Case5:05-cv-00410-JMH Document64 Filed 12/07/2006 Page 1...

Case 5:05-cv-00410-JMH Document 64 Filed 12/07/2006 of

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF KENTUCKY

AT LEXINGTON

KEVIN J. GRILLO, Individually and On ) Lead Case No. 5:05-cv-00410-JMHBehalf of All Others Similarly Situated, ) (Consolidated with No. 5:05-cv-00421-JMH;

5:05-cv-00455-JMH; 5 :05-cv-00485-JMHPlaintiff, ) and 5 :05-cv-00486-JMH)

vs. ) CLASS ACTION

TEMPUR-PEDIC INTERNATIONAL, INC.,ROBERT B. TRUSSELL, JR., H. THOMASBRYANT, DALE E. WILLIAMS,MATTHEW D. CLIFT, JEFFREY S.BARBER, DAVID C. FOGG, P. ANDREWSMcLANE, DAVID MONTGOMERY,TA ASSOCIATES, INC. and FRIEDMAN,FLEISCHER & LOWE, LLC,

Defendants.

DEMAND FOR JURY TRIAL

FIRST AMENDED CONSOLIDATED COMPLAINT FOR VIOLATIONOF THE FEDERAL SECURITIES LAWS


SUMMARY AND OVERVIEW

1. This is a securities class action on behalf of all purchasers of the publicly traded

securities of Tempur-Pedic International , Inc. ("Tempur-Pedic or the "Company ) between

April 22, 2005 and September 19, 2005 (the "Class Period ), against Tempur-Pedic and certain

of its officers and directors and its major shareholders, TA Associates, Inc. ("TA Associates )

and Friedman, Fleischer & Lowe, LLC ("FF&L ), for violations of the Securities Exchange Act

of 1934 (the "1934 Act ).

2. Tempur-Pedic engages in the manufacture, marketing, and distribution of

advanced visco-elastic products under the TEMPUR and Tempur-Pedic brands worldwide. Its

products include pillows, mattresses, and adjustable beds, as well as cushions and other comfort

products. The Company has sales and distribution operations in the United States, Europe, and

Asia Pacific.

3. This case arises out of a fraudulent scheme whereby defendants made false and

misleading statements regarding the Company's earnings, top line growth and retail business

strength, and omissions regarding competitive pressure in order to drive the price of Tempur-

Pedic stock to its highest price ever. While the Company's stock was trading at record highs,

certain defendants capitalized on this opportunity and sold massive quantities of stock at

artificially inflated prices while in possession of material non-public information.

4. To accomplish this scheme, defendants had to create the illusion that Tempur-

Pedic's products were in high demand and that demand would continue to grow at an equally

high pace . Thus, in January 2005, defendants announced that a 6% price increase of all Tempur-

Pedic mattress lines in the United States would go into effect February 2005. This caused a

frenzy of retailers to stock up on inventory for the entire year at the lower price. As a result of

this price incentive, Tempur-Pedic was able to boast record first quarter 2005 ("1Q05 ) earnings.

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Huge amounts of the Company's retail revenue was pulled forward from the rest of the year

leaving very little chance for growth in future quarters. Defendants grossly understated the

impact of the price increase incentive on revenue for 1 Q05 to investors.

5. Instead of revealing that the business had shown growth in 1 Q05 only because it

experienced massive early-buying to avoid the price increase, defendants claimed that strong

business momentum and increased customer awareness from their national marketing campaign

were the catalysts for the gangbuster quarter. Defendants also significantly raised the

Company's full year guidance . To bolster the false sense of success even more, defendants

falsely assured investors that the Company was planning a retail expansion towards higher priced

bed models, such as its Deluxe and CelebrityBed models, and that the Company would be

launching these models in the summer of 2005.

6. After spewing all of this false positive information on investors, the Company's

stock went on a record breaking climb to $24.50, its highest price ever. Then, on July 21, 2005,

after defendants had sold $246 million worth of their shares at inflated prices , Tempur-Pedic

shocked investors by announcing that instead of releasing a new high-end bed as promised, it

was releasing the low-priced OriginalBed. The Company also announced lower than their

publicly forecasted sales for 2Q05. These public revelations communicated that Tempur-Pedic's

business was not performing at the level previously promised by defendants. Investors and the

market were sufficiently shocked by these disclosures that, as a result, Tempur-Pedic's stock

price fell over 20%, on unusually high volume, from $23.87 on July 21, 2005 to $17.81 per share

on July 22, 2005. However, even these disclosures on July 21, 2005 were false and failed to

reveal the full truth about Tempur-Pedic' s business.

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7. Because these revelations had occurred only one month after defendants traded

over $246 million, defendants were desperate to recover investor confidence. Therefore,

defendants continued their fraudulent scheme by reaffirming the Company's business growth

and guidance again during an investor meeting in August 2005.

8. Unable to keep up the fa ade any longer, on September 19, 2005, the Company

again devastated its investors by issuing more "lower guidance for 2005, sending the

Company's shares plummeting, falling 28% from $16.38 per share on September 19, 2005 to

$11.70 on September 20, 2005.

9. The true facts, which were known by each of the defendants but concealed by

them from the investing public during the Class Period, were as follows:

(a) That Tempur-Pedic' s market share in the visco-elastic market was

declining, not expanding - eliminating the Company's prospects for the 2005 growth defendants

had projected;

(b) That even by July 21, 2005 , when the Company was publicly faced with

the fact that increased competition was rumored to have already negatively hurt the Company's

business, defendants reiterated positive guidance, despite clear signals that such guidance was

even more unattainable than it was when it was first issued;

(c) That the Company's retail channel performance was volatile and irregular

and characterized internally as such;

(d) That the Company's visco-elastic product line was not expanding to

higher-end mattresses as defendants claimed;

(e) That the Company's "worldwide leadership position was not

"continu[ing] to grow as defendants repeatedly claimed;

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(f) That the Company was not on track to meet its goal of increasing sales in

its retail channel by 30-35% because much of the sales for the year were pulled forward into

1 Q05 to avoid the announced price increase;

(g) That the Company's low priced mattress was cannibalizing the

Company's other products;

(h) That the Company was violating Generally Accepted Accounting

Principles ("GAAP ) by not processing returns; and

(i) As a result of (a)-(h) above , the Company's fiscal year 2005 ("FY05 )

projections of $880-$890 million in revenue and $1.10-$1.13 earnings per share ("EPS ) were

grossly overstated.

10. As a result of the defendants' false statements, Tempur-Pedic stock traded at

inflated levels during the Class Period, enabling the Company's insiders and entities associated

with insiders to sell more than $246 million worth of stock at the highest trading price in the

Company's history. Of that amount, $239 was sold by TA Associates and FF&L, controlling

shareholders that have three nominee directors on Tempur-Pedic's Board of Directors -

Defendant Jeffrey S. Barber, Defendant Chairman P. Andrews McLane, a managing director of

TA Associates, and Christopher Masto, a managing director of FF&L.

JURISDICTION AND VENUE

11. Jurisdiction is conferred by §27 of the 1934 Act. The claims asserted herein arise

under §§10(b) and 20(a) of the 1934 Act and Rule IOb-5.

12. (a) Venue is proper in this District pursuant to §27 of the 1934 Act. Many of

the false and misleading statements were made in or issued from this District.

(b) Tempur-Pedic's executive offices are located in Lexington, Kentucky,

where the day-to-day operations of the Company are directed and managed.

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THE PARTIES

13. Lead Plaintiff Massachusetts Laborers' Annuity Fund, and plaintiffs Tim

Altpeter, William Andrews, Kevin J. Grillo, Peter Hibberd, Eugene C. Onorato, and City of

Pontiac Police and Fire Retirement System purchased Tempur-Pedic securities and were

damaged thereby.

14. Defendant Tempur-Pedic engages in the manufacture, marketing, and distribution

of advanced visco-elastic products under the TEMPUR and Tempur-Pedic brands worldwide. Its

products include pillows, mattresses, and adjustable beds, as well as cushions and other comfort

products . The Company has sales and distribution operations in the United States , Europe, and

Asia Pacific. Tempur-Pedic markets its products through retail, including furniture and specialty

stores, as well as department stores internationally; direct response and Internet; chiropractors,

medical retailers, and hospitals; and third party distributors. Tempur-Pedic was founded in 1992

and is headquartered in Lexington, Kentucky.

15. Defendant Robert B. Trussell, Jr. ("Trussell ) is the Vice Chairman and the

former Chief Executive Officer ("CEO ) of Tempur-Pedic. Trussell retired from his position as

CEO in April 2006.

16. Defendant H. Thomas Bryant ("Bryant ) is the CEO and President of Tempur-

Pedic. During the Class Period, Bryant sold $1.3 million worth of his Tempur-Pedic stock.

17. Defendant Dale E. Williams ("Williams ) is President and Chief Financial Officer

("CFO ) of Tempur-Pedic.

18. Defendant Matthew D. Cliff ("Cliff ) is Executive Vice President of Operations of

Tempur-Pedic.

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19. Defendant Jeffrey S. Barber ("Barber ) is a director of the Company . Barber is

also the Vice President of TA Associates. During the Class Period, Barber sold $2.3 million

worth of his Tempur-Pedic stock.

20. Defendant David C. Fogg ("Fogg ) is a Senior Vice President and President of

Tempur-Pedic Retail Division. During the Class Period, Fogg sold $2.1 million worth of his

Tempur-Pedic stock.

21. Defendant P. Andrews McLane ("McLane ) is the Chairman of Tempur-Pedic

Board of Directors. McLane is also the Senior Managing Director of TA Associates. During the

Class Period, McLane sold $2 million worth of his Tempur-Pedic stock.

22. Defendant David Montgomery ("Montgomery ) is Executive Vice President and

President of International Operations of the Company. During the Class Period, Montgomery

sold $2.5 million worth of his Tempur-Pedic stock.

