entered
into agreements and adopted plans that require us to provide compensation and/or
other benefits to each Named Executive Officer in the event of that executive’s
termination of employment under certain circumstances. The table below sets
forth the amounts payable to each Named Executive Officer assuming the executive
officer’s employment had terminated under various scenarios on December 31, 2008 (the last
business day of fiscal 2008).
Except as
otherwise expressly indicated, the amounts set forth in the table below do not
represent the actual sums a Named Executive Officer would receive if his
employment were terminated or there were a change of control of Tempur-Pedic
International. Rather, the amounts below generally represent only estimates,
based upon assumptions described in the footnotes to the table, of certain
payments and benefits that the Named Executive Officers who were employed by
Tempur-Pedic International or any of its subsidiaries on December 31, 2008
would have been entitled to receive had any of the identified events occurred on
such date. Moreover, for all of the Named Executive Officers, the amounts set
forth in the table necessarily are based upon the benefit plans and agreements
that were in effect as of December 31, 2008. Payments which Tempur-Pedic
International may make in the future upon an employee’s termination of
employment or upon a change of control of Tempur-Pedic International will be
based upon benefit plans and agreements in effect at that time, and the terms of
any such future plans and agreements may be materially different than the terms
of our benefit plans and agreements as of December 31, 2008. Upon Mr.
Bryant’s resignation as Chief Executive Officer in August 2008, he received no
payments in connection with the termination of his employment with the
Company.
|
Termination
|
||||||||||||||||||
|
Termination
|
Employee
|
Termination
|
Due
to
|
|||||||||||||||
|
By
Company
|
Termination
|
By
Company
|
Death
or
|
|||||||||||||||
|
Without
Cause
|
For
Good Reason
|
For
Cause
|
Disability
|
|||||||||||||||
|
Name
|
Benefits
and Payments
|
($)
(1) (2)
|
($)
(1) (2)
|
($)
|
($)
(3)
|
|||||||||||||
|
Mark
Sarvary
|
Cash
Severance
|
$ |
2,187,500
|
$ |
2,187,500
|
—
|
$ |
312,500
|
||||||||||
|
Insurance
Benefits
|
18,604
|
18,604
|
||||||||||||||||
|
Dale
E. Williams
|
Cash
Severance
|
527,000
|
527,000
|
—
|
187,000
|
|||||||||||||
|
Insurance
Benefits
|
8,942
|
8,942
|
||||||||||||||||
|
Matthew
D. Clift
|
Cash
Severance
|
558,000
|
558,000
|
—
|
198,000
|
|||||||||||||
|
Insurance
Benefits
|
8,055
|
8.055
|
||||||||||||||||
|
David
Montgomery
|
Cash
Severance
|
689,150
|
689,150
|
—
|
224,537
|
|||||||||||||
|
Insurance
Benefits
|
1,656
|
1,656
|
||||||||||||||||
|
Richard
W. Anderson
|
Cash
Severance
|
508,400
|
508,400
|
—
|
180,400
|
|||||||||||||
|
Insurance
Benefits
|
9,362
|
9,362
|
||||||||||||||||
| (1) |
Reflects
cash severance including two (2) years of base salary for Mr. Sarvary and
an additional severance payment equal to a pro rata portion of his base
salary, twelve (12) months of base salary for all other Named Executive
Officers, payable in accordance with the normal payroll practices of the
Company and pro-rata portion of any Performance Bonus/Non-Equity Incentive
compensation with respect to the Bonus Year in which the termination
occurs.
|
||
|
(2)
|
Upon
termination by the Company without cause or termination by the employee
for good reason, each Named Executive Officer would be entitled to the
continuation of welfare plans of the Company as detailed in the
“Compensation Discussion and Analysis” for the duration of the officer’s
applicable severance period. The severance period for Mr. Sarvary is two
(2) years and twelve (12) months for all other Named Executive
Officers.
|
||
|
(3)
|
Upon
termination due to death or disability, each Named Executive Officer would
receive a pro-rata portion of any Performance Bonus that would be payable
with respect to the Bonus Year in which the termination
occurs.
|
||
Employment
Arrangements
On June 30,
2008 we entered into an employment agreement with Mark Sarvary, providing for
his employment as President and Chief Executive Officer of Tempur-Pedic
International. The agreement has an initial term of one year and a perpetual
one-year renewal term. Either party may elect not to renew the agreement, upon
written notice, 90 days prior to the expiration of the initial or renewal term.
Mr. Sarvary’s agreement provides for an annual base salary of $750,000, subject
to annual adjustment by our Board of Directors beginning January 1, 2009, a
variable performance bonus set to a target of Mr. Sarvary’s base salary if
certain criteria are met, and options to purchase shares of our common stock. In
addition, he received a hiring bonus of $200,000 to help defray certain
reimbursement expenses not covered by the reimbursement of relocation expense
policy offered to senior management, of which fifty percent was payable upon the
commencement of his employment and fifty percent is payable upon the first
anniversary of his employment.
On March 5,
2008, we entered into an amended and restated employment agreement with Dale E.
Williams, reflecting his promotion to Executive Vice President in 2007. The
agreement provides for his employment as Executive Vice President, Chief
Financial Officer and Secretary, or such other executive position as may be
assigned from time to time by our Chief Executive Officer. The agreement has an
initial term of one year and a perpetual one-year renewal term. Either party may
terminate the agreement, upon written notice, 90 days prior to the expiration of
the initial or renewal term. The agreement provides for an annual base salary of
$225,000, subject to annual adjustment by our Board of Directors beginning
January 1, 2004, a variable performance bonus set to a target of Mr. Williams’
base salary if certain criteria are met, and options to purchase shares of our
common stock.
On September
12, 2003, we entered into an executive employment agreement with David
Montgomery, effective February 24, 2003, providing for his employment as
Executive Vice President and President, Tempur-International Limited, or such
other executive position as may be assigned from time to time by our Chief
Executive Officer. The agreement provides that employment shall continue unless
and until terminated by either party. Mr. Montgomery may terminate employment
with six months written notice. We may terminate employment with 12 months
written notice. The agreement provides for an annual base salary of £192,500,
subject to an annual adjustment of our Board of Directors on or about January 1
of each year beginning with January 1, 2004, and a variable performance bonus
set to a target of Mr. Montgomery’s base salary if certain criteria are
met.
On December
1, 2004, we entered into an executive employment agreement with Matthew D.
Clift, providing for his employment as Executive Vice President, Operations or
such other executive position as may be assigned from time to time by our Chief
Executive Officer. The agreement has an initial term of one year and a perpetual
one-year renewal term. Either party may terminate the agreement, upon written
notice, 90 days prior to the expiration of the initial or renewal term. The
agreement provides for an annual base salary of $300,000, subject to annual
adjustment by our Board of Directors beginning January 1, 2006, a variable
performance bonus set to a target of Mr. Clift’s base salary if certain criteria
are met, a one-time hiring bonus, options to purchase shares of our common
stock, and a grant of restricted stock units.
On July 6,
2006, we entered into an executive employment agreement with Richard
W. Anderson, effective July 18, 2006, providing for his employment as
Executive Vice President, President North America or such other executive
position as may be assigned from time to time by our Chief Executive Officer.
The agreement has an initial term of one year and a perpetual one-year renewal
term. Either party may terminate the agreement, upon written notice, 90 days
prior to the expiration of the initial or renewal term. The agreement provides
for an annual base salary of $300,000, subject to annual adjustment by our Board
of Directors beginning January 1, 2007, a variable performance bonus set to a
target of Mr. Anderson’s base salary if certain criteria are met, a one-time
hiring bonus and options to purchase shares of our common stock.
On June 29,
2006, we entered into an amended and restated employment agreement with H.
Thomas Bryant, effective April 28, 2006, providing for his employment as
President and Chief Executive Officer. The agreement has an initial term of two
years and a perpetual one-year renewal term. Either party may elect not to renew
the agreement, upon written notice, 90 days prior to the expiration of the
initial or renewal term. Mr. Bryant’s agreement provides for an annual base
salary of $600,000, subject to annual adjustment by our Board of Directors
beginning January 1, 2007, a variable performance bonus set to a target of Mr.
Bryant’s base salary if certain criteria are met, and options to purchase shares
of our common stock. In connection with his decision to retire, Mr.
Bryant elected not to renew his employment agreement for an additional
term. As a result, after April 28, 2008, Mr. Bryant became an at-will
employee. Mr. Bryant is subject to a two-year non-compete
provision upon the termination of his employment with
the Company. On July 8, 2008, the Compensation Committee
amended Mr. Bryant’s stock option agreement dated as of June 26, 2006. The
option agreement originally stated that the exercise period for the option would
expire on the effective date of Mr. Bryant's retirement as an employee of the
Company. The amendment allowed for a ninety-day exercise period for the
option. All other terms of the option agreement remained the
same.
By the terms
of their employment agreements Messrs. Sarvary, Williams, Montgomery, Clift,
Anderson and Bryant are prohibited from disclosing certain confidential
information and trade secrets, soliciting any employee for one or two years
following their employment and working with or for any competing companies
during their employment and for one or two years thereafter.
All other
senior managers are deemed to be “at will” employees and are not under contract.
As such, there are no formal policies regarding severance benefits for these
employees.
Termination
of Employment Arrangements and Change in Control Arrangements
The Company’s
Named Executive Officers’ employment, stock option and restricted stock unit
award agreements provide certain protections to the Named Executive Officers in
the event of their termination as summarized below (additional details and the
complete definitions can be found in the actual employment, stock option and
restricted stock award agreements, which have been filed with the
SEC):
Severance.
Generally, if Mr. Sarvary is terminated without cause or resigns for good
reason, he will receive two (2) years of base salary and any earned and unpaid
base salary, the value of any accrued unused vacation, a pro-rata portion of any
performance bonus (based on the number of days of the applicable year prior to
the effective date of termination and based on 100% of the Target Bonus), an
additional severance payment equal to a pro rata portion of his base salary
(based on the number of days of the applicable year prior to the effective date
of termination), reimbursement of expenses, vesting acceleration of his next
installment of any unvested portion of his outstanding stock options and any
stock options to which he is entitled under his stock option
agreements.
If any of the
other named executive officers is terminated without cause or resigns for good
reason, he will receive 12 months of base salary and any unpaid base salary, the
value of any accrued unused vacation, a pro-rata portion of any performance
bonus (based on the number of days of the applicable year prior to the effective
date of termination), reimbursement of expenses, and any stock options and/or
restricted stock units to which he is entitled under his stock award agreements.
However, Mr. Montgomery’s agreement generally provides that he will receive his
yearly salary plus medical and insurance benefits for 12 months, as well as his
annual auto allowance and annual pension benefits.
Benefit
Continuation. If Mr. Sarvary is terminated without cause or resigns for
good reason, he will continue to participate in the Company’s retirement plans
for an additional two (2) years. If any of the other Named Executive Officers is
terminated without cause or resigns for good reason, he will continue to
participate in the Company’s retirement plans for an additional 12
months.
Equity Vesting
Acceleration. Mr. Sarvary’s stock option agreement dated June 30, 2008
provides that if he is terminated without cause, resigns for good reason, is
terminated as a result of death or disability or is terminated upon the
Company’s election not to renew his employment agreement, his next installment
of 225,000 unvested options as of the date preceding his termination will
accelerate. If Mr. Sarvary is terminated without cause or resigns for good
reason (as defined in his employment agreement) within twelve (12) months of a
change in control, his next installment of 225,000 unvested options will
accelerate as of the date preceding his termination.
For the other
Named Executive Officers, under stock option award agreements entered into
pursuant to the 2002 Stock Option Plan, a pro-rata portion (based on the number
of days elapsed between the prior quarterly vesting date and the date of
termination) of the next quarterly vesting amount of that employee’s stock
option vest immediately if he is terminated without cause or resigns for good
reason.
For the other
Named Executive Officers, there is no acceleration of vesting of equity upon
termination under stock option agreements entered into pursuant to the Amended
and Restated 2003 Equity Incentive Plan, other than the stock option awards
granted on May 15, 2008 and option awards granted to Mr. Anderson in January
2008 described below. Each stock option award granted on May 15, 2008
to the Named Executive Officers (other than the Chief Executive Officer)
provides that if a change of control occurs and the Named Executive Officer’s
employment is terminated but not for cause or if the Named Executive Officer
resigns for Good Reason within twelve (12) months of the change of control, then
the next installment of unvested shares will accelerate and vest as of the date
preceding his termination of employment.
In January
2008, the Company granted to Mr. Anderson an option award for
100,000 shares of our common stock. Pursuant to this agreement, if a change
of control of the Company occurs and Mr. Anderson’s employment is terminated but
not for cause or if Mr. Anderson resigns for good reason (in each case as
defined in his employment agreement) within twelve (12) months after the
occurrence of a change of control, Mr. Anderson’s next installment of 25,000
shares will accelerate and vest as of the date of his termination of
employment. The Compensation Committee approved the terms of this
option grant after taking into account the 2007 Cook Report as described above
under “Compensation Process”.
Receipt of
any severance and benefits is conditioned on the Named Executive Officer signing
a release and waiver of claims in a form satisfactory to the Company. No Named
Executive Officers are entitled to gross-ups associated with taxes owed on
Change in Control payments or taxes due to Section 280G of the
Code.
The severance
arrangements and change of control arrangements for our Named Executive Officers
were determined primarily through the agreements negotiated at the time these
employees were hired or promoted by the Company:
|
•
|
|
We
entered into employment agreements with Mr. Williams in July 2003 and Mr.
Montgomery in September 2003, all prior to the Company’s initial public
offering in December 2003. The terms of these employment
agreements and related stock option agreements were developed based on
negotiations between the applicable executive and the Board of Directors
of the Company at that time, which was controlled by several private
equity investors. These contracts specified the compensation
and other benefits to be paid upon a termination of employment or upon a
change of control as described
above.
|
|
•
|
|
Mr.
