MFRM Mattress Firm Holding Corp. (MM)

Employment and Severance Agreements

        The Company is currently a party to employment agreements with Kenneth E. Murphy III, R. Stephen Stagner and Alexander S. Weiss, and letter agreements Karrie D. Forbes, Matthew Forbes, Cathy Hauslein, Craig McAndrews, Samuel A. Woods and Kindel L. Elam.

        Pursuant to the employment agreements with Messrs. Murphy and Stagner, if either executive officer's employment is terminated by the Company without "cause" or the executive terminates his employment for "good reason" (each, as defined in the respective employment agreement) within one year of a "covered transaction," the executive is entitled to severance benefits consisting of (i) 24 months of his base salary in effect at the time of termination (18 months outside of the occurrence of a covered transaction); (ii) reimbursement for the premiums he pays for any continued medical and dental coverage under the Company's benefit plans for 24 months following the date of termination (or until he becomes eligible to participate in comparable medical and dental coverage pursuant to another employer's plan, if earlier) (18 months outside of the occurrence of a covered transaction); (iii) if such termination or resignation is on or after the last day of any fiscal year for which a bonus is payable but before such bonus has been paid, the amount of such bonus ("Accrued Bonus Payment"); (iv) earned but unpaid base salary and any accrued and unpaid benefits pursuant to the Company's employee benefit plans or programs in which he participates on his last day of employment ("Accrued Termination Obligations"); and (v) the immediate acceleration and vesting in full of all outstanding and unvested equity awards. The Merger will constitute a "covered transaction" under these agreements.

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        Pursuant to the employment agreement with Mr. Weiss, if his employment is terminated by the Company "without cause" or he terminates his employment for "good reason" (each as defined in his employment agreement), he is entitled to severance benefits consisting of (i) 18 months of his base salary in effect on the date of termination; (ii) reimbursement for the premiums he pays for any continued medical and dental coverage under the Company's benefit plans for 18 months following the date of termination (or until he becomes eligible to participate in comparable medical and dental coverage pursuant to another employer's plan, if earlier); (iii) if such termination or resignation is on or after the last day of any fiscal year for which a bonus is payable but before such bonus has been paid, the Accrued Bonus Payment; and (iv) Accrued Termination Obligations.

        Pursuant to the letter agreement with Ms. Forbes, if her employment is terminated by the Company without cause, she is entitled to 12 months of base salary.

        Messrs. Forbes, McAndrews and Woods and Mses. Elam and Hauslein, are all participants in the Company's Severance Pay Plan. As executive officers, these executives are entitled to a one-time, lump-sum cash payment equal to 52 weeks of their base salaries in effect at the time of termination upon a "qualifying termination" of employment (as such term is defined in this plan). The Company's Severance Pay Plan has been filed herewith as Exhibit (e)(17) and is incorporated herein by reference.

        If the employment of each of Messrs. Forbes, McAndrews, Woods and Mses. Elam and Hauslein were terminated without cause on August 10, 2016, the severance amounts payable to them under their respective agreements or the Company's Severance Pay Plan, as applicable, would be approximately $235,000, $335,000, $335,000, $332,312 and $259,080, respectively. For further information with respect to amounts payable to the Company's named executive officers in connection with the Offer and the Merger, see the information included in Item 8 under the heading "Additional Information—Golden Parachute Compensation" (which is hereby incorporated into this Item 3 by reference).

Restrictive Covenants

        Under the terms of his or her employment or letter agreement, each executive officer (with the exceptions of Mses. Elam and Hauslein) is subject to restrictive covenants related to confidentiality, non-competition and non-solicitation.

        Messrs. Murphy and Stagner have each agreed to non-competition and non-solicitation covenants during the term of each executive's employment agreement and for a period of 18 months thereafter. Mr. Weiss has also agreed to non-competition and non-solicitation covenants during the term of his employment agreement and for a period of 12 months thereafter. Messrs. Forbes, McAndrews, Wood and Ms. Forbes have each agreed to non-competition and non-solicitation covenants during the term of each executive's letter agreement and for a period equal to 12 months thereafter.

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Indemnification of Executive Officers and Directors

        The Merger Agreement provides that all rights to indemnification and advancement of expenses by the Company and its subsidiaries to each individual who at the Effective Time is, or at any time prior to the Effective Time was, an officer or director of the Company or any of its subsidiaries will remain in full force and effect in accordance with the terms of any applicable law or agreement and will not be amended, repealed or otherwise modified for a period of six (6) years from the Effective Time (and, in the event that any relevant proceeding is pending or asserted or any relevant claim made during such period, until the final disposition of such proceeding or claim).

        The Merger Agreement requires the Surviving Corporation to maintain in effect the Company's current directors' and officers' liability insurance covering acts or omissions occurring at or prior to the Effective Time with respect to those individuals who are currently (and any additional individuals who prior to the Effective Time become) covered by the Company's directors' and officers' liability insurance policies on terms and scope with respect to such coverage, and in amount, no less favorable to such individuals than those of such policy in effect on the date of the Merger Agreement (including a "tail policy" with respect to matters existing or occurring prior to the Effective Time), or substitute them for policies issued by reputable insurers, of at least the same coverage with respect to matters existing or occurring prior to the Effective Time. Prior to the Effective Time, the Company has the right to purchase a six-year prepaid "tail policy" on terms and conditions providing at least substantially equivalent benefits as the directors' and officers' liability insurance maintained by the Company and its subsidiaries as of the time of the entry into the Merger Agreement with respect to matters existing or occurring prior to the Effective Time, including the Merger and the Offer. Notwithstanding the foregoing, the effective annual premiums for insurance policies paid by the Surviving Corporation will not exceed 125% of the last annual premium paid by the Company for such insurance before the date of the Merger Agreement.

        The foregoing summary of the indemnification of executive officers and directors and directors' and officers' insurance does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which has been filed as Exhibit (e)(1) hereto and is incorporated herein by reference.

Employment Agreements Following the Merger

        As of the date of this Schedule 14D-9, Parent, HoldCo and Offeror have informed the Company that none of the Company's current executive officers have entered into any agreement, arrangement or understanding with Parent, HoldCo, Offeror or their affiliates regarding employment with the Surviving Corporation. Although it is possible that Parent may enter into employment or consultancy compensation, severance or other employee or consultant benefits arrangements with the Company's executive officers and certain other key employees, after the date of this Schedule 14D-9, no discussions have occurred between the Company's executive officers and representatives of Parent, HoldCo, Offeror or their affiliates regarding any such arrangements, and there can be no assurance that any parties will reach an agreement.

Effect of the Merger Agreement on Employee Benefits

        Under the Merger Agreement, Parent has agreed that, subject to the terms of any applicable collective bargaining agreement, until December 31, 2017, it will, or will cause the Surviving Corporation to, provide (i) base salary or hourly wage rate and target bonus opportunity amount to each person who is an employee of the Company or any of its subsidiaries immediately prior to the Effective Time (each, a "Continuing Employee") that are no less favorable, in each case, than those in effect immediately prior to the Effective Time, (ii) severance benefits to each Continuing Employee that are no less favorable than those that would have been provided to such Continuing Employee

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under the applicable severance benefit plans, programs, policies, agreements and arrangements as in effect immediately prior to the Effective Time and (iii) employee benefits (excluding severance) that are no less favorable in the aggregate to those provided to the Continuing Employees immediately prior to the Effective Time (other than changes to employee benefits (excluding severance) that are reasonable and made in the ordinary course of business consistent with past practices for the new year commencing January 1, 2017). Parent is not prevented from otherwise changing the terms and conditions of employment (other than with respect to compensation and benefits, or as may be required by law or collective bargaining agreements) or terminating the employment of any employee at any time after the closing of the Merger.

        Parent has also agreed to honor, or cause the Surviving Corporation to honor, in accordance with their terms all of the Company's employee benefit plans. With respect to all employee benefit plans of the Surviving Corporation or its subsidiaries in which Continuing Employees are eligible to participate from and after the Effective Time, for all purposes, including determining eligibility to participate, vesting, and, with respect to any vacation, paid time-off or severance plans, rate of benefit accruals, each Continuing Employee's service with the Company or any of its subsidiaries (as well as service with any predecessor employer of the Company or any such subsidiary, to the extent service with the predecessor employer was recognized by the Company or such subsidiary) will be treated as credited service under such employee benefit plan (except (i) to the extent that such recognition would result in duplication of benefits for the same period of service, (ii) for purposes of any plan or arrangement that is grandfathered or frozen, either with respect to the level of benefits or participation or (iii) to the extent that such service was not recognized for a similar type of benefit by the Company). The Continuing Employees of the Surviving Corporation and its subsidiaries will receive comparable credit if they participate in any Parent employee benefit plan.

