Document:

ex10-5.htm

EXHIBIT NO. 10.5

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (THE “AGREEMENT”) is effective the 1st day of October, 2011, by and between ePlus inc. a Delaware corporation (the “Company”) or collectively, with its subsidiaries, the “Companies”) and Steven J. Mencarini (the “Executive”).

 

RECITAL

 

The Executive is employed as the Company’s Senior Vice President of Business Operations, and the parties have negotiated this Agreement in consideration of the Executive’s valuable services and expertise.

 

NOW THEREFORE, in consideration of the mutual promises and covenant herein contained, the parties do hereby agree as follows:

 

1.  EFFECTIVE DATE.  This agreement shall be effective as of the date noted above.

 

2.  DEFINITIONS.  As used herein, the following terms shall have the following meanings:

 

a.  “Incapacity” shall mean the Executive’s physical or mental inability to perform his duties under this Agreement, even with reasonable accommodations consistent with ADA requirements, for more than twelve (12) weeks, whether or not consecutive, in any twelve-month period.

 

b.  “Employment Term” shall be the period from October 1, 2011, through and including July 31, 2012.

 

c.  “Expiration Date” means the date that the Employment Term (as it may have been extended) expires.

 

d.  “Good Cause” means that the Compensation Committee of the Company’s Board of Directors (the “Board”) in good faith determines that the Executive:

 

i.         Failed to satisfactorily perform his duties to the Company and such failure was not cured within 30 days of the Company’s providing Executive written notice of such failure; or

 

ii.         Failed to comply with a  material policy of the Company that was applicable to the Executive and such failure was not cured within 30 days of the Company’s providing Executive written notice of such failure; or

 

iii.         Acted or failed to act in a manner that constitutes gross misconduct, embezzlement, misappropriation of corporate assets, breach of the duty of loyalty, fraud or negligent or willful violations of any laws with which the Company is required to comply; or

 

iv.         Was convicted of or entered a plea of “guilty” or “no contest” to a felony;

 

v.         Refused or failed to comply with lawful and reasonable instructions of the Board and such refusal or failure was not cured within 30 days of the Company providing Executive written notice of such refusal or failure; or

 

vi.         Any other material breach of this Agreement by the Executive that is not cured within 30 days of the company providing Executive written notice of such breach.

 

“Good Cause” shall not include failures as set forth in Section 2(d) of this Section when such failure is a result of the Executive’s illness or injury.

 

e.           “Good Reason” shall mean that within thirty days prior to the Executive’s providing the notice to the Company required under Section 6.b.ii of this Agreement that any of the following has occurred:

 

i.         a material change in the scope of the Executive’s assigned duties and responsibilities or the assignment of duties or responsibilities that are inconsistent with the Executive’s level or position; or

 

ii.         a reduction by the Company in the Executive’s base salary as set forth herein as may be increased from time to time or a reduction by the Company in the Executive’s incentive compensation; or

 

iii.         a change in the Executive’s principal office to a location outside of a 35 mile radius from the Company’s offices in Herndon, Virginia; or

 

iv.         the failure by the Company to continue to provide the Executive with benefits substantially similar to those specified in Section 5 of this Agreement.

 

v.         a termination of employment by the Executive for any reason during the 90-day period immediately following a Change of Control as “Change of Control” is defined in the 2008 Employee Long-Term Incentive Plan.

 

vi.         Any other material breach of this Agreement by the Company that is not cured within 30 days of the Executive providing the Company written notice of such breach.

 

f.  “Termination Date” shall mean the date Executive’s termination is effective, as described in the respective subparts of Section 6.

 

3.  EMPLOYMENT.  The Company and Executive hereby agree to employ the Executive as set forth herein during the Employment Term and until Executive’s employment terminates pursuant to Section 6 below.

 

4.  POSITION, DUTIES AND RESPONSIBILITIES.  During the Employment Term, the Executive shall:

 

a.   serve as the Company’s Senior Vice President of Business Operations.  The Executive shall be responsible for, but not limited to, the following areas: Business Operations;

 

b.  render such other services to the Company as requested provided that such services are consistent with the level of his position; and

 

c.  devote his substantially full business time, attention, skill and energy to the business of the Company and not engage or prepare to engage in any other business activity, whether or not such business activity is pursued for gain, profit or other economic or financial advantage.   Executive may engage in appropriate civic, charitable, or educational activities provided that such activities do not materially interfere or conflict with the Executive’s responsibilities or the Company’s interests.  Nothing in this Agreement shall preclude Executive from acquiring or managing any passive investment he has in publicly traded equity securities in companies that are not in
the same line of business as the Company.

 

5.  COMPENSATION, COMPENSATION PLANS AND BENEFITS.  During the Employment Term, the Executive shall be compensated as follows:

 

a.  Executive shall receive a base annual salary of two hundred and seventy five thousand dollars, (275,000 Dollars), which may be increased from time to time.

 

 b.  Based on his MBOs and overall company performance the Executive shall be eligible to be considered for an annual bonus of up to 50% of his base salary then in effect under the terms and conditions as outlined in the Executive Incentive Plan.  The Company shall pay any bonus earned under this section 5(b) no earlier than the end of the fiscal year for which earned and no later than the next September 30th following the fiscal year in which the bonus was earned, provided that financial filings are timely provided to the Compensation Committee.  In no event will any bonus earned under this Section 5(b) be paid later
than the next December 31st following the fiscal year for which the bonus was earned, unless calculation of the bonus is not administratively practicable by that date, and further delay would not violate Code Section 409A.

 

c.  The Executive shall be entitled to participate in and receive other benefits offered by the Company to all employees, which may include, but are not limited to, vacation, sick, holiday and other leave times, and benefits under any life, health, accident, disability, medical, and dental insurance plans.

 

d.  The Executive shall be entitled to be reimbursed for the reasonable and necessary out-of-pocket expenses, including entertainment, travel and similar items and all expenses necessary to maintain his professional, industry association memberships incurred by him in performing his duties, in accordance with the Company’s expense reimbursement policies in place from time to time. Any reimbursements which are includible in gross income of the Executive under this section 5(d) must meet the following conditions.  Such reimbursements: (i) must be for expenses incurred during the term of this agreement; (ii) shall not be subject to liquidation or exchange for any other benefit; (iii) shall not
affect eligibility for reimbursements in any other taxable year of the Executive; and (iv) shall be made no later than the last day of the Executive’s taxable year following the taxable year in which the expense was incurred.

 

e.  In the event Executive’s employment with Company terminates for any reason, any payments and benefits due the Executive under the Company’s employee benefit plans and programs, including any Long-Term Incentive Plan, shall be determined in accordance with the terms of such benefit plans and programs, and shall be in addition to any other payments or benefits herein.

 

f.  In the event it is determined that any bonus or other incentive compensation payable by the Company to the Executive was paid based on incorrect financial results, the Compensation Committee will review such payment.  If the amount of the payment would have been lower had the level of achievement of applicable financial performance goals been calculated based on the correct financial results, the Company's Compensation Committee may, in its sole discretion, adjust (i.e., lower) the amount of such payment so that it reflects the amount that would have applied based on the correct financial results and, to the extent permitted by applicable law, require the reimbursement by Executive of any
amount paid to or received by the Executive with respect to such bonus or other incentive compensation.  Additionally, bonuses or other incentive compensation payable to the Executive by the Company are subject to recovery by the Company to the extent required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the Sarbanes-Oxley Act of 2002 and any regulations promulgated thereunder.  Except as required by law, this subsection shall not apply to time-vested stock options, restricted stock or restricted stock units which are not awarded, granted or vested based on financial measure required to be reported under the securities laws.

 

6.  TERMINATION OF EMPLOYMENT

 

a.  Termination by the Company.

 

i.         During the Employment Term, the Company may terminate the Executive’s employment for Good Cause. In the absence of cure by the Executive as per Section 2(d), termination by the Company for Good Cause shall be effective on the thirty-first day after the Company gives written notice to the Executive of failure to perform.

 

ii.         During the Employment Term, the Company may terminate the Executive’s employment at any time without Good Cause upon the Company’s payment to the Executive for the 30 days’ written notice period to the Executive or 30 days’ pay in lieu of such notice.  Termination is effective 30 days after the date the written notice is provided to the Executive. The Company may, in its sole discretion, place the Executive on paid administrative leave as of any date prior to the end of the 30-day notice period and require that the Executive no longer be present on Company premises.  During any period of paid administrative leave,
the Executive is not authorized to act or speak as a representative of the Company.

 

b.  Termination by Executive.

 

i.         During the Employment Term, the Executive may voluntarily terminate his employment for any reason with the Company upon 30 days prior notice. Termination is effective 30 days after the date the notice is provided to the Company.  The Company may, in its sole discretion, place the Executive on paid administrative leave as of any date prior to the end of the 30-day notice period and require that the Executive no longer be present on Company premises.  During any such period of paid administrative leave, the Executive is not authorized to act or speak as a representative of the Company.