23. Defendant TA Associates is a private equity fund that defendants Barber and

McLane are principals in, which sold $124.5 million of its Tempur-Pedic stock during the Class

Period. TA Associates is one of the two private equity funds that formed TWI Holdings to

purchase Tempur-Pedic and subsequently bring it public in 2003.

24. Defendant FF&L is a private equity fund where Tempur-Pedic board of director

Christopher Masto is the managing director. FF&L distributed seven million shares of Tempur-

Pedic stock worth $115 million to its partners during the Class Period. FF&L is one of the two

private equity funds that formed TWI Holdings to purchase Tempur-Pedic and subsequently

bring it public in 2003.

25. The individuals named as defendants in ¶115-22 are referred to herein as the

"Individual Defendants. The Individual Defendants, because of their positions with the

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Company, possessed the power and authority to control the contents of Tempur-Pedic ' s quarterly

reports, press releases and presentations to securities analysts, money and portfolio managers and

institutional investors, i.e., the market. Each defendant was provided with copies of the

Company's reports and press releases alleged herein to be misleading prior to or shortly after

their issuance and had the ability and opportunity to prevent their issuance or cause them to be

corrected. Because of their positions and access to material non-public information available to

them but not to the public, each of these defendants knew that the adverse facts specified herein

had not been disclosed to and were being concealed from the public and that the positive

representations which were being made were then materially false and misleading. The

Individual Defendants are liable for the false statements pleaded herein at ¶147, 48, 56, 62, 67,

68, 80, as those statements were each "group-published information, the result of the collective

actions of the Individual Defendants.

26. Moreover, each defendant is liable for (i) making false statements, or (ii) failing

to disclose adverse facts known to him about Tempur-Pedic. Defendants' fraudulent scheme and

course of business that operated as a fraud or deceit on purchasers of Tempur-Pedic publicly

traded securities was a success , as it : (i) deceived the investing public regarding Tempur-Pedic's

prospects and business ; (ii) artificially inflated the price of Tempur-Pedic publicly traded

securities; (iii) allowed defendants to arrange to sell and actually sell in excess of $246 million

worth of Tempur-Pedic securities at artificially inflated prices; and (iv) caused plaintiffs and

other members of the Class to purchase Tempur-Pedic publicly traded securities at inflated

prices.

INSIDER TRADING

27. While Tempur-Pedic' s top insiders were issuing favorable statements about

Tempur-Pedic, a number of Tempur-Pedic' s insiders sold over 13 million shares of Tempur-

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Pedic stock, for more than $246 million in illegal insider trading proceeds to personally profit

from the artificial inflation in Tempur-Pedic's record high stock price. Notwithstanding their

access to material non-public information and their duty to disclose all material facts before

trading in Tempur-Pedic, they sold significant amounts of their Tempur-Pedic stock at artificially

inflated prices. Defendants were motivated to engage in the fraudulent practices alleged herein

in order to obtain insider trading proceeds, as depicted below:

DEFENDANT DATE SHARES PRICE VALUE

Barber 05/06/05 15,941 $20.22 $322,32706/15/05 86,606 $23.50 $2,035,241Total 102,547 $2,357,568

Bryant 05/04/05 69,293 $20.00 $1,385,860

Fogg 05/12/05 40,300 $20.19 $813,65705/12/05 30,200 20.18 609,43605/12/05 26,400 20.23 534,07205/12/05 5,312 20.20 107,30205/12/05 800 20.21 16,16805/12/05 300 20.22 6,06605/12/05 100 20.17 2,01705/16/05 1,100 20.26 22,28605/16/05 750 20.26 15,195Total 105,262 $2,126,199

McLane 06/15/05 86,606 $23.50 $2,035,241

Montgomery 04/26/05 15,000 $19.00 $285,00004/26/05 10,000 19.15 191,50004/26/05 5,000 19.10 95,50005/02/05 23,100 19.25 444,67505/02/05 10,000 19.29 192,90005/02/05 2,600 19.35 50,31005/02/05 700 19.31 13,51705/02/05 700 19.32 13,52405/02/05 500 19.30 9,65005/03/05 5,000 19.40 97,00005/03/05 5,000 19.45 97,25005/03/05 2,400 19.35 46,44005/04/05 5,000 19.50 97,50005/04/05 5,000 19.64 98,200

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DEFENDANT DATE SHARES PRICE VALUE05/04/05 5,000 19.65 98,25005/04/05 5,000 19.70 98,50005/04/05 5,000 19.75 98,75005/04/05 5,000 19.80 99,00005/04/05 5,000 19.85 99,25005/04/05 5,000 19.90 99,50005/04/05 4,470 19.95 89,17605/04/05 3,700 19.60 72,52005/04/05 1,300 19.62 25,506Total 129,470 $2,513,418

FF&L 04/26/05 7,000,000 16.41 $114,870,000

TA Associates 06/15/05 3,220,579 $23.50 $75,683,606.5006/15/05 805,146 23.50 18,920,931.0006/15/05 799,332 23.50 18,784,302.0006/15/05 310,562 23.50 7,298,207.0006/15/05 86,606 23.50 2,035,241.0006/15/05 65,940 23.50 1,549,590.0006/15/05 11,835 23.50 278,122.50Total 5,300,000 $124,550,000.00

Grand Total 12,620,591 $246,780,207.00

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Ternpur-Pedic International Inc.Daily Share Pricing: September 1. 2004 - November 15. 2005

$27

$24

$21

Pm

d $18

0

$15

$12

$9

28. As depicted above, defendants' insider sales occurred at the highest stock prices

the Company has ever enjoyed. Defendants traded this stock while in possession of material,

non-public information. And once a partial disclosure was made to the public regarding the true

financial condition of the Company, on July 21, 2005, the stock dropped precipitously.

29. In addition to the above-described involvement, each Individual Defendant had

knowledge of Tempur-Pedic's problems and was motivated to conceal such problems. Williams,

as CFO, was responsible for financial reporting and communications with the market. Many of

the internal reports showing Tempur-Pedic's forecasted and actual growth were prepared by the

finance department under Williams' direction. Defendants Trussell, as CEO, Bryant, as

President , and Clift, as Executive Vice President of Operations , were responsible for the

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09/01/2004 11/11/2004 01/25/2005 04/07/2005 06/17/2005 08/29/2005 1110'^nn10/07/2004 12/17/2004 03/02/2005 05/12/2005 07/25/2005 101041200.`


financial results and press releases issued by the Company. Each Individual Defendant sought to

demonstrate that he could lead the Company successfully and generate the growth expected by

the market.

BACKGROUND

30. Tempur-Pedic was founded in 1992 after a decade of research and development of

visco-elastic , originally designed for use by NASA. Tempur-Pedic engages in the manufacture,

marketing , and distribution of advanced visco-elastic products under the TEMPUR and Tempur-

Pedic brands worldwide. Its products include pillows, mattresses , and adjustable beds, as well as

cushions and other comfort products. The Company has sales and distribution operations in the

United States, Europe, and Asia Pacific. Tempur-Pedic markets its products through retail,

including furniture and specialty stores, as well as department stores internationally; direct

response and Internet; chiropractors, medical retailers, and hospitals; and third party distributors.

31. In November 2002, defendants TA Associates and FF&L, both private equity

investment funds , formed TWI Holdings , to purchase Tempur World, Inc., the parent of Tempur-

Pedic, for approximately $390 million from its Swedish owners. The purpose of this business

venture was to bring Tempur-Pedic public on the NYSE Stock Exchange , which it did with the

help of banking underwriters in December 2003.

32. Tempur-Pedic did not enter the market with a "bang. The stock performed

mediocre, trading in the low to middle teens for most of 2004. Tempur-Pedic needed a boost, so

the Company decided to start a national marketing campaign to gain name recognition in the

United States. This campaign was focused on promoting Tempur-Pedic's visco-elastic products

as high end, luxury and medically beneficial. Tempur-Pedic marketed its mattresses as superior

to the major mattress producers such as Serta, Sealy and Simmons, even referring to its

competitors' products as knock-offs of Tempur-Pedic's.

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33. Over the first half of 2005, the defendants would make false public statements

concerning strong demand for the Company's products and would routinely incorporate bold

statements concerning the Company's future profitability based on this trumped-up demand,

enabling defendants and the Company's major stockholders to cash out at artificially inflated

stock prices . This demand, shareholders would learn later, was far less than defendants had

claimed.

FRAUDULENT SCHEME AND COURSE OF BUSINESS

34. To artificially boost sales , in the beginning of January 2005, defendants

announced a 6% price increase of all Tempur-Pedic mattress lines in the United States.

Defendants informed retailers that this price increase would not go into effect until February 1,

2005. This caused a frenzy of retailers to stock up on their inventory needs for up to a year at the

lower prices . In fact, according to a former Tempur-Pedic retail sales manager, the Company

allowed retailers to continue to purchase at the lower prices until mid to late February in order to

pull as many sales as they could into that quarter. As a result of this price incentive, Tempur-

Pedic was able to boast record earnings in 1 Q05.

35. Defendants deliberately concealed the impact of their 6% price increase and

grossly understated its impact on the Company's revenues for I Q05. Because the defendants

had told their retailers that the increase would not be implemented until mid-February 2005,

many retailers accelerated their purchases causing a huge amount of the Company' s revenue to

be pulled forward from the rest of the year leaving very little chance for retail channel growth in

future quarters.

36. In an April 21, 2005 press release , defendant Trussell stated:

"Tempur-Pedic International turned in another stellar performance in the firstquarter of 2005, with our best quarter ever in terms of net sales and earnings, aswe continued to drive growth through the successful expansion of our retail

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channel. The key elements of Tempur-Pedic's strategy - our superior products,unique marketing model and expanding distribution capacity - all played animportant role in the Company's outstanding performance . We believe we haveput all the pieces in place to deliver sustained growth and capitalize on the hugemarket opportunity that we believe exists in thepremium bedding category.