        Parent has agreed to waive, or cause to be waived, or cause the Surviving Corporation to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any welfare benefit plan maintained by the Surviving Corporation or any of its subsidiaries in which Continuing Employees (and their eligible dependents) will be eligible to participate from and after the Effective Time, except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Company employee benefit plan immediately prior to the Effective Time. Parent will recognize, or cause the Surviving Corporation to recognize, the dollar amount of all co-payments, deductibles and similar expenses incurred by each Continuing Employee (and his or her eligible dependents) during the calendar year in which the Effective Time occurs for purposes of satisfying such year's deductible and co-payment limitations under the relevant welfare benefit plans in which they will be eligible to participate from and after the Effective Time.

Section 16 Matters

        Pursuant to the Merger Agreement, the Company Board has adopted resolutions so that, in accordance with Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), the disposition of all Company equity securities pursuant to the Merger Agreement by any officer or director of the Company as well as certain investment funds and related entities affiliated with or managed by affiliates of Berkshire Partners Holdings LLC (the "Berkshire Funds"), in each case that is a reporting person for purposes of Section 16 of the Exchange Act will be an exempt transaction for purposes of Section 16 of the Exchange Act.

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(b)  Arrangements with Offeror and Parent.

Merger Agreement

        The summary of the Merger Agreement contained in Section 11—"The Transaction Documents" of the Offer to Purchase filed as Exhibit (a)(1)(A) hereto and the description of the conditions of the Offer contained in Section 15—"Conditions to Purchaser's Obligations" of the Offer to Purchase are incorporated herein by reference. Such summary and description are qualified in their entirety by reference to the Merger Agreement, which is filed as Exhibit (e)(1) hereto and is incorporated herein by reference.

        The Merger Agreement governs the contractual rights between the Company, Parent, HoldCo and Offeror in relation to the Offer and the Merger. The Merger Agreement has been filed as an exhibit to this Schedule 14D-9 to provide you with information regarding the terms of the Merger Agreement and is not intended to modify or supplement any factual disclosures about the Company or Parent in the Company's public reports filed with the SEC. In particular, the Merger Agreement and this summary of terms are not intended to be, and should not be relied upon as, disclosures regarding any facts or circumstances relating to the Company or Parent. The representations and warranties have been negotiated with the principal purpose of establishing the circumstances in which Offeror may have the right not to consummate the Offer, or a party may have the right to terminate the Merger Agreement, if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocate risk between the parties, rather than establish matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in the Company's public disclosures.

Tender and Support Agreements

        On August 6, 2016, in connection with the Merger Agreement, certain stockholders associated with J.W. Childs Associates, Inc. (the "J.W. Childs Support Stockholders"), solely in their respective capacities as stockholders of the Company and who collectively beneficially own approximately 36.1% of the outstanding Shares, each entered into a tender and support agreement (collectively, the "Tender and Support Agreements") with Parent, HoldCo and Offeror. Each Tender and Support Agreement provides that the applicable J.W. Childs Support Stockholder will tender all of the Shares held by it in the Offer. Each Tender and Support Agreement also provides that, in connection with any meeting of stockholders of the Company, or any action by written consent, the applicable J.W. Childs Support Stockholder granted Parent a proxy to (i) vote all of the Shares held by it in favor of the Merger or in any other transaction pursuant to which Parent proposes to acquire the Company in which the consideration is equal to or greater than the consideration to be received in the Offer and (ii) to vote all the Shares held by it against any action or agreement which would impede or interfere with the Offer or the Merger. Pursuant to each Tender and Support Agreement, in the event that (i) Parent increases the Offer Price above $64.00 per Share or (ii) the Company is obligated to pay a termination fee and an acquisition proposal from a third party at a price higher than the Offer Price occurs within one year of commencement of the Offer, Parent is entitled to receive from the applicable J.W. Childs Support Stockholder 90% of all profits above $64.00 per Share received by it in respect of the Shares, subject to its Tender and Support Agreement. Each Tender and Support Agreement, other than the profit sharing provisions described in clause (ii) above, terminates upon certain events, including completion of the Merger or certain adverse modifications or termination of the Merger Agreement pursuant to its terms.

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        The foregoing description of the Tender and Support Agreements is qualified in its entirety by the full text of such agreements, which are attached hereto as Exhibits (e)(18) to (e)(21), and is incorporated by reference herein.

Support Agreements

        On August 6, 2016, in connection with the Merger Agreement, the Berkshire Funds, who collectively own approximately 13.9% of the outstanding Shares, and Dale R. Carlsen, a director of the Company, and certain trusts related to Mr. Carlsen, who collectively own approximately 1.0% of the outstanding Shares (the "Carlsen Stockholders" and together with the Berkshire Funds, the "Company Support Stockholders"), solely in their respective capacities as stockholders of the Company, entered into support agreements (the "Support Agreements") with Parent, HoldCo and Offeror. Each Support Agreement provides that the applicable Company Support Stockholder will vote all of the Shares held by such Company Support Stockholder in connection with any meeting of stockholders of the Company, or any action by written consent, against any action or agreement which would impede or interfere with the Offer or the Merger. Pursuant to the Support Agreements, in the event that (i) Parent increases the Offer Price above $64.00 per Share or (ii) the Company is obligated to pay a termination fee and an acquisition proposal from a third party at a price higher than the Offer Price occurs within one year of commencement of the Offer, Parent is entitled to receive from each Company Support Stockholder 90% of all profits above $64.00 per Share received by it in respect of the Shares subject to its Support Agreement. The Support Agreements, other than the profit sharing provisions described in clause (ii) above, terminate upon certain events, including completion of the Merger or certain adverse modifications or termination of the Merger Agreement pursuant to its terms.

        The foregoing description of the Support Agreements is qualified in its entirety by the full text of such agreement, which are attached hereto as Exhibits (e)(22) through (e)(30), and are incorporated by reference herein.

        Where the percentage of outstanding Shares is given in this Schedule 14D-9, unless otherwise indicated, it is calculated based on 37,718,175 Shares outstanding as of August 10, 2016 (including 483,886 Restricted Shares).

Item 4.    The Solicitation or Recommendation.

(a)   Recommendation of the Company Board.

        After consideration, including review of the terms and conditions of the Offer in consultation with the Company's management, as well as the Company's financial and legal advisors, the Company Board, by unanimous vote at a meeting on August 5, 2016, (a) determined that the Offer, the Merger and the other transactions contemplated by the Merger Agreement (collectively, the "Transactions") are fair to, and in the best interests of, the Company and its stockholders, (b) duly authorized and approved the execution and delivery by the Company of the Merger Agreement and the consummation by the Company of the Transactions, (c) approved and declared advisable the Merger Agreement and the Transactions, (d) approved the Tender and Support Agreements and the Support Agreements and (e) recommended that the Company's stockholders tender their Shares into the Offer.

         Accordingly, for the reasons described in more detail below, the Company Board unanimously recommends that the Company's stockholders accept the Offer and tender their Shares to Offeror pursuant to the Offer.

(b)   Background and Reasons for the Company Board's Recommendation.

Background of the Offer

        As part of its normal strategic review process, the Company Board and the Company's senior management have periodically reviewed and evaluated strategic alternatives for the Company, and

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discussed potential strategic alternatives, valuation matters and the state of the mergers and acquisitions market. The Company has also, from time to time in the past, received unsolicited overtures from other companies and financial sponsors expressing interest in a possible transaction. In the judgment of the Company Board, none of those past overtures involved a potential transaction that was reasonably likely to be completed at a price that offered attractive values to the Company's stockholders.

        On July 14, 2015, Sean Summers, Chief Executive Officer of United Kingdom Retail at Parent and Anthony Joyce, Director at Parent, met with Stephen Stagner, at that time the Company's Chief Executive Officer, Ken Murphy, the then Co-Chief Operating Officer of the Company, Alex Weiss, the Company's Chief Financial Officer, Robert Killgore, the then Co-Chief Operating Officer of the Company, Brian Baxter, the then Chief Merchandising Officer of the Company, Craig McAndrews, the then Chief Learning Officer of the Company, and Sam Woods, the Company's Senior Vice President—Sales, at the Company's headquarters in Houston, Texas to discuss product and merchandising opportunities between the two companies. At the meeting the Company provided Parent with publicly available information regarding the Company and gave Messrs. Summers and Joyce a tour of one of the Company's stores. During the visit Mr. Summers suggested that the parties should consider exploring a potential business combination. Mr. Stagner subsequently called Bill Watts, at that time the Chairman of the Company Board, to inform him of Mr. Summers' suggestion. Mr. Stagner then introduced Mr. Summers to Mr. Watts who discussed the idea of a business combination between Parent and the Company. Messrs. Stagner and Watts determined that while the concept of a potential business combination with Parent was too preliminary to warrant discussion among the Company Board at that time, further discussions with Parent were warranted to determine if Parent might be willing to engage in a business combination with the Company on terms that would be acceptable to the Company Board.

        On July 28, 2015, Mr. Watts invited Mr. Summers to have executives of Parent meet with the Company on September 18, 2015.

