MFRM Mattress Firm Holding Corp. (MM)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 21, 2016

MATTRESS FIRM HOLDING CORP.

(Exact Name of Registrant as Specified in Charter)

Registrant’s telephone number, including area code: (713) 923-1090

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01      Entry into a Material Definitive Agreement.

In connection with his promotion to President and Chief Executive Officer, Mattress Firm Holding Corp., a Delaware corporation (the “Company”), and Mattress Firm, Inc., a wholly-owned subsidiary of the Company, entered into an amended and restated employment agreement with Mr. Ken Murphy, effective March 21, 2016.  The term of Mr. Murphy’s employment agreement will continue until March 21, 2019, and for successive one year terms thereafter, unless terminated by either party upon three months, prior written notice. Mr. Murphy’s compensation during the term of his employment, including base salary and any bonus compensation, will be determined by the compensation committee of the Company’s Board of Directors. The amended and restated employment agreement is attached as Exhibit 10.1.

Pursuant to his employment agreement, except as described below, upon termination of Mr. Murphy’s employment and his execution of a release, he is entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Murphy participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, (c) eighteen months’ salary continuation and (d) eighteen months’ continuation of medical and dental coverage (unless and until he becomes covered by another employer’s medical and dental plans).  Additionally, his unvested equity awards will be permitted to continue to vest, if at all, upon the terms set forth in the applicable grant award agreements.  Mr. Murphy will receive these same benefits, other than the continued vesting of equity, in the event of a termination of his employment due to disability as well as continuation of disability insurance coverage to the extent necessary to continue benefits that Mr. Murphy became entitled to receive prior to the termination of his employment with the Company.  In the event that his employment terminates other than for Cause or without Good Reason within one year after a change of control event, Mr. Murphy’s salary continuation and benefits coverage will be extended to continue for a twenty-four month period and all unvested equity awards held by Mr. Murphy will immediately vest.

Pursuant to his employment agreement, if Mr. Murphy’s employment is terminated by the Company for Cause or by Mr. Murphy other than for Good Reason, he is only entitled to receive earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Murphy participates on his last day of employment.  “Cause” is defined to mean the employee’s (a) dishonesty or bad faith in connection with the performance of his duties; (b) refusal or failure to use his best efforts to perform duties consistent with the office(s) held by him as requested by the Board of Directors of the Company which would not give rise to Good Reason and which is not cured within thirty (30) days after written notice is delivered by the Board of Directors of the Company to the employee; (c) conviction of a felony; (d) the failure to notify the Board of Directors of any material relationships between him and/or any member of his immediate family with any person or entity with whom the Company or any of its subsidiaries has a material business relationship; or (e) material breach of the provisions in the employment agreement relating to confidentiality, non-competition, non-solicitation and certain other matters.  “Good Reason” is defined to mean a demotion, a reduction in base salary, a relocation of the employee’s base location of employment, the discontinuation of any employee benefit without comparable substitution, or a material breach of the employment agreement by the Company, in each case, following a specified cure period.

In the event of a termination of employment due to Mr. Murphy’s death, his estate will be entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Murphy participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, and (c) eighteen months’ salary continuation.

If Mr. Murphy’s employment is not renewed at the expiration of the then-current term by the Company, upon his execution of a release, he is entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Murphy participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, (c) eighteen months’ salary continuation and (d) eighteen months’ continuation of medical and dental coverage (unless and until he becomes covered by another employer’s medical and dental plans).

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Mr. Murphy has agreed to non-competition and non-solicitation obligations for eighteen months following employment termination.

The foregoing description of the employment agreement is qualified in its entirety by reference to the full text of Mr. Murphy’s amended and restated employment agreement, a copy of which is attached as Exhibit 10.1 hereto and is incorporated herein by reference.

In connection with his transition to Executive Chairman, the Company and Mattress Firm, Inc. entered into an amended and restated employment agreement with Mr. Steve Stagner, effective March 21, 2016.  The term of Mr. Stagner’s employment agreement will continue until March 21, 2019, and for successive one year terms thereafter, unless terminated by either party upon three months, prior written notice. Mr. Stagner’s compensation during the term of his employment, including base salary and any bonus compensation, will be determined by the compensation committee of the Company’s Board of Directors. The amended and restated employment agreement is attached as Exhibit 10.2.

Pursuant to his employment agreement, except as described below, upon termination of Mr. Stagner’s employment and his execution of a release, he is entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Stagner participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, (c) eighteen months’ salary continuation and (d) eighteen months’ continuation of medical and dental coverage (unless and until he becomes covered by another employer’s medical and dental plans).  Additionally, his unvested equity awards will be permitted to continue to vest, if at all, upon the terms set forth in the applicable grant award agreements.  Mr. Stagner will receive these same benefits, other than the continued vesting of equity, in the event of a termination of his employment due to disability as well as continuation of disability insurance coverage to the extent necessary to continue benefits that Mr. Stagner became entitled to receive prior to the termination of his employment with the Company.  In the event that his employment terminates other than for Cause or without Good Reason within one year after a change of control event, Mr. Stagner’s salary continuation and benefits coverage will be extended to continue for a twenty-four month period and all unvested equity awards held by Mr. Stagner will immediately vest.

Pursuant to his employment agreement, if Mr. Stagner’s employment is terminated by the Company for Cause or by Mr. Stagner other than for Good Reason, he is only entitled to receive earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Stagner participates on his last day of employment.  “Cause” is defined to mean (a) the employee’s dishonesty or bad faith in connection with the performance of his duties; (b) a refusal or failure by the employee to use his best efforts to perform duties consistent with the office(s) held by him as requested by the Board of Directors of the Company which would not give rise to Good Reason and which is not cured within thirty (30) days after written notice is delivered by the Board of Directors of the Company to the employee; (c) the employee’s conviction of a felony; (d) the failure of the employee to notify the Board of Directors of any material relationships between him and/or any member of his immediate family with any person or entity with whom the Company or any of its subsidiaries has a material business relationship; or (e) a material breach of the provisions in the employment agreement relating to confidentiality, non-competition, non-solicitation and certain other matters.  “Good Reason” is defined to mean a demotion, a reduction in base salary, a relocation of the employee’s base location of employment, the discontinuation of any employee benefit without comparable substitution, or a material breach of the employment agreement by the Company, in each case, following a specified cure period.

In the event of a termination of employment due to Mr. Stagner’s death, his estate will be entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Stagner participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, and (c) eighteen months’ salary continuation.

If Mr. Stagner’s employment is not renewed at the expiration of the then-current term by the Company, upon his execution of a release, he is entitled to receive (a) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company’s employee benefit plans or programs in which Mr. Stagner participates on his last day of employment, (b) if the termination is on or after the last day of any fiscal year for which a bonus is payable, the amount of such bonus, (c) eighteen months’ salary continuation and (d) eighteen months’ continuation of medical and dental coverage (unless and until he becomes covered by another employer’s medical and dental plans).

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Mr. Stagner has agreed to non-competition and non-solicitation obligations for eighteen months following employment termination.

The foregoing description of the employment agreement is qualified in its entirety by reference to the full text of the amended and restated employment agreement, a copy of which is attached as Exhibit 10.2 hereto and is incorporated herein by reference.

Item 2.02      Results of Operations and Financial Condition.

After the close of the market on March 21, 2016, the Company issued a press release announcing its financial results for the fourth fiscal quarter (13 weeks) and full fiscal year (52 weeks) ended February 2, 2016. The press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

The information contained in this Item 2.02 to the Company’s Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regardless of any general incorporation language in any such filing.

Item 5.02      Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On March 21, 2016, the Company announced the promotion of Mr. Ken Murphy to the position of Chief Executive Officer of the Company and the transition of Mr. Steve Stagner to the position of Executive Chairman of the Company and Chairman of the Company’s Board of Directors.  These organizational changes are effective March 21, 2016.   In addition to serving in his new role as the Chief Executive Officer of the Company, Mr. Murphy will remain the Company’s President.  The press release is attached to this Current Report on Form 8-K as Exhibit 99.2 and is incorporated herein by reference.

Mr. Murphy’s expanded role as President and Chief Executive Officer of the Company reflects the natural progression of the Company’s long-term succession plan.  Mr. Murphy, 40, has had multiple leadership roles within the Company, having previously served as the Company’s President since September 2015 and prior to that time, as the Company’s sole, and then co-, Chief Operating Officer from January 2014.  Mr. Murphy has also served as the Company’s Executive Vice President, Sales and Operations from January 15, 2012 until January 2014, after holding various positions within the Company since 2005, including National Vice President of Sales, Director of Training and Recruiting, Vice President of Field and Talent Management and Regional Vice President of Sales.  From 2003 to 2005, Mr. Murphy was as an account manager at Sealy Corporation.  Mr. Murphy is also currently serving on the Stephen F. Austin University General Business Advisory Board.

There is no arrangement or understanding between Mr. Murphy and any other person pursuant to which Mr. Murphy was selected as an officer of the Company.  There are no transactions involving Mr. Murphy requiring disclosure under Item 404(a) of Regulation S-K as prescribed under the Securities Act.

For a description of the amended and restated employment arrangement entered into with Mr. Murphy in connection with his promotion, please refer to the disclosure under Item 1.01 Entry into a Material Definitive Agreement above.

As Executive Chairman of the Company and Chairman of the Company’s Board of Directors, Mr. Stagner will focus primarily on ensuring the implementation of the Company’s strategic vision and the successful integration of the Sleepy’s business. Mr. Stagner, 47, has held varying leadership positions within the Company since 2005 and had been the Company’s Chief Executive Officer since February 2010, serving for the majority of that time, until October 2014, as both the Company’s President and Chief Executive Officer.

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There is no arrangement or understanding between Mr. Stagner and any other person pursuant to which Mr. Stagner was selected as an officer of the Company.  Except as set forth below, there are no transactions involving Mr. Stagner requiring disclosure under Item 404(a) of Regulation S-K as prescribed under the Securities Act.

For a description of the amended employment arrangement entered into with Mr. Stagner in connection with the above-referenced transition, please refer to the disclosure under Item 1.01 Entry into a Material Definitive Agreement above.

As disclosed in the Company’s Current Report on Form 8-K filed with the U.S. Securities and Exchange Commission on February 3, 2016, Mr. Stagner, at the time the Chief Executive Officer of the Company, entered into a share purchase agreement with the Company and certain investment fund affiliates of J.W. Childs Associates, Inc., the Company’s largest stockholder, pursuant to which Mr. Stagner agreed to purchase from the Company 139,860 shares of the Company’s common stock at a purchase price per share equal to $35.75 per share (the price at which the Company’s common sold at the close of trading on February 2, 2016).  The securities purchase closed on February 5, 2016, and the approximately $5 million in capital that the Company raised from Mr. Stagner’s purchase was used to fund a portion of the cash purchase price required to consummate the acquisition of HMK Mattress Holdings LLC, the leading East Coast based bedding specialty retailer operating under the Sleepy’s brand.

Item 7.01      Regulation FD Disclosure.

On March 21, 2016, the Company filed a prospectus supplement to its Registration Statement on Form S-3ASR filed with the U.S. Securities and Exchange Commission on July 14, 2014, relating to the proposed offering of up to 839,160 shares of common stock by the named selling stockholders.  The Company will not receive any proceeds from the sale of any shares of common stock under the prospectus supplement.

This Current Report on Form 8-K is neither an offer to sell nor a solicitation of an offer to buy any of the securities described herein, and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

The information contained in this Item 7.01 to the Company’s Current Report on Form 8-K is being furnished and shall not be deemed “filed” for any purpose, and shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, regardless of any general incorporation language in any such filing.

Item 8.01      Other Events.

In connection with the filing of the prospectus supplement described above, the Company is filing a legal opinion of Ropes & Gray LLP as Exhibit 5.1 to this Current Report on Form 8-K.

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Item 9.01      Financial Statements and Exhibits.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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Index to Exhibits

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Exhibit 5.1

March 21, 2016

Mattress Firm Holding Corp.

5815 Gulf Freeway,

Houston, Texas 77023

Re:          Registration Statement on Form S-3 filed on July 14, 2014 (Registration No. 333-197410)

Ladies and Gentlemen:

This opinion is furnished to you in connection with the above-referenced registration statement (the “Registration Statement”) and the base prospectus dated July 14, 2014 (the “Base Prospectus”) and prospectus supplement dated March 21, 2016 (together with the Base Prospectus, the “Prospectus”) filed with the Securities and Exchange Commission by Mattress Firm Holding Corp., a Delaware corporation (the “Company”), pursuant to Rule 424 promulgated under the Securities Act of 1933, as amended (the “Act”).  The Prospectus relates to the offering (the “Offering”) of 839,160 shares (the “Shares”) of common stock, par value $0.01 per share, of the Company by certain stockholders of the Company, which Shares are covered by the Registration Statement.