This statement was false when made as retail sales were, in fact, known by defendants to be

irregular and volatile. The price incentive caused a dramatic spike in retail sales in I Q05. A

former distribution manager at Tempur-Pedic claims that retailers stocked up for many months

when the price increase was announced. Because retailers stockpiled inventory for the year in

1Q05, retailer demand decreased significantly in 2Q05 and 3Q05.

37. Senior management admitted themselves in presentations at management

meetings that retail sales were volatile and irregular . This is far different than the story

defendants were telling investors about "sustained growth. In fact, solving the distribution

problems that are associated with the irregularity and volatility of retail sales were the topic of

power point presentations at management meetings.

38. Moreover, the Company's other divisions were not performing well at all.

According to a former Tempur-Pedic sales representative in the medical division of the

Company, medical sales were flat in 1Q05 . Realizing that they had to change this situation,

defendants implemented a sales quota of $1 million per sales representative for FY05 in an effort

to pressure the representatives into selling more product. The witness claimed that this quota

was impossible to attain given the weak demand for Tempur-Pedic's products at that time. In

fact, according to the sales representative, most medical division sales representatives were

selling only $200,000 per year.

39. Not only did defendants misrepresent the reasons for the Company's record

earnings in I Q05, they also boasted falsely that the Company' s competitors were not impacting

Tempur-Pedic's market share. In that vein, defendants also led investors to believe that they

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would be launching more high-end mattresses within the year. Investment analysts picked up on

these representations and based their bullish recommendations about the Company's stock on

these false representations . On April 21, 2005, CIBC issued a statement , "[o]ur bullish stance on

TPX has not changed .... Looking ahead, we expect growth to come from a combination of

further retail expansion . . . , a mix shift toward higher priced Deluxe and CelebrityBed

models (andperhaps an even higherpriced bed to be launched this summer) ....

40. To further create the illusion that Tempur-Pedic was planning on launching more

high-end mattresses and was not being affected by the lower-priced competitors , defendants

Bryant and Williams held a Consumer Conference in New York City on June 8 , 2005 . During

this conference, defendants told the public that the fifth mattress scheduled for launch in late July

at the inaugural Las Vegas furniture market would be the highest priced mattress yet. This

statement caused PiperJaffray to reiterate its bullish rating for Tempur-Pedic on June 8, 2005 in a

report that boasted Tempur-Pedic's high-end market strategy as a catalyst for top line growth.

41. As a result of the Company's record earnings in 1 Q05 and bold statements about

growth, the stock traded at record levels during the Class Period, creating the perfect opportunity

for certain defendants to sell their Tempur-Pedic holding at inflated prices. The Company's

venture capital investors , FF&L and TA Associates , did just that. On April 26, 2005, FF&L

distributed seven million shares of Tempur-Pedic stock worth $115 million to its partners and, on

June 15, 2005, TA Associates sold 5. 3 million shares of Tempur-Pedic stock worth over $124

million. When transferring and selling their stock, the managing directors of these funds were in

possession of the material facts not disclosed to the public about the Company's financial

condition and future plans to succumb to competitive pressures by releasing a cheap, low-end

mattress . Moreover, defendants Barber, Bryant, Fogg, McLane and Montgomery sold over $10

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million during 2Q05 as well with knowledge of undisclosed material information regarding the

Company's financial condition.

42. Then, on July 21, 2005, after defendants had dumped $246 million worth of their

shares at inflated prices, Tempur-Pedic surprisingly announced that instead of releasing its

highest-end bed ever (as defendants Bryant and Williams led the market to believe), it was

re-releasing the low-end, OriginalBed, which was priced much lower than Tempur-Pedic's other

beds and was intended to compete with Tempur-Pedic's major competitors' beds. The Company

also announced that its 2Q05 sales growth was much lower than expected. These public

revelations communicated that Tempur-Pedic's business was not performing at the level

previously promised by defendants. Investors and the market were shocked by these disclosures

and, as a result, Tempur-Pedic's stock price fell over 20% on July 22, 2005. However, even

these disclosures on July 21, 2005 were false and failed to reveal the full truth about Tempur-

Pedic's business.

43. In fact, according to a former Tempur-Pedic sales representative , sales had

decreased so significantly in 2Q05 that the sales representatives were instructed Company-wide

not to process return credits during the last two weeks of the quarter. This allowed the Company

to falsely inflate its bottom line financial results.

44. Given that the July 21, 2005 revelations had occurred only one month after

defendants traded over $246 million, defendants were desperate to recover investor confidence.

Therefore, in furtherance of the fraud, defendants reaffirmed the Company' s business growth and

guidance again during an investor meeting with Citigroup on August 11, 2005. At this

conference, defendants claimed that the factors that depressed 2Q05 sales growth would reverse

in 3Q05 and reaffirmed guidance.

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45. However, defendants knew in August when they made these false statements that

there was a large variance between the actual and forecasted sales in 3Q05. Defendants were

provided detailed monthly inventory distribution reports. According to a Tempur-Pedic former

distribution manager, reports detailing actual to forecasted sales were prepared by the various

distribution managers and provided to defendants on a monthly basis. These reports

demonstrated that the Company was way behind its forecast when defendants held their

conference with Citigroup, yet they did nothing to lower the Company guidance.

46. In the face of rumors concerning defendants' profitability and lack of high-end

growth, defendants' refusal to "bring down the Company 's estimates alleviated shareholder

concerns and allowed the shares to continue to trade at artificially inflated prices through mid-

September. However, defendants could not maintain the fa ade forever and, on September 19,

2005, the Company again devastated its investors by issuing further lower guidance for 2005,

sending the Company's shares plummeting, falling 28% from $16.38 per share on September 19,

2005 to $11.70 on September 20, 2005. Defendants, of course, were not the ones to suffer, as

they had already profited over $246 million. This burden fell squarely on the shoulders of the

unsuspecting investors who lost hundreds of millions of dollars.

DEFENDANTS' FALSE AND MISLEADING STATEMENTSISSUED DURING THE CLASS PERIOD

47. On April 21, 2005, following the close of the market, the Company issued a press

release entitled "Tempur-Pedic International Achieves 45% Net Sales Increase and Record

Earnings in First Quarter of 2005; Pro Forma Net Income Increases 66% to $0.27 Per Diluted

Share, GAAP Net Income Increases 127% to $0.26 Per Diluted Share; Company Raises Sales

and Earnings Guidance for 2005, and had a conference call with investors, highlighting in part:

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Tempur-Pedic International Inc., the market-leading manufacturer, marketer anddistributor of premium mattresses and pillows worldwide, today announcedrecord net sales and earnings for the first quarter ended March 31, 2005.

First Quarter 2005 Highlights

• Pro forma net income rose 66% to $27.5 million, or $0.27 per diluted share, from$16.6 million, or $0.16 per diluted share, in the first quarter of 2004. TheCompany reported net income under GAAP of $26.8 million, or $0.26 per dilutedshare, compared to $11.8 million, or $0.11 per diluted share, in the first quarter of2004, an increase in net income of 127%.

• Net sales rose 45% to $222.4 million from $153.1 million in the first quarter of2004.

• Operating margin increased to 22% from 20% in the first quarter of 2004.

• The Company's retail channel continued its strong growth, with net sales rising62% worldwide.

• Sales in the U. S. retail channel were especially strong, increasing 74%.

• Worldwide, mattress net sales increased 65% on unit growth of 51%.

Chief Executive Officer Robert B. Trussell, Jr. commented, "Tempur-Pedic International turned in another stellarperformance in the first quarter of2005, with our best quarter ever in terms of net sales and earnings, as wecontinued to drive growth through the successful expansion of our retailchanneL The key elements of Tempur-Pedic's strategy - our superior products,unique marketing model and expanding distribution capacity - all played animportant role in the Company's outstanding performance. We believe we haveput all the pieces in place to deliver sustained growth and capitalize on the hugemarket opportunity that we believe exists in thepremium bedding category.

President H. Thomas Bryant added, "During the seasonally strong firstquarter, Tempur-Pedic continued to generate strong growth in our establishedaccounts and added approximately 330 net furniture retail stores in the U.S.,substantially exceeding our target number. These factors combined to increaseU. S. furniture retail store sales 91% to $93.4 million for the quarter. In addition,internationally, we added approximately 170 net furniture retail stores. We werealso pleased to see signs that the visco-elastic category as a whole is continuingto expand We believe the superiority of our proprietary Tempur® material,combined with the Company's role as `first-mover' in the category, is helping ussolidify Tempur-Pedic's worldwide leadership position as the overall marketcontinues to grow.

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"In addition to generating exceptional financial results, we madeexcellentprogress in our newproduct initiatives during thepast several months.In January, we began delivering ourfuton product to Japan's large departmentstores, where the Company's sales representatives are beginning to introducecustomers to the features and attributes of this new product. Initial reaction tothefuton has been very positive and our next step will be to expand distributionto bedding andfuton stores.

"More recently, we unveiled `The EuroBed by Tempur-PedicTM,' aunique new sleep system that recognizes how important design elements havebecome in the bedroom. `The EuroBed by TempurPedicTM , which representsan important addition to the growing array ofproducts our Company offers,received an enthusiastic response when it was introduced in the U.S. in Aprilthis year. The new offering will start shipping in the U.S. in June.

"During the first quarter, we increased our advertising spend as planned tocontinue driving sales and expanding Tempur-Pedic's brand awareness, includinga new marketing campaign focused on our pillow offerings. Finally, constructionof our new manufacturing facility in Albuquerque, New Mexico proceeded onschedule. We expect the 750,000 square foot factory, which will play a key role infulfilling the growing demand for Tempur-Pedic's products in North America, tobegin operations in the second quarter of 2006.

2005 Guidance

Given the Company's strong performance in the first quarter of 2005and its continued positive outlook for the year, Tempur-Pedic International isincreasing the fullyear guidance itpreviously providedfor 2005. The Companynow expects net sales for 2005 to rangefrom $880 million - $890 million, ratherthan being in the vicinity of$880 million. It currently expects pro forma dilutednet income to range between $1.10 to $1.13 rather than being in the vicinity of$1.10. It also currently expects GAAP diluted earnings per share to rangebetween $1.08 to $1.11 rather than being approximately $1.08.