        On September 18, 2015, Messrs. Stagner, Weiss, Murphy and Watts, and Adam Suttin, a director of the Company, met with Markus Jooste, Parent's Chief Executive Officer; Andries Benjamin la Grange, Parent's Chief Financial Officer; Mr. Summers; Danie van der Merwe, Parent's Chief Operating Officer; Mariza Nel, Parent's Director Corporate Services; and Philip Dieperink, Chief Financial Officer United Kingdom Retail at Parent. At the meeting they discussed Parent's background and the general market in the U.S. for the Company's products and potential implications of a purchase of the Company by Parent. No financial or material non-public information was provided to Parent at this meeting, although Parent requested to review the Company's financial information for purposes of forming an initial valuation.

        On September 23, 2015, at a special telephonic meeting of the Company Board, Mr. Stagner updated the Company Board concerning his September 18, 2015 meeting with executives of Parent on September 18, 2015. Mr. Stagner informed the Company Board that Parent would like to review the Company's financial information for purposes of forming an initial valuation in connection with a potential strategic transaction. Mr. Stagner noted that if the Company was to provide financial information, the Company would likely provide Parent with financial forecasts for three years. Following a discussion, the Company Board approved entering into a confidentiality agreement with Parent for the purpose of providing Parent with basic financial information, which would allow Parent to form an initial valuation of the Company in connection with a potential strategic transaction. Additionally, the Company Board formed a committee (the "M&A Committee") comprised of Mr. Stagner, Mr. Suttin, Robert Creager and Joseph Fortunato to allow a smaller group of directors with relevant mergers and acquisition experience and time to focus on a potential transaction with Parent to react more nimbly than the entire Company Board could react to matters relating to any

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potential transaction with Parent. The Company Board gave the M&A Committee a mandate to evaluate and negotiate the terms of a potential strategic transaction with Parent.

        During the period between September 23, 2015 and October 6, 2015, the Company's management, with assistance from its outside legal counsel, Ropes & Gray LLP ("Ropes & Gray"), negotiated the terms of a non-disclosure and standstill agreement (the "Confidentiality Agreement") with Parent and Parent's legal advisors, Linklaters LLP ("Linklaters"). On October 6, 2015, the Company and Parent executed the Confidentiality Agreement.

        On October 15, 2015, the Company shared with Parent a three-year forecast of the Company's projected financial performance.

        On November 12, 2015, the M&A Committee held a meeting to discuss the Company's discussions to date with Parent. Mr. Suttin informed the M&A Committee that Parent had requested a meeting in Frankfurt, Germany on December 8, 2015 and that he, Messrs. Stagner and Watts planned to attend the meeting on behalf of the Company.

        On November 30, 2015, the Company announced that it had executed a definitive agreement to acquire HMK Mattress Holdings LLC, the holding company of Sleepy's and related entities (the "Sleepy's Acquisition").

        On December 1, 2015, Mr. la Grange contacted Mr. Stagner and stated that in light of the Sleepy's Acquisition, Parent would need to receive updated projections from the Company to determine its valuation. They agreed to pause discussions regarding a potential business combination until the Sleepy's Acquisition was completed. The parties therefore cancelled the meeting in Frankfurt, Germany that had been scheduled for December 8, 2015.

        On February 5, 2016, the Company completed the Sleepy's Acquisition.

        On February 17, 2016, the Company shared with Parent a revised three-year forecast of the Company's projected financial performance.

        On March 9, 2016, Mr. la Grange and Ms. Nel from Parent met with Messrs. Stagner and Weiss at the Company's corporate headquarters in Houston, Texas to generally discuss the Company's business and to tour a Company store and warehouse. There were no discussions between the parties regarding valuation or diligence matters.

        On March 16, 2016, Messrs. Jooste and la Grange called Mr. Stagner and conveyed Parent's informal, non-binding proposal to acquire all of the Company's outstanding Shares for $50.00 per Share in cash. At this time, Mr. Jooste also informed Mr. Stagner that Parent would expect the Company's senior management to reinvest a portion of their proceeds in connection with any transaction and that Parent would not make an offer to purchase the Company without management's agreement to do so. No specifics regarding the potential contribution of equity were discussed. Mr. Stagner then called Messrs. Suttin and Watts to inform them of the offer. The Company Board was subsequently informed of the offer and it was deemed insufficient.

        On March 17, 2016, Mr. Stagner sent an email to Mr. la Grange, informing Mr. la Grange that the Company was not willing to further discuss a potential transaction at a $50.00 per Share price. That same day, Mr. la Grange sent an email to Mr. Stagner, requesting further discussions on the price. Messrs. la Grange and Stagner had a telephone conversation and it was agreed that Parent would reconsider its valuation of the Company and propose a revised price.

        On April 5, 2016, Mr. la Grange called Mr. Stagner. He stated that Parent had reconsidered its valuation of the Company and was prepared to offer to acquire all of the Company's outstanding Shares for $60.00 per Share in cash. Mr. la Grange again mentioned Parent's proposal was contingent on certain members of senior management of the Company, including Mr. Stagner, reinvesting a significant portion of their equity investment in the Company in a potential merger.

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        On April 11, 2016, at a special telephonic meeting of the Company Board attended by certain members of management and a representative from Ropes & Gray, Mr. Stagner described his April 5, 2016 conversation with Mr. la Grange, including the price per Share and Parent's requirement that Mr. Stagner and other members of the Company's senior management reinvest a significant portion of their equity in the Company in connection with a potential transaction. Mr. Stagner advised that he would be willing to reinvest some portion of his equity in the Company in connection with the potential transaction. Mr. Suttin then noted that if the Company Board were to further consider Parent's proposal it would need to engage a financial advisor. The Company Board determined that Barclays Capital, Inc. ("Barclays") was best suited to serve as financial advisor in light of its industry expertise and familiarity with the Company, having represented the Company in past mergers and acquisitions and financing transactions, including the Sleepy's Acquisition. The Company Board then authorized the M&A Committee to discuss with Barclays the potential retention of Barclays as the Company's financial advisor with respect to a potential strategic transaction, including a potential transaction with Parent.

        Between April 11, 2016 and April 15, 2016, Mr. Suttin, on behalf of the M&A Committee and assisted by Ropes & Gray, negotiated with Barclays the terms of a potential engagement of Barclays by the Company with respect to a potential strategic transaction, including a potential transaction with Parent.

        On April 14, 2016, immediately prior to a scheduled special telephonic meeting of the Company Board, Mr. Suttin and Ms. Elam, the Company's General Counsel and Secretary, suggested to Mr. Stagner that he step off the M&A Committee as a result of his having indicated previously that he would agree to reinvest a portion of his equity in the Company in connection with a potential transaction with Parent, and could therefore potentially be viewed as having a conflict of interest with respect to the consideration of a potential transaction. Mr. Stagner agreed to do so. The Company Board delegated authority to Mr. Suttin to finalize negotiations with Barclays within specified parameters and retain Barclays if terms for its retention could be successfully negotiated within those parameters. In approving the Company's potential retention of Barclays, the Company Board considered Barclays' familiarity with the Company and its efforts on behalf of the Company in connection with prior engagements, the expertise of the Barclays team members who would work on the engagement, Barclays' familiarity with the Company's industry and the potential conflicts created by the prior retention by Parent of Barclays on unrelated matters (and the fees Barclays had obtained from those engagements), which Barclays had disclosed to the Company Board. See "Item 4. The Solicitation or Recommendation—Opinion of the Financial Advisor to the Company Board" for investment banking and financial services performed by Barclays for the Company, Parent and their affiliates in the past.

        At the April 14, 2016 meeting, the Company Board also discussed Parent's requirement that certain members of the Company's senior management to reinvest their equity. The Company Board discussed the possible conflicts of interest of such a structure could present. Mr. Stagner and the other members of the Company's senior management present at the meeting voluntarily recused themselves from Company Board discussions relating to the potential transaction with Parent. The Company Board then discussed how to respond to Parent's recent offer and determined that Parent's offer of $60.00 per Share undervalued the Company and they would not discuss a transaction at that price.

        On April 15, 2016, the Company executed an engagement letter with Barclays, which letter memorialized the terms and conditions of Barclays' engagement by the Company in connection with a potential strategic transaction, including the potential transaction with Parent.

        On April 18, 2016, Messrs. Suttin and Watts contacted Messrs. Jooste and la Grange to inform them that the Company Board believed that Parent's $60.00 per Share offer undervalued the Company and that the Company was not willing to further discuss a potential transaction at a $60.00 per Share price. In response, Messrs. Jooste and la Grange explained that any acquisition needed to be at a price

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for Parent to meet its own financial objectives. Mr. Suttin requested that Parent provide its calculations and valuation analysis to ensure that both parties understood the basis for Parent's valuation methodology and calculations.

        On April 19, 2016, Mr. la Grange shared an analysis of the Company with Messrs. Suttin and Watts, which supported a proposal of $60.00 per Share.