Clift joined the Company in December 2004, Mr. Anderson joined the Company
in July 2006 and Mr. Sarvary joined the Company in June 2008, after the
Company went public. However, the terms of their employment agreements
regarding severance and other payments upon termination of employment and
a change of control were structured similarly to the other Named Executive
Officers. However, we granted restricted stock units to Mr. Clift with his
initial compensation package to offset lost equity compensation from his
previous employer. The terms of Mr. Clift’s employment agreement provide
that these restricted stock units vest immediately if he is terminated
without cause, if his employment ends as a result of death or disability,
or if he resigns for good reason. Mr. Clifts’s restricted stock units
became fully vested on January 1,
2008.
|
|
•
|
|
In
March 2008, Mr. Williams and the Company amended and restated his
employment agreement to reflect his promotion to Executive Vice President
in 2007. The modifications included extending his severance
period and benefits maintenance period from six (6) to twelve (12) months,
which is consistent with the agreements for the Company’s other Executive
Vice Presidents.
|
|
•
|
|
Mr.
Sarvary’s initial compensation package as Chief Executive Officer was
determined by our Compensation Committee in connection with the
negotiation of his employment agreement in June 2008. The
Compensation Committee approved the terms of his employment agreement and
his stock option awards as further described in the “Compensation
Discussion & Analysis - Compensation Process”
above.
|
Except
for the amendment to Mr. Williams’ employment agreement, the Company has not
amended any of the provisions regarding payments upon termination or change of
control in the original agreements with its other Named Executive
Officers.
Certain
Definitions
“Good Reason.” Mr. Sarvary’s
employment agreement generally defines “Good Reason” as relocation of his
principal workplace, his demotion from his position as Chief Executive Officer,
or the Company’s material breach of his employment agreement. The employment
agreements for Messrs. Williams, Clift and Anderson generally define “Good
Reason” as relocation of their principal workplace, or the Company’s material
breach of their employment agreements.
“For Cause.” The employment
agreements for Mr. Sarvary generally define “For Cause” as the employee’s
(a) willful and continued failure to substantially perform the reasonably
assigned duties with the Company, (b) material breach of his employment
agreement which is not cured within 30 days after receipt of written notice of
such breach, (c) material violation of any material written policy of the
Company, (d) willful misconduct which is materially and demonstrably
injurious to the Company, (e) conviction by a court of competent
jurisdiction of, or his pleading guilty or nolo contendere to, any felony, or
(f) commission of an act of fraud, embezzlement, or misappropriation
against the Company, including, but not limited to, the offer, payment,
solicitation or acceptance of any unlawful bribe or kickback with respect to the
Company’s business.
The
employment agreements for Messrs Williams, Clift and Anderson each generally
define “For Cause” as the employee’s (a) willful and continued failure to
substantially perform his assigned duties with the Company, (b) willful
engagement in illegal conduct, (c) conviction of, or guilty plea or nolo
contendere to, any felony, or (d) commission of an act of fraud, embezzlement,
or misappropriation against the Company, including, but not limited to, the
offer, payment, solicitation or acceptance of any unlawful bribe or kickback
with respect to the Company’s business.
Mr.
Montgomery’s employment agreement does not provide for a “For Cause”
termination, but does provide that he can be immediately terminated upon written
notice on a variety of grounds, including a serious breach of his employment
agreement, gross misconduct or any willful neglect in the discharge of his
duties.
“Change of Control.” The 2002
Stock Option Plan does not employ this term. However, under stock option award
agreements entered into pursuant to that Plan, 50% of unvested stock options
shall immediately vest upon (a) any sale of all or substantially all of the
assets of the Company and its subsidiaries, or (b) any merger or consolidation
of the Company, or any transaction as a result of which the Company is acquired
by the purchase of a majority of its outstanding Common Stock, as a result of
which, in each such case, the holders of a majority of the outstanding Common
Stock before such merger, consolidation or sale cease to hold, directly or
indirectly, a majority of the Common Stock of the Company or a majority of the
common stock of the successor to the Company immediately following such merger,
consolidation or sale.
Under the
Amended and Restated 2003 Equity Incentive Plan, “Change of Control” is
generally defined as (a) an acquisition of a third party, unless the Company’s
existing stockholders continue to hold at least 50% of the outstanding stock,
(b) an acquisition of more than 50% of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer made
directly to the Company’s stockholders that the Board does not recommend the
stockholders accept, (c) over a period of 36 consecutive months or less, there
is a change in the composition of a majority of the Board, without the approval
of existing Board members, or (d) if a majority of the Board votes in favor of a
decision that a Change in Control has occurred. The Amended and
Restated 2003 Equity Incentive Plan provides, unless provided otherwise in the
specific award agreement, that upon a change in control (a) any outstanding
stock options or stock appreciation rights that are not fully exercisable shall
accelerate and become exercisable with respect to 50% of those shares which are
not then exercisable, (b) any risk of forfeiture applicable to restricted stock
and restricted stock units which is not based on achievement of performance
goals shall lapse with respect to 50% of the restricted stock and restricted
stock units still subject to such risk of forfeiture, and (c) all outstanding
restricted stock and restricted stock unit awards conditioned on the achievement
of performance goals shall be deemed to have been satisfied as to a pro rata
number of shares based on the assumed achievement of all relevant performance
goals and the length of time within the performance period which has elapsed
prior to the Change in Control.
The
following table sets forth the cash, equity awards and other compensation
earned, paid or awarded, as the case may be, to each of the Company’s
non-employee directors during the year ended December 31, 2008.
|
Fees
Earned or
|
Option
|
|||||||||||
|
Name
|
Paid
in
Cash ($) (1)
|
Awards
($)(6)
|
Total
($)
|
|||||||||
|
Francis
A. Doyle
|
72,800
|
$
|
49,330
|
(2)
|
$
|
170,776
|
||||||
|
48,646
|
(3)
|
|||||||||||
|
John
Heil
|
22,000
|
29,531
|
(2)
|
57,028
|
||||||||
|
5,497
|
(4)
|
|||||||||||
|
Peter
K. Hoffman
|
61,800
|
41,499
|
(2)
|
144,224
|
||||||||
|
40,925
|
(3)
|
|||||||||||
|
Nancy
F. Koehn
|
56,800
|
38,144
|
(2)
|
152,772
|
||||||||
|
37,615
|
(3)
|
|||||||||||
|
20,213
|
(5)
|
|||||||||||
|
Sir
Paul Judge
|
56,800
|
38,144
|
(2)
|
152,772
|
||||||||
|
37,615
|
(3)
|
|||||||||||
|
20,213
|
(5)
|
|||||||||||
|
Christopher
A. Masto
|
44,000
|
29,531
|
(2)
|
102,653
|
||||||||
|
29,122
|
(3)
|
|||||||||||
|
P.
Andrews McLane
|
62,000
|
49,665
|
(2)
|
144,096
|
||||||||
|
32,431
|
(3)
|
|||||||||||
|
Robert
B. Trussell, Jr.
|
40,000
|
26,846
|
(2)
|
93,320
|
||||||||
|
26,474
|
(3)
|
|||||||||||
|
(1)
|
Director
compensation is based on the Board year, which is the period from one
annual meeting to the next annual meeting. The amounts shown are pro-rated
for fiscal year 2008, and do not represent the amounts each director will
earn from the 2008 Annual Meeting until the 2009 Annual
Meeting.
|
|
|
(2)
|
Stock
option grants were made on May 5, 2008 at an exercise price of $11.28 and
a FAS 123(R) value of $3.33 per share. For stock options granted, the
value shown represents the dollar amount recognized for financial
reporting purposes and appear in the Company’s financial statements in
accordance with FAS 123(R). See the Company’s Annual Report for the year
ended December 31, 2008 for a complete description of the FAS 123(R)
valuation.
|
|
|
(3)
|
Stock
option grants were made on June 18, 2007 at an exercise price of $26.85
and a FAS 123(R) value of $7.15 per share. For stock options granted, the
value shown represents the dollar amount recognized for financial
reporting purposes and appear in the Company’s financial statements in
accordance with FAS 123(R). See the Company’s Annual Report for the year
ended December 31, 2008 for a complete description of the FAS 123(R)
valuation.
|
|
(4)
|
A
stock option grant was made to Mr. Heil on March 7, 2008 at an exercise
price of $15.97 and a FAS 123(R) value of $2.81 per share. For stock
options granted, the value shown represents the dollar amount recognized
for financial reporting purposes and appear in the Company’s financial
statements in accordance with FAS 123(R). See the Company’s Annual Report
for the year ended December 31, 2008 for a complete description of
the FAS 123(R) valuation.
|
|
|
(5)
|
Stock
option grants were made to Ms. Koehn and Sir Paul Judge on December 15,
2005 at an exercise price of $12.37 and a FAS 123(R) value of $5.39 per
share. For stock options granted, the value shown represents the dollar
amount recognized for financial reporting purposes and appear in the
Company’s financial statements in accordance with FAS 123(R). See the
Company’s Annual Report for the year ended December 31, 2007 for a
complete description of the FAS 123(R) valuation.
|
|
|
(6)
|
The
following table sets forth the aggregate number of stock option awards
outstanding for each director as of December 31, 2008 as well as the
grant date fair value of stock awards and option grants made during
2008:
|
|
Aggregate
Option
Awards
|
Grant
Date Fair Value
|
|||||||
|
Outstanding
|
of
Stock Option
|
|||||||
|
as
of
|
Awards
|
|||||||
|
Name
|
December
31, 2008
|
made
during 2008
|
||||||
|
Francis
A. Doyle
|
66,150
|
$
|
73,427
|
|||||
|
John
Heil
|
15,200
|
49,576
|
||||||
|
Peter
K. Hoffman
|
52,950
|
61,772
|
||||||
|
Nancy
F. Koehn
|
91,150
|
56,777
|
||||||
|
Sir
Paul Judge
|
91,150
|
56,777
|
||||||
|
Christopher
A. Masto
|
39,600
|
43,956
|
||||||
|
P.
Andrews McLane
|
51,600
|
73,926
|
||||||
|
Robert
B. Trussell, Jr.
|
62,285
|
39,960
|
||||||
Annual
Retainers
|
•
|
For
the 2008 Board Year, each non-employee director receives an annual
retainer of $40,000, payable in equal installments on July 31, 2008,
October 31, 2008, January 31, 2009 and April 30, 2009 and an option grant
for 12,000 shares of common stock. The option awards vest in four equal
increments at the end of July 2008, October 2008, January 2009 and April
2009. Vesting of each option award is subject to the applicable grant
recipient being a member of the Board or applicable Committee as of the
applicable vesting date. Mr. Bryant received a retainer of $30,000 and a
stock option grant of 9,000, which are pro-rated for his service as a
non-employee director from August 2008 – April 2009.
|
|
|
•
|
For
the 2008 Board Year, the Non-Executive Chair of the Board of Directors
receives a supplemental annual retainer of $25,000 and an option grant for
7,500 shares of common stock.
|
|
|
•
|
For
the 2008 Board Year, each Chair of one of the standing committees of the
Board receives a supplemental annual retainer as follows — Audit
Committee Chair, $16,000 and an option grant for 5,000 shares of common
stock; Compensation Committee Chair, $5,000 and an option grant for 1,500
shares of common stock; and Nominating and Governance Committee Chair,
$5,000 and an option grant for 1,500 shares of common
stock.
|
|
|
•
|
For
the 2008 Board Year, each member of one of the standing committees of the
Board receives a supplemental annual retainer as follows — Audit
Committee Member, $12,800 and an option grant for 3,850 shares of common
stock; Compensation Committee Member, $4,000 and an option
grant of 1,200 shares of common stock; and Nominating and Governance
Committee Member, $4,000 and an option grant of 1,200 shares of common
stock.
|
Section 16(a) of
the Exchange Act requires that Tempur-Pedic International’s executive officers,
directors, and persons who own more than 5% of our common stock to file reports
of ownership and changes in ownership with the SEC. Based solely on a review of
the copies of reports furnished to us, Tempur-Pedic International believes that
during the year ended December 31, 2007, its executive officers, directors,
and greater than 5% stockholders complied with all Section 16(a) filing
requirements, other than the following: Matthew D. Clift, the Executive Vice
President of Global Operations of the Company, filed a Form 4 reporting the
exercise of restricted stock units and the subsequent sale of shares on January
14, 2008, ten days after the applicable deadline and Robert Trussell, a member
of our Board of Directors, filed a Form 4 on February 11, 2008 reporting four
purchases of Tempur-Pedic International’s common stock and two sales
of Tempur-Pedic International’s common stock that occurred during
2007. Mr. Trussell’s
sale of Tempur-Pedic International common stock was matchable under Section
16(b) of the Exchange Act in that the purchases of February 27, 2007, March 12,
2007 and April 12, 2007 were all matchable against the sale of August 9,
2007. Mr. Trussell has paid to Tempur-Pedic International $14,570.64,
representing the full amount of the profit realized connection with these
transactions.
Related
Party Transactions
In March
2007, our Board of Directors, upon the recommendation of the Nominating and
Corporate Governance Committee, adopted a written Related Party Transactions
Policy providing for the review and approval or ratification by the Nominating
and Corporate Governance Committee of certain transactions or relationships
involving Tempur-Pedic International and its directors, executive officers and
their affiliates. In reviewing a transaction or relationship, the Nominating and
Corporate Governance Committee will take into account, among other factors it
deems appropriate, whether it is on terms no more favorable than to an
unaffiliated third party under similar circumstances, as well as the extent of
the related party’s interest in the transaction.
Registration
Rights Agreement
On November
1, 2002, Tempur-Pedic International and certain of our stockholders entered into
a registration rights agreement. Under this agreement, holders of 10% of
Tempur-Pedic International’s registrable securities, as defined in the
registration rights agreement, and certain stockholders who held notes with an
aggregate unpaid principal balance of $15.0 million have the right, subject to
certain conditions, to require Tempur-Pedic International to register any or all
of their shares under the Securities Act at Tempur-Pedic International’s
expense. In addition, all holders of registrable securities are entitled to
request the inclusion of any of their shares in any registration statement at
Tempur-Pedic International’s expense whenever we propose to register any of our
securities under the Securities Act. In connection with all such registrations,
Tempur-Pedic International has agreed to indemnify all holders of registrable
securities against certain liabilities, including liabilities under the
Securities Act. All holders requesting or joining in a registration have agreed
to indemnify Tempur-Pedic International against certain
liabilities.
