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THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED OR TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (2) THERE IS AN OPINION OF COUNSEL, SATISFACTORY TO THE CORPORATION, THAT AN EXEMPTION THEREFROM IS AVAILABLE (PROVIDED THAT NO SUCH OPINION OF COUNSEL SHALL BE REQUIRED FOR SALES PURSUANT TO RULE 144 UNDER THE ACT).

VGTEL, INC.

WARRANT

to Purchase Common Stock

THIS WARRANT IS TO CERTIFY THAT, Peter W. Shafran, his nominees, heirs, executors, successors and assigns (hereinafter collectively referred to as the “Holder"), is entitled to purchase from VGTel, Inc., a New York corporation (the "Company"), 1,000,000 shares of the Company's Common Stock, par value $0.0001 per share (the "Common Stock"), at the Exercise Price. Shafran has acquired this Warrant for Ten ($10.00) Dollars and other valuable consideration.

SECTION 1.

Certain Definitions.

As used in this Warrant, unless the context otherwise requires:

"Charter" shall mean the Certificate of Incorporation of the Company, as in effect from time to time.

"Exercise Price" shall mean $5,000.

"Holder" shall mean the Holder, as the initial holder of this Warrant, and his nominees, heirs, executors, successors and assigns, including any subsequent holder of this Warrant to whom it has been legally transferred.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Warrant" shall mean this Warrant and all additional or new warrants issued upon division or combination of, or in substitution for, this Warrant. All such additional or new warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Warrant Stock for which they may be exercised.

"Warrant Stock" shall mean the shares of the Company's Common Stock that may be purchased by the holder of this Warrant upon the exercise of such Warrant.

SECTION 2.

Exercise of Warrant.

(a)

At any time after the date hereof but prior to June 30, 2015 (the "Expiration Date"), the Holder may at any time and from time to time exercise this Warrant, in whole but not in part.

(b)(i)

The Holder shall exercise this Warrant by means of delivering to the Company at its office identified in Section 14 hereof (i) a written notice of exercise, (ii) this Warrant and (iii) payment equal to the Exercise Price in accordance with Section 3(b)(ii). Such notice of exercise shall be in the Subscription Form set out at the end of this Warrant.

(ii)

Upon exercise of this Warrant, the Holder shall pay the Exercise Price to the Company either by cash, certified check or wire transfer. Alternatively, the Holder may pay the Exercise Price through a “broker-assisted cashless exercise.” 

(c)

Upon exercise of this Warrant and delivery of the Subscription Form with proper payment relating thereto, the Company shall cause to be executed and delivered to the Holder a certificate or certificates representing the aggregate number of fully-paid and nonassessable shares of Warrant Stock issuable upon such exercise (the “Warrant Stock”).

(d)

The stock certificate or certificates for the Warrant Stock to be delivered in accordance with this Section 2 shall be in such denominations as may be specified in said notice of exercise and shall be registered in the name of the Holder or such other name or names as shall be designated in said notice. Such certificate or certificates shall be deemed to have been issued and the Holder or any other person so designated to be named therein shall be deemed to have become the holder of record of such shares, including to the extent permitted by law the right to vote such shares or to consent or to receive notice as shareholders, as of the time said notice is delivered to the Company as aforesaid.

(e)

The Company shall pay all expenses payable in connection with the preparation, issue and delivery of stock certificates under this Section 2.

(f)

All shares of Warrant Stock issuable upon the exercise of this Warrant in accordance with the terms hereof shall be validly issued, fully paid and nonassessable, and free from all liens and other encumbrances thereon, other than liens or other encumbrances created by the Holder.

(g)

In no event shall any fractional share of Warrant Stock of the Company be issued upon any exercise of this Warrant. If, upon any exercise of this Warrant, the Holder would, except as provided in this paragraph, be entitled to receive a fractional share of Warrant Stock, then the Company shall either (a) deliver in cash to such holder an amount equal to such fractional interest, or (b) issue a full share in lieu of such fractional share.

SECTION 3.

Effect of Certain Events.

