Exhibit 10.5


 


Execution
Version


AMENDMENT NO. 11 TO CREDIT AGREEMENT


 


This Amendment No. 11 to Credit Agreement (this “Eleventh
Amendment”) is entered into as of May 22, 2009 by and among Select
Comfort Corporation (the “Company”), JPMorgan Chase Bank, National
Association, as Administrative Agent and Collateral Agent, Bank of America,
N.A., as Syndication Agent, and the financial institutions signatories hereto
as lenders (the “Lenders”).


 


RECITALS


 


A.            The
undersigned are parties 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, Amendment No. 3 to Credit Agreement dated as of May 30, 2008,
Amendment No. 4 to Credit Agreement dated as of December 2, 2008,
Amendment No. 5 to Credit Agreement dated as of January 2, 2009,
Amendment No. 6 to Credit Agreement dated as of January 15, 2009 (“Amendment
No. 6”), Amendment No. 7 to Credit Agreement dated as of January 31,
2009, Amendment No. 8 to Credit Agreement dated as of February 28,
2009, Amendment No. 9 to Credit Agreement dated as of April 18, 2009,
and Amendment No. 10 to Credit Agreement dated as of May 8, 2009 (the
“Credit Agreement”). Unless otherwise specified herein, capitalized
terms used in this Eleventh Amendment shall have the meanings ascribed to them
by the Credit Agreement.


 


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


 


C.            The
undersigned Lenders are willing to amend the Credit Agreement and to grant a
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.             Amendments
to Credit Agreement. On the Effective Date (as
defined below), the Credit Agreement is hereby amended as follows:


 


(a)           The
definition of “Applicable Rate” appearing in section 1.01 of the Credit Agreement
is hereby amended by restating such definition in full as follows:


 


“Applicable Rate” means,
for any day, with respect to any ABR Loan, Eurocurrency Loan or the facility
fees payable hereunder, the applicable rate per annum set forth on Schedule
1.01 under the caption “ABR Spread” or “Facility Fee Rate”, as the case may
be.


 


(b)           Section 5.01(b) of the Credit Agreement is hereby amended by deleting


 

















 


the number “45” appearing therein and replacing it with
the number “40”, and by deleting the number “30” appearing therein and
replacing it with the number “25”.


 


(c)           Sections
6.13 of the Credit Agreement is hereby amended by restating such section in
full as follows:


 


SECTION 6.13 Minimum Availability. The Company shall not permit the outstanding
principal balance of the Loans plus the LC Exposure to exceed at any time the
aggregate amount of the Commitments less $10,000,000 through June 30,
2009, and $5,000,000 thereafter.


 


(d)           Article VI
of the Credit Agreement is hereby amended to add the following new Section 6.16
at the end thereof:


 


SECTION 6.16 Cash Usage. The Company shall not (i) other than with
respect to the Secured Obligations, pay, or permit any Subsidiary to pay, any
principal, interest or other sums on any of their Indebtedness or other
obligations not at the time due and payable, except for payments to landlords
not to exceed $1,500,000 in the aggregate after May 22, 2009 for the early
termination of store leases, or (ii) at the close of business on any
Business Day maintain aggregate cash and cash equivalents for itself and its
Subsidiaries in an amount greater than $5,000,000.


 


(e)           Schedule
1.01 of the Credit Agreement is hereby amended by restating such schedule in
full as set forth on Annex I hereto.


 


2.             Limited Waiver. On the Effective Date, the Administrative Agent and
the Lenders signatory hereto hereby waive the Company’s (i) breach of Section 5.01(a) of
the Credit Agreement occasioned by its delivery of an audit for fiscal year
2008 with a “going concern” qualification, (ii) breach of Section 6.09
of the Credit Agreement for the respective fiscal period ending on or about December 31,
2008 and other applicable fiscal periods ending on or prior to a Waiver
Termination Event, (iii) breach of Section 6.10 of the Credit
Agreement for the respective fiscal period ending on or about March 31,
2009 and other applicable fiscal periods ending on or prior to a Waiver
Termination Event, and (iv) breach of the financial covenant set forth in Section 6.12
of the Credit Agreement for the fiscal period ending on or about December 31,
2008 and other applicable fiscal periods ending on or prior to a Waiver
Termination Event, provided
such waivers shall expire on the occurrence of any Waiver Termination Event,
and upon such expiration the terms and provisions of Sections 5.01(a), 6.09,
6.10 and 6.12 of the Credit Agreement shall be effective with the same force
and effect under the Credit Agreement as if such waivers had not been given.