        On April 26, 2016, the Company shared with Parent a revised forecast of the Company's projected financial performance, which was meant to provide updated data in response to the valuation methodology that Mr. la Grange had provided the Company on April 19, 2016.

        On April 26, 2016, Messrs. Suttin and Weiss participated in a conference call with Mr. la Grange and other members of Parent's management to further discuss valuation.

        On April 29, 2016, John Childs, a director of the Company, and Mr. Suttin each received a call from a private equity sponsor ("Party A") expressing interest in a potential transaction with the Company. Party A did not indicate on that call a price at which it would be interested in a potential transaction with the Company. Mr. Suttin informed Party A that if it was interested in a potential transaction with the Company, it should submit a written proposal to the Company.

        On May 5, 2016, Messrs. Suttin and Weiss participated in a conference call with Mr. la Grange and other members of Parent's management. On that call, the parties reviewed the various elements included in the valuation analysis prepared by the Company. Mr. la Grange indicated that Parent could not pay more than $62.00 per Share for the Company in a potential transaction.

        On May 16, 2016, Messrs. Suttin and Weiss conducted another conference call with Mr. la Grange and other members of Parent's management to discuss valuation. Mr. Suttin requested that Parent send a written proposal to acquire the Company, and that such proposal be for a value in excess of $62.00 per Share.

        On May 27, 2016, Messrs. Childs, Fortunato, Suttin and Watts met with representatives of Party A at J.W. Childs Associates, Inc.'s office in Waltham, Massachusetts. The purpose of the meeting was to discuss Party A's potential interest in acquiring the Company. No material non-public information was shared with Party A and Party A did not propose an acquisition price.

        On May 27, 2016, the Company received a non-binding offer letter from Parent in which Parent offered to acquire all of the Company's outstanding Shares for $64.00 per Share in cash. This offer represented a then 93% premium to the closing price of the Company's common stock on May 26, 2016, a then 77% premium to the Company's 30-day average volume weighted average price and a then 51% premium to the Company's six-month volume weighted average price. The offer letter conditioned Parent's willingness to proceed with the transaction at the $64.00 per Share price on, among other things, (i) the satisfactory completion of due diligence; (ii) the negotiation and execution of transaction documentation including as Parent stated in the letter "strong deal protection measures"; (iii) Parent's satisfaction that the Company would achieve "sustainable EBITDA of $422.9 million" for the 12-month period ending October 31, 2017; and (iv) Parent's satisfaction that the Company's net debt as of October 31, 2016 would be less than or equal to $1.388 billion. The letter also indicated that, because Parent did not have a substantial presence in the United States at that time, Parent did not believe that there would be any antitrust-related regulatory impediments to closing the transaction. Parent also indicated that it would require an exclusive negotiating period of 45 days as a condition to its willingness to continue to devote time to a potential acquisition of the Company. Parent did not, as part of the May 27, 2016 proposal, state that it would require or request any of the Company's management to reinvest their equity.

        On June 1, 2016, at a meeting of the Company Board (attended by all directors other than Mr. Stagner, who recused himself) and also attended by representatives from Barclays and Ropes & Gray, Mr. Suttin provided an update on the potential transaction with Parent. Mr. Suttin noted that

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Parent had provided a formal written offer of $64.00 per Share, which was a very significant increase over Parent's initial offer of $50.00 per Share. Barclays provided the Company Board with a preliminary valuation analysis using standard valuation methodologies. The Barclays analysis demonstrated, among other things, that the $64.00 per Share offer represented a then 89.0% premium to the Company's stock price as of May 27, 2016, a then 78.3% premium to the volume weighted average stock price over the past 30 trading days and a then 38.2% premium to the volume weighted average stock price over the past year. Barclays also provided the Company Board with analysis concerning the Company Board's potential response to Parent's offer, which the Company Board discussed with Barclays and Ropes & Gray. A representative of Ropes & Gray then advised the Company Board regarding its fiduciary duties in evaluating Parent's proposal. The Company Board noted that the offered price represented a very significant premium over the current market price. The Company Board also discussed the fact that the Company expected to announce results for the first quarter of fiscal year 2016 that were less favorable than those reflected in the management projections provided to Parent and less favorable than those which the Company had previously disclosed publicly. The Company Board discussed that it would be important prior to any grant of exclusivity to Parent to receive confirmation from Parent that Parent continued to be willing to proceed with an acquisition of the Company at the proposed $64.00 per Share offer price, after being informed of the results for the first quarter and the resulting impact on the Company's expected future performance. After a lengthy discussion, the Company Board authorized Mr. Suttin to respond to Parent by (i) proposing a $65.00 per Share price for a potential transaction; (ii) rejecting the proposed 45-day exclusivity period; and (iii) permitting a diligence review to commence if Parent confirmed its commitment to proceed with a potential transaction at a $65.00 per Share price.

        On June 6, 2016, Messrs. Suttin and Watts conveyed the message authorized by the Company Board at the June 1, 2016 meeting to Mr. la Grange, including its rejection of the exclusivity period and the offer to permit a diligence review to commence if Parent confirmed a $65.00 per Share price. They also provided Parent with updated projections of the Company's future financial performance, which were now lower than the projections provided to Parent previously as a result of the Company's revised full fiscal year 2016 financial guidance. The revised projections included an anticipated EBITDA amount for the 12-month period ended October 31, 2017 lower than the $422.9 million amount included in Parent's May 27, 2016 offer letter.

        On June 8, 2016, the Company received a letter from Parent rejecting the Company's $65.00 per Share counter-offer. In the letter, Parent reconfirmed its commitment to a transaction at a price of $64.00 per Share, subject to certain conditions, including the granting of the aforementioned exclusivity period.

        The Company Board convened later that day to consider the latest communication from Parent. At that meeting, the Company Board discussed that the offer from Parent was compelling and considered whether it was advisable to request that Barclays contact potential alternative acquirers at this time to determine if any potential third parties might also be interested in acquiring the Company in a transaction which could be expected to offer a comparable, if not superior, proposal in terms of valuation and transaction certainty to Parent. The Company Board concluded, based on the industry expertise and experience of the members of the Company Board and taking into account Barclays' preliminary valuation analysis presented at the June 1, 2016 Company Board meeting, that the $64.00 per Share price offered by Parent was in excess of the amount that a financial sponsor would likely be willing to pay for the Company based on customary financial sponsor models and return requirements. The Company Board also concluded, in consultation with Barclays, that it was unlikely that another strategic buyer would be prepared to offer the Company in excess of the $64.00 per Share offered by Parent. The Company Board separately concluded that any proposal made by certain strategic buyers could raise material regulatory issues. The Company Board also considered the potential risks to the Company if it requested that Barclays contact potential alternative acquirers and Barclays's efforts in this regard became public knowledge, including, among other things, risks to the Company's

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relationships with key suppliers, potential distractions to the Company's employees, and risks to Parent's willingness to continue discussions concerning a potential transaction.

        The Company Board further considered that the Company would attempt to obtain provisions in any definitive transaction documentation that would permit a "go-shop" and/or a fiduciary out provision that would allow the Company to terminate the merger agreement should a superior proposal be made, thereby making available an opportunity for an alternative acquirer prepared to make a proposal to acquire the Company on terms more favorable than those proposed by Parent to come forward. On this basis the Company Board authorized the M&A Committee to negotiate a two-tiered exclusivity agreement with Parent that would afford an initial exclusivity period for Parent to conduct its business and financial due diligence, and then would only extend beyond that point if Parent confirmed it had substantially completed its business and financial due diligence and remained willing to proceed with a potential acquisition of the Company at the proposed $64.00 per Share offer price.

        Also at the June 8, 2016 meeting of the Company Board, the Company Board appointed Chris Hadley to the M&A Committee to replace Mr. Stagner, who had recused himself from the M&A Committee at the April 14, 2016 meeting of the Company Board in light of his potential conflict of interest with respect to a potential transaction with Parent.

        On June 9, 2016, the Company announced its financial results for the first quarter of fiscal year 2016. The Company missed its quarterly sales guidance by 3.2% and its quarterly adjusted earnings per share ("EPS") guidance by 163.5% for the most recent quarter, and revised its current fiscal year projections downward from net sales of $3.95 - $4.00 billion to $3.825 - $3.875 billion, same store sales growth downward from 4.0% - 5.5% to 1.0% - 2.0%, adjusted EBITDA downward from $365 - $370 million to $338 - $343 million and adjusted EPS downward from $2.50 - $2.60 per Share to $1.98 - $2.08 per Share in response to, among other things, less favorable than expected business conditions.

        On June 9, 2016, Messrs. Suttin and Watts contacted Messrs. Jooste and la Grange. Despite the lowered projections, including projected EBITDA for the 12-month period ended October 31, 2017 being lower than the $422.9 million amount set forth in the May 27, 2016 letter from Parent to the Company conditioning Parent's willingness to proceed with an offer of $64.00 per share on such EBITDA amount, Mr. la Grange indicated that Parent would confirm its $64.00 per Share offer in connection with a grant of exclusivity from the Company. However, Mr. la Grange indicated that Parent would require a longer exclusivity period through July 11, 2016 to complete its diligence procedures and confirm price.