(a) 

Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Company, the effectuation by the Company of a transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of, or the consolidation, merger or other business combination of the Company with or into any other Person (as defined below) or Persons when the Company is not the survivor, shall be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

(b)

 Adjustment Due to Merger, Consolidation, Etc. If, at any time prior to the Expiration Date, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Company shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Company or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then the Holder shall thereafter have the right to receive upon exercise of this Warrant, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon exercise, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had the Warrant been exercised in full immediately prior to such transaction (without regard to any limitations on exercise set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustment of the price and of the number of shares issuable upon exercise of the Warrant) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the exercise hereof. The Company shall not affect any transaction described in this Section 3.1(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to exercise this Warrant) and (b) the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligations of this Section 3.1(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

(c)

 Adjustment Due to Distribution. If the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Company’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off) (a “Distribution”), then the Holder of this Warrant shall be entitled, upon any exercise of this Warrant after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such exercise had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

(d)

 Adjustment Due to Dilutive Issuance. If, the Company issues or sells, or in accordance with this Section 3.1(d) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Exercise Price in effect on the date of such issuance (or deemed issuance) of such shares of Common Stock (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be reduced to the amount of the consideration per share received by the Company in such Dilutive Issuance. Notwithstanding anything else contained herein the ratchet rights contained in this section 3.1(d) shall only be at 50% coverage.

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The Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or grants any warrants, rights or options (not including employee stock option plans), whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Exercise Price then in effect, then the Exercise Price shall be equal to such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the exercise or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full exercise of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the exercise or exchange of Convertible Securities issuable upon exercise of such Options.

Additionally, the Company shall be deemed to have issued or sold shares of Common Stock if the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options), and the price per share for which Common Stock is issuable upon such exercise or exchange is less than the Exercise Price then in effect, then the Exercise Price shall be equal to such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such exercise or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon exercise or exchange of such Convertible Securities.

(e) 

Purchase Rights. If, at any time when any Notes are issued and outstanding, the Company issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Warrant will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

(f) 

Notice of Adjustments. Upon the occurrence of each adjustment or readjustment of the Exercise Price as a result of the events described in this Section 3.1, the Company, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Exercise Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon exercise of the Warrant.

SECTION 4.

Tag-Along Rights; Drag-Along Rights

SECTION 4.01. Tag-Along Rights.

(a) Subject to Sections 4.01(g) and 4.03, if any stockholder of the Company holding ten percent (10%) or more the Company’s securities (the “Tag-Along Seller”) proposes to Transfer more than ten percent (10%) of its Company Securities to any Third Party or Third Parties (a “Tag-Along Sale”),

(i) the Tag-Along Seller shall provide the Holder written notice of the terms and conditions of such proposed Transfer (“Tag-Along Notice”) and offer the Holder the opportunity to participate in such Transfer in accordance with this Section 4.01, and

(ii) the Holder may elect, at its option, to participate in the proposed Transfer in accordance with this Section 4.01 (thereby becoming and hereinafter referenced as, a “Tagging Person”).

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The Tag-Along Notice shall identify the number and class of Company Securities proposed to be sold by the Tag-Along Seller and all other Company Securities subject to the offer (“Tag-Along Offer”), the consideration for which the Transfer is proposed to be made, and all other material terms and conditions of the Tag-Along Offer, including the form of the proposed agreement, if any, and a firm offer by the proposed Third Party transferee to purchase Company Securities from the Stockholders in accordance with this Section 4.01.

From the date of its receipt of the Tag-Along Notice, the Tagging Person shall have the right (a “Tag-Along Right”), exercisable by notice (“Tag-Along Response Notice”) given to the Tag-Along Seller within ten (10) Business Days after its receipt of the Tag-Along Notice (the “Tag-Along Notice Period”), to request and require that the Tag-Along Seller include in the proposed Transfer up to the number of Company Securities constituting its Tag-Along Portion of Company Securities and the Tag-Along Seller shall include the number of Company Securities proposed to be Transferred by the Tag-Along Seller as set forth in the Tag-Along Notice, reduced by the aggregate number of Company Securities to be sold by the Tagging Person. The Tag-Along Response Notice shall include wire transfer instructions for payment of the purchase price for the Company Securities to be sold in such Tag-Along Sale. The Tagging Person, having exercised its Tag-Along Rights hereunder shall deliver to the Tag-Along Seller, with its Tag-Along Response Notice, the certificate or certificates representing the Company Securities of such Tagging Person to be included in the Tag-Along Sale, together with a limited power-of-attorney authorizing the Tag-Along Seller to Transfer such Company Securities on the terms set forth in the Tag-Along Notice. Delivery of the Tag-Along Response Notice with such certificate or certificates and limited power-of-attorney shall constitute an irrevocable acceptance of the Tag-Along Offer by such Tagging Person.

