EXHIBIT 10.39

9/25/2006

 

[Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission.]

 

MASTER AGREEMENT

 

THIS MASTER AGREEMENT, made and entered into this, by and between SELECT COMFORT
CORPORATION, a corporation organized and existing under the laws of the state of
Minnesota, hereinafter referred to as “Buyer” and XXXXXXXX, organized under the
laws of XXXXXXXX, hereinafter referred to as “Seller”.

 

[Portions of this recital have been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with this recital intact has been filed
separately with the Securities and Exchange Commission.]

 

WINTNESS:

 

WHEREAS, Buyer is a user of the goods hereinafter described and desires to
establish a formal relationship for the purchase from Seller of such goods; and

 

WHEREAS, Seller is the manufacturer and supplier of such goods and is willing to
provide and sell them to Buyer, all upon the terms and conditions hereinafter
stated.

 

NOW, THEREFORE, in consideration of the mutual promises and covenants herein set
forth, the parties hereby agree as follows:

 

ARTICLE 1.

DEFINITIONS

 

For purposes of this Agreement, the following terms, word and phrases, where
written with an initial capital letter, shall have the following meanings:

 

1.1

“Products” shall mean the air chambers manufactured by Seller according to the
Master Specification Exhibit III attached;

 

1.2

“Improvements” shall mean modifications and/or enhancements to the design of
products owned by Buyer, developed by either party during the term of this
Agreement as per the Master Specification Exhibit III attached.

 

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ARTICLE 2.

SUPPLY AND PURCHASE

 

During the term of this Agreement, Buyer agrees to purchase from Seller, and
Seller agrees to supply to Buyer, at the prices determined in accordance
herewith, and subject to the terms and conditions hereinafter set forth, the
annual minimum volumes of Products set forth in Exhibit IV as defined by Exhibit
III, Master Specification attached hereto from Seller

 

2.1

Seller agrees that all air chamber “Products”, as specified in Exhibit III,
shall be delivered exclusively to Buyer or a company designated by the Buyer.
All inquiries that Seller receives on a worldwide basis relative to Buyer’s air
chamber “Products” as specified in Exhibit III, shall be directed to Buyer.

 

ARTICLE 3.

ORDERS, DELIVERY AND MODIFICATION OF PRODUCTS

 

3.1

Purchase Orders. Buyer shall submit purchase orders for the Products a minimum
of 14 days prior to the requested delivery date. The delivery date is the date
the order is expected to leave the factory en-route to the FOB point. Seller
shall advise within 2 business days of receipt of the order if they are unable
to fulfill the order as requested. All purchase orders shall be mutually
executed in accordance with the terms and conditions of this Agreement and at
the prices established herein.

 

3.2

Delivery of Products. Seller shall deliver the Products within the times
specified on the individual purchase orders, in the quantities specified on the
individual purchase orders and at the prices specified herein, all in accordance
with Buyer’s instructions and Master Specifications (Exhibit III). Buyer
reserves the right to adjust the mix of the product with a minimum of 14 days
notice from the requested delivery date.

 

3.3

Stock outs:      Buyer shall reserve the right to assert claims for actual costs
incurred due to the Seller’s failure to deliver the product against a confirmed
purchase order on the confirmed ship date. All claims shall be submitted in
writing to the Seller and accompanied with supporting documentation. Seller may
reserve the right to have the claim audited by an independent 3rd party. This
claim shall include, but not be limited to, the following costs: expedited
freight, in-bound and out-bound, sales lost due to Buyer’s inability to meet the
7-10 day delivery commitment to our Customers, or any additional handling or
overtime costs incurred as a result of the late delivery.

 

3.4

Shipping Terms. The initial shipping term for Products delivered by Seller to
Buyer pursuant to this agreement shall be the shipping term set forth in Exhibit
I. Such shipping term may be changed by the parties upon mutual agreement in

 

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writing at any time during the term of this agreement. The shipping terms
stipulated by the Parties shall be interpreted in accordance with the terms of
the Incoterm 2000 defined by the International Chamber of Commerce. In the event
of a change in the shipping term, the parties shall adjust the prices for
Products set forth in Exhibit I to reflect the changed shipping term.

