Document:

exhibit10_4.htm

    
      

      

    

    

     

    SECURITY
AGREEMENT

     

    THIS SECURITY AGREEMENT (the
“Agreement”), is entered into and made
effective as of May 21, 2008, by and between PLATINA ENERGY GROUP, INC.,
(the “Company”), and Trafalgar Capital Specialized
Investment Fund, Luxembourg   (the “Secured
Party”).

     

    WHEREAS, the Company shall
issue and sell to the Secured Party, as provided in the Securities Purchase
Agreement dated the date hereof between the Company and the Secured
Party (the “Securities Purchase Agreement”), and the Secured Party shall
purchase up to Four Million Six Hundred Thousand Dollars ($4,600,000) of secured
promissory notes (the “Notes”), which shall
be convertible into shares of the Company’s common stock, par value $.001 (the
“Common Stock”)
(as converted, the “Conversion Shares”),
for a total purchase price of up to Four Million Six Hundred Thousand
Dollars ($4,600,000), in the respective amounts set forth opposite each
Buyer(s) name on Schedule I attached to the Securities Purchase
Agreement;

     

    WHEREAS, to induce the Secured
Party to enter into the transaction contemplated by the Securities Purchase
Agreement, the Notes, the Investor Registration Rights Agreement, the
Irrevocable Transfer Agent Instructions, the Pledge Agreement, and the Escrow
Agreement, each as defined in
the Securities Purchase Agreement (collectively referred to as the “Transaction
Documents”), the Company hereby grants to the Secured Party a security
interest in and to the pledged collateral identified on Attachment 1 hereto
until the satisfaction of the Obligations, as defined herein below.

     

    NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein contained, and for
other good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:

     

    ARTICLE
1

     

    DEFINITIONS AND
INTERPRETATIONS

     

    
      	
               
      

            	
              Section
      2

            	
              Recitals.

            

    

     

    The above
recitals are true and correct and are incorporated herein, in their entirety, by
this reference.

     

    
      	
               
      

            	
              Section
      3

            	
              Interpretations.

            

    

     

    Nothing
herein expressed or implied is intended or shall be construed to confer upon any
person other than the Secured Party any right, remedy or claim under or by
reason hereof.

     

    
      	
               
      

            	
              Section
      4

            	
              Obligations
      Secured.

            

    

     

    The
obligations secured hereby are any and all obligations of the Company now
existing or hereinafter incurred to the Secured Party, whether oral or written
and whether arising before, on or after the date hereof including, without
limitation, those obligations of the Company to the Secured Party under the
Securities Purchase Agreement, the Notes, the Investor Registration Rights
Agreement and Irrevocable Transfer Agent Instructions, and any other amounts now
or hereafter owed to the Secured Party by the Company thereunder or hereunder
(collectively, the “Obligations”).

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    ARTICLE
5

     

    PLEDGED COLLATERAL,
ADMINISTRATION OF COLLATERAL

     

     

    AND TERMINATION OF SECURITY
INTEREST

     

    
      	
               
      

            	
              Section
      6

            	
              Grant of Security
      Interest.

            

    

     

    7       As
security for the Obligations, Company hereby pledges to Secured Party and grants
to Secured Party a security interest in all right, title and interests of
Company and its subsidiaries in and to the property described in Attachment 1
hereto, whether now existing or hereafter from time to time acquired
(collectively, the  “Pledged
Collateral.”).

     

    8             Simultaneously
with the execution and delivery of this Agreement, the Company shall make,
execute, acknowledge, file, record and deliver to the Secured Party any
documents reasonably requested by the Secured Party to perfect its security
interest in the Pledged Collateral.  Simultaneously with the execution
and delivery of this Agreement, the Company shall make, execute, acknowledge and
deliver to the Secured Party such documents and instruments, including, without
limitation, financing statements, certificates, affidavits and forms as may, in
the Secured Party’s reasonable judgment, be necessary to effectuate, complete or
perfect, or to continue and preserve, the security interest of the Secured Party
in the Pledged Collateral, and the Secured Party shall hold such documents and
instruments as secured party, subject to the terms and conditions contained
herein.

     

    
      	
               
      

            	
              Section
      9

            	
              Rights; Interests;
      Etc.

            

    

     

    10             So
long as no Event of Default (as hereinafter defined) shall have occurred
and be continuing:

     

    11                   the
Company and its subsidiaries shall be entitled to exercise any and all rights
pertaining to the Pledged Collateral or any part thereof for any purpose not
inconsistent with the terms hereof; and

     

    12                   the
Company and its subsidiaries shall be entitled to receive and retain any and all
payments paid or made in respect of the Pledged Collateral.

     

    13             Upon
the occurrence and during the continuance of an Event of Default:

     

    14                   All
rights of the Company and/or its subsidiaries to exercise the rights which it
would otherwise be entitled to exercise pursuant to
Section 2.2(a)(i) hereof and to receive payments which it would
otherwise be authorized to receive and retain pursuant to
Section 2.2(a)(ii) hereof shall be suspended, and all such rights
shall thereupon become vested in the Secured Party who shall thereupon have the
sole right to exercise such rights and to receive and hold as Pledged Collateral
such payments; provided,
however, that if the Secured Party shall become entitled and shall elect
to exercise its right to realize on the Pledged Collateral pursuant to
Article 5 hereof, then all cash sums received by the Secured Party, or held
by Company and/or its subsidiaries for the benefit of the Secured Party and paid
over pursuant to Section 2.2(b)(ii) hereof, shall be applied against
any outstanding Obligations; and

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    15                   All
interest, dividends, income and other payments and distributions which are
received by the Company and/or its subsidiaries contrary to the provisions of
Section 2.2(b)(i) hereof shall be received in trust for the benefit of
the Secured Party, shall be segregated from other property of the Company and/or
its subsidiaries and shall be forthwith paid over to the Secured Party;
or

     

    16                   The
Secured Party in its sole discretion shall be authorized to sell any or all of
the Pledged Collateral at public or private sale in order to recoup all of the
outstanding principal plus accrued interest owed pursuant to the Notes as
described herein

     

    17             Each
of the following events shall constitute a default under this Agreement (each an
“Event of
Default”):

     

    18                   any
default, whether in whole or in part, shall occur in the payment to the Secured
Party of principal, interest or other item comprising the Obligations as and
when due or with respect to any other debt or obligation of the Company to a
party other than the Secured Party;

     

    19                   any
default, whether in whole or in part, shall occur in the due observance or
performance of any obligations or other covenants, terms or provisions to be
performed under this Agreement or the Transaction Documents;

     

    20                   the
Company and/or its subsidiaries shall:  (1) make a general
assignment for the benefit of its creditors; (2) apply for or consent to
the appointment of a receiver, trustee, assignee, custodian, sequestrator,
liquidator or similar official for itself or any of its assets and properties;
(3) commence a voluntary case for relief as a debtor under the United
States Bankruptcy Code; (4) file with or otherwise submit to any
governmental authority any petition, answer or other document
seeking:  (A) reorganization, (B) an arrangement with
creditors or (C) to take advantage of any other present or future
applicable law respecting bankruptcy, reorganization, insolvency, readjustment
of debts, relief of debtors, dissolution or liquidation; (5) file or
otherwise submit any answer or other document admitting or failing to contest
the material allegations of a petition or other document filed or otherwise
submitted against it in any of the proceedings set forth in this Section
2.2(c)(ii) under any such applicable law, or (6) be adjudicated a bankrupt
or insolvent by a court of competent jurisdiction; or 21 any case, proceeding or
other action shall be commenced against the Company for the purpose of
effecting, or an order, judgment or decree shall be entered by any court of
competent jurisdiction approving (in whole or in part) anything specified
in Section 2.2(c)(ii) hereof, or any receiver, trustee, assignee,
custodian, sequestrator, liquidator or other official shall be appointed with
respect to the Company and/or its subsidiaries, or shall be appointed to take or
shall otherwise acquire possession or control of all or a substantial part of
the assets and properties of the Company and/or its subsidiaries, and any of the
foregoing shall continue unstayed and in effect for any period of thirty
(30) days.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    ARTICLE
22

     

    ATTORNEY-IN-FACT;
PERFORMANCE

     

    
      	
               
      

            	
              Section
      23

            	
              Secured Party
      Appointed Attorney-In-Fact.

            

    

     

    Upon the
occurrence of an Event of Default, the Company hereby appoints the Secured Party
as its attorney-in-fact, with full authority in the place and stead of the
Company and in the name of the Company or otherwise, from time to time in the
Secured Party’s discretion to take any action and to execute any instrument
which the Secured Party may reasonably deem necessary to accomplish the purposes
of this Agreement, including, without limitation, to receive and collect all
instruments made payable to the Company representing any payments in respect of
the Pledged Collateral or any part thereof and to give full discharge for the
same.  The Secured Party may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose, or realize on the Pledged Collateral as
and when the Secured Party may determine.  To facilitate collection,
the Secured Party may notify account debtors and obligors on any Pledged
Collateral or Pledged Collateral to make payments directly to the Secured
Party.

     

    
      	
               
      

            	
              Section
      24

            	
              Secured Party May
      Perform.

            

    

     

    If the
Company fails to perform any agreement contained herein, the Secured Party, at
its option, may itself perform, or cause performance of, such agreement, and the
expenses of the Secured Party incurred in connection therewith shall be included
in the Obligations secured hereby and payable by the Company under
Section 8.3.

     

    ARTICLE
25

     

    REPRESENTATIONS AND
WARRANTIES

     

    
      	
               
      

            	
              Section
      26

            	
              Authorization;
      Enforceability.

            

    

     

    Each of
the parties hereto represents and warrants that it has taken all action
necessary to authorize the execution, delivery and performance of this Agreement
and the transactions contemplated hereby; and upon execution and delivery, this
Agreement shall constitute a valid and binding obligation of the respective
party, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors’ rights or by the principles governing the
availability of equitable remedies.

     

    
      	
               
      

            	
              Section
      27

            	
              Ownership of Pledged
      Collateral.

            

    

     

    The
Company warrants and represents that it is the legal and beneficial owner of the
Pledged Collateral free and clear of any lien, security interest, option or
other charge or encumbrance except for the security interest created by this
Agreement.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    ARTICLE
28

     

    DEFAULT; REMEDIES;
SUBSTITUTE COLLATERAL

     

    
      	
               
      

            	
              Section
      29

            	
              Default and
      Remedies.