If, at the end of a 120-day period after the Tag-Along Date (which 120-day period shall be extended if any of the transactions contemplated by the Tag-Along Offer are subject to regulatory approval until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the Tag-Along Date by the Tag-Along Seller), the Tag-Along Seller has not completed the Transfer of all such Company Securities on substantially the same terms and conditions set forth in the Tag-Along Notice, the Tag-Along Seller shall (i) promptly return to the Tagging Person the limited power-of-attorney (and all copies thereof) together with all certificates representing the Company Securities that the Tagging Person delivered for Transfer pursuant to this Section 4.01(a) and any other documents in the possession of the Tag-Along Seller executed by the Tagging Person in connection with the proposed Tag-Along Sale, and (ii) not conduct any Transfer of Company Securities without again complying with this Section 4.01(a). 

(b) Concurrently with the consummation of the Tag-Along Sale, the Tag-Along Seller shall (i) notify the Tagging Person thereof, (ii) remit or cause to be remitted to the Tagging Person the total consideration to be paid at the closing of the Tag-Along Sale for the Company Securities of the Tagging Person Transferred pursuant thereto, with the cash portion of the purchase price paid by wire transfer of immediately available funds in accordance with the wire transfer instructions in the applicable Tag-Along Response Notices and (iii) promptly after the consummation of such Tag-Along Sale, furnish such other evidence of the completion and the date of completion of such Transfer and the terms thereof as may be reasonably requested by the Tagging Person.

(c) If at the termination of the Tag-Along Notice Period the Holder shall not have elected to participate in the Tag-Along Sale, the Holder shall be deemed to have waived its rights under Section 4.01(a) with respect to, and only with respect to, the Transfer of its Company Securities pursuant to such Tag-Along Sale.

(d) If (i)  the Holder declines to exercise its Tag-Along Rights or (ii) the Tagging Person elects to exercise its Tag-Along Rights with respect to less than such Tagging Person’s Tag-Along Portion (the “Excess Portion”), the Tag-Along Seller shall notify the Tagging Person who desires to sell their Tag-Along Portion (but not less than such amount) (a “Fully Participating Tagging Person”) and the Tag-Along Seller and any Fully Participating Tagging Person shall be entitled to Transfer, pursuant to the Tag-Along Offer, in addition to any Company Securities already being Transferred, a number of Company Securities held by it equal to the product of (i) the Excess Portion and (ii) a fraction, the numerator of which is the Aggregate Ownership of Company Securities of the Tag-Along Seller or Fully Participating Tagging Person, as the case may be, and the denominator of which is equal to the sum of the Aggregate Ownership of Company Securities of the Tag-Along Seller and all Fully Participating Tagging Persons.

(e) The Tag-Along Seller shall Transfer, on behalf of itself and any Tagging Person, the Company Securities subject to the Tag-Along Offer and elected to be Transferred on the terms and conditions set forth in the Tag-Along Notice within 120 days (or such longer period as extended under Section 4.01(a)) of the date on which all Tag-Along Rights shall have been waived, exercised or expired (the “Tag-Along Date”).

(f) Notwithstanding anything to the contrary contained in this Section 4.01, there shall be no liability on the part of the Tag-Along Seller to the Tagging Person (other than the obligation to return any certificates evidencing Company Securities and limited powers- of-attorney received by the Tag-Along Seller) if the Transfer of Company Securities pursuant to Section 4.01 is not consummated for whatever reason. The decision to effect a Transfer of Company Securities pursuant to this Section 4.01 by the Tag-Along Seller is in the sole and absolute discretion of the Tag-Along Seller.

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(g) The provisions of this Section 4.01 shall not apply to any Transfer of Company Securities: (i) to any Permitted Transferees of the Tag-Along Seller, or (ii) in a Drag-Along Sale for which the Drag-Along Seller shall have elected to exercise its rights under Section 4.02.

SECTION 4.02. Drag-Along Rights.