48. When asked by Jonathan Shapiro of Goldman Sachs during the Company's 1 Q05

conference call whether the price increase incentive resulted in the Company pulling forward

revenues from future months, defendant Williams stated:

Well, actually what we think is because the retailers had - we allowedthem to order extra, we were delivering the January orders into February. Wedon't really believe there 's a pull ahead.

-18-


49. On April 21, 2005, CIBC issued a report entitled "Tempur-Pedic International;

Haven't We Heard This Before? TPX Beats Estimates, Raises Guidance rating stock a "Sector

Outperformer :

[T]he company raised both top- and bottom-line guidancefor 2005, continuing apattern witnessed in recent quarters.

Sales in the quarter increased a healthy 45%, to $222 million, easilyexceeding our forecast of a 32% increase. This was driven by 59% growth inU.S. sales, including a 72% increase in domestic mattress sales.

Three Times a Charm or Guidance?

For the third time this year, management raised its full-year 2005guidance, citing the continued strong momentum in the business and growingconsumer awareness and acceptance of non-innerspring bedding products... .Importantly, management expressed comfort in its prior expectations of 30%-35%growth from established accounts (those the company has been selling to for overa year) in 2005, a good analogy to "same store sales.

We Remain Bullish on the Name

Our bullish stance on TPX has not changed, and we continue to view theshares as attractive for risk tolerant investors. Importantly, the company hasestablished itself as the leading brand in the fast-growing visco-elastic beddingmarket. While competitors - both established brands and knock-offs - continueto enter the market and gain distribution, we believe this only validates thecategory, while TPX's head start and aggressive marketing campaign ... shouldhelp it to continue to take market share.

Looking ahead, we expect growth to comefrom a combination offurtherretail expansion ..., a mix shift toward higherpriced Deluxe and CelebrityBedmodels (andperhaps an even higherpriced bed to be launched this summer) ...

50. On April 22, 2005, also based on defendants ' statements , Citigroup recommended

TPX as a "Buy and stated:

-19-


Management's actions indicate that itforesees little impact on Tempur'sgrowth prospects from competitors such as Sealy and Serta.

* * *

1 Q05 benefited from the same strong fundamentals that we have highlighted since3Q04, including operating leverage versus selling and general expenses andcontinuing strong sales of Tempur's higher-price products, which generate highermargins for the company. We note that the higher-price Celebrity and Deluxemodels accounted for 64% of 1 Q05 US bedding sales , up from 62% in 4Q04 and25% in 1Q04. With the recent introduction of the EuroBed model, which willbe priced between the Celebrity and Deluxe models, Tempur should be able tocontinue driving strong sales ofits higher-price products.

* * *

Tempur's I Q05 benefited from a spike in sales prior to its February 1stprice increases of roughly 6%. The company allowed its customers to acceleratetheir orders and to use the upcoming price increase as a promotional tool (e.g."Buy Before The Price Increase ).... Importantly, management indicated thatorderpatterns had resumed their normalflow by the end ofIQ05, implying thatthere should be limited disruption from the 1Q05price increase in 2Q05.

51. On April 22, 2005, SunTrust Robinson HumphreysM issued a report entitled,

"Tempur-Pedic International , Inc.; TPX: TPX Beats 1Q05 Estimates ; Raises Full Year

Guidance, rating the stock a "Buy based on the Company's bullish guidance:

Guidance Raised: TPX increased full year top line guidance for 2005 to $880-$890 million compared to $880 million. It expects 2005 EPS to be in the range of$1.10-$1.13 based on 30%-35% established account growth as opposed toprevious guidance of $1.10. TPX increased potential U.S. furniture/beddingretailer targets to 10,000 from 9,000.

52. Also on April 22, 2005 Adams Harkness issued a report "Tempur-Pedic

International; `Tempur-fect' Q1; Raising estimates and target ... Again, reiterating "TPX -

$19.48 - Strong Buy, based in part on the following:

* TPX re-accelerated its guidance for U.S. and international furniture &bedding store additions to 80-90/mo. and 30-40/mo (from 70-80 and 20-30) and raised its targeted U.S. furniture and bedding doors opportunity to10,000 from 9,000.

-20-


53. On April 22, 2005, Piper Jaffray issued a report entitled "Tempur Pedic Int'l

Outperform; Raising Estimates On Strong 1Q Results; Maintain Outperform reiterating an

outperform, which stated in part:

We are maintaining our Outperform rating and $30 price target (22x FY06 EPSestimate) following 1Q sales and EPS results that beat our forecasts andconsensus . We are raising our FY05 EPS estimate from $1.11 to $1.13, which isat the high end of guidance, and our FY06 estimate from $1.35 to $1.37....Competitive concerns appear to be overdone, based on our store checks andcommentaryfrom management on the conference call.

We believe the shares are attractively valued relative to recent businessmomentum and solid growth prospects.

54. As a result of the Company's false positive statement about demand for its

products and lack of competition, the stock shot up in price and the defendants proceeded to go

on a selling spree over the next several weeks.

55. On April 26, 2005, defendant Montgomery sold 30,000 shares of Tempur-Pedic

stock at prices between $19.00-$19.15 per share for insider trading proceeds of approximately

$572,000.

56. Also, on April 26, 2005, the Company issued a press release entitled "Tempur-

Pedic International Confirms Partial Distribution by Major Stockholder, which stated in part:

Tempur-Pedic International Inc., the market-leading manufacturer, marketer anddistributor of premium mattresses and pillows worldwide, confirmed that it hasbeen informed by Friedman, Fleischer & Lowe, LLC (FFL) that FFL has made apartial distribution to its partners ofa total of 7 million shares of Tempur-PedicInternational common stock.

The Company further noted that FFL acquired these shares in connectionwith its original investment in the Company in November 2002, and that aftergiving effect to this distribution FFL will still be a significant stockholder, owningapproximately 6 million shares of the Company's common stock . In addition,two persons affiliated with FFL remain on the Tempur-Pedic Board ofDirectors.

-21-


57. Between May 2 and May 4, 2005, defendant Montgomery sold 99,470 shares of

Tempur-Pedic stock at prices between $19.25-$19.95 per share for gross proceeds of $1.9

million.

58. On May 4, 2005, defendant Barber sold 15,941 shares of Tempur-Pedic stock at

$20.22 per share for gross proceeds of $322,327.

59. On May 4, 2005, defendant Bryant sold 69,293 shares of Tempur-Pedic stock at

$20.00 per share for gross proceeds of approximately $1.38 million.

60. Between May 12, 2005 and May 16, 2005, defendant Fogg sold 105,262 shares of

Tempur-Pedic stock at prices between $20.17-$20.26 per share for gross proceeds of $2.1

million.

61. On May 31, 2005, CIBC issued a report entitled "Tempur-Pedic International;

Investors Can Rest Easy; Raising Estimates/Target, Removing Speculative Label, which stated

in part:

Operating Leverage and Trade-Up Strategy Should Support Margins

... In addition, we believe TPX will continue to successfully trade upconsumers to higher-priced beds, as it did with last year's launch of the premium-priced CelebrityBed, which accounted for 17% of its U.S. mattress volumes in theMarch quarter (in fact, the CelebrityBed, at $3,000 retail, and Deluxe, at $2,100retail, combined for 64% of U. S. volumes in the quarter). Importantly, we expectthe company to introduce another bed SKU in late July at a bedding industryconvention in Las Vegas, with a price point north of the CelebrityBed In ourview, this would validate the belief among the company and retailers that thereremains a sizeable consumer appetitefor higherpriced beds.

62. On June 1, 2005, the Company issued a press release entitled "Tempur-Pedic

International Inc. Named as a BusinessWeek Hot Growth Company, which stated in part:

Readers of BusinessWeek will soon learn what executives at Tempur-PedicInternational Inc. already knew - the company is growing. In the latest issue ofBusinessWeek, Tempur-Pedic is named 62nd on the publication's list of 100 "HotGrowth Companies.

-22-


"Business Week has its finger on the pulse of the business community inthe United States and beyond To be recognized by this publication is extremelyexciting for Tempur-Pedic," said Tom Bryant, president of Tempur-PedicInternational Inc. "We've had a great year and are looking forward tocontinued growth for the companyfor many years to come.

According to the magazine, in order to identify its "Hot GrowthCompanies, BusinessWeek looks at publicly-traded companies with a wide rangeof revenues and ranks them by sales and earnings growth and return on capitalover a three-year period.

63. On June 8, 2005, Piper Jaffray issued a report entitled "Tempur Pedic Int'l

Outperform; Consumer Conference Highlights: Sales And Earnings Momentum Continuing

reiterating an Outperform, which stated in part:

• ... At our Consumer Conference in New York, Tempur-Pedic President TomBryant and CFO Dale Williams ....

• Continuing To Push Average Selling Prices Higher: We believe TPX willcontinue to have success raising the average selling prices of its beds as newmattress models are at relatively high price points. The company will begin nextmonth to ship the "EuroBed, which will be the second-highest-priced of the four-bed primary domestic lineup at $2,999 retail for a queen set. Tempur-Pedicmanagement confirmed today that the fifth mattress, scheduledfor launch latenext month at the inaugural Las Vegas furniture market, will be the highest-priced mattress yet, topping its $3,299 CelebrityBed We believe theintroduction of these models will facilitate continuation of the trend toward ahigher number ofslots per door, which historically has been a driver oftop-linegrowth as its helps legitimise the overall visco category and the Tempur-Pedicbrand specifically.

64. Based on these additional false positive statements by defendants, the stock

climbed to $23.50 per share, Tempur-Pedic's highest stock price in the history of the Company.

On June 15, 2005, defendant Barber - Vice President of TA Associates and Director of Tempur-

Pedic - sold 86,606 shares of Tempur-Pedic stock at $23.50 per share for gross proceeds of $2

million.