            

    

     

    30             If
an Event of Default described in Section 2.2(c)(i) or
(ii) occurs, then in each such case the Secured Party may declare the
Obligations to be due and payable immediately, by a notice in writing to the
Company, and upon any such declaration, the Obligations shall become immediately
due and payable.  If an Event of Default described in
Sections 2.2(c)(iii) or (iv) occurs and is continuing for the
period set forth therein, then the Obligations shall automatically become
immediately due and payable without declaration or other act on the part of the
Secured Party.

     

    31             Upon
the occurrence of an Event of Default, the Secured Party shall: (i) be
entitled to receive all distributions with respect to the Pledged Collateral,
(ii) to cause the Pledged Collateral to be transferred into the name of the
Secured Party or its nominee, (iii) to dispose of the Pledged Collateral,
and (iv) to realize upon any and all rights in the Pledged Collateral then
held by the Secured Party.

     

    
      	
               
      

            	
              Section
      32

            	
              Method of Realizing
      Upon the Pledged Collateral: Other
  Remedies.

            

    

     

    Upon the
occurrence of an Event of Default, in addition to any rights and remedies
available at law or in equity, the following provisions shall govern the Secured
Party’s right to realize upon the Pledged Collateral:

     

    33             Any
item of the Pledged Collateral may be sold for cash or other value in any number
of lots at brokers board, public auction or private sale and may be sold without
demand, advertisement or notice (except that the Secured Party shall give the
Company ten (10) days’ prior written notice of the time and place or
of the time after which a private sale may be made (the “Sale Notice”)), which
notice period shall in any event is hereby agreed to be commercially
reasonable.  At any sale or sales of the Pledged Collateral, the
Company may bid for and purchase the whole or any part of the Pledged Collateral
and, upon compliance with the terms of such sale, may hold, exploit and dispose
of the same without further accountability to the Secured Party.  The
Company will execute and deliver, or cause to be executed and delivered, such
instruments, documents, assignments, waivers, certificates, and affidavits and
supply or cause to be supplied such further information and take such further
action as the Secured Party reasonably shall require in connection with any such
sale.

     

    34             Any
cash being held by the Secured Party as Pledged Collateral and all cash proceeds
received by the Secured Party in respect of, sale of, collection from, or other
realization upon all or any part of the Pledged Collateral shall be applied as
follows:

     

    35                   to
the payment of all amounts due the Secured Party for the expenses reimbursable
to it hereunder or owed to it pursuant to Section 8.3 hereof;

     

    36                   to
the payment of the Obligations then due and unpaid.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    37                   the
balance, if any, to the person or persons entitled thereto, including, without
limitation, the Company.

     

    38             In
addition to all of the rights and remedies which the Secured Party may have
pursuant to this Agreement, the Secured Party shall have all of the rights and
remedies provided by law, including, without limitation, those under the Uniform
Commercial Code.

     

    39                   If
the Company fails to pay such amounts due upon the occurrence of an Event of
Default which is continuing, then the Secured Party may institute a judicial
proceeding for the collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same against the
Company and collect the monies adjudged or decreed to be payable in the manner
provided by law out of the property of Company, wherever situated.

     

    40                   The
Company agrees that it shall be liable for any reasonable fees, expenses and
costs incurred by the Secured Party in connection with enforcement, collection
and preservation of the Transaction Documents, including, without limitation,
reasonable legal fees and expenses, and such amounts shall be deemed included as
Obligations secured hereby and payable as set forth in Section 8.3
hereof.

     

    
      	
               
      

            	
              Section
      41

            	
              Proofs of
      Claim.

            

    

     

    In case
of the pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relating to the Company or the property of the Company or of such
other obligor or its creditors, the Secured Party (irrespective of whether the
Obligations shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Secured Party shall have made any
demand on the Company for the payment of the Obligations), subject to the rights
of Previous Security Holders, shall be entitled and empowered, by intervention
in such proceeding or otherwise:

     

    42                   to
file and prove a claim for the whole amount of the Obligations and to file such
other papers or documents as may be necessary or advisable in order to have the
claims of the Secured Party (including any claim for the reasonable legal fees
and expenses and other expenses paid or incurred by the Secured Party permitted
hereunder and of the Secured Party allowed in such judicial proceeding),
and

     

    43                   to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by the Secured Party to make such payments to
the Secured Party and, in the event that the Secured Party shall consent to the
making of such payments directed to the Secured Party, to pay to the Secured
Party any amounts for expenses due it hereunder.

     

    
      	
               
      

            	
              Section
      44

            	
              Duties Regarding
      Pledged Collateral.

            

    

     

    The
Secured Party shall have no duty as to the collection or protection of the
Pledged Collateral or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody and reasonable care of any of the
Pledged Collateral actually in the Secured Party’s possession.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    ARTICLE
45

     

    AFFIRMATIVE
COVENANTS

     

    The
Company covenants and agrees that, from the date hereof and until the
Obligations have been fully paid and satisfied, unless the Secured Party shall
consent otherwise in writing (as provided in Section 8.4
hereof):

     

    
      	
               
      

            	
              Section
      46

            	
              Existence, Properties,
      Etc.

            

    

     

    47             The
Company shall do, or cause to be done, all things, or proceed with due diligence
with any actions or courses of action, that may be reasonably necessary
(i) to maintain Company’s due organization, valid existence and good
standing under the laws of its state of incorporation, and (ii) to preserve
and keep in full force and effect all qualifications, licenses and registrations
in those jurisdictions in which the failure to do so could have a Material
Adverse Effect (as defined below); and (b) the Company shall not do, or
cause to be done, any act impairing the Company’s corporate power or authority
(i) to carry on the Company’s business as now conducted, and (ii) to
execute or deliver this Agreement or any other document delivered in connection
herewith, including, without limitation, any UCC-1 Financing Statements required
by the Secured Party to which it is or will be a party, or perform any of
its obligations hereunder or thereunder.  For purpose of this
Agreement, the term “Material Adverse
Effect” shall mean any material and adverse affect as determined by
Secured Party in its sole discretion, whether individually or in the aggregate,
upon (a) the Company’s assets, business, operations, properties or
condition, financial or otherwise or results of operations of the Company, taken
as a whole, excluding any change, event, circumstance or effect that is caused
by changes in general economic conditions or changes generally affecting the
industry in which the Company operates (provided that such changes do not affect
the Company in a materially disproportionate manner); or (b) the Company’s
ability to make payment as and when due of all or any part of the Obligations;
or (c) the Pledged Collateral.

     

    
      	
               
      

            	
              Section
      48

            	
              Financial Statements
      and Reports.

            

    

     

    The
Company shall furnish to the Secured Party such financial data as the Secured
Party may reasonably request.  Without limiting the foregoing, the
Company shall furnish to the Secured Party (or cause to be furnished to the
Secured Party) the following:

     

    (
a)             as
soon as practicable and in any event within ninety (90) days after the end of
each fiscal year of the Company, the balance sheet of the Company as of the
close of such fiscal year, the statement of earnings and retained earnings of
the Company as of the close of such fiscal year, and statement of cash flows for
the Company for such fiscal year, all in reasonable detail, prepared in
accordance with generally accepted accounting principles consistently applied,
certified by the chief executive and chief financial officers of the Company as
being true and correct and accompanied by a certificate of the chief executive
and chief financial officers of the Company, stating that the Company has kept,
observed, performed and fulfilled each covenant, term and condition of this
Agreement during such fiscal year and that no Event of Default hereunder has
occurred and is continuing, or if an Event of Default has occurred and is
continuing, specifying the nature of same, the period of existence of same and
the action the Company proposes to take in connection therewith;

     

    (
b)             within
thirty (30) days of the end of each calendar month, a balance sheet of the
Company as of the close of such month, and statement of earnings and retained
earnings of the Company as of the close of such month, all in reasonable detail,
and prepared substantially in accordance with generally accepted accounting
principles consistently applied, certified by the chief executive and chief
financial officers of the Company as being true and correct; and

     

    (
c)             promptly
upon receipt thereof, copies of all accountants' reports and accompanying
financial reports submitted to the Company by independent accountants in
connection with each annual examination of the Company.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    
      	
              Section
      6.3

            	
              Accounts and
      Reports.

            

    

     

    The
Company shall maintain a standard system of accounting in accordance with
generally accepted accounting principles consistently applied and provide, at
its sole expense, to the Secured Party the following:

     

    49             as
soon as available, a copy of any notice or other communication alleging any
nonpayment or other material breach or default, or any foreclosure or other
action respecting any material portion of its assets and properties, received
respecting any of the indebtedness of the Company in excess of $25,000 (other
than the Obligations), or any demand or other request for payment under any
guaranty, assumption, purchase agreement or similar agreement or arrangement
respecting the indebtedness or obligations of others in excess of $25,000,
including any received from any person acting on behalf of the Secured Party or
beneficiary thereof, except for supplier requests in the normal course of
business for payment of past due accounts payable invoices so long as such past
due amounts do not exceed in the aggregate $50,000 at any time; and

     

    50             within
fifteen (15) days after the making of each submission or filing, a copy of
any report, financial statement, notice or other document, whether periodic or
otherwise, submitted to the shareholders of the Company, or submitted to or
filed by the Company with any governmental authority involving or affecting (i)
the Company that could have a Material Adverse Effect; (ii) the
Obligations; (iii) any part of the Pledged Collateral; or (iv) any of
the transactions contemplated in this Agreement or the Transaction
Documents.

     

    
      	
              Section6.4.

            	
              Maintenance of Books
      and Records; Inspection.

            

    

     

    The
Company shall maintain its books, accounts and records in accordance with
generally accepted accounting principles consistently applied, and permit the
Secured Party, its officers and employees and any professionals designated by
the Secured Party in writing, during business hours and upon reasonable notice
to visit and inspect any of its properties (including but not limited to the
Pledged Collateral), corporate books and financial records, and to discuss its
accounts, affairs and finances with any employee, officer or director
thereof.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    
      	
              Section
      6.5.

            	
              Maintenance and
      Insurance.