 


As used in this paragraph 2:


 


“Waiver Termination Event” means
the earliest to occur of (A) 5 p.m. Chicago time on July 31, 2009, (B) if
at any time Capital Expenditures for the period commencing on the first day of
the fiscal month for January, 2009 through the date of determination exceeds
$4,000,000 in the aggregate, (C) the Company shall amend, supplement or
otherwise modify the Securities Purchase Agreement without the prior written
consent of the Administrative Agent in each instance, provided such consent has
not been


 


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unreasonably withheld, (D) failure of the Company by June 1,
2009 to file with the Securities and Exchange Commission (the “SEC”) its proxy
statement for soliciting shareholder approval of the sale of its common stock
pursuant to the Securities Purchase Agreement, (E) failure of the Company
to commence solicitation to its shareholders of its proxy statement by June 17,
2009, (F) failure of the Company to obtain by July 24, 2009 approval
of its shareholders to consummate the sale of its common stock under the
Securities Purchase Agreement, (G) either the Company or the Buyer (as
defined in the Securities Purchase Agreement) shall terminate or otherwise
disaffirm its obligations under the Securities Purchase Agreement, or (H) the
Securities Purchase Agreement at any time shall cease to be in full force and
effect, provided that, in the event the SEC shall notify the Company of its
intent to review or issue comments with respect to the Compnay’s proxy
statement timely filed in accordance with the foregoing clause (D), each of the
dates specified in clauses (A), (E) and (F) above shall be deemed to
have been extended by forty-five calendar days.


 


“Securities Purchase Agreement” means that certain
Securities Purchase Agreement, dated as of May 22, 2009, by and among the
Company, Sterling SC Investors, LLC and the other Buyers designated therein, as
amended, modified or otherwise supplemented from time to time.


 


3.               Effect on Amendment No. 10. This Eleventh Amendment supersedes and replaces Amendment No. 10 as
of the Effective Date hereof. To the extent any term or provision of Amendment No. 10
is inconsistent with this Eleventh Amendment, the terms and provisions of this
Eleventh Amendment shall govern after the Effective Date hereof.


 


4.               Acknowledgement. The Company and Subsidiary Guarantors acknowledge that the Administrative
Agent and the Lenders have no obligation or commitment to enter into any
amendments to the Credit Agreement, including those contemplated by the Securities
Purchase Agreement, and any such amendments shall require the consent of
Required Lenders or all Lenders, as applicable, in their sole discretion in
each instance.


 


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


 


(a)             Its
execution, delivery and performance of this Eleventh Amendment has been duly
authorized by all necessary corporate action and this Eleventh Amendment is its
legal, valid and binding obligation enforceable against it 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).


 


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


 