We have acted as counsel for the Company in connection with the Offering.  For purposes of this opinion, we have examined and relied upon such documents, records, certificates and other instruments as we have deemed necessary.

The opinions expressed below are limited to the Delaware General Corporation Law.

Based upon and subject to the foregoing, we are of the opinion that the Shares have been duly authorized, validly issued, and are fully paid and non-assessable.

We hereby consent to your filing this opinion as an exhibit to the Company’s Current Report on Form 8-K filed on the date hereof and to the use of our name in the Prospectus under the caption “Legal Matters.”  In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Securities and Exchange Commission thereunder.

Very truly yours,

/s/ Ropes & Gray LLP

Ropes & Gray LLP

Exhibit 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of March 21, 2016 by and among Kenneth E. Murphy III (the “Executive”), Mattress Firm Holding Corp., a Delaware corporation (“MFHC”) and Mattress Firm, Inc., a Delaware corporation (“MFI”) (MFHC and MFI are referred to herein collectively, as the “Company”).

WHEREAS, Executive currently serves as the President and Chief Executive Officer of the Company;

WHEREAS, the parties entered into an employment agreement on August 4, 2014 (the “Original Employment Agreement”), as amended from time to time thereafter; and

WHEREAS, the Company desires to amend and restate the Original Employment Agreement with the Executive to set forth certain terms of his employment relationship and as a means to incentivize the Executive to continue in an employment relationship with the Company;

NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MFHC, the Executive and MFI agree to amend and restate the Original Employment Agreement in its entirety as follows as follows:

Section 1. Agreement to Employ; No Conflicts. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ the Executive, and the Executive hereby accepts such continued employment with the Company. The Executive represents and agrees that (a) he is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound, (b) he has not violated, and in connection with his employment with the Company will not violate, any non-competition, non-solicitation or other similar covenant or agreement by which he is or may be bound and (c) in connection with his employment with the Company he will not use any confidential or proprietary information he may have obtained in connection with his employment with any prior employer.

Section 2. Employment Duties. During the Term (as defined below), the Executive shall serve as President and Chief Executive Officer of the Company and shall report to the Executive Chairman, and be subject to the direction and control of, the Company’s Executive Chairman and Board of Directors. In such capacity, the Executive shall have the authority and responsibility to oversee, manage and direct the operations of the Company, primarily focusing on the activities, strategy, training, development and efficiencies of the Company’s field operations as well as managing the back office operations and shall have duties in connection therewith that include cost management, management of departments, overseeing and directing the strategic growth and direction of the Company, ensuring efficiency of operations throughout the organization, developing and implementing plans for the operational infrastructure of systems, processes, and personnel designed to accommodate the rapid growth objectives of the Company and otherwise providing senior executive level support to the Company as from time to time requested by the Board of Directors of MFHC (the “Board”) or Executive Chairman. During the Term, the Executive shall devote all of his business time, energy, experience and talents to such employment, shall devote his best efforts to advance the interests of the Company and its subsidiaries and other Affiliates and shall not engage in any other business activities, as an employee, director, consultant or in any other capacity, whether or not he receives any compensation therefor, without the prior written consent of the Board; provided that the Executive may perform the following activities without the prior written consent of the Board, provided that such activities do not interfere with or otherwise affect the performance of his duties hereunder: (i) if invited to do so, serve on the board of directors of another company, subject to the approval of the Board, which shall not be withheld unreasonably; (ii) manage his personal investments and estate planning in a manner not in violation of this Agreement; and (iii) engage in philanthropic, charitable and community activities. For purposes of this Agreement, “Affiliate” shall mean any person or entity that, directly or indirectly, is controlled by MFHC. As used herein, “controlled by” means the possession, directly or indirectly, of the power to vote 50% or more of the outstanding voting securities of, or voting interest in, such person or entity or otherwise direct the management policies of such person or entity, by contract, agreement or otherwise.

Amended and Restated Employment Agreement – Ken Murphy

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Section 3. Term of Employment. The term of the Executive’s employment under this Agreement shall commence on March 21, 2016, and, unless earlier terminated pursuant to Section 7, will continue under this Agreement until and through March 21, 2019 (the “Initial Expiration Date”), provided, however, that effective upon the Initial Expiration Date and the last day of each subsequent fiscal year of the Company (each, an “Extension Date”), the Term shall be automatically extended upon the same terms and conditions for an additional period of one (1) year from the scheduled expiration of the Term (prior to giving effect to such one (1) year extension) unless either the Company or the Executive shall have notified the other in writing at least three (3) months prior to the next Extension Date that such party does not desire to have the Term so extended. The term of this Agreement, as from time to time extended or renewed, is hereafter referred to as the “Term.”

Section 4. Place of Employment. The Executive’s principal place of employment shall be Houston, Texas. Notwithstanding the foregoing, the Executive acknowledges that the duties to be performed by the Executive hereunder are such that the Executive may be required to travel extensively.

Section 5. Compensation; Reimbursement. During the remainder of the Term, the Company shall pay or provide to the Executive, in full satisfaction for his services provided hereunder, the following:

(a) Base Salary.  During the Term the Company shall pay the Executive a base salary of $800,000 per year (as adjusted by the Compensation Committee from time to time, the “Base Salary”), payable not less frequently than semi-monthly in accordance with the payroll policies of the Company for senior executives as from time to time in effect (the “Payroll Policies”), less such amounts as may be required to be withheld by applicable federal, state and local law and regulations.

(b) Cash Bonus.

(i) For each fiscal year of the Company during the Term, the Executive will be eligible to receive a cash bonus, with the amount of the bonus to be determined by the Company based on the EBITDA achieved by the Company in such fiscal year relative to the annual EBITDA target for such fiscal year set forth in the Company’s annual management plan pursuant to the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives) (as to a given fiscal year, the “Annual EBITDA Target”). The Executive’s target bonus for each fiscal year will be 100% of Base Salary for such fiscal year if the Company achieves 100% of the Annual EBITDA Target for such fiscal year. If the Company achieves more than 100% of the Annual EBITDA Target, the Executive may receive a bonus of up to 200% of Base Salary pursuant to terms established by the Board. If the Company does not achieve more than 90% of the Annual EBITDA Target, the Executive will be entitled to no cash bonus. If the Company achieves between 90% and 100% of the Annual EBITDA Target, the cash bonus will be determined by linear interpolation between 0% and 100% of Base Salary. “EBITDA” shall be determined as provided in the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives).

(ii) The Annual EBITDA Target for each fiscal year shall be determined annually by the Board or the Compensation Committee of the Board in good faith. Whether the Annual EBITDA Target for any fiscal year has been achieved, in whole or in part, will be determined by the Board or the Compensation Committee of the Board.

(iii) Any bonus payable hereunder for an applicable fiscal year shall be paid after the Board has reviewed the Company’s final audited consolidated financial statements for the applicable fiscal year, provided, however, that the bonus payable for a fiscal year shall be paid no later than the date that is two and one-half months after the end of the calendar year in which such fiscal year ended. The Executive must be employed by the Company on the last day of the applicable fiscal year for which a bonus is payable hereunder in order to receive any such bonus for such fiscal year; provided that, if for any reason other than the Company’s termination of the Executive’s employment for Cause or the Executive’s resignation without Good Reason, the

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employment of the Executive terminates on or after the last day of any fiscal year for which a bonus is payable hereunder but before such bonus has been paid, the Executive shall be paid such bonus in accordance with this Section 5(b)(iii) (including, for the avoidance of doubt, in the event that the employment of the Executive is terminated due to the provision of notification pursuant to Section 3 that the Term will not continue beyond its then scheduled expiration date).

(c) Expenses. The Company shall pay or reimburse the Executive for ordinary and necessary business expenses incurred by him in the performance of his duties contemplated hereby in accordance with the Company’s usual policies upon receipt from the Executive of written substantiation of such expenses in accordance with the Company’s usual policies. Such payments under this Section 5(c) shall be made within ten (10) business days after the delivery of the Executive’s written request for the payment accompanied by such evidence of fees and expenses incurred as the Company may reasonably require, provided that such request is made no later than thirty (30) days after such expense is incurred. The amount of expenses eligible for reimbursement pursuant to this Section 5(c) during a given taxable year of the Executive shall not affect the amount of expenses eligible for reimbursement in any other taxable year of the Executive. The right to reimbursement pursuant to this Section 5(c) is not subject to liquidation or exchange for another benefit.

(d)  Vacation and Other Time Off. The Executive shall be entitled to twenty (20) days of vacation per year, accrued in accordance with the Company’s vacation policy, prorated for any partial years of service, as well as any other paid time off provided for in the Company’s employee handbook.

(e) Benefits. During the remainder of the Term, the Executive shall be entitled to continue to participate in all medical, dental, disability insurance, life insurance, retirement, savings and any other employee benefit plans or programs (other than a car allowance) which are otherwise generally made available by the Company to its senior executives; provided, however, that the Company shall be entitled to amend or terminate any employee benefit plans which are applicable generally to the Company’s senior executives, officers or other employees.  For the avoidance of doubt, as used in this Agreement, the phrase “employee benefit plans or programs” does not include compensation, bonus or vacation allowance and such items may not be amended without the consent of the Executive.  The Executive shall hold, at the Company’s expense, (i) an accidental death and dismemberment insurance policy for up to 1x Base Salary (not to exceed $500,000), (ii) a basic term life insurance policy for up to 1x Base Salary (not to exceed $500,000) and (iii) an additional basic term life insurance policy for up to 1x Base Salary.

Section 6. Equity Participation. The Executive shall be eligible to receive equity grants under the Mattress Firm Holding Corp. 2011 Omnibus Incentive Plan as may be awarded by the Compensation Committee of the Board from time to time.  Subject to Compensation Committee approval, the Executive will receive annual equity grants having an aggregate grant date fair value of 150% of Base Salary; provided that, due to the equity grant that the Executive will receive on the date hereof, no additional equity grants will be issued to the Executive in 2016.

Section 7. Termination. The Executive’s employment hereunder may be terminated as follows:

(a) Upon Disability.

(i) If during the Term, the Executive shall become physically or mentally disabled, whether totally or partially, either permanently or so that the Executive, in the good faith judgment of the Board based on the opinion of a physician selected by the Board who may but need not be the Executive’s normal treating physician, is unable as a result of such disability, with or without a reasonable accommodation, to substantially and competently perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred twenty (120) days during any six-month period (a “Disability”), the Company may terminate the Executive’s employment hereunder. In order to assist the Board in making that determination, the Executive shall, as reasonably requested by the Board, (A) make himself available for medical examinations by one or more physicians chosen by the Board and (B) use his best efforts to cause his own physician(s) to be available to discuss with the Board such Disability.

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(ii) Upon termination of the Executive’s employment for Disability, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than payments in respect of the Base Salary then in effect for services rendered or expenses incurred through the date of such termination or accrued and unpaid benefits pursuant to any medical, dental, disability insurance, life insurance, retirement, savings or any other employee benefit plans or programs in which the Executive participates on the Executive’s last day of employment hereunder, which shall be paid in accordance with the Company’s plans and applicable law (collectively, “Accrued Termination Obligations”)); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall (A) pay to the Executive, or the legal representative of the Executive, the Base Salary at the rate in effect on the date of termination (less any amounts that the Executive receives pursuant to any Company-sponsored long-term disability insurance policy for the Executive as and if in effect at the date of termination) in equal installments in accordance with the Payroll Policies for a period of eighteen (18) months following such termination, (B) reimburse the Executive for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for eighteen (18) months following the date of such termination as provided in Section 7(j) and (C) if applicable, continue to provide disability insurance coverage for the Executive to the extent necessary to continue benefits which the Executive became entitled to receive prior to the termination of his employment with the Company; and provided, further, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. If at the time of termination of employment accrued vacation is paid out under the Company’s policies as then generally applicable to senior executives, then such accrued vacation shall be treated for all purposes of this Agreement as an Accrued Termination Obligation hereunder to the extent such accrued vacation is otherwise payable under such policies. If the Executive is not a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination (“Specified Employee”), and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a general release of claims in form and substance reasonably satisfactory to the Company (a “Release”), which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (except for the Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.