(a) Subject to Sections 4.02(g) and 4.03, if any stockholder of the Company holding ten percent (10%) or more the Company’s securities (the “Drag-Along Seller”) proposes to Transfer (not including, however, any pledge, encumbrance or hypothecation) any shares of any class of Company Securities that results in a Change of Control (i) to any Third Party or Parties or (ii) to any Person in connection with a bona fide reorganization or restructuring of the Company as determined by the Board so long as each Stockholder in the Company maintains their proportionate economic and voting interest in the capital stock (or equivalent securities) of the successor entity to the Company (the “Drag-Along Transferee”) in a single transaction or in a series of related transactions, and (any such Transfer, a “Drag-Along Sale”), the Drag-Along Seller may at its option require each Other Stockholder to Transfer the Drag-Along Portion of the class of Company Securities (“Drag-Along Rights”) then held by such Other Stockholder, and (subject to and at the closing of the Drag-Along Sale) to exercise such number of options for Common Shares held by such Other Stockholder as is required in order that a sufficient number of Common Shares are available to Transfer the relevant Drag-Along Portion of Company Securities held by each such Other Stockholder, (i) for the same consideration per share or unit of the relevant class of Company Securities, (ii) in cash, notes, and/or marketable securities, and (iii) otherwise on the same terms and conditions as the Drag-Along Seller; provided that any Other Stockholder that holds options the exercise price per share of which is greater than the per share price at which the Common Shares are to be Transferred to the Drag-Along Transferee, if required by the Drag-Along Seller to exercise such options, may, in place of such exercise, submit to irrevocable cancellation thereof without any liability for payment of any exercise price with respect thereto. If the Drag-Along Sale is not consummated with respect to any Common Shares acquired upon exercise of such options, or the Drag-Along Sale is not consummated, such options shall be deemed not to have been exercised or canceled, as applicable.

(b) The Drag-Along Seller shall provide notice of such Drag-Along Sale to the Other Stockholders (a “Drag-Along Sale Notice”) not later than twenty (20) Business Days prior to the proposed Drag-Along Sale. The Drag-Along Sale Notice shall identify the Drag-Along Transferee, the number of Company Securities subject to the Drag-Along Sale, the consideration for which a Transfer is proposed to be made (the “Drag-Along Sale Price”) and all other material terms and conditions of the Drag-Along Sale. The number of Company Securities to be sold by each Other Stockholder shall be the Drag-Along Portion of the class of Company Securities that such Other Stockholder owns. Each Other Stockholder shall be required to participate in the Drag-Along Sale on the terms and conditions as the Drag-Along Seller is participating as set forth in the Drag-Along Sale Notice and to tender the Drag-Along Portion of its Company Securities as set forth below. The price payable in such Transfer shall be the Drag-Along Sale Price. Not later than ten (10) Business Days after the date of the Drag-Along Sale Notice (the “Drag-Along Sale Notice Period”), each of the Other Stockholders shall deliver to a representative of the Drag-Along Seller designated in the Drag-Along Sale Notice the certificates and other applicable instruments representing the Company Securities of such Other Stockholder to be included in the Drag-Along Sale, together with a limited power-of-attorney authorizing the Drag-Along Seller or such representative to Transfer such Company Securities on the terms set forth in the Drag-Along Notice and wire transfer instructions for payment of the cash portion of the consideration to be received in such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Company Securities pursuant to this Section 4.02(b) at the closing for such Drag-Along Sale against delivery to such Other Stockholder of the consideration therefore. If an Other Stockholder should fail to deliver to the Drag-Along Seller the limited power-of-attorney referenced therein, then such Other Stockholder hereby grants hereunder to the Company and any representative designated by the Board without further action by such Other Stockholder a limited irrevocable power of attorney hereunder to effect such Drag-Along Sale on behalf of such Other Stockholder, which power of attorney shall be deemed to be coupled with an interest. If an Other Stockholder should fail to deliver such certificates to the Drag-Along Seller and the Drag-Along Sale is consummated, the Company shall cause the books and records of the Company to show that such Company Securities are bound by the provisions of this Section 4.02(b) and that such Company Securities shall be Transferred to the Drag-Along Transferee immediately upon surrender for Transfer by the holder thereof.