 

ii.         During the Employment Term, the Executive may terminate his employment for Good Reason as defined in Section 2(e) only if the Executive has provided the Board with written notice of his intent to terminate his employment for Good Reason at least 10 days prior to the date of termination and the Company fails to cure the Good Reason within 10 business days after receiving Executive’s written notice.  Termination for Good Reason will be effective on the 11th business day after the Company receives Executive’s written notice and fails to cure the Good Reason identified in Executive’s notice.

 

c.  Termination by Reason of Death or Incapacity.  Executive’s employment with the Company shall be deemed to have been terminated effective upon the date of Executive’s death, or the date upon which the Company provides Executive with notice of Incapacity.

 

d.  At-will Termination.  If the Employment Term ends without the parties’ entering into a new employment agreement or extending the Employment Term of this Agreement, the Executive’s employment with the Company shall continue on an at will basis and either the Company or the Executive may terminate his employment at any time for any reason or no reason upon 30 days’ written notice.  The Company may choose to end the employment relationship at any time during any such notice period, provided that the Company pays the Executive for the balance of such notice period.

 

7.  EFFECT OF TERMINATION.

 

a.  If the Executive’s employment ends at any time (during or after the Employment Term) for any reason, the Company shall pay the Executive his then current base salary and provide the Executive his then current benefits (as provided in Section 5) through the Termination Date.

 

b.  If during the Employment Term the Executive’s employment terminates by reason of death as described in Section 6(c), the Company shall also pay the Executive’s estate any bonus as determined by the Compensation Committee in accordance with the Company’s Executive Incentive Plan. Pursuant to the Executive incentive plan, the Compensation Committee will determine the amount of such bonus, if any, and such amount, if any, will be paid within sixty (60) days of the termination of Executive’s employment.

 

c.  Provided that after the Termination Date the Executive (i) signs in the form provided by the Company a release of any claims Executive may have against the Company or its then current or former officers, directors, or employees (attached hereto as Exhibit 1) and (ii) certifies that the Executive has complied with Sections 8, 9, 10, 11 and 12 of this Agreement (confidentiality, intellectual property, non-compete, non-solicit, conflict of interest and return of property provisions), then:

 

1)  If during the Employment Term the Executive’s employment is terminated by reason of Incapacity as described in Section 6(c), the Company shall also pay the Executive any bonus as determined by the Compensation Committee in accordance with the Company’s Executive Incentive Plan for the fiscal year that includes the Termination Date, and an additional amount equal to one year of the Executive’s base salary. The payment of the amount equal to one year of the Executive’s base salary shall be made with thirty (30) days of termination of employment. Pursuant to the Executive Incentive Plan, the Compensation Committee will determine the amount of such bonus, if any, and such amount, if
any, will be paid within sixty (60) days of the termination of Executive’s employment.

 

2) If, during the Employment Term, either the Company terminates Executive’s employment without Good Cause as described in Section 6(a) or Executive terminates his employment for Good Reason, as described in Section 6(b)(ii), then (a) the Company shall also pay Executive an amount equal to one year of the Executive’s base salary; and (b) provided that the Executive remains eligible for and timely elects to continue his and any eligible dependants health benefits under COBRA, the Company shall also pay to the insurer the amount necessary for the Executive to continue medical and dental insurance for himself and his dependants through COBRA for a period of one year after the Termination
Date.  Should the Executive or any of his dependants become covered under another employer’s health benefit plan before the end of the one year period, the Company will have no obligation to continue making such additional payments to the insurer.  The Executive shall not be obligated in any way to mitigate the Company’s obligations to him under this Section and any amounts earned by the Executive subsequent to his termination shall not serve as an offset to the payments due him by the Company under this Section. Any payment due under this section 7(c)(2) shall be made in a lump sum within thirty (30) days following the termination of employment.

 

3)  If the parties have not entered into a new employment agreement or extended the Employment Term under this Agreement and within 10 days following the end of the Employment Term either the Company or the Executive gives notice of an At-Will Termination as described in Section 6(d),  then (a) the Company will pay the Executive an additional amount equal to one year of the Executive’s base salary and (b) provided that the Executive remains eligible for and timely elects to continue his and any eligible dependants health benefits under COBRA, the Company shall also pay to the insurer the amount necessary for the Executive to continue medical and dental insurance for himself and his
dependants through COBRA for a period of one year after the Termination Date.  Should the Executive or any of his dependants become covered under another employer’s health benefit plan before the end of the one year period, the Company will have no obligation to continue making such additional payments to the insurer.  The Executive shall not be obligated in any way to mitigate the Company’s obligations to him under this Section and any amounts earned by the Executive subsequent to his termination shall not serve as an offset to the payments due him by the Company under this Section. Any payment due under this section 7(c)(3) shall be made in a lump sum within thirty (30) days following the termination of employment.

 

4)  Notwithstanding the above, if the Executive is a “specified employee” within the meaning of Section 20, the payments under Subsections 7(c)(1),(2) and (3) above shall be made no earlier than the date provided in Section 20.

 

5)  Any release and certification required from the Executive under the first paragraph of this Section 7(c) shall be on the form attached as Exhibit 1 unless the Company has provided Executive a different form on or before his termination of employment.  The applicable release and certification must be signed and returned by Executive to the Company within twenty one (21) days of the date of termination of employment and not revoked in order for Executive to be entitled to payments under Section 7(c).  Except as provided by subsection 7(c)(4), provided the requirements of this subsection are met, any lump sum payment due Executive under subsection 7(c)(1), (2),  or (3) shall
be paid on the last day of the thirty (30) day, sixty (60) day or other applicable period in which the Company may make such payment in compliance with the applicable provision.

 

8.  CONFIDENTIALITY.  During the course of employment, Executive has had and shall continue to have access to the Company’s Confidential Information (as defined below).  Executive shall not disclose or use at any time, either during his employment or after his employment ends for any reason, any Confidential Information (as defined below) of the Company, whether or not patentable, which Executive learns as a result of his involvement with the Company, whether or not he developed such information.  “Involvement with the Company” for purposes of this Agreement shall mean holding a position as an employee, officer, or director with either the Company or any of
its affiliates (collectively, the “Companies”).  “Confidential Information” means Company information that is material to the Company’s business and that is not generally known by, or made available to, the public. The term “Confidential Information” shall specifically exclude any information known to the Executive prior to his employment with the Company regardless of whether such information otherwise would be deemed “Confidential Information.” “Confidential Information” shall include, without limitation, information regarding:

 

•         “Trade Secrets” or proprietary information;

•         strategic sourcing information or analysis;

	
  

	
•

	
patents, patent applications, developmental or experimental work, formulas, test data, prototypes, models, and product specifications;

•         accounting and financial information;

•         financial projections and pro forma financial information;

•         sales and marketing strategies, plans and programs

•         product development and product testing information;

•         product sales and inventory information;

	
  

	
•

	
personnel information, such as employees’ and consultants’ benefits, perquisites, salaries, stock options, compensation, formulas or bonuses;

•         organizational structure and reporting relationships;

•         business plans;

•         names, addresses, phone numbers of customers;

	
  

	
•

	
contracts, including contracts with clients, suppliers, independent contractors or employees; business plans and forecasts;

•         existing and prospective projects or business opportunities; and

•         passwords and other physical and information security protocols and information.

 

            “Trade Secrets” includes any information that derives independent economic value, actually and potentially, from not being generally known to, and is not readily being ascertainable by proper means by, other persons who can obtain economic value from their disclosure or use and that are the subject of efforts that are reasonable under the circumstances to maintain their secrecy.  Information that is or later becomes publicly available in a manner wholly unrelated to any breach of this Agreement by Executive will not be considered Confidential Information as of the date it enters the public domain.  If Executive is
uncertain whether something is Confidential Information, Executive should treat it as Confidential Information until he receives clarification from the person to whom he reports that it is not Confidential Information.  Confidential Information shall remain at all times the property of the Company.  Executive may use or disclose Confidential Information only:

 

a.  when he is employed by the Company, as authorized and necessary in performing the responsibilities of his position, provided that he has taken reasonable steps to ensure that the information remains confidential; or

 

b.  with prior written consent of the CEO; or

 

c.  in a legal proceeding between Executive and the Company to establish the rights of either party under this Agreement, provided that Executive stipulates to a protective order to prevent any unnecessary use or disclosure; or

 

d.  where such disclosure is required by law, provided that Executive has complied with the following procedures to ensure that the Companies have an adequate opportunity to protect their legal interests in preventing disclosure.  Upon receipt of a subpoena or any other compulsory legal process (“Compulsory Process”) that could possibly require disclosure of Confidential Information, Executive shall provide within forty-eight (48) hours of receiving it a copy of the Compulsory Process and complete information regarding the circumstances under which he received it to the General Counsel by hand delivery or by facsimile provided that Executive confirms with the General Counsel by phone
conversation that the General Counsel received the facsimile.  Executive shall not make any disclosure until the latest possible date for making such disclosure in accordance with the Compulsory Process (“Latest Possible Date”).  If one of the Companies seeks to prevent disclosure in accordance with the applicable legal procedures, and provides Executive with notice before the Latest Possible Date that it has initiated such procedures, Executive shall not make disclosures of any Confidential Information that is the subject of such procedures, until such objections are withdrawn, or the appropriate tribunal either makes a final determination that the objections are invalid or orders Executive to make the disclosure.