65. Also, on June 15, 2005, TA Associates sold 5,300,000 shares of Tempur-Pedic

stock at $23.50 per share for gross proceeds of a staggering $124,550,000.

-23-


66. Defendants' above statements were false when made and the true facts, which

were known by each of the defendants but concealed by them from the investing public during

the Class Period, were as follows:


declining - eliminating the Company's prospects for the 2005 growth defendants had projected;

(b) That even by July 21 , 2005 , when the Company was publicly faced with




(c) That the Company's strength vis- -vis its retail channel was volatile and

irregular;


higher end mattresses as defendants claimed;





1 Q05 from the announced price increase; and


Company's other products.

(h) As a result of (a)-(g) above, the Company's FY 2005 projections of $880-

$890 million in revenue and $1.10-$1.13 EPS were grossly overstated.

-24-


67. Then, on July 21, 2005, the Company announced its 2Q05 financial results in a

press release entitled "Tempur-Pedic International Achieves 47% Earnings Increase on 27% Net

Sales Increase in Second Quarter of 2005; Pro Forma Net Income Increases 38% to $0.25 Per

Diluted Share , GAAP Net Income Increases 47% to $0.24 Per Diluted Share , which stated in

part:

Chief Executive Officer Robert B. Trussell, Jr. commented, " Tempur-Pedic International delivered excellent second quarter results and stronggrowth in what is seasonally a slower period for the retail furniture industry.Our results were fueled by the ongoing expansion of our retail channel and salesof our premium mattresses, reflecting consumers ' growing awareness of thecomfort and sleep benefits our products offer. We continue to see the keyelements of Tempur-Pedic's strategy - our superior products, unique marketingmodel and growing distribution - play a decisive role in the Company'simpressive performance. By executing on our strategy, we believe Tempur-Pedic can deliver sustained growth and capitalize on the extraordinary marketopportunity we have identified in thepremium bedding category.

President H. Thomas Bryant continued, "During the second quarter, weadded approximately 400 net furniture retail stores in the U.S. and approximatelyanother 180 net internationally to our retail distribution channel, substantiallyexceeding our targets for the period. Equally important, we generated solidgrowth in our established accounts and are well on track to meet our goal ofincreasing sales from these accounts by 30-35% this year. The visco-elasticcategory we created is continuing to expand as more and more people becomeinterested in our innovative and proprietary technology and growing array ofproducts.

"Over the past three months, we made excellent progress with our newproduct introductions and other initiatives. `The CelebrityBed by Tempur-PedicTM' represented 20% of our mattress sales in the U.S. in the secondquarter. Retailer interest in `The EuroBed by TempurPedicTM , which beganshipping in July, has been outstanding. Our futon product is being wellreceived by Japanese consumers and we began the secondphase of the roll-outon schedule, shipping to bedding andfuton stores throughout Japan.

"Our marketing campaign, which has been so successful in establishingthe Tempur-Pedic brand, continued to serve as an enginefor growth, improvingour brand recognition worldwide. In fact, our most recent independent studyshows that aided brand awareness in the U.S. increased to 71% at the end of2004 from 60% the previous year. Construction of our new manufacturingfacility in Albuquerque, New Mexico proceeds on schedule and on budget. Welook forward to beginning operations in the second quarter of 2006. The new

-25-


factory will help us satisfydemand in North America, our largest single market,quickly and cost-effectively.

2005 Guidance

The Company is confirming the fullyear guidance it previouslyprovidedfor 2005. The Company currently expects net sales for 2005 to rangefrom $880 million - $890 million and pro forma diluted net income to rangefrom $1.10 - $1.13. It expects GAAP diluted earnings per share to range from$1.08 - $1.11.

The Truth Beings to Unravel

68. During a conference call with investors that same day, defendant Bryant shocked

investors by announcing that:

We will launch this product, which we have named The Original byTempur-Pedic at the Las Vegas show next week, with a suggested retail price of1199 for a queen. We believe this addition to our line will enable us to attract abroader universal consumer to our premium offering and also will leaveconsumers with little reason to consider lower quality imitators.

69. On July 21, 2005, CIBC issued a report entitled "Tempur-Pedic International;

Competitive Pressures Appear Real: Downgrading to Sector Performer, which stated in part:

In particular, we believe the company's announcement that it would beintroducing an entry-level priced bed at next week's industry trade show- rather than a premiumpriced bed as we had been led to believe - is achange in strategy and likely presages a period of price-basedcompetition.

While the lower price point is likely to increase consumer trial and help togrow the category, for TPX, we expect the lower-priced bed to at leastpartially cannibalize its higher-priced offerings and affect itdisproportionately , since it is the premium-priced player in the category.

70. On July 22, 2005, Bloomberg issued an article entitled "Tempur-Pedic Shares Fall

as Cheaper Bed Added to Product Line, which stated in part:

Tempur-Pedic International Inc. shares fell as much as 24 percent after an analystsaid the maker of luxury mattresses could hurt demand for its higher-pricedproducts by adding an entry-level mattress to its offerings.

-26-


Shares of Tempur-Pedic fell $5.59 to $18.16 as of 1:35 p.m. in New YorkStock Exchange composite trading, after earlier dropping as low as $17.95

The company said in a statement issued by PR Newswire that it willunveil the "OriginalBed, next week. The queen-sized version of the mattresswill sell for about $1,199, while most of Tempur's mattresses are priced at $1,400and above, according to the Lexington, Kentucky-based company's Web site.

The maker of products such as CelebrityBed and SupremePillow was cutto "sector perform from "sector outperform by CIBC analyst Joseph Altobello.In a note to clients, he wrote that he expects Tempur-Pedic will face increasedcompetition with the introduction of the entry-level mattress and"cannibalization " ofthe company's higherpriced offerings.

Tempur-Pedic's Chief Financial Officer Dale Williams didn't immediatelyreturn a voice mail left at his office. Company spokeswoman Katie Tableing alsodidn't return a call.

71. On July 22, 2005, Citigroup Smith Barney issued a report entitled "Tempur-Pedic

International; TPX: Fundamentals Remain Intact; Reiterating Buy, reiterating a Buy, which

stated in part:

* Lower sales growth in 2Q was more the result of temporary factors suchas sales pulled forward to 1Q and seasonal factors than competitors'success.

* The launce of the Original model could help Tempur drive sales and gainmarket share, although skeptics incorrectly see it as a response tocompetitors.

* Fundamentals remain strong - store count growth, sales slots/store, andthe percentage of sales driven by Tempur's higher-price point mattresses.

* Our estimates remain unchanged and our target price increases slightly to$29.

* * *

2Q05 Sales Growth

* * *

The special promotional activity that retailers ran prior to February2005 price increases on Tempur 's products pulled forward sales from 2Q05.After I Q05, management estimated that this special promotional activityincreased sales by roughly $10-12 million in 1 Q05. On its 2Q05 conference call,

-27-


management indicated that rough $7 million of the $10-12 million was pulledforward from 2Q05. We believe that at this stage the effects of the promotionalactivity have worked their way through the system and should have little if anyimpact on 3Q05 results.

72. On July 22, 2005, Piper Jaffray issued a report entitled "Tempur-Pedic Int'l;

Outperform; 2Q Revenues Miss Estimates; Full-Year Guidance Maintained; Maintain

Outperform, reiterating an Outperform which stated in part:

The company reiterated its FY05 revenue guidance of $880-$890 million;we are reducing our forecast modestly to $887 million. Based on thisrevenue revision, we are lowering our FY05 EPS estimate by $0.01 to$1.13....

* Lower PricePoint Mattress Launch Raises Questions : In a surprisemove, Tempur-Pedic announced plans to introduce a lower-price-pointmattress next week at the Las Vegas furniture market. The mattress,called the Original by Tempur-Pedic, will carry a price tag of $1,199 for aqueen ... which is $400 less than the company's next mattress SKU. Wehad anticipated the company to launch a superpremium price pointmattress (above $4,000), and we believe this change in course will drawscrutiny from investors that believe that increasing competition isnegatively impacting business trends. Based on commentary frommanagement on last night's conference call indicating strong sell-through of Tempur-Pedic product in retail locations that also carrycompeting branded visco foam mattresses , we view this launch not as acompetitive response but as a proactive move to capture additional shareof the growing visco foam market by addressing a broader customer base.

* * *

To what degree the Original mattress cannibalizes sales of the Classic will becritical to monitor going forward, though overall we believe this move will beincrementally positive to unit volume and the average number of mattress slotsper retail location.

73. On July 22, 2005, Adams Harkness issued a report entitled "Tempur-Pedic

International; Tempur comes out swinging with "the Original, reiterating a Strong Buy, which

stated in part:

* TPX posted relatively in-line Q2 results and surprised investors byannouncing a lower-priced entry-level mattress . FY05 sales and EPSguidance maintained . Noise surrounding Q1/Q2 domestic mattress sales

-28-


variance, low-priced bed, international pillow business, and competitiveconcerns may pressure shares ....

TPX announced last evening that it would introduce a new lower-pricedentry-level mattress at next week's Las Vegas trade show, a move that is certainto send ripples throughout the entire industry. Atfirst glance it was obvious thatthe announcement surprised the investment community, given TPX's recentcommentary suggesting a new higher-end mattress would be introduced.

The acceleration of launching "the Original was driven by the Company's abilityto increase production capacity at its Virginia facility.

74. On July 22, 2005, SunTrust Robinson HumphreysM issued a report entitled "TPX:

2Q05 In Line; New Introduction Direct Challenge to Competitors which stated in part:

Results in Line: Guidance Unchanged. TPX reported pro forma EPS of$0.25, in line with our estimate and the Street mean. During the quarter thecompany added 400 net furniture retail stores in the U.S., ahead of the previouslyannounced goal of 80-90 stores per month.