        On June 9, 2016, Mr. Suttin, on behalf of the M&A Committee, provided Parent with a proposed exclusivity agreement that would grant exclusivity to Parent through June 30, 2016. Pursuant to the terms of the agreement, on the condition that Parent confirmed on or before that date that it had substantially completed its business and financial due diligence and remained prepared to complete an acquisition of the Company at the proposed $64.00 per Share price, the exclusivity period would be extended through July 18, 2016.

        On June, 10, 2016, at a special telephonic meeting of the M&A Committee attended by representatives from Barclays and Ropes & Gray, Mr. Suttin provided an update on a call he had with Mr. la Grange earlier in the day. Mr. Suttin noted that Parent and its representatives were reviewing the exclusivity agreement prepared by the Company and Mr. la Grange indicated that Parent would likely need a longer exclusivity period than was provided in the agreement.

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        On June 13, 2016, Parent provided the Company with a revised exclusivity agreement seeking to extend the initial exclusivity period from June 30, 2016 to July 13, 2016, with an extension of exclusivity until August 5, 2016 if Parent confirmed on or before July 11, 2016 that it remained prepared to complete an acquisition of the Company at the proposed $64.00 per Share price. In addition to sending the revised exclusivity agreement, Parent also sent an anticipated transaction timeline which contemplated executing definitive transaction documents on August 3, 2016.

        Between June 13, 2016 and June 15, 2016, representatives of Ropes & Gray and Linklaters negotiated the provisions of the exclusivity agreement.

        On June 16, 2016, the Company and Parent executed the exclusivity agreement. The exclusivity agreement provided for exclusivity through July 11, 2016, which would be extended to July 28, 2016 if Parent confirmed to the Company by July 11, 2016 that (i) it had completed its business and financial due diligence investigation and (ii) intended to complete the acquisition of the Company at $64.00 per Share.

        During the week of June 27, 2016, representatives of Parent traveled to the Company's headquarters in Houston, Texas to conduct in-person due diligence. Parent concluded its in-person due diligence on July 1, 2016. At the conclusion of the diligence sessions Mr. Jooste shared with Mr. Suttin Parent's expectation that the J.W. Childs Support Stockholders would commit to support the transaction with Parent. Mr. Suttin indicated that, subject to a review of the relevant documentation, the J.W. Childs Support Stockholders would be willing to commit to support the transaction.

        On July 5, 2016, the Company received an unsolicited indication of interest from Party A, which made a non-binding and conditional proposal to acquire all of the Company's outstanding Shares for $51.00 per Share in cash. The next day Mr. Suttin called Party A to acknowledge receipt of the proposal and to indicate that he would share the proposal with the Company Board.

        On July 11, 2016, the Company received a letter from Parent confirming that Parent had completed its business and financial due diligence of the Company and that it remained prepared to complete a business combination with the Company at a purchase price of $64.00 per Share, subject to confirmatory due diligence being completed.

        On July 11, 2016, after considering the request from Parent that the J.W. Childs Support Stockholders execute agreements committing to support the proposed transaction between the Company and Parent, Mr. Suttin determined that Parent's proposed transaction timeline would require the J.W. Childs Support Stockholders to execute a support agreement earlier than such stockholders would be willing to do so due to securities law considerations, and that the J.W. Childs Support Stockholders would not be prepared to execute such a support agreement prior to August 6, 2016. Mr. Suttin relayed the J.W. Childs Support Stockholders' position to the M&A Committee and to Parent on July 11, 2016. In response, Parent agreed to extend the timeline to execution of the merger agreement and other transaction documents until the J.W. Childs Support Stockholders would be in a position to execute a support agreement, provided that the Company agreed to extend the exclusivity period through August 6, 2016.

        On July 11, 2016, at a special telephonic meeting of the Company Board attended by certain members of management and representatives from Barclays and Ropes & Gray, the Company Board considered extending the exclusivity period for Parent based on the J.W. Childs Support Stockholders' timing requirements for execution of any support agreement and Parent's requirement that exclusivity be extended to accommodate that delay. After discussion, the Company Board agreed to the extension of the exclusivity period. The Company Board also authorized Mr. Suttin to respond to Party A's proposal by informing Party A that its proposal was insufficient and to discuss with the M&A Committee how to respond to Party A.

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        On July 15, 2016, Mr. Suttin contacted Party A to inform it that its offer was insufficient to warrant further discussion concerning a potential transaction.

        On July 15, 2016, Parent delivered a draft merger agreement to the Company that contemplated that the acquisition would be structured as a tender offer followed by a prompt merger effected pursuant to Section 251(h) of the DGCL. The draft merger agreement did not permit the Company to terminate the merger agreement following a change of the Company Board's recommendation in response to a superior proposal from another potential acquirer. Additionally, the draft contemplated that certain of the Company's stockholders would execute support agreements within a short period of time after execution of the definitive merger agreement, and that failure to execute those support agreements would provide Parent with a right to terminate the merger agreement. Parent did not provide draft support agreements at that time.

        On July 18, 2016, Ropes & Gray discussed the initial draft of the merger agreement and the support agreements with Linklaters. Linklaters informed Ropes & Gray that Parent expected that the J.W. Childs Support Stockholders, the Berkshire Funds and the Carlsen Stockholders would execute support agreements, and that those support agreements would contain irrevocable obligations to tender into the proposed tender offer. Collectively these stockholders held over 50% of the Company's outstanding common stock. As such, the support agreements contemplated by Parent, combined with the provisions in the draft merger agreement preventing the Company from terminating the agreement to accept a superior proposal, would effectively prevent a party willing to acquire the Company on terms more favorable to the Company's stockholders than the proposed transaction with Parent from doing so. Linklaters indicated that Parent's offer of $64.00 per Share, a substantial premium over the then-current price of the Company's common stock, was predicated on receiving the deal protection provisions included in the merger agreement. Linklaters also informed Ropes & Gray that Parent had withdrawn its request to have the transaction contingent on agreement from Company management to reinvest their shares and would not have any such discussions with the Company's management team regarding their future involvement with the Company until following agreement of a definitive transaction, if at all.

        On July 19, 2016, Mr. Suttin, along with representatives from Ropes & Gray, and Mr. la Grange, along with representatives from Linklaters, discussed the proposed deal protection terms in the draft merger agreement. Mr. Suttin noted that those deal protection terms were likely unacceptable and that he would need to discuss the terms with the M&A Committee. Linklaters reiterated that Parent's offer price of $64.00 per Share was predicated on receiving the strict deal protections included in the draft merger agreement.

        On July 19, 2016, at a special telephonic meeting of the M&A Committee also attended by representatives of Barclays and Ropes & Gray, the M&A Committee discussed the draft merger agreement circulated by Parent on July 15, 2016, and Mr. Suttin's call with Parent, Ropes & Gray and Linklaters earlier in the day. The M&A Committee concluded that it was not in the best interests of the Company or the Company's stockholders to accept terms that would effectively eliminate any possibility for the Company Board to enter into a transaction with a third party that could offer a superior proposal to Parent's $64.00 per Share offer. The M&A Committee therefore instructed Mr. Suttin and Ropes & Gray to negotiate deal protection provisions that would permit a third party to make a superior proposal that the Company could accept.

        From July 19, 2016 through July 29, 2016, the parties negotiated various terms of the merger agreement, particularly the deal protection provisions.

        On July 21, 2016, at a special telephonic meeting of the M&A Committee attended by representatives of Barclays and Ropes & Gray, Mr. Suttin provided an update on his discussions with Parent. Mr. Suttin noted that Parent remained insistent on receiving strict deal protection provisions in connection with a potential transaction, but that it appeared to be willing to consider certain revisions

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to such provisions. Mr. Suttin suggested to the M&A Committee, and the M&A Committee agreed, that Ropes & Gray should incorporate less strict deal protection provisions in the draft merger agreement.

        On July 24, 2016, Ropes & Gray delivered a revised draft of the merger agreement to Linklaters and Parent. The draft included (i) a "go-shop" provision that would permit the Company to solicit other competing offers for a period of time following execution of the definitive agreement; (ii) a termination right in favor of the Company Board in the event that the Company Board changed its recommendation to accept the Parent's acquisition proposal in favor of a third-party competing offer that was superior to Parent's offer; (iii) a termination fee payable by the Company to Parent equal to 2.0% of the fully diluted equity value of the Company; (iv) a termination fee payable by the Company to Parent equal to 1.0% of the fully diluted equity value of the Company if the Company entered into an acquisition agreement with a party that submitted a proposal during the "go-shop" period; and (v) a provision stating that only the J.W. Childs Support Stockholders would execute a support agreement.