 

Executive hereby acknowledges that any breach of this Section 8 would cause the Company irreparable harm.

 

9.  INTELLECTUAL PROPERTY.  Executive  acknowledges that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, original works of authorship, copyrights and all similar or related information (whether or not patentable) which relate to the Company’s actual or anticipated business, research and development or existing or future products or services and which are conceived, developed or made by Executive while employed by the Company (“Intellectual Property”) belong to the Company.  Executive agrees that both during and after his employment with the Company that he will sign any documents or provide any
information necessary for the Company to protect its rights to such Intellectual Property.  If Executive is unavailable to sign any document that is necessary for the Company to protect its rights to such Intellectual Property, Executive hereby authorizes the Company to sign on his behalf.

 

10.  NON-COMPETITION and NON-SOLICITATION.  During Executive’s employment and for a period of one year following the date on which his employment ends for any reason, (the “Restricted Period”), the Executive agrees to the following below Non-Competition and Non-Solicitation restrictions.

 

Notwithstanding the above, in the event the Employment Term ends without the parties’ entering into a new employment agreement or extending the Employment Term of this Agreement and the Executive’s employment with the Company continues on an at will basis, the one year  period referenced above shall begin to run at the end of the Employment Term.

 

a.   Non-Competition.  Executive shall not, directly or indirectly, individually or as part of or on behalf of any other person, company, employer or other entity, except with prior written approval of the Company’s CEO, (i) own, (ii) manage, (iii) operate, (iv) advise, (v) be employed by (vi) perform services for, (vii) consult with or (viii) control any Competing Business.  “Competing Business” shall mean a business that is selling products or services similar to those products or services that any of the “Covered Entities” is selling as of the date the Executive’s employment ends and continues to offer for sale during the Restricted Period
within any city, town or county in which, as of the date Executive’s employment ends, any Covered Entity is actively marketing or has made a significant investment in time and money prior to the date the Executive’s employment ends to begin marketing its products or services beginning within sixty (60) days after the date the Executive’s employment ends.   “Covered Entities” include the Company and any affiliated entities in which Executive is actively engaged as an officer, director or employee or about which Executive has received Confidential Information as a result of his Involvement with the Company.

 

b.  Non-Solicitation.  Executive shall not, directly or indirectly, individually or as part of or on behalf of any other person, company, employer or other entity, except with prior written approval of the Company’s CEO:

 

i.           hire or attempt to hire a Covered Employee, encourage another to hire a Covered Employee, or otherwise seek to adversely influence or alter such Covered Employee’s relationship with the Company.  A “Covered Employee” shall mean any person who either is employed by the Company or has been employed by the Company within the preceding sixty (60) days;

 

ii.           encourage or attempt to persuade a Customer to purchase other than from the Company products or services similar to those that the Company was selling as of the date Executive’s employment ends and is continuing to offer for sale. A “Customer” shall mean any person or entity that has purchased products or services from the Company within six (6) months prior to the date Executive’s employment ends; and/or

 

iii.           encourage, or attempt to persuade any person or entity that the Company is using as a consultant or vendor as of the date Executive’s employment ends to terminate or modify such business relationship with the Company in a manner adverse to the Company.

 

c.  Nature of Restrictions.  Executive acknowledges that as a result of his employment as Senior Vice President of Business Operations  of the Company, he has held and will continue to hold a position of utmost trust in which Executive has come to know and will continue to come to know the Company’s employees, Customers and Confidential Information.  Executive agrees that the provisions of this entire Section 10 are necessary to protect the Company’s legitimate business interests.  Executive warrants that these provisions shall not unreasonably interfere with his ability to earn a living or to pursue his occupation after his employment ends for any
reason.  Executive agrees that upon beginning any new employment or business during the Restricted Period, he will promptly inform the Company of the name and address of your his new employer or business and provide such new employer or business with a copy of this Agreement and copy the Company on the letter or email transmitting the Agreement to the appropriate person in such new employer or business.

 

11.  CONFLICT OF INTEREST.  During his employment, Executive agrees to have undivided loyalty to the Company.  This means that Executive shall avoid any situation that involves or has the potential to appear to involve a conflict of interest, such as participating in a business transaction that personally benefits Executive or a relative based on information or relationships developed on the job, failing to disclose that someone who is doing or seeking to do business with or work for the Company is a relative or close personal associate, or receiving direct or indirect compensation from a client or vendor.

 

12.  RETURN OF PROPERTY.  On the date Executive’s  employment ends for any reason, or at any time during his employment, on the request or direction of the Company, Executive will immediately deliver to the Company any or all equipment, property, material, Confidential Information, Intellectual Property or copies thereof which are owned by the Company and are in Executive’s possession or control.  This includes documents or other information prepared by Executive, on his behalf or provided to him in connection with his duties while employed by the Company, regardless of the form in which such document or information are maintained or stored, including computer,
typed, handwritten, electronic, audio, video, micro-fiche, imaged, drawn or any other means of recording or storing documents or other information.  Executive hereby warrants that he will not retain in any form such documents, Confidential Information, Intellectual Property or other information or copies thereof.  Executive may retain a copy of this Agreement and any other document or information describing any rights he may have after the Termination Date.

 

13.  COOPERATION WITH LEGAL PROCEEDINGS.  Executive agrees to reasonably cooperate with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of any of the Companies, which relate to events or occurrences that transpired while Executive was employed by any of the Companies.  Executive’s reasonable cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of any of the Companies.  Executive also agrees to reasonably cooperate with any of the
Companies in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by any of the Companies.  Executive understands that in any legal action, investigation, or review covered by this paragraph the Company expects Executive to provide only accurate and truthful information or testimony. The Company agrees to reimburse the Executive for any costs he incurs in cooperation pursuant to this Section, including but not limited to travel expenses and attorneys’ fees and costs. Nothing in this Section shall limit any indemnification rights Executive may have on the effective date of this Agreement.

 

14.  REMEDY.

 

a.  Executive acknowledges that his breach of the obligations contained in Sections 8, 9, 10, 11 and 12 of this Agreement would cause the Company irreparable harm that could not be reasonably or adequately compensated by damages in an action at law.  If Executive breaches or threatens to breach any of the provisions contained in Sections 8, 9, 10, 11 and 12 of this Agreement, the Company shall be entitled to an injunction, without bond, restraining him from committing such breach.  The Company’s right to exercise its option to obtain an injunction shall not limit its right to any other remedies, including damages.

 

b.  Any action relating to or arising from this Agreement shall be brought exclusively in a court of competent jurisdiction in the Commonwealth of Virginia, and Executive hereby consents to venue and personal jurisdiction in any such court in the Commonwealth of Virginia.

 

c.  Executive expressly waives any right to a trial by jury for any action relating to or arising from this Agreement.

 

15.  SUCCESSORS; BINDING AGREEMENT.

 

a.  This Agreement shall be binding upon, and inure to the benefit of the parties hereto and their heirs, successors and assigns.

 

b.  The Company shall require any successor to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

16.   NOTICES.  For the purpose of this Agreement, notices and all other communications provided herein shall be in writing and shall be deemed to have been duly given when delivered in person or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

	
IF TO THE EXECUTIVE:

Steven J. Mencarini

c/o ePlus inc.

13595 Dulles Technology Drive

Herndon, VA  22171

	
IF TO THE COMPANY;

ePlus inc.

13595 Dulles Technology Drive

Herndon, VA 20171

 

17.  GOVERNING LAW.  All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

 

18.  SEVERABILITY.  The provisions of this Agreement are severable, and if any part of it is found to be unlawful or unenforceable, the other provisions of this Agreement shall remain fully valid and enforceable to the maximum extent consistent with applicable law.

 

19.  MISCELLANEOUS.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of other provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in
this Agreement.

 

20.  CODE SECTION 409A.  It is the intent of this Agreement to either meet an exception from or to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and any rulings and regulations promulgated thereunder (collectively, the “Code”), and any ambiguities herein will be so interpreted and this agreement will be so administered.  References to a termination of employment in Section 7 of this Agreement shall mean the date of a "separation from service" within the meaning of Code Section 409A(a)(2)(A)(i).  If the Executive is a “specified employee” within the meaning of Code Section 409A(a)(2)(B)(i) at the time of
the Executive’s termination of employment, any nonqualified deferred compensation subject to Code Section 409A that would otherwise have been payable under this Agreement as a result of, and within the first six (6) months following, the Executive’s "separation from service" and not by reason of another event under Section 409A(a)(2)(A), will become payable six (6) months and one (1) day following the date of the Executive’s separation from service or, if earlier, the date of Executive’s death.  The Company agrees that it will pay, indemnify and hold the Executive harmless for any additional tax or interest penalty payable amount by the Executive on account of a violation of section 409A.  Any payment by the Company of such amount shall include a “gross-up” payment, which shall be the amount required to cause the net amount
retained by the Executive after payment of all taxes, including taxes on the “gross-up” payment, to equal the amount of additional tax and interest penalty payable by the Executive on account of the violation of section 409A.  Such payment shall be made by the Company within thirty (30) days of the date that Executive submits proof of payment of such taxes to the taxing authority and not later than the end of Executive’s taxable year next following the taxable year in which the Executive submits the respective taxes to the taxing authority. the Executive agrees that the Company may amend this agreement, with the consent of the Executive, as the Company determines is necessary or advisable so that payments made pursuant to this agreement will not result in additional taxation of the Executive pursuant to the provisions of section 409A of the
code.  The Executive agrees that he will not withhold his consent under this Section 20 if the proposed amendment does not materially adversely affect the Executive’s rights under this agreement.