75. As a result of the Company' s unexpected release of a low-end bed, rather than the

high-end bed the Company led investors to believe it would release, the stock dropped over 20%,

as investors believed it was a sign that the Company had not been honest about its top-line

growth and competitive pressure.

76. On July 28, 2005, Piper Jaffray issued a report entitled "Tempur Pedic Int'l

Outperform; Positive Retailer Reception For New Mattress Model; Maintain Outperform,

reiterating an Outperform, which stated in part:

Expanding The Addressable Market Through New Mattress Launch:After getting a firsthand look at the newest mattress in Tempur-Pedic's lineup -"The OriginalBed by Tempur-Pedic - and talking with retailers, competitors, andTPX management at the inaugural Las Vegas furniture market, we believe theaddition of this lower-price-point model will be an incremental positive for thecompany.

-29-


77. On August 1, 2005, Citigroup Smith Barney issued a reported entitled "TPX:

Misplaced Fears, Mispriced Stock, reiterating a Buy which stated in part:

* We believe Tempur-Pedic's shares offer an excellent opportunity for investorsto capitalize on a violent, but likely short-lived, spike in negative sentiment.

* * *

Moreover, as management noted on its 2Q05 conference call, Tempur'sproducts are, if anything, selling better in the stores in which they have directcompetition.

78. On August 14, 2005, Citigroup issued a report entitled "TPX: Remains Out Top

Pick Following Meeting With Management, reiterating a Buy, which stated in part:

Last week, we hosted an investor meeting with Tempur-Pedicmanagement at the company's headquarters in Lexington, Kentucky. Tempur-Pedic was represented by CEO Bob Trussell, COO Tom Bryan and CFO DaleWilliams....

* * *

Tempur-Pedic remains a highly controversial stock in the wake of2Q05,when slowing sales growth and the unexpected announcement of theOriginalbed crystallized investors 'fears about competition....

Following our meeting with management, we have increased confidencethat the temporary factors that depressed 2Q05 sales growth should reverse in2H05. As we wrote previously ("Fundamental Remain Intact; Reiterating Buy ,July 22, 2005), one of the two major reasons for skepticism following 2Q05 was adecline in the rate of overall sales growth to 27% from the 40%+ growth rates in1 Q05 and FY04. The primary cause of this slowdown in sales growth was USmattress sales growth, which slowed to 40% from 72% in 1Q05:

* * *

The adjusted sales growth series shown above also illustrates the effect ofseasonality in US retail mattress sales , where 2Q is typically the weakest quarterof the year and 3Q is the strongest . The effect of seasonality of Tempur-Pedic hasgrown larger as the company has increased its penetration of the US retailchannel . Seasonality depressed 2Q04 sales growth versus 1Q04 and we believe itonce again had an effect in 2Q05. Accordingly, we believe Tempur-Pedic's USretail sales could benefit from a seasonably strong 3Q05.

-30-


79. In the face of rumors concerning defendants' profitability and lack of high-end

growth, defendants' refusal to "bring down the Company' s estimates alleviated shareholder

concerns and allowed the shares to continue to trade at artificially inflated prices through mid-

September.

80. On September 19, 2005, just four weeks after reaffirming Tempur-Pedic's

guidance and claiming that demand for products in the third quarter is the strongest, the

Company stunned the market with its 3Q05 financial results and lowered guidance, issuing a

press release entitled "Tempur-Pedic International Updates Full Year Financial Guidance and

Comments on Third Quarter 2005, which stated in part:

Tempur-Pedic International Inc., the market-leading manufacturer, marketer anddistributor of premium mattresses and pillows worldwide, today updated itsfinancial guidance for 2005. For the full year, the Company currently expects netsales to range between $845 million and $855 million, compared to its previousguidance of approximately $880 million to $890 million. Net sales at thisrevised level for 2005 would represent an increase of 23% to 25% above theCompany's $684.9 million in net sales for 2004.

Tempur-Pedic also updated its earnings guidance for 2005. TheCompany currently expects proforma diluted earnings per share to be withinthe range of $1.05 to $1.07 and GAAP diluted earnings per share to be withinthe range of $1.04 to $1.06. This compares to its previous guidance of $1.10 to$1.13 per share on a proforma basis and $1.08 to $1.11 per share on a GAAPbasis. Pro forma earnings per share at this revised level for 2005 wouldrepresent an increase of28% to 30% from 2004.

In addition, although the Company does not ordinarily provide quarterlyguidance, the Company provided an outlook for the third quarter. Based on anupdated review, the Company currently expects net sales for the third quarter of2005 to range between $203 million and $207 million, compared to last year'sthird quarter net sales of $181.7 million. The Company currently expects pro-forma diluted earnings per share to be approximately $0.22 to $0.23 and GAAPdiluted earnings per share to be approximately $0.21 to $0.22. The Companynotes that its expectations for the third quarter of 2005 and the full year arebased on information available at the time of this release, and are subject tochanging conditions, many ofwhich are outside the Company's control.

Chief Executive Officer Robert B. Trussell, Jr. commented, "Although ourrevised guidance still reflects significant growth in our net sales and earnings

-31-


compared to 2004, a number of unanticipated factors have arisen this quarter thathave adversely affected our net sales growth, primarily in our US retail furniturechannel.

"First, recently available industry data indicates that the U.S. mattressindustry got off to a slow start in the third quarter and has been experiencing amore modest growth rate than we previously anticipated. Our retail storecustomers and industry analysts attribute this trend primarily to the very attractiveincentives offered by the U.S. automotive industry this summer . We believe thesepromotions diverted consumer spending away from other `big ticket' items suchas mattresses.

"A second factor is a significant dampening of consumer sentimentnationally. Thus far in September we have not experienced the degree of seasonalgrowth that we anticipated, despite record sales for the Labor Day period. Webelieve this deviation from normal trends primarily reflects the significant impactthat Hurricane Katrina and the accompanying sharp increase in gas prices havehad on consumer purchasing patterns.

"A third factor is the direct impact of the hurricane, driving a noticeableloss in business in the areas most affected. We have analyzed our sales patternsand estimate that in the disaster area we are likely to lose approximately $1million in net sales per month.

"With respect to competition, we continue to see stores that havecompetitive visco offerings perform as well, if not better, than stores withoutknock-off visco products. However, we do note that it is possible that ourmattress sales are being impacted by competitive offerings in stores where weare not currently represented.

"Based on these factors and the continued uncertain consumer outlook, weare revising our outlook for 2005. Our revised earnings guidance also reflects ourcurrent estimate of the impact of cost pressures from the recent rise in chemicalprices driven primarily by natural gas increases , and fuel surcharges for thetransportation and delivery of our products.

President H. Thomas Bryant added, "We are continuing to focus on stepsto drive sales and earnings growth. These include enlarging our retail sales andtraining forces. We are continuing the drive to open new furniture retail andbedding accounts and expand our retail floor space by accelerating the rollouts ofthe EuroBed by Tempur-PedicTM and the OriginalBed by Tempur-PedicTM. Inaddition, we are now beginning to roll out the Scandinavian Bed CollectionTMthroughout the rest of Europe and are launching our new pillow line in Japan.Finally, we are stepping up efforts to improve the productivity of ourmanufacturing and supply chain operations to reduce costs.

-32-


"While we are not pleased to see this slow down in growth , we remainextremely confident of the long term prospects for Tempur-Pedic. As the categoryleader, we are well positioned and believe we will continue to disproportionatelybenefit from the rapidly growing visco elastic category.

81. Shocked by this sudden and inexplicable change of circumstances, the Company's

lowered guidance for 2005 and the truth revealed regarding the Company's slow growth and

competition in the industry, Tempur-Pedic shares fell 28% in one day, from $16. 38 per share on

September 19, 2005, to $11.70 per share on September 20, 2005.

82. On the news of the Company' s true financial condition , the investment analysts

lowered guidance for Tempur-Pedic stock across the board. For example, on September 20,

2005, SunTrust Robinson Humphrey issued a report entitled "TPX: Warns on Year; Downgrade

to Neutral, 4Q05 Still Too High, which stated in part:

Lowers Year Guidance; 3Q05 Below Analysts' Expectations. TPX cutfull year 2005 revenue estimates by about $45 million to $845-$855 million(+24% yoy) and earnings to $1.05-$1.07 (+29%) from $1.10-$1.13.

Lowering To Neutral; Dead Money For Some Time. We despisedowngrading stocks on bad news but see several issues with the stocks. (1) Ourbelief that 4Q05 estimates are too high (2) Continued margin pressure fromrising petrochemical costs that cannot be offset from some time (3) Newcapacity coming on line next year that could continue margin pressure. Thequestion for TPX has always been what long-term growth will slow down to overthe coming years as competition continues to push into the market.

83. The true facts, which were known by each of the defendants but concealed by

them from the investing public during the Class Period, were as follows:


declining - eliminating the Company's prospects for the 2005 growth defendants had projected;

(b) That even by July 21, 2005 , when the Company was publicly faced with


-33-




(c) That the Company's retail channel performance was volatile and irregular

and characterized internally as such;


higher-end mattresses as defendants claimed;





1 Q05 from the announced price increase;


Company's other products;

(h) That the Company was violating GAAP by not processing returns; and

(i) As a result of (a)-(h) above, the Company's FY 2005 projections of $880-

$890 million in revenue and $1.10-$1.13 EPS were grossly overstated.

84. The September 19, 2005 statement concerning the Company's inability to achieve

the very projections they reported to the market only weeks earlier was issued after defendants

had sold $246 million worth of their own shares.

DEFENDANTS ' FALSE FINANCIAL REPORTING AND GAAP VIOLATIONSDURING THE CLASS PERIOD

85. As detailed herein, in order to improperly inflate Tempur-Pedic's net income,

earnings and revenue, defendants caused the Company to falsely report its financial results

included in press releases and analyst conference calls during the Class Period, and in Tempur-

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Pedic's Form 10-Q for the quarter ended March 31, 2005, and overstating net income and

earnings by failing to account for all returns in the last two weeks of 2Q05. These failures

represented material violations of GAAP.