6.                Effective Date. This Eleventh Amendment shall become effective upon receipt by the
Administrative Agent of (i) duly executed counterparts of this Eleventh
Amendment from the Company, the Subsidiary Guarantors and all the Lenders, (ii) the
Reaffirmation of Guaranty in the form attached hereto as Exhibit A executed by each of the Subsidiary Guarantors, (iii) copies of the
Company’s and each Subsidiary Guarantor’s board of director’s resolutions,
certified by the Secretary or Assistant Secretary thereof, and in form and
substance satisfactory to the Administrative Agent, authorizing this Eleventh
Amendment, the Securities Purchase Agreement, and the transactions contemplated
hereby and thereby, (iv) a certificate of the Company’s Secretary or
Assistant Secretary certifying that attached thereto is a true and correct copy
of the executed Securities Purchase Agreement, including all exhibits,
schedules, amendments and other modifications thereto, (v) a written
opinion of counsel to the Company and the Subsidiary Guarantors in form and
substance satisfactory to the Administrative Agent, (vi) payment to the
Administrative Agent, in immediately available funds for the ratable benefit of
the Lenders, of an amendment fee of $100,000, which fee shall be deemed fully
earned and nonrefundable on the Effective Date, provided such amount shall be
credited against any amendment fee payable to the Administrative Agent for the
benefit of the Lenders in connection with the closing, if any, of the
transactions contemplated by the Securities Purchase Agreement, and (vii) payment
of all other fees due the Administrative Agent, including, without limitation,
all fees and out-of-pocket costs and expenses of counsel to the Administrative
Agent and of the financial advisor retained by its counsel invoiced through the
date hereof, and all fees payable pursuant to Section 2.11(c) of the
Credit Agreement.


 


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. Without limiting the generality of the foregoing, the Company hereby
reaffirms its obligations under paragraph 4(b) of Amendment No. 6
with respect to the deposit into a cash collateral account with the Collateral
Agent of any federal or state income tax refunds received hereafter by or for
the benefit of the Company or any Subsidiary Guarantor.


 


(b)              The
execution, delivery and effectiveness of this Eleventh 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
Eleventh 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 the Subsidiary Guarantors 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


 


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“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 Eleventh 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 the
Subsidiary Guarantors 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 the
Subsidiary Guarantors 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 or the Subsidiary Guarantors 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 Eleventh 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).


 


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


 


12.           Counterparts. This Eleventh 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]


 


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


 


 


	
   

  	
  SELECT
  COMFORT CORPORATION,

  
	
   

  	
  Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  James C. Raabe

  
	
   

  	
  Name:

  	
  James
  C. Raabe

  
	
   

  	
  Title:

  	
  CFO

  



 


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  JPMORGAN
  CHASE BANK, NATIONAL

  
	
   

  	
  ASSOCIATION,
  individually as a Lender, 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 as a

  
	
   

  	
  Lender
  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 Metha

  
	
   

  	
  Name:

  	
  Sugam
  Metha

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS
  FARGO BANK, NATIONAL ASSOCIATION,

  
	
   

  	
  as
  a Lender

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Troy Jefferson

  
	
   

  	
  Name:

  	
  Troy
  Jefferson

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BRANCH
  BANKING AND TRUST CO., as a

  
	
   

  	
  Lender

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Troy R. Weaver

  
	
   

  	
  Name:

  	
  Troy
  R. Weaver

  
	
   

  	
  Title:

  	
  Senior
  Vice President

  



 

















 


ANNEX I


 


Schedule 1.01


 


PRICING SCHEDULE


 


	
   

  	
   

  	
  APPLICABLE

  RATE

  	
   

  
	
  Facility Fee Rate

  	
   

  	
  0.75

  	
  %

  
	
  ABR Spread

  	
   

  	
  5.50

  	
  %

  



 


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EXHIBIT A


 


REAFFIRMATION OF GUARANTY


 


Each
of the undersigned hereby acknowledges receipt of a copy of Amendment No. 11
to the Credit Agreement (the “Eleventh Amendment”) dated as of May 22,
2009, 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 Eleventh Amendment).


 


Dated
as of May 22, 2009


 


 


	
   

  	
  SELECT
  COMFORT RETAIL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  James C. Raabe

  
	
   

  	
  Name:

  	
  James
  C. Raabe

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  SELECT
  COMFORT CANADA HOLDING INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  James C. Raabe

  
	
   

  	
  Name:

  	
  James
  C. Raabe

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  	
   

  
	
   

  	
  SELECT
  COMFORT.COM CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  James C. Raabe

  
	
   

  	
  Name:

  	
  James
  C. Raabe

  
	
   

  	
  Title:

  	
  CFO