exhibit10_1.htm


    Exhibit
10.1



    Execution
Copy

    


     

    AMENDMENT NO. 4 TO
CREDIT AGREEMENT

     

    This
Amendment No. 4 to Credit Agreement (this “Fourth Amendment”) is
entered into as of December 2, 2008 by and among Select Comfort Corporation (the
“Company”),
Select Comfort Retail Corporation, the other financial institutions signatory
hereto (the "Lenders"), JPMorgan
Chase Bank, National Association, as Administrative Agent and Bank of America,
N.A., as Syndication Agent.

     

     

    RECITALS

     

    A.           The
Company, the Subsidiary Borrowers, the Administrative Agent and the Lenders are
party to that certain Credit Agreement dated as of June 9, 2006, as amended
pursuant to Amendment No. 1 to Credit Agreement dated as of June 28, 2007,
Amendment No. 2 to Credit Agreement dated as of February 1, 2008 and Amendment
No. 3 to Credit Agreement dated as of May 30, 2008 (the “Credit
Agreement”).  Unless otherwise specified herein, capitalized
terms used in this Fourth Amendment shall have the meanings ascribed to them by
the Credit Agreement.

     

    B.           The
Company has requested that the Administrative Agent and the Lenders further
amend the Credit Agreement to reflect certain changes thereto and to grant a
limited waiver with respect to the Credit Agreement.

     

    C.           The
Administrative Agent and the undersigned Lenders are willing to amend the Credit
Agreement and to grant a limited waiver on the terms and conditions set forth
below.

     

    Now,
therefore, in consideration of the mutual execution hereof and other good and
valuable consideration, the parties hereto agree as follows:

     

    1.           Reduction of Aggregate
Commitments.  The aggregate amount of the Lenders' Commitments
is hereby reduced from $100,000,000 to $90,000,000 as of the date hereof and
shall be further reduced to $85,000,000 commencing on January 3, 2009 and to
$80,000,000 commencing on July 1, 2009.  Accordingly, Schedule 2.01 of
the Credit Agreement is hereby amended and restated as set forth on Annex II
hereto.

     

    2.           Additional Amendments to
Credit Agreement.  The Credit Agreement is hereby further
amended as follows:

     

    (a)           Section
6.13 of the Credit Agreement is hereby amended by deleting such section in its
entirety and replacing it with a reference to "[Reserved]".

     

    (b)           Schedule
1.01 of the Credit Agreement is hereby amended and restated as set forth on
Annex I
hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.           Covenant.  No
later than December 15, 2008, the Company shall have delivered to the
Administrative Agent and the Lenders an assessment of the Company's business
plans and available alternatives as prepared by the Company with the assistance
of AlixPartners, which assessment shall be in form and substance reasonably
satisfactory to the Administrative Agent.

     

    4.           Limited
Waiver.  Subject to the terms and conditions herein, the
Administrative Agent and the Lenders signatory hereto hereby waive the
requirement that the Company comply with the financial covenant set forth in
Section 6.12 of the Credit Agreement for the period ending on November 30,
2008.

     

    5.           Representations and
Warranties of the Company.  The Company represents and warrants
that:

     

    (a)           The
execution, delivery and performance by the Company of this Fourth Amendment has
been duly authorized by all necessary corporate action and this Fourth Amendment
is a legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as the enforcement thereof may be
subject to (i) the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors’ rights generally
and (ii) general principles of equity, regardless of whether considered in a
proceeding in equity or at law.

     

    (b)           Each
of the representations and warranties contained in the Credit Agreement and the
other Credit Documents is true and correct in all material respects on and as of
the date hereof as if made on the date hereof (except any such representation or
warranty that expressly relates to or is made expressly as of a specific earlier
date, in which case such representation or warranty shall be true and correct
with respect to or as of such specific earlier date).

     

    (c)           After
giving effect to this Fourth Amendment, no Default has occurred and is
continuing.

     

    (d)           The
Company has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows (i) as of and for
the fiscal year ended December 31, 2007, reported on by KPMG LLP, independent
public accountants, and (ii) as of and for the fiscal month ended October 25,
2008, certified by its chief financial officer.  Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Company and its consolidated
Subsidiaries as of such dates and for such periods in accordance with GAAP,
subject to year end audit adjustments and the absence of footnotes in the case
of the statements referred to in clause (ii) above.

     

    6.           Effective
Date.  This Fourth Amendment shall become effective upon
receipt by the Administrative Agent of (i) duly executed counterparts of this
Fourth Amendment from the Company, Select Comfort Retail Corporation and the
Required Lenders and (ii) the Reaffirmation of Guaranty in the form attached
hereto as Exhibit
A executed by each of the Subsidiary Guarantors.

     

    
      
        -
2 -

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.           Reference to and Effect Upon
the Credit Agreement.

     

    (a)           Except
as specifically amended above, the Credit Agreement and the other Credit
Documents shall remain in full force and effect and are hereby ratified and
confirmed.

