Underwriting Agreement

Exhibit 10.17


18,750,000 Shares


TEMPUR-PEDIC INTERNATIONAL INC.


Common Stock


UNDERWRITING AGREEMENT
----------------------


December 17, 2003


Lehman Brothers Inc. Goldman, Sachs & Co. UBS Securities LLC Citigroup Global Markets Inc. CIBC World Markets Corp. U.S. Bancorp Piper Jaffray Inc. c/o Lehman Brothers Inc. 745 Seventh Avenue, 19th Floor New York, New York 10019


Ladies and Gentlemen:


Tempur-Pedic International Inc., a Delaware corporation (the "Company"), and certain stockholders of the Company named in Schedule 2 hereto (the "Selling Stockholders"), propose to sell an aggregate of 18,750,000 shares (the "Firm Stock") of the Company's common stock par value $0.01 per share (the "Common Stock"). Of the 18,750,000 shares of the Firm Stock, 6,250,000 are being sold by the Company and 12,500,000 are being sold by the Selling Stockholders. In addition, the Selling Stockholders propose to grant to the Underwriters named in Schedule 1 hereto (the "Underwriters") an option to purchase up to an aggregate of 2,812,500 additional shares of the Common Stock on the terms and for the purposes set forth in Section 3 (the "Option Stock"). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the "Stock." This is to confirm the agreement concerning the purchase of the Stock from the Company and the Selling Stockholders by the Underwriters.


1. Representations, Warranties and Agreements of the Company. The Company represents, warrants and agrees that:


(a) A registration statement on Form S-1, and amendments
thereto, with respect to the Stock have (i) been prepared by the
Company in conformity with the requirements of the Securities Act of
1933, as amended (the "Securities Act") and the rules and regulations
(the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder, (ii) been filed with the
Commission under the Securities Act and (iii) become effective under
the Securities Act. Copies


of such registration statement and each of the amendments thereto have
been delivered by the Company to you as the representatives (the
"Representatives") of the Underwriters. As used in this Agreement,
"Effective Time" means the date and the time as of which such
registration statement, or the most recent post-effective amendment
thereto, if any, was declared effective by the Commission; "Effective
Date" means the date of the Effective Time; "Preliminary Prospectus"
means each prospectus included in such registration statement, or
amendments thereof, before it became effective under the Securities
Act and any prospectus filed with the Commission by the Company with
the consent of the Representatives pursuant to Rule 424(a) of the
Rules and Regulations; "Registration Statement" means such
registration statement, as amended at the Effective Time, including
all information contained in the final prospectus filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations and
deemed to be a part of the registration statement as of the Effective
Time pursuant to paragraph (b) of Rule 430A of the Rules and
Regulations, and including any registration registering additional
shares of Common Stock filed with the Commission pursuant to Rule
462(b) of the Rules and Regulations; and "Prospectus" means such final
prospectus, as first filed with the Commission pursuant to paragraph
(1) or (4) of Rule 424(b) of the Rules and Regulations. The Commission
has not issued any order preventing or suspending the use of any
Preliminary Prospectus.


(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to
the requirements of the Securities Act and the Rules and Regulations
and do not and will not, as of the applicable effective date (as to
the Registration Statement and any amendment thereto) and as of the
applicable filing date (as to the Prospectus and any amendment or
supplement thereto) contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided that
no representation or warranty is made as to information contained in
or omitted from the Registration Statement or the Prospectus in
reliance upon and in conformity with written information furnished to
the Company through the Representatives by or on behalf of any
Underwriter specifically for inclusion therein.


(c) The Company and each of its subsidiaries (as defined in
Section 18) have been duly organized, are validly existing and are in
good standing under the laws of their respective jurisdictions of
organization and are duly qualified to do business and are in good
standing in each jurisdiction in which their respective ownership or
lease of property or the


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conduct of their respective businesses requires such qualification,
except where the failure to be so organized, existing in good standing
or duly qualified would not reasonably be expected to have a material
adverse effect on the general affairs, management, consolidated
financial position, stockholders' equity, results of operations or
business of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). The Company and each of its subsidiaries
have all corporate power and authority necessary to own or hold their
respective properties and to conduct the businesses in which they are
engaged. The subsidiaries of the Company listed on Schedule 3 hereto
are the only subsidiaries of the Company.


(d) The Company has an authorized capitalization as set forth
in the Prospectus; all of the issued shares of capital stock of the
Company and its subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable; and all of the issued
shares of capital stock of each subsidiary of the Company are owned
directly or indirectly by the Company (other than the directors'
qualifying shares for foreign subsidiaries), free and clear of all
liens, encumbrances, equities or claims, other than liens,
encumbrances, equities or claims contemplated under the amended and
restated senior credit facilities dated as of August 15, 2003, entered
into by and among Tempur-Pedic, Inc., Tempur Production USA, Inc.,
Tempur World Holding Company ApS and Dan-Foam ApS, as the borrowers,
the guarantors named therein and the agents and lenders party thereto,
or such as are otherwise described in the Prospectus, and none of such
shares of capital stock were issued in violation in any material
respect of preemptive or other similar rights arising by operation of
law, under the charter and bylaws of the Company and each of its
subsidiaries or under any agreement to which the Company and each of
its subsidiaries is a party or otherwise.