 

21.  CODE SECTION 280(G).  In the event the Company (or its successor) and Executive agree, based on the advice of an independent nationally recognized public accounting firm engaged by the Company, that part or all of the consideration, compensation or benefits to be paid to or for the benefit of Executive under this Agreement constitute “parachute payments” under Section 280G(b)(2) of the Code, then either (a) or (b) below shall apply.

 

a.  Except as provided in (b), if the aggregate present value of such parachute payments, singularly or together with the aggregate present value of any consideration, compensation or benefits to be paid to or for the benefit of Executive under any other plan, arrangement or agreement which constitute “parachute payments”, calculated as provided under Code Section 280G, (collectively, the “Parachute Amount”) exceeds 2.99 times Executive’s “base amount”, as defined in Section 280G(b)(3) of the Code (the “Base Amount”), the amounts constituting “parachute payments” which would otherwise be payable to Executive or for Executive’s benefit
shall be reduced to the extent necessary so that the Parachute Amount is equal to 2.99 times the Base Amount (the “Reduced Amount”).

 

b.  The Parachute Amounts shall not be reduced as provided in (a) above if, based on the advice of such public accounting firm, without such reduction Executive would be entitled to receive and retain, on a net after-tax basis (including, without limitation, after imposition of any excise taxes payable under Section 4999 of the Code), an amount which is greater than the amount, on a net after-tax basis, that Executive would be entitled to retain upon receipt of the Reduced Amount.

 

If the determination made above results in a reduction under (b) above of the payments that would otherwise be paid to or for the benefit of Executive, such reduction in payments shall be first applied to reduce any cash severance payments that Executive would otherwise be entitled to receive hereunder and shall thereafter be applied to reduce other payments and benefits in a manner that would not result in subjecting Executive to additional taxation under Section 409A of the Code.

 

22.  STATUS OF PRIOR EMPLOYMENT AGREEMENTS.  Executive acknowledges that this Agreement supplants and replaces in full all prior employment agreements between Executive and the Company.  Executive waives any and all rights to enforce any and all provisions in any prior employment agreement between Executive and the Company.

 

 

	
ePlus inc.

	  	
Executive

	  	  	  
	  	  	  
	
/s/ Phillip G. Norton

	  	
/s/ Steven J. Mencarini

	
Signature

	  	
Signature

	  	  	  
	
Name:

	
Phillip G. Norton

	  	
Name:

	
Steven J. Mencarini

	  	  	  	  
	
Title:

	
CEO

	  	
Date:

	
September 27, 2011

	  	  	  	  	  
	
Date:

	
September 27, 2011

	  	  

 

  

  

  

 

EXHIBIT 1

 

SAMPLE RELEASE

 

 

This Release is entered into by ePlus inc. (hereafter referred to as “ePlus” or the “Company”) and Steven Mencarini (hereafter referred to as “Employee”).

 

WHEREAS, Employee’s employment with ePlus terminated effective (insert date).

 

NOW THEREFORE, in consideration of the premises and mutual promises contained in the Employment Agreement between Employee and ePlus, the parties agree as follows:

 

Employee  agrees to and does hereby release ePlus, its past and present officers, directors, agents, shareholders, trustees, partners, employees, in their individual and/or corporate capacities, as well as its employee benefit plans, affiliates, subsidiaries, predecessors, successors and successors in interest (the “Releasees”)  from all claims, charges, causes of action or other liabilities (hereafter collectively referred to as “claims”), whether in contract or tort, known or unknown (with the exception of claims arising under the ADEA, for which only known claims are released), arising out of or relating in any way to his employment and/or termination of employment with
ePlus, including, but not limited to, claims for wrongful discharge, breach of contract, express or implied, claims for wages, other compensation, pension, severance pay or any other benefits of any kind, including but not limited to claims arising under ERISA, claims for alleged discrimination under federal, state or local law, including but not limited to Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment At (ADEA), and the American With Disabilities Act, claims arising under federal, state or local law pertaining to family and/or medical leave, and any other claims relating to his employment which could be brought under federal, state or local law.  Any initiation of claims prohibited by this Agreement shall be a breach of this Agreement and shall entitle ePlus to recover the consideration as set in Paragraph 7(c)
of the Employment Agreement, along with reasonable attorney’s fees incurred by ePlus to litigate any such action to the extent permitted by law.

 

Employee may, if desired, have a period of twenty-one calendar days to consider this Release, including its reference to the ADEA contained in this paragraph.  Employee is also advised to consult with an attorney (without expense to ePlus) concerning release of claims under the ADEA prior to executing this Agreement.  In addition, Employee may revoke this Agreement within a period of seven calendar days following execution of this Agreement.  If  Employee does not revoke this Agreement during the revocation period, this Agreement will become fully effective upon the expiration of the revocation period.

 

The provisions of this Release shall inure to the benefit of the parties, their successors and assigns and shall be binding upon the parties and their heirs, executors, administrators, successors and assigns.

 

This Release shall be interpreted, applied and enforced in accordance with and shall be governed by the laws of the state of Delaware, without regards to its conflict of laws provisions.

 

Employee hereby certifies he has complied with Sections 8, 9, 10, 11 and 12 of his Employment Agreement (confidentiality, intellectual property, non-compete, non-solicit, conflict of interest and return of property provisions).

 

IN WITNESS WHEREOF, the parties have executed this Release on the date set forth next to each party’s signature.

 

 

	
Steven J. Mencarini

	  	
ePlus

	  
	  	  	  	  
	  	  	  	  
	  	  	  	  
	
Signature

	  	
Signature

	  
	  	  	  	  
	  	  	  	  
	
Date:

	  	
Name/Title:

	  
	  	  	  	  
	  	  	  	  
	  	  	
Date:Exhibit 4.1

 

MATTRESS FIRM HOLDING CORP.

 

REGISTRATION RIGHTS AGREEMENT

 

Dated as of [   ], 2011

 

 

MATTRESS FIRM HOLDING CORP. REGISTRATION RIGHTS AGREEMENT

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I. DEFINITIONS
    	
1
    
	
 
    	
 
    	
 
    
	
1.1.
    	
Certain Matters of Construction
    	
1
    
	
 
    	
 
    	
 
    
	
1.2.
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
ARTICLE II. REGISTRATION   RIGHTS
    	
4
    
	
 
    	
 
    	
 
    
	
2.1.
    	
General
    	
4
    
	
 
    	
 
    	
 
    
	
2.2.
    	
Demand Registration Initiated by the Sponsor Stockholder
    	
4
    
	
 
    	
 
    	
 
    
	
2.3.
    	
Piggyback Registration; Reduction in Registration
    	
5
    
	
 
    	
 
    	
 
    
	
2.4.
    	
Obligations of the Company
    	
6
    
	
 
    	
 
    	
 
    
	
2.5.
    	
Furnish Information
    	
8
    
	
 
    	
 
    	
 
    
	
2.6.
    	
Expenses of Registration
    	
8
    
	
 
    	
 
    	
 
    
	
2.7.
    	
Underwriting Requirements
    	
8
    
	
 
    	
 
    	
 
    
	
2.8.
    	
Indemnification
    	
9
    
	
 
    	
 
    	
 
    
	
2.9.
    	
Registration on Form S-3
    	
11
    
	
 
    	
 
    	
 
    
	
2.10.
    	
Reports Under Securities Exchange Act of 1934
    	
12
    
	
 
    	
 
    	
 
    
	
2.11.
    	
No Inconsistent Agreements
    	
12
    
	
 
    	
 
    	
 
    
	
2.12.
    	
Reserved
    	
12
    
	
 
    	
 
    	
 
    
	
2.13.
    	
Timing and Other Limitations
    	
13
    
	
 
    	
 
    	
 
    
	
2.14.
    	
Lock-up
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE III. MISCELLANEOUS
    	
14
    
	
 
    	
 
    	
 
    
	
3.1.
    	
Remedies
    	
14
    
	
 
    	
 
    	
 
    
	
3.2.
    	
Entire Agreement; Amendment; Waiver
    	
14
    
	
 
    	
 
    	
 
    
	
3.3.
    	
Severability
    	
14
    
	
 
    	
 
    	
 
    
	
3.4.
    	
Notices
    	
15
    
	
 
    	
 
    	
 
    
	
3.5.
    	
Binding Effect; Assignment
    	
15
    
	
 
    	
 
    	
 
    
	
3.6.
    	