APPROVAL
OF THE
FIRST
AMENDMENT TO TEMPUR-PEDIC INTERNATIONAL INC.
AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN
We are asking
our stockholders to approve the First Amendment to our Amended and Restated 2003
Equity Incentive Plan (2003 Plan). The First Amendment
increases the maximum number of shares of our common stock that may be
issued under our current 2003 Plan by 2,500,000 shares. As
of December 31, 2008, approximately 3,142,950 shares remained available for the
future grant of awards under our current 2003 Plan. After
the approval of the amended 2003 Plan 5,642,950 shares would then be available
for issuance under the 2003 Plan, representing approximately 7.5% of our total
outstanding shares as of December 31, 2008. The Board of Directors
approved the First Amendment to the 2003 Plan on February 27, 2009,
subject to stockholder approval. A copy of the First Amendment
to our 2003 Plan is attached as Appendix A to this
Proxy Statement.
Our Board of
Directors, upon recommendation of the Compensation Committee, has unanimously
adopted, subject to stockholder approval, the First Amendment to the 2003 Plan
to provide for an increase of the maximum number of shares of common stock
issuable under the current 2003 Equity Incentive Plan by
2,500,000 shares to a total of 11,500,000 shares. The Compensation
Committee made these recommendations after reviewing the number of shares
available for issuance under the current 2003 Equity Incentive Plan.
Based on anticipated useage and grants pursuant to the 2003 Plan, the
Compensation Committee foresees potential risk that the number of shares
available under the 2003 Plan will be depleted prior to the 2010 Annual Meeting
of Stockholders. The adoption of the First Amendment to our 2003 Plan
would ensure that we will continue to have available a reasonable number of
shares for our 2003 Plan. The Board of Directors believes that
in order to successfully attract and retain the best possible candidates for
positions of responsibility, we must continue to offer a competitive equity
incentive program.
We are asking
you to approve the proposed First Amendment to our 2003 Plan so that we will
have a sufficient number of shares available for the issuance of stock option
and other equity awards. Our Board of Directors believes that the
ability of the Company to grant stock options is important in enabling us to
offer competitive compensation packages and to make the most effective use of
the shares our stockholders authorize for incentive purposes. Therefore, the
Board of Directors urges you to vote to approve the proposed First Amendment to
the 2003 Plan.
VOTE
REQUIRED
Approval of
this proposal requires an affirmative “FOR” vote of a majority of the shares of
common stock present and entitle to vote at the Annual Meeting. An
abstention is counted as a vote against this Proposal TWO .
THEREFORE,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE FIRST AMENDMENT TO
OUR AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN.
Amended
and Restated 2003 Equity Incentive Plan
The following
summary of the Amended and Restated 2003 Equity Incentive Plan, as proposed to
be amended by Proposal Two, is qualified in its entirety by the specific
language of the 2003 Plan, a copy of which is attached as Appendix B to this
Proxy Statement.
For purposes
of this summary, we assumed that no award will be considered “deferred
compensation” as that term is defined for purposes of the federal tax rules
governing nonqualified deferred compensation arrangements (Section 409A of the
Code). We also assumed that if any award were considered to any extent to
constitute deferred compensation, its terms would comply with the requirements
of that legislation (in general, by limiting any flexibility in the time of
payment). For example, the award of a nonstatutory option with an exercise price
which is less than the market value of the stock covered by the option would
constitute deferred compensation. If an award includes deferred compensation,
and its terms do not comply with the requirements of the legislation, then any
deferred compensation component of the award will be taxable when it is earned
and vested (even if not then payable) and the recipient will be subject to a 20%
additional tax.
|
Summary
|
Upon
completion of Tempur-Pedic International’s initial public offering, our Board
and stockholders adopted a new incentive compensation plan, the 2003 Equity
Incentive Plan. In May 2008, our stockholders approved the Amended
and Restated 2003 Equity Incentive Plan, which increased the number of shares
available by an additional 1,000,000 shares and provided for a limitation on
repricing of stock options and stock appreciation rights. Under the
2003 Plan as currently in effect, the number of shares of our common stock
issued pursuant to or subject to outstanding awards shall not exceed 9,000,000,
except in the event of a stock dividend, split, reclassification or similar
corporate action. Under the 2003 Plan as proposed to be amended, the maximum
number of shares available for awards under the 2003 Plan would be increased
to 11,500,000 shares. The 2003 Plan is administered by the Compensation
Committee of our Board of Directors, which has the exclusive authority,
including the power to determine eligibility to receive awards, the types and
number of shares of stock subject to the awards, the price and timing of awards
and the acceleration or waiver of any vesting, performance, or forfeiture
restriction. The Compensation Committee, however, does not have the authority to
waive any performance restrictions for performance-based awards (that is, awards
intended to produce performance-based compensation not subject to the $1,000,000
deduction). As used in this Proxy Statement, the term “administrator” means the
Compensation Committee.
|
Participants.
|
Any of our
employees, our non-employee directors, consultants, and advisors to us, as
determined by the Compensation Committee may be selected to participate in the
2003 Plan. Participants may receive one or more of the following types of
awards:
|
•
|
stock
options;
|
|
|
•
|
stock
appreciation rights;
|
|
|
•
|
restricted
stock and stock unit awards;
|
|
|
•
|
performance
units;
|
|
|
•
|
stock
grants; and
|
|
|
•
|
qualified
performance-based
awards.
|
|
|
Stock
options.
|
Stock options
may be granted under the 2003 Plan, including incentive stock options, as
defined under Section 422 of the Code, and nonqualified stock options. The
option exercise price of all stock options granted under the 2003 Plan will be
determined by the administrator, except that any incentive stock option or any
option intended to qualify as performance-based compensation under Code
Section 162(m) will not be granted at a price that is less than 100% of the
fair market value of the stock on the date of grant or not less than 110% of the
fair market value in the case of incentive stock options granted to a holder of
10% of our stock. Stock options may be exercised as determined by the
administrator, but in no event after the tenth anniversary date of grant, or
after the fifth anniversary for a holder of 10% of our stock.
Upon
the exercise of a stock option, the purchase price must be paid in full in
either cash or its equivalent. The administrator may also allow payment by
tendering previously acquired shares of our common stock with a fair market
value at the time of exercise equal to the exercise price, provided such shares
have been held for at least six months prior to tender and broker-assisted
cashless exercises and may authorize loans for the purpose of exercise as
permitted under applicable law.
|
Stock
appreciation right (SAR).
|
A
SAR entitles a participant to receive a payment equal in value to the difference
between the fair market value of a share of stock on the date of exercise of the
SAR over the grant price of the SAR. The administrator may pay that amount in
cash, in shares of our common stock, or a combination. The terms, methods of
exercise, methods of settlement, form of consideration payable in settlement,
and any other terms and conditions of any SAR will be determined by the
administrator at the time of the grant of award and will be reflected in the
award agreement, except that when a SAR is awarded together with an option,
the exercise price shall equal the exercise price of the related
option.
|
Restricted
stock and stock units.
|
A
restricted stock award or restricted stock unit award is the grant of shares of
our common stock either currently (in the case of restricted stock) or at a
future date (in the case of restricted stock units) at a price determined by the
administrator (including zero), that is nontransferable and is subject to
substantial risk of forfeiture until specific conditions or goals are met.
Conditions may be based on continuing employment or achieving performance goals.
During the period of restriction, participants holding shares of restricted
stock shall, except as otherwise provided in an individual award agreement, have
full voting and may have dividend rights with respect to such shares. The
restrictions will lapse in accordance with a schedule or other conditions
determined by the administrator.
|
Performance
units.
|
A performance
share award is a contingent right to receive a pre-determined number shares of
our common stock if certain performance goals are met. The value of performance
units will depend on the degree to which the specified performance goals are
achieved but are generally based on the value of our common stock. The
administrator may, in its discretion, pay earned performance shares in cash, or
stock, or a combination of both.
|
Stock
Grants.
|
A stock grant
is an award of shares of common stock without restriction. Stock grants may only
be made in limited circumstances, such as in lieu of other earned compensation.
Stock grants are made without any forfeiture conditions.
|
Qualified
Performance-based awards.
|
Qualified
performance-based awards are grants of other awards granted under the 2003 Plan
on a basis intended to qualify as “performance-based compensation” under
Section 162(m) of the Code and thereby preserve the deductibility of these
awards for federal income tax purposes. Because Section 162(m) of the Code
only applies to those employees who are “covered employees” as defined in
Section 162(m) of the Code, only covered employees, and those likely to
become covered employees, are eligible to receive performance-based
awards.
Participants
are only entitled to receive payment for a performance-based award for any given
performance period to the extent that pre-established performance goals set by
the administrator for the period are satisfied. These pre-established
performance goals must be based on one or more of the following performance
criteria: pre- or after-tax net earnings, sales or revenue, operating earnings,
operating cash flow, return on net assets, return on stockholders’ equity,
return on assets, return on capital, stock price growth, stockholder returns,
gross or net profit margin, earnings per share, price per share, and market
share. These performance criteria may be measured in absolute terms or as
compared to any incremental increase or as compared to results of a peer group.
With regard to other awards, other than options, intended to qualify as
qualified performance-based awards, the administrator has the discretion to
select the length of the performance period, the type of performance-based
awards to be granted, and the goals that will be used to measure the performance
for the period. In determining the actual size of an individual
performance-based award for a performance period, the administrator may reduce
or eliminate (but not increase) the award. Generally, a participant must be
employed on the date the performance-based award is paid to be eligible for a
performance-based award for that period.
|
Change
of Control.
|
Except as
otherwise provided in an individual agreement, in the event of a change in
control, (1) all stock options and stock appreciation rights accelerate with
respect to 50% of the shares not already exercisable, (2) any risk of
forfeiture applicable to restricted stock and stock units, not based on
achievement of performance goals, shall lapse with respect to 50% of the
restricted stock and stock units subject to such risk of forfeiture immediately
prior to the change of control, and (iii) all outstanding restricted stock and
stock units conditioned upon performance goals shall be deemed satisfied as to a
pro rata number of shares based on the assumed achievement of all relevant
performance goals and the length of time which had elapsed prior to the change
in control. The vesting of qualified performance-based awards will
not accelerate on a change of control, except as allowed by Section
162(m).
|
Amendment
and termination.
|
The Board may
terminate, amend, or modify the 2003 Plan as it deems advisable at any time;
however, stockholder approval will be obtained for any amendment to the extent
necessary and desirable to comply with any applicable law, regulation, or stock
exchange rule. Unless the Board expressly provides, no amendment shall affect
the terms of any outstanding award and no termination or amendment may, without
the consent of any award recipient, adversely affect the rights of the award
recipient. The administrator may amend the terms of any award
granted, prospectively or retroactively, provided that the amendment is
consistent with the terms of the 2003 Plan.
Neither the
Board nor the administrator has the ability to reprice stock options or stock
appreciation rights (other than pro rata adjustments to reflect stock splits,
stock dividends or other corporate transactions, or repricings our stockholders
approve), including programs under which outstanding options are surrendered or
cancelled in exchange for options with a lower exercise price or greater
economic value.
We may not
make any grants under the 2003 Plan after December 1,
2013.
|
Adoption
by stockholders.
|
The current 2003
Equity Incentive Plan was approved by the holders of a majority of outstanding
shares of our common stock in December 2003, and the Amended and Restated 2003
Equity Incentive Plan was approved by the holders of a majority of outstanding
of common stock in May 2008. Our Board approved the proposed First
Amendment to the Amended and Restated 2003 Equity Incentive Plan on March 6,
2009, subject to stockholder approval.
Summary
of U.S. Federal Income Tax Consequences
The following
summary is intended only as a general guide to the U.S. federal income tax
consequences under current law of participation in the 2003 Plan and does not
attempt to describe all possible federal or other tax consequences of such
participation or tax consequences based on particular
circumstances.
This summary
is based upon laws and regulations in effect on January 1, 2009. Such laws
and regulations are subject to change. This summary is intended for the
information of stockholders in voting upon this proposal and not as tax guidance
to participants in the 2003 Plan. Participants in the 2003 Plan
should consult their own tax advisors as to the tax consequences of awards under
the 2003 Plan
Incentive Stock
Options. An optionee recognizes no taxable income for regular income tax
purposes as a result of the grant or exercise of an incentive stock option
qualifying under Section 422 of the Code. Optionees who neither dispose of their
shares within two years following the date the option was granted nor within one
year following the exercise of the option will normally recognize a capital gain
or loss upon a sale of the shares equal to the difference, if any, between the
sale price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year after the date of
exercise (a “disqualifying disposition”), the difference between the fair market
value of the shares on the exercise date and the option exercise price (not to
exceed the gain realized on the sale if the disposition is a transaction with
respect to which a loss, if sustained, would be recognized) will be taxed as
ordinary income at the time of disposition. Any gain in excess of that amount
will be a capital gain. If a loss is recognized, there will be no ordinary
income, and such loss will be a capital loss. Any ordinary income recognized by
the optionee upon the disqualifying disposition of the shares generally should
be deductible by the Company for federal income tax purposes, except to the
extent such deduction is limited by applicable provisions of the
Code.
The
difference between the option exercise price and the fair market value of the
shares on the exercise date of an incentive stock option is treated as an
adjustment in computing the optionee’s alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax exceeds
the regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares, and certain tax credits that may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock
Options. Options not designated or qualifying as incentive stock options
will be nonstatutory stock options having no special tax status. An optionee
generally recognizes no taxable income as the result of the grant of such an
option. Upon exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount of the difference between the option
exercise price and the fair market value of the shares on the exercise date. If
the optionee is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. Upon the sale of stock acquired by
the exercise of a nonstatutory stock option, any gain or loss, based on the
difference between the sale price and the fair market value on the exercise
date, will be taxed as capital gain or loss. No tax deduction is available to
the Company with respect to the grant of a nonstatutory stock option or the sale
of the stock acquired pursuant to such grant. The Company generally should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of a nonstatutory stock option, except to
the extent such deduction is limited by applicable provisions of the
Code.