86. GAAP are those principles recognized by the accounting profession as the

conventions, rules and procedures necessary to define accepted accounting practices at a

particular time. Those principles are the official standards accepted by the Securities and

Exchange Commission ("SEC ) and promulgated in part by the American Institute of Certified

Public Accountants ("AICPA ), a private professional association , through three successor

groups it established: the Committee on Accounting Procedure; the Accounting Principles Board

(the "Board ); and the Financial Accounting Standards Board (the "FASB ) with the permission

of the SEC (Accounting Series Release No. 150).

87. The SEC requires that public companies prepare their financial statements in

accordance with GAAP. As set forth in SEC Rule 4-01(a) of SEC Regulation S-X, "[f]inancial

statements filed with the [SEC] which are not prepared in accordance with [GAAP] will be

presumed to be misleading or inaccurate . 17 C.F.R. §210.4-01(a)( 1). Management is

responsible for preparing financial statements that conform with GAAP. As noted by AICPA

auditing standards ("AU ), § 110.02:

The Financial statements are management's responsibility. . . .Management is responsible for adopting sound accounting policies and forestablishing and maintaining internal controls that will, among other things,record, process, summarize, and report transactions (as well as events andconditions) consistent with management's assertions embodied in the financialstatements. The entity's transactions and the related assets, liabilities, and equityare within the direct knowledge and control of management.... Thus, the fairpresentation of financial statements in conformity with generally acceptedaccounting principles is an implicit and integral part of management'sresponsibility.

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88. Tempur-Pedic's financial statements filed with the SEC during the Class Period

violated the following provisions of GAAP, among others discussed below:

(a) The principle that financial reporting should provide information that is

useful to present and potential investors and creditors and other users in making rational

investment, credit and similar decisions. (FASB Statement of Financial Accounting Concepts -

"SFAC No. 1);

(b) The principle that financial reporting should provide information about the

economic resources of an enterprise, the claims to those resources and the effects of transactions,

events and circumstances that change resources and claims to those resources . (SFAC No. 1);

(c) The principle that financial reporting should provide information about

how management of an enterprise has discharged its stewardship responsibility to owners

(stockholders) for the use of enterprise resources entrusted to it. To the extent that management

offers securities of the enterprise to the public, it voluntarily accepts wider responsibilities for

accountability to prospective investors and to the public in general . (SFAC No. 1);

(d) The principle that financial reporting should provide information about an

enterprise's financial performance during a certain time period. Investors and creditors often use

information about the past to help in assessing the prospects of an enterprise. Thus, although

investment and credit decisions reflect investors' expectations about future enterprise

performance, those expectations are commonly based at least partly on evaluations of past

enterprise performance . (SFAC No. 1);

(e) The principle that the quality of reliability and, in particular, of

representational faithfulness leaves no room for accounting representations that subordinate

substance to form. (SFAC No. 2);

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(f) The principle that financial reporting should be reliable in that it

represents what it purports to represent. That information should be reliable as well as relevant

is a notion that is central to accounting . (SFAC No. 2);

(g) The principle of completeness, which means that nothing is left out of the

information that may be necessary to insure that it validly represents underlying events and

conditions . (SFAC No. 2);

(h) The principle that conservatism be used as a prudent reaction to

uncertainty to try to ensure that uncertainties and risks inherent in business situations are

adequately considered. The best way to avoid injury to investors is to try to ensure that what is

reported represents what it purports to represent . (SFAC No. 2);

(i) The principle that losses be accrued for when a loss contingency exists.

(Statement of Financial Accounting Standards - "FASB Statement - No. 5);

(j) The principle that if no accrual is made for a loss contingency, then

disclosure of the contingency shall be made when there is at least a reasonable possibility that a

loss or an additional loss may have been incurred. (FASB Statement No. 5);

(k) The principle that sales returns must be estimated and recorded at each

balance sheet date. Inherent in this principle is that known returns must be included within

estimated returns. (FASB Statement No. 48);

(1) The principle that contingencies and other uncertainties that affect the

fairness of presentation of financial data at an interim date shall be disclosed in interim reports in

the same manner required for annual reports. (Accounting Principles Board - "APB Opinion

No. 28);

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(m) The principle that disclosures of contingencies shall be repeated in interim

and annual reports until the contingencies have been removed, resolved, or have become

immaterial . (APB Opinion No. 28);

(n) The principle that management should provide commentary relating to the

effects of significant events upon the interim financial results . (APB Opinion No. 28); and

(o) The principle that disclosure of accounting policies should identify and

describe the accounting principles followed by the reporting entity and the methods of applying

those principles that materially affect the financial statements. (APB Opinion No. 22).

89. The SEC regulates statements by companies "that can reasonably be expected to

reach investors and the trading markets, whoever the intended primary audience. Securities Act

Release No. 33-6504, 1984 SEC LEXIS 2559, at*2 (Jan. 1984). Under SEC regulations, the

management of a public company has a duty promptly "to make full and prompt announcements

of material facts regarding the company's financial condition. Securities Exchange Act Release

No. 8995, 1970 SEC LEXIS 648, at *2 (Oct. 15, 1970). The SEC has emphasized that

"[i]nvestors have legitimate expectations that public companies are making, and will continue to

make, prompt disclosure of significant corporate developments. Securities Exchange Act

Release No. 18271, 1981 SEC LEXIS 292, at *13 (Nov. 19, 1981).

90. In Accounting Series Release No. 173, 1975 SEC LEXIS 2516, at *4 (July 2,

1975), the SEC reiterated the duty of management to present a true representation of a

company's operations. "[I]t is important that the overall impression created by the financial

statements be consistent with the business realities of the company's financial position and

operations.

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91. Item 7 of Form 10-K and Item 2 of Form 10-Q, Management's Discussion and

Analysis of Financial Condition and Results of Operations ("MD&A ), require the issuer to

furnish information required by Item 303 of Regulation S-K. (17 C.F.R. §229.303.)

92. During the Class Period, Tempur-Pedic falsely represented that the Company's

financial statements were in compliance with GAAP. At all times during the Class Period,

Tempur-Pedic issued certifications signed by its CEO and CFO, defendants Trussell and

Williams, respectively, pursuant to the requirements of the Sarbanes-Oxley Act of 2002, which

stated that the Company's SEC filings did not contain any untrue statement of material fact or

omit to state a material fact necessary to make the statements made, in light of the circumstances

under which such statements were made, not misleading and that the financial statements and

other financial information included in the SEC filings fairly presented in all material respects

the financial condition , results of operations and cash flows of the Company.

93. Defendants clearly and deliberately violated GAAP by refusing to process returns

in the last part of 2Q05. This stark, and utterly fraudulent, instruction was issued to help

maintain the fa ade that the Company was performing better than it was. The fact that

defendants ordered this deviation from the Company' s standard practice of processing returns in

the quarter in which they occur present an unambiguous case of fraudulent accounting and

further demonstrates defendants' scienter to defraud investors. Defendants' conduct also

constitutes a violation of the internal controls both defendants Trussell and Williams certified to

the SEC.

LOSS CAUSATION/ECONOMIC LOSS

94. During the Class Period as detailed herein, defendants engaged in a scheme to

deceive the market and in a course of business that artificially inflated the price of Tempur-Pedic

securities and operated as a fraud or deceit on Class Period purchasers of Tempur-Pedic's

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securities , by misrepresenting the Company's business success , and future business prospects,

and omitting information concerning the Company's competitive problems. Defendants

achieved this fa ade of success, growth, and strong future business prospects via the

misrepresentations detailed herein, at ¶147, 48, 56 , 62, 67, 68, 80 . When defendants'

misrepresentations and fraudulent conduct were disclosed to the market, Tempur-Pedic's stock

price fell precipitously as the artificial inflation created by defendants' misrepresentations and

wrongful course of business came out of the Company's stock price. As a result of both their

purchases of inflated Tempur-Pedic securities' during the Class Period - and the subsequent

deflation of those securities - Lead Plaintiffs and other members of the Class suffered damages

under the federal securities laws.

95. Defendants' false and misleading statements and omissions had their intended

effect, causing Tempur-Pedic securities to trade at artificially inflated levels throughout the Class

Period, with Tempur-Pedic's stock price reaching as high as $24.40 per share. That inflation was

removed from Tempur-Pedic 's securities in a series of disclosures . On July 21, 2005, defendants

announced that instead of releasing its highest-end bed ever, it was releasing the low-end

OriginalBed and that its 2Q05 sales growth was not as high as expected. These public

revelations communicated that Tempur-Pedic's business was not performing at the level

previously described by defendants. Investors and the market were surprised by these

disclosures, and, as a result Tempur-Pedic's stock price fell over 20%, on unusually high

volume , from $23. 87 on July 21, 2005 to $17 .81 per share on July 22, 2005. However, this

disclosure on July 19, 2005 was itself false and misleading in that it failed to reveal all of the

known adverse facts about the condition of Tempur-Pedic 's business . In fact, defendants

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reaffirmed the Company's business growth and guidance again during an investor meeting in

August 2005, thereby continuing to inflate Tempur-Pedic's stock price.

96. On September 19, 2005, Tempur-Pedic announced that it was retracting its FY05

guidance, and that in fact they had been experiencing a slowing in sales. In response to this

announcement, the Company's common shares plummeted 28%, from $16.95 on September 19,

2005 to $11.60 on September 20, 2005, trading at an extremely high volume of over 25 million

shares.

