Exhibit 10.2


 


EXHIBIT C


 


GUARANTEE


OF


STERLING
CAPITAL PARTNERS III, L.P.


 


GUARANTEE, dated
as of May 22, 2009  (this “Guarantee”), by Sterling Capital Partners III, L.P., a
Delaware limited partnership (the “Guarantor”), in
favor of Select Comfort Corporation, a Delaware corporation (the “Company”).


 


1.                                      Guarantee.
To induce the Company to enter into that certain Securities Purchase Agreement,
dated as of May 22, 2009 (as amended, supplemented or otherwise modified
from time to time, the “Purchase Agreement”;
capitalized terms used without definition herein have the meanings ascribed to
them in the Purchase Agreement), by and between the Company and Sterling SC
Investor, LLC, a Delaware limited liability company (“Buyer”),
pursuant to which Buyer will purchase shares of Common Stock of the Company,
the Guarantor absolutely, unconditionally and irrevocably guarantees to the
Company, the due and punctual observance, payment, performance and discharge of
all obligations of Buyer under the Purchase Agreement (the “Obligations”).


 


2.                                      Nature
of Guarantee. The Company shall not be obligated to file
any claim relating to the Obligations in the event that Buyer becomes subject
to a bankruptcy, reorganization or similar proceeding, and the failure of the
Company to so file shall not affect the Guarantor’s obligations hereunder. In
the event that any payment to the Company in respect of any Obligation is
rescinded or must otherwise be returned for any reason whatsoever, the
Guarantor shall remain liable hereunder with respect to such Obligation as if
such payment had not been made. This is an unconditional guarantee of payment
and not of collectibility. The Guarantor shall have, and reserves the right to
assert, any defenses which Buyer may have to payment of any Obligations other
than defenses arising from the bankruptcy or insolvency of Buyer, fraudulent
conveyance or fraudulent transfer, moratorium, reorganization or other statutes
or proceedings affecting creditors rights generally and other defenses
expressly waived hereby.


 


3.                                      Changes
in Obligations, Certain Waivers. The Guarantor
agrees that the Company may at any time and from time to time, without notice
to or further consent of the Guarantor, extend the time of payment of any of
the Obligations, and may also make any agreement with Buyer for the extension,
renewal, payment, compromise, discharge or release thereof, in whole or in
part, or for any modification of the terms thereof or of any agreement between
the Company and Buyer without in any way impairing or affecting this Guarantee.
The Guarantor agrees that the obligations of the Guarantor hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (a) the
failure of the Company to assert any claim or demand or to enforce any right or
remedy against Buyer or any other Person interested in the transactions
contemplated by the Purchase Agreement; (b) any change in the time, place
or manner of payment of any of the Obligations or any rescission, waiver,
compromise, consolidation or other amendment or modification of any of the
terms or provisions of the Purchase Agreement or any other agreement
evidencing, securing or otherwise executed in connection with any of the
Obligations, (c) the addition, substitution or release of any other Person
interested in the transactions contemplated by the Purchase Agreement; (d) any
change in the corporate existence, 


 

















 


structure or
ownership of Buyer or any other Person interested in the transactions
contemplated by the Purchase Agreement; (e) any insolvency, bankruptcy,
reorganization or other similar proceeding affecting Buyer or any other Person
interested in the transactions contemplated in the Purchase Agreement; (f) the
existence of any claim, set-off or other rights which the Guarantor may have at
any time against Buyer, whether in connection with the Obligations or
otherwise; or (g) the adequacy of any other means the Company may have of
obtaining payment of the Obligations. The Guarantor waives promptness,
diligence, notice of the acceptance of this Guarantee and of the Obligations,
presentment, demand for payment, notice of non-performance, default, dishonor
and protest, notice of any Obligations incurred and all other notices of any
kind (except for notices to be provided to Buyer in accordance with the Purchase
Agreement), all defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or hereafter in effect, any right
to require the marshalling of assets of Buyer or any other Entity or other Person
interested in the transactions contemplated by the Purchase Agreement, and all
suretyship defenses generally (other than (i) fraud or willful misconduct
by the Company or any of its Subsidiaries or (ii) any defenses to the
payment or performance of the Obligations that are available to Buyer under the
Purchase Agreement or (iii) breach by the Company of this Guarantee). The
Guarantor acknowledges that it will receive substantial direct and indirect
benefits from the transactions contemplated by the Purchase Agreement and that
the waivers set forth in this Guarantee are knowingly made in contemplation of
such benefits. Notwithstanding anything to the contrary contained in this Guarantee,
the Company hereby agrees that, to the extent Buyer is relieved of any Obligation
under the Purchase Agreement (other than by reason of bankruptcy or insolvency
of the Buyer, fraudulent transfer, fraudulent conveyance, moratorium,
reorganization and other defenses expressly waived hereby), the Guarantor shall
be similarly relieved of such Obligation under this Guarantee.