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(b) Upon Death.

(i) If the Executive dies during the Term, the Executive’s employment hereunder shall automatically terminate as of the close of business on the date of his death.

(ii) Upon termination of the Executive’s employment as result of the Executive’s death, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than the Accrued Termination Obligations); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall pay to the Executive’s estate the Base Salary at the rate in effect on the date of termination in equal installments in accordance with the Payroll Policies for a period of eighteen (18) months. These installment payments shall be paid in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date of the Participant’s death.

(c) For Cause. The Company may terminate the Executive’s employment hereunder at any time, effective immediately upon written notice to the Executive, for Cause (as defined below) and all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination. The Company shall have “Cause” for termination of the Executive if any of the following has occurred:

(i) the Executive’s dishonesty or bad faith in connection with the performance of his duties;

(ii) a refusal or failure by the Executive to use his best efforts to perform duties consistent with the office(s) held by him as requested by the Board which would not give rise to Good Reason and which is not cured within thirty (30) days after written notice is delivered by the Board to the Executive;

(iii) the Executive’s conviction of a felony;

(iv) the failure of the Executive to notify the Board of any material relationships between him and/or any member of his immediate family with any person or entity with whom the Company or any of its subsidiaries has a material business relationship; or

(v) a material breach of the provisions of Section 8, Section 9 or Section 10 of this Agreement by the Executive.

(d) Without Cause.

(i) The Company may terminate the Executive’s employment hereunder without Cause at any time upon written notice to the Executive. Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, for eighteen (18) months, (A) continued payment of the Base Salary at the rate in effect on the date of termination in accordance with the Payroll Policies (all such payments, collectively, the “Severance Payments”) and (B) reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for eighteen (18) months following the date of such termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required

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under COBRA. If the Executive is not a Specified Employee as of the date of termination and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.  Further, in the event that the Executive’s employment is terminated under this Section 7(d), subject to the delivery to the Company of a signed Release that is not subsequently revoked, all unvested equity awards shall be permitted to continue to vest, if at all, in accordance with the terms of the applicable grant agreements during a period of six (6) months following the Executive’s termination date as though the Executive remained an employee for such period and, at the end of such 6-month period, all equity awards that remain unvested shall be immediately forfeited.

(ii) In the event that the Executive’s employment is terminated under this Section 7(d) within one (1) year after the effective date of a Covered Transaction (as defined in the Company’s 2011 Omnibus Incentive Plan), (A) the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company the same Severance Payments and benefits described above in this Section 7(d) provided that the salary continuation and COBRA premium reimbursements shall extend by six (6) months to a period of twenty-four (24) months and (B) all outstanding unvested equity awards issued to the Executive shall accelerate and vest in full as of the termination date.  The remaining terms and conditions set forth in this Section 7(d), including the provisions of Section 7(d) relating to the requirement of a Release, shall apply as written.

(iii) It is further acknowledged and agreed by the parties that the actual damages to the Executive in the event of termination under this Section 7(d) would be difficult if not impossible to ascertain, and, therefore, the salary and benefit continuation provisions set forth in this Section 7(d) shall be the Executive’s sole and exclusive remedy in the case of termination under this Section 7(d) and shall, as liquidated damages or severance pay or both, be considered for all purposes in lieu of any other rights or remedies, at law or in equity, which the Executive may have in the case of such termination.

(e) Resignation Without Good Reason. The Executive shall have the right to terminate his employment hereunder upon one (1) month’s prior written notice to the Company, and upon such termination, all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination.

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(f) Resignation For Good Reason.

(i) The Executive shall have the right to terminate his employment hereunder at any time for Good Reason (as defined below). Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company the same Severance Payments and benefits that he would have been entitled to receive had the Executive been terminated by the Company in accordance with Section 7(d) above, including the continued vesting of equity awards, payable as provided in Section 7(d) above (including the provisions of Section 7(d) relating to the requirement of a Release).  Further, in the event the Executive terminates his employment hereunder within one (1) year after the effective date of a Covered Transaction, the extended benefits and equity acceleration provided for in Section 7(d)(ii) shall apply, subject to the other terms and conditions of Section 7(d).

(ii) The Executive shall have “Good Reason” for termination of his employment hereunder if any of the following has occurred without the Executive’s prior written consent; provided that the Executive shall not be deemed to have Good Reason unless (i) notice of the event or condition purportedly giving rise to Good Reason is given in writing no later than ninety (90) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises, (ii) there does not exist an event or condition which could serve as the basis of a termination of the Executive’s employment for Cause, (iii) the Company has had thirty (30) days from the date written notice of such termination is given (the “Cure Period”) to cure such event or condition and has not done so and (iv) the Executive resigns no later than ninety (90) days following expiration of the Cure Period:

(A) a material diminution in Executive’s duties or authority;

(B) any material reduction in the Base Salary, material perquisites (including vacation allowance) or the overall level of other benefits (other than as a result of changes to benefit plans generally made available to the employees and/or senior management of the Company in which the Executive participates or for any reductions required by law);

(C) relocation of the Executive’s principal place of employment more than fifty (50) miles from its location as of the date of this Agreement; or

(D) a material breach by the Company of this Agreement.

Notwithstanding the foregoing, the Executive shall not have “Good Reason” to terminate his employment if he has consented in writing to any event set forth above. For the avoidance of doubt, a disagreement between the Executive and the Board with respect to the policies and strategies adopted or approved by the Board with respect to the Company’s business and affairs, including without limitation matters set forth in any annual operating budget or strategic plan approved by the Board, shall not constitute “Good Reason” for purposes of this Agreement.

(g) Upon Expiration of the Term. In the event the Company notifies the Executive that the Term will not automatically extend in accordance with Section 3 and there is an expiration of the Term at its regularly scheduled expiration date under Section 3 (a “Scheduled Expiration”), then, following the expiration of the Term and a concurrent termination of the Executive’s employment (regardless of whether such termination is by the Company or the Executive), the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, for nine (9) months, (A) continued payment of the Base Salary at the rate in effect at the expiration of the Term in accordance with the Payroll Policies and (B) reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for nine (9) months following the date of such expiration of the Term and such concurrent termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums

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paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required under COBRA. If the Executive is not a Specified Employee as of expiration of the Term and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the earlier of the deadline established by the Company or the applicable payment date (the date that is the first payroll date that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. For the avoidance of doubt, in no event shall Section 7(a)-(f) apply in the case of a termination covered by this Section 7(g). For the avoidance of doubt, in the event that the Executive notifies the Company that he does not desire to extend the Term in accordance with Section 3 above, then all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than any rights that the Executive may have under Section 5(b)(vi) in accordance with its terms and, in the case of a concurrent termination of the Executive’s employment, the Accrued Termination Obligations) shall cease upon the expiration of the Term.

(h) Release. For the avoidance of doubt, as a condition to the payments under Section 7(a), 7(d), 7(f) or 7(g), the Executive shall execute and deliver to the Company a Release, which shall be executed and delivered and become irrevocable within sixty (60) days following termination (it being expressly agreed and understood that no payment or benefits under these Section 7(a), 7(d), 7(f) or 7(g) shall be required to be paid or provided unless or until the foregoing release requirements are satisfied).

(i) Section 409A. This Agreement is intended to comply with the provisions of Section 409A of the Code, and shall be interpreted in a manner consistent with Section 409A, or, if applicable, an exclusion therefrom. For purposes of this Agreement, all references to “termination”, “termination of employment” and correlative phrases shall mean a Separation From Service. Each payment made under this Agreement shall be treated for the purposes of Section 409A as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Any reimbursements provided for in this Agreement shall be made consistent with the requirements of Section 1.409A-1(b)(9)(v) of the Treasury Regulations.

(j) Reimbursement of COBRA Premiums. If, at the time the Executive’s employment with the Company terminates under Section 7(a), (d) or (f) or at the time the Term expires due to the election of the Company pursuant to Section 3 not to extend the Term beyond its then scheduled expiration date, the Executive is an active participant in the Company’s group medical plan and/or the Company’s group dental plan (collectively, the “Group Health Plan”) and the Executive timely elects under COBRA to continue the Executive’s and any qualifying dependent’s Group Health Plan coverage (“COBRA Coverage”) the

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Company will reimburse the Executive for the full amount of the premiums the Executive pays for COBRA Coverage under the Group Health Plan for up to the first eighteen (18) months the Executive maintains such COBRA Coverage, subject, with respect to each month, to the Executive’s submission of reasonable documentation that he has paid such premium, if reasonably requested by the Company. Any reimbursements by the Company to the Executive required under this Section 7(j) shall be made on the last day of each month the Executive pays the amount required for such COBRA Coverage, for up to the first eighteen (18) months of COBRA Coverage if the Executive’s employment with the Company terminates under Section 7(a), (d) or (f). If the Executive is a Specified Employee and the benefits specified in this Section 7(j) are taxable to the Executive and not otherwise exempt from Section 409A then any amounts to which the Executive would otherwise be entitled under this Section 7(j) during the first six months following the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive on the date that is six months following the date of the Executive’s Separation From Service. Except for any reimbursements under the applicable Group Health Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 7(j), or in-kind benefits provided, during the Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Executive. The Executive’s right to reimbursement or in-kind benefits pursuant to this Section 7(j) shall not be subject to liquidation or exchange for another benefit. Subject to the Executive’s Group Health Plan continuation rights under COBRA, the benefits listed in this Section 7(j) shall be reduced to the extent benefits of the same type are received by the Executive, the Executive’s spouse or any eligible dependent from any other person during such period, and provided, further, that the Executive shall have the obligation to notify the Company that the Executive or his spouse or other eligible dependent is receiving such benefits. The Company shall retain the discretion to reasonably modify the manner in which the benefits described in this Section 7(j) are provided by the Company to the Executive to the extent reasonably necessary to comply with applicable law; provided, however, that the Company shall make such modifications so as to allow the Executive to continue to receive to the maximum extent possible the economic benefits contemplated by this Section 7(j).

Section 8. Protection of Confidential Information; Non-Competition; Non-Solicitation.

(a) Acknowledgment. The Executive agrees and acknowledges that in the course of rendering services to the Company and its clients and customers he has acquired and will acquire access to and become acquainted with confidential information about the professional, business and financial affairs of the Company, its subsidiaries and Affiliates that is non-public, confidential or proprietary in nature. The Executive acknowledges that the Company is engaged in a highly competitive business and the success of the Company in the marketplace depends upon its good will and reputation. The Executive agrees and acknowledges that reasonable limits on his ability to engage in activities competitive with the Company are warranted to protect its substantial investment in developing and maintaining its status in the marketplace, reputation and goodwill. The Executive recognizes that in order to guard the legitimate interests of the Company, it is necessary for it to protect all confidential information. The existence of any claim or cause of action by the Executive against the Company shall not constitute and shall not be asserted as a defense to the enforcement by the Company of this Agreement.

(b) Confidential Information. During and at all times after the Term, the Executive shall keep secret all non-public information, matters and materials of the Company (including any subsidiaries or Affiliates), including, but not limited to, know-how, trade secrets, mail order and customer lists, vendor or supplier information, pricing policies, operational methods, any information relating to the Company’s (including any subsidiaries’ or Affiliates’) products or product development, processes, product specifications and formulations, artwork, designs, graphics, services, budgets, business and financial plans, marketing and sales plans and techniques, employee lists and other business, financial, commercial and technical information of the Company (including any subsidiaries and Affiliates) (collectively, the “Confidential Information”), to which he has had or may have access and shall not use or disclose such Confidential Information to any person other than (i) the Company, its authorized employees and such other persons to whom the Executive has been instructed to make disclosure by the Board or the General Counsel of the Company, or to the extent necessary or desirable in the course of the Executive’s service to the Company or as otherwise expressly required in connection with court process, (ii) as may be required

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by law and then only after consultation with the Board to the extent possible or (iii) to the Executive’s personal advisors for purposes of enforcing or interpreting this Agreement, or to a court for the purpose of enforcing or interpreting this Agreement, and who in each case have been informed as to the confidential nature of such Confidential Information and, as to advisors, their obligation to keep such Confidential Information confidential. “Confidential Information” shall not include any information which is in the public domain during the period of service of the Executive, provided such information is not in the public domain as a consequence of disclosure by the Executive in violation of this Agreement or by any other party in violation of a confidentiality or nondisclosure agreement with the Company. Upon termination of his employment for any reason or at such earlier time requested by the Board, the Executive shall deliver to the Company all documents, data, papers and records of any nature and in any medium (including, but not limited to, electronic media) in his possession or subject to his control that (x) belong to the Company or (y) contain or reflect any information concerning the Company, its subsidiaries and Affiliates.