            

    

     

    51             The
Company shall maintain or cause to be maintained, at its own expense, all of its
assets and properties in good working order and condition, making all necessary
repairs thereto and renewals and replacements thereof.

     

    52             The
Company shall maintain or cause to be maintained, at its own expense, insurance
in form, substance and amounts (including deductibles), which the Company deems
reasonably necessary to the Company’s business, (i) adequate to insure all
assets and properties of the Company, which assets and properties are of a
character usually insured by persons engaged in the same or similar business
against loss or damage resulting from fire or other risks included in an
extended coverage policy; (ii) against public liability and other tort
claims that may be incurred by the Company; (iii) as may be required by the
Transaction Documents and/or applicable law and (iv) as may be reasonably
requested by Secured Party, all with adequate, financially sound and reputable
insurers.

     

    
      	
              Section
      6.6.

            	
              Contracts and Other
      Collateral.

            

    

     

    The
Company shall perform all of its obligations under or with respect to each
instrument, receivable, contract and other intangible included in the Pledged
Collateral to which the Company is now or hereafter will be party on a timely
basis and in the manner therein required, including, without limitation, this
Agreement.

     

    
      	
              Section
      6.7.

            	
              Defense of Collateral,
      Etc.

            

    

     

    The
Company shall defend and enforce its right, title and interest in and to any
part of:  (a) the Pledged Collateral; and (b) if not
included within the Pledged Collateral, those assets and properties whose loss
could have a Material Adverse Effect, the Company shall defend the Secured
Party’s right, title and interest in and to each and every part of the Pledged
Collateral, each against all manner of claims and demands on a timely basis to
the full extent permitted by applicable law.

     

    
      	
              Section
      6.8.

            	
              Payment of Debts,
      Taxes, Etc.

            

    

     

    The
Company shall pay, or cause to be paid, all of its indebtedness and other
liabilities and perform, or cause to be performed, all of its obligations in
accordance with the respective terms thereof, and pay and discharge, or cause to
be paid or discharged, all taxes, assessments and other governmental charges and
levies imposed upon it, upon any of its assets and properties on or before the
last day on which the same may be paid without penalty, as well as pay all other
lawful claims (whether for services, labor, materials, supplies or
otherwise) as and when due

     

    
      	
              Section
      6.9.

            	
              Taxes and Assessments;
      Tax Indemnity.

            

    

     

    The
Company shall (a) file all tax returns and appropriate schedules thereto
that are required to be filed under applicable law, prior to the date of
delinquency, (b) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon the Company, upon its income and profits or upon
any properties belonging to it, prior to the date on which penalties attach
thereto, and (c) pay all taxes, assessments and governmental charges or
levies that, if unpaid, might become a lien or charge upon any of its
properties; provided,
however, that the Company in good faith may contest any such tax,
assessment, governmental charge or levy described in the foregoing clauses (b)
and (c) so long as appropriate reserves are maintained with respect
thereto.

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      	
              Section
      6.10.

            	
              Compliance with Law
      and Other Agreements.

            

    

     

    The
Company shall maintain its business operations and property owned or used in
connection therewith in compliance with (a) all applicable federal, state
and local laws, regulations and ordinances governing such business operations
and the use and ownership of such property, and (b) all agreements,
licenses, franchises, indentures and mortgages to which the Company is a party
or by which the Company or any of its properties is bound.  Except as
set forth in its cash flow projections provided to the Secured Party as set
forth in the Securities Purchase Agreement, without limiting the foregoing, the
Company shall pay all of its indebtedness promptly in accordance with the terms
thereof.

     

    
      	
              Section
      6.11.

            	
              Notice of
      Default.

            

    

     

    The
Company shall give written notice to the Secured Party of the occurrence of any
default or Event of Default under this Agreement, the Transaction Documents or
the Debenture any other agreement of Company for the payment of money, promptly
upon the occurrence thereof.

     

    
      	
              Section
      6.12.

            	
              Notice of
      Litigation.

            

    

     

    The
Company shall give notice, in writing, to the Secured Party of (a) any
actions, suits or proceedings wherein the amount at issue is in excess of
$50,000, instituted by any persons against the Company, or affecting any of the
assets of the Company, and (b) any dispute, not resolved within fifteen
(15) days of the commencement thereof, between the Company on the one hand and
any governmental or regulatory body on the other hand, which might reasonably be
expected to have a Material Adverse Effect on the business operations or
financial condition of the Company.

     

    ARTICLE
53

     

    NEGATIVE
COVENANTS

     

    The
Company covenants and agrees that, from the date hereof until the Obligations
have been fully paid and satisfied, the Company shall not, unless the Secured
Party shall consent otherwise in writing:

     

    
      	
               
      

            	
              Section
      54

            	
              Indebtedness.

            

    

     

     Other
than in the ordinary course of business consistent with past practice, the
Company shall not directly or indirectly permit, create, incur assume, permit to
exist, increase, renew or extend on or after the date hereof any additional debt
or permit any subsidiary of the Company to do or allow any of the foregoing
without the Secured Party’s prior written consent beyond that which is set forth
in Schedule 4(j) of the Securities Purchase
Agreement.   .

     

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              Section
      55

            	
              Liens and
      Encumbrances.

            

    

     

    Other
than in the ordinary course of business consistent with past
practice,  and except for such assignment, transfer, pledge, mortgage,
security interest or other lien or encumbrance as is outstanding on the date of
this Agreement, the Company shall not directly or indirectly make, create,
incur, assume or permit to exist any assignment, transfer, pledge, mortgage,
security interest or other lien or encumbrance of any nature in, to or against
any part of the Pledged Collateral or of the Company’s capital stock, or offer
or agree to do so, or own or assign, pledge or in any way transfer or encumber
its right to receive any income or other distribution or proceeds from any part
of the Pledged Collateral or the Company’s capital stock; or enter into any
sale-leaseback financing respecting any part of the Pledged Collateral as
lessee, or cause or assist the inception or continuation of any of the
foregoing.

     

    
      	
               
      

            	
              Section
      56

            	
              Certificate of
      Incorporation, By-Laws, Mergers, Consolidations, Acquisitions and
      Sales.

            

    

     

    Other
than in the ordinary course of business consistent with past practice, without
the prior express written consent of the Secured Party, the Company shall
not:  (a) Amend its Certificate of Incorporation or By-Laws; (b)
issue or sell any Common Stock or Preferred Stock without consideration or for a
consideration per share less than the bid price of the Common Stock determined
immediately prior to its issuance, (c) issue or sell any Preferred Stock,
warrant, option, right, contract, call, or other security or instrument granting
the holder thereof the right to acquire Common Stock without consideration or
for a consideration per share less than such Common Stock’s bid price value
determined immediately prior to its issuance, (c) be a party to any merger,
consolidation or corporate reorganization, (d) purchase or otherwise
acquire all or substantially all of the assets or stock of, or any partnership
or joint venture interest in, any other person, firm or entity, (e) enter
into any security instrument granting the holder a security interest in any of
the assets of the Company or sell, transfer or lease all or any substantial part
of the assets of the Company, nor (f) create any subsidiaries nor convey
any of its assets to any subsidiary.

     

    
      	
               
      

            	
              Section
      57

            	
              Management,
      Ownership.

            

    

     

    The
Company shall not materially change its ownership, executive staff or management
without the prior written consent of the Secured Party.  The
ownership, executive staff and management of the Company are material factors in
the Secured Party's willingness to institute and maintain a lending relationship
with the Company.

     

    
      	
               
      

            	
              Section
      58

            	
              Dividends,
      Etc.

            

    

     

    The
Company shall not declare or pay any dividend of any kind, in cash or in
property, on any class of its capital stock, nor purchase, redeem, retire or
otherwise acquire for value any shares of such stock, nor make any distribution
of any kind in respect thereof, nor make any return of capital to shareholders,
nor make any payments in respect of any pension, profit sharing, retirement,
stock option, stock bonus, incentive compensation or similar plan (except as
required or permitted hereunder), without the prior written consent of the
Secured Party.

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              Section
      59

            	
              Guaranties;
      Loans.

            

    

     

    Other
than in the ordinary course of business, and except for such guarantees or
liabilities as are outstanding on the date of this Agreement, the Company shall
not guarantee nor be liable in any manner, whether directly or indirectly, or
become contingently liable after the date of this Agreement in connection with
the obligations or indebtedness of any person or persons, except for (i) the
indebtedness currently secured by the liens identified on the Pledged Collateral
identified on Exhibit A hereto and (ii) the endorsement of negotiable
instruments payable to the Company for deposit or collection in the ordinary
course of business.  The Company shall not make any loan, advance or
extension of credit to any person other than in the normal course of its
business.

     

    
      	
               
      

            	
              Section
      60

            	
              Debt.

            

    

     

    Other
than in the ordinary course of business, and except for such indebtedness as is
outstanding on the date of this Agreement, without the prior written approval of
Trafalgar, the Company shall not create, incur, assume or suffer to exist any
additional indebtedness of any description whatsoever in an aggregate amount in
excess of $50,000 (excluding any indebtedness of the Company to the Secured
Party, trade accounts payable and accrued expenses incurred in the ordinary
course of business and the endorsement of negotiable instruments payable to the
Company, respectively for deposit or collection in the ordinary course of
business).

     

    
      	
               
      

            	
              Section
      61

            	
              Conduct of
      Business.

            

    

     

    The
Company will continue to engage in the business of the Company in the same
manner as heretofore conducted and only in the ordinary course consistent with
past practice.

     

    
      	
               
      

            	
              Section
      62

            	
              Places of
      Business.

            

    

     

    The
location of the Company’s chief place of business is at the address set forth
in  Section 8.1 hereof.  The Company shall not change the
location of its chief place of business, chief executive office or any place of
business disclosed to the Secured Party or move any of the Pledged Collateral
from its current location (other than in the ordinary course of
business) without thirty (30)
days' prior written notice to the Secured Party in each instance.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    ARTICLE
63

     

    MISCELLANEOUS

     

    
      	
               
      

            	
              Section
      64

            	
              Notices.

