Exhibit 10.6


 


	
  

  	
  May 21,
  2009

  	
  GE
  Money Bank

   

  4246
  South Riverboat Road, Suite 200

  Salt
  Lake City, UT 84123-2551

  USA

  



 


VIA FACSIMILE


(763)
551-7889 and (763) 551- 6888


Select
Comfort Corporation


6105
Trenton Lane North


Minneapolis,
Minneapolis 55442


 


	
  Attn:

  	
   Chief Financial Officer

  
	
   

  	
  General
  Counsel

  



 


Re: Sterling Capital Partners III, L.P


 


Gentlemen:


Reference
is made to the Amended and Restated Private Label Consumer Credit Card Program
Agreement (as amended from time to time, the “Program Agreement”) dated December 14,
2005, between Select Comfort Retail Corporation (“SCRC”) and Select
Comfort Corporation (“SCC” and collectively with SCRC, “Retailer”)
and GE Money Bank (“GEMB”). Capitalized terms not defined herein are
used as defined In the Program Agreement.


 


I.
WAIVERS.


 


We
understand that Retailer is contemplating a transaction with Sterling Capital
Partners III, LLC (“Sterling”) and certain of
its Affiliates which would result in Sterling and its Affiliates owning 50% or
more of the combined voting power of the outstanding securities of Retailer
entitled to vote generally in the election of directors (the “Transaction”).
GEMB hereby agrees that if the Transaction is consummated on or before October 31,
2009, GEMB will not exercise its termination rights under section 9.2(d) of
the Program Agreement as a result of the consummation of the Transaction.
Further, GEMB hereby waives any right it may have as of the date hereof to
terminate the Program Agreement pursuant to (i) Section 9.2(e) as
a result of any default or event of default under that certain Credit Agreement
(as amended, the “Credit Agreement”), dated as of June 9, 2006, by
and among Retailer, on the one hand, and JP Morgan Chase Bank, National
Association (as administrative agent), Bank of America, N.A. (as syndication
agent) and the other lenders from time to time party thereto, on the other, or (ii) to
the extent applicable, Section 9.2(f). Anything in the foregoing to the
contrary notwithstanding, GEMB hereby reserves all of its rights under the Program
Agreement, including, pursuant to Sections 9.2(d), (e) and (f), to terminate the
Program Agreement for reasons other than (i) the consummation of the
Transaction or (ii) the occurrence of a default or event of default under
the Credit Agreement or the occurrence of a material adverse effect (within the
meaning of Section 9.2(f) of the Program Agreement), in each case
with respect to this clause (ii), existing as of the date hereof, as
applicable. For the avoidance of doubt, whether or not any change of control
has occurred after the effective date of the Transaction shall be determined
based on the equity structure of Retailer after giving effect to the Sterling
investment undertaken pursuant to the Transaction.


 

















 


II.
PROGRAM AGREEMENT AMENDMENTS.


 


The
parties hereby acknowledge and agree that the Program Agreement shall be
amended as follows:


 


1.              The definition of “Working
Capital Lender” is hereby deleted and replaced with the following:


 


a.              “Working Capital Lender”
means, individually and collectively, JPMorgan Chase, N.A., as administrative
agent (and any successor thereto) and the lenders from time to time party to (i) that
certain Credit Agreement, dated as of June 9, 2006 (as amended, the “Credit
Agreement”), by and among Retailer, on the one hand, and JP Morgan Chase
Bank, National Association (as administrative agent), Bank of America, N.A. (as
syndication agent) and the other lenders from time to time party thereto, on
the other, or (ii) any working capital or other credit facility that replaces
the Credit Agreement in connection with a refinancing thereof.


 


2.              The following new
definitions are hereby added to the Program Agreement:


 


a.              “Increased Net Cost of
Sales” means, as of any date, the amount (expressed as a percentage) by
which the Net Cost of Sales for Retailer for the twelve (12) month period
immediately preceding Bank’s notice of New Pricing would have exceeded Retailer’s
actual Net Cost of Sales during such twelve (12) month period if Bank’s
proposed New Pricing had been effectuated at the beginning of such twelve (12)
month period.


 


b.             “Net Cost of Sales”
means, as of any date, the percentage cost to Retailer of Program-financed
sales, expressed in basis points, represented by the quotient, the numerator of
which is aggregate Program Fees paid by Retailer during the immediately
preceding twelve (12) month period and the denominator of which is Net Program
Sales for such period. Alterations to any Promotional Rate as a result of the
application of Section 3.6 (and the corresponding increase or decrease in
the aggregate amount of Program Fees paid during any period based thereon)
shall not be included the calculation of the Net Cost of Sales.


 


c.              “New Pricing” has the
meaning given to it in Section 9.2(m).