 

3.5

Packaging and shipping will be done according to the Master Specification
(Exhibit III) and Buyers instructions that will be in conformity with the other
paragraphs of the Agreement.

 

ARTICLE 4.

QUALITY OF PRODUCTS

 

The quality of all Products delivered by Seller shall be in accordance with the
Quality Requirements and Acceptance Criteria, Exhibit II.

 

ARTICLE 5.

COOPERATION

 

The parties agree to cooperate in value engineering and product development
efforts relating to quality improvement and cost reduction of the Products. Such
efforts shall take the form and extent as mutually agreed to by the parties in
writing. A cost sharing formula for any savings achieved by these efforts shall
be mutually determined and the unit pricing established under Exhibit I shall be
revised accordingly to reflect such savings. It is Buyer’s expectation that the
Seller take a lead role in investigating and presenting new material and process
improvements in the air chamber technology.

 

ARTICLE 6.

PRICES AND PAYMENT

 

Prices and Adjustments. The pricing to be paid by the Buyer for the Products
purchased hereunder shall be the prices set forth in Exhibit I attached hereto.
In addition to any changes to such prices pursuant to Paragraph 3.4, such prices
may be subject to adjustments as agreed to by the parities. A minimum of 60 days
written notice is required prior to the effective date of the requested price
adjustment. The adjusted price shall be guaranteed for a minimum of 6 (six)
months from the effective date of the price adjustment. Such adjusted prices
shall be substituted for the prices set forth in Exhibit I, and a new Exhibit I,
as so modified shall be attached to this Agreement.

 

6.1

Payment Terms. Payment for delivered Products shall be made via a wire transfer
by Buyer in United States Dollars thirty (30) days from the date of the Bill of
Lading for Products ordered and delivered. Such payment terms may be changed by
the parties upon mutual agreement in writing at any time during the term of this
agreement.

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6.2

Late Payments. If the Buyer is in delay of payment to the Seller, Seller
reserves the right to assert a claim to the buyer for interest incurred at the
rate of 0.05% per day for each day payment is delayed beyond the original due
date of the invoice.

 

6.2.1

In the event that payment is delayed beyond 30 days from the original due date
of the invoice, Supplier reserves the right to withhold confirmed shipments to
the Buyer until payment for outstanding invoices is received by the Seller.

 

ARTICLE 7.

TAXES

Except as otherwise provided in this Agreement Seller shall be responsible for
and shall pay any and all (a) export duties, (b) gross receipt, income and
pre-sale taxes and (c) other governmental charges which relate to the
production, delivery and sale of the Products, as such are now or may hereafter
be imposed under or by any state, local or municipal governmental authority or
agency in the XXXXXXXX. Seller shall not be responsible and shall not pay any
taxes or charges as outlined in above levied after delivery to Buyer.

 

[A portion of this Article has been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with this Article intact has been filed
separately with the Securities and Exchange Commission.]

 

ARTICLE 8.

ACCEPTANCE AND WARRANTY

 

8.

Buyer shall accept all Product that meets the Select Comforts Air Chamber,
Rubber/Cotton Vulcanized, Test and Inspection Specification SP-004, conducted at
the Seller site prior to shipment to Buyer. Buyer may forego inspection at the
point of receipt or in-coming and/or in-process quality acceptance tests at the
time the products are being prepared for shipment to Buyer’s customers at its
principal place(s) of business in Minneapolis, Minnesota; Irmo, South Carolina;
and, Salt Lake City, Utah. Buyer and Seller shall agree to a quality discount
percentage that will be applied to invoices at the time the Product ships from
the Seller to Buyer. This quality discount
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXX. The
quality discount will be reviewed at least every XXXXXX and adjusted based on
the last XXXXXX activity. A review of the quality discount will be warranted
prior to XXXXXX in the event the quality discount average varies more than
XXXXXX from the established quality discount over any XXXXXX period. In the
event of a change in the quality discount, Exhibit II will be updated to reflect
the revised quality discount.

 

[A portion of this Article has been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with this Article intact has been filed
separately with the Securities and Exchange Commission.]

 

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8.1.1.