            

    

     

    All
notices or other communications required or permitted to be given pursuant to
this Agreement shall be in writing and shall be considered as duly given
on:  (a) the date of delivery, if delivered in person, by
nationally recognized overnight delivery service or
(b) five (5) days after mailing if mailed from within the
continental United States by certified mail, return receipt requested to the
party entitled to receive the same:

     

    
      	 
      	
              If
      to the Secured Party:

            	
              Trafalgar
      Capital Specialized Investment Fund

            
	 
      	 
      	
              8-10
      Rue Mathias Hardt

            
	 
      	 
      	
              BP
      3023

            
	 
      	 
      	
              L-1030
      Luxembourg

            
	 
      	 
      	
              Attention:
      Andrew Garai, Chairman of the Board of

            
	 
      	 
      	
              Trafalgar
      Capital Sarl, General Partner

            
	 
      	 
      	
              Facsimile:                                  011-44-207-405-0161
      and

                                      001-786-323-1651

            
	 
      	 
      	 
      
	 
      	
              With
      a copy to:

            	
              James
      G. Dodrill II, P.A.

            
	 
      	 
      	
              5800
      Hamilton Way

            
	 
      	 
      	
              Boca
      Raton, FL  33496

            
	 
      	 
      	
              Attention:                                  James
      Dodrill, Esq.

            
	 
      	 
      	
              Telephone:                                  (561)
      862-0529

            
	 
      	 
      	
              Facsimile:                                  (561)
      892-7787

            
	 
      	 
      	 
      
	 
      	
              And
      if to the Company:

            	
              Blair
      Merriam, CEO

            
	 
      	 
      	
              14850
      Montfort Drive, Suite 131

            
	 
      	 
      	
              Dallas,
      Texas 75254

            
	 
      	 
      	
              Telephone:
      (303) 881-2604

            
	 
      	 
      	
              Facsimile: (480)
      287-9560

            
	 
      	 
      	 
      
	 
      	
              With
      a copy to:

            	
              Michael
      J. Tauger, Esq.

            
	 
      	 
      	
              5445
      DTC Parkway, Suite 520

            
	 
      	 
      	
              Greenwood
      Village, CO 80111

            
	 
      	 
      	
              Telephone:
      (303) 713-0363

            
	 
      	 
      	
              Facsimile:
      (720)489-1587

            

    

    

    Any party
may change its address by giving notice to the other party stating its new
address.  Commencing on the tenth (10th) day after the giving of
such notice, such newly designated address shall be such party’s address for the
purpose of all notices or other communications required or permitted to be given
pursuant to this Agreement.

     

    
      	
               
      

            	
              Section
      65

            	
              Severability.

            

    

     

    If any
provision of this Agreement shall be held invalid or unenforceable, such
invalidity or unenforceability shall attach only to such provision and shall not
in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.

     

    
      	
               
      

            	
              Section
      66

            	
              Expenses.

            

    

     

    In the
event of an Event of Default, the Company will pay to the Secured Party the
amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel, which the Secured Party may incur in connection
with:  (i) the custody or preservation of, or the sale,
collection from, or other realization upon, any of the Pledged Collateral;
(ii) the exercise or enforcement of any of the rights of the Secured Party
hereunder or (iii) the failure by the Company to perform or observe any of
the provisions hereof.

     

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              Section
      67

            	
              Waivers, Amendments,
      Etc.

            

    

     

    The
Secured Party’s delay or failure at any time or times hereafter to require
strict performance by Company of any undertakings, agreements or covenants shall
not waiver, affect, or diminish any right of the Secured Party under this
Agreement to demand strict compliance and performance herewith.  Any
waiver by the Secured Party of any Event of Default shall not waive or affect
any other Event of Default, whether such Event of Default is prior or subsequent
thereto and whether of the same or a different type.  None of the
undertakings, agreements and covenants of the Company contained in this
Agreement, and no Event of Default, shall be deemed to have been waived by the
Secured Party, nor may this Agreement be amended, changed or modified, unless
such waiver, amendment, change or modification is evidenced by an instrument in
writing specifying such waiver, amendment, change or modification and signed by
the Secured Party.

     

    
      	
               
      

            	
              Section
      68

            	
              Continuing Security
      Interest.

            

    

     

    This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall: (i) remain in full force and effect until payment in full of the
Obligations; and (ii) be binding upon the Company and its successors and
heirs and (iii) inure to the benefit of the Secured Party and its
successors and assigns.  Upon the payment or satisfaction in full of
the Obligations, the Company shall be entitled to the return, at its expense, of
such of the Pledged Collateral as shall not have been sold in accordance with
Section 5.2 hereof or otherwise applied pursuant to the terms
hereof.

     

    
      	
               
      

            	
              Section
      69

            	
              Independent
      Representation.

            

    

     

    Each
party hereto acknowledges and agrees that it has received or has had the
opportunity to receive independent legal counsel of its own choice and that it
has been sufficiently apprised of its rights and responsibilities with regard to
the substance of this Agreement.

     

    
      	
               
      

            	
              Section
      70

            	
              Applicable
      Law:  Jurisdiction.

            

    

     

    This
Agreement shall be governed by and interpreted in accordance with the laws of
the State of Florida without regard to the principles of conflict of
laws.  The parties further agree that any action between them shall be
heard in Florida and expressly consent to the jurisdiction and venue of the
Florida State Court sitting in Broward County, Florida and the United States
District Court for the Southern District of Florida for the adjudication of any
civil action asserted pursuant to this Paragraph.

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              Section
      71

            	
              Waiver of Jury
      Trial.

            

    

     

    AS A
FURTHER INDUCEMENT FOR THE SECURED PARTY TO ENTER INTO THIS AGREEMENT AND TO
MAKE THE FINANCIAL ACCOMMODATIONS TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING RELATED IN ANY WAY TO THIS
AGREEMENT AND/OR ANY AND ALL OTHER DOCUMENTS RELATED TO THIS
TRANSACTION.

     

    
      	
               
      

            	
              Section
      72

            	
              Entire
      Agreement.

            

    

     

    This
Agreement constitutes the entire agreement among the parties and supersedes any
prior agreement or understanding among them with respect to the subject matter
hereof.

     

    

    

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    

    IN WITNESS WHEREOF, the
parties hereto have executed this Security Agreement as of the date first above
written.

     

    

    
      	 
      	
              COMPANY:

            
	 
      	
              PLATINA
      ENERGY GROUP, INC.

            
	 
      	 
      
	 
      	
              By:
      /s/ Blair Merriam

            
	 
      	
              Name:
      Blair Merriam

            
	 
      	
              Title:
      Chief Executive Officer

            
	 
      	 
      
	 
      	 
      
	 
      	
              SECURED
      PARTY:

            
	 
      	
              TRAFALGAR
      CAPITAL SPECIALIZED

            
	 
      	
              INVESTMENT
      FUND, LUXEMBOURG

            
	 
      	
              By:                 Trafalgar
      Capital Sarl

            
	 
      	
              Its:                 General
      Partner

            
	 
      	 
      
	 
      	
              By:

            
	 
      	
              Name:

            
	 
      	
              Title:
      Portfolio Manager

            

    

    

    

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

     

     EXHIBIT
A

     

     

    DEFINITION OF PLEDGED
COLLATERAL

     

     

    For the
purpose of securing prompt and complete payment and performance by the Company
of all of the Obligations, the Company unconditionally and irrevocably hereby
grants to the Secured Party a continuing security interest in and to, and lien
upon, all of the Company’s assets and all of the assets of the Company’s
subsidiaries which are held by either as of the date of the Agreement to which
this Exhibit is attached, including specifically the following Pledged
Collateral of the Company and its subsidiaries:

     

     

    73                 all
goods of the Company and/or its subsidiaries, including, without limitation,
machinery, equipment, furniture, furnishings, fixtures, signs, lights, tools,
parts, supplies and motor vehicles of every kind and description, now or
hereafter owned by the Company and/or its subsidiaries or in which the Company
and/or its subsidiaries may have or may hereafter acquire any interest, and all
replacements, additions, accessions, substitutions and proceeds thereof, arising
from the sale or disposition thereof, and where applicable, the proceeds of
insurance and of any tort claims involving any of the foregoing;

     

     

    74             all
inventory of the Company and/or its subsidiaries, including, but not limited to,
all goods, wares, merchandise, parts, supplies, finished products, other
tangible personal property, including such inventory as is temporarily out of
Company’s or its subsidiaries’ custody or possession and including any returns
upon any accounts or other proceeds, including insurance proceeds, resulting
from the sale or disposition of any of the foregoing;

     

     

    75             all
contract rights and general intangibles of the Company and/or its subsidiaries,
including, without limitation, goodwill, trademarks, trade styles, trade names,
leasehold interests, partnership or joint venture interests, patents and patent
applications, copyrights, deposit accounts whether now owned or hereafter
created;

     

     

    76             all
documents, warehouse receipts, instruments and chattel paper of the Company
and/or its subsidiaries whether now owned or hereafter created;

     

     

    77             all
accounts and other receivables, instruments or other forms of obligations and
rights to payment of the Company and/or its subsidiaries (herein collectively
referred to as “Accounts”), together
with the proceeds thereof, all goods represented by such Accounts and all such
goods that may be returned by the Company’s and/or its subsidiaries’ customers,
and all proceeds of any insurance thereon, and all guarantees, securities and
liens which the Company and/or its subsidiaries may hold for the payment of any
such Accounts including, without limitation, all rights of stoppage in transit,
replevin and reclamation and as an unpaid vendor and/or lienor, all of which the
Company and its subsidiaries represent and warrant will be bona fide and
existing obligations of its respective customers, arising out of the sale of
goods by the Company in the ordinary course of business;

     

     

    78             to
the extent assignable, all of the Company’s and/or its subsidiaries’ rights
under all present and future authorizations, permits, licenses and franchises
issued or granted in connection with the operations of any of its
facilities;

     

     

    79             all
products and proceeds (including, without limitation, insurance proceeds) from
the above-described Pledged Collateral.exhibit10_1.htm

    EXHIBIT
10.1

    

     

    AMENDMENT NO. 3 TO
CREDIT AGREEMENT

     

    This
Amendment No. 3 to Credit Agreement (this “Third Amendment”) is
entered into as of May 30, 2008 by and among Select Comfort Corporation (the
“Company”),
Select Comfort Retail Corporation, JPMorgan Chase Bank, National Association, as
Administrative Agent, the other financial institutions signatory hereto (the
"Lenders") 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 and
Amendment No. 2 dated as of February 1, 2008 (the “Credit
Agreement”).  Unless otherwise specified herein, capitalized
terms used in this Third Amendment shall have the meanings ascribed to them by
the Credit Agreement.