 


4.                                      No
Waiver.  No failure
on the part of the Company to exercise, and no delay in exercising, any right,
remedy or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise by the Company of any right, remedy or power
hereunder preclude any other or future exercise of any right, remedy or power
hereunder.


 


5.                                      Representations
and  Warranties.
The Guarantor hereby represents and warrants that:


 


a.                                       the
execution, delivery and performance of this Guarantee have been duly authorized
by all necessary action and do not contravene any provision of the Guarantor’s
partnership agreement, operating agreement or similar organizational documents
or any law, regulation, rule, decree, order, judgment or contractual
restriction binding on the Guarantor or its assets;


 


b.                                      all
consents, approvals, authorizations and permits of, filings with and
notifications to, any governmental authority necessary for the due execution,
delivery and performance of this Guarantee by the Guarantor have been obtained
or made and all conditions thereof have been duly complied with, and no other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required in connection with the execution, delivery or
performance of this Guarantee;


 


c.                                       this
Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, subject to (i) the
effects of


 


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bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws affecting creditors’ rights generally, and (ii) general equitable
principles (whether considered in a proceeding in equity or at law);


 


d.                                      this
Guarantee does not constitute a breach or event of default under any other
agreement to which the Guarantor is a party, except as would not have a
material adverse effect on the Guarantor’s ability to perform its obligations
hereunder; and


 


e.                                       the
Guarantor has the financial capacity to pay and perform its obligations under
this Guarantee, and all funds necessary for the Guarantor to fulfill its
Obligations under this Guarantee shall be available to the Guarantor for so
long as this Guarantee shall remain in effect in accordance with Section 8
hereof.


 


6.                                      No
Assignment. Neither the Guarantor nor the Company may
assign its rights, interests or obligations hereunder to any other Person
(except by operation of law) without the prior written consent of the other
party hereto, as the case may be; provided, however, that the
Guarantor may assign all or a portion of its obligations hereunder to an
affiliate or to an entity managed or advised by an affiliate of the Guarantor,
provided that no such assignment shall relieve the Guarantor of any liability
or obligation hereunder except to the extent of amounts actually received by
the Company from the assignee.


 


7.                                      Notices.
All notices and other communications hereunder will be effective (a) if
delivered by hand or overnight courier, when such delivery is made at the address
specified in this Section, or (b) if delivered by facsimile, when such
facsimile is transmitted to the facsimile number specified in this Section and
appropriate confirmation is received. Any notice, request, instruction or other
communication to the Guarantor hereunder shall be in writing and delivered by
hand or overnight courier service or by facsimile:


 


To the Guarantor:


 


Sterling Capital Partners III, L.P.


1033 Skokie Boulevard, Suite 600


Northbrook, Illinois 60062


Attention:  Office of General
Counsel


Facsimile:  (847) 480-0199


 


With a copy to (which shall not constitute
notice):


 


Katten Muchin Rosenman LLP


525 W. Monroe Street


Chicago, Illinois 60661-3693


Attention:   Jeffrey R. Patt, Esq.


                   Mark
D. Wood, Esq.


Facsimile:   (312) 902-1061


 


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or to such other address or
facsimile number as the Guarantor shall have notified the Company in a written
notice delivered to the Company in accordance with the Purchase Agreement. All
notices to the Company hereunder shall be delivered as set forth in the Purchase
Agreement.