(c) The Drag-Along Seller shall have a period of 120 days from the date of receipt of the Drag-Along Sale Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice, provided that, if such Drag-Along Sale is subject to regulatory approval, such 120-day period shall be extended until the expiration of five (5) Business Days after all such approvals have been received, but in no event later than 180 days following the date of receipt of the Drag-Along Sale Notice. If the Drag-Along Sale shall not have been consummated during such period, the Drag-Along Seller shall promptly return to each of the Other Stockholders any limited power-of-attorney (and all copies thereof) and all certificates and other applicable instruments representing Company Securities that such Other Stockholders delivered for Transfer pursuant hereto, together with any other documents in the possession of the Drag-Along Seller executed by the Other Stockholders in connection with such proposed Transfer, and all the restrictions on Transfer contained in this Agreement or otherwise applicable at such time with respect to such Company Securities owned by the Other Stockholders shall again be in effect.

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(d) Concurrently with the consummation of the Drag-Along Sale, the Drag-Along Seller shall give notice thereof to the Other Stockholders, shall remit or cause to be remitted to each of the Other Stockholders that have surrendered their certificates and other applicable instruments the total consideration to be paid at the closing of the Drag-Along Sale (the cash portion of which is to be paid by wire transfer of immediately available funds in accordance with such Other Stockholder’s wire transfer instructions) for the Company Securities Transferred pursuant hereto and shall furnish such other evidence of the completion and time of completion of such Transfer as may be reasonably requested by such Other Stockholders.

(e) Notwithstanding anything contained in this Section 4.02, there shall be no liability on the part of the Drag-Along Seller to the Other Stockholders (other than the obligation to return any limited power-of-attorney and the certificates and other applicable instruments representing Company Securities received by the Drag-Along Seller) if the Transfer of Company Securities pursuant to this Section 4.02 is not consummated for whatever reason, regardless of whether the Drag-Along Seller has delivered a Drag-Along Sale Notice. The decision to effect a Transfer of Company Securities pursuant to this Section 4.02 by the Drag-Along Seller is in the sole and absolute discretion of the Drag-Along Seller.

(f) A Drag-Along Sale may also be affected by a merger or other corporate transaction and each Stockholder agrees to vote his, her or its Company Securities that are entitled to vote or execute proxies or written consents, as the case may be, and to take all other actions necessary in order to approve the consummation of the Drag-Along Sale.

SECTION 4.03.  Notwithstanding anything contained in Sections 4.01 or 4.02, in connection with a Tag-Along Sale under Section 4.01 or a Drag-Along Sale under Section 4.02, upon the consummation of such Tag-Along Sale or Drag-Along Sale, the Holder will receive the same form and amount of consideration per share of Company Securities, or, if any Stockholders are given an option as to the form and amount of consideration to be received, the Holder will be given the same option.

SECTION 5.

Division and Combination.

This Warrant may be divided or combined with other Warrants upon presentation at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney.  The Holder shall pay all expenses in connection with the preparation, issue and delivery of Warrants under this Section 5.  The Company agrees to maintain at its aforesaid office books for the registration of the Warrants.

SECTION 6.

Reclassification, Etc.

In case of any reclassification or change of the outstanding Warrant Stock of the Company (other than as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Company with, or merger of the Company into, another corporation or other business organization (other than a consolidation or merger in which the Company is the continuing corporation and which does not result in any reclassification or change of the outstanding Warrant Stock of the Company) at any time prior to the Expiration Date, then, as a condition of such reclassification, reorganization, change, consolidation or merger, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right prior to the Expiration Date to purchase, at a total price not to exceed that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable upon such reclassification, reorganization, change, consolidation or merger by a holder of the number of shares of Warrant Stock of the Company which might have been purchased by the Holder immediately prior to such reclassification, reorganization, change, consolidation or merger, and in any such case appropriate provisions shall be made with respect to the rights and interest of the Holder to the end that the provisions hereof (including provisions for the adjustment of the Exercise Price and of the number of shares purchasable upon exercise of this Warrant) shall thereafter be applicable in relation to any shares of stock and other securities and property thereafter deliverable upon exercise hereof.

SECTION 7.

Reservation and Authorization of Capital Stock.

The Company shall, at all times on and after the date hereof, reserve and keep available for issuance such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants.

SECTION 8.

Rights of Shareholders.

Nothing contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value, consolidation, merger, conveyance, or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise until the Warrant shall have been exercised and the certificates representing the Warrant Stock shall have been issued, as provided herein.

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SECTION 9.

Stock and Warrant Books.

The Company will not at any time, except upon dissolution, liquidation or winding up, close its stock books or warrant books so as to result in preventing or delaying the exercise of any Warrant.