     

    B.           The
Company has requested that the Administrative Agent and the Lenders amend the
Credit Agreement to reflect certain changes thereto.

     

    C.           The
Administrative Agent and the undersigned Lenders are willing to amend the Credit
Agreement 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.  Upon the Third Amendment Effective Date (as defined
below), the Credit Agreement is hereby amended as follows:

     

    (a)           Section
1.01 of the Credit Agreement is hereby amended by deleting (i) the definitions
of "Material Subsidiary", "Permitted Acquisition" and "Subsidiary Borrower" in
their entirety and (ii) the definitions of "Asset Disposition, "Commitment",
"Credit Documents", "Indebtedness", "Interest Coverage Ratio", "Material
Indebtedness", "Maturity Date" and "Permitted Investments" in their entirety and
replacing them with the following:

     

    "Asset Disposition"
means, as to any asset or right of the Company or any Subsidiary, (a) any sale,
transfer or other disposition thereof in a single transaction or in a series of
related transactions (other than (i) the sale of inventory or products in the
ordinary course of business or the sale of obsolete or worn out property in the
ordinary course of business, (ii) the making of payments for property and
services used by the Company or any Subsidiary in the ordinary course of
business and (iii) the sale of Permitted Investments in the ordinary course of
business), (b) any loss, destruction or damage thereof or (c) any
condemnation, confiscation, requisition, seizure or taking thereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    "Commitment" means
with respect to each Lender, the commitment of such Lender to make Revolving
Loans and to acquire participations in Letters of Credit and Swingline Loans
hereunder, expressed as an amount representing the maximum aggregate amount of
such Lender’s Revolving Credit Exposure hereunder, as such commitment may be (a)
reduced from time to time pursuant to Section 2.08 or 2.10 and (b) reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section
9.04.  The initial amount of each Lender’s Commitment is set
forth on Schedule
2.01, or in the Assignment and Assumption pursuant to which such Lender
shall have assumed its Commitment, as applicable.  The initial
aggregate amount of the Lenders’ Commitments is $100,000,000.

     

    "Credit Documents"
means this Agreement, each promissory note, if any, delivered pursuant to Section 2.09(e), the
Subsidiary Guaranty and each Security Document.

     

    "Indebtedness" of any
Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid, (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property acquired by such Person,
(e) all obligations of such Person in respect of the deferred purchase price of
property or services (excluding current accounts payable incurred in the
ordinary course of business), (f) all Indebtedness of others secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien on property owned or acquired by such
Person, whether or not the Indebtedness secured thereby has been assumed, (g)
all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease
Obligations of such Person, (i) all obligations, contingent or otherwise, of
such Person as an account party in respect of letters of credit and letters of
guaranty, (j) all obligations, contingent or otherwise, of such Person in
respect of bankers’ acceptances and (k) all Off-Balance Sheet
Liabilities.  The Indebtedness of any Person (x) shall include the
Indebtedness of any other entity (including any partnership in which such Person
is a general partner) to the extent such Person is liable therefor as a result
of such Person’s ownership interest in or other relationship with such entity,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor, and (y) shall exclude any liability or obligations arising
from a breach of a representation, warranty or other contractual obligation
(other than a Guarantee) arising under the Credit Card Program
Agreement.  For purposes of Section 6.01 and
clause (f) of Article
VII hereof only, all of the obligations of the Company and its
Subsidiaries under each of the Corporate Card Agreement and the Purchasing Card
Agreement shall be deemed to constitute Indebtedness.

     

    “Interest Coverage
Ratio” means as of the end of any month or fiscal quarter of the Company,
as applicable, the ratio of (a) EBITDAR to (b) the sum of Total Interest Expense
plus Rentals, in each case for the period of twelve months or four fiscal
quarters then ended, as applicable, computed on a consolidated basis for the
Company and its Subsidiaries.

     

    
      
        -
2 -

      

      
         

        
          

        

      

      
         

      

    

    “Material
Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the Company and its Subsidiaries in an aggregate principal amount
exceeding $5,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Company or any
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Company or
such Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.

     

    "Maturity Date" means
June 9, 2010.

     

    “Permitted
Investments” means:

     

    (a)           direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America, in each case
maturing within 12 months from the date of acquisition thereof;

     

    (b)           obligations
issued by any Federal agency of the United States of America, in each case
maturing within 12 months from the date of acquisition thereof;

     

    (c)           municipal
investments and direct obligations of any State of the United States of America,
in each case with a rating of AAA or higher by S&P and/or A-1 or higher by
Moody's and a maximum maturity of 12 months (for securities where the interest
rate is adjusted periodically (e.g. floating rate securities), the reset date
will be used to determine the maturity date);

     

    (d)           investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, a rating of A-1 from S&P or
P-1 from Moody’s;

     

    (e)           investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within 12 months from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any State thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000;

     

    (f)           fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial
institution satisfying the criteria described in clause (e) above;
and

     

    (g)   money
market funds that (i) comply with the criteria set forth in Securities and
Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are
rated AAA by S&P or Aaa by Moody’s and (iii) have portfolio assets of at
least $5,000,000,000.

     

    
      
        -
3 -

      

      
         

        
          

        

      

      
         

      

    

     (b)           Section
1.01 of the Credit Agreement is hereby amended by adding the following
definitions in alphabetical order:

     

    "Account" has the
meaning assigned to such term in the Security Agreement.

     

    "Account Debtor" means
any Person obligated on an Account.

     

    "Bank Products
Agreement" means those certain cash management service agreements entered
into from time to time between the Company or any of its Subsidiaries and a
Lender or its Affiliates in connection with any of the Bank
Products.

     

    "Bank Products" means
any service or facility extended to the Company or any of its Subsidiaries by
any Lender or its Affiliates including: (a) credit cards, (b) credit card
processing services, (c) debit cards, (d) purchase cards (including, without
limitation, any purchase cards extended to the Company or any Subsidiary
pursuant to the Purchasing Card Agreement or Corporate Card Agreement), (e) cash
management, including controlled disbursement, accounts or services, and
Automated Clearing House processing of electronic funds transfers through the
direct Federal Reserve Fedline system and (f) Swap Agreement
transactions.

     

    “Bank Products
Obligations” means any and all obligations of the Credit Parties, whether
absolute or contingent and howsoever and whensoever created, arising, evidenced
or acquired (including all renewals, extensions and modifications thereof and
substitutions therefor) in connection with Bank Products, including all Swap
Obligations.

     

    "Capital Expenditures"
means, without duplication, any expenditures for any purchase or other
acquisition of any asset which would be classified as a fixed or capital asset
on a consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP, other than Capital Lease Obligations permitted under Section 6.01(e);
provided, that
for purposes of Section 6.14 only,
Capital Expenditures shall include (without duplication) amounts paid for, or
reimbursed to, the Company or any Subsidiary by any developer, landlord or other
third party with respect to leasehold improvements at any retail location leased
by the Company or any Subsidiary that would otherwise be required to be
classified as a fixed or capital asset of the Company and its Subsidiaries if
paid for by the Company or its Subsidiaries.

     

    "Collateral" means all
property with respect to which any security interests have been granted pursuant
to any Security Document, including, without limitation, all Pledge Agreement
Collateral and all cash delivered as collateral pursuant to Section
2.05(j).

     

    "Collateral Agent"
means the Administrative Agent acting as collateral agent for the Secured
Creditors pursuant to the Security Documents.

     

    
      
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    "Corporate Card
Agreement" means that certain Bank of America Corporate Card Agreement
dated as of April 11, 2007 by and between FIA Card Services, N.A. and the
Company.

     

    "Inventory" has the
meaning assigned to such term in the Security Agreement.

     

    "Net Available
Proceeds" means (a) with respect to any Asset Disposition, the aggregate
cash proceeds (including cash proceeds received pursuant to policies of
insurance and by way of deferred payment of principal pursuant to a note,
installment receivable or otherwise, but only as and when received) received by
the Company or any Subsidiary pursuant to such Asset Disposition net of
(i) the reasonable direct costs relating to such Asset Disposition
(including sales commissions and legal, accounting and investment banking fees,
commissions and expenses), (ii) any portion of such proceeds deposited in
an escrow account pursuant to the documentation relating to such Asset
Disposition (provided that such amounts shall be treated as Net Available
Proceeds upon their release from such escrow account to the Company or the
applicable Subsidiary), (iii) taxes paid or reasonably estimated by Company
to be payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), (iv) so long as no
Default has occurred and is continuing, any amount of insurance or condemnation
proceeds applied within 180 days to the restoration, repair or replacement of
property and (v) amounts required to be applied to the repayment of any
Indebtedness secured by a Lien prior to the Lien of Administrative Agent on the
asset subject to such Asset Disposition; and (b) with respect to any issuance of
debt or equity securities, the aggregate cash proceeds received by the Company
or any Subsidiary pursuant to such issuance, net of the reasonable direct costs
relating to such issuance (including reasonable sales and underwriter's
commission and reasonable legal and accounting fees).

     

    “Obligations” means
all now existing and hereafter arising indebtedness, obligations and other
liabilities of each of the Credit Parties to each of the Secured Creditors
arising under the Credit Documents, whether the same are fixed or contingent,
due or to become due, liquidated or unliquidated, including, without limitation,
all unpaid principal of and accrued and unpaid interest on the Loans, all LC
Exposure, all Swingline Exposure, all accrued and unpaid fees, and all expenses,
reimbursements, indemnities and other obligations under the Credit
Documents.

     

    "Pledge Agreements"
means, collectively, the Pledge Agreements dated as of the Third Amendment
Effective Date made by the Company and certain of its Subsidiaries in favor of
the Collateral Agent for the benefit of the Secured Creditors, as the same may
be amended, restated, modified or supplemented from time to time, and each other
document or instrument pursuant to which debt securities or Equity Interests are
pledged to the Collateral Agent for the benefit of the Secured Creditors
pursuant hereto.

     

    "Pledge Agreement
Collateral" means all "Collateral" as defined in the Pledge
Agreements.

     

    
      
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    "Purchasing Card
Agreement" means that certain Bank of America Corporate Purchasing Card
Agreement dated as of April 11, 2007 by and between FIA Card Services, N.A. and
the Company.