        On July 24, 2016, at a special telephonic meeting of the Company Board attended by all of the members of the Company Board, certain members of management, including Mr. Stagner and representatives from Barclays and Ropes & Gray, Mr. Suttin provided an update regarding the communications and events with Parent since the Company Board's last meeting on July 11, 2016. He noted that Parent indicated that it was unwilling to maintain the $64.00 per Share offer price if it did not receive the deal protections it had requested, particularly the execution of support agreements by not just the J.W. Childs Support Stockholders but also the Berkshire Funds and Carlsen Stockholders. Mr. Suttin summarized the M&A Committee's concerns about the strict deal protection provisions Parent had demanded in the proposed transaction. A representative from Ropes & Gray summarized the terms of the proposed merger agreement circulated to Parent earlier in the day. Ropes & Gray also advised the Company Board regarding its fiduciary duties as the Company Board considered the deal protection measures and other terms and conditions Parent had requested in the definitive merger agreement.

        On July 27, 2016, Parent delivered a letter to the Company informing the Company that it was unwilling to accept the deal protection provisions proposed in the revised merger agreement sent on July 24, 2016. Parent stated that it would be prepared to proceed with a potential acquisition of the Company at a price of $64.00 per Share only if (i) the merger agreement included a "no-shop" provision (with no "go-shop" provision); (ii) a match right for Parent in the event that the Company were to receive from a third party an unsolicited superior proposal for the acquisition of the Company; (iii) a termination fee payable by the Company to Parent equal to 3.0% of the fully diluted equity value of the Company, irrespective of the identity of the third party; (iv) a right in favor of the Company to terminate the merger agreement if the Company Board changed its recommendation to accept a superior proposal after offering Parent an opportunity to match the superior proposal; (v) the J.W. Childs Support Stockholders signed an irrevocable agreement requiring it to tender its shares in the tender offer; and (vi) each of the J.W. Childs Support Stockholders, the Berkshire Funds and the Carlsen Stockholders agreed to a profit sharing agreement with Parent such that, in the event that the stockholders of the Company receive in excess of $64.00 per Share (whether in relation to a superior proposal or from Parent increasing its price following execution of the merger agreement), each of the J.W. Childs Support Stockholders, the Berkshire Funds and the Carlsen Stockholders would agree to pay Parent 90% of any such excess amount.

        On July 29, 2016, the Company Board held a special telephonic meeting attended by certain members of management and representatives of Barclays and Ropes & Gray. The Company Board discussed the letter received from Parent on July 27, 2016. A representative from Ropes & Gray provided advice regarding the Company Board's fiduciary obligations to the Company's stockholders. The Company Board again considered the question of whether a third party financial sponsor would realistically be able to meet or exceed Parent's $64.00 per Share offer price. The Company Board

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concluded, taking into account a preliminary valuation analysis presented by Barclays to the Company Board on June 1, 2016 and following discussion among the Company Board members, that it was not likely that a financial sponsor would match or exceed Parent's offer. The Company Board again considered whether a third party strategic buyer could be expected to make an offer that was more favorable to the Company's stockholders, taking into account the significant premium Parent's offer provides the Company's stockholders and the deal certainty of a potential transaction with Parent attributable to the minimal regulatory approvals required by such a transaction. The Company Board concluded that such an offer would not be likely. On this basis, the Company Board authorized the M&A Committee to continue to negotiate the transaction terms with Parent. The Company Board also approved revised five-year projections of the Company's expected future financial performance, which the Company's management had prepared to reflect additional information concerning the Company's performance and strategic plan, and which the Company Board authorized Barclays to use in connection with its analysis of a potential transaction with Parent.

        Between July 30, 2016 and August 5, 2016, the Company, Parent and their respective representatives continued to negotiate the various terms of the merger agreement and the support agreements and to negotiate the Company's disclosure letter. Parent and its representatives also continued to submit diligence requests, to which the Company responded. Additionally, each of the J.W. Childs Support Stockholders, the Berkshire Funds and the Carlsen Stockholders, as well as their respective representatives, negotiated the terms of the support agreements with Parent.

        On August 5, 2016, the Company Board held a telephonic meeting attended by all of the members of the Company Board, certain members of management and representatives from Barclays and Ropes & Gray. Mr. Suttin updated the Company Board on the interactions with Parent following the meeting of the Company Board on July 29, 2016, and a representative from Ropes & Gray summarized the terms of the proposed merger agreement. The Company Board considered the reasons for the Company to enter into the proposed merger agreement with Parent, including both reasons in favor of proceeding with the transaction and reasons against proceeding with the transaction. As they discussed the reasons in favor of and against proceeding with the transaction, the Company Board again considered the deal protections being required by Parent. The Company Board concluded, taking into account the valuation analysis in the materials circulated by Barclays prior to the meeting, and based upon the experience and market knowledge of the directors serving on the Company Board, that it was not likely that a financial sponsor would be willing to pay in excess of the $64.00 per Share purchase price offered by Parent. The Company Board noted that Party A's offer of $51.00 was consistent with the valuation analysis circulated by Barclays related to what a financial sponsor would be willing to pay per Share. The Company Board concluded, based upon the industry experience and market knowledge of the Company Board members and input from the Barclays team, that it was not likely that a strategic acquirer would be willing to make an acquisition proposal that would provide the Company's stockholders with consideration equal to or in excess of the consideration offered by Parent, or that would be able to offer a transaction certainty profile comparable to that of the offer from Parent, taking into account likely antitrust clearance risk and financing risk. In this regard, the Company Board further considered the fact that it was known to the market that financial investors held a majority of the Company's common stock, and therefore if another strategic acquirer was interested in proposing to acquire the Company, it would have likely already expressed interest in doing so or would present its interest after the announcement of the transaction. The Company Board considered the "pay-over" provisions of the support agreements required by Parent, pursuant to which the J.W. Childs Support Stockholders, the Berkshire Funds and the Carlsen Stockholders would, in certain circumstances, pay over to Parent 90% of any profit in excess of $64.00 per Share that they earned in the event that the stockholders of the Company receive in excess of $64.00 per Share (whether in relation to a superior proposal or from Parent exercising its match rights). The Company Board concluded, taking into account financial analyses performed by Barclays at the request of the Company Board that demonstrated that the return advantage these provisions offered to Parent was relatively modest, in

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particular compared to the return advantage that would be enjoyed by a competing bidder which had acquired 5% of the Company's stock in the market (the maximum amount a potential interloper could acquire without public disclosure of its interest and the amount Party A informed the Company that it had acquired), at or about the then-current trading price prior to making an offer for the Company, that the "pay-over" provisions were unlikely to materially deter a potential competing bidder from making an offer to acquire the Company after the transaction was announced. The Company Board further considered the significant premium being offered by Parent and the fact that Parent had repeatedly stated it was unwilling to proceed with a transaction at that price with deal protection provisions more favorable to the Company. As such, the Company Board viewed the Parent offer as compelling. The telephonic meeting of the Company Board began before the end of the trading day and ended after the market closed.

        Representatives from Barclays then provided the Company Board a presentation regarding the fairness of the proposed $64.00 per Share purchase price. At the conclusion of their presentation, Barclays delivered to the Company Board its oral opinion, which opinion was confirmed by delivery of a written option dated August 5, 2016, that, as of such date and based upon and subject to the qualifications, limitations and assumptions set forth in the opinion, from a financial point of view, the $64.00 in cash per Share to be offered to stockholders of the Company (other than Parent and its affiliates) was fair to such stockholders.

        Thereafter, the Company Board unanimously (i) determined that the Offer, the Merger and the other Transactions were fair to, and in the best interests of, the Company and its stockholders, (ii) duly authorized and approved the execution and delivery by the Company of the Merger Agreement and the consummation by the Company of the Transactions, (iii) approved and declared advisable the Merger Agreement and the Transactions, (iv) approved the Tender and Support Agreements and the Support Agreements and (v) recommended that the Company's stockholders accept the Offer and tender their Shares into the Offer.

        On August 6, 2016, the Company and Parent executed the Merger Agreement.