Seller warrants to the Buyer from the date of delivery of the Products to the
Buyer in accordance with Section 3.2 of this Agreement that all Products sold
hereunder shall (i) be free from any defects in material or workmanship and be
of good and merchantable quality, (ii) conform to Buyer’s specifications to any
sample or prototype approved by Buyer and (iii) comply and have been produced,
processed and delivered in conformity with Article 4 herein for the period
defined in the warranty schedule contained in Exhibit II, Quality Requirements
and Acceptance.

 

 

8.1.2.

The foregoing warranties shall survive inspection of, delivery of and payment
for the Products and shall run in favor of Buyer and its customers. If Seller
breaches any of the foregoing warranties during the term of the warranty period
specified in Exhibit II, or if Seller fails to perform or comply with any
provision of this Agreement, Seller shall be liable to Buyer for any and all
costs, expenses (including reasonable attorneys’ fees, court costs and
litigation expenses) and damages arising therefrom.

 

ARTICLE 9.

PROPRIETARY RIGHTS

 

9.1

Buyer retains all proprietary rights in and to all designs of the air chambers,
as specified in the Master Specification, Exhibit III. The Seller agrees to
continuously undertake efforts concerning the quality improvements of the
Products taking into consideration the market requirements and the economical
production.

 

9.2

The Seller agrees to continue to make process and development improvements to
the product according to special requests made by Buyer. Such improvements are
made for consideration on basis of mutual written agreements of the parties. The
costs of these development activities are to be borne as agreed upon in writing
by both parties prior to the actual development activities.

 

9.3

Seller retains all proprietary rights in and to all engineering details and
other data pertaining to its manufacturing technology and processes.

 

ARTICLE 10.

TRADEMARKS

 

Nothing contained in the Agreement will be deemed to grant either party any
right or interest in the trademarks, trade name, service marks, proprietary
words, or symbols which the other may have adopted or used at any time in the
course of its business.

 

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ARTICLE 11.

CONFIDENTIALITY

 

Each party agrees that all information disclosed to it or any of its affiliates
by other, whether verbally or in writing, shall be presumed to be proprietary
and confidential to such party, unless otherwise stated in writing. Each party
shall prevent the disclosure of any such proprietary information in strictest
confidence absent service of compulsory process. Each party shall not during the
term of this Agreement or thereafter, use any such proprietary information for
any purpose other than as specifically set forth in the Agreement.

 

ARTICLE 12.

COMPETITIVE ACTIVITIES

 

During the term of this Agreement, Seller will not participate in the management
or operations of any enterprise engaged in activities in competition with the
business of Buyer.

 

ARTICLE 13.

TERM AND TERMINATION

 

13.1

Term of Agreement. This agreement shall take effect as of the date hereof and
shall continue in full force and effect for a period of (5) years and thereafter
shall be automatically renewed for successive terms of (1) one year each. Either
party may provide written notice to the other party at least 365 days prior to
the expiration of the initial term or any renewal term of its desire not to
renew this Agreement upon the expiration of the relevant term.

 

13.2

Termination. This Agreement may be terminated only in accordance with the
following provisions:

 

 

13.2.1

This Agreement may be terminated at any time upon the mutual written consent of
the parties hereto;

 

 

13.2.2

Either party hereto may terminate this Agreement by giving notice in writing to
the other party in the event that the other party is in material breach of this
Agreement and shall have failed to cure such breach within (30) thirty days of
receipt of written notice thereof from the first party specifying the nature of
the breach; or

 

 

13.2.3

Either party hereto may terminate this Agreement at any time by giving notice in
writing to the other party, if (1) the other party at any time (i) file or have
filed against it a petition of any type as to its bankruptcy, (ii) be adjudged
bankrupt or insolvent, (iii) make and assignment for the benefit of its
creditors, or (iv) go into liquidation receivership; (2) a trustee, receiver or
other equivalent officer is appointed for the other party by any

 

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court or governmental authority or any third party to administrator or
liquidate, who is not dismissed within (60) sixty days of the date of
appointment; or (3) dissolution proceedings are commenced by or against the
other party, which are not dismissed within (60) sixty days of commencement.

 

 

13.2.4

This Agreement may be terminated by Buyer or Seller with a minimum of (365)
three hundred sixty five days written notice if either party discontinues using
the Products in its business.