     

    "Report" means reports
prepared by the Administrative Agent or another Person showing the results of
appraisals, field examinations or audits pertaining to the Company's and its
Subsidiaries' assets from information furnished by or on behalf of the Company,
after the Administrative Agent has exercised its rights of inspection pursuant
to this Agreement.

     

    "Secured Creditors"
shall have the meaning assigned that term in the respective Security
Documents.

     

    “Secured Obligations”
means all Obligations and all Bank Products Obligations.

     

    "Security Agreement"
means the Security Agreement dated as of the Third Amendment Effective Date made
by the Company and certain of its Subsidiaries in favor of the Collateral Agent
for the benefit of the Secured Creditors, as the same may be amended, restated,
modified or supplemented from time to time.

     

    "Security Documents"
means and includes the Security Agreement, the Pledge Agreements, intellectual
property security agreements, and each other document or instrument pursuant to
which security is granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant hereto.

     

    “Swap Obligations” of
a Person means any and all obligations of such Person, whether absolute or
contingent and howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and substitutions
therefor), under (a) any and all Swap Agreements, and (b) any and all
cancellations, buy backs, reversals, terminations or assignments of any Swap
Agreement transaction.

     

    "Third Amendment"
means that certain Amendment No. 3 to Credit Agreement dated as of May 30, 2008
among the Company, the Administrative Agent and the Lenders signatory
thereto.

     

    "Third Amendment Effective
Date" has the meaning set forth in Section 4 of the Third
Amendment.

     

    "UCC" means the
Uniform Commercial Code as from time to time in effect in the relevant
jurisdiction.

     

    "UK Security Trustee"
means the Administrative Agent acting as trustee pursuant to any of the Security
Documents governed by English law.

     

    (c)           Section
2.04(a)(i) of the Credit Agreement is hereby amended by replacing the reference
to "$15,000,000" appearing therein with "$5,000,000".

     

    
      
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    (d)           Section
2.08 of the Credit Agreement is hereby amended by deleting clause (d) thereof in
its entirety.

     

    (e)           Section
2.10 of the Credit Agreement is hereby amended by adding a new clause (c) as
follows:

     

    "(c)           The
Company shall make mandatory prepayment of the Revolving Loans in amounts equal
to the following:

     

    (i)           concurrently
with the receipt thereof by the Company or any Subsidiary, 100% of the aggregate
Net Available Proceeds in excess of $1,000,000 realized upon any Asset
Disposition or in the aggregate for all Asset Dispositions in any fiscal year of
the Company; and

     

    (ii)           concurrently
with the receipt thereof by the Company or any Subsidiary, 50% of the Net
Available Proceeds (unless such prepayment is waived by the Required Lenders)
realized upon (A) the sale by the Company of any equity or debt securities or by
such Subsidiary of any debt securities (other than the proceeds of any sales of
equity securities in an aggregate amount not to exceed $5,000,000 in any fiscal
year (x) pursuant to the exercise of any stock options issued to any employee,
officer or director of the Company as compensation or (y) under any employee
stock purchase plan of the Company) or (B) any other incurrence of Indebtedness
by the Company or any Subsidiary (other than Indebtedness permitted to be
incurred pursuant to Section 6.01(c),
(d), (e), (f) or (g)) .

     

    All mandatory prepayments made pursuant
to this Section
2.10(c) shall result in a corresponding permanent reduction of the
Commitments in the amount of such mandatory prepayment; provided, that the
Commitments shall only be reduced in increments of $1,000,000 and any amounts
not so applied in any fiscal year shall not be carried over to the succeeding
fiscal year."

     

    (f)           Section
2.12(c) of the Credit Agreement is hereby amended by restating clause (c)
thereof in its entirety as follows:

     

    "(c)           Notwithstanding
the foregoing, if any Event of Default has occurred and is continuing, then the
Obligations shall bear interest, after as well as before judgment, at a rate per
annum equal to (i) in the case of principal of any Loan, 2% plus the rate
otherwise applicable to such Loan as provided in the preceding paragraphs of
this Section or (ii) in the case of any other amount outstanding hereunder, 2%
plus the rate applicable to such amount as provided hereunder."

     

    (g)           Section
2.17 of the Credit Agreement is hereby amended by restating clause (b) thereof
in its entirety as follows:

     

    
      
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    "(b)           Any
proceeds of Collateral received by the Administrative Agent (i) not constituting
either (A) a specific payment of principal, interest, fees or other sum payable
under the Credit Documents or (B) a mandatory prepayment (which shall be applied
in accordance with Section 2.10(c)) or
(ii) after an Event of Default has occurred and is continuing and the
Administrative Agent so elects or the Required Lenders so direct, shall be
applied ratably first, to pay any
fees, indemnities, or expense reimbursements, including amounts then due to the
Administrative Agent and the Issuing Bank from the Company (including in
connection with Bank Products Obligations), second, to pay any
fees or expense reimbursements then due to the Lenders from the Company
(including in connection with Bank Products Obligations), third, to pay
interest then due and payable on the Loans and any finance charges then due and
payable in respect of Bank Product Obligations, ratably among the parties
entitled thereto in accordance with the amounts of interest and finance charges
then due to such parties, fourth, to prepay
principal on the Loans and unreimbursed LC Disbursements, and to the payment of
any amounts owing with respect to Bank Products Obligations, ratably among the
parties entitled thereto in accordance with the amounts of principal,
unreimbursed LC Disbursements and Bank Products Obligations then due to such
parties, fifth,
to pay an amount to the Administrative Agent equal to one hundred five percent
(105%) of the aggregate undrawn face amount of all outstanding Letters of Credit
and the aggregate amount of any unpaid LC Disbursements, to be held as cash
collateral for such Obligations, and sixth, to the payment
of any other Secured Obligation due to the Administrative Agent or any Lender by
the Company.  Notwithstanding anything to the contrary contained in
this Agreement, unless so directed by the Company, or unless a Default is in
existence, neither the Administrative Agent nor any Lender shall apply any
payment which it receives to any Eurocurrency Loan of a Class, except (a) on the
expiration date of the Interest Period applicable to any such Eurocurrency Loan
or (b) in the event, and only to the extent, that there are no outstanding ABR
Loans of the same Class and, in any event, the Company shall pay the break
funding payment required in accordance with Section
2.15.  The Administrative Agent and the Lenders shall have the
continuing and exclusive right to apply and reverse and reapply any and all such
proceeds and payments to any portion of the Secured Obligations."

     

    (h)           Article
III of the Credit Agreement is hereby amended by adding Sections 3.14, 3.15 and
3.16 as follows:

     

    "SECTION
3.14  Security
Documents.  The security interests created in favor of the
Collateral Agent, as pledgee, for the benefit of the Secured Creditors, under
each Security Document constitute perfected security interests in the Collateral
described in such Security Document under the governing law of the Agreement,
subject to no security interests of any other Person, except as permitted by
such Security Document.  No filings or recordings (other than filings
or recordings that have been made or continuation statements that are required
to be subsequently made) are required in order to perfect (or maintain the
perfection or priority of) the security interests created in the Collateral
under any Security Document."

     

    "SECTION
3.15 Material
Agreements.  Neither the Company nor any Subsidiary is a party
to any agreement or instrument or subject to any charter or other corporate
restriction which could reasonably be expected to have a Material Adverse
Effect.  Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (a) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (b) any
Material Indebtedness agreement."

     

    
      
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    "SECTION
3.16  Labor
Relations.  Neither the
Company nor any of its Subsidiaries is engaged in any unfair labor practice that
could reasonably be expected to have a Material Adverse Effect.  There
is (a) no significant unfair labor practice complaint pending against the
Company or any of its Subsidiaries or, to the best knowledge of the Company,
threatened against any of them before the National Labor Relations Board or any
similar Governmental Authority in any jurisdiction, and no significant grievance
or significant arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against the Company or any of its
Subsidiaries or, to the best knowledge of the Company, threatened against any of
them, (b) no significant strike, labor dispute, slowdown or stoppage is pending
against the Company or any of its Subsidiaries or, to the best knowledge of the
Company, threatened against the Company or any of its Subsidiaries and (c) to
the best knowledge of the Company, no question concerning union representation
exists with respect to the employees of the Company or any of its Subsidiaries,
except (with respect to any matter specified in clause (a), (b) or (c) above,
either individually or in the aggregate) such as could not reasonably be
expected to have a Material Adverse Effect."

     

    (i)           Section
5.01(b) of the Credit Agreement is hereby amended by restating such clause (b)
as follows:

     

    "(b)           within
(i) 45 days after the end of each of the first three fiscal quarters of each
fiscal year of the Company, its consolidated balance sheet and related
statements of operations, stockholders’ equity and cash flows as of the end of
and for such fiscal quarter and the then elapsed portion of the fiscal year,
setting forth in each case in comparative form the figures for the corresponding
period or periods of (or, in the case of the balance sheet, as of the end of)
the previous fiscal year, all certified by one of its Financial Officers as
presenting fairly in all material respects the financial condition and results
of operations of the Company and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied, subject to normal year-end
audit adjustments and the absence of footnotes and (ii) as soon as available,
but not later than 30 days after the end of each fiscal month of the Company,
its consolidated balance sheet and related statements of operations and cash
flows as of the end of and for such fiscal month and the then elapsed portion of
the fiscal year, setting forth in each case in comparative form the figures for
the corresponding period or periods of (or, in the case of the balance sheet, as
of the end of) the previous fiscal year, all certified by one of its Financial
Officers as presenting fairly in all material respects the financial condition
and results of operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;"

     

    (j)           Section
5.01 of the Credit Agreement is hereby amended by (i) deleting the "and"
appearing at the conclusion of clause (e) and (ii) inserting clauses (g), and
(h) as follows:

     

    
      
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    "(g)           at
the reasonable request of Administrative Agent, by 12:00 Noon (New York City
time) of Wednesday of each week, furnish to the Administrative Agent
consolidated cash flow projections in form and substance reasonably acceptable
to the Administrative Agent showing projected receipts and disbursements and
such other information reasonably requested by the Administrative Agent, which
forecasts shall be based on the Company's good faith estimates of business
conditions, known material expenditures and receipts and typical intramonth cash
movements; and"

     

    "(h)           concurrently
with any delivery of financial statements under clause (a) above, a copy of
the plan and forecast (including a projected consolidated balance sheet, income
statement and funds flow statement) of the Company for each quarter of the
upcoming two fiscal years in form reasonably satisfactory to the Administrative
Agent."