Restricted
Stock. A participant acquiring restricted stock generally will recognize
ordinary income equal to the fair market value of the shares on the
“determination date.” The “determination date” is the date on which the
restricted stock is acquired unless the shares are subject to a substantial risk
of forfeiture (for example, where the restricted stock award is subject to
vesting conditions, service requirements, or performance criteria prior to the
satisfaction of which the shares remain subject to forfeiture) and are not
transferable, in which case the determination date is the earlier of (i) the
date on which the shares become transferable or (ii) the date on which the
shares are no longer subject to a substantial risk of forfeiture. If the
participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. If the determination date is after
the date on which the participant acquires the shares, the participant may
elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be
the determination date by filing an election with the Internal Revenue Service
no later than 30 days after the date the shares are acquired. Upon the sale of
shares acquired pursuant to a restricted stock award, any gain or loss, based on
the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. The Company generally
should be entitled to a deduction equal to the amount of ordinary income
recognized by the participant on the determination date, except to the extent
such deduction is limited by applicable provisions of the Code.
Restricted Stock
Units. A
participant generally will recognize no income upon the grant of a restricted
stock unit award. Upon the settlement of such award, or on the grant of stock
without restriction i.e. a “stock grant”, a participant normally will recognize
ordinary income in the year of settlement in an amount equal to the fair market
value of any unrestricted shares received. If the participant is an employee,
such ordinary income generally is subject to withholding of income and
employment taxes. Upon the sale of any shares received, any gain or loss, based
on the difference between the sale price and the fair market value on the
settlement date, will be taxed as capital gain or loss. The Company generally
should be entitled to a deduction equal to the amount of ordinary income
recognized by the participant on the settlement date, except to the extent such
deduction is limited by applicable provisions of the Code.
Stock Appreciation
Rights. Stock appreciation rights are generally subject to the same tax
rules as nonstatutory stock options, i.e., no taxable income is generally
recognized as the result of the grant, and upon its exercise, the participant
normally recognizes ordinary income in the amount paid in settlement of such
right. If the participant is an employee, such ordinary income
generally is subject to withholding of income and employment taxes. Upon the
sale of any stock received on the exercise of a stock appreciation right, any
gain or loss, based on the difference between the sale price and the fair market
value of the shares received in settlement of the right, will be taxed as
capital gain or loss. No tax deduction is available to the Company with respect
to the grant of a stock appreciation right or the sale of any stock received in
settlement of such a right. The Company generally should be entitled to a
deduction equal to the amount of ordinary income recognized by the optionee as a
result of the exercise of a stock appreciation rights except to the extent such
deduction is limited by applicable provisions of the Code.
Potential Deferred
Compensation. For purposes of the foregoing summary of federal income tax
consequences, we assumed that no award under the 2003 Plan will be considered
“deferred compensation” as that term is defined for purposes of federal tax
rules governing nonqualified deferred compensation arrangements, Section 409A of
the Code, or, if any award were considered to any extent to constitute deferred
compensation, its terms would comply with the requirements of that legislation
(in general, by limiting any flexibility in the time of payment). For example,
the award of an SAR at less than 100% of the market value of the Company’s
stock, would constitute deferred compensation. If an award includes deferred
compensation, and its terms do not comply with the requirements of the
applicable rules, then any such award under the 2003 Plan will be taxable when
it is earned and vested (even if not then payable) and the recipient will be
subject to a 20% additional federal tax.
Section 162(m)
Limitations on the Company’s Tax Deduction. In general, whenever a
recipient is required to recognize ordinary income in connection with an award,
the Company will be entitled to a corresponding tax
deduction. However, the Company will not be entitled to deductions in
connection with awards under the 2003 Plan to certain senior executive officers
to the extent that the amount of deductible income in a year to any such
officer, together with his or her other compensation from the Company exceeds
the $1 million dollar limitation of Section 162(m) of the Code. Compensation
which qualifies as “performance-based” is not subject to this limitation,
however.
The following table
sets forth equity compensation plan information as of December 31,
2008:
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding
options
|
Weighted-average
exercise price of outstanding options
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||||
|
(a)
|
(b)
|
(c)
|
||||||||||
|
Equity
compensation plans approved by security holders
|
||||||||||||
|
2002
Stock Option Plan (1)
|
139,031 | $ | 1.66 | — | ||||||||
|
2003
Equity Incentive Plan
|
5,256,233 | $ | 16.16 | 3,142,950 | ||||||||
|
2003
Employee Stock Purchase Plan (2)
|
— | — | 289,896 | |||||||||
|
Equity
compensation plans not approved by security holders
|
— | — | — | |||||||||
|
Total
|
5,395,264 | $ | 15.50 | 3,432,846 | ||||||||
|
(1)
|
In
December 2003, our Board of Directors adopted a resolution that prohibited
further grants under the 2002 Stock Option Plan.
|
|
|
(2)
|
Shares
under the 2003 Employee Stock Purchase Plan allows eligible employees to
purchase our common stock annually over the course of two semi-annual
offering periods at a price of no less than 85% of the price per share of
our common stock. This plan is an open market purchase plan and does
not have a dilutive
effect.
|
|
Other
Employee Benefit Plans
|
2002
Stock Option Plan
|
In November
2002, our Board of Directors and stockholders approved a stock option plan,
effective for a ten-year term, to encourage ownership of stock by our employees,
directors, and consultants and to provide them with additional financial
incentives to promote the success of the Company. Under the plan, the number of
outstanding shares of our common stock attributable to the exercise of options,
together with the number of shares issuable upon the exercise of outstanding
options, shall not exceed 9,907,349 shares except in the event of a stock
dividend, split, reclassification or other similar corporate transaction. No
individual may be granted options for more than 66 2/3% of this total
number of shares.
Employees,
directors, and consultants are eligible to receive options under the plan.
However, directors who are not also employees are not eligible to receive
incentive stock options. In the case of incentive stock options, the option
price shall be not less than 100% of the fair market value of our common stock
on the date the option is granted, or not less than 110% of that fair market
value for a holder of 10% of our voting stock. Incentive stock options expire
ten years after the date on which they are granted, or five years after the
grant date for holders of 10% of our voting stock. Other options under the plan
are not subject to such limitation.
In December
2003, the Board adopted a resolution that prohibited further grants being made
under the 2002 Plan.
2003
Employee Stock Purchase Plan
Upon
completion of Tempur-Pedic International’s initial public offering, a new
employee stock purchase plan went into effect, which we refer to in this proxy
statement as the 2003 Employee Stock Purchase Plan. The 2003 Employee Stock
Purchase Plan permits eligible employees (as defined in the 2003 Employee Stock
Purchase Plan) to purchase up to $25,000 worth of our common stock annually over
the course of two semi-annual offering periods at a price of no less than 85% of
the price per share of our common stock either at the beginning or the end of
each six-month offering period, whichever is less. The Compensation Committee of
our Board of Directors administers the 2003 Employee Stock Purchase Plan. Our
Board may amend or terminate the plan. The 2003 Employee Stock Purchase Plan
complies with the requirements of Section 423 of the Code. We may issue a
maximum of 500,000 shares of our common stock under this plan. This plan
was approved by the holders of a majority of outstanding shares of our common
stock in December 2003. In March 2008, the Board amended this plan to extend its
term until December 2013.
RATIFICATION
OF INDEPENDENT AUDITORS
We
are asking stockholders to ratify the appointment of Ernst & Young LLP
as Tempur-Pedic International’s independent auditors for the year ending
December 31, 2009. Ernst & Young became the independent auditors
for Tempur-Pedic International after Tempur-Pedic International acquired Tempur
World, Inc. in 2002.
VOTE
REQUIRED
The
affirmative vote of a majority of the shares of common stock present or
represented and voting at the Annual Meeting is required to ratify such
appointment.
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP TO SERVE AS TEMPUR-PEDIC
INTERNATIONAL’S INDEPENDENT AUDITORS FOR THE YEAR ENDING DECEMBER 31,
2009.
Representatives
of Ernst & Young LLP are expected to be present at the Annual Meeting
and will have the opportunity to make a statement if they desire to do so. It is
also expected that they will be available to respond to appropriate
questions.
The aggregate
fees for professional services rendered by Ernst & Young LLP for the years
ended December 31, 2007 and December 31, 2008 were approximately as follows (in
thousands):
|
2007
|
2008
|
|||||||
|
Audit
fees (1)
|
$ | 1,603 | 1,622 | |||||
|
Audit-related
fees (2)
|
— | — | ||||||
|
Tax
fees (3)
|
36 | 224 | ||||||
|
All
other fees (4)
|
— | — | ||||||
|
Total
|
$ | 1,639 | $ | 1,846 | ||||
|
(1)
|
Audit
fees billed for 2007 and 2008 were related to services provided in
connection with the audit of our consolidated financial statements and the
effectiveness of our internal control over financial reporting as of and
for the years ended December 31, 2007 and December 31, 2008, the
statutory audits of certain international subsidiaries and the reviews of
our quarterly reports on Form 10-Q.
|
|
|
(2)
|
There
were no audit-related services or fees in 2008 or 2007 that are (1)
reasonably related the performance of the audit or review of the Company's
financial statements and (2) not reported under "Audit fees"
above.
|
|
|
(3)
|
Tax fees include fees for tax compliance, tax advice, and tax planning. | |
|
(4)
|
There were no other services or fees. |
The Audit
Committee is responsible for appointing, setting compensation, and overseeing
the work of the independent auditor. The Audit Committee has established a
policy regarding pre-approval of all audit and non-audit services provided by
the independent auditor.
On
an ongoing basis, management communicates specific projects and categories of
service for which the advance approval of the Audit Committee is requested. The
Audit Committee reviews these requests and advises management if the Committee
approves the engagement of the independent auditor. On a periodic basis,
management reports to the Audit Committee regarding the actual spending for such
projects and services compared to the approved amounts. The projects and
categories of service are as follows:
Audit —Annual audit fees
relate to services rendered in connection with the audit of Tempur-Pedic
International’s consolidated financial statements, the quarterly reviews of
financial statements included in Tempur-Pedic International’s quarterly report
on Form 10-Q, review of registration statements filed with the SEC and the
statutory audits of certain international subsidiaries.
Audit Related
Services —Audit related services include fees for services that are
reasonably related to the performance of the audit or review of the financial
statements and are not reported under "Audit fees"
Tax —Tax
services include fees for tax compliance, tax advice, and tax
planning.
Other
Services —Other services are pre-approved on an
engagement-by-engagement basis.
All services
performed by our independent registered public accounting firm have been
pre-approved by the Audit Committee.
The
information contained in this report shall not be deemed to be
“soliciting material” or “filed” or incorporated by reference in future filings
with the Securities and Exchange Commission, or subject to the liabilities of
Section 18 of the Exchange Act, except to the extent that Tempur-Pedic
International specifically incorporates it by reference into a document filed
under the Securities Act or the Exchange Act.
The Audit
Committee of the Board of Directors is responsible for providing independent,
objective oversight with respect to the Company’s accounting and financial
reporting functions, internal and external audit functions, and system of
internal controls regarding financial matters and legal, ethical and regulatory
compliance. The Audit Committee is composed of four directors, Francis A. Doyle,
Peter K. Hoffman, Sir Paul Judge and Nancy F. Koehn, each of whom the Board of
Directors has determined is “independent” as defined in the applicable rules of
the New York Stock Exchange and the SEC. The Board of Directors has also
determined that Mr. Doyle is an “audit committee financial expert” as defined
under the applicable rules of the Securities and Exchange
Commission. The charter of the Audit Committee is available on
Tempur-Pedic International’s website at http://investor.tempurpedic.com/
under the caption “Corporate Governance.”
Management
is responsible for the Company’s internal controls and financial reporting
processes. Ernst & Young LLP, the Company’s independent certified public
accountants, is responsible for performing an independent audit of the Company’s
consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America and to issue a report
thereon. The Audit Committee’s responsibility is to monitor and oversee these
processes.
In
connection with its responsibilities, the Audit Committee met on eleven (11)
occasions during 2008, either in person or via teleconference, and acted once by
written consent. These meetings involved representatives of management, internal
auditors and the independent accountants. Management represented to the Audit
Committee that the Company’s consolidated financial statements were prepared in
accordance with accounting principles generally accepted in the United States of
America, and the Audit Committee has reviewed and discussed with management,
internal auditors and the independent accountants the consolidated financial
statements. The Audit Committee has also discussed with internal auditors and
the independent accountants, with and without management present, the
evaluations of the Company’s internal controls and the overall quality of the
Company’s financial reporting. The Audit Committee has discussed with the
independent accountants the matters required by Statement on Auditing Standards
No. 61, as amended (Communication with Audit Committees). The Audit Committee
received from the Company’s independent accountants written disclosures required
by the applicable standards of the Public Company Accounting Oversight Board and
the Audit Committee has discussed with the independent accountants that firm’s
independence.