Governing Law
    	
16
    
	
 
    	
 
    	
 
    
	
3.7.
    	
Recapitalizations, Exchanges, Etc.
    	
16
    
	
 
    	
 
    	
 
    
	
3.8.
    	
Action Necessary to Effectuate the Agreement
    	
16
    
	
 
    	
 
    	
 
    
	
3.9.
    	
Effectiveness of Transfers
    	
16
    
	
 
    	
 
    	
 
    
	
3.10.
    	
Other Stockholders
    	
16
    

 

i

 

	
3.11.
    	
No Waiver
    	
16
    
	
 
    	
 
    	
 
    
	
3.12.
    	
Costs and Expenses
    	
17
    
	
 
    	
 
    	
 
    
	
3.13.
    	
Counterpart
    	
17
    
	
 
    	
 
    	
 
    
	
3.14.
    	
Headings
    	
17
    
	
 
    	
 
    	
 
    
	
3.15.
    	
Third Party Beneficiaries
    	
17
    
	
 
    	
 
    	
 
    
	
3.16.
    	
Consent to Jurisdiction
    	
17
    
	
 
    	
 
    	
 
    
	
4.17.
    	
WAIVER OF JURY TRIAL
    	
17
    

 

ii

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”) is entered into as of the [•] day of [•], 2011 by and among (i) Mattress Firm Holding Corp., a Delaware corporation (together with its successors and assigns, the “Company”), (ii) the parent of the Company, Mattress Holdings, LLC (the “Parent”) and (iii) the equity holders of the Parent listed on Schedule A hereto (the “Equity Holders” and after such Equity Holders receive shares of Common Stock in the Company in the Distribution, the “Stockholders”).

 

WHEREAS, on June 10, 2011 the Company filed a registration statement on form S-1 with the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), to register for sale certain Shares of Common Stock of the Company (the “IPO”);

 

WHEREAS, the Parent currently owns 100% of the outstanding Shares of Common Stock of the Company and will continue to own Shares of Common Stock of the Company after the completion of the IPO; and

 

WHEREAS, the Parent and the Company plan to, at some point after the successful completion of the IPO, distribute Shares of Common Stock of the Company to the Equity Holders (the “Distribution”);

 

NOW THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties to this Agreement agree as follows:

 

ARTICLE I.
 DEFINITIONS

 

1.1.                              Certain Matters of Construction.  In addition to the definitions referred to or set forth below in this Section 1:

 

(a)                                  The words “hereof,” “herein,” “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any particular Section or provision of this Agreement, and reference to a particular Section of this Agreement shall include all subsections thereof;

 

(b)                                 References to Sections and Articles refer to Sections and Articles of this Agreement;

 

(c)                                  Definitions shall be equally applicable to both nouns and verbs and the singular and plural forms of the terms defined; and

 

1

 

(d)                                 The masculine, feminine and neuter genders shall each include the other.

 

1.2.                              Definitions.  For the purposes of this Agreement, the following terms shall have the following meanings:

 

“1933 Act” shall have the meaning as set forth in the recitals.

 

“1934 Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor act.

 

“Affiliate” shall mean, with respect to any specified Person, any other Person which, directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person (for the purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise).

 

“Agreement” shall have the meaning set forth in the first paragraph of this Agreement.

 

“Associate” (i) when used to indicate a relationship with any Person shall mean, (a) any corporation or organization of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (b) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as a trustee or in a similar fiduciary capacity, and (c) any relative of such Person who has the same home as such Person, is a parent, sibling, spouse, in-law, child or grandchild of such Person, or the spouse of any of them, or (ii) when used to indicate a relationship with the Company, shall also mean a director or officer of the Company or any Subsidiary.  Neither the Parent, the Company nor any of its Subsidiaries shall be deemed an Associate of any Stockholder.

 

“Board of Directors” shall mean the Board of Directors of the Company as the same shall be constituted from time to time.

 

“Common Stock” shall mean the Company’s common stock, par value $[•] per share (including any class thereof), that the Company may be authorized to issue from time to time, any other securities of the Company into which such Common Stock may hereafter be changed or for which such Common Stock may be exchanged after giving effect to the terms of such change or exchange (by way of reorganization, recapitalization, merger, consolidation or otherwise) and shall also include any common stock of the Company hereafter authorized and any capital stock of the Company of any other class hereafter authorized which is not preferred as to dividends or distribution of assets in liquidation over any other class of capital stock of the Company and which has ordinary voting power for the election of directors of the Company.

 

“Company” shall have the meaning set forth in the first paragraph of this Agreement.

 

2

 

“Holder” or “Holders” have the meaning as set forth in Section 2.1.

 

“IPO” shall have the meaning as set forth in the recitals.

 

“Non-Sponsor Stockholders” shall mean those Stockholders other than the Sponsor Stockholder.

 

“Permitted Transfer” shall mean a Transfer of Shares by (1) the Sponsor Stockholder to any Affiliate of the Sponsor Stockholder or any of the employees, partners, members or Affiliates of such Sponsor Stockholder or any such Affiliate or (2) NB Co-Investment Partners LP, NB Co-Investment Group LP, Co-Investment Capital Partners LP and NB Fund of Funds XVIII—Co-Investment Holding LP (the “NB Entities”) to any Affiliate of the NB Entities or any of the employees, partners, members or Affiliates of such NB Entities or any such Affiliate.

 

“Permitted Transferee” shall mean any Person who shall have acquired and who shall hold Shares pursuant to a Permitted Transfer.

 

“Person” shall mean any individual, partnership, corporation, association, limited liability company, trust, joint venture, unincorporated organization or entity, or any government, governmental department or agency or political subdivision thereof.

 

“Public Offering” shall mean the completion of a sale of Common Stock pursuant to a registration statement which has become effective under the 1933 Act (excluding registration statements on Form S-4, S-8 or similar limited purpose forms), in which the Common Stock shall be listed and traded on a national securities exchange.

 

“register,” “registered” and “registration” shall have the meaning as set forth in Section 2.1.

 

“Registrable Securities” shall mean (i) all shares of Common Stock held by any Stockholder on the date hereof, (ii) all shares of Common Stock received by a Stockholder of the Parent in the Distribution and (iii) any other common equity securities of the Company issued in exchange for, upon a reclassification of, or in a distribution with respect to, such Common Stock which are (y) held by a party hereto on the date hereof or (z) otherwise entitled to registration rights on the date hereof pursuant to a grant of such rights by the Company.  As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when (a) a registration statement (other than a registration statement on Form S-8) with respect to the sale of such securities shall have become effective under the 1933 Act and such securities shall have been disposed of in accordance with such registration statement, (b) a registration statement on Form S-8 with respect to such securities shall have become effective under the 1933 Act, or (c) such securities shall have been sold under Rule 144 (or any successor provision) under the 1933 Act or such securities may be resold by the Holder thereof without registration under the 1933 Act.

 

“Registration Rights Holder” shall mean any stockholder of the Company that has been granted registration rights by the Company.

 

3

 

“SEC” shall have the meaning as set forth in the recitals.

 

“Shares” shall mean (i) shares of Common Stock held by Stockholders from time to time, including shares of common stock issued to Equity Holders in the Distribution or (ii) securities of the Company issued in exchange for, upon reclassification of, or as a distribution in respect of, the foregoing.

 

“Sponsor Stockholder” shall mean (i) JWC Mattress Holdings, LLC and (ii) its Permitted Transferees, as evidenced by an executed counterpart to this Agreement or a joinder to this Agreement, in either case, indicating that such Permitted Transferee will be a Sponsor Stockholder.

 

“Stockholders” shall have the meaning as set forth in the recitals.

 

“Subsidiary” with respect to any entity (the “parent”) shall mean any corporation, company, firm, association or trust of which such parent, at the time in respect of which such term is used, (i) owns directly or indirectly more than fifty percent (50%) of the equity or beneficial interest, on a consolidated basis, or (ii) owns directly or controls with power to vote, directly or indirectly through one or more Subsidiaries, shares of the equity or beneficial interest having the power to elect more than fifty percent (50%) of the directors, trustees, managers or other officials having powers analogous to that of directors of a corporation.  Unless otherwise specifically indicated, when used herein the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company.

 

“Third Party” shall mean any Person other than the Company.

 

“Transfer” shall mean to transfer, sell, assign, pledge, hypothecate, give, create a security interest in or lien on, place in trust (voting or otherwise), assign or in any other way encumber or dispose of, directly or indirectly and whether or not by operation of law or for value, any Shares.

 

ARTICLE II.
 REGISTRATION RIGHTS

 

2.1.                              General.  For purposes of Article II: (a) the terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement that has become effective under the 1933 Act and (b) the term “Holder” means any Stockholder holding Registrable Securities.