(e) The shares of the Stock to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein, will be validly issued, fully paid and non-assessable; the
shares of the Stock to be sold by the Selling Stockholders to the
Underwriters hereunder have been duly and validly authorized and, when
issued upon the automatic conversion of the existing shares of
preferred stock or common stock held by such Selling Stockholders or
the exercise or conversion of warrants or the exercise of options held
by such Selling Stockholders, will be validly issued and fully paid
and non-assessable; and the Stock will conform to the descriptions
thereof contained in the Prospectus.


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(f) The Company has all requisite corporate power and authority
to execute, deliver and perform its respective obligations under this
Agreement.


(g) This Agreement has been duly and validly authorized,
executed and delivered by the Company.


(h) The execution, delivery and performance of this Agreement by
the Company, and the consummation of the transactions contemplated
hereby will not (i) conflict with or result in a breach or violation
of any of the terms or provisions of, impose any lien, charge or
encumbrance upon any property or assets of the Company and its
subsidiaries, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement, license or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to
which any of the property or assets of the Company or any of its
subsidiaries is subject, (ii) result in any violation of the
provisions of the charter or bylaws of the Company or any of its
subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries, or (iii) assuming the accuracy of
the Underwriters' representations herein and compliance by the
Underwriters with their obligations hereunder, result in any violation
of any of their properties or assets; and, except for filings under
the Securities Act and applicable state or foreign securities laws in
connection with the purchase and sale of the Stock by the
Underwriters, no consent, approval, authorization or order of, or
filing or registration with, any such court or governmental agency or
body is required for the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions
contemplated hereby.


(i) The historical financial statements (including the related
notes) included in the Prospectus comply as to form in all material
respects with the requirements of Regulation S-X under the Securities
Act and present fairly the financial condition, results of operations
and cash flows of the entities purported to be shown thereby, at the
dates and for the periods indicated, and have been prepared in
conformity with accounting principles generally accepted in the United
States applied on a consistent basis throughout the periods involved.
The other financial data, selected pro forma ratios and other pro
forma financial information, operating data and statistical
information and data included in the Prospectus is presented fairly
and has been prepared on a basis consistent in all material respects
(except for, with respect to the pro forma information, the pro forma
adjustments described in the Prospectus) with such financial
statements and the books and records of the Company.


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(j) Except as set forth in the Prospectus, there are no legal or
governmental proceedings pending to the Company of any of its
subsidiaries is a party or of which any property or assets of the
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any such subsidiary would reasonably be
expected to have a Material Adverse Effect, and to the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or others.


(k) Except as set forth in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities to be
registered pursuant to the Registration Statement or in any securities
registered or to be registered pursuant to any other registration
statement filed by or required to be filed by the Company under the
Securities Act.


(l) Except as disclosed in the Prospectus, since the date of the
latest audited consolidated financial statements of the Company and
its subsidiaries included in the Prospectus, none of the Company nor
any of its subsidiaries has incurred any liability or obligation,
direct or contingent, or entered into any transaction, in each case
not in the ordinary course of business, that is material to the
Company and each of its subsidiaries taken as a whole, and there has
not occurred, to the knowledge of the Company, any development or
event involving or reasonably likely to result in a Material Adverse
Effect and, except as disclosed in or contemplated by the Prospectus,
there has been no (i) dividend or distribution of any kind declared,
paid or made by the Company or its affiliates on any class of their
respective capital stock, (ii) issuance of securities by the Company
or its affiliates (other than pursuant to an issuance by the Company
or its affiliates of options to purchase the capital stock of the
Company or its affiliates or exercise of any such options) or (iii)
material increase in short-term or long-term debt of the Company.


(m) The Company and its subsidiaries (i) make and keep accurate
books and records and (ii) maintain a system of internal accounting
controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of the Company's financial statements in conformity with
accounting principles generally accepted in the United States and to
maintain accountability for its assets, (C) access to the Company's
assets is permitted only in accordance with management's authorization
and (D) the recorded


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accountability for the Company's assets is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.


(n) (i) Each of the Company and its subsidiaries has established
and maintains disclosure controls and procedures (as such term is
defined in Rule 13a-14 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); (ii) such disclosure controls and
procedures are designed to ensure that information required to be
disclosed by the Company and each of its subsidiaries in the reports
they file or submit under the Exchange Act is accumulated and
communicated to the management of the Company and each of its
subsidiaries, including their respective principal executive officers
and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure; and (iii) such disclosure
controls and procedures are effective in all material respects to
perform the functions for which they were established.


(o) Since the date of the most recent balance sheet of the
Company and its consolidated subsidiaries reviewed or audited by,
Ernst & Young LLP and the audit committee of the board of directors of
the Company (or persons fulfilling the equivalent function), the
Company has not been advised of (i) any significant deficiencies in
the design or operation of internal controls which could adversely
affect the ability of the Company and each of its subsidiaries to
record, process, summarize and report financial data, or any material
weaknesses in internal controls; and (ii) any fraud, whether or not
material, that involves management or other employees who have a
significant role in the internal controls of the Company and each of
its subsidiaries.