Based
upon the Audit Committee’s discussions with management, internal auditors and
the independent accountants, and the Audit Committee’s review of the audited
consolidated financial statements, evaluations of the Company’s internal
controls, and the representations of management, internal auditors and the
independent accountants, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008, filed with the
SEC.
|
|
Submitted
by,
|
|
|
AUDIT
COMMITTEE:
|
|
|
Francis
A. Doyle (Chair)
|
|
|
Peter
K. Hoffman
|
|
|
Sir
Paul Judge
|
|
|
Nancy
F. Koehn
|
Stockholders
who wish to nominate a candidate for election as a director at an annual meeting
of stockholders or propose business for consideration at such meeting must
provide written notice to the Secretary of Tempur-Pedic International following
the procedures prescribed in Rule 14a-8 under the Exchange Act and Section
2.12 of Tempur-Pedic International’s by-laws. To be eligible, such notice must
be received in writing at Tempur-Pedic International’s corporate headquarters in
Lexington, Kentucky by the Secretary of Tempur-Pedic International not later
than the close of business on the 120th day,
and not earlier than the close of business on the 150th day,
prior to the first anniversary of the preceding year’s annual
meeting. Only persons nominated in accordance with the procedures set
forth in our by-laws will be eligible to serve as directors and the only
business to be conducted at an annual meeting shall be brought pursuant to our
by-laws. Section 2.12 of our by-laws sets forth the information
requirements for the notice of a director nomination or notice of
business to be conducted at an annual meeting, which includes information about
the stockholder bringing forth the nomination or notice of business, as well as
information regarding the nominee or such business. A copy of our
by-laws may be obtained by contacting the Secretary of Tempur-Pedic
International at our principal executive officers at 1713 Jaggie Fox Way,
Lexington, Kentucky 40511 or call or call the Secretary of Tempur-Pedic
International at (800) 878-8889.
A stockholder
nomination or proposal intended to be considered at the 2010 Annual Meeting must
be received by the Secretary not earlier than the close of business on December
6, 2009 and prior to the close of business on January 5, 2010. Any proposal or
nomination submitted after January 5, 2010 will be considered untimely. Only
persons nominated in accordance with the procedures set forth in our by-laws
will be eligible to serve as directors and the only business to be conducted at
an annual meeting shall be brought pursuant to our by-laws.
Our Annual
Report on Form 10-K for the year ended December 31, 2008 is available
without charge to each stockholder, upon written request to the Secretary of
Tempur-Pedic International at our principal executive offices at
1713 Jaggie Fox Way, Lexington, Kentucky 40511 and is also available at on
our website at http://investor.tempurpedic.com/
under the caption “SEC Filings.”
Only one copy
of our Annual Report on Form 10-K, Proxy Statement or Notice of Internet
Availability of Proxy Materials is being delivered to multiple security holders
sharing an address unless we have received instructions to the contrary from one
or more of the stockholders.
We will
deliver promptly upon written or oral request a separate copy our Annual Report
on Form 10-K, the Proxy Statement or Notice of Internet Availability
of Proxy Materials to any stockholder at a shared address to which a single copy
of either of those documents was delivered. To receive a separate copy our
Annual Report on Form 10-K, Proxy Statement or Notice of Internet Availability
of Proxy Materials, or if two stockholders sharing an address have received two
copies of any of these documents and desire to only receive one, you may write
the Secretary of Tempur-Pedic International at our principal executive officers
at 1713 Jaggie Fox Way, Lexington, Kentucky 40511 or call or call the Secretary
of Tempur-Pedic International at (800) 878-8889.
You may vote
in person at the meeting or by proxy. We recommend you vote by proxy even if you
plan to attend the meeting. You can always change your vote at the meeting.
Giving us proxy means you authorize us to vote your shares at the meeting in the
manner you direct.
If your
shares are held in your name, you can vote by proxy in three convenient
ways:
|
|
Via Internet: Go to
http://www.proxyvote.com
and follow the instructions. You will need to enter the control number
printed on your proxy card.
|
|
|
By Telephone: Call
toll-free 1-800-690-6903 and follow the instructions. You will need to
enter the control number printed on your proxy
card.
|
|
|
In Writing: Complete,
sign, date and return your proxy card in the enclosed envelope (if you
have received a paper copy of the voting
materials).
|
If your shares are
held in street name, you may vote by submitting instructions to your stockbroker
or nominee. In most cases, you will be able to do this by mail. Please refer to
the summary instructions included on your proxy card. For shares held in street
name, the voting instruction card will be included by your stockbroker or
nominee.
You may
submit your proxy by signing your proxy card or, for shares held in street name,
by following the voting instruction card included by your stockbroker or nominee
and mailing it in the enclosed, postage-paid envelope. If you provide specific
voting instructions, your shares will be voted as you have
instructed.
The Board of
Directors knows of no other matters to be submitted at the meeting. If any other
matters properly come before the meeting, it is the intention of the persons
named in the enclosed form of proxy to vote the shares they represent as the
Board of Directors may recommend.
Tempur-Pedic
International will pay the costs of soliciting proxies from stockholders.
Directors, executive officers, and regular employees may solicit proxies, either
personally or by telephone, on behalf of Tempur-Pedic International, without
additional compensation, other than the time expended and telephone charges in
making such solicitations.
|
By
Order of the Board of
Directors,
|
|
DALE
E. WILLIAMS
|
|
|
Executive
Vice President, Chief Financial Officer,
|
|
|
and
Secretary
|
Lexington,
Kentucky
March 25,
2009
APPENDIX
A
FIRST
AMENDMENT TO THE TEMPUR-PEDIC INTERNATIONAL INC.
AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN
This
FIRST AMENDMENT (the “Amendment”) to the
Amended and Restated 2003 Equity Incentive Plan (the “Plan”) of
Tempur-Pedic International Inc., a Delaware corporation (the “Company”), was
adopted by resolution of the Board of Directors of the Company in accordance
with Section 15 of the Plan, such amendment to be effective immediately upon
approval by the Company’s stockholders (the “Effective
Date”).
As of the Effective Date, the Plan is
hereby amended as follows:
1. The
first sentence of Section 4 of the Plan (“Stock Subject to the Plan”) is hereby
amended to read as follows:
At no
time shall the number of shares of Stock issued pursuant to or subject to
outstanding Awards granted under the Plan exceed 11,500,000 shares of Stock;
subject, however, to
the provisions of Section 8 of the Plan.
said
amendment being for the purpose of increasing the total number of shares of
common stock, $0.01 par value per share, that may be subject to options granted
under the Plan from 9,000,000 shares to 11,500,000 shares.
Except to the extent amended hereby,
all of the terms, provisions and conditions set forth in the Plan are hereby
ratified and confirmed and shall remain in full force and effect. The
Plan and this Amendment shall be read and construed together as a single
instrument.
APPENDIX
B
TEMPUR-PEDIC
INTERNATIONAL INC.
AMENDED
AND RESTATED
2003
EQUITY INCENTIVE PLAN
TABLE
OF CONTENTS
|
1.
|
|
|
B -
2
|
|
|
2.
|
|
|
B -
2
|
|
|
3.
|
|
|
B -
5
|
|
|
4.
|
|
|
B -
5
|
|
|
5.
|
|
|
B -
5
|
|
|
6.
|
|
|
B -
6
|
|
|
7.
|
|
|
B -
6
|
|
|
8.
|
|
|
B -
11
|
|
|
9.
|
|
|
B -
11
|
|
|
10.
|
|
|
B -
12
|
|
|
11.
|
|
|
B -
14
|
|
|
12.
|
|
|
B -
14
|
|
|
13.
|
|
|
B -
14
|
|
|
14.
|
|
|
B -
15
|
|
|
15.
|
|
|
B -
15
|
|
|
16.
|
|
|
B -
15
|
|
|
17.
|
|
|
B -
15
|
|
AMENDED
AND RESTATED
TEMPUR-PEDIC
INTERNATIONAL INC.
2003
EQUITY INCENTIVE PLAN
This Plan
is intended to encourage ownership of Stock by employees, consultants and
directors of the Company and its Affiliates and to provide additional incentive
for them to promote the success of the Company’s business through the grant of
Awards of or pertaining to shares of the Company’s Stock. The Plan is intended
to be an incentive stock option plan within the meaning of Section 422 of the
Code, but not all Awards are required to be Incentive Options.
As used
in this Plan, the following terms shall have the following
meanings:
2.1.
Accelerate, Accelerated, and Acceleration, means: (a) when used with respect to
an Option or Stock Appreciation Right, that as of the time of reference the
Option or Stock Appreciation Right will become exercisable with respect to some
or all of the shares of Stock for which it was not then otherwise exercisable by
its terms; (b) when used with respect to Restricted Stock or Restricted Stock
Units, that the Risk of Forfeiture otherwise applicable to the Stock or Units
shall expire with respect to some or all of the shares of Restricted Stock or
Units then still otherwise subject to the Risk of Forfeiture; and (c) when used
with respect to Performance Units, that the applicable Performance Goals shall
be deemed to have been met as to some or all of the Units.
2.2.
Acquisition means a merger or consolidation of the Company with or into another
person or the sale, transfer, or other disposition of all or substantially all
of the Company’s assets to one or more other persons in a single transaction or
series of related transactions.
2.3.
Affiliate means any corporation, partnership, limited liability company,
business trust, or other entity controlling, controlled by or under common
control with the Company.
2.4.
Award means any grant or sale pursuant to the Plan of Options, Stock
Appreciation Rights, Performance Units, Restricted Stock, Restricted Stock Units
or Stock Grants.
2.5.
Award Agreement means an agreement between the Company and the recipient of an
Award, setting forth the terms and conditions of the Award.
2.6.
Board means the Company’s Board of Directors.
2.7.
Change of Control means the occurrence of any of the following after the date of
the approval of the Plan by the Board:
(a) an
Acquisition, unless securities possessing more than 50% of the total combined
voting power of the survivor’s or acquiror’s outstanding securities (or the
securities of any parent thereof) are held by a person or persons who held
securities possessing more than 50% of the total combined voting power of the
Company’s outstanding securities immediately prior to that transaction,
or
(b) any
person or group of persons (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended and in effect from time to time)
directly or indirectly acquires beneficial ownership (determined pursuant to
Securities and Exchange Commission Rule 13d-3 promulgated under the said
Exchange Act) of securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities pursuant to a tender or
exchange offer made directly to the Company’s stockholders that the Board does
not recommend such stockholders accept, other than (i) the Company or an
Affiliate, (ii) an employee benefit plan of the Company or any of its
Affiliates, (iii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, or (iv) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or
(c) over
a period of 36 consecutive months or less, there is a change in the composition
of the Board such that a majority of the Board members (rounded up to the next
whole number, if a fraction) ceases, by reason of one or more proxy contests for
the election of Board members, to be composed of individuals who either (i) have
been Board members continuously since the beginning of that period, or (ii) have
been elected or nominated for election as Board members during such period by at
least a majority of the Board members described in the preceding clause (i) who
were still in office at the time that election or nomination was approved by the
Board; or
(d) a
majority of the Board votes in favor of a decision that a Change in Control has
occurred.
2.8. Code
means the Internal Revenue Code of 1986, as amended from time to time, or any
successor statute thereto, and any regulations issued from time to time
thereunder.
2.9.
Committee means the Compensation Committee of the Board, which in general is
responsible for the administration of the Plan, as provided in Section 5 of the
Plan. For any period during which no such committee is in existence “Committee”
shall mean the Board and all authority and responsibility assigned to the
Committee under the Plan shall be exercised, if at all, by the
Board.
2.10.
Company means Tempur-Pedic International Inc., a corporation organized under the
laws of the State of Delaware.
2.11.
Covered Employee means an employee who is a “covered employee” within the
meaning of Section 162(m) of the Code.
2.12.
Grant Date means the date as of which an Option is granted, as determined under
Section 7.1(a).
2.13.
Incentive Option means an Option which by its terms is to be treated as an
“incentive stock option” within the meaning of Section 422 of the
Code.
2.14.
Market Value means the value of a share of Stock on a particular date determined
by such methods or procedures as may be established by the Committee. Unless
otherwise determined by the Committee, the Market Value of Stock as of any date
is the closing price for the Stock as reported on the New York Stock Exchange
(or on any other national securities exchange on which the Stock is then listed)
for that date or, if no closing price is reported for that date, the closing
price on the next preceding date for which a closing price was reported. For
purposes of Awards effective as of the effective date of the Company’s initial
public offering, Market Value of Stock shall be the price at which the Company’s
Stock is offered to the public in its initial public offering.
2.15.
Nonstatutory Option means any Option that is not an Incentive
Option.
2.16.
Option means an option to purchase shares of Stock.
2.17.
Optionee means a Participant to whom an Option shall have been granted under the
Plan.
2.18.
Participant means any holder of an outstanding Award under the
Plan.
2.19.
Performance Criteria means the criteria that the Committee selects for purposes
of establishing the Performance Goal or Performance Goals for a Participant for
a Performance Period. The Performance Criteria used to establish Performance
Goals are limited to: pre- or after-tax net earnings, sales growth, operating
earnings, operating cash flow, return on net assets, return on stockholders’
equity, return on assets, return on capital, Stock price growth, stockholder
returns, gross or net profit margin, earnings per share, price per share of
Stock, and market share, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to results of a peer
group. The Committee will, but within the time prescribed by Section 162(m) of
the Code in the case of Qualified Performance-Based Awards, objectively define
the manner of calculating the Performance Criteria it selects to use for such
Performance Period for such Participant.
2.20.
Performance Goals means, for a Performance Period, the written goals established
by the Committee for the Performance Period based upon the Performance Criteria.
Depending on the Performance Criteria used to establish such Performance Goals,
the Performance Goals may be expressed in terms of overall Company performance
or the performance of a division, business unit, subsidiary, or an
individual.
2.21.
Performance Period means the one or more periods of time, which may be of
varying and overlapping durations, selected by the Committee, over which the
attainment of one or more Performance Goals will be measured for purposes of
determining a Participant’s right to, and the payment of, a Performance
Unit.
2.22.
Performance Unit means a right granted to a Participant under Section 7.5, to
receive cash, Stock or other Awards, the payment of which is contingent on
achieving Performance Goals established by the Committee.
2.23.
Plan means this Amended and Restated 2003 Equity Incentive Plan of the Company,
as amended from time to time, and including any attachments or addenda
hereto.
2.24.
Qualified Performance-Based Awards means Awards intended to qualify as
“performance-based compensation” under Section 162(m) of the Code.
2.25.
Restricted Stock means a grant or sale of shares of Stock to a Participant
subject to a Risk of Forfeiture.
2.26.
Restriction Period means the period of time, established by the Committee in
connection with an Award of Restricted Stock, during which the shares of
Restricted Stock are subject to a Risk of Forfeiture described in the applicable
Award Agreement.