(c) Non-Competition. During the Term and thereafter for a period equal to eighteen (18) months (without consideration of whether any termination benefits otherwise available to Executive under Section 7 are eliminated as a result of Executive’s acceptance of other employment), the Executive shall not, in any capacity, anywhere in the United States, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (A) own, operate, manage, or control, (B) serve as an officer, director, partner, member, employee, agent, consultant, advisor or developer or in any similar capacity to or (C) have any financial interest in, or assist anyone else in the conduct of the business of any Competitor (as defined below); provided, however, that the Executive shall be permitted to own less than 5% of any class of publicly traded securities of any company. For purposes of this Section 8, “Competitor” means any person or entity engaged in or which proposes to engage in the business of the retail sale of mattresses.

(d) Non-Solicitation. During the Term and for a period of eighteen (18) months thereafter, the Executive shall not, in any capacity, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (i) solicit, divert or encourage any officers, directors or key employees of the Company (including any subsidiary or Affiliate) to terminate his or her relationship with the Company (including any subsidiary or Affiliate), or hire any such officer, director or key employee, (ii) solicit, divert or encourage any officers, directors or key employees of the Company (including any subsidiary or Affiliate) to become officers, directors, employees, agents, consultants or representatives of another business, enterprise or entity, or (iii) influence, attempt to influence or otherwise cause any of the clients, vendors, distributors or business partners of the Company (including any subsidiary or Affiliate) to transfer his, her or its business or patronage from the Company to any Competitor.

(e) Remedies for Breach. The Company and the Executive agree that the restrictive covenants contained in this Agreement are severable and separate, and the unenforceability of any specific covenant herein shall not affect the validity of any other covenant set forth herein. The Executive acknowledges that the Company will suffer irreparable harm as a result of a breach of such restrictive covenants by the Executive for which an adequate monetary remedy does not exist and a remedy at law may prove to be inadequate. Accordingly, in the event of any actual or threatened breach by the Executive of any provision of this Agreement, the Company shall, in addition to any other remedies permitted by law, be entitled to obtain remedies in equity, including, but not limited to, specific performance, injunctive relief, a temporary restraining order, and a preliminary or permanent injunction in any court of competent jurisdiction, and to prevent or otherwise restrain a breach of this Section 8 without the necessity of proving damages or posting a bond or other security. Such relief shall be in addition to and not in substitution of any other remedies available to the Company. The existence of any claim or cause of action of the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of said covenants. The Executive shall not defend on the basis that there is an adequate remedy at law. In addition to and not in lieu of any other remedy that the Company may have under this Section 8 or otherwise, in the event of any breach of any provision of this Section 8, Section 9 or Section 10 during the period during which the Executive is entitled to receive payments and benefits pursuant to Section 7, such period shall be deemed to have terminated as of the date of such breach and the

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Executive shall not thereafter be entitled to receive any salary or other payments or benefits under this Agreement with respect to periods following such date.

(f) Modification. The parties agree and acknowledge that the duration, scope and geographic area of the covenants described in this Section 8 are fair, reasonable and necessary in order to protect the Confidential Information, goodwill and other legitimate interests of the Company and that adequate consideration has been received by the Executive for such obligations. The Executive further acknowledges that after termination of his employment with the Company for any reason, he will be able to earn a livelihood without violating the covenants described in this Section 8 and the Executive’s ability to earn a livelihood without violating such covenants is a material condition to his employment with the Company. If, however, for any reason any court of competent jurisdiction determines that the restrictions in this Section 8 are not reasonable, that consideration is inadequate or that the Executive has been prevented unlawfully from earning a livelihood, such restrictions shall be interpreted, modified or rewritten to include the maximum duration, scope and geographic area identified in this Section 8 as will render such restrictions valid and enforceable.

Section 9. Certain Agreements.

(a) Suppliers. The Executive does not have, and at any time during the Term shall not have, any employment with or any direct or indirect interest in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise) any supplier or vendor to the Company (including its subsidiaries or Affiliates); provided, however, that the Executive shall be permitted to own less than five percent (5%) of any class of publicly traded securities of any company.

(b) Certain Activities. During the Term, the Executive shall not knowingly (i) without the prior approval of the Board give or agree to give, any gift or similar benefit of more than nominal value to any customer, supplier, or governmental employee or official or any other person who is or may be in a position to assist or hinder the Company in connection with any proposed transaction, which gift or similar benefit, if not given or continued in the future, might adversely affect the business or prospects of the Company, (ii) use any corporate or other funds for unlawful contributions, payments, gifts or entertainment, (iii) make any unlawful expenditures relating to political activity to government officials or others, (iv) establish or maintain any unlawful or unrecorded funds in violation of Section 30A of the Securities Exchange Act of 1934, as amended, and (v) accept or receive any unlawful contributions, payments, gifts, or expenditures.

Section 10. Intellectual Property. All copyrights, trademarks, trade names, service marks and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon, and all other intangible or intellectual property rights that may be invented, conceived, developed or enhanced by Executive during the term of his employment that relate to the business or operations of the Company or any subsidiary or Affiliate thereof or that result from any work performed by the Executive for the Company or any such subsidiary or Affiliate shall be the sole property of the Company or such subsidiary or Affiliate, as the case may be, and Executive hereby waives any right or interest that he may otherwise have in respect thereof. Upon the reasonable request of the Company, Executive shall execute, acknowledge and deliver any instrument or document reasonably necessary or appropriate to give effect to this Section 10 and, at the Company’s cost, do all other acts and things reasonably necessary to enable the Company or such subsidiary or Affiliate, as the case may be, to exploit the same or to obtain patents or similar protection with respect thereto. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company.

Section 11. Notices. All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation of receipt when such notice or other communication is sent by facsimile, (c) one day after delivery to an overnight delivery courier, or (d) on the fifth day following the date of deposit in the United States mail if sent first class, postage prepaid, by registered or certified mail. The addresses for such notices shall be as follows:

(i) For notices and communications to MFHC and MFI:

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Mattress Firm Holding Corp.
5815 Gulf Freeway

Houston, Texas 77023
Attn: William E. Watts

with a copy to:

Mattress Firm Holding Corp.
5815 Gulf Freeway

Houston, Texas 77023
Attn: General Counsel

(ii) For notices and communications to the Executive, at the address on file with the Company, which shall be updated by the Executive in writing as needed.

Any party hereto may, by notice to the other, change its address for receipt of notices hereunder.

Section 12. General.

(a) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.

(b) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF AND/OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR SEPARATION THEREFROM. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE COMPANY THAT THIS SECTION 12(b) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE COMPANY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

(c) Amendment; Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

(d) Successors and Assigns. This Agreement shall be binding upon the Executive, without regard to the duration of his employment by the Company or reasons for the cessation of such employment, and inure to the benefit of his administrators, executors, heirs and assigns, although the obligations of the Executive are personal and may be performed only by him. The Company may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its assets or business(es), whether by merger, consolidation or otherwise. This Agreement shall also be binding upon and inure to the benefit of the Company and its subsidiaries, successors and assigns.

(e) Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of withholding required by law.

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(f) Counterparts; Effectiveness. This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original and all of which together shall be considered one and the same agreement, and will become effective when each of the Company and the Executive receives a counterpart hereof that has been executed by the other.

(g) Severability. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.

(h) Effective Time; Entire Agreement. This Agreement amends, restates and supersedes the Original Employment Agreement in its entirety, with effect from and after the effective date of this Agreement.  This Agreement constitutes the entire agreement between the Executive and the Company and any of their respective affiliates with respect to the terms and conditions of the Executive’s employment with the Company and his rights and obligations as an equity holder of Holdings and supersedes all prior agreements, arrangements, promises and understandings, whether written or oral, between the Executive and the Company and any of their respective affiliates with respect to those subject matters.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

MATTRESS FIRM HOLDING CORP.

Amended and Restated Employment Agreement — Ken Murphy

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Exhibit 10.2

THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of March 21, 2016 by and among R. Stephen Stagner (the “Executive”), Mattress Firm Holding Corp., a Delaware corporation (“MFHC”) and Mattress Firm, Inc., a Delaware corporation (“MFI”) (MFHC and MFI are referred to herein collectively, as the “Company”).

WHEREAS, Executive currently serves as the Executive Chairman of the Company;

WHEREAS, MFHC, Mattress Holding Corp. and the Executive entered into that certain Second Amended and Restated Employment Agreement on September 14, 2011 (the “Original Employment Agreement”), as amended from time to time thereafter; and

WHEREAS, the Company desires to amend and restate the Original Employment Agreement with the Executive to set forth certain terms of his employment relationship and as a means to incentivize the Executive to continue in an employment relationship with the Company;

NOW, THEREFORE, in consideration of the premises and mutual agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, MFHC, the Executive and MFI agree to amend and restate the Original Employment Agreement in its entirety as follows as follows:

Section 1. Agreement to Employ; No Conflicts. Upon the terms and subject to the conditions of this Agreement, the Company hereby agrees to continue to employ the Executive, and the Executive hereby accepts such continued employment with the Company. The Executive represents and agrees that (a) he is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound, (b) he has not violated, and in connection with his employment with the Company will not violate, any non-competition, non-solicitation or other similar covenant or agreement by which he is or may be bound and (c) in connection with his employment with the Company he will not use any confidential or proprietary information he may have obtained in connection with his employment with any prior employer.

Section 2. Employment Duties. During the Term (as defined below), the Executive shall serve as Executive Chairman of the Company and shall report to the Board of Directors of MFHC, and be subject to the direction and control of, MFHC’s Board of Directors. In such capacity, the Executive shall have the authority and responsibility to oversee, manage and direct the strategic operations of the Company, primarily focusing on the development and implementation of a national chain as well as integration activities and strategy and otherwise performing such duties and having such authority over the affairs and business of the Company as are consistent with the responsibilities and authority. The President and Chief Executive Officer of the Company shall report to the Executive.  During the Term, the Executive shall devote all of his business time, energy, experience and talents to such employment, shall devote his best efforts to advance the interests of the Company and its subsidiaries and other Affiliates and shall not engage in any other business activities, as an employee, director, consultant or in any other capacity, whether or not he receives any compensation therefor, without the prior written consent of the Board; provided that the Executive may perform the following activities without the prior written consent of the Board, provided that such activities do not interfere with or otherwise affect the performance of his duties hereunder: (i) if invited to do so, serve on the board of directors of another company, subject to the approval of the Board, which shall not be withheld unreasonably; (ii) manage his personal investments and estate planning in a manner not in violation of this Agreement; and (iii) engage in philanthropic, charitable and community activities. For purposes of this Agreement, “Affiliate” shall mean any person or entity that, directly or indirectly, is controlled by MFHC. As used herein, “controlled by” means the possession, directly or indirectly, of the power to vote 50% or more of the outstanding voting securities of, or voting interest in, such person or entity or otherwise direct the management policies of such person or entity, by contract, agreement or otherwise.

Section 3. Term of Employment. The term of the Executive’s employment under this Agreement shall commence on March 21, 2016, and, unless earlier terminated pursuant to Section 7, will continue under this

Third Amended and Restated Employment Agreement – Steve Stagner

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Agreement until and through March 21, 2019 (the “Initial Expiration Date”), provided, however, that effective upon the Initial Expiration Date and the last day of each subsequent fiscal year of the Company (each, an “Extension Date”), the Term shall be automatically extended upon the same terms and conditions for an additional period of one (1) year from the scheduled expiration of the Term (prior to giving effect to such one (1) year extension) unless either the Company or the Executive shall have notified the other in writing at least three (3) months prior to the next Extension Date that such party does not desire to have the Term so extended. The term of this Agreement, as from time to time extended or renewed, is hereafter referred to as the “Term.”

Section 4. Place of Employment. The Executive’s principal place of employment shall be Houston, Texas. Notwithstanding the foregoing, the Executive acknowledges that the duties to be performed by the Executive hereunder are such that the Executive may be required to travel extensively.

Section 5. Compensation; Reimbursement. During the remainder of the Term, the Company shall pay or provide to the Executive, in full satisfaction for his services provided hereunder, the following:

(a) Base Salary.  During the Term the Company shall pay the Executive a base salary of $800,000 per year (as adjusted by the Compensation Committee from time to time, the “Base Salary”), payable not less frequently than semi-monthly in accordance with the payroll policies of the Company for senior executives as from time to time in effect (the “Payroll Policies”), less such amounts as may be required to be withheld by applicable federal, state and local law and regulations.