 

2.2.                              Demand Registration Initiated by the Sponsor Stockholder.

 

(a)                                  Subject to paragraph (b) hereof and at any time after the expiration of the lock-up agreements executed by the Sponsor Stockholder or its affiliates in connection with the IPO, if the Company shall receive a written request (specifying that it is being made pursuant to this Section 2.2) by or on behalf of the Sponsor Stockholder, that the Company file a registration statement under the 1933 Act, or a similar document pursuant to any other statute then in effect corresponding to the 1933 Act, covering the registration of at least

 

4

 

the lesser of (i) $[20] million of Registrable Securities (determined based upon the market value of such Registrable Securities on the date of request), or (ii) eighty-five percent (85%) of the Registrable Securities then held by the Sponsor Stockholder, then the Company shall promptly notify all other Registration Rights Holders of such request and shall use its best efforts to cause all Registrable Securities that the Registration Rights Holders have requested (within ten (10) days after such Company notice) be registered, to be registered under the 1933 Act.

 

(b)                                 In the case of a Public Offering, if the total amount of Registrable Securities that the Registration Rights Holders request to be included in such offering exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which, in the opinion of such underwriters, can be sold in accordance with the procedures set forth in Section 2.3(b); and

 

(c)                                  The Company shall be obligated to effect:  for the Sponsor Stockholder no fewer than two (2) registrations of Registrable Securities pursuant to this Section 2.2, provided, that in the event that, at the request of the underwriters, the amount of Registrable Securities that the Sponsor Stockholder requested to be included in any offering is reduced by more than thirty percent (30%), such offering shall be deemed not to be a registration demanded by the Sponsor Stockholder for purposes of this Section 2.2.

 

2.3.                              Piggyback Registration; Reduction in Registration.

 

(a)                                  If, at any time, the Company determines to register any of its equity securities for its own account under the 1933 Act in connection with a Public Offering of such securities, solely for cash on a form that would also permit the registration of any of the Registrable Securities, the Company shall, at each such time, promptly give each Holder written notice of such determination.  Upon the written request of any Holder received by the Company within ten (10) days after the giving of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the 1933 Act all of the Registrable Securities of each such Holder that each such Holder has requested be registered.  If the total amount of Registrable Securities that are to be included by the Company for its own account and at the request of Registration Rights Holders exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which in the opinion of such underwriters can be sold, in the following order:

 

(i)                                     first, the equity securities to be registered on behalf of the Company; and

 

(ii)                                  then the Registrable Securities requested to be included by the Registration Rights Holders, pro rata, based on the number of Registrable Securities owned by each of them which each of them request be included in such registration; provided, however, that if an underwriter who is not an Affiliate or

 

5

 

Associate of any Holder, in good faith requests for the success of the offering, that the number of Registrable Securities to be sold by any Holder be apportioned or excluded, such number of Registrable Securities of such Holder shall be reduced or not included to the extent so requested by said underwriter.

 

(b)                                 If the Company at any time proposes to register any of its equity securities for the account of the Sponsor Stockholder pursuant to Section 2.2 or Section 2.9 of this Agreement or for the account of any other Registration Rights Holder pursuant to an S-3 registration under the 1933 Act in connection with the Public Offering of such securities solely for cash on a form that would also permit the registration of any of the Registrable Securities, the Company shall, at each such time, promptly give each Holder written notice of such determination.  Upon the written request of any Holder received by the Company within ten (10) days after the giving of any such notice by the Company, the Company shall use its best efforts to cause to be registered under the 1933 Act all of the Registrable Securities of each such Holder that each such Holder has requested be registered.  In the case of a Public Offering, if the total amount of Registrable Securities requested to be included by the requesting Holders under Section 2.2 or 2.9, and at the request of other Registration Rights Holders pursuant to applicable piggy-back registration rights, the Company and the other Holders, exceeds the amount of securities that the underwriters reasonably believe compatible with the success of the offering, then the Company will include in such registration only the number of securities which in the opinion of such underwriters can be sold, in the following order:

 

(i)                                     first, the equity securities to be registered on behalf of the Sponsor Stockholder initiating the demand;

 

(ii)                                  second, the equity securities to be registered on behalf of the Company; and

 

(iii)                               third, the Registrable Securities requested to be included by the other Registration Rights Holders, pro rata, based on the number of Registrable Securities owned by each of them which each of them request be included in such registration;

 

provided, however, that if an underwriter who is not an Affiliate or Associate of any Holder or the Company, in good faith, requests for the success of the underwritten offering that the number of Registrable Securities to be sold by any Holder or the Company be apportioned or excluded, such number of Registrable Securities of such Holder or the Company shall be reduced or not included to the extent so requested by said underwriter.

 

2.4.                              Obligations of the Company.  Whenever required under Sections 2.2, 2.3 or 2.9 to use its best efforts to effect the registration of any Registrable Securities, the Company shall:

 

(a)                                  prepare and file with the SEC a registration statement with respect to such Registrable Securities, and use its best efforts to cause such registration statement to become and remain effective;

 

6

 

(b)                                 as expeditiously as reasonably possible, prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement;

 

(c)                                  as expeditiously as reasonably possible, furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with requirements of the 1933 Act, and such other documents they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

 

(d)                                 as expeditiously as reasonably possible, use its best efforts to register and qualify the securities covered by such registration statement under the securities or Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the distribution of the securities covered by the registration statement, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such jurisdiction, and further provided that (anything in this Agreement to the contrary notwithstanding with respect to the bearing of expenses) if any jurisdiction in which the securities shall be qualified shall require that expenses incurred in connection with the qualification of the securities in that jurisdiction be borne by selling stockholders, then such expenses shall be payable by selling stockholders pro rata, to the extent required by such jurisdiction;

 

(e)                                  use its best efforts to cause all Registrable Securities covered by such registration statement to be registered with, or approved by, such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities;

 

(f)                                    notify each seller of Registrable Securities covered by such registration statement, at any time when a prospectus relating thereto is required to be delivered under the 1933 Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made, and at the request of any such seller or Holder, promptly prepare and file with the SEC and furnish to such seller or Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; provided, that, each Holder agrees that it shall not sell any Registrable Securities covered by such a registration statement upon notice from the Company until receipt of notice that such statement or omission has been corrected.

 

(g)                                 otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably

 

7

 

practicable, an earnings statement covering the period of at least twelve (12) months, but not more than eighteen (18) months, beginning with the first full calendar month after the effective date of such registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act, and will furnish to each seller at least two (2) business days prior to the filing thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any amendment or supplement thereof to which any such seller shall have reasonably objected, except to the extent required by law, on the grounds that such amendment or supplement does not comply in all material respects with the requirements of the 1933 Act or of the rules or regulations thereunder;

 

(h)                                 provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; and

 

(i)                                     use its best efforts to list all Registrable Securities covered by such registration statement on a national securities exchange on which any class of Registrable Securities is then listed.

 

2.5.                              Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any act pursuant to this Article II that the Holders selling Registrable Securities shall furnish to the Company such information regarding them, the Registrable Securities held by them and the intended method of disposition of such securities as the Company shall reasonably request and as shall be required in connection with the action to be taken by the Company.

 

2.6.                              Expenses of Registration.  All expenses incurred in connection with a registration pursuant to Sections 2.2, 2.3 or 2.9 (excluding underwriters’ discounts and commissions, which shall be borne by the sellers), including without limitation all registration and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company (which counsel shall be reasonably satisfactory to the holders of a majority of the Registrable Securities then being registered), and the reasonable fees and disbursements of one counsel for the selling Holders (which counsel shall be selected by the Holders which own a majority of the Registrable Securities being sold under the applicable registration) shall be borne by the Company; provided, however, that all such expenses in connection with any amendment or supplement to a registration statement or prospectus filed more than nine (9) months after the effective date of such registration statement because any Holder of Registrable Securities has not effected the disposition of the securities requested to be registered shall be paid by such Holder; provided, further, however, that the Sponsor Stockholder, after initiating a demand, may withdraw any request made pursuant to Section 2.2, in which event such first withdrawn request shall be deemed for all purposes herein not to have been made.

 

2.7.                              Underwriting Requirements.

 

(a)                                  Each Holder selling Registrable Securities in a Public Offering in any registration pursuant to Sections 2.2 or 2.3 that is underwritten shall, as a condition for inclusion of such Registrable Securities in such underwritten registration, execute and deliver an underwriting agreement (i) acceptable to the Company and consented to by the Sponsor

 

8

 

Stockholder, in the case of a registration pursuant to Section 2.2 or (ii) acceptable to the Company and consented to by the Holders who own a majority of the Registrable Securities to be included in such registration, in the case of a registration pursuant to Section 2.3, and the underwriters with respect to such registration.  Such underwriters shall be selected (i) by the Sponsor Stockholder and consented to by the Company (which consent shall not be unreasonably withheld, conditioned or delayed) in the case of a registration pursuant to Section 2.2 or (ii) by the Company and consented to by a majority in interest of the Registrable Securities to be included in such registration in all other cases (which consent shall not be unreasonably withheld, conditioned or delayed), in the case of a registration pursuant to Section 2.3.  Notwithstanding the foregoing, each Holder shall take all action reasonably necessary with respect to executing such underwriting agreement, including being liable (i) in respect of any representations and warranties being made by each selling Holder and (ii) any indemnification agreements and “lock-up” agreements made by each such selling Holder for the benefit of the underwriters in such underwriting agreement; provided, however, that except with respect to individual representations and warranties regarding such matters as legal capacity or due organization of such participating Holder, authority to participate in the Public Offering, compliance by such Holder with laws and agreements applicable to it, ownership (free and clear of liens, charges, encumbrances and adverse claims) of Registrable Securities to be sold by such Holder and accuracy of information with respect to such Holder furnished for inclusion in any disclosure document relating to each Public Offering, the aggregate amount of the liabilities of such participating Holder pursuant to such underwriting agreement shall not exceed the net proceeds received by such participating Holder from the Public Offering. A participating Holder shall not be liable for any untrue or alleged untrue statement or any omission or alleged omission to state a material fact in any disclosure document relating to the Public Offering except for information about such Holder furnished by the Holder.