     

    (k)           Section
5.06 of the Credit Agreement is hereby amended by restating such section as
follows:

     

    "SECTION
5.06  Books
and Records; Inspection Rights.  The Company will, and will
cause each Subsidiary to, (i) keep proper books of record and account in which
full, true and correct entries are made of all dealings and transactions in
relation to its business and activities and (ii) permit any representatives
designated by the Administrative Agent or any Lender (including employees of the
Administrative Agent or any Lender, or any consultants, accountants, lawyers and
appraisers retained by the Administrative Agent or any Lender), upon reasonable
prior notice, to visit and inspect its properties, to examine and make extracts
from its books and records, including environmental assessment reports and Phase
I or Phase II studies, and to discuss its affairs, finances and condition with
its officers and independent accountants, all at such reasonable times and as
often as reasonably requested.  The Company and the Subsidiaries
acknowledge that the Administrative Agent or any Lender, as the case may be,
after exercising its rights of inspection, may prepare certain Reports
pertaining to the Company's and its Subsidiaries' assets for internal use by the
Administrative Agent or such Lender. The Company will permit the Administrative
Agent or any Lender to conduct field audit examinations of the Company's and its
Subsidiaries' assets, liabilities, books and records once per calendar year;
provided, that
the Company will permit the Administrative Agent or any Lender to conduct such
examinations at any time and with any reasonable frequency after the occurrence
and during the continuation of a Default.  In connection with such
field audits, the Company will permit the Administrative Agent or any Lender to
make test verifications of the Accounts with the Loan Party's
customers."

     

    (l)           Section
5.09 of the Credit Agreement is hereby restated in its entirety as
follows:

     

    "SECTION
5.09  Further
Assurances.  (a)  Effective upon any Person which is
not, as of the date hereof, a Subsidiary becoming a Subsidiary, the Company
shall cause such Person to, within five (5) Business Days, execute and deliver
to the Administrative Agent for the benefit of the Lenders a joinder to the
Subsidiary Guaranty.  The Company shall promptly notify the
Administrative Agent at any time at which any Person becomes a
Subsidiary.

     

    
      
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    (b)           The
Company will, and will cause each of its Subsidiaries to, at the expense of the
Company, make, execute, endorse, acknowledge, file and/or deliver to the
Collateral Agent from time to time such schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports, landlord waivers, leasehold mortgages, control agreements
and other assurances or instruments and take such further steps relating to the
Collateral covered by any of the Security Documents as the Collateral Agent may
reasonably require to assure the creation and continuation of perfected security
interests in the Collateral and as are generally consistent with the terms of
this Agreement and the Security Documents.  Furthermore, the Company
will, and will cause its Subsidiaries to, deliver to the Collateral Agent such
opinions of counsel and other related documents as may be reasonably requested
by the Administrative Agent to assure compliance with this Section
5.09.

     

    (c)           The
Company agrees that each action required by clause (b) of this Section 5.09 shall be
completed as soon as reasonably practical, but in no event later than 30 days
(or such greater number of days as the Collateral Agent may agree) after such
action is requested to be taken by the Collateral Agent, the Administrative
Agent or the Required Lenders.

     

    (d)           If,
following a change in the relevant sections of the Code or the regulations,
rules, rulings, notices or other official pronouncements issued or promulgated
thereunder, the Company does not within 30 days after a request from the
Administrative Agent deliver evidence, in form and substance reasonably
satisfactory to the Administrative Agent (which evidence may be in the form of
an opinion of counsel), with respect to any Foreign Subsidiary of the Company
which has not already had all of its stock pledged pursuant to the Pledge
Agreements that (i) a pledge of 66-2/3% or more of the total combined voting
power of all classes of capital stock of such Foreign Subsidiary entitled to
vote, (ii) the entering into by such Foreign Subsidiary of a guaranty in
substantially the form of the Subsidiary Guaranty and (iii) the granting by such
Foreign Subsidiary of security interests in all of its Collateral, in any such
case could reasonably be expected to cause (I) any undistributed earnings of
such Foreign Subsidiary or its parent as determined for Federal income tax
purposes to be treated as a deemed dividend to such Foreign Subsidiary’s direct
or indirect United States parent for Federal income tax purposes or (II) other
Federal income tax consequences to the Company and its Subsidiaries having an
adverse financial consequence to the Company or any Subsidiary in any material
respect, then in the case of a failure to deliver the evidence described in
clause (i) above, that portion of such Foreign Subsidiary’s outstanding capital
stock not theretofore pledged pursuant to the Pledge Agreements shall be
promptly pledged to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Pledge Agreements (or another pledge agreement in
substantially similar form, if needed), and in the case of a failure to deliver
the evidence described in clause (ii) above, such Foreign Subsidiary shall
promptly execute and deliver the Subsidiary Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing the obligations of the
Company under the Credit Documents and under any Bank Products Agreement entered
into with a Secured Creditor or any Affiliate thereof, in each case to the extent that the
entering into of a Pledge Agreement or Subsidiary Guaranty is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 5.09(d) to be
in form and substance reasonably satisfactory to the Administrative
Agent.  In addition, following the occurrence and continuation of a
Default, at the request of the Administrative Agent, the Company and its
Subsidiaries shall be required to take any or all of the steps outlined above
without regard to any of the consequences described above."

     

    
      
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    (m)           Article
V of the Credit Agreement is hereby amended by adding a new Section 5.10 as
follows:

     

    "SECTION
5.10  Appraisals.  At
any time that the Administrative Agent requests, the Company will provide the
Administrative Agent with appraisals or updates thereof of its Inventory,
equipment, real property, intellectual property and other intangible assets from
an appraiser selected and engaged by the Administrative Agent, and prepared on a
basis satisfactory to the Administrative Agent, such appraisals and updates to
include, without limitation, information required by applicable law and
regulations; provided, however,
that if no Event of Default has occurred and is continuing, only one such
appraisal per calendar year shall be at the sole expense of the Company; provided, further, that after
the occurrence and during the continuance of an Event of Default, any additional
appraisals requested by the Administrative Agent shall be at the Company’s sole
expense."

     

    (n)           Section
6.01 of the Credit Agreement is hereby amended by (i) restating clauses (c) and
(d) in their entirety as follows:

     

    "(c)           (i)
Indebtedness of the Company to any Subsidiary and of any Domestic Subsidiary to
the Company or any other Subsidiary and (ii) Indebtedness of any Foreign
Subsidiary to the Company or any Domestic Subsidiary in an outstanding principal
amount, which together with any Indebtedness incurred pursuant to clause (d)(iv)
below, shall not at any time exceed $2,000,000 in the aggregate;

     

    (d)           Guarantees
by (i) the Company of Indebtedness of any Domestic Subsidiary, (ii) any Domestic
Subsidiary of Indebtedness of the Company or any other Domestic Subsidiary,
(iii) any Foreign Subsidiary of Indebtedness of any other Subsidiary and (iv)
the Company or any Domestic Subsidiary of Indebtedness of any Foreign Subsidiary
in an outstanding principal amount, which together with any Indebtedness
incurred pursuant to clause (c)(ii) above, shall not at any time exceed
$2,000,000 in the aggregate;"

     

    (ii)
replacing the reference to "$75,000,000" appearing in clauses (e) and (f) with a
reference to "$10,000,000", and (iii) restating clauses (g), (h) and (i) in
their entirety and inserting a new clause (j) as follows:

     

    
      
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    "(g)           Indebtedness
of the Company or any Subsidiary as an account party in respect of trade letters
of credit incurred in the ordinary course of business;

     

    (h)           
Obligations arising under the Corporate Card Agreement and the Purchasing Card
Agreement; provided that (i) the
Company shall repay any outstanding balance thereunder in accordance with the
terms of such agreements and (ii) the aggregate principal amount outstanding
under the Purchasing Card Agreement shall not exceed $13,000,000 through July
15, 2008 and $0 at all times thereafter, and the aggregate principal amount
outstanding under the Corporate Card Agreement shall not exceed $4,000,000;
and

     

    (i)           other
Indebtedness; provided that (i)
such incurrence would not cause a Default, as determined in respect of Sections 6.09 and
6.10 on a pro forma basis after giving effect thereto, (ii) all such
Indebtedness shall be subordinated to the Indebtedness arising under this
Agreement and the other Credit Documents and shall have subordination and other
terms acceptable to the Administrative Agent and (iii) any such Indebtedness
shall be unsecured;

     

    (j)           other
unsecured Indebtedness in an aggregate principal amount not exceeding $2,500,000
at any time outstanding."

     

    (o)           Section
6.02 of the Credit Agreement is hereby amended by (i) restating clause (c) as
follows:

     

    "(c)           any
Lien existing on any property or asset prior to the acquisition thereof by the
Company or any Subsidiary; provided, that (i)
such Lien is not created in contemplation of or in connection with such
acquisition, (ii) such Lien shall not apply to any other property or assets of
the Company or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition and extensions,
renewals and replacements thereof that do not increase the outstanding principal
amount thereof;"

     

    (ii)
deleting clauses (e), (g) and (h) in their entirety and replacing them with a
reference to "[Reserved]", (iii) deleting the "and" appearing at the conclusion
of clause (h), (iv) restating the current clause (i) as follows:

     

          
"(i)           Liens
created pursuant to the Security Documents; and"

     

    substituting
"(j)" in place of the current clause (i) appearing in such section and replacing
the reference to "$10,000,000" appearing in such clause with
"$500,000".

     

    (p)           Section
6.03(b) of the Credit Agreement is hereby amended by (i) restating clause (ii)
thereof as follows:

     

    "(ii)
Asset Dispositions by Foreign Subsidiaries to the Company or any Domestic
Subsidiary,"

     

    and (ii) deleting clause (iv) thereof
in its entirety.