(b) Cash Bonus.

(i) For each fiscal year of the Company during the Term, the Executive will be eligible to receive a cash bonus, with the amount of the bonus to be determined by the Company based on the EBITDA achieved by the Company in such fiscal year relative to the annual EBITDA target for such fiscal year set forth in the Company’s annual management plan pursuant to the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives) (as to a given fiscal year, the “Annual EBITDA Target”). The Executive’s target bonus for each fiscal year will be 100% of Base Salary for such fiscal year if the Company achieves 100% of the Annual EBITDA Target for such fiscal year. If the Company achieves more than 100% of the Annual EBITDA Target, the Executive may receive a bonus of up to 200% of Base Salary pursuant to terms established by the Board. If the Company does not achieve more than 90% of the Annual EBITDA Target, the Executive will be entitled to no cash bonus. If the Company achieves between 90% and 100% of the Annual EBITDA Target, the cash bonus will be determined by linear interpolation between 0% and 100% of Base Salary. “EBITDA” shall be determined as provided in the Mattress Firm Holding Corp. Executive Annual Incentive Plan (or such other bonus plan maintained by the Company for its senior executives).

(ii) The Annual EBITDA Target for each fiscal year shall be determined annually by the Board or the Compensation Committee of the Board in good faith. Whether the Annual EBITDA Target for any fiscal year has been achieved, in whole or in part, will be determined by the Board or the Compensation Committee of the Board.

(iii) Any bonus payable hereunder for an applicable fiscal year shall be paid after the Board has reviewed the Company’s final audited consolidated financial statements for the applicable fiscal year, provided, however, that the bonus payable for a fiscal year shall be paid no later than the date that is two and one-half months after the end of the calendar year in which such fiscal year ended. The Executive must be employed by the Company on the last day of the applicable fiscal year for which a bonus is payable hereunder in order to receive any such bonus for such fiscal year; provided that, if for any reason other than the Company’s termination of the Executive’s employment for Cause or the Executive’s resignation without Good Reason, the employment of the Executive terminates on or after the last day of any fiscal year for which a bonus is payable hereunder but before such bonus has been paid, the Executive shall be paid such bonus in accordance with this Section 5(b)(iii) (including, for the avoidance of doubt, in the event

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that the employment of the Executive is terminated due to the provision of notification pursuant to Section 3 that the Term will not continue beyond its then scheduled expiration date).

(c) Expenses. The Company shall pay or reimburse the Executive for ordinary and necessary business expenses incurred by him in the performance of his duties contemplated hereby in accordance with the Company’s usual policies upon receipt from the Executive of written substantiation of such expenses in accordance with the Company’s usual policies. Such payments under this Section 5(c) shall be made within ten (10) business days after the delivery of the Executive’s written request for the payment accompanied by such evidence of fees and expenses incurred as the Company may reasonably require, provided that such request is made no later than thirty (30) days after such expense is incurred. The amount of expenses eligible for reimbursement pursuant to this Section 5(c) during a given taxable year of the Executive shall not affect the amount of expenses eligible for reimbursement in any other taxable year of the Executive. The right to reimbursement pursuant to this Section 5(c) is not subject to liquidation or exchange for another benefit.

(d)  Vacation and Other Time Off. The Executive shall be entitled to twenty (20) days of vacation per year, accrued in accordance with the Company’s vacation policy, prorated for any partial years of service, as well as any other paid time off provided for in the Company’s employee handbook.

(e) Benefits. During the remainder of the Term, the Executive shall be entitled to continue to participate in all medical, dental, disability insurance, life insurance, retirement, savings and any other employee benefit plans or programs (other than a car allowance) which are otherwise generally made available by the Company to its senior executives; provided, however, that the Company shall be entitled to amend or terminate any employee benefit plans which are applicable generally to the Company’s senior executives, officers or other employees.  For the avoidance of doubt, as used in this Agreement, the phrase “employee benefit plans or programs” does not include compensation, bonus or vacation allowance and such items may not be amended without the consent of the Executive.  The Executive shall hold, at the Company’s expense, (i) an accidental death and dismemberment insurance policy for up to 1x Base Salary (not to exceed $500,000), (ii) a basic term life insurance policy for up to 1x Base Salary (not to exceed $500,000) and (iii) an additional basic term life insurance policy for up to 1x Base Salary.

Section 6. Equity Participation. The Executive shall be eligible to receive equity grants under the Mattress Firm Holding Corp. 2011 Omnibus Incentive Plan as may be awarded by the Compensation Committee of the Board from time to time.  Subject to Compensation Committee approval, the Executive will receive annual equity grants having an aggregate grant date fair value of 150% of Base Salary.

Section 7. Termination. The Executive’s employment hereunder may be terminated as follows:

(a) Upon Disability.

(i) If during the Term, the Executive shall become physically or mentally disabled, whether totally or partially, either permanently or so that the Executive, in the good faith judgment of the Board based on the opinion of a physician selected by the Board who may but need not be the Executive’s normal treating physician, is unable as a result of such disability, with or without a reasonable accommodation, to substantially and competently perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred twenty (120) days during any six-month period (a “Disability”), the Company may terminate the Executive’s employment hereunder. In order to assist the Board in making that determination, the Executive shall, as reasonably requested by the Board, (A) make himself available for medical examinations by one or more physicians chosen by the Board and (B) use his best efforts to cause his own physician(s) to be available to discuss with the Board such Disability.

(ii) Upon termination of the Executive’s employment for Disability, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than payments in respect of the Base Salary then in effect for services rendered

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or expenses incurred through the date of such termination or accrued and unpaid benefits pursuant to any medical, dental, disability insurance, life insurance, retirement, savings or any other employee benefit plans or programs in which the Executive participates on the Executive’s last day of employment hereunder, which shall be paid in accordance with the Company’s plans and applicable law (collectively, “Accrued Termination Obligations”)); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall (A) pay to the Executive, or the legal representative of the Executive, the Base Salary at the rate in effect on the date of termination (less any amounts that the Executive receives pursuant to any Company-sponsored long-term disability insurance policy for the Executive as and if in effect at the date of termination) in equal installments in accordance with the Payroll Policies for a period of eighteen (18) months following such termination, (B) reimburse the Executive for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for eighteen (18) months following the date of such termination as provided in Section 7(j) and (C) if applicable, continue to provide disability insurance coverage for the Executive to the extent necessary to continue benefits which the Executive became entitled to receive prior to the termination of his employment with the Company; and provided, further, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. If at the time of termination of employment accrued vacation is paid out under the Company’s policies as then generally applicable to senior executives, then such accrued vacation shall be treated for all purposes of this Agreement as an Accrued Termination Obligation hereunder to the extent such accrued vacation is otherwise payable under such policies. If the Executive is not a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and Final Department of Treasury Regulations issued thereunder (collectively, “Section 409A”) at the time of termination (“Specified Employee”), and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a general release of claims in form and substance reasonably satisfactory to the Company (a “Release”), which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s “separation from service” within the meaning of Section 409A (“Separation From Service”). The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (except for the Executive’s rights under section 4980B of the Code and the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”)) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.

(b) Upon Death.

(i) If the Executive dies during the Term, the Executive’s employment hereunder shall automatically terminate as of the close of business on the date of his death.

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(ii) Upon termination of the Executive’s employment as result of the Executive’s death, the Company shall not be obligated to make any salary, bonus or other payments or to provide any benefits under this Agreement (other than the Accrued Termination Obligations); provided, however, that, in addition to the Accrued Termination Obligations, the Company shall pay to the Executive’s estate the Base Salary at the rate in effect on the date of termination in equal installments in accordance with the Payroll Policies for a period of eighteen (18) months. These installment payments shall be paid in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date of the Participant’s death.

(c) For Cause. The Company may terminate the Executive’s employment hereunder at any time, effective immediately upon written notice to the Executive, for Cause (as defined below) and all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination. The Company shall have “Cause” for termination of the Executive if any of the following has occurred:

(i) the Executive’s dishonesty or bad faith in connection with the performance of his duties;

(ii) a refusal or failure by the Executive to use his best efforts to perform duties consistent with the office(s) held by him as requested by the Board which would not give rise to Good Reason and which is not cured within thirty (30) days after written notice is delivered by the Board to the Executive;

(iii) the Executive’s conviction of a felony;

(iv) the failure of the Executive to notify the Board of any material relationships between him and/or any member of his immediate family with any person or entity with whom the Company or any of its subsidiaries has a material business relationship; or

(v) a material breach of the provisions of Section 8, Section 9 or Section 10 of this Agreement by the Executive.

(d) Without Cause.

(i) The Company may terminate the Executive’s employment hereunder without Cause at any time upon written notice to the Executive. Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, for eighteen (18) months, (A) continued payment of the Base Salary at the rate in effect on the date of termination in accordance with the Payroll Policies (all such payments, collectively, the “Severance Payments”) and (B) reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for eighteen (18) months following the date of such termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required under COBRA. If the Executive is not a Specified Employee as of the date of termination and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has become irrevocable by the time set forth below, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the

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Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A, shall be accumulated and paid to the Executive on the date that is six (6) months and one day following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the date that is sixty (60) days following the date of the Executive’s Separation From Service.  Further, in the event that the Executive’s employment is terminated under this Section 7(d), subject to the delivery to the Company of a signed Release that is not subsequently revoked, all unvested equity awards shall be permitted to continue to vest, if at all, in accordance with the terms of the applicable grant agreements during a period of six (6) months following the Executive’s termination date as though the Executive remained an employee for such period and, at the end of such 6-month period, all equity awards that remain unvested shall be immediately forfeited.

(ii) In the event that the Executive’s employment is terminated under this Section 7(d) within one (1) year after the effective date of a Covered Transaction (as defined in the Company’s 2011 Omnibus Incentive Plan), (A) the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company the same Severance Payments and benefits described above in this Section 7(d) provided that the salary continuation and COBRA premium reimbursements shall extend by six (6) months to a period of twenty-four (24) months and (B) all outstanding unvested equity awards issued to the Executive shall accelerate and vest in full as of the termination date.  The remaining terms and conditions set forth in this Section 7(d), including the provisions of Section 7(d) relating to the requirement of a Release, shall apply as written.

(iii) It is further acknowledged and agreed by the parties that the actual damages to the Executive in the event of termination under this Section 7(d) would be difficult if not impossible to ascertain, and, therefore, the salary and benefit continuation provisions set forth in this Section 7(d) shall be the Executive’s sole and exclusive remedy in the case of termination under this Section 7(d) and shall, as liquidated damages or severance pay or both, be considered for all purposes in lieu of any other rights or remedies, at law or in equity, which the Executive may have in the case of such termination.

(e) Resignation Without Good Reason. The Executive shall have the right to terminate his employment hereunder upon one (1) month’s prior written notice to the Company, and upon such termination, all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than Accrued Termination Obligations) shall cease upon such termination.

(f) Resignation For Good Reason.

(i) The Executive shall have the right to terminate his employment hereunder at any time for Good Reason (as defined below). Upon such termination, the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company the same

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Severance Payments and benefits that he would have been entitled to receive had the Executive been terminated by the Company in accordance with Section 7(d) above, including the continued vesting of equity awards, payable as provided in Section 7(d) above (including the provisions of Section 7(d) relating to the requirement of a Release).  Further, in the event the Executive terminates his employment hereunder within one (1) year after the effective date of a Covered Transaction, the extended benefits and equity acceleration provided for in Section 7(d)(ii) shall apply, subject to the other terms and conditions of Section 7(d).

(ii) The Executive shall have “Good Reason” for termination of his employment hereunder if any of the following has occurred without the Executive’s prior written consent; provided that the Executive shall not be deemed to have Good Reason unless (i) notice of the event or condition purportedly giving rise to Good Reason is given in writing no later than ninety (90) days after the time at which the event or condition purportedly giving rise to Good Reason first occurs or arises, (ii) there does not exist an event or condition which could serve as the basis of a termination of the Executive’s employment for Cause, (iii) the Company has had thirty (30) days from the date written notice of such termination is given (the “Cure Period”) to cure such event or condition and has not done so and (iv) the Executive resigns no later than ninety (90) days following expiration of the Cure Period:

(A) a material diminution in Executive’s duties or authority;

(B) any material reduction in the Base Salary, material perquisites (including vacation allowance) or the overall level of other benefits (other than as a result of changes to benefit plans generally made available to the employees and/or senior management of the Company in which the Executive participates or for any reductions required by law);

(C) relocation of the Executive’s principal place of employment more than fifty (50) miles from its location as of the date of this Agreement; or

(D) a material breach by the Company of this Agreement.