 

2.8.                              Indemnification.  In the event any Registrable Securities are included in a registration statement under this Article II:

 

(a)                                  To the fullest extent permitted by law, the Company will indemnify and hold harmless each Holder (which term, for the avoidance of doubt includes the Sponsor Stockholder and each of the other Stockholders listed on Schedule A hereto holding Registrable Securities, and shall also include the directors, officers and employees of the Sponsor Stockholder and its Affiliates) requesting or joining in a registration, any underwriter (as defined in the 1933 Act) for a registration, and each Person, if any, who controls such Holder or such underwriter within the meaning of the 1933 Act, against any and all losses, claims, damages or liabilities, joint or several, to which any such Holder, underwriter or Person may become subject under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based on any untrue or alleged untrue statement of any material fact contained in a registration statement relating to a registration pursuant to this Article II, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or arise out of any violation by the Company of the 1933 Act or any rule or regulation promulgated under the 1933 Act applicable to the Company and relating to action or

 

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inaction required of the Company in connection with any such registration, and will reimburse each such Holder, underwriter or control Person for any and all legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to anyone for any such loss, claim, damage, liability, action or proceeding to the extent that it arises out of or is based upon an untrue statement or omission made in connection with such registration statement, preliminary prospectus, final prospectus or amendments or supplements thereto in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by such Holder, underwriter or control Person.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder, underwriter or control Person and shall survive the transfer of such securities by such Holder.

 

(b)                                 To the fullest extent permitted by law, each Holder requesting or joining in a registration will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each Person, if any, who controls the Company within the meaning of the 1933 Act, and each agent and any underwriter for the Company and any Person who controls any such agent or underwriter and each other Holder and any Person who controls such Holder (within the meaning of the 1933 Act) against any and all losses, claims, damages or liabilities, joint or several, to which the Company or any such director, officer, control Person, agent, underwriter or other Holder may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings, whether commenced or threatened in respect thereto) arise out of or are based upon an untrue statement of any material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission was made in such registration statement, preliminary or final prospectus, or amendments or supplements thereto, in reliance upon and in conformity with written information furnished by such Holder (other than information furnished by such Holder on behalf of the Company in his or her capacity as an officer or director of the Company) expressly for use in connection with such registration; and such Holder will reimburse the Company and each such director, officer, control Person, agent, underwriter or other Holder for any and all legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, the indemnity obligation of each such Holder hereunder shall be limited to and shall not exceed the proceeds actually received by such Holder upon a sale of Registrable Securities pursuant to a registration statement hereunder; and provided, further that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such Holder (which

 

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consent shall not be unreasonably withheld).  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any such director, officer, Holder, underwriter or control Person and shall survive the transfer of such securities by such Holder.

 

(c)                                  Any Person seeking indemnification under this Section 2.8 will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification (but the failure to give such notice will not affect the right to indemnification hereunder, unless and to the extent the indemnifying party is materially prejudiced by such failure) and (ii) unless in such indemnified party’s reasonable judgment a conflict of interest may exist between such indemnified and indemnifying parties with respect to such claim, permit such indemnifying party, and other indemnifying parties similarly situated, jointly to assume the defense of such claim with counsel reasonably satisfactory to the parties.  In the event that the indemnifying parties cannot mutually agree as to the selection of counsel, each indemnifying party may retain separate counsel to act on its behalf and at its expense.  The indemnified party shall in all events be entitled to participate in such defense at its expense through its own counsel.  If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld).  No indemnifying party will consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.  An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim, in which event the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel.

 

(d)                                 If for any reason the foregoing indemnification is unavailable to any party or insufficient to hold it harmless as and to the extent contemplated by the preceding paragraphs of this Section 2.8, then each indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits received by the applicable indemnifying party, on the one hand, and the applicable indemnified party, as the case may be, on the other hand, and also the relative fault of the applicable indemnifying party and the applicable indemnified party, as the case may be, as well as any other relevant equitable considerations.

 

2.9.                              Registration on Form S-3. At anytime within the five year period within which the Company becomes eligible to file a Registration Statement on Form S-3 (or any successor form relating to secondary offerings),  a Holder or Holders holding in the aggregate at least [20%] of the Registrable Securities may request in writing (specifying that such request is being made pursuant to this Section 2.9) that the Company file a registration statement on Form S-3 (or any similar limited purpose form to Form S-3 regardless of its designation) for a non-underwritten

 

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Public Offering of securities having an anticipated net aggregate offering value of not less than $[25,000,000] and. the Company shall file a Form S-3 with respect to such securities within ninety (90) days from the date of such request, and shall use its best efforts to cause such registration statement to become effective; provided, that the Company shall not be required to effect any such registration more frequently than once every six (6) months.

 

2.10.                        Reports Under Securities Exchange Act of 1934.  With a view to making available to the Holders and their Permitted Transferees the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company agrees to use its best efforts to:

 

(a)                                  make and keep public information available, as those terms are understood and defined in Rule 144, at all times subsequent to ninety (90) days after the effective date of the first registration statement covering a Public Offering filed by the Company;

 

(b)                                 file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act; and

 

(c)                                  furnish to any Holder forthwith upon request a written statement by the Company that it has complied with the reporting requirements of Rule 144 (at any time after ninety (90) days after the effective date of said first registration statement filed by the Company), and of the 1933 Act and the 1934 Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents so filed by the Company as may be reasonably requested in availing any Holder of any rule or regulation of the SEC permitting the selling of any such securities without registration.

 

2.11.                        No Inconsistent Agreements.  The Company represents and warrants that it has not entered into, and covenants that it will not hereafter enter into, any agreement with respect to the registration of its securities that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement without the prior written consent of a majority in interest of the Holders.

 

2.12.                        Reserved.

 

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2.13.                        Timing and Other Limitations.

 

(a)                                  No request shall be made with respect to any registration pursuant to Section 2.2 within one hundred twenty (120) days immediately following the effective date of any registration statement filed by the Company (other than a registration statement on Form S-8 or Form S-4 or similar limited purpose form).

 

(b)                                 If the Company shall furnish to the Holders of Registrable Securities requesting a registration pursuant to Section 2.2 a certificate signed by a majority of the Board of Directors stating that in the good faith judgment of the Board of Directors, it would be seriously detrimental to the Company or its stockholders for such registration statement to be filed on or before the date filing would be required and it is therefore advisable to defer the filing of such registration statement, then the Company shall have the right to defer the filing of the registration statement for a period of not more than one hundred twenty (120) days and the request pursuant to Section 2.2 then made shall not be counted for purposes of determining the number of registrations pursuant to Section 2.2; provided, however, that the Company may not utilize such right more than once in any twelve-month period.

 

2.14.                        Lock-up.

 

In connection with a Public Offering initiated pursuant to Section 2.2 hereof, at the request of the Sponsor Stockholder or a person acting on its behalf no Holder of Shares shall Transfer any Shares without the prior written consent of the underwriters managing the offering. The request made by the Sponsor Stockholder or a person acting on its behalf pursuant to this clause (b) shall not be made within sixty (60) days of the expiration of any other contractual lock-up period (which 60 day period shall be increased by the number of days the Company’s insider trading window has been closed during such 60 day period) and the lock-up period shall expire ninety (90) days (or such shorter period to which the underwriter shall agree) following the commencement of sales in the Public Offering.   At the request of the underwriter, such Holder of Shares shall enter into an agreement with the underwriter to the effect of the foregoing.  The provisions of this Section 2.14(a) shall not be applicable to Permitted Transferees of any Holder who are shareholders, partners or members, respectively, of such Holder, who in each case, received Shares after the initial Public Offering and not otherwise during any lock-up period, (ii) any Holder more than once during any calendar year, (iii) any Holder (other than the Company’s directors and officers) that is not provided the opportunity to include Shares in such Public Offering on a pro rata basis with all holders according to the total amount of Registrable Securities then owned by such holder, and (iv) any Holder who holds less than 5% of the Company’s outstanding common stock, other than the Company’s directors and officers.