 


3.              Section 3.5(b) of
the Program Agreement is hereby deleted and replaced with the following:


 


a.              Beginning in January 2010,
and at the end of each six (6) month period thereafter during the Term,
Bank, in conjunction with Retailer, will


 

















 


review
and evaluate the effectiveness of the Program generally (including the
credit-based promotion sales mix, the overall level of sales charged to
Accounts, and Account fraud and credit losses during such period), as well as
evaluating the performance of each credit-based promotion during such period.
Based on such review, Bank may, after not less than thirty (30) days’ prior
notice to Retailer, adjust the Base Rate and, for any credit-based promotion,
terminate such promotion or adjust the Promotional Rate applicable thereto.
With respect to any adjustments to the Promotional Rates pursuant to this Section 3.5(b),
Retailer shall have the rights set forth in Section 9.2(m).


 


4.              Section 9.1 of the
Program Agreement is hereby amended by deleting the reference to February 15,
2011 and replacing it with February 15, 2012.


 


5.              Section 9.2(m) of
the Program Agreement is hereby deleted and replaced with the following:


 


a.              Retailer shall have the
right to terminate the Agreement as set forth below if, pursuant to Section 3.5(b),
Bank elects to increase the Program Fee Percentages set forth on Schedule 3.5
(in each case “New Pricing”); provided, that Retailer may not
elect to terminate this Agreement under this Section 9.2(m) unless
the New Pricing would, assuming implementation of such New Pricing on the date
such New Pricing is proposed (even if Bank’s notice of New Pricing indicates a
later effective date), result in Increased Net Cost of Sales of at least ten
percent (10%), which calculation shall exclude any cost of funds adjustments
contemplated in Section 3.6 (by way of example, if Retailer’s Net Cost of
Sales was 400 basis points and the New Pricing would result in Net Cost of
Sales of 446 basis points, then the ten percent (10%) Increased Net Cost of
Sales threshold would be exceeded). If the Increased Net Cost of Sales
threshold has been exceeded, Retailer may only terminate this Agreement under
this Section 9.2(m) after it has completed the “Competitive Pricing
Procedures”. For purposes of this Section 9.2(m), “Competitive Pricing
Procedures” means the following procedures, which shall be implemented if
the Increased Net Cost of Sales exceeds the threshold amount and Retailer
asserts that such New Pricing is materially non-competitive. In such case,
Retailer will have sixty (60) days from the date of Bank’s notice to Retailer
setting forth the proposed New Pricing to obtain a bona fide written proposal
from an issuer of private label credit programs (“Competing Offer”) and
to submit such Competing Offer to Bank. If Retailer fails to submit a Competing
Offer within such period, then Retailer’s option to terminate this Agreement as
a result of such New Pricing will expire. If Retailer presents Bank with a
Competing Offer and Bank does not meet the Competing Offer (in an economic
sense, taking into account all proposed terms of a Competing Offer relevant to
the terms of the Program), then over the sixty (60) day 


 

















 


period
following Bank’s receipt of the Competing Offer (the “Negotiation Period”),
Retailer and Bank will use commercially reasonable efforts to negotiate
mutually agreeable New Pricing. If Retailer and Bank are unable to agree on New
Pricing by the end of the Negotiation Period, then either party may, during the
thirty (30) days immediately following the end of the Negotiation Period, give a written notice of termination to the other party. This Agreement will
terminate sixty (60) days after any such termination notice. In each case,
regardless of whether Retailer terminates this Agreement, the New Pricing shall
become effective immediately upon Bank’s notice thereof to Retailer (unless
Bank’s notice of New Pricing indicates a later date) and shall remain effective
until the Final Liquidation Date or the date when Bank and Retailer agree on
other pricing. 


 


Except
for the waivers and amendments set forth in this letter agreement, the terms
and conditions of the Program Agreement shall remain in full force and effect.
In the event of any conflict between the Program Agreement and the terms of
this letter agreement, this letter agreement shall control. Upon the execution
and delivery by Retailer and GEMB, this letter agreement shall be deemed
effective as of the date hereof.


 


If
you agree to the foregoing, please have an authorized signatory of both SCC and
SCRC sign below and return a fully executed copy of this letter to Paul
Boeckman at (866.837.5765).


 


Sincerely,


GE
MONEY BANK


 


	
  /s/
  John McElligott

  	
   

  
	
  Name:

  	
  John
  McElligott

  	
   

  
	
  Title:

  	
  V/P
  Finance

  	
   

  



 


 


ACKNOWLEDGED
AND AGREED TO: 


 


SELECT
COMFORT CORPORATION


 


	
  /s/
  James C. Raabe

  	
   

  
	
  Name:

  	
  James
  C. Raabe

  	
   

  
	
  Title:

  	
  CFO

  	
   

  



 


SELECT
COMFORT RETAIL CORPORATION


 


	
  /s/
  James C. Raabe

  	
   

  
	
  Name:

  	
  James
  C. Raabe

  	
   

  
	
  Title:

  	
  CFO