     

    
      
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    (q)           Section
6.04 of the Credit Agreement is hereby amended by (i) restating clauses (b) and
(c) in their entirety as follows:

     

    "(b)           (i)
investments by the Company in the capital stock of its Domestic Subsidiaries and
(ii) investments by the Company in the capital stock of its Foreign Subsidiaries
which shall not at any time exceed $500,000 in the aggregate;

     

    (c)           Indebtedness
permitted pursuant to Section 6.01(c) and
Section
6.01(d);"

     

    (ii)
deleting clause (f) thereof in its entirety and replacing it with a reference to
"[Reserved]", (iii) replacing the reference to "$2,500,000" appearing in clause
(h) thereof with a reference to "$500,000", (iv) deleting clauses (i), (k) and (l) thereof in
their entirety and replacing them with a reference to "[Reserved]", (v)
restating clause (m) thereof in its entirety as follows:

     

    "(m)           investments
consisting of credit sale contracts generated by retail customers of the
Borrower or any of its Subsidiaries in the ordinary course of business in
conjunction with the Current GE Agreement; and"

     

    and (vi)
replacing the reference to "$25,000,000" appearing in clause (n) thereof with a
reference to "$1,000,000":

     

      (r)           Section
6.06 of the Credit Agreement is hereby amended by restating such section as
follows:

     

    "SECTION
6.06 Restricted
Payments.  The Company will not, and will not permit any of its
Subsidiaries to, declare, pay or make, or agree to declare, pay or make,
directly or indirectly, any Restricted Payment, except (a) the Company may
declare and pay dividends with respect to its Equity Interests payable solely in
additional shares of its common stock, (b) the Wholly-Owned Subsidiaries may
declare and pay dividends ratably with respect to their Equity Interests and (c)
the Company may make Restricted Payments pursuant to and in accordance with
stock plans or other benefit plans for management or employees of the Company
and its Subsidiaries."

     

    (s)           Section
6.08 of the Credit Agreement is hereby amended by  deleting clauses
(v) and (vi)(B) thereof in their entirety and replacing them with a reference to
"[Reserved]".

     

    (t)           Section
6.09 of the Credit Agreement is hereby amended by restating such section as
follows:

     

    “SECTION
6.09  Minimum Interest Coverage
Ratio.  The Company will not permit the Interest Coverage Ratio
as of any date of determination set forth below for the period of twelve months
or four fiscal quarters then ended, as applicable, to be less than the
applicable ratio set forth below:

     

    
      
        -
14 -

      

      
         

        
          

        

      

       

       

    

    
      	
              Date of
      Determination—Last Day of:

            	
              Interest

              Coverage
      Ratio

               

            
	
              Fiscal
      quarter ending June 30, 2008

               

            	
              1.25
      to 1.00

            
	
              Fiscal
      quarter ending September 30, 2008

               

            	
              1.00
      to 1.00

            
	
              Fiscal
      quarter ending December 31, 2008

               

            	
              1.00
      to 1.00

            
	
              Month
      ending January 31, 2009

               

            	
              1.10
      to 1.00

            
	
              Month
      ending February 28, 2009

               

            	
              1.15
      to 1.00

            
	
              Month
      ending March 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending April 30, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending May 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending June 30, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending July 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending August 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending September 30, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending October 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending November 30, 2009

               

            	
              1.25
      to 1.00

            
	
              Month
      ending December 31, 2009

               

            	
              1.25
      to 1.00

            
	
              Fiscal
      quarter ending March 31, 2010 and each fiscal quarter ending
      thereafter

            	
              1.50
      to 1.00"

            

    

    

     

    (u)           Section
6.10 of the Credit Agreement is hereby amended by restating such section as
follows:

     

    “SECTION
6.10  Maximum Leverage
Ratio.  The Company will not permit the Leverage Ratio of the
Company to exceed the applicable ratio set forth below for the four fiscal
quarter period ending on the dates set forth below:

     

    
      	
              Last
      Day of Fiscal Quarter

              Ending On or
      About

               

            	
              Leverage

              Ratio

            
	
              March
      31, 2009

               

            	
              3.50
      to 1.00

            
	
              June
      30, 2009

               

            	
              3.50
      to 1.00

            
	
              September
      30, 2009

               

            	
              3.25
      to 1.00

            
	
              December
      31, 2009 and each period ending thereafter

            	
              3.00
      to 1.00"

            

    

    

    
      
        -
15 -

      

      
         

        
          

        

      

      
         

      

    

     

    (v)           Article
VI of the Credit Agreement is hereby amended by adding Sections 6.12, 6.13,
6.14, and 6.15 as follows:

     

    "SECTION
6.12  EBITDA.  The
Company will not permit EBITDA as of the last day of each period set forth below
for such period to be less than the applicable amount set forth
below:

     

    
      	
              Period

               

            	
              EBITDA

            
	
              April
      1, 2008 through June 30, 2008

               

            	
              ($13,500,000)

            
	
              April
      1, 2008 through July 31, 2008

               

            	
              ($13,000,000)

            
	
              April
      1, 2008 through August 31, 2008

               

            	
              ($10,500,000)

            
	
              April
      1, 2008 through September 30, 2008

               

            	
              ($5,000,000)

            
	
              April
      1, 2008 through October 31, 2008

               

            	
              ($2,500,000)

            
	
              April
      1, 2008 through November 30, 2008

               

            	
              $0

            
	
              April
      1, 2008 through December 31, 2008

            	
              $5,000,000

            

    

    

     

    SECTION
6.13  Liquidity.  The
Company will not permit the sum of (a) (i) the principal amount of the Loans,
plus (ii) the amount available to be drawn under outstanding Letters of Credit,
to exceed at any time (b) (i) the aggregate amount of the Commitments, less (ii)
the applicable amount set forth below for such period:

     

    
      	
              Period

               

            	
              Liquidity

            
	
              May
      30, 2008 through August 31, 2008

               

            	
              $5,000,000

            
	
              September
      1, 2008 through November 30, 2008

               

            	
              $10,000,000

            
	
              December
      1, 2008 through June 30, 2009

               

            	
              $15,000,000

            
	
              Thereafter

            	
              $20,000,000

            

    

    

     

    provided, that the
required amount set forth above shall be reduced dollar for dollar by the amount
of any reduction of the Commitments effected pursuant to Section 2.08(b) or
Section
2.10(c).

     

    SECTION
6.14  Capital
Expenditures.  The Company will not, nor will it permit any
Subsidiary to, expend, or be committed to expend, Capital Expenditures during
any one fiscal year on a non-cumulative basis in the aggregate for the Company
and its Subsidiaries in excess of the applicable amount set forth below for such
fiscal year:

     

    
      
        -
16 -

      

      
         

        
          

        

      

       

       

    

    
      	
              Fiscal
      Year

              Ending

               

            	
              Capital

              Expenditures

            
	
              December
      31, 2008

               

            	
              $30,000,000

            
	
              December
      31, 2009

               

            	
              $25,000,000

            
	
              December
      31, 2010

            	
              $35,000,000

            

    

     

     

    SECTION
6.15  Restriction of Amendments to
Certain Documents.  The Company will not, nor will it permit
any Subsidiary to, amend or otherwise modify, or waive any rights under
(a) any provisions of any Indebtedness incurred pursuant to Section 6.01(i), (b)
the Credit Card Program Agreement, (c) the Corporate Card Agreement or (d) the
Purchasing Card Agreement, other than (x) an amendment to the Credit Card
Program Agreement imposing financial covenants not more restrictive than those
set forth in Sections
6.09 through 6.14 hereof and
providing for the issuance, contemporaneously with such amendment, of a Letter
of Credit to GE Money Bank as security for the obligations of the Company and
Select Comfort Retail Corporation under the Credit Card Program Agreement, in an
amount not to exceed $3,500,000 in the aggregate and (y) immaterial
amendments, modifications and waivers not adverse to the interests of the
Administrative Agent or any Lender."

    

    (w)           Article
VII of the Credit Agreement is hereby amended by (i) restating clause (d)
thereof as follows:

     

    "(d)           the
Company shall fail to observe or perform any covenant, condition or agreement
contained in Section
5.01, 5.02, 5.03 (with respect to
the Company’s existence), 5.06, 5.08, 5.09 or 5.10 or in Article
VI;"

     

    (ii)
replacing the reference to "$5,000,000" appearing in clause (k) with a reference
to "$1,000,000", (iii) replacing the references to "$5,000,000" and
"$15,000,000" appearing in sub-clauses (i) and (ii) of clause (l) with a
reference to "$1,000,000" and "$5,000,000, respectively, (iv) deleting the "or"
appearing at the conclusion of clause (m), (v) inserting an "or" at the
conclusion of clause (n) and (vi) adding a new clause (o) as
follows:

     

    "(o)           any
Security Document shall cease to be in full force and effect, or shall cease to
give the Collateral Agent for the benefit of the Secured Creditors the Liens,
rights, powers and privileges purported to be created thereby, or the Company or
any Subsidiary shall default in the due performance or observance of any
material term, covenant or agreement on its part to be performed or observed
pursuant to any such Security Document and such default shall continue beyond
the period of grace, if any, specifically applicable thereto pursuant to the
terms of such Security Document;"

     

    (x)           Article
VIII of the Credit Agreement is hereby amended by (i) modifying the existing
heading of such Article from "The Administrative Agent" to "The Administrative
Agent and the Collateral Agent", (ii) creating a section entitled "Section 8.01
Administrative
Agent" and including all existing provisions of Article VIII thereunder,
and (iii) inserting Sections 8.02 and 8.03 as follows:

     

    
      
        -
17 -

      

      
         

        
          

        

      

      
         

      

    

    "SECTION
8.02  Collateral
Agent.  (a) Each of the Lenders and the Issuing Bank hereby
irrevocably appoints the Collateral Agent as its agent and authorizes the
Collateral Agent to take such actions on its behalf and to exercise such powers
as are delegated to the Collateral Agent by the terms hereof or of the other
Credit Documents, together with such actions and powers as are reasonably
incidental thereto.  All provisions of this Article VIII relating to
the Administrative Agent shall be equally applicable to the Collateral Agent
mutatis mutandis.

     

    (b)  Without
limiting the foregoing, if any Collateral is sold in a transaction permitted
hereunder (other than to the Company or to a Subsidiary thereof which is not an
SPC), such Collateral shall be sold free and clear of the Liens created by the
Security Documents and the Administrative Agent and the Collateral