Notwithstanding the foregoing, the Executive shall not have “Good Reason” to terminate his employment if he has consented in writing to any event set forth above. For the avoidance of doubt, a disagreement between the Executive and the Board with respect to the policies and strategies adopted or approved by the Board with respect to the Company’s business and affairs, including without limitation matters set forth in any annual operating budget or strategic plan approved by the Board, shall not constitute “Good Reason” for purposes of this Agreement.

(g) Upon Expiration of the Term. In the event the Company notifies the Executive that the Term will not automatically extend in accordance with Section 3 and there is an expiration of the Term at its regularly scheduled expiration date under Section 3 (a “Scheduled Expiration”), then, following the expiration of the Term and a concurrent termination of the Executive’s employment (regardless of whether such termination is by the Company or the Executive), the Executive shall, in addition to the Accrued Termination Obligations, have the right to receive from the Company, for nine (9) months, (A) continued payment of the Base Salary at the rate in effect at the expiration of the Term in accordance with the Payroll Policies and (B) reimbursement from the Company for the premiums the Executive pays for any continued medical and dental coverage for the Executive and the Executive’s eligible dependents under the Company’s group health plans for nine (9) months following the date of such expiration of the Term and such concurrent termination as provided in Section 7(j); provided, however, that the Company shall be entitled to amend or terminate any plans which are applicable generally to the Company’s senior executives, officers or other employees. Notwithstanding the foregoing, if the Executive accepts other employment, the Company’s obligation under Section 7(j) to reimburse the Executive for the premiums paid by the Executive for COBRA Coverage (as that term is defined below in Section 7(j)) shall immediately cease upon Executive’s becoming eligible to participate in comparable medical and dental coverage pursuant to such other employer’s plans, subject to his right to continue coverage at the Executive’s own expense to the extent required under COBRA. If the Executive is not a Specified

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Employee as of expiration of the Term and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies commencing on the first payroll date under the Payroll Policies that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. The Executive will not be permitted to specify the year in which his payment will be made. If the 60-day period spans two taxable years of the Executive, the cash severance benefits will begin to be paid in the later of such taxable years. In the event that the Company is described in Section 409A(a)(2)(B)(i) of the Code and the Executive is a Specified Employee and the Executive has timely signed and delivered to the Company, by the deadline established by the Company, a Release, which has by that time become irrevocable, the Company shall pay the Executive the cash severance benefits described in clause (A) in the event of a Scheduled Expiration and such concurrent termination in accordance with the Payroll Policies; provided, however, that the payments for the first six (6) months, to the extent (if any) such payments are subject to Section 409A of the Code, shall be accumulated and paid to the Executive on the date that is six (6) months following the date of the Executive’s Separation From Service to the extent that earlier payment would result in adverse tax consequences under Section 409A. Whether the Executive is or is not a Specified Employee, the Executive will not be paid the cash severance benefits described in clause (A) or entitled to the benefits described in clause (B) (subject to the Executive’s rights under COBRA) and the Executive shall forfeit any right to such payments and benefits, unless (i) the Executive has signed and delivered to the Company the Release and (ii) the period for revoking the Release shall have expired (in the case of both clauses (i) and (ii)) prior to the earlier of the deadline established by the Company or the applicable payment date (the date that is the first payroll date that coincides with or immediately follows the date that is sixty (60) days following the date of the Executive’s Separation From Service. For the avoidance of doubt, in no event shall Section 7(a)-(f) apply in the case of a termination covered by this Section 7(g). For the avoidance of doubt, in the event that the Executive notifies the Company that he does not desire to extend the Term in accordance with Section 3 above, then all of the Executive’s rights to payments and any other benefits otherwise due hereunder (other than any rights that the Executive may have under Section 5(b)(vi) in accordance with its terms and, in the case of a concurrent termination of the Executive’s employment, the Accrued Termination Obligations) shall cease upon the expiration of the Term.

(h) Release. For the avoidance of doubt, as a condition to the payments under Section 7(a), 7(d), 7(f) or 7(g), the Executive shall execute and deliver to the Company a Release, which shall be executed and delivered and become irrevocable within sixty (60) days following termination (it being expressly agreed and understood that no payment or benefits under these Section 7(a), 7(d), 7(f) or 7(g) shall be required to be paid or provided unless or until the foregoing release requirements are satisfied).

(i) Section 409A. This Agreement is intended to comply with the provisions of Section 409A of the Code, and shall be interpreted in a manner consistent with Section 409A, or, if applicable, an exclusion therefrom. For purposes of this Agreement, all references to “termination”, “termination of employment” and correlative phrases shall mean a Separation From Service. Each payment made under this Agreement shall be treated for the purposes of Section 409A as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. Any reimbursements provided for in this Agreement shall be made consistent with the requirements of Section 1.409A-1(b)(9)(v) of the Treasury Regulations.

(j) Reimbursement of COBRA Premiums. If, at the time the Executive’s employment with the Company terminates under Section 7(a), (d) or (f) or at the time the Term expires due to the election of the Company pursuant to Section 3 not to extend the Term beyond its then scheduled expiration date, the Executive is an active participant in the Company’s group medical plan and/or the Company’s group dental plan (collectively, the “Group Health Plan”) and the Executive timely elects under COBRA to continue the Executive’s and any qualifying dependent’s Group Health Plan coverage (“COBRA Coverage”) the Company will reimburse the Executive for the full amount of the premiums the Executive pays for COBRA Coverage under the Group Health Plan for up to the first eighteen (18) months the Executive maintains such COBRA Coverage, subject, with respect to each month, to the Executive’s submission of reasonable documentation that he has paid such premium, if reasonably requested by the Company. Any

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reimbursements by the Company to the Executive required under this Section 7(j) shall be made on the last day of each month the Executive pays the amount required for such COBRA Coverage, for up to the first eighteen (18) months of COBRA Coverage if the Executive’s employment with the Company terminates under Section 7(a), (d) or (f). If the Executive is a Specified Employee and the benefits specified in this Section 7(j) are taxable to the Executive and not otherwise exempt from Section 409A then any amounts to which the Executive would otherwise be entitled under this Section 7(j) during the first six months following the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive on the date that is six months following the date of the Executive’s Separation From Service. Except for any reimbursements under the applicable Group Health Plan that are subject to a limitation on reimbursements during a specified period, the amount of expenses eligible for reimbursement under this Section 7(j), or in-kind benefits provided, during the Executive’s taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Executive. The Executive’s right to reimbursement or in-kind benefits pursuant to this Section 7(j) shall not be subject to liquidation or exchange for another benefit. Subject to the Executive’s Group Health Plan continuation rights under COBRA, the benefits listed in this Section 7(j) shall be reduced to the extent benefits of the same type are received by the Executive, the Executive’s spouse or any eligible dependent from any other person during such period, and provided, further, that the Executive shall have the obligation to notify the Company that the Executive or his spouse or other eligible dependent is receiving such benefits. The Company shall retain the discretion to reasonably modify the manner in which the benefits described in this Section 7(j) are provided by the Company to the Executive to the extent reasonably necessary to comply with applicable law; provided, however, that the Company shall make such modifications so as to allow the Executive to continue to receive to the maximum extent possible the economic benefits contemplated by this Section 7(j).

Section 8. Protection of Confidential Information; Non-Competition; Non-Solicitation.

(a) Acknowledgment. The Executive agrees and acknowledges that in the course of rendering services to the Company and its clients and customers he has acquired and will acquire access to and become acquainted with confidential information about the professional, business and financial affairs of the Company, its subsidiaries and Affiliates that is non-public, confidential or proprietary in nature. The Executive acknowledges that the Company is engaged in a highly competitive business and the success of the Company in the marketplace depends upon its good will and reputation. The Executive agrees and acknowledges that reasonable limits on his ability to engage in activities competitive with the Company are warranted to protect its substantial investment in developing and maintaining its status in the marketplace, reputation and goodwill. The Executive recognizes that in order to guard the legitimate interests of the Company, it is necessary for it to protect all confidential information. The existence of any claim or cause of action by the Executive against the Company shall not constitute and shall not be asserted as a defense to the enforcement by the Company of this Agreement.

(b) Confidential Information. During and at all times after the Term, the Executive shall keep secret all non-public information, matters and materials of the Company (including any subsidiaries or Affiliates), including, but not limited to, know-how, trade secrets, mail order and customer lists, vendor or supplier information, pricing policies, operational methods, any information relating to the Company’s (including any subsidiaries’ or Affiliates’) products or product development, processes, product specifications and formulations, artwork, designs, graphics, services, budgets, business and financial plans, marketing and sales plans and techniques, employee lists and other business, financial, commercial and technical information of the Company (including any subsidiaries and Affiliates) (collectively, the “Confidential Information”), to which he has had or may have access and shall not use or disclose such Confidential Information to any person other than (i) the Company, its authorized employees and such other persons to whom the Executive has been instructed to make disclosure by the Board or the General Counsel of the Company, or to the extent necessary or desirable in the course of the Executive’s service to the Company or as otherwise expressly required in connection with court process, (ii) as may be required by law and then only after consultation with the Board to the extent possible or (iii) to the Executive’s personal advisors for purposes of enforcing or interpreting this Agreement, or to a court for the purpose of enforcing or interpreting this Agreement, and who in each case have been informed as to the confidential nature of such Confidential Information and, as to advisors, their obligation to keep such Confidential

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Information confidential. “Confidential Information” shall not include any information which is in the public domain during the period of service of the Executive, provided such information is not in the public domain as a consequence of disclosure by the Executive in violation of this Agreement or by any other party in violation of a confidentiality or nondisclosure agreement with the Company. Upon termination of his employment for any reason or at such earlier time requested by the Board, the Executive shall deliver to the Company all documents, data, papers and records of any nature and in any medium (including, but not limited to, electronic media) in his possession or subject to his control that (x) belong to the Company or (y) contain or reflect any information concerning the Company, its subsidiaries and Affiliates.

(c) Non-Competition. During the Term and thereafter for a period equal to eighteen (18) months (without consideration of whether any termination benefits otherwise available to Executive under Section 7 are eliminated as a result of Executive’s acceptance of other employment), the Executive shall not, in any capacity, anywhere in the United States, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (A) own, operate, manage, or control, (B) serve as an officer, director, partner, member, employee, agent, consultant, advisor or developer or in any similar capacity to or (C) have any financial interest in, or assist anyone else in the conduct of the business of any Competitor (as defined below); provided, however, that the Executive shall be permitted to own less than 5% of any class of publicly traded securities of any company. For purposes of this Section 8, “Competitor” means any person or entity engaged in or which proposes to engage in the business of the retail sale of mattresses.

(d) Non-Solicitation. During the Term and for a period of eighteen (18) months thereafter, the Executive shall not, in any capacity, whether for his own account or on behalf of any other person or organization, directly or indirectly, with or without compensation, (i) solicit, divert or encourage any officers, directors or key employees of the Company (including any subsidiary or Affiliate) to terminate his or her relationship with the Company (including any subsidiary or Affiliate), or hire any such officer, director or key employee, (ii) solicit, divert or encourage any officers, directors or key employees of the Company (including any subsidiary or Affiliate) to become officers, directors, employees, agents, consultants or representatives of another business, enterprise or entity, or (iii) influence, attempt to influence or otherwise cause any of the clients, vendors, distributors or business partners of the Company (including any subsidiary or Affiliate) to transfer his, her or its business or patronage from the Company to any Competitor.

(e) Remedies for Breach. The Company and the Executive agree that the restrictive covenants contained in this Agreement are severable and separate, and the unenforceability of any specific covenant herein shall not affect the validity of any other covenant set forth herein. The Executive acknowledges that the Company will suffer irreparable harm as a result of a breach of such restrictive covenants by the Executive for which an adequate monetary remedy does not exist and a remedy at law may prove to be inadequate. Accordingly, in the event of any actual or threatened breach by the Executive of any provision of this Agreement, the Company shall, in addition to any other remedies permitted by law, be entitled to obtain remedies in equity, including, but not limited to, specific performance, injunctive relief, a temporary restraining order, and a preliminary or permanent injunction in any court of competent jurisdiction, and to prevent or otherwise restrain a breach of this Section 8 without the necessity of proving damages or posting a bond or other security. Such relief shall be in addition to and not in substitution of any other remedies available to the Company. The existence of any claim or cause of action of the Executive against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of said covenants. The Executive shall not defend on the basis that there is an adequate remedy at law. In addition to and not in lieu of any other remedy that the Company may have under this Section 8 or otherwise, in the event of any breach of any provision of this Section 8, Section 9 or Section 10 during the period during which the Executive is entitled to receive payments and benefits pursuant to Section 7, such period shall be deemed to have terminated as of the date of such breach and the Executive shall not thereafter be entitled to receive any salary or other payments or benefits under this Agreement with respect to periods following such date.