2.27.
Risk of Forfeiture means a limitation on the right of the Participant to retain
Restricted Stock or Restricted Stock Units, including a right in the Company to
reacquire shares of Restricted Stock at less than their then Market Value,
arising because of the occurrence or non-occurrence of specified events or
conditions.
2.28.
Restricted Stock Units means rights to receive shares of Stock at the close of a
Restriction Period, subject to a Risk of Forfeiture.
2.29.
Stock means common stock, par value $0.01 per share, of the Company, and such
other securities as may be substituted for Stock pursuant to Section
8.
2.30.
Stock Appreciation Right means a right to receive any excess in the Market Value
of shares of Stock (except as otherwise provided in Section 7.2(c)) over a
specified exercise price.
2.31.
Stock Grant means the grant of shares of Stock not subject to restrictions or
other forfeiture conditions.
2.32.
Stockholders’ Agreement means any agreement by and among the holders of at least
a majority of the outstanding voting securities of the Company and setting
forth, among other provisions, restrictions upon the transfer of shares of Stock
or on the exercise of rights appurtenant thereto (including but not limited to
voting rights).
2.33. Ten
Percent Owner means a person who owns, or is deemed within the meaning of
Section 422(b)(6) of the Code to own, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company (or any
parent or subsidiary corporations of the Company, as defined in Sections 424(e)
and (f), respectively, of the Code). Whether a person is a Ten Percent Owner
shall be determined with respect to an Option based on the facts existing
immediately prior to the Grant Date of the Option.
Unless
the Plan shall have been earlier terminated by the Board, Awards may be granted
under this Plan at any time in the period commencing on the date of approval of
the Plan by the Board and ending immediately prior to the tenth anniversary of
the earlier of the adoption of the Plan by the Board or approval of the Plan by
the Company’s stockholders. Awards granted pursuant to the Plan within that
period shall not expire solely by reason of the termination of the Plan. Awards
of Incentive Options granted prior to stockholder approval of the Plan are
expressly conditioned upon such approval, but in the event of the failure of the
stockholders to approve the Plan shall thereafter and for all purposes be deemed
to constitute Nonstatutory Options.
At no
time shall the number of shares of Stock issued pursuant to or subject to
outstanding Awards granted under the Plan exceed 9,000,000 shares of Stock; subject, however
, to the provisions of Section 8 of the Plan. For purposes of applying the
foregoing limitation, if any Option or Stock Appreciation Right expires,
terminates, or is cancelled for any reason without having been exercised in
full, or if any other Award is forfeited by the recipient, the shares not
purchased by the Optionee or which are forfeited by the recipient shall again be
available for Awards to be granted under the Plan. In addition, settlement of
any Award shall not count against the foregoing limitations except to the extent
settled in the form of Stock. Shares of Stock issued pursuant to the Plan may be
either authorized but unissued shares or shares held by the Company in its
treasury.
The Plan
shall be administered by the Committee; provided, however, that at
any time and on any one or more occasions the Board may itself exercise any of
the powers and responsibilities assigned the Committee under the Plan and when
so acting shall have the benefit of all of the provisions of the Plan pertaining
to the Committee’s exercise of its authorities hereunder; and provided further,
however, that the Committee may delegate to an executive
officer or officers the authority to grant Awards hereunder to employees who are
not officers, and to consultants, in accordance with such guidelines as the
Committee shall set forth at any time or from time to time. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make or to select the manner of making all determinations with
respect to each Award to be granted by the Company under the Plan including the
employee, consultant or director to receive the Award and the form of Award. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective employees, consultants, and directors,
their present and potential contributions to the success of the Company and its
Affiliates, and such other factors as the Committee in its discretion shall deem
relevant. Subject to the provisions of the Plan, the Committee shall also have
complete authority to interpret the Plan, to prescribe, amend and rescind rules
and regulations relating to it, to determine the terms and provisions of the
respective Award Agreements (which need not be identical), and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee’s determinations made in good faith on matters referred to in the Plan
shall be final, binding and conclusive on all persons having or claiming any
interest under the Plan or an Award made pursuant to hereto.
6.1. Eligibility. The
Committee may grant from time to time and at any time prior to the termination
of the Plan one or more Awards, either alone or in combination with any other
Awards, to any employee of or consultant to one or more of the Company and its
Affiliates or to non-employee member of the Board or of any board of directors
(or similar governing authority) of any Affiliate. However, only employees of
the Company, and of any parent or subsidiary corporations of the Company, as
defined in Sections 424(e) and (f), respectively, of the Code, shall be eligible
for the grant of an Incentive Option. Further, in no event shall the number of
shares of Stock covered by Options or other Awards granted to any one person in
any one calendar year exceed 25% of the aggregate number of shares of Stock
subject to the Plan.
6.2. General
Terms of Awards. Each grant of an Award shall be subject to all
applicable terms and conditions of the Plan (including but not limited to any
specific terms and conditions applicable to that type of Award set out in the
following Section), and such other terms and conditions, not inconsistent with
the terms of the Plan, as the Committee may prescribe. No prospective
Participant shall have any rights with respect to an Award, unless and until
such Participant has executed an agreement evidencing the Award, delivered a
fully executed copy thereof to the Company, and otherwise complied with the
applicable terms and conditions of such Award.
6.3. Effect
of Termination of Employment, Etc. Unless the Committee shall provide
otherwise with respect to any Award, if the Participant’s employment or other
association with the Company and its Affiliates ends for any reason, including
because of the Participant’s employer ceasing to be an Affiliate, (a) any
outstanding Option or Stock Appreciation Right of the Participant shall cease to
be exercisable in any respect not later than 90 days following that event and,
for the period it remains exercisable following that event, shall be exercisable
only to the extent exercisable at the date of that event, and (b) any other
outstanding Award of the Participant shall be forfeited or otherwise subject to
return to or repurchase by the Company on the terms specified in the applicable
Award Agreement. Military or sick leave or other bona fide leave shall not be
deemed a termination of employment or other association, provided that
it does not exceed the longer of ninety (90) days or the period during which the
absent Participant’s reemployment rights, if any, are guaranteed by statute or
by contract.
6.4. Transferability
of Awards. Except as otherwise provided in this Section 6.4, Awards shall not be
transferable, and no Award or interest therein may be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will or
by the laws of descent and distribution. All of a Participant’s rights in any
Award may be exercised during the life of the Participant only by the
Participant or the Participant’s legal representative. However, the Committee
may, at or after the grant of an Award of a Nonstatutory Option, or shares of
Restricted Stock, provide that such Award may be transferred by the recipient to
a family member; provided, however
, that any such transfer is without payment of any consideration whatsoever and
that no transfer shall be valid unless first approved by the Committee, acting
in its sole discretion. For this purpose, “family member” means any child,
stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the employee’s household (other than a tenant or employee), a trust in
which the foregoing persons have more than fifty (50) percent of the beneficial
interests, a foundation in which the foregoing persons (or the Participant)
control the management of assets, and any other entity in which these persons
(or the Participant) own more than fifty (50) percent of the voting
interests.
7.1. Options
(a) Date of Grant.
The granting of an Option shall take place at the time specified in the Award
Agreement. Only if expressly so provided in the applicable Award Agreement shall
the Grant Date be the date on which the Award Agreement shall have been duly
executed and delivered by the Company and the Optionee.
(b) Exercise Price.
The price at which shares of Stock may be acquired under each Incentive Option
shall be not less than 100% of the Market Value of Stock on the Grant Date, or
not less than 110% of the Market Value of Stock on the Grant Date if the
Optionee is a Ten Percent Owner. The price at which shares may be acquired under
each Nonstatutory Option shall not be so limited solely by reason of this
Section.
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(c) Option Period. No
Incentive Option may be exercised on or after the tenth anniversary of the Grant
Date, or on or after the fifth anniversary of the Grant Date if the Optionee is
a Ten Percent Owner. The Option period under each Nonstatutory Option shall not
be so limited solely by reason of this Section.
(d) Exercisability.
An Option may be immediately exercisable or become exercisable in such
installments, cumulative or non-cumulative, as the Committee may determine. In
the case of an Option not otherwise immediately exercisable in full, the
Committee may Accelerate such Option in whole or in part at
any time; provided,
however, that in the case of an Incentive Option, any such
Acceleration of the Option would not cause the Option to fail to comply with the
provisions of Section 422 of the Code or the Optionee consents to the
Acceleration.
(e) Method of
Exercise. An Option may be exercised by the Optionee giving written notice, in
the manner provided in Section 16, specifying the number of shares with respect
to which the Option is then being exercised. The notice shall be accompanied by
payment in the form of cash or check payable to the order of the Company in
an amount equal to the exercise price of the shares to be purchased or, if the
Committee had so authorized on the grant of an Incentive Option or on or after
grant of an Nonstatutory Option (and subject to such conditions, if any, as the
Committee may deem necessary to avoid adverse accounting effects to the Company)
by delivery to the Company of
(i) shares of Stock
having a Market Value equal to the exercise price of the shares to be purchased,
or
(ii) unless
prohibited by applicable law, the Optionee’s executed promissory note in the
principal amount equal to the exercise price of the shares to be purchased and
otherwise in such form as the Committee shall have approved.
If the
Stock is traded on an established market, payment of any exercise price may also
be made through and under the terms and conditions of any formal cashless
exercise program authorized by the Company entailing the sale of the Stock
subject to an Option in a brokered transaction (other than to the Company).
Receipt by the Company of such notice and payment in any authorized or
combination of authorized means shall constitute the exercise of the Option.
Within thirty (30) days thereafter but subject to the remaining provisions of
the Plan, the Company shall deliver or cause to be delivered to the Optionee or
his agent a certificate or certificates for the number of shares then being
purchased. Such shares shall be fully paid and nonassessable.
(f) Limit on
Incentive Option Characterization. An Incentive Option shall be considered to be
an Incentive Option only to the extent that the number of shares of Stock for
which the Option first becomes exercisable in a calendar year do not have an
aggregate Market Value (as of the date of the grant of the Option) in excess of
the “current limit”. The current limit for any Optionee for any calendar year
shall be $100,000 minus the
aggregate Market Value at the date of grant of the number of shares of Stock
available for purchase for the first time in the same year under each other
Incentive Option previously granted to the Optionee under the Plan, and under
each other incentive stock option previously granted to the Optionee under any
other incentive stock option plan of the Company and its Affiliates, after
December 31, 1986. Any shares of Stock which would cause the foregoing limit to
be violated shall be deemed to have been granted under a separate Nonstatutory
Option, otherwise identical in its terms to those of the Incentive
Option.
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(g) Notification of
Disposition. Each person exercising any Incentive Option granted under the Plan
shall be deemed to have covenanted with the Company to report to the Company any
disposition of such shares prior to the expiration of the holding periods
specified by Section 422(a)(1) of the Code and, if and to the extent that the
realization of income in such a disposition imposes upon the Company federal,
state, local or other withholding tax requirements, or any such withholding is
required to secure for the Company an otherwise available tax deduction, to
remit to the Company an amount in cash sufficient to satisfy those
requirements.
7.2. Stock
Appreciation Rights.
(a) Tandem or
Stand-Alone. Stock Appreciation Rights may be granted in tandem with an Option
(at or, in the case of a Nonstatutory Option, after, the award of the Option),
or alone and unrelated to an Option. Stock Appreciation Rights in tandem with an
Option shall terminate to the extent that the related Option is exercised, and
the related Option shall terminate to the extent that the tandem Stock
Appreciation Rights are exercised.
(b) Exercise Price.
Stock Appreciation Rights shall have such exercise price as the Committee may
determine, except that in the case of Stock Appreciation Rights in tandem with
Options, the exercise price of the Stock Appreciation Rights shall equal the
exercise price of the related Option.
(c) Other Terms.
Except as the Committee may deem inappropriate or inapplicable in the
circumstances, Stock Appreciation Rights shall be subject to terms and
conditions substantially similar to those applicable to a Nonstatutory Option.
In addition, an Stock Appreciation Right related to an Option which can only be
exercised during limited periods following a Change in Control may entitle the
Participant to receive an amount based upon the highest price paid or offered
for Stock in any transaction relating to the Change in Control or paid during
the thirty (30) day period immediately preceding the occurrence of the change in
control in any transaction reported in the stock market in which the Stock is
normally traded.
7.3.
Restricted Stock.
(a) Purchase Price.
Shares of Restricted Stock shall be issued under the Plan for such
consideration, in cash, other property or services, or any combination thereof,
as is determined by the Committee.
(b) Issuance of
Certificates. Each Participant receiving a Restricted Stock Award, subject to
subsection (c) below, shall be issued a stock certificate in respect of such
shares of Restricted Stock Such certificate shall be registered in the name
of such Participant, and, if applicable, shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such Award
substantially in the following form:
The transferability
of this certificate and the shares represented by this certificate are subject
to the terms and conditions of the Tempur-Pedic International Inc. 2003 Equity
Incentive Plan and an Award Agreement entered into by the registered owner and
Tempur-Pedic International Inc. Copies of such Plan and Agreement are on file in
the offices of Tempur-Pedic International Inc.
(c) Escrow of Shares.
The Committee may require that the stock certificates evidencing shares of
Restricted Stock be held in custody by a designated escrow agent (which may but
need not be the Company) until the restrictions thereon shall have lapsed, and
that the Participant deliver a stock power, endorsed in blank, relating to the
Stock covered by such Award.
(d) Restrictions and
Restriction Period. During the Restriction Period applicable to shares of
Restricted Stock, such shares shall be subject to limitations on transferability
and a Risk of Forfeiture arising on the basis of such conditions related to the
performance of services, Company or Affiliate performance or otherwise as the
Committee may determine and provide for in the applicable Award Agreement. Any
such Risk of Forfeiture may be waived or terminated, or the Restriction Period
shortened, at any time by the Committee on such basis as it deems
appropriate.