97. The price declines in Tempur-Pedic' s securities as a result of defendants' July 21,

2005 and September 19, 2005 disclosures were a direct result of the nature and extent of

defendants' fraud finally being revealed to investors and the market. The timing and magnitude

of the decline in the price of Tempur-Pedic's securities negates any inference that the loss

suffered by plaintiff and other Class members was caused by changed market conditions,

macroeconomic issues , industry factors, or Company-specific facts unrelated to the defendants'

fraudulent conduct. On July 21, 2005, when the defendants announced that the Company was

releasing a low-end bed and had below expected sales , Tempur-Pedic's stock price dropped 20%

while the Standard and Poor's Index stayed flat. Likewise, although Tempur-Pedic's stock fell

28% in response to defendants' announcement on September 19, 2005 that the Company was

retracting its FY05 guidance, and had fallen drastically short of its sales projections, the Standard

and Poor's Index was flat during the same time-frame. In sum, as the truth about defendants'

business performance was revealed to the market, the Company's stock price plummeted, the

artificial inflation came out of the stock, and plaintiffs and other members of the Class were

damaged, suffering substantial economic losses.

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98. The damages , suffered by plaintiffs and other members of the Class was a direct

result of (a) defendants' fraudulent scheme to artificially inflate Tempur-Pedic's stock price

during the Class Period, and (b) the subsequent significant decline in the value of Tempur-

Pedic's stock when defendants' prior misrepresentations and other fraudulent conduct became

known to the market.

CLASS ACTION ALLEGATIONS

99. Plaintiffs brings this action as a class action pursuant to Rule 23 of the Federal

Rules of civil Procedure on behalf of all persons who purchased Tempur-Pedic publicly traded

securities on the open market during the Class Period (the "Class ). Excluded from the Class are

defendants.

100. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits to

the parties and the Court. Tempur-Pedic had more than 97 million shares of stock outstanding,

owned by hundreds if not thousands of persons.

101. There is a well-defined community of interest in the questions of law and fact

involved in this case. Questions of law and fact common to the members of the class which

predominate over questions which may affect individual Class members include:

(a) Whether the 1934 Act was violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants' statements omitted material facts necessary to make

the statements made, in light of the circumstances under which they were made, not misleading;

(d) Whether defendants knew or deliberately disregarded that their statements

were false and misleading;

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(e) Whether the prices of Tempur-Pedic publicly traded securities were

artificially inflated; and

(f) The extent of damage sustained by Class members and the appropriate

measure of damages.

102. Plaintiffs' claims are typical of those of the Class because plaintiffs and the Class

sustained damages from defendants' wrongful conduct.

103. Plaintiffs will adequately protect the interests of the Class and have retained

counsel who are experienced in class action securities litigation. Plaintiffs have no interests

which conflict with those of the class.

104. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

APPLICABILITY OF PRESUMPTION OF RELIANCEFRAUD-ON-THE-MARKET DOCTRINE

105. At all relevant times, the market for Tempur-Pedic's publicly traded securities

was an efficient market for the following reasons, among others:

(a) Tempur-Pedic' s securities met the requirements for listing, and were listed

and actively traded on the NYSE, which is a highly efficient and automated market;

(b) As a regulated issuer, Tempur-Pedic filed periodic public reports with the

SEC and the NYSE;

(c) Tempur-Pedic regularly communicated with public investors via

established market communication mechanisms, including through regular disseminations of

releases on the national circuits of major news wire services and through other wide ranging

public disclosures, such as communications with the financial press and other similar reporting

services; and

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(d) Tempur-Pedic was followed by numerous securities analysts employed by

major brokerage firms, including Piper Jaffray, CIBC World Markets, Citigroup and Sun Trust

Robinson Humphrey who wrote reports which were distributed to the sales force and certain

customers of their respective brokerage firms. Each of these reports was publicly available and

entered the public marketplace.

106. As a result of the foregoing, the market for Tempur-Pedic's publicly traded

securities promptly digested current information regarding Tempur-Pedic from all publicly

available sources and reflected such information in the prices of Tempur-Pedic's publicly traded

securities . Under these circumstances , all purchasers of Tempur-Pedic's publicly traded

securities during the Class Period suffered similar injury through their purchase of Tempur-

Pedic's publicly traded securities at artificially inflated prices and a presumption of reliance

applies.

NO SAFE HARBOR

107. The statutory safe harbor provided for forward looking statements under certain

circumstances does not apply to any of the allegedly false statements pleaded in this Complaint.

Many of the specific statements pleaded herein were not identified as "forward-looking

statements when made. To the extent there were any forward-looking statements, there were no

meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the purportedly forward-looking statements . Alternatively, to the

extent that the statutory safe harbor does apply to any forward-looking statements pleaded

herein, defendants are liable for those false forward looking statements because at the time each

of those forward-looking statements was made, the particular speaker knew that the particular

forward looking statement was false, and/or the forward-looking statement was authorized and/or

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approved by an executive officer of Tempur-Pedic who knew that those statements were false

when made.

COUNT I

For Violation of §10(b) of the 1934 Act and Rule 10b 5 Against All Defendants

108. Plaintiffs incorporate ¶¶1-107 by reference.

109. During the Class Period, defendants disseminated or approved the false

statements specified above, which they knew or deliberately disregarded were misleading in that

they contained misrepresentations and failed to disclose material facts necessary in order to make

the statements made, in light of the circumstances under which they were made, not misleading.

110. Defendants violated § 10(b) of the 1934 Act and Rule I Ob-5 in that they:

(a) Employed devices, schemes, and artifices to defraud;

(b) Made untrue statements of material facts or omitted to state material facts

necessary in order to make the statements made, in light of the circumstances under which they

were made, not misleading; or

(c) Engaged in acts, practices, and a course of business that operated as a

fraud or deceit upon plaintiffs and others similarly situated in connection with their purchases of

Tempur-Pedic publicly traded securities during the Class Period.

111. Plaintiffs and the Class have suffered damages in that, in reliance on the integrity

of the market, they paid artificially inflated prices for Tempur-Pedic publicly traded securities.

Plaintiffs and the Class would not have purchased Tempur-Pedic publicly traded securities at the

prices they paid, or at all, if they had been aware that the market prices had been artificially and

falsely inflated by defendants' misleading statements.

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112. As a direct and proximate result of these defendants' wrongful conduct, plaintiffs

and the other members of the Class suffered damages in connection with their purchases of

Tempur-Pedic publicly traded securities during the Class Period.

COUNT II

For Violation of §20(a) of the 1934 Act Against All Defendants,Except Defendants TA Associates and FF&L


114. The Individual Defendants acted as controlling persons of Tempur-Pedic within

the meaning of §20(a) of the 1934 Act. By reason of their positions as officers and/or directors

of Tempur-Pedic, and their ownership of Tempur-Pedic stock, the Individual Defendants had the

power and authority to cause Tempur-Pedic to engage in the wrongful conduct complained of

herein. Tempur-Pedic controlled each of the Individual Defendants and all of its employees. By

reason of such conduct, the Individual Defendants and Tempur-Pedic are liable pursuant to

§20(a) of the 1934 Act.

COUNT III

For Violation of §20A of the 1934 Act Against Defendants Bryant, Barber, Fogg,Montgomery, McLane, TA Associates and FF&L


116. While Tempur-Pedic securities traded at artificially inflated and distorted prices,

defendants Bryant, Barber, Fogg, Montgomery, McLane and TA Associates personally profited

by selling 5,793,178 shares of their holdings in Tempur-Pedic securities while in possession of

adverse, material non-public information about Tempur-Pedic, pocketing over $246 million in

illegal insider trading proceeds, as detailed above.

117. By contrast, plaintiffs purchased contemporaneously as follows:

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(a) Lead Plaintiff Mass Laborers' Annuity Fund and members of the Class

traded contemporaneously with defendants by purchasing Tempur-Pedic securities at artificially

inflated prices on June 13, 2005 and were damaged thereby.

(b) Plaintiff City of Pontiac Police and Fire Retirement Systems and members

of the Class traded contemporaneously with defendants by purchasing Tempur-Pedic securities

at artificially inflated prices on June 15, 2005 and were damaged thereby.

118. These plaintiffs and all the other members of the Class who purchased Tempur-

Pedic securities contemporaneously with the sales of Tempur-Pedic securities by the Individual

Defendants:

(a) have suffered substantial damages in that they paid artificially inflated

prices for Tempur-Pedic securities as a result of violations of § 10(b) of the 1934 Act and Rule

IOb-5 herein described; and

(b) would not have purchased Tempur-Pedic securities at the prices they paid,

or at all, if they had been aware that the market prices had been artificially inflated and/or

distorted by defendants' false and misleading statements.

119. As a result of the wrongful conduct alleged herein, these plaintiffs and other

members of the Class have suffered damages.

120. By reason of the foregoing, defendants Bryant, Barber, Fogg, Montgomery,

McLane, TA Associates and FF&L violated §20A of the 1934 Act and are liable to these

plaintiffs and the other members of the Class for the substantial damages they suffered in

connection with their purchase of Tempur-Pedic securities during the Class Period and/or

disgorgement of their ill-gotten gains.

PRAYER FOR RELIEF

WHEREFORE, plaintiffs pray for judgment as follows:

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A. Declaring this action to be a proper class action pursuant to Fed. R. Civ. P. 23;

B. Awarding plaintiffs and the members of the Class damages , including interest;

C. Awarding plaintiffs reasonable costs and attorneys' fees; and

D. Awarding such equitable/injunctive or other relief as the Court may deem just and

proper.

JURY DEMAND

Plaintiffs demand a trial by jury.

DATED: September 13, 2006 STEWART, ROELANDT, STOESS,CRAIGMYLE & EMERY PLLC

JOHN FRITH STEWART6506 West Highway 22P.O. Box 307Crestwood, KY 40014Telephone: 502/241-4660502/241-9301 (fax)

Liaison Counsel

LERACH COUGHLIN STOIA GELLERRUDMAN & ROBBINS LLP

MARK SOLOMONVALERIE L. McLAUGHLIN

s/ MARK SOLOMONMARK SOLOMON

655 West Broadway, Suite 1900San Diego, CA 92101Telephone : 619/231-1058619/231-7423 (fax)

Lead Counsel for Plaintiffs

S:\CasesSD\Tempur-Pedic\CPT00034476_1ST AMD.doc

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Case5:05-cv-00410-JMH Document64 Filed 12/07/2006 Page 1...

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