(p) Since the date of the most recent balance sheet of the
Company and its consolidated subsidiaries reviewed or audited by Ernst
& Young LLP, there have been no significant changes in internal
controls or in other factors that could significantly affect internal
controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.


(q) Ernst & Young LLP, who have certified certain financial
statements of the Company and its consolidated subsidiaries, whose
report appears in the Prospectus and who have delivered the initial
letter referred to in Section 10(j) hereof, are independent public
accountants as required by the Securities Act and the rules and
regulations promulgated thereunder.


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(r) The statistical and market-related data included in the
Prospectus are based on or derived from sources which the Company
believes to be reliable and accurate in all material respects.


(s) Each of the Company and its subsidiaries has such permits,
licenses, patents, franchises, certificates of need and other
approvals or authorizations of governmental or regulatory authorities
("Permits") as are necessary under applicable law to own its
properties and to conduct its businesses in the manner described in
the Prospectus and except as disclosed in or specifically contemplated
by the Prospectus and except for any of the foregoing that would not
reasonably be expected to have a Material Adverse Effect; each of the
Company and its subsidiaries has fulfilled and performed in all
material respects, all of its material obligations with respect to the
Permits, and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder
of any such Permits, except as disclosed in the Prospectus; except for
any of the foregoing that would not reasonably be expected to have a
Material Adverse Effect.


(t) The Company and each of its subsidiaries carry, or are
covered by, insurance from insurers of recognized financial
responsibility in such amounts and covering such risks as is, in the
judgment of the Company, adequate for the conduct of their respective
businesses and the value of their respective properties and as is
customary for companies engaged in similar businesses in similar
industries; all policies of insurance insuring the Company and each of
its subsidiaries or their respective businesses, assets, employees,
officers and directors are in full force and effect in all material
respects.


(u) The Company and each of its subsidiaries own or possess
adequate rights to use all patents, patent applications, trademarks,
service marks, trade names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of
their respective businesses, except where the failure to own or have
rights to use would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect, and have not received
any notice of any claim of conflict with, any such rights of others,
and the Company is not aware of any pending or threatened claim to the
contrary or any pending or threatened challenge by any other person to
the rights of the Company and its subsidiaries with respect to the
foregoing which, if determined adversely to any of the Company or its
subsidiaries would have a Material Adverse Effect.


(v) There are no contracts which are required to be described in
the Prospectus or filed as exhibits to the Registration Statement that
have


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not been described in the Prospectus or filed as exhibits to the
Registration Statement.


(w) No relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company on the other hand,
which are required to be described in a prospectus included in a
registration statement on Form S-1 which is not so described in the
Prospectus.


(x) No labor disturbance by the employees of the Company or its
subsidiaries exists or, to the knowledge of the Company, is imminent,
that would reasonably be expected to have a Material Adverse Effect.


(y) Each of the Company and its subsidiaries is in compliance
with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"), except for such
instances of non-compliance that would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect; no
"reportable event" (as defined in ERISA) has occurred with respect to
any "pension plan" (as defined in ERISA) for which the Company or any
of its subsidiaries would have any liability; the Company and its
subsidiaries have not incurred and do not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code");
each "pension plan" for which the Company and each of its subsidiaries
would have any liability that is intended to be qualified under
Section 401(a) of the Code is to the Company's knowledge so qualified
in all material respects and nothing has occurred, whether by action
or by failure to act, which would cause the loss of such
qualification; and the Company and each of its subsidiaries have not
incurred any unpaid liability to the Pension Benefit Guaranty
Corporation (other than for payment of premiums in the ordinary course
of business).


(z) The Company and each of its subsidiaries have filed all
foreign, federal, state and local income and franchise tax returns
required to be filed through the date hereof, subject to any permitted
extensions (except where failure to file such returns would not be
expected to result in a Material Adverse Effect), and paid all taxes
shown as due thereon, and (x) no tax deficiency has been determined
adversely to the Company or any of its subsidiaries, nor (y) does the
Company have any knowledge of any tax deficiency, which, in case of
(x) or (y), if determined adversely to the Company or any of its
subsidiaries would reasonably be expected to have a Material Adverse
Effect.


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(aa) Neither the Company nor any of its subsidiaries (i) is in
violation of its charter and bylaws (or similar organizational
documents), (ii) is in default, and no event has occurred which, with
notice or lapse of time or both, would constitute such a default, in
the due performance or observance of any term, covenant or condition
contained in any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which it is a party or by which it is
bound or to which any of its properties or assets is subject, except
for any of the foregoing that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect,
or (iii) is in violation of any law, ordinance, governmental rule,
regulation or court decree to which it or its property or assets may
be subject or has failed to obtain any material license, permit,
certificate, franchise or other governmental authorization or permit
necessary to the ownership of its property or to the conduct of its
business, except for any of the foregoing that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect.


(bb) Neither the Company nor any of its subsidiaries, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries, has used
any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity; made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is
in violation of any provision of ...