Reasons for the Recommendation of the Company Board

        The Company Board considered each of the following reasons, among others, when reaching its recommendation that stockholders accept the Offer and tender their Shares to Offeror:

        Transaction Financial Terms.     The Company Board considered the relationship of the Offer Price to the historical market prices of the Company's common stock, and expectations regarding expected trading prices if the Company remained an independent company. The Company Board considered that the Offer Price of $64.00 per Share represents a premium of (a) 117.7% compared to the closing price of the Company common stock of $29.40 on August 3, 2016, (b) 103.1% compared to the volume weighted average trading price of the Company common stock of $31.52 per Share over the 30 trading days ended August 3, 2016 and (c) –1.1% compared to the 52-week high trading price of the Company common stock of $64.72 per Share on August 19, 2015. The Company Board also considered that Parent did not reduce its proposed offer of $64.00 per Share despite (x) the fact that the Company missed its quarterly sales guidance by 3.2% and its quarterly adjusted EPS guidance by 163.5% for the most recent quarter and subsequently revised its current fiscal year projections downward from net sales of $3.95 - $4.00 billion to $3.825 - $3.875 billion, same store sales growth from 4.0% - 5.5% to 1.0% - 2.0%, adjusted EBITDA from $365 - $370 million to $338 - $343 million and adjusted EPS from $2.50 - $2.60 per Share to $1.98 - $2.08 per Share in response to less favorable than expected business conditions and (y) the fact that the Company's reduced projections for the current fiscal year brought the Company's projected results below the projected results that the Company had provided to Parent in connection with the due diligence process when Parent proposed to offer $64.00 per Share. The Company Board also considered the fact that the Offer Price was Parent's "best and final" proposal,

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which represented a substantial increase from Parent's initial proposal, and which the Company Board believed was the highest per Share offer Parent would be willing to make in connection with a potential transaction.

        The Company's Operating and Financial Condition; Prospects of the Company.     The Company Board considered the Company's business, financial condition and results of operations, as well as its long-range plan. The Company Board considered, among other things, that the holders of the Shares would continue to be subject to the risks and uncertainties of the Company executing on its long-range plan if it remained independent. These risks and uncertainties included:

•

the ability to actualize the Company's business plan, especially given historical deviations from expectations;



•

the risk of failure to manage challenges posed by the Company's rapid growth over the past several years, including in particular the successful integration of the recent Sleepy's Acquisition, or unexpected difficulties during expansion, including the failure of acquired businesses to achieve expected cost or revenue synergies or other results, including with respect to, among other things, the Company's national re-branding campaign; and



•

other risks and uncertainties discussed in the Company's filings with the SEC, including the "risk factors" set forth in the Company's Annual Report on Form 10-K for the fiscal year ending February 2, 2016.

        Ability to Respond to Unsolicited Acquisition Proposals and Terminate the Merger Agreement to Accept a Superior Proposal.     The Company Board considered the provisions in the Merger Agreement that permit the Company, subject to the terms and conditions of the Merger Agreement, to provide information to, and engage in negotiations with, a third party that makes an unsolicited proposal, and, subject to payment of a termination fee and the other conditions set forth in the Merger Agreement, to enter into a transaction with a party that makes a superior proposal. In this regard, the Company Board further considered that potential acquirers with interest in acquiring the Company would become aware of the Company's proposed transaction with Parent through the media attention associated with the announcement of the transaction and, if interested in pursuing a superior proposal, would be sufficiently sophisticated to execute on that strategy.

        Termination Fee Provisions.     The Company Board considered the termination fee provisions of the Merger Agreement and determined that they likely would not be a significant deterrent to a competing offer that might be superior to the Offer Price. The Company Board believed that the termination fee of $73.2 million was a reasonable fee to be paid to Parent by the Company should a superior offer be accepted by the Company.

        Termination of Tender and Support Agreements and Support Agreements.     The Company Board considered the fact that the Tender and Support Agreements and Support Agreements automatically terminate upon a termination of the Merger Agreement in accordance with its terms, and that should a superior proposal emerge, the Company Board has the flexibility under the Merger Agreement, subject to the terms of the Merger Agreement, to terminate the Merger Agreement and accept a superior proposal. The Company Board further considered the provisions in the Tender and Support Agreements and Support Agreements that obligate the stockholders executing such agreements to pay over to Parent 90% of any incremental proceeds they receive from any higher proposal. In considering those provisions, the Company Board concluded that the potential advantage those provisions would provide Parent in competing against a potential interloper were not so great that they would be likely to deter an interested interloper from making a proposal to acquire the Company that might be superior to the Offer Price. In forming this view, the Company Board relied in part for this conclusion on an analysis prepared by Barclays, at the request of the Company Board, and presented at the meeting at which the Company Board approved the Merger Agreement.

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        Conditions to the Consummation of the Offer and the Merger; Likelihood of Closing.     The Company Board considered the conditions to the Offer and the Merger reasonable and the consummation of the Transactions contemplated by the Merger Agreement probable. In particular, the Company Board considered that the consummation of the Transactions is not subject to a financing condition and that the lack of any competing business of Parent in the United States made approval by relevant competition authorities likely to occur. The Company Board also assessed Parent's resources and access to financing sources to fund the consideration contemplated by the Merger Agreement, including Parent's investment grade credit rating and "certain funds" financing package. The Company Board also considered the fact that the parties elected to have the Merger Agreement governed by Section 251(h) of the DGCL, which, subject to certain statutory provisions, permits completion of the Merger upon the acquisition by Purchaser of one Share more than 50% of the number of Shares then issued and outstanding.

        Potential Alternative Acquirers.     The Company Board considered the fact that it had not approached other potential acquirers to inquire whether any third party would have interest in acquiring the Company on terms more favorable than those proposed by Parent prior to the execution of the Merger Agreement and that after the Merger Agreement was executed, the non-solicitation provision in the Merger Agreement would prevent it from doing so. In this regard, the Company Board considered, in consultation with Barclays and the benefit of the investor and industry expertise of the Company Board members, (a) that the price per Share offered by Parent was in excess of the amount that any financial sponsor would likely be willing to pay for the Company based on customary financial sponsor models prepared and analyzed by Barclays, as more fully described below under the heading "Opinion of the Financial Advisor to the Company Board", and return requirements of financial sponsors and (b) that a strategic buyer prepared to offer the Company a price in excess of the Offer Price and provide the Company the degree of certainty offered by Parent's antitrust profile and certain funds financing package was unlikely. The Company Board further considered the fact that it was known to the market that financial investors held a majority of the Company's common stock with a basis substantially below the Offer Price. Therefore, the Company Board viewed it likely that if another strategic acquirer was interested in acquiring the Company, it would have already expressed interest in doing so.

        Relationship of Offer Price to Deal Protections.     The Company Board considered the negotiations with Parent and the Company's efforts to negotiate more favorable deal protection from Parent, including that Parent had indicated in connection with its initial proposal of $64.00 per Share that Parent's proposed price was contingent upon the Company Board being unable to terminate the Merger for any reason. The Company Board further considered the fact that Parent's initial draft merger agreement contemplated a transaction structure that would effectively preclude any other potential acquirer from coming forward with an alternative proposal that may be superior to the proposal from Parent. However, the final Merger Agreement, following negotiations with Parent, permits a realistic opportunity for an interloper with interest in acquiring the Company to express such interest. The Company Board further considered that it was clear to the Company's representatives negotiating the transaction terms with Parent that it would not accept different deal protections than those reflected in the Merger Agreement at its $64.00 per Share Offer Price.

        Type of Consideration.     The Company Board considered that cash consideration will be paid to the Company's stockholders, which will provide liquidity and certainty of value to stockholders, while eliminating long-term business and execution risk.

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        Opinion of the Company's Financial Advisors.     The Company Board considered that Barclays provided an oral opinion to the Company Board (subsequently confirmed in writing by delivery of Barclays' written opinion dated August 5, 2016) to the effect that, as of August 5, 2016 and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, from a financial point of view, the consideration to be offered to the stockholders of the Company (other than Parent and its affiliates) is fair to such stockholders. See "Opinion of the Financial Advisor to the Company Board."

        Ability of Stockholders to Determine Whether to Tender.     The Company Board considered the fact that the Offer is structured as a tender offer, which can be completed, and the Offer Price can be delivered to stockholders of the Company, on a prompt basis and at such stockholders' election, thereby reducing the period of uncertainty during the pendency of the transactions contemplated by the Merger Agreement on stockholders and employees. Furthermore, the Company Board considered that the Offer would be followed by a second-step merger in which stockholders who do not tender their Shares in the Offer will receive the same cash price payable for the Shares in the Offer.

        Appraisal Rights.     The Company Board considered the availability of statutory appraisal rights to the Company's stockholders who do not tender their Shares in the Offer and otherwise comply with all required procedures for demanding appraisal under the DGCL.

        The Company Board also considered a number of uncertainties and risks in their deliberations concerning the transactions contemplated by the Merger Agreement, including the following:

        Risks to Achievement of Projections.     Although the Offer Price is on the low end of the discounted cash flow analysis prepared by Barclays, which indicated an implied price per Share range of $63.33 to $80.88 per Share, the Company Board considered the risks associated with the achievement of the projections that formed the basis for the discounted cash flow analysis and the uncertainties associated with any projection of future results, including that the Company has consistently failed to achieve management's projections, including most recently in the Company's most recently completed fiscal quarter.

        Transaction Process.     The Company Board considered the fact that the Company did not solicit inquiries from third parties concerning potential interest in acquiring the Company before entering into the Merger Agreement, as well as the fact that the Merger Agreement imposes restrictions on the Company's ability to solicit competing acquisition proposals.