(e) Rights Pending
Lapse of Risk of Forfeiture or Forfeiture of Award. Except as otherwise provided
in the Plan or the applicable Award Agreement, at all times prior to lapse of
any Risk of Forfeiture applicable to, or forfeiture of, an Award of Restricted
Stock, the Participant shall have all of the rights of a stockholder of the
Company, including the right to vote, and the right to receive any dividends
with respect to, the shares of Restricted Stock. The Committee, as determined at
the time of Award, may permit or require the payment of cash dividends to be
deferred and, if the Committee so determines, reinvested in additional
Restricted Stock to the extent shares are available under Section
4.
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(f) Lapse of
Restrictions. If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock, the certificates for such shares shall be
delivered to the Participant promptly if not theretofore so
delivered.
7.4.
Restricted Stock Units.
(a) Character. Each
Restricted Stock Unit shall entitle the recipient to a share of Stock at a close
of such Restriction Period as the Committee may establish and subject to a Risk
of Forfeiture arising on the basis of such conditions relating to the
performance of services, Company or Affiliate performance or otherwise as the
Committee may determine and provide for in the applicable Award Agreement. Any
such Risk of Forfeiture may be waived or terminated, or the Restriction Period
shortened, at any time by the Committee on such basis as it deems
appropriate.
(b) Form and Timing
of Payment. Payment of earned Restricted Stock Units shall be made in a single
lump sum following the close of the applicable Restriction Period. At
the discretion of the Committee, Participants may be entitled to receive
payments equivalent to any dividends declared with respect to Stock referenced
in grants of Restricted Stock Units but only following the close of the
applicable Restriction Period and then only if the underlying Stock shall have
been earned. Unless the Committee shall provide otherwise, any such dividend
equivalents shall be paid, if at all, without interest or other
earnings.
7.5.
Performance Units.
(a) Character. Each
Performance Unit shall entitle the recipient to the value of a specified number
of shares of Stock, over the initial value for such number of shares, if any,
established by the Committee at the time of grant, at the close of a specified
Performance Period to the extent specified Performance Goals shall have been
achieved.
(b) Earning of
Performance Units. The Committee shall set Performance Goals in its discretion
which, depending on the extent to which they are met within the applicable
Performance Period, will determine the number and value of Performance Units
that will be paid out to the Participant. After the applicable Performance
Period has ended, the holder of Performance Units shall be entitled to receive
payout on the number and value of Performance Units earned by the Participant
over the Performance Period, to be determined as a function of the extent to
which the corresponding Performance Goals have been achieved.
(c) Form and Timing
of Payment. Payment of earned Performance Units shall be made in a single lump
sum following the close of the applicable Performance Period. At the discretion
of the Committee, Participants may be entitled to receive any dividends declared
with respect to Stock which have been earned in connection with grants of
Performance Units which have been earned, but not yet distributed to
Participants. The Committee may permit or, if it so provides at grant require, a
Participant to defer such Participant’s receipt of the payment of cash or the
delivery of Stock that would otherwise be due to such Participant by virtue of
the satisfaction of any requirements or goals with respect to Performance Units.
If any such deferral election is required or permitted, the Committee shall
establish rules and procedures for such payment deferrals.
7.6. Stock
Grants. Stock Grants shall be awarded solely in recognition of significant
contributions to the success of the Company or its Affiliates, in lieu of
compensation otherwise already due and in such other limited circumstances as
the Committee deems appropriate. Stock Grants shall be made without forfeiture
conditions of any kind.
7.7.
Qualified Performance-Based Awards.
(a) Purpose. The
purpose of this Section 7.7 is to provide the Committee the ability to qualify
Awards as “performance-based compensation” under Section 162(m) of the Code. If
the Committee, in its discretion, decides to grant an Award as a
Qualified Performance-Based Award, the provisions of this Section 7.7 will
control over any contrary provision contained in the Plan. In the course of
granting any Award, the Committee may specifically designate the Award as
intended to qualify as a Qualified Performance-Based Award. However, no Award
shall be considered to have failed to qualify as a Qualified Performance-Based
Award solely because the Award is not expressly designated as a Qualified
Performance-Based Award, if the Award otherwise satisfies the provisions of this
Section 7.7 and the requirements of Section 162(m) of the Code and the
regulations thereunder applicable to “performance-based
compensation.”
(b) Authority. All
grants of Awards intended to qualify as Qualified Performance-Based Awards and
determination of terms applicable thereto shall be made by the Committee or, if
not all of the members thereof qualify as “outside directors” within the meaning
of applicable IRS regulations under Section 162 of the Code, a subcommittee of
the Committee consisting of such of the members of the Committee as do so
qualify. Any action by such a subcommittee shall be considered the action of the
Committee for purposes of the Plan.
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(b) Applicability.
This Section 7.7 will apply only to those Covered Employees, or to those persons
who the Committee determines are reasonably likely to become Covered Employees
in the period covered by an Award, selected by the Committee to receive
Qualified Performance-Based Awards. The Committee may, in its discretion, grant
Awards to Covered Employees that do not satisfy the requirements of this Section
7.7.
(c) Discretion of
Committee with Respect to Qualified Performance-Based Awards. Options may be
granted as Qualified Performance-Based Awards in accordance with Section 7.1,
except that the exercise price of any Option intended to qualify as a Qualified
Performance-Based Award shall in no event be less that the Market Value of the
Stock on the date of grant. With regard to other Awards intended to qualify as
Qualified Performance-Based Awards, such as Restricted Stock, Restricted Stock
Units, or Performance Units, the Committee will have full discretion to select
the length of any applicable Restriction Period or Performance Period, the kind
and/or level of the applicable Performance Goal, and whether the Performance
Goal is to apply to the Company, a Subsidiary or any division or business unit
or to the individual. Any Performance Goal or Goals applicable to Qualified
Performance-Based Awards shall be objective, shall be established not later than
ninety (90) days after the beginning of any applicable Performance Period (or at
such other date as may be required or permitted for “performance-based
compensation” under Section 162(m) of the Code) and shall otherwise meet the
requirements of Section 162(m) of the Code, including the requirement that the
outcome of the Performance Goal or Goals be substantially uncertain (as defined
in the regulations under Section 162(m) of the Code) at the time
established.
(d) Payment of
Qualified Performance-Based Awards. A Participant will be eligible to receive
payment under a Qualified Performance-Based Award which is subject to
achievement of a Performance Goal or Goals only if the applicable Performance
Goal or Goals period are achieved within the applicable Performance Period, as
determined by the Committee. In determining the actual size of an individual
Qualified Performance-Based Award, the Committee may reduce or eliminate the
amount of the Qualified Performance-Based Award earned for the Performance
Period, if in its sole and absolute discretion, such reduction or elimination is
appropriate.
(e) Maximum Award
Payable. The maximum Qualified Performance-Based Award payment to any one
Participant under the Plan for a Performance Period is the number of shares of
Stock set forth in Section 4 above, or if the Qualified Performance-Based Award
is paid in cash, that number of shares multiplied by the Market Value of the
Stock as of the date the Qualified Performance-Based Award is
granted.
(f) Limitation on
Adjustments for Certain Events. No adjustment of any Qualified Performance-Based
Award pursuant to Section 8 shall be made except on such basis, if any, as will
not cause such Award to provide other than “performance-based compensation”
within the meaning of Section 162(m) of the Code.
7.8. Awards
to Participants Outside the United States. The Committee may modify the terms of
any Award under the Plan, granted to a Participant who is, at the time of grant
or during the term of the Award, resident or primarily employed outside of the
United States in any manner deemed by the Committee to be necessary or
appropriate in order that the Award shall conform to laws, regulations, and
customs of the country in which the Participant is then resident or primarily
employed, or so that the value and other benefits of the Award to the
Participant, as affected by foreign tax laws and other restrictions applicable
as a result of the Participant’s residence or employment abroad, shall be
comparable to the value of such an Award to a Participant who is resident or
primarily employed in the United States. The Committee may establish supplements
to, or amendments, restatements, or alternative versions of, the Plan for the
purpose of granting and administrating any such modified Award. No such
modification, supplement, amendment, restatement or alternative version may
increase the share limit of Section 4.
8.1.
Adjustment for Corporate Actions. All of the share numbers set forth in the Plan
reflect the capital structure of the Company as of December 23, 2003. Subject to
Section 8.2, if subsequent to that date the outstanding shares of Stock (or any
other securities covered by the Plan by reason of the prior application of this
Section) are increased, decreased, or exchanged for a different number or kind
of shares or other securities, or if additional shares or new or different
shares or other securities are distributed with respect to shares of Stock,
through merger, consolidation, sale of all or substantially all the property of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, or other similar distribution with respect to
such shares of Stock, an appropriate and proportionate adjustment will be made
in (i) the maximum numbers and kinds of shares provided in Section 4, (ii) the
numbers and kinds of shares or other securities subject to the then outstanding
Awards, (iii) the exercise price for each share or other unit of any other
securities subject to then outstanding Options and Stock Appreciation Rights
(without change in the aggregate purchase price as to which such Options or
Rights remain exercisable), and (iv) the repurchase price of each share of
Restricted Stock then subject to a Risk of Forfeiture in the form of a Company
repurchase right.
8.2. Treatment in
Certain Acquisitions. Subject to any provisions of then outstanding Awards
granting greater rights to the holders thereof, in the event of an Acquisition
in which outstanding Awards are not Accelerated in full pursuant to Section 9,
any then outstanding Awards shall nevertheless Accelerate in full if not assumed
or replaced by comparable Awards referencing shares of the capital stock of the
successor or acquiring entity or parent thereof, and thereafter (or after a
reasonable period following the Acquisition, as determined by the Committee)
terminate. As to any one or more outstanding Awards which are not otherwise
Accelerated in full by reason of such Acquisition, the Committee may also,
either in advance of an Acquisition or at the time thereof and upon such terms
as it may deem appropriate, provide for the Acceleration of such outstanding
Awards in the event that the employment of the Participants should subsequently
terminate following the Acquisition. Each outstanding Award that is assumed in
connection with an Acquisition, or is otherwise to continue in effect subsequent
to the Acquisition, will be appropriately adjusted, immediately after the
Acquisition, as to the number and class of securities and other relevant terms
in accordance with Section 8.1. 1
8.3.
Dissolution or Liquidation. Upon dissolution or liquidation of the Company,
other than as part of an Acquisition or similar transaction, each outstanding
Option and Stock Appreciation Right shall terminate, but the Optionee or Stock
Appreciation Right holder shall have the right, immediately prior to the
dissolution or liquidation, to exercise the Option or Stock Appreciation Right
to the extent exercisable on the date of dissolution or
liquidation.
8.4.
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events. In the event of any corporate action not specifically covered by the
preceding Sections, including but not limited to an extraordinary cash
distribution on Stock, a corporate separation or other reorganization or
liquidation, the Committee may make such adjustment of outstanding Awards and
their terms, if any, as it, in its sole discretion, may deem equitable and
appropriate in the circumstances. The Committee may make adjustments in the
terms and conditions of, and the criteria included in, Awards in recognition of
unusual or nonrecurring events (including, without limitation, the events
described in this Section) affecting the Company or the financial statements of
the Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan.
8.5. Related
Matters. Any adjustment in Awards made pursuant to this Section 8 shall be
determined and made, if at all, by the Committee and shall include any
correlative modification of terms, including of Option exercise prices, rates of
vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for
Restricted Stock, and Performance Goals and other financial objectives which the
Committee may deem necessary or appropriate so as to ensure the rights of the
Participants in their respective Awards are not substantially diminished nor
enlarged as a result of the adjustment and corporate action other than as
expressly contemplated in this Section 8. No fraction of a share shall be
purchasable or deliverable upon exercise, but in the event any adjustment
hereunder of the number of shares covered by an Award shall cause such number to
include a fraction of a share, such number of shares shall be adjusted to the
nearest smaller whole number of shares. No adjustment of an Option exercise
price per share pursuant to this Section 8 shall result in an exercise price
which is less than the par value of the Stock.
Except as
otherwise provided below, upon the occurrence of a Change in
Control:
(a) any
and all Options and Stock Appreciation Rights not already exercisable in full
shall Accelerate with respect to 50% of the shares for which such Options or
Stock Appreciation Rights are not then exercisable;
(b) any
Risk of Forfeiture applicable to Restricted Stock and Restricted Stock Units
which is not based on achievement of Performance Goals shall lapse with respect
to 50% of the Restricted Stock and Restricted Stock Units still subject to such
Risk of Forfeiture immediately prior to the Change of Control; and
(c) All
outstanding Awards of Restricted Stock and Restricted Stock Units conditioned on
the achievement of Performance Goals and the target payout opportunities
attainable under outstanding Performance Units shall be deemed to have been
satisfied as of the effective date of the Change in Control as to a pro rata
number of shares based on the assumed achievement of all relevant Performance
Goals and the length of time within the Performance Period which has elapsed
prior to the Change in Control. All such Awards of Performance Units and
Restricted Stock Units shall be paid to the extent earned to Participants in
accordance with their terms within thirty (30) days following the effective date
of the Change in Control.
1 1/Note that Change of Control,
as defined, includes certain transactions which are also “Acquisitions.”
Therefore, both Section 8.2 and Article 9 may apply to the same event prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.
None
of the foregoing shall apply, however, (i) in the case of an Qualified
Performance-Based Award specifically designated as such by the Committee at the
time of grant (except to the extent allowed by Section 162(m) of the Code), (ii)
in the case of any Award pursuant to an Award Agreement requiring other or
additional terms upon a Change in Control (or similar event), or (iii) if
specifically prohibited under applicable
laws, or
by the rules and regulations of any governing governmental agencies or national
securities exchanges.
10.1. In
General. Options and Restricted Stock shall be settled in accordance with their
terms. All other Awards may be settled in cash, Stock, or other Awards, or a
combination thereof, as determined by the Committee at or after grant and
subject to any contrary Award Agreement. The Committee may not require
settlement of any Award in Stock pursuant to the immediately preceding sentence
to the extent issuance of such Stock would be prohibited or unreasonably delayed
by reason of any other provision of the Plan.