 

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ARTICLE III.
 MISCELLANEOUS

 

3.1.                              Remedies.  The parties to this Agreement acknowledge and agree that the covenants of the Company and the Stockholders set forth in this Agreement may be enforced in equity by a decree requiring specific performance.  In the event of a breach of any material provision of this Agreement, the aggrieved party will be entitled to institute and prosecute a proceeding to enforce specific performance of such provision, as well as to obtain damages for breach of this Agreement.  Without limiting the foregoing, if any dispute arises concerning the Transfer of any of the Shares subject to this Agreement or concerning any other provisions hereof or the obligations of the parties hereunder, the parties to this Agreement agree that an injunction may be issued in connection therewith (including, without limitation, restraining the Transfer of such Shares or rescinding any such Transfer).  Such remedies shall be cumulative and non-exclusive and shall be in addition to any other rights and remedies the parties may have under this Agreement or otherwise.

 

3.2.                              Entire Agreement; Amendment; Waiver.  This Agreement, together with Schedule A hereto, sets forth the entire understanding of the parties, and supersedes all prior agreements and all other arrangements and communications, whether oral or written, with respect to the subject matter hereof.  Schedule A may be amended to reflect changes in the composition of the Stockholders as a result of Permitted Transfers or Transfers permitted hereunder.  Amendments to Schedule A reflecting Permitted Transfers or Transfers permitted hereunder shall become effective when a copy of the Agreement as executed by any new transferee is filed with the Company, except as otherwise provided in Section 3.10.  Any other amendments to, or the termination of, this Agreement shall require the prior written consent of a majority of the Holders; provided, that (a) any such amendment which would have an adverse effect on the Sponsor Stockholder, if such adverse effect would be borne solely by the Sponsor Stockholder or would be borne disproportionately by the Sponsor Stockholder relative to the other Stockholders, shall require the written consent of the Sponsor Stockholder  and (b) any such amendment which would have an adverse effect on the Non-Sponsor Stockholders, if such adverse effect would be borne solely by the Non-Sponsor Stockholders or would be borne disproportionately by the Non-Sponsor Stockholders relative to the Sponsor Stockholder, shall require the written consent of Non-Sponsor Stockholders holding a majority of the Shares held by the Non-Sponsor Stockholders.  Notwithstanding any provisions to the contrary contained herein, any party may waive any rights with respect to which such party is entitled to benefits under this Agreement.  No waiver of or consent to any departure from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof.

 

3.3.                              Severability.  It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, the invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if the invalid or unenforceable provision were omitted.  Notwithstanding the foregoing, if such provision could be more narrowly drawn so as not to be invalid or unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so more narrowly drawn, without invalidating the remaining provisions

 

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of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

 

3.4.                              Notices.  All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered in the manner specified herein or, in the absence of such specification, shall be deemed to have been duly given seven (7) days after mailing by certified mail, when delivered by hand, upon confirmation of receipt by telecopy, or one (1) business day after sending by overnight delivery service, to the respective addresses of the parties set forth below:

 

(a)                                  For notices and communications to the Company to:

 

Mattress Firm Holding Corp.

5815 Gulf Freeway

Houston, Texas 77023

Attention: Jim R. Black

Facsimile: (713)-921-4053

 

with a copy to:

 

Ropes & Gray LLP

111 South Wacker Drive, 46th Floor
 Chicago, IL 60606
 Attention:  Andrew J. Terry, Esq.

Facsimile: (312) 845-1265

 

(b)                                 for notices and communications to the Sponsor Stockholder, to its respective address as set forth in Schedule A, with a copy to:

 

Ropes & Gray LLP

5 New Street Square 
 London EC4A 3BF 
 United Kingdom

Attention:  William E. Mone, Esq.

Facsimile: 44 20 3122 1218

 

(c)                                  for notices and communications to any other Stockholders, to their respective addresses set forth in Schedule A.

 

By notice complying with the foregoing provisions of this Section 3.4, each party shall have the right to change the mailing address for future notices and communications to such party.

 

3.5.                              Binding Effect; Assignment.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective transferees, successors and assigns; provided, however, that no right or obligation under this Agreement may be assigned except as expressly provided herein, it being understood that the Company’s rights hereunder may be assigned by the Company to any corporation which is the surviving entity in a merger,

 

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consolidation or like event involving the Company.  No such assignment shall relieve an assignor of its obligations hereunder.

 

3.6.                              Governing Law.  This Agreement shall be governed by the law of the State of New York (regardless of the laws that might otherwise govern under applicable New York principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies.

 

3.7.                              Recapitalizations, Exchanges, Etc.  The provisions of this Agreement shall apply, to the full extent set forth herein with respect to Shares, to any and all shares of capital stock of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution of the Shares, by reason of a stock dividend, stock split, stock issuance, reverse stock split, combination, recapitalization, reclassification, merger, consolidation or otherwise.

 

3.8.                              Action Necessary to Effectuate the Agreement.  The parties hereto agree to take or cause to be taken all such corporate and other action as may be necessary to effect the intent and purposes of this Agreement.

 

3.9.                              Effectiveness of Transfers.  All Shares transferred by a Stockholder (other than pursuant to an effective registration statement under the 1933 Act or pursuant to a Rule 144 transaction) shall, except as otherwise expressly stated herein, be held by the transferee thereof subject to this Agreement.  Such transferee shall, except as otherwise expressly stated herein, have all the rights and be subject to all of the obligations of a Stockholder under this Agreement (as though such party had so agreed pursuant to Section 3.10) automatically and without requiring any further act by such transferee or by any parties to this Agreement.  Without affecting the preceding sentence, if such transferee is not a Stockholder on the date of such transfer, then such transferee, as a condition to such transfer, shall confirm such transferee’s obligations hereunder in accordance with Section 3.10.  No Shares shall be transferred on the Company’s books and records, and no transfer of Shares shall be otherwise effective, unless any such transfer is made in accordance with the terms and conditions of this Agreement, and the Company is hereby authorized by all of the Stockholders to enter appropriate stop transfer notations on its transfer records to give effect to this Agreement.

 

3.10.                        Other Stockholders.  Subject to the restrictions on transfers of Shares contained herein or in any lock-up agreements executed by the Stockholders listed on Schedule A hereto, any Person who is not already a Stockholder listed on Schedule A hereto, shall, on or before the transfer or issuance to it of Shares (other than pursuant to an effective registration under the 1933 Act or pursuant to a Rule 144 transaction), sign a counterpart or joinder to this Agreement in form reasonably satisfactory to the Company and shall thereby become a party to this Agreement to be bound hereunder as (i) the Sponsor Stockholder if a transferee of the Sponsor Stockholder or (ii) another Stockholder if such transferee does not fall within clause (i)above.  Each such additional Stockholder shall be listed on Schedule A, as amended from time to time.

 

3.11.                        No Waiver.  No course of dealing and no delay on the part of any party hereto in exercising any right, power or remedy conferred by this Agreement shall operate as waiver thereof or otherwise prejudice such party’s rights, powers and remedies.  No single or partial

 

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exercise of any rights, powers or remedies conferred by this Agreement shall preclude any other or further exercise thereof or the exercise of any other right, power or remedy.

 

3.12.                        Costs and Expenses.  Each party shall pay its own costs and expenses incurred in connection with this Agreement, and any and all other documents furnished pursuant hereto or in connection herewith.

 

3.13.                        Counterpart.  This Agreement may be executed in two or more counterparts each of which shall be deemed an original but all of which together shall constitute one and the same instrument, and all signatures need not appear on any one counterpart.

 

3.14.                        Headings.  All headings and captions in this Agreement are for purposes of reference only and shall not be construed to limit or affect the substance of this Agreement.

 

3.15.                        Third Party Beneficiaries.  Nothing in this Agreement is intended or shall be construed to entitle any Person other than the Company and the Stockholders to any claim, cause of action, right or remedy of any kind.

 

3.16.                        Consent to Jurisdiction.  The Company and each of the Stockholders, by its, his or her execution hereof, (i) hereby irrevocably submit to the exclusive jurisdiction of the federal courts in the State of New York  for the purposes of any claim or action arising out of or based upon this Agreement or relating to the subject matter hereof, (ii) hereby waive, to the extent not prohibited by applicable law, and agree not to assert by way of motion, as a defense or otherwise, in any such claim or action, any claim that it or he is not subject personally to the jurisdiction of the above-named courts, that its, his or her property is exempt or immune from attachment or execution, that any such proceeding brought in the above-named court is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court and (iii) hereby agree not to commence any claim or action arising out of or based upon this Agreement or relating to the subject matter hereof other than before the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such claim or action to any court other than the above-named courts whether on the grounds of inconvenient forum or otherwise.  The Company and each of the Stockholders hereby consent to service of process in any such proceeding, and agree that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 3.4 is reasonably calculated to give actual notice.

 

3.17.                        WAIVER OF JURY TRIAL.  TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.  EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS

 

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SECTION 4.17 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT.   ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.17 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

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IN WITNESS WHEREOF, each of the stockholders of Mattress Firm Holding Co. has duly executed this Registration Rights Agreement (or caused this Registration Rights Agreement to be executed on its behalf by its officer or representative thereunto duly authorized) as of the date first above written.

 

[Signature Pages Follow]

 

Mattress Firm Holding Corp. Registration Rights Agreement

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