 


8.                                      Continuing
Guarantee. This Guarantee shall remain in full force
and effect and shall be binding on the Guarantor, its successors and assigns
until all amounts payable under this Guarantee have been indefeasibly paid or
satisfied in full. Notwithstanding the foregoing, this Guarantee shall
terminate and the Guarantor shall have no further obligations under this Guarantee
as of the earliest of (a) the Closing of the Transactions, (b) the
termination of the Purchase Agreement in accordance with its terms by mutual
consent of the parties or otherwise under circumstances in which Buyer would thereafter
have no liability to the Company for any Obligation under the Purchase
Agreement, or (c) the first anniversary of any termination of the Purchase
Agreement in accordance with its terms, except as to a claim for payment of any
Obligation presented by the Company to Buyer prior to such first anniversary.  Notwithstanding the foregoing, in the event
that the Company or any of its affiliates asserts in any litigation or other
proceeding that the provisions of this Section 8 or Section 9 hereof
are illegal, invalid or unenforceable in whole or in part, or asserting any
theory of liability against the Guarantor or any Affiliate of the Guarantor
with respect to the transactions contemplated by the Purchase Agreement other
than the liability of the Guarantor under this Guarantee, then (i) the
obligations of the Guarantor under this Guarantee shall terminate ab initio and
be null and void, and (ii) if the Guarantor has previously made any
payments under this Guarantee, it shall be entitled to recover such payments; provided,
however, that if the Guarantor asserts in any litigation or other
proceeding that this Guarantee is illegal, invalid or unenforceable in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and to general equitable principles
(whether considered in a proceeding in equity or at law), then, to the extent
the Company prevails in such litigation or proceeding, the Guarantor shall pay
on demand all reasonable fees and out-of-pocket expenses of the Company in
connection with such litigation or proceeding.


 


9.                                      No
Recourse.


 


a.                                       The
Company acknowledges that the sole assets of Buyer are cash in a de minimus
amount and its rights under the Purchase Agreement, and that no additional
funds are expected to be contributed to Buyer unless and until the Closing
occurs. Notwithstanding anything that may be expressed or implied in this Guarantee
or any document or instrument delivered contemporaneously herewith, and
notwithstanding the fact that the Guarantor may be a limited partnership, by
its acceptance of the benefits of this Guarantee, the Company acknowledges and
agrees that, other than with respect to the Company’s rights under this Guarantee,
it has no right of recovery against, and no liability shall attach to, the
former, current or future stockholders, directors, officers, employees, agents,
affiliates, members, managers, general or limited partners or assignees of the
Guarantor or Buyer or any former, current or future stockholder, director,
officer, employee, general or limited partner, member, manager, affiliate,
agent or assignee of any of the foregoing (collectively, but not including the Guarantor,
each an “Affiliate”), or, other than its right
to recover from the Guarantor for up to the amount of the Obligations (subject
to the limitations described herein), the Guarantor, through Buyer or
otherwise, whether by or through attempted piercing of the limited partnership
veil, by or 


 


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through a claim
by or on behalf of Buyer against an Affiliate or the Guarantor arising under,
or in connection with, the Purchase Agreement or the transactions contemplated
thereby or otherwise relating thereto, by the enforcement of any assessment or
by any legal or equitable proceeding, by virtue of any statute, regulation or
applicable law, or otherwise. The Company hereby covenants and agrees that it
shall not institute, directly or indirectly, and shall cause its respective
affiliates not to institute, any proceeding or bring any other claim arising
under, or in connection with, the Purchase Agreement or the transactions
contemplated thereby or otherwise relating thereto, against an Affiliate or,
other than its right to recover from the Guarantor for up to the amount of the
Obligations (subject to the limitations described herein), the Guarantor.


 


b.                                      Recourse
against the Guarantor under this Guarantee pursuant to their written guarantees
delivered contemporaneously herewith shall be the sole and exclusive remedy of
the Company against the Guarantor and any Affiliates in respect of any
liabilities or obligations arising under, or in connection with, the Purchase
Agreement or the transactions contemplated thereby or hereby or otherwise
relating thereto or hereto. Nothing set forth in this Guarantee shall confer or
give or shall be construed to confer or give to any Person other than the
Guarantor and the Company (including any Person acting in a representative
capacity) any rights or remedies against any Person other than the Company and
the Guarantor as expressly set forth herein.