SECTION 10. Limitation of Liability.

No provisions hereof, in the absence of affirmative action by the Holder to purchase Warrant Stock hereunder, shall give rise to any liability of the Holder to pay the Exercise Price or as a shareholder of the Company (whether such liability is asserted by the Company or creditors of the Company).

SECTION 11.  Transfer

This Warrant may be transferred only upon the written consent of the Company, which approval shall not be unreasonably withheld or delayed. Any Warrants issued upon the transfer of this Warrant shall be numbered and shall be registered in a Warrant Register as they are issued. The Company shall be entitled to treat the registered holder of any Warrant on the Warrant Register as the owner in fact thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such Warrant on the part of any other person, and shall not be liable for any registration of transfer of Warrants that are registered or to be registered in the name of a fiduciary or the nominee of a fiduciary unless made with the actual knowledge that a fiduciary or nominee is committing a breach of trust in requesting such registration or transfer, or with the knowledge of such facts that its participation therein amounts to bad faith. This Warrant shall be transferable only on the books of the Company upon delivery thereof duly endorsed by the Holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment, or authority to transfer. In all cases of transfer by an attorney, executor, administrator, guardian, or other legal representative, duly authenticated evidence of his or its authority shall be produced. Upon any registration of transfer, the Company shall deliver a new Warrant or Warrants to the person entitled thereto. This Warrant may be exchanged, at the option of the Holder thereof, for another Warrant, or other Warrants of different denominations, of like tenor and representing in the aggregate a like amount, upon surrender to the Company or its duly authorized agent. Notwithstanding the foregoing, the Company shall have no obligation to cause Warrants to be transferred on its books to any person if, in the opinion of counsel to the Company, such transfer does not comply with the provisions of the Securities Act and the rules and regulations thereunder.

SECTION 12.  Investment Representations; Restrictions on Warrant Stock.

Unless a current registration statement under the Securities Act shall be in effect with respect to the Warrant Stock to be issued upon exercise of this Warrant, the Holder, by accepting this Warrant, covenants and agrees that, at the time of exercise hereof, and at the time of any proposed transfer of Warrant Stock acquired upon exercise hereof, such Holder will deliver to the Company a written statement that the securities acquired by the Holder upon exercise hereof are for the account of the Holder or are being held by the Holder as trustee, investment manager, investment advisor or as any other fiduciary for the account of the beneficial owner or owners for investment and are not acquired with a view to, or for sale in connection with, any distribution thereof (or any portion thereof) and with no present intention (at any such time) of offering and distributing such securities (or any portion thereof).

SECTION 13.  Loss, Destruction of Warrant Certificates.

Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any warrant and, in the case of any such loss, theft or destruction, upon receipt of indemnity and/or security satisfactory to the Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant, the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor and representing the right to purchase the same aggregate number of shares of Warrant Stock.

SECTION 14.  Amendments.

The terms of this Warrant may be amended, and the observance of any term herein may be waived, but only with the written consent of the Company and the Holder.

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SECTION 15.  Notices Generally.

Any notice, request, consent, other communication or delivery pursuant to the provisions hereof shall be in writing and shall be sent by one of the following means: (i) by registered or certified first class mail, postage prepaid, return receipt requested; (ii) by facsimile transmission or email, with confirmation of receipt; (iii) by overnight courier service; or (iv) by personal delivery, and shall be properly addressed to the Holder at the last known address, email address or facsimile number appearing on the books of the Company, or, except as herein otherwise expressly provided, to the Company at its principal executive office at VGTel, Inc., 400 Rella Boulevard, Suite 174, Suffern, NY 10901, Attention: Mr. Neil Fogel, Chief Financial Officer; with a copy to: Spencer G. Feldman, Esq., Olshan Frome Wolosky LLP, Park Avenue Tower, 65 East 55th Street, New York, NY 10022 (fax: (212) 451-2222), or such other address, email address or facsimile number as shall have been furnished to the party giving or making such notice, demand or delivery.

SECTION 16.  Successors and Assigns.

This Warrant shall bind and inure to the benefit of and be enforceable by the parties hereto and their respective permitted successors and assigns.

SECTION 17.  Governing Law.

In all respects, including all matters of construction, validity and performance, this Warrant and the obligations arising hereunder shall be governed by, and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and performed in such State.

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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its name by its duly authorized officer.