10.2.
Violation of Law. Notwithstanding any other provision of the Plan or the
relevant Award Agreement, if, at any time, in the reasonable opinion of the
Company, the issuance of shares of Stock covered by an Award may constitute a
violation of law, then the Company may delay such issuance and the delivery of a
certificate for such shares until (i) approval shall have been obtained from
such governmental agencies, other than the Securities and Exchange Commission,
as may be required under any applicable law, rule, or regulation and (ii) in the
case where such issuance would constitute a violation of a law administered by
or a regulation of the Securities and Exchange Commission, one of the following
conditions shall have been satisfied:
(a) the
shares are at the time of the issue of such shares effectively registered under
the Securities Act of 1933; or
(b) the
Company shall have determined, on such basis as it deems appropriate (including
an opinion of counsel in form and substance satisfactory to the Company) that
the sale, transfer, assignment, pledge, encumbrance or other disposition of such
shares or such beneficial interest, as the case may be, does not require
registration under the Securities Act of 1933, as amended or any applicable
State securities laws.
The
Company shall make all reasonable efforts to bring about the occurrence of said
events.
10.3.
Corporate Restrictions on Rights in Stock. Any Stock to be issued pursuant to
Awards granted under the Plan shall be subject to all restrictions upon the
transfer thereof which may be now or hereafter imposed by the charter,
certificate or articles, and by-laws, of the Company. Whenever Stock is to be
issued pursuant to an Award, if the Committee so directs at or after grant, the
Company shall be under no obligation to issue such shares until such time, if
ever, as the recipient of the Award (and any person who exercises any Option, in
whole or in part), shall have become a party to and bound by the Stockholders’
Agreement, if any. In the event of any conflict between the provisions of this
Plan and the provisions of the Stockholders’ Agreement, the provisions of the
Stockholders’ Agreement shall control except as required to fulfill the
intention that this Plan constitute an incentive stock option plan within the
meaning of Section 422 of the Code, but insofar as possible the
provisions of the Plan and such Agreement shall be construed so as to give full
force and effect to all such provisions.
10.4.
Investment Representations. The Company shall be under no obligation to issue
any shares covered by any Award unless the shares to be issued pursuant to
Awards granted under the Plan have been effectively registered under the
Securities Act of 1933, as amended, or the Participant shall have made such
written representations to the Company (upon which the Company believes it may
reasonably rely) as the Company may deem necessary or appropriate for purposes
of confirming that the issuance of such shares will be exempt from the
registration requirements of that Act and any applicable state securities laws
and otherwise in compliance with all applicable laws, rules and regulations,
including but not limited to that the Participant is acquiring the shares for
his or her own account for the purpose of investment and not with a view to, or
for sale in connection with, the
10.5.
Registration. If the Company shall deem it necessary or desirable to register
under the Securities Act of 1933, as amended or other applicable statutes any
shares of Stock issued or to be issued pursuant to Awards granted under the
Plan, or to qualify any such shares of Stock for exemption from the Securities
Act of 1933, as amended or other applicable statutes, then the Company shall
take such action at its own expense. The Company may require from each recipient
of an Award, or each holder of shares of Stock acquired pursuant to the Plan,
such information in writing for use in any registration statement, prospectus,
preliminary prospectus or offering circular as is reasonably necessary for that
purpose and may require reasonable indemnity to the Company and its officers and
directors from that holder against all losses, claims, damage and liabilities
arising from use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made. In addition, the Company may require of any such person that he or she
agree that, without the prior written consent of the Company or the managing
underwriter in any public offering of shares of Stock, he or she will not sell,
make any short sale of, loan, grant any option for the purchase of, pledge or
otherwise encumber, or otherwise dispose of, any shares of Stock during the 180
day period commencing on the effective date of the registration statement
relating to the underwritten public offering of securities. Without limiting the
generality of the foregoing provisions of this Section 10.5, if in connection
with any underwritten public offering of securities of the Company the managing
underwriter of such offering requires that the Company’s directors and officers
enter into a lock-up agreement containing provisions that are more restrictive
than the provisions set forth in the preceding sentence, then (a) each holder of
shares of Stock acquired pursuant to the Plan (regardless of whether such person
has complied or complies with the provisions of clause (b) below) shall be bound
by, and shall be deemed to have agreed to, the same lock-up terms as those to
which the Company’s directors and officers are required to adhere; and (b) at
the request of the Company or such managing underwriter, each such person shall
execute and deliver a lock-up agreement in form and substance equivalent to that
which is required to be executed by the Company’s directors and
officers.
10.6. Placement
of Legends; Stop Orders; etc. Each share of Stock to be issued
pursuant to Awards granted under the Plan may bear a reference to the investment
representation made in accordance with Section 10.4 in addition to any other
applicable restriction under the Plan, the terms of the Award and if applicable
under the Stockholders’ Agreement and to the fact that no registration statement
has been filed with the Securities and Exchange Commission in respect to such
shares of Stock. All certificates for shares of Stock or other securities
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of any stock exchange upon which the Stock
is then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
10.7. Tax
Withholding. Whenever shares of Stock are issued or to be issued
pursuant to Awards granted under the Plan, the Company shall have the right to
require the recipient to remit to the Company an amount sufficient to satisfy
federal, state, local or other withholding tax requirements if, when, and to the
extent required by law (whether so required to secure for the Company an
otherwise available tax deduction or otherwise) prior to the delivery of any
certificate or certificates for such shares. The obligations of the Company
under the Plan shall be conditional on satisfaction of all such withholding
obligations and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
recipient of an Award. However, in such cases Participants may elect, subject to
the approval of the Committee, to satisfy an applicable withholding requirement,
in whole or in part, by having the Company withhold shares to satisfy their tax
obligations. Participants may only elect to have Shares withheld having a Market
Value on the date the tax is to be determined equal to the minimum statutory
total tax which could be imposed on the transaction. All elections shall be
irrevocable, made in writing, signed by the Participant, and shall be subject to
any restrictions or limitations that the Committee deems
appropriate.
The
Company shall at all times during the term of the Plan and any outstanding
Awards granted hereunder reserve or otherwise keep available such number of
shares of Stock as will be sufficient to satisfy the requirements of the Plan
(if then in effect) and the Awards and shall pay all fees and expenses
necessarily incurred by the Company in connection therewith.
A
Participant shall not be deemed for any purpose to be a stockholder of the
Company with respect to any of the shares of Stock subject to an Award, unless
and until a certificate shall have been issued therefor and delivered to the
Participant or his agent. Any Stock to be issued pursuant to Awards granted
under the Plan shall be subject to all restrictions upon the transfer thereof
which may be now or hereafter imposed by the Certificate of
Incorporation and the By-laws of the Company. Nothing contained in the Plan or
in any Award Agreement shall confer upon any recipient of an Award any right
with respect to the continuation of his or her employment or other association
with the Company (or any Affiliate), or interfere in any way with the right of
the Company (or any Affiliate), subject to the terms of any separate employment
or consulting agreement or provision of law or corporate articles or by-laws to
the contrary, at any time to terminate such employment or consulting agreement
or to increase or decrease, or otherwise adjust, the other terms and conditions
of the recipient’s employment or other association with the Company and its
Affiliates.
The Plan
is intended to constitute an “unfunded” plan for incentive compensation, and the
Plan is not intended to constitute a plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments with respect to Options,
Stock Appreciation Rights and other Awards hereunder, provided, however
, that the existence of such trusts or other arrangements is consistent with the
unfunded status of the Plan.
Neither
the adoption of the Plan by the Board nor the submission of the Plan to the
stockholders of the Company shall be construed as creating any limitations on
the power of the Board to adopt such other incentive arrangements as it may deem
desirable, including without limitation, the granting of stock options and
restricted stock other than under the Plan, and such arrangements may be either
applicable generally or only in specific cases.
The Board
may at any time terminate the Plan or make such modifications of the Plan as it
shall deem advisable. Unless the Board otherwise expressly provides, no
amendment of the Plan shall affect the terms of any Award outstanding on the
date of such amendment. In any case, no termination or amendment of the Plan
may, without the consent of any recipient of an Award granted hereunder,
adversely affect the rights of the recipient under such Award.
Subject
to the last sentence of this paragraph, the Committee may amend the terms of any
Award theretofore granted, prospectively or retroactively, provided that the
Award as amended is consistent with the terms of the Plan, but no such amendment
shall impair the rights of the recipient of such Award without his or her
consent. Except in connection with corporate transactions involving
the Company (including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, or exchange of shares), no
amendment, alteration or modification to any Option or Stock Appreciation Right
that has the effect of a repricing thereof or the cancellation or regrant
of such Option or Stock Appreciation Rights is allowable without the prior
approval of the stockholders of the Company, and the Committee may not establish
or maintain any program under which outstanding Options are surrendered or
canceled in exchange for Options with a lower exercise price or greater economic
value; provided however, that appropriate adjustments may be made to outstanding
Options and Stock Appreciation Rights to achieve compliance with applicable law,
including Section 409A of the Code.
Any
notice, demand, request or other communication hereunder to any party shall be
deemed to be sufficient if contained in a written instrument delivered in person
or duly sent by first class registered, certified or overnight mail, postage
prepaid, or telecopied with a confirmation copy by regular, certified or
overnight mail, addressed or telecopied, as the case may be, (i) if to the
recipient of an Award, at his or her residence address last filed with the
Company and (ii) if to the Company, at its principal place of business,
addressed to the attention of its Treasurer, or to such other address or
telecopier number, as the case may be, as the addressee may have designated by
notice to the addressor. All such notices, requests, demands and other
communications shall be deemed to have been received: (i) in the case of
personal delivery, on the date of such delivery; (ii) in the case of mailing,
when received by the addressee; and (iii) in the case of facsimile transmission,
when confirmed by facsimile machine report.
The Plan
and all Award Agreements and actions taken thereunder shall be governed,
interpreted and enforced in accordance with the laws of the State of Delaware,
without regard to the conflict of laws principles thereof.
-------------------------------------------------------------------------------------------
This
Plan was last updated effective May 6, 2008.
PROXY CARD
TEMPUR-PEDIC
INTERNATIONAL INC.
PROXY
FOR 2009 ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned stockholder of TEMPUR-PEDIC INTERNATIONAL INC., a Delaware
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders and Proxy Statement, each dated March 25, 2009, and hereby appoint
Bhaskar Rao and Dale E. Williams, each of them as proxies and attorneys-in-fact,
with full power of substitution, on behalf and in name of the undersigned, to
represent the undersigned at the 2009 Annual Meeting of Stockholders of
Tempur-Pedic International Inc. to be held at 10:00 a.m., local time, on May 5,
2009 at the offices of Bingham McCutchen LLP, 13th Floor,
One Federal Street, Boston, Massachusetts 02110 and at any adjournment or
adjournments thereof, and to vote all shares of common stock which the
undersigned would be entitled to vote, if personally present, on the matters set
forth on the reverse side and, in accordance with their discretion, on any other
business that may come before the Annual Meeting, and revokes all proxies
previously given by the undersigned with respect to the shares covered
hereby.
THIS
PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED,
WILL
BE VOTED FOR THE ELECTION OF DIRECTORS AND AS SAID PROXIES DEEM
ADVISABLE
ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(IMPORTANT
— PLEASE SIGN AND DATE THIS PROXY ON THE REVERSE SIDE OF THIS CARD)
| x |
PLEASE
MARK YOUR VOTE AS IN THIS EXAMPLE
|
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| 1. |
ELECTION OF
DIRECTORS
|
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Nominees:
|
(01)
Mark Sarvary
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(02)
H. Thomas Bryant
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(03)
Francis A. Doyle
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(04)
John Heil
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(05)
Peter K. Hoffman
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(06)
Sir Paul Judge
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(07)
Nancy F. Koehn
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|
(08)
Christopher A. Masto
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(09)
P. Andrews McLane
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(10)
Robert B. Trussell, Jr.
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FOR
ALL NOMINEES
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AGAINST
ALL NOMINEES
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(except
as marked)
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(Instructions:
To withhold authority to vote for any indicated nominee, write the
numbers(s) of the Nominee(s) on the line provided to the
right.)
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||||||||||
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2. APPROVAL
OF THE FIRST AMENDMENT TO THE AMENDED AND RESTATED 2003 EQUITY INCENTIVE
PLAN
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FOR
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AGAINST
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ABSTAIN
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| o | o | o | ||||||||
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3. RATIFICATION OF ERNST &
YOUNG LLP AS INDEPENDENT AUDITORS
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||||||||||
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FOR
|
AGAINST
|
ABSTAIN
|
||||||||
| o | o | o | ||||||||
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MARK
BOX AT RIGHT IF YOU PLAN TO ATTEND THE ANNUAL MEETING.
|
o
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|
|
MARK
BOX AT RIGHT IF AN ADDRESS CHANGE HAS BEEN NOTED ON THIS
CARD.
|
o
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This
proxy is revocable and the undersigned may revoke it at any time prior to the
Annual Meeting by giving written notice of such revocation to the Secretary of
Tempur-Pedic International prior to the meeting or by filing with the Secretary
of Tempur-Pedic International prior to the meeting a later-dated proxy. Should
the undersigned be present and want to vote in person at the Annual Meeting, or
at any postponement or adjournment thereof, the undersigned may revoke this
proxy by giving written notice of such revocation to the Secretary of
Tempur-Pedic International on a form provided at the Annual Meeting. The
undersigned hereby acknowledges receipt of a Notice of Annual Meeting of
Stockholders of Tempur-Pedic International called for May 5, 2009 and the Proxy
Statement for the Annual Meeting prior to the signing of this
proxy.
|
Signature
|
Date
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|
|
Signature
|
Date
|
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(if
held jointly)
|
||
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Please
sign exactly as name appears on this proxy. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give your full title. If a
corporation, please sign in full corporate name by authorized officer. If
a partnership or LLC, please sign in firm name by authorized partner or
member.
|
PLEASE
MARK, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
CONTROL
NUMBER:
[ ]