(f) Modification. The parties agree and acknowledge that the duration, scope and geographic area of the covenants described in this Section 8 are fair, reasonable and necessary in order to protect the

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Confidential Information, goodwill and other legitimate interests of the Company and that adequate consideration has been received by the Executive for such obligations. The Executive further acknowledges that after termination of his employment with the Company for any reason, he will be able to earn a livelihood without violating the covenants described in this Section 8 and the Executive’s ability to earn a livelihood without violating such covenants is a material condition to his employment with the Company. If, however, for any reason any court of competent jurisdiction determines that the restrictions in this Section 8 are not reasonable, that consideration is inadequate or that the Executive has been prevented unlawfully from earning a livelihood, such restrictions shall be interpreted, modified or rewritten to include the maximum duration, scope and geographic area identified in this Section 8 as will render such restrictions valid and enforceable.

Section 9. Certain Agreements.

(a) Suppliers. The Executive does not have, and at any time during the Term shall not have, any employment with or any direct or indirect interest in (as owner, partner, shareholder, employee, director, officer, agent, consultant or otherwise) any supplier or vendor to the Company (including its subsidiaries or Affiliates); provided, however, that the Executive shall be permitted to own less than five percent (5%) of any class of publicly traded securities of any company.

(b) Certain Activities. During the Term, the Executive shall not knowingly (i) without the prior approval of the Board give or agree to give, any gift or similar benefit of more than nominal value to any customer, supplier, or governmental employee or official or any other person who is or may be in a position to assist or hinder the Company in connection with any proposed transaction, which gift or similar benefit, if not given or continued in the future, might adversely affect the business or prospects of the Company, (ii) use any corporate or other funds for unlawful contributions, payments, gifts or entertainment, (iii) make any unlawful expenditures relating to political activity to government officials or others, (iv) establish or maintain any unlawful or unrecorded funds in violation of Section 30A of the Securities Exchange Act of 1934, as amended, and (v) accept or receive any unlawful contributions, payments, gifts, or expenditures.

Section 10. Intellectual Property. All copyrights, trademarks, trade names, service marks and all ideas, inventions, discoveries, secret processes and methods and improvements, together with any and all patents that may be issued thereon, and all other intangible or intellectual property rights that may be invented, conceived, developed or enhanced by Executive during the term of his employment that relate to the business or operations of the Company or any subsidiary or Affiliate thereof or that result from any work performed by the Executive for the Company or any such subsidiary or Affiliate shall be the sole property of the Company or such subsidiary or Affiliate, as the case may be, and Executive hereby waives any right or interest that he may otherwise have in respect thereof. Upon the reasonable request of the Company, Executive shall execute, acknowledge and deliver any instrument or document reasonably necessary or appropriate to give effect to this Section 10 and, at the Company’s cost, do all other acts and things reasonably necessary to enable the Company or such subsidiary or Affiliate, as the case may be, to exploit the same or to obtain patents or similar protection with respect thereto. All copyrightable works that the Executive creates shall be considered “work made for hire” and shall, upon creation, be owned exclusively by the Company.

Section 11. Notices. All notices or other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) upon confirmation of receipt when such notice or other communication is sent by facsimile, (c) one day after delivery to an overnight delivery courier, or (d) on the fifth day following the date of deposit in the United States mail if sent first class, postage prepaid, by registered or certified mail. The addresses for such notices shall be as follows:

(i) For notices and communications to MFHC and MFI:

Mattress Firm Holding Corp.
5815 Gulf Freeway

Houston, Texas 77023
Attn: William E. Watts

with a copy to:

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Mattress Firm Holding Corp.
5815 Gulf Freeway

Houston, Texas 77023
Attn: General Counsel

(ii) For notices and communications to the Executive, at the address on file with the Company, which shall be updated by the Executive in writing as needed.

Any party hereto may, by notice to the other, change its address for receipt of notices hereunder.

Section 12. General.

(a) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of law thereof.

(b) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, THE PARTIES HERETO HEREBY WAIVE AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT TO ANY CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF AND/OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY OR SEPARATION THEREFROM. THE EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE COMPANY THAT THIS SECTION 12(b) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THE COMPANY IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

(c) Amendment; Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by any party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

(d) Successors and Assigns. This Agreement shall be binding upon the Executive, without regard to the duration of his employment by the Company or reasons for the cessation of such employment, and inure to the benefit of his administrators, executors, heirs and assigns, although the obligations of the Executive are personal and may be performed only by him. The Company may assign this Agreement and its rights, together with its obligations, hereunder in connection with any sale, transfer or other disposition of all or substantially all of its assets or business(es), whether by merger, consolidation or otherwise. This Agreement shall also be binding upon and inure to the benefit of the Company and its subsidiaries, successors and assigns.

(e) Withholding. The Company shall be entitled to withhold from any payments or deemed payments any amount of withholding required by law.

(f) Counterparts; Effectiveness. This Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original and all of which together shall be considered one and the same agreement, and will become effective when each of the Company and the Executive receives a counterpart hereof that has been executed by the other.

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(g) Severability. If any portion of this Agreement is held invalid or inoperative, the other portions of this Agreement shall be deemed valid and operative and, so far as is reasonable and possible, effect shall be given to the intent manifested by the portion held invalid or inoperative.

(h) Effective Time; Entire Agreement. This Agreement amends, restates and supersedes the Original Employment Agreement in its entirety, with effect from and after the effective date of this Agreement, and the parties hereby acknowledge and agree that the Original Employment Agreement is terminated effective as of the date hereof.  This Agreement constitutes the entire agreement between the Executive and the Company and any of their respective affiliates with respect to the terms and conditions of the Executive’s employment with the Company and his rights and obligations as an equity holder of Holdings and supersedes all prior agreements, arrangements, promises and understandings, whether written or oral, between the Executive and the Company and any of their respective affiliates with respect to those subject matters.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

Third Amended and Restated Employment Agreement — Steve Stagner

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Exhibit 99.1

FOR IMMEDIATE RELEASE

MATTRESS FIRM ANNOUNCES FOURTH FISCAL QUARTER AND FULL FISCAL YEAR 2015 FINANCIAL RESULTS

— Tenth Consecutive Quarter and Sixth Consecutive Year of Comparable-Store Sales Growth —

— Achieved 90 basis points of Adjusted EBITDA Margin Improvement in Q4 —

— Q4 GAAP EPS Increased Approximately 95% to $0.37 and Adjusted EPS Increased 29% to $0.53 —

— Provides Guidance for Q1 and Full Fiscal Year 2016 —

HOUSTON, March 21, 2016 /BUSINESSWIRE/ — Mattress Firm Holding Corp. (the “Company”) (NASDAQ: MFRM), the nation’s largest specialty mattress retailer, today announced its financial results for the fourth fiscal quarter (13 weeks) and full fiscal year (52 weeks) ended February 2, 2016.  Net sales for the fourth fiscal quarter increased 3.4% over the prior year (14 weeks) to $618.6 million, reflecting comparable-store sales growth of 0.7% and incremental sales from new and acquired stores. The Company reported fourth fiscal quarter earnings per diluted share (“EPS”) on a generally accepted accounting principles (“GAAP”) basis of $0.37, and EPS on a non-GAAP adjusted basis, excluding acquisition-related costs, fixed asset impairment costs and severance charges (“Adjusted”), of $0.53.

Reported sales results and expected GAAP and Adjusted EPS are preliminary and remain subject to audit and adjustment until the filing of the Company’s Annual Report on Form 10-K with the U.S. Securities and Exchange Commission.  The Company expects to report its finalized fourth fiscal quarter and full fiscal year results in early April.

Expected diluted EPS on a GAAP basis and Adjusted basis are reconciled in the table below:

Fourth Fiscal Quarter and Full Fiscal Year Reconciliation of GAAP to Adjusted EPS and Adjusted Cash EPS
See “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for Notes

* Due to rounding to the nearest cent, totals may not equal the sum of the lines in the table above.

5815 Gulf Freeway · Houston, TX · 77023 · Phone: 713-923-1090 · Fax: 713-923-1096

“We are pleased with our fourth quarter results which showed approximately 90 basis points of improvement in Adjusted EBITDA margin and our tenth consecutive quarter of comparable-store sales growth,” stated Steve Stagner, chief executive officer. “We delivered strong fourth quarter Adjusted EPS growth of approximately 29% from the prior year, as we continue to execute on our plan. Our Chicago business has turned market-level EBITDA positive and our streamlined organizational structure is generating significant leverage. With the recently completed Sleepy’s acquisition, we believe we are well positioned to realize meaningful synergies and leverage the benefits of national scale, driving continued growth, opportunities and profitability over time.”

Preliminary Fourth Quarter Financial Summary

·                  Net sales for the fourth fiscal quarter increased 3.4% as compared with the comparable prior year period to $618.6 million, reflecting comparable-store sales growth of 0.7% and incremental sales from new and acquired stores. Comparable-store sales growth in the prior year period was 1.9%.

·                  Opened 75 new stores, closed 20, and acquired nine bringing the total number of Company-operated stores to 2,359 as of the end of the fiscal year.

·                  Income from operations was $31.5 million. Excluding $8.9 million of acquisition-related costs, fixed asset impairment costs and severance charges, Adjusted income from operations was $40.4 million, as compared with $36.7 million for the comparable prior year period.  Adjusted operating income margin was 6.5% of net sales as compared to 6.1% in fiscal 2014, and included 170 basis-points of expense leverage from general and administrative expense, 90 basis-points of expense deleverage in sales and marketing expense, 30 basis-points of gross margin decline, and 10 basis-points of margin declines in loss on store closings. Please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for a reconciliation of income from operations to Adjusted income from operations and other information.

·                  Net income was $13.3 million and GAAP EPS was $0.37.  Excluding $5.7 million, net of income taxes, of acquisition-related costs, fixed asset impairment costs and severance charges, Adjusted net income was $19.0 million and Adjusted EPS was $0.53. Please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for a reconciliation of net income and GAAP EPS to Adjusted net income and Adjusted EPS, respectively, and other information.

Preliminary Full Fiscal Year Financial Summary (52 weeks ended February 2, 2016)

·                  Net sales increased $735.7 million, or 40.7%, to $2,541.7 million, for fiscal 2015 from $1,806.0 million in the prior year period as a result of incremental sales from new and acquired stores and comparable-store sales growth of 2.1%. Comparable-store sales growth in the prior year period was 6.1%.

·                  Company-operated stores increased by 265, or 12.7%, to 2,359 at year end, as a result of opening 311 new stores, an acquisition that added nine stores, and closing 55 stores.

·                  Income from operations was $143.7 million. Excluding $30.5 million of acquisition-related costs, secondary offering costs, ERP system implementation costs, fixed asset impairment and severance costs, Adjusted income from operations was $174.2 million, as compared with $138.5 million for the prior year period. Adjusted operating income margin was 6.9% of net sales as compared to 7.7% in fiscal 2014, and included 80 basis-points of expense leverage from general and administrative expense, an 80 basis-point decrease in gross margin, and 80 basis-points of decrease in sales and marketing expense leverage. Please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for a reconciliation of income from operations to Adjusted income from operations and other information.

·                  Net income was $64.5 million for fiscal 2015 and GAAP EPS was $1.82.  Excluding $19.2 million, net of income taxes, of acquisition-related costs, secondary offering costs, ERP system implementation costs, and impairment and severance charges, adjusted net income was $83.7 million for the full fiscal year and Adjusted EPS was $2.36.  See “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” below for a reconciliation of net income as reported to adjusted net income.

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Acquisitions Completed During the Fourth Fiscal Quarter of 2015

On November 17, 2015, the Company acquired substantially all of the retail assets and operations of Double J-RD, LLC, a former franchisee which operated stores under the Mattress Firm brand in East Texas and Louisiana, relating to the operation of nine mattress specialty retail stores for a total purchase price of approximately $3.7 million, subject to further working capital adjustments.

Acquisitions Completed During Fiscal 2016

On November 25, 2015, the Company entered into a Securities Purchase Agreement to purchase all of the outstanding equity interests in HMK Mattress Holdings LLC, the holding company of Sleepy’s, LLC and related entities (collectively, “Sleepy’s”), for an aggregate purchase price of approximately $780 million, subject to working capital and other customary post-closing purchase price adjustments.  Sleepy’s operates approximately 1,050 specialty mattress retail stores located in 17 states in the Northeast, New England, the Mid-Atlantic and Illinois and employs approximately 3,300 people.  The Company completed the acquisition of Sleepy’s on February 5, 2016, during the first week of the Company’s fiscal 2016.  Upon the closing of the Sleepy’s acquisition, Adam Blank, previously Sleepy’s chief operating officer and general counsel, became the president of Sleepy’s.

Real Estate Optimization

With the closing of the Sleepy’s acquisition, the Company has acquired more than 1,700 stores over the past 24 months, which naturally includes some underperforming or duplicative locations and also highlights some lower performing stores in the Company’s existing portfolio.  Historically the Company has closed these types of stores upon lease termination.  As a result of the decision to focus its future growth initiatives under one national brand, the Company will evaluate its real estate portfolio.  Upon further review, the Company plans to accelerate certain store closures, primarily in overlapping and other recent acquisition markets, over the course of fiscal 2016.  After completion of its store optimization review, the Company will provide the estimated number of store closings and related costs. This store optimization effort is expected to drive a more efficient deployment of capital under one national banner going forward.

Balance Sheet and Amendments to Senior Credit Facility

The Company had cash and cash equivalents of $1.8 million on February 2, 2016, the end of its fiscal 2015.  Net cash provided by operating activities was $196.4 million for fiscal 2015. As of February 2, 2016, there were no borrowings outstanding under the revolving portion of the Senior Credit Facility (as defined in the Company’s filings with the Securities and Exchange Commission) and approximately $4.2 million in outstanding letters of credit, with additional borrowing capacity of $97.6 million.

On February 5, 2016, the Company entered into an amended $865 million senior secured credit facility to fund a portion of the Sleepy’s acquisition’s cash purchase price.  As part of this amendment, the revolving commitments were increased by $75 million to $200 million under the facility’s asset-backed loan credit agreement (the “ABL Credit Agreement”).  The ABL Credit Agreement’s termination date was also extended to February 5, 2021.  In addition, the applicable margin for LIBOR rate loans under the ABL Credit Agreement was amended to vary from 1.25% to 1.50%, instead of 1.25% to 1.75%, and the applicable margin for base rate loans under the ABL Credit Agreement was amended to vary from 0.25% to 0.50%, instead of 0.25% to 0.75%.  Further, an incremental term loan of $665 million was added to the term loan credit agreement under the facility (the “Term Loan Credit Agreement”).  The interest rate applicable to all loans under the Term Loan Credit Agreement, including those previously outstanding, was amended to 5.25% for LIBOR loans, with a 1.0% LIBOR floor. Loans previously outstanding under the Term Loan Credit Agreement prior to the amendment were at a 4.00% spread to LIBOR, also with a 1.0% floor, based on the Company’s total net leverage ratio at the time. The maturity date of the term loans issued under the Term Loan Credit Agreement remains October 20, 2021.

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Each of the foregoing descriptions of the ABL Credit Agreement and the Term Loan Amendment is subject, and qualified in its entirety by reference, to Exhibit 10.1 and Exhibit 10.2, respectively, which are attached to the Company’s Current Report on Form 8-K (File No. 001-35354) filed with the U.S. Securities and Exchange Commission on February 5, 2016.

There were approximately $80 million in borrowings and $12.4 million in outstanding standby letters of credit under the amended revolving facility as of March 18, 2016, resulting in $68 million of available borrowings. Total term loan borrowings were approximately $1.4 billion as of March 18, 2016.

Financial Guidance

The Company is providing initial financial guidance for the full fiscal year (52 weeks) ending January 31, 2017 (“fiscal 2016”).  These projections are forecasts and are intended solely to give investors an understanding of management’s expectations for the full fiscal year in light of recent conditions and strategies.  The projections do not take into account, or give effect for, any acquisitions that may be completed by the Company during the fiscal year or any other events that are beyond the Company’s reasonable control.  Please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” for a reconciliation of GAAP EPS to Adjusted EPS and other information which is not calculated on a GAAP basis. Adjusted data for future periods reflects management’s reasonable estimates of appropriate adjustments based on historical experience.

(1)         Before any incremental closures under the proposed real estate optimization program announced on March 21, 2016.

(2)         Based on midpoint of range

(3)         Includes an estimated 300 basis points benefit from the inclusion of Sleepy’s eCommerce and multi-channel sales businesses into the comparable-store sales in fiscal 2016.

Sleepy’s quarterly sales mix is similar to Mattress Firm’s legacy businesses.  However, the expected profitability (as illustrated by Adjusted EBITDA) of the Sleepy’s business differs dramatically by quarter, with an approximately breakeven first quarter and 80% to 85% of profitability generated during the second and third quarters. This is in-line with what has historically been an approximately breakeven Q1 for Sleepy’s over the past few years, based on their historical financials. As a result of the impact of incorporating the Sleepy’s business into the Company’s consolidated results, the Company plans to provide quarterly earnings guidance in connection with its regular earnings announcements throughout fiscal 2016 to provide additional insight.  The Company anticipates returning to its historical practice of only providing annual guidance in fiscal 2017.

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Due to the immediate dilution from financing the Sleepy’s acquisition, combined with the expectation that Sleepy’s will continue to be approximately breakeven at the Adjusted EBITDA level in Q1, as well as the time required to capture synergies from the Sleepy’s business and implement other initiatives, the Company anticipates reporting GAAP EPS of ($0.32) to ($0.25), with approximately $0.25 per share of adjustments, resulting in Adjusted EPS of ($0.07) to $0.00 in Q1. In Q2 and Q3, the Company expects to show meaningful adjusted earnings growth over the prior year, as the Sleepy’s business is strongest in these months and the Company anticipates realizing synergies and benefitting from other strategic initiatives as the year progresses.

Call Information

A conference call to discuss fourth fiscal quarter and full fiscal year results is scheduled for today, March 21, 2016, at 5:00 p.m. Eastern Time. The call will be hosted by Steve Stagner, chief executive officer, Ken Murphy, president, Alex Weiss, chief financial officer, and Scott McKinney, vice president of investor relations.

The conference call will be accessible by telephone and the internet.  To access the call, participants from within the U.S. may dial (877) 705-6003, and participants from outside the U.S. may dial (201) 493-6725.  Participants may also access the call via live webcast by visiting the Company’s investor relations web site at http://ir.mattressfirm.com.

The replay of the call will be available from approximately 8:00 p.m. Eastern Time on March 21, 2016 through midnight Eastern Time on April 4, 2016.  To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 13632409. The archive of the webcast will be available on the Company’s web site for a limited time.

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Net Sales and Store Unit Information

The components of the net sales increase for the thirteen and fifty-two weeks ended February 2, 2016 as compared to the corresponding prior year period were as follows (in millions):

The composition of net sales by major category of product and services were as follows (in millions):

The activity with respect to the number of Company-operated store units was as follows:

Forward-Looking Statements

Certain statements contained in this press release are not based on historical fact and are “forward-looking statements” within the meaning of applicable federal securities laws and regulations. In many cases, you can identify forward-looking statements by terminology such as “may,” “would,” “should,” “could,” “forecast,” “feel,” “project,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue” or the negative of these terms or other comparable terminology; however, not all forward-looking statements contain these identifying words. The forward-looking statements contained in this press release, such as those relating to our net sales, GAAP and Adjusted EPS and net store unit change for fiscal year 2016 and any anticipated effects of any recent acquisitions, are subject to various risks and uncertainties, including but not limited to downturns in the economy; reduction in discretionary spending by

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consumers; our ability to execute our key business strategies and advance our market-level profitability; our ability to profitably open and operate new stores and capture additional market share; our relationship with our primary mattress suppliers; our dependence on a few key employees; the possible impairment of our goodwill or other acquired intangible assets; the effect of our planned growth and the integration of our acquisitions on our business infrastructure; the impact of seasonality on our financial results and comparable-store sales; our ability to raise adequate capital to support our expansion strategy; our success in pursuing and completing strategic acquisitions; the effectiveness and efficiency of our advertising expenditures; our success in keeping warranty claims and comfort exchange return rates within acceptable levels; our ability to deliver our products in a timely manner; our status as a holding company with no business operations; our ability to anticipate consumer trends; risks related to our largest stockholder, J.W. Childs Associates, L.P.; heightened competition; changes in applicable regulations; risks related to our franchises, including our lack of control over their operation and our liabilities if they default on note or lease obligations; risks related to our stock and other factors set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended February 3, 2015 filed with the U.S. Securities and Exchange Commission (“SEC”) on April 3, 2015 and our other SEC filings.  Forward-looking statements relate to future events or our future financial performance and reflect management’s expectations or beliefs concerning future events as of the date of this press release.  Actual results of operations may differ materially from those set forth in any forward-looking statements, and the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation by us that our plans or objectives will be achieved. We do not undertake to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events or otherwise

Non-GAAP Financial Measures

Adjusted EBITDA is defined as net income before income tax expense, interest income, interest expense, depreciation and amortization (“EBITDA”), without giving effect to non-cash goodwill and intangible asset impairment charges, gains or losses on store closings and impairment of store assets, gains or losses related to the early extinguishment of debt, financial sponsor fees and expenses, non-cash charges related to stock-based awards and other items that are excluded by management in reviewing the results of operations. We have presented Adjusted EBITDA because we believe that the exclusion of these items is appropriate to provide additional information to investors about our ongoing operating performance excluding certain non-cash and other items and to provide additional information with respect to our ability to comply with various covenants in documents governing our indebtedness and as a means to evaluate our period-to-period results. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by any such adjustments. We have provided this information to analysts, investors and other third parties to enable them to perform more meaningful comparisons of past, present and future operating results and as a means to evaluate the results of our ongoing operations. Management also uses Adjusted EBITDA to determine executive incentive compensation payment levels. In addition, our compliance with certain covenants under the Senior Credit Facility, are calculated based on similar measures and differ from Adjusted EBITDA primarily by the inclusion of pro forma results for acquired businesses and new stores in those similar measures. Other companies in our industry may calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a measure of performance under U.S. GAAP and should not be considered as a substitute for net income prepared in accordance with U.S. GAAP. Adjusted EBITDA has significant limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP.

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The following table contains a reconciliation of our net income determined in accordance with U.S. GAAP to EBITDA and Adjusted EBITDA for the periods indicated (in thousands):

(a)                                 We receive cash payments from certain vendors for each new incremental store that we open (“new store funds”). New store funds are initially recorded in other noncurrent liabilities when received and are then amortized as a reduction of cost of sales over 36 months in our financial statements. Historically, we have considered new store funds as a component of Adjusted EBITDA when received since new store funds are included in cash provided from operations. The adjustment includes the amount of new store funds received during the period presented and eliminates the non-cash reduction in cost of sales included in our results of operations.

(b)                                 Reflects both non-cash effects included in net income related to acquisition accounting adjustments made to inventories and other acquisition-related cash costs included in net income, such as direct acquisition costs and costs related to integration of acquired businesses.

(c)                                  Consists of various items that management excludes in reviewing the results of operations, including none and $2.5 million of ERP system implementation costs incurred during the thirteen weeks ended February 2, 2016 and the fourteen weeks ended February 3, 2015, respectively, and $0.7 million and $7.3 million of such costs incurred during the fifty-two weeks ended February 2, 2016 and the fifty-three weeks ended February 3, 2015, respectively.

Adjusted EPS and the other “Adjusted” data provided in this press release, including Adjusted Cash EPS, are also considered non-GAAP financial measures.  We report our financial results in accordance with GAAP; however, management believes evaluating our ongoing operating results may be enhanced if investors have additional non-GAAP basis financial measures to facilitate year-over-year comparisons. Management reviews non-GAAP financial measures to assess ongoing operations and considers them to be effective indicators, for both management and investors, of our financial performance over time. Our management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.  For more information, please refer to “Reconciliation of Reported (GAAP) to Adjusted Statements of Operations Data” below.

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MATTRESS FIRM HOLDING CORP.

Consolidated Balance Sheets

(In thousands, except share amounts)

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MATTRESS FIRM HOLDING CORP.

Consolidated Statements of Operations

(In thousands, except share and per share amounts)