Dated:

July 30, 2014

VGTel, Inc.

                   By: /s/ Neil Fogel                                   

Neil Fogel

Chief Financial Officer

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SUBSCRIPTION FORM

(to be executed only upon exercise of Warrant)

To:

VGTel, Inc.

400 Rella Boulevard, Suite 174

Suffern, New York 10901

The undersigned, pursuant to the provisions set forth in the attached Warrant, hereby irrevocably elects to purchase ________ shares of the Warrant Stock covered by such Warrant and herewith makes payment of $5,000, representing the full purchase price for such shares.

Dated: ____________________

Name:_____________________________________________

Signature___________________________________________

Address:___________________________________________

__________________________________________________

 

10Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (this “Agreement”) is dated as of August 4, 2014 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 Chief Operating Officer of the Company; and

 

WHEREAS, the Company desires to enter into an 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 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 Chief Operating Officer of the Company and shall report to, and be subject to the direction and control of, the Company’s Chief Executive Officer. 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 Chief Executive Officer. 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 January 29, 2014, and, unless earlier terminated pursuant to Section 7, will continue under this Agreement until and through the last day of the Company’s fiscal year ending closest to January 31, 2017 (the “Initial Expiration Date”), provided, however, that effective upon the Initial Expiration Date and the last day of each

 

Employment Agreement — Ken Murphy

 

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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) fiscal 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 $350,000 per year (the “Initial 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.  Commencing February 1, 2015 and on each subsequent February 1 during the Term, the Base Salary shall be increased to an amount at least equal to the product of the Initial Base Salary times the quotient of the United States Bureau of Labor Statistics Revised Consumer Price Index, All Items Figures for Urban Wage Earners and Clerical Workers (1982-84 = 100) (hereinafter, the “CPI-W”) for the most recent month for which the CPI-W is available, divided by 233.443, the CPI-W for April 2014; provided, however, that a decline in the CPI-W shall not result in a reduction of the Executive’s Base Salary.

 

(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 50% 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 100% 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 50% of Base Salary. By way of example, if the Company achieves 95% of the Annual EBITDA Target, the bonus shall be equal to 25% 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) In addition to the bonus described above, with respect to each fiscal year of the Company during the Term, the Executive will be eligible to share with other members of senior management of the Company, in a percentage to be determined by the Board, an incremental bonus pool of 10% of the amount of annual EBITDA in excess of a second, higher annual EBITDA target for such fiscal year as 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) (the “Maximum Annual EBITDA Target”).

 

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(iii) The Annual EBITDA Target and the Maximum 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 or the Maximum 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.

 

(iv) 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. 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)(iv) (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.

 

(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.

 

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.

 

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

 

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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 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 twelve (12) 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 twelve (12) 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

 

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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.

 

(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 twelve (12) 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 twelve (12) 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 twelve (12) months following the date of such termination as provided in Section 7(j); provided, however, that the

 

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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 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.

 

(ii) 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 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, payable as provided in Section 7(d) above (including the provisions of Section 7(d) relating to the requirement of a Release).

 

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(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 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.

 

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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 12 months the Executive maintains such COBRA Coverage (or for up to the first 9 months in the case 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), 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 12 months of COBRA Coverage if the Executive’s employment with the Company terminates under Section 7(a), (d) or (f) or for up to the first 9 months in the case 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. 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

 

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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 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 Chief Executive Officer 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 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

 

9

 

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 twelve (12) 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 twelve (12) 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 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

 

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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:

 

Mattress Firm Holding Corp.
 5815 Gulf Freeway

Houston, Texas 77023
 Attn: General Counsel

 

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(ii) For notices and communications to the Executive:

 

Ken Murphy

[      ]

 

with a copy to:

[      ]

 

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 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.

 

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

 

	
 
    	
MATTRESS   FIRM HOLDING CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Alex Weiss
    
	
 
    	
Name:
    	
Alex   Weiss
    
	
 
    	
Title:
    	
Executive   Vice President and CFO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
MATTRESS   FIRM, INC.
    
	
 
    	
By:
    	
/s/   Alex Weiss
    
	
 
    	
Name:
    	
Alex   Weiss
    
	
 
    	
Title:
    	
Executive   Vice President and CFO
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
/s/   Kenneth E. Murphy III
    
	
 
    	
Kenneth   E. Murphy III
    

 

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