     

    (b)           The
execution, delivery and effectiveness of this Fourth Amendment shall not operate
as a waiver of any right, power or remedy of the Administrative Agent or any
Lender under the Credit Agreement or any Credit Document, nor constitute a
waiver of any provision of the Credit Agreement or any Credit Document, except
as specifically set forth herein.  Upon the effectiveness of this
Fourth Amendment, each reference in the Credit Agreement to “this Agreement”,
“hereunder”, “hereof”, “herein” or words of similar import shall mean and be a
reference to the Credit Agreement as amended hereby.

     

    8.           Release of Claims and
Waiver.  Each of the Company and each of its Subsidiaries
hereby releases, remises, acquits and forever discharges each of the Lenders and
such Lender's employees, agents, representatives, consultants, attorneys,
fiduciaries, servants, officers, directors, partners, predecessors, successors
and assigns, subsidiary corporations, parent corporations, and related corporate
divisions (all of the foregoing hereinafter called the "Released Parties"),
from any and all actions and causes of action, judgments, executions, suits,
debts, claims, demands, liabilities, obligations, damages and expenses of any
and every character, known or unknown, direct and/or indirect, at law or in
equity, of whatsoever kind or nature, for or because of any matter or things
done, omitted or suffered to be done by any of the Released Parties prior to and
including the date of execution hereof, and in any way directly or indirectly
arising out of or in any way connected to this Fourth Amendment, the Collateral,
the Loans, the Credit Agreement, or the other Credit Documents (all of the
foregoing hereinafter called the "Released
Matters").  Each of the Company and each of its
Subsidiaries acknowledges that the agreements in this paragraph are
intended to be in full satisfaction of all or any alleged injuries or damages
arising in connection with the Released Matters. Each of the Company and each of
its Subsidiaries represents and warrants to the Lenders that it has not
purported to transfer, assign or otherwise convey any right, title or interest
of the Company in any Released Matter to any other person and that the foregoing
constitutes a full and complete release of all Released Matters.

     

    9.           Costs and
Expenses.  The Company hereby affirms its obligations under
Section 9.03 of the Credit Agreement to reimburse the Administrative Agent for
all reasonable costs and out-of-pocket expenses paid or incurred by the
Administrative Agent in connection with the preparation, negotiation, execution
and delivery of this Fourth Amendment, including but not limited to the
reasonable fees, charges and disbursements of attorneys for the Administrative
Agent with respect thereto.

     

    10.           Governing
Law.  This Agreement shall be construed in accordance with and
governed by the law of the State of New York (without regard to conflict of law
provisions thereof).

     

    
      
        -
3 -

      

      
        
        

        
          

        

      

      
        
        

      

    

    11.           Headings.  Section
headings in this Fourth Amendment are included herein for convenience of
reference only and shall not constitute a part of this Fourth Amendment for any
other purposes.

     

    12.           Counterparts.  This
Fourth Amendment may be executed in any number of counterparts, each of which
when so executed shall be deemed an original but all such counterparts shall
constitute one and the same instrument.

     

     [signature
pages follow]

     

    
      
        -
4 -

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    



    IN
WITNESS WHEREOF, the parties have executed this Fourth Amendment as of the date
and year first above written.

     

    SELECT
COMFORT CORPORATION, as a Borrower

     

    By                      /s/James C.
Raabe

    Name:              
James C. Raabe

    Title:                 CFO

    


     

    SELECT
COMFORT RETAIL CORPORATION

     

    By                      /s/James C.
Raabe

    Name:               James
C. Raabe

    Title:                 CFO

     

    

 

    
      
        -
5 -

      

      
        
        

        
          

        

      

      
        
        

      

    

    JPMORGAN
CHASE BANK, NATIONAL ASSOCIATION, individually, as Administrative Agent and as
Collateral Agent

     

    By     /s/Patricia S.
Carpen                                                                           

    Name:  Patricia S.
Carpen

    Title:       
Vice President

    


     

    BANK OF
AMERICA, N.A., individually and as Syndication Agent

     

    By     /s/Lynn D.
Simmons                                                                           

    Name:  Lynn D.
Simmons

    Title:       
Senior Vice President

    


     

    CITICORP
USA, INC., as a Lender

    


    By            
/s/Sugam
Mehta

    Name:       Sugam
Mehta

    Title:         Vice
President

    


     

    WELLS
FARGO BANK, NATIONAL ASSOCIATION,

    as a
Lender

     

    By
_______________________________________

                                                                   
Name:

                                                                   
Title:

    


     

    BRANCH
BANKING AND TRUST CO., as a Lender

     

    By                      /s/Troy R.
Weaver

                                                                   
Name:              
Troy R. Weaver

                                                                   
Title:                 Senior
Vice President

     

    


     

    
 

    
 

    
      
        -
6 -

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ANNEX I

    


    Schedule
1.01

    


    PRICING
SCHEDULE

    


    


    
      	
              Applicable
      Rate

            	
              Level
      I Status

            	
              Level
      II Status

            	
              Level
      III Status

            	
              Level
      IV Status

            
	
              Eurocurrency

              Spread

            	
               

              4.15%

            	
               

              4.35%

            	
               

              4.55%

            	
               

              5.00%

            
	
              Facility
      Fee Rate

            	
              0.35%

            	
              0.40%

            	
              0.45%

            	
              0.50%

            
	
              ABR
      Spread

            	
              3.00%

            	
              3.25%

            	
              3.50%

            	
              4.00%

            


    

    


    For the purposes of this Schedule, the
following terms have the following meanings, subject to the final paragraph of
this Schedule:

    


    “Financials” means the annual,
quarterly or monthly financial statements of the Company delivered pursuant to
Section 5.01 of
this Agreement.

    


    “Level I Status” exists at any date if,
as of the last day of the fiscal quarter of the Company referred to in the most
recent Financials, the Leverage Ratio is less than 1.50 to 1.00.

    


    “Level II Status” exists at any date
if, as of the last day of the fiscal quarter of the Company referred to in the
most recent Financials, (i) the Company has not qualified for Level I Status and
(ii) the Leverage Ratio is less than 2.00 to 1.00.

    


    “Level III Status” exists at any date
if, as of the last day of the fiscal quarter of the Company referred to in the
most recent Financials, (i) the Company has not qualified for Level I Status or
Level II Status and (ii) the Leverage Ratio is less than 2.50 to
1.00.

    


    “Level IV Status” exists at any date if
the Company has not qualified for Level I Status, Level II Status or Level III
Status.

    


    “Status” means Level I Status, Level II
Status, Level III or Level IV Status.

    


    The Applicable Rate shall be determined
in accordance with the foregoing table based on the Company’s Status as
reflected in the then most recent Financials.  Adjustments, if any, to
the Applicable Rate shall be effective five Business Days after the
Administrative Agent has received the applicable Financials.  If the
Company fails to deliver the Financials to the Administrative Agent at the time
required pursuant to the Credit Agreement, then the Applicable Rate shall be the
highest Applicable Rate set forth in the foregoing table until five days after
such Financials are so delivered.  Until adjusted commencing with the
delivery of the Company’s Financials with respect to the fiscal quarter ending
on or about December 31, 2008, Level IV Status shall be deemed to
exist.

    


    


     

    
      
        -
7 -

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      If, as a
result of (i) any restatement of or other adjustment to the Financials of the
Company or its Subsidiaries or (ii) for any other reason, which in any such case
referred to in clause (i) or (ii), arises from an act of fraud or willful
misconduct on the part of Company or its Subsidiaries, the Administrative Agent
or Required Lenders determine that (a) the Leverage Ratio or Applicable Margin
as calculated by the Company and its Subsidiaries as of any applicable date were
inaccurate (due to any errors or misstatements in the calculation thereof) and
(b) a proper calculation of the Leverage Ratio or Applicable Margin would have
resulted in a higher level of pricing for any period, then the Company shall
automatically and retroactively be obligated to pay to the Lenders, and shall
pay to the Lenders promptly on demand by the Administrative Agent or Required
Lenders, an amount equal to the excess of the amount of interest and fees that
should have been paid for such period over the amount of interest and fees
actually paid for such period.

    

    
 

    
      
        -
8 -

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ANNEX II

    


    Schedule
2.01

    


    Commitments

    


    


    
      	 
      	
              December
      2, 2008 – January 2, 2009

            	
              January
      3, 2009 – June 30, 2009

            	
              July
      1, 2009 and thereafter

            
	
              JPMorgan
      Chase Bank, National Association

            	
              $24,300,000

            	
              $22,950,000

            	
              $21,600,000

            
	
              Bank
      of America, N.A.

            	
              $20,700,000

            	
              $19,550,000

            	
              $18,400,000

            
	
              Citicorp
      USA, Inc.

            	
              $18,000,000

            	
              $17,000,000

            	
              $16,000,000

            
	
              Wells
      Fargo Bank, National Association

            	
              $13,500,000

            	
              $12,750,000

            	
              $12,000,000

            
	
              Branch
      Banking and Trust Co.

            	
              $13,500,000

            	
              $12,750,000

            	
              $12,000,000

            
	
              TOTAL   
      

            	
              $90,000,000

            	
              $85,000,0000

            	
              $80,000,000

            


    

    


     

    
      
        -
9 -

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    EXHIBIT
A

     

    REAFFIRMATION OF
GUARANTY

     

    The
undersigned hereby acknowledges receipt of a copy of Amendment No. 4 to the
Credit Agreement (the “Fourth Amendment”)
dated as of December 2, 2008, and reaffirms its obligations under the Subsidiary
Guaranty dated as of June 9, 2006 in favor of JPMorgan Chase Bank, National
Association, as Administrative Agent, and the Lenders (as defined in the Fourth
Amendment).

     

    Dated as
of December 2, 2008

     

    


     

    SELECT
COMFORT RETAIL CORPORATION

     

    By                      /s/James C.
Raabe

    Name:               James
C. Raabe

    Title:                
CFO

    


     

    


    


     

    
      
        -
10 -