 


c.                                       For
all purposes of this Guarantee, a Person shall be deemed to have pursued a
claim against another Person if such first Person brings a legal action against
such Person, adds such other Person to an existing legal proceeding, or
otherwise asserts a legal claim of any nature against such Person.


 


d.                                      The
Company acknowledges that the Guarantor is agreeing to enter into this Guarantee
in reliance on the provisions set forth in this Section 9. This Section 9
shall survive termination of this Guarantee.


 


10.                                Governing
Law. This Guarantee will be governed by, and construed
in accordance with, the laws of the State of Delaware, without giving effect to
any applicable principles of conflict of laws that would cause the laws of
another State to otherwise govern this Guarantee. Each of the parties hereto
irrevocably agrees that any legal action or proceeding with respect to this Guarantee
and the rights and obligations arising hereunder, or for recognition and
enforcement of any judgment in respect of this Guarantee and the rights and
obligations arising hereunder brought by the other party hereto or its
successors or assigns shall be brought and determined exclusively in any state
or federal court in the State of Delaware. 
Each of the parties hereto agrees that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 7 or in such other manner as may be permitted by applicable
laws, will be valid and sufficient service thereof.  Each of the parties hereto hereby irrevocably
submits with regard to any such action or proceeding for itself and in respect
of its property, generally and unconditionally, to the personal jurisdiction of
the aforesaid courts and agrees that it will not bring any action relating to
this Guarantee or any of the transactions contemplated by this Guarantee in any
court or tribunal other than the aforesaid courts.  Each of the parties hereto hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Guarantee and
the rights and obligations arising hereunder, or for recognition and
enforcement of any judgment in respect of this Guarantee and the rights and
obligations arising hereunder (i) any claim that it is 


 


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not personally
subject to the jurisdiction of the above named courts for any reason other than
the failure to serve process in accordance with this Section 10, (ii) any
claim that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (iii) to the fullest
extent permitted by the applicable law, any claim that (x) the suit,
action or proceeding in such court is brought in an inconvenient forum, (y) the
venue of such suit, action or proceeding is improper or (z) this Guarantee,
or the subject matter hereof, may not be enforced in or by such courts.


 


11.                                WAIVER
OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS GUARANTEE OR ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY.


 


12.                                Counterparts;
Effectiveness. This Guarantee may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to each other party. 
In the event that any signature to this Guarantee or any amendment
hereto is delivered by facsimile transmission or by e-mail delivery of a “.pdf”
format data file, such signature shall create a valid and binding obligation of
the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such facsimile or “.pdf” signature page were
an original thereof.  No party hereto
shall raise the use of a facsimile machine or e-mail delivery of a “.pdf”
format data file to deliver a signature to this Guarantee or any amendment
hereto or the fact that such signature was transmitted or communicated through
the use of a facsimile machine or e-mail delivery of a “.pdf” format data file
as a defense to the formation or enforceability of a contract and each party
hereto forever waives any such defense.


 


[Signature
page follows]


 


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IN WITNESS
WHEREOF, the Guarantor and the Company have caused this Guarantee to be
executed and delivered as of the date first written above by its officer
thereunto duly authorized.


 


	
   

  	
  STERLING CAPITAL PARTNERS III, L.P.

  
	
   

  	
   

  
	
   

  	
  By: SC Partners III, L.P.

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  
	
   

  	
  By: Sterling Capital Partners III, LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ R. Christopher Hoehn-Saric

  
	
   

  	
  Name: R. Christopher Hoehn-Saric

  
	
   

  	
  Title: Senior Managing Director

  



 


 


	
  Accepted and Agreed to:

  	
   

  
	
   

  	
   

  
	
  SELECT COMFORT
  CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William R. McLaughlin

  	
   

  
	
  Name:

  	
  William R. McLaughlin

  	
   

  
	
  Its:

  	
  President and Chief
  Executive Officer