 

 

13.2.5

This Agreement may be terminated by the Buyer with immediate effect upon the
Buyer providing the Seller with notice of such termination in the event of any
of the following:

 

a)          The Seller fails to meet the quality standards specified in Exhibit
II in any material respect for a period of at least 90 consecutive days. The
termination right pursuant to this Section 13.2.5(a) shall be exercised as
follows. If at any time during the term of this Agreement the Buyer becomes
aware of a material failure of the quality standards as specified in Exhibit II,
it shall immediately notify the Seller in writing, clearly specifying the
failure of quality standards and providing a 90-day period to the Seller for
remedy. For the avoidance of any doubt, it is agreed that Exhibit II shall
specify which quality failures are considered material. Upon receipt of such
written notice from the Buyer, the 90-day period for remedy and improvement in
quality commences. If the Seller fails to comply in a material respect with the
quality standards specified in Exhibit II within that 90-day period, the Buyer
is entitled to serve termination notice pursuant to this Section 13.2.5 upon the
lapse of the period;

b)          The Seller repeatedly and for a period of at least 60 consecutive
days fails to meet the delivery requirements specified in Section 3.2 (and
Exhibit III respectively). The termination right pursuant to this Section
13.2.5(b) shall be exercised as follows. If at any time during the term of this
Agreement the Buyer becomes aware of a failure of the Seller to meet the
respective delivery requirements pursuant to Section 3.2 (and Exhibit III
respectively), it shall immediately notify the Seller in writing, clearly
specifying the failure of the Seller to meet the delivery requirements and
providing a 60-day period to the Seller for remedy. Upon receipt of such written
notice from the Buyer, the 60-day period for remedy and improvement in delivery
commences. If the Seller fails to meet the delivery requirements specified in
Section 3.2 (and Exhibit III respectively) with respect to the supplies provided
to the Buyer within that 60-day period, the Buyer is entitled to serve
termination notice pursuant to this Section 13.2.5 upon the lapse of the period.

 

13.2.6

Upon the lapse of three (3) years from the date of conclusion of this Agreement,
this Agreement may be terminated by the Buyer with a

 

 

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minimum of (365) three hundred and sixty-five days’ written notice in the event
that the Seller ceases to be cost competitive. The termination right pursuant to
this Section 13.2.6 can be exercised as follows:

a) If the Buyer obtains at least two (2) legally binding offers from third
parties, which are not parties related to the Buyer, offering to supply products
(i) identical to the products offered by the Seller; and (ii) under at least
equal terms with regard to quality, delivery and volume of supplies for the
delivery of the products; and (iii) with at least an equal volume of supplies as
anticipated and agreed in Exhibit IV until the end of this Agreement, and (iv)
for prices that are at least 10% lower than the prices provided by the Seller.
The Buyer shall notify the Seller of any such competitive offers. Upon receipt
of such written notice from the Buyer, the Seller shall have a period of 90-days
in which to respond with a competitive offer. If the Seller fails to provide or
is unable to provide such an offer deemed to be competitive by the Buyer as per
the conditions described in this Section 13.2.6.a, the termination right
pursuant to Section 13.2.6 may be excercised by the Buyer.

b) It is agreed that the termination notice must contain copies of the offers
stipulated in Section 13.2.6.

 

13.2.7

This Agreement may be terminated by the Buyer or Seller with a minimum of (365)
three hundred and sixty-five days’ written notice in the event that (i) there is
a Change of Control of the Seller or Buyer, and (ii) such Change of Control has
Negative Consequence on the respective business of the Buyer or Seller.

 

a) For the purposes of this Section, the term “Change of Control” means the
acquisition by any person or entity or group of affiliated persons or entities
of more than twenty-five percent (25%) of the voting rights in the Seller or
Buyer respectively. For the purposes of this Section, the term “Negative
Consequence” means a situation in which the Change of Control may result in (i)
a substantial deterioration in the financial ability of the Seller or Buyer to
meet the terms of this Agreement, or (ii) a direct competitor of the Buyer (in
the case of a Change of Control of the Seller) becoming an owner or person
exercising voting rights in the Seller.

b) Upon the occurrence of a Change of Control, the Seller or Buyer respectively
are obliged to notify the other party in writing about the Change of Control,
providing, in particular, the details on the person or legal entity taking
control within the meaning of a Change of Control. If the Buyer or Seller does
not use its right to terminate the Agreement within the period of 30 days after
the notification of the Change of Control, the right to terminate on the basis
of the notified Change of Control expires. For the avoidance of any doubt, the
termination right pursuant to

 

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this Section 13.2.7 does not arise if the Change of Control is a result of the
internal restructuring of the group of the Seller or Buyer respectively.

c) It is agreed that before the Seller or Buyer exercise the right to terminate
pursuant to this Section 13.2.7, the parties will exert their best efforts to
explain and potentially remedy the potential Negative Consequences which the
Change of Control may have on this Agreement.

d) In any event this Agreement can be terminated by Seller of Buyer, with
immediate effect upon the Buyer providing the Seller with notice of such
termination in the event that the person or legal entity which acquires any
share of the voting rights in the Seller or Buyer respectively, is resident in
the countries which are listed on the list of US government of the countries
[with which the trading is restricted].

 

13.3

Rights and Obligations on Termination. In the event of the termination of this
agreement, the parties hereto shall have the following rights and obligations:

 

 

13.3.1

The obligations of Seller and Buyer under the terms of Sections 4, 7, 8, 9, 10
and 11 hereof shall survive the termination of this Agreement.

 

 

13.3.2

Within (20) twenty days after the termination of this Agreement, each party
shall either return to the other any and all proprietary or provide a written
certification of destruction of such confidential information in its possession
or under its control.

 

 

13.3.3

Termination or expiration of this Agreement shall not release either party from
the obligation to make payment to the other party of all amounts then and
thereafter due payable under this Agreement within (30) thirty days of
termination.

 

ARTICLE 14.

FORCE MAJEURE

 

14.1

Definition. Force Majeure shall mean any event or condition, not existing as of
the date of signature of this Agreement, not reasonably foreseeable as of such
date and not reasonably within the control of either party, which prevents in
whole or in material part the performance of such obligations so difficult or
costly as to make such performance commercially unreasonable. Without limiting
the foregoing, the following shall constitute events or conditions of Force
Majeure: acts of State or, governmental action, riots, disturbance, war,
strikes, lockouts, slowdowns, prolonged shortage of energy supplies, epidemics,
fire, flood, hurricane, typhoon, earthquake, lightning and explosion.

 

14.2

Notice. Upon giving notice to the other party, a party affected by an event of
Force Majeure shall be released without any liability on its part from the
performance of its obligations under this Agreement, except for the obligation
to

 

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pay any amounts due and owing hereunder, but only to the extent and only for the
period that its performance of such obligations is prevented by the event of
Force Majeure. Such notice shall include a description of the nature of the
event of Force Majeure, its cause and possible consequences. The party claiming
Force Majeure shall promptly notify the other party to the terminations of such
event.

 

14.3

Suspension of Performance. During the period that the performance by one of the
parties of its obligations under this Agreement has been suspended by reason of
an event of Force Majeure, the other party may likewise suspend the performance
of all or part of its obligations hereunder.

 

ARTICLE 15.

DISPUTES AND GOVERNING LAW

 

15.1

Disputes. The parties hereto shall submit any disputes arising under this
Agreement to arbitration. Such arbitration proceedings shall be conducted in
English and shall be carried on in the city of Vienna, Austria or any other
place mutually agreeable to the Parties, under the UNCITRAL Arbitration Rules.
Judgement upon the award rendered by the arbitrator in favor of the prevailing
party, which shall include an award for the payment of costs, attorneys’ fees
and expenses of the arbitration proceedings, may be entered in any court of
competent jurisdiction and assets may be attached in any country in the world
pursuant to such judgement.

 

ARTICLE 16.

GENERAL TERMS AND CONDITIONS

 

16.1

Relationship. This Agreement does not make either party hereto the employee,
agent or legal representative of the other party for any purpose whatsoever.
Neither party hereto is granted any right or authority to assume or to create
any obligation or responsibility, expressed or implied, on behalf of or in the
name of the other party. In fulfilling its obligations pursuant to the
Agreement, each party hereto shall act as an independent contractor.

 

16.2

Assignment. Each party shall not assign or otherwise transfer any of its rights
or obligations under this Agreement without the prior written consent of the
other party. This Agreement and the rights and obligation arising hereunder
shall not be affected by any change in the corporate structure of ownership of
the parties.

 

16.3

Notices. All notices permitted or required to be given hereunder shall be
delivered personally or sent by telecopy or registered or certified air mail,
postage prepaid, return receipt requested, addressed to the addresses of the
parties hereto as set forth above or to such other addresses as the given
parties may designate by like notice from time to time. Notices so given shall
be effective (a) upon the date of personal delivery, (b) if sent by telecopy,
concurrently with the transmission thereof if the sender’s machine produces a
transmission report without notice of a

 

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communication fault, (c) on the (3rd) third business day following the date on
which such notice is mailed by registered or certified air mail.

 

16.4

Entire Agreement. This Agreement, including the Exhibits attached hereto and by
this reference made an integral part hereof, constitute the entire agreement of
the parties hereto with respect to the subject matter hereof and thereof, and
supersede all previous proposals, verbal or written, expressed or implied, and
all negotiations, conversations or discussions heretofore between the parties
hereto related to the subject matter of this Agreement.

 

16.5

Amendment. This Agreement shall not be deemed or construed to be modified,
amended, rescinded, canceled or waived, in whole or in part, except by written
statement signed by both parties hereto.

 

16.6

Severability. In the event that any of the terms of this Agreement are in
conflict with any rule of law or statutory provision or otherwise unenforceable
under the laws or regulations of any government or subdivision thereof, such
terms shall be deemed stricken from this Agreement, but such invalidity or
unenforceability of any such provisions hereof does substantial violence to, or
where the invalid or unenforceable provisions comprise an integral part of, or
otherwise inseparable from, the remainder of this Agreement.

 

16.7

Compliance with Applicable Laws. The parties to this Agreement shall at all
times conduct their activities hereunder in accordance with all applicable
federal, state and local laws, rules and governmental regulations.

 

16.8

Waiver. No failure by either party hereto to take any action or assert any right
hereunder shall be deemed to be a waiver of such right in the event of the
continuation or repetition of the circumstances giving rise to such right.

 

16.9

Counterparts. This Agreement may be executed in (2) two or more counterparts in
the English language, each of which shall be deemed an original, but all of
which shall constitute (1) one and the same instrument.

 

16.10

Remedies Cumulative. Each of the right and remedies of the parties set forth in
this Agreement shall be cumulative with all other rights and remedies, as well
as with all rights and remedies of the partied hereto otherwise available at law
or in equity.

 

16.11

Indemnification. Each party shall indemnify the other and hold it harmless from
and against any and all costs including reasonable attorneys’ fees, court costs
and litigation expenses, losses, expenses and damages incurred by the other
party in connection with any claim or cause of action brought by any third
person or part against it which, in whole or in part is based upon or arises out
of any breach of any of its obligations hereunder.

 

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16.12

Captions. The captions of Articles and Sections of this Agreement are included
for convenient reference only, shall not be construed as part of this Agreement
and shall not be used to define, limit, extend or interpret the terms hereof.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
on the day and year first written above.

 

 

 

SELECT COMFORT CORPORATION   XXXXXXXXX   By    /s/   XXXXXXXXX     By   
/s/   XXXXXXXXX   Title  VP Supply Chain     Title  Vice Chairman of Board of
Directors   Date:   9/25/06     Date:   3.10.06  

 

 

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EXHIBIT I

 

Product Part Number, Description, and Pricing

 

The following prices shall be in effect from January 1, 2007 through December
31, 2009 providing that the Buyer comply the volume requirements and/or that the
parties mutually agree to change the minimum volume requirements in accordance
with Exhibit IV. These prices shall be valid for 2010 and 2011 only for the
volumes in the amount of XXXXXX pcs in 2010 and in the amount of XXXXXX pcs in
2011. In case the Buyer shall take delivery of the goods in 2010 and 2011 above
XXXXXX pcs in 2010 and XXXXXX pcs in 2011, the prices for this over-production
shall be stipulated by the Parties based on the deviation between up-to-date
exchange rate in the given year, and the basic exchange rate which was used for
the determination of below mentioned prices on the level of 1.00 USD = XXXXXX.
Prices below are shown in USD.

 

Part

2006

2007 – 2009

2010 – 2011

Number

Description

Prices

Prices

Prices

 

100133

Mini

XXXXX

XXXXX

XXXXX

100270

Twin

XXXXX

XXXXX

XXXXX

100271

Full

XXXXX

XXXXX

XXXXX

100272

Single Queen

XXXXX

XXXXX

XXXXX

100273

Dual Queen

XXXXX

XXXXX

XXXXX

100274

Eastern King

XXXXX

XXXXX

XXXXX

100275

Cal King

XXXXX

XXXXX

XXXXX

100276

TXL

XXXXX

XXXXX

XXXXX

100277

Super Single

XXXXX

XXXXX

XXXXX

100278

Super Queen

XXXXX

XXXXX

XXXXX

100279

Super King

XXXXX

XXXXX

XXXXX

100281

Euro

XXXXX

XXXXX

XXXXX

105757

Expanded Queen

XXXXX

XXXXX

XXXXX

105758

Cosmetic Twin

XXXXX

XXXXX

XXXXX

105759

Cosmetic Full

XXXXX

XXXXX

XXXXX

105760

Cosmetic Dual Queen

XXXXX

XXXXX

XXXXX

105761

Cosmetic Eastern King

XXXXX

XXXXX

XXXXX

106433

Grand King

XXXXX

XXXXX

XXXXX

106811

TXL Dual Inlet

XXXXX

XXXXX

XXXXX

106812

Single Queen Dual Inlet

XXXXX

XXXXX

XXXXX

106813

Dual Queen Dual Inlet

XXXXX

XXXXX

XXXXX

106814

Exp Queen Dual Inlet

XXXXX

XXXXX

XXXXX

106815

Eastern King Dual Inlet

XXXXX

XXXXX

XXXXX

106816

Cal King Dual Inlet

XXXXX

XXXXX

XXXXX

107099

Sleeper Sofa

XXXXX

XXXXX

XXXXX

107173

Grand King Dual Inlet

XXXXX

XXXXX

XXXXX

107325

FXL

XXXXX

XXXXX

XXXXX

 

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108050

Cosmetic Exp Queen

XXXXX

XXXXX

XXXXX

108051

Cosmetic Cal King

XXXXX

XXXXX

XXXXX

 

 

Delivery/Shipping Terms

FOB German – Bremerhaven or Hamburg Ocean Port, full 20’ or 40’ container
delivered

 

Prices are determined and valid in relation to volumes said in EXHIBIT IV.

 

Both parties reserve the right to open price negotiations as per Article 6 of
the long term Agreement in case of considerable change of prices of basic
materials, energy, fuels, and transport costs.

 

[A portion of this Exhibit I has been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission.]

 

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EXHIBIT II

 

Quality Requirements and Acceptance Criteria

 

The Buyers engineering specifications and engineering drawing requirements take
precedence over other requirements communicated to the Seller, whether such
requirements are verbal or written, except where a Deviation From Specification
(DFS) is approved and issued to the Seller by the Buyer.

 

The Seller shall review pre-production, prototype, first-piece, sample, or other
initial part or product, with the Buyer. This review shall include
representative samples, process data, and inspection and test data, for the
purpose of determining if the part or product meets the Buyers engineering
specifications and engineering drawing requirements, as well as safety and other
regulatory requirements specific to the part or product supplied.

 

Either Seller or Buyer may initiate a DFS where there is a realized need to
depart from requirements documented within the Buyers engineering specifications
or engineering drawings.

 

The Seller shall review known part or product deficiencies with the Buyer prior
to shipping the part or product to the Buyer. In some instances, Buyer may
approve a DFS to allow the Seller to produce deficient parts or products for a
limited period of time, or to ship a limited quantity of parts or products
exhibiting a known deficiency.

 

Seller disputes concerning requirements, or whether part or product meets the
Buyers engineering specifications or engineering drawing requirements, shall be
reviewed and mediated by the Buyers representatives from the Quality Control,
Manufacturing Engineering, R&D, and Supply Chain Management departments.

 

The Seller shall install appropriate controls and methods to ensure the part or
product supplied meets the Buyers engineering specifications and engineering
drawing requirements upon final delivery to the Buyer. Seller controls shall be
considered for, but not limited to, operations within raw material receiving,
work-in-process, finished goods, packaging, and shipping.

 

Buyer may, at any point, reject part or product that does not meet the Buyers
engineering specifications, engineering drawing requirements, or deviated
requirements (per an approved and issued DFS). This shall include at the
receiving, storage, value-added operations, packaging, shipping, or customer
service stages of Buyer’s use, and/or sale of the supplied part or product.

 

Rejected part or product shall be reviewed by the Buyer with the Seller for the
purpose of making a disposition of the part or product. The Seller shall have
the opportunity to review rejected part or product, and to dispute the
determination of rejection.

 

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Where a rejection is found to be valid, the Seller shall perform an analysis of
the part, product, process, or other element within the Seller’s scope of
operations, as necessary, and issue a report of corrective action to the Buyer.

 

The Seller shall allow buyer representatives to discuss, review, inspect,
measure, test, or otherwise evaluate part or product issues with Seller
representatives within the Seller’s manufacturing facility(ies), at a Buyer’s
facility, or at a mutually agreed upon location. Upon suitable notification to
the Seller, Buyer shall be allowed to verify compliance with this agreement, and
to perform on-site audits of the Seller’s manufacturing processes related to
part or product as specified and purchased by the Buyer.

 

Seller efforts to improve, cost-reduce, boost efficiencies, or otherwise change
the part, product, or the process originally agreed to, shall be reviewed in
advance with the Buyer, whether or not this activity has any affect or influence
on the part or product meeting the Buyer’s engineering specifications or
engineering drawing requirements.

 

The Seller shall review plans to subcontract to another corporate entity, any
part or product the Buyer has contracted with the Seller to supply. This review
shall be completed prior to any such subcontracting, and shall include the
review and approval by the buyer of the Seller’s quality plan for the
subcontracted part or product. In some instances, Buyer will require first piece
samples, including inspection and test data, from the subcontractor prior to
approval of part or product manufactured by the subcontractor. In any event, the
Seller shall remain fully and completely responsible for supplying the part or
product to the Buyer’s engineering specification and engineering drawing
requirements.

 

All air chamber testing shall be in accordance with Select Comfort’s Air
Chamber, Rubber/Cotton Vulcanized Construction, Test and Inspection
Specification SP-004.

 

Quality Discount percentage: as of September 2006 is XXXXX and shall remain in
effect as outlined in Article 8.

 

Warranty Schedule:

 

January 1, 2006 and beyond

60 Month warranty period

 

 

[A portion of this Exhibit II has been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission.]

 

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EXHIBIT III

Master Specifications

(master files)

 

 

[The entire contents of this Exhibit III have been omitted pursuant to a request
for confidential treatment under Rule 24b-2 of the Securities Exchange Act of
1934, as amended. A copy of this Exhibit with the contents intact has been filed
separately with the Securities and Exchange Commission.]

 

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Exhibit IV (Revised September 2006)

Forecasted Volume

 

Fiscal Year

Volume (range of +/- 10%)

 

2007

XXXXXXX

2008

XXXXXXX

2009

XXXXXXX

2010

XXXXXXX

2011

XXXXXXX

 

 

Best effort will be made to submit standard purchase orders that represent 12
equal monthly quantities plus or minus XXXXXXX in any given month.

 

Fiscal Year means the twelve-month period from January 1 through December 31.

 

Any changes to the volumes represented above shall be mutually agreed to with a
minimum of three months notice prior to the requested change date.

 

This September 2006 revision to the exhibit reflects previously provided volume
information for the years 2007-2009.

 

XXXXXXX has requested longer term outlook to include 2010- 2011. The figures
included for these years above are estimated only based on assumed continued
linear growth of XXXXXXX per calendar year XXXXXXX using the revised 2007
figures as the baseline, and should be considered informational only for the
purpose requested, and should not be considered firm annual volumes or
commitment .

 

By:_______________

Title:_____________

Date:______________

 

[A portion of this Exhibit IV has been omitted pursuant to a request for
confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934,
as amended. A copy of this Exhibit with the portions intact has been filed
separately with the Securities and Exchange Commission.]

 

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