        Restrictions; Termination Fee.     The Company Board considered the restrictions that the Merger Agreement would impose on the Company against actively soliciting competing bids. Those restrictions, which were included due to Parent's unwillingness to proceed with its offer of $64.00 per Share without them, included a termination fee of $73.2 million and an obligation by the Carlsen Stockholders, the J.W. Childs Support Stockholders and the Berkshire Funds to pay over to Parent 90% of any incremental proceeds those stockholders receive, in certain circumstances, in connection with a superior proposal. The Company Board considered the potential effect of those restrictions in deterring other potential bidders from proposing alternative transactions.

        Failure to Close.     The Board considered that Parent's, HoldCo's and Offeror's obligations to consummate the Offer and the Merger were subject to conditions, and the possibility that such conditions may not be satisfied, including as a result of events outside of the Company's control, such as stockholders of the Company failing to tender a number of Shares equal to one Share more than 50% of the number of Shares then issued and outstanding, or a governmental authority issuing an injunction that would prohibit the consummation of the Offer or the Merger. The Company Board also considered the fact that, if the Merger was not completed, the market's perception of the Company's continuing business could potentially result in an adverse impact on the Company's business and the

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trading price of the Company's common stock. The Company Board also considered the fact that, if the Merger was not consummated, the Company's directors, officers and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the pendency of the transaction, and the Company will have incurred significant transaction costs, attempting to consummate the transaction.

        Pre-Closing Covenants.     The Company Board considered that, under the terms of the Merger Agreement, the Company agreed that it will carry on its business in the ordinary course consistent with past practice and, subject to specified exceptions, will not take a number of actions related to the conduct of its business without the written consent of Parent and HoldCo. The Company Board further considered that these terms of the Merger Agreement may limit the Company's ability to pursue business opportunities that it might otherwise pursue.

        No Future Stockholder Participation in Future Earnings or Growth of the Company as an Independent Company.     The Company Board considered the fact that, following the consummation of the Merger, the Company will no longer operate as an independent public company, and former stockholders of the Company will not have the opportunity to participate in its future earnings growth and future profits as an independent company.

        Potential Conflicts of Interest.     The Company Board was aware that its financial advisor had previously advised, and continued to advise, Parent on unrelated matters, and considered the potential conflicts of interest that may exist as a result of those engagements, ultimately concluding that the benefit to the Company of Barclays' familiarity with the Company, industry expertise and professionals outweighed the risks that a conflict of interest would undermine their advice.

        The Company Board believed that, overall, the potential benefits of the Merger to the Company's stockholders outweighed the risks, and that the Merger Agreement represented the most attractive alternative for stockholders of the Company. In analyzing the Merger, the Company Board and the Company's management were assisted and advised by legal counsel and financial advisors.

        The foregoing discussion of factors considered by the Company Board is not intended to be exhaustive, but summarizes the material factors considered by the Company Board. In light of the variety of factors considered in connection with its evaluation of the Merger, the Company Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Moreover, each member of the Company Board applied his own personal business judgment to the process and may have given different weight to different factors. The Company Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support their ultimate determination.

(c)   Intent to Tender.

        To the best of the Company's knowledge, after reasonable inquiry, each executive officer and director of the Company who owns Shares presently intends to tender in the Offer all Shares that he or she owns of record or beneficially. The foregoing does not include any Shares over which, or with respect to which, any such executive officer, director or affiliate acts in a fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender.

(d)   Opinion of the Financial Advisor to the Company Board

Opinion of Barclays Capital Inc.

        The Company engaged Barclays to act as its financial advisor with respect to pursuing strategic alternatives for the Company, including a possible sale of the Company. On August 5, 2016, Barclays

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rendered its oral opinion (which was subsequently confirmed in writing later that same day) to the Company Board that, as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, from a financial point of view, the consideration to be offered to the stockholders of the Company (other than Parent and its affiliates) in the proposed transaction is fair to such stockholders.

         The full text of Barclays' written opinion, dated as of August 5, 2016, is attached hereto as Annex A . Barclays' written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays' opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.

        Barclays' opinion, the issuance of which was approved by Barclays' Valuation and Fairness Opinion Committee, is addressed to the Company Board, addresses only the fairness, from a financial point of view, of the consideration to be offered to the stockholders of the Company (other than Parent and its affiliates) and does not constitute a recommendation to any stockholder of the Company as to whether or not such stockholder should tender their Shares pursuant to the offer or how such stockholder should vote or otherwise act with respect to the proposed transaction. The terms of the proposed transaction were determined through arm's-length negotiations between the Company and Parent and were unanimously approved by the Company Board. Barclays did not recommend any specific form of consideration to the Company or that any specific form of consideration constituted the only appropriate consideration for the proposed transaction. Barclays was not requested to address, and its opinion does not in any manner address, the Company's underlying business decision to proceed with or effect the proposed transaction. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any class of persons, relative to the consideration to be offered to the stockholders of the Company in the proposed transaction. No limitations were imposed by the Company Board upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.

        In arriving at its opinion, Barclays, among other things:

•

reviewed and analyzed a draft of the merger agreement, dated as of August 5, 2016, and the specific terms of the proposed transaction;



•

reviewed and analyzed a draft of the tender and support agreements, dated of as August 5, 2016, pursuant to which certain stockholders of the Company agreed to, among other things, (x) in certain instances pay to Parent the Profit (as defined in the support agreements) in respect of a sale of Shares that resulted in proceeds in excess of $64.00 per Share and (y) in the case of some such stockholders, tender their Shares into the offer;



•

reviewed and analyzed publicly available information concerning the Company that Barclays believed to be relevant to its analysis, including the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2016 and Quarterly Report on Form 10-Q for the fiscal quarter ended May 3, 2016;



•

reviewed and analyzed financial and operating information with respect to the business, operations and prospects of the Company furnished to Barclays by the Company, including financial projections prepared by the Company's management—See "Certain Company Management Projections";



•

reviewed and analyzed a trading history of the Shares from August 3, 2013 through August 3, 2016;

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•

reviewed and analyzed a comparison of the historical financial results and present financial condition of the Company with those of other companies that Barclays deemed relevant;



•

reviewed and analyzed a comparison of the financial terms of the proposed transaction with the financial terms of certain other transactions that Barclays deemed relevant;



•

reviewed and analyzed published estimates of independent research analysts with respect to the future financial performance of the Company;



•

had discussions with the management of the Company concerning its business, operations, assets, liabilities, financial condition and prospects; and



•

undertook such other studies, analyses and investigations as Barclays deemed appropriate.

        In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information. Barclays also relied upon the assurances of management of the Company that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of the Company, upon advice of the Company, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the Company's future financial performance and that the Company would perform in accordance with such projections. In arriving at its opinion, Barclays assumed no responsibility for and expressed no view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of the Company and did not make or obtain any evaluations or appraisals of the assets or liabilities of the Company. In addition, Barclays was not authorized by the Company to solicit, and did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of the Company's business. Barclays' opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, August 5, 2016. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after August 5, 2016.

        In connection with rendering its opinion, Barclays performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the Shares but rather made its determination as to fairness, from a financial point of view, to the Company's stockholders (other than Parent and its affiliates) of the consideration to be offered to such stockholders in the proposed transaction on the basis of various financial and comparative analyses, taken as a whole. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.

        In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.

        The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the Company Board. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. In performing its analyses, Barclays made numerous

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assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the proposed transaction. None of the Company, Parent, HoldCo, the Offeror, Barclays or any other person assumes responsibility if future results are materially different from those discussed herein. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the businesses do not purport to be appraisals or reflect the prices at which the businesses may actually be sold.

Selected Public Company Trading Analysis

        In order to assess how the public market values shares of similar publicly traded companies, Barclays reviewed and compared specific financial and operating data relating to the Company with the selected companies listed in this section because their business and operating profiles are reasonably similar to those of the Company. Barclays also included the Company in its selected public company trading analysis. The selected public companies were of two types—Mattress Companies and Best-in-Class/High Growth Specialty Retail Companies, or BIC/HGSR Companies:

Mattress Companies :
Sleep Country Canada
Tempur Sealy
Select Comfort

BIC/HGSR Companies :
O'Reilly Auto Parts
Tractor Supply Co.
Tile Shop Holdings
CarMax
Restoration Hardware
The Container Store
Williams-Sonoma

        Barclays calculated and compared various financial multiples and ratios of the Company and the selected public companies. As part of its selected public companies trading analysis, Barclays calculated and analyzed each company's ratio of its current stock price to its projected earnings per share (commonly referred to as a price earnings ratio, or P/E), and each company's enterprise value, or EV, to estimated earnings before interest, taxes, depreciation and amortization, adjusted to exclude extraordinary and non-recurring items, or EBITDA. The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its diluted common equity, the value of any preferred stock (at liquidation value) and the book value of any minority interest, and subtracting its cash and cash equivalents. All of these calculations were performed, and

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based on publicly available financial data (including FactSet) and closing prices, as of August 3, 2016. The results of this selected public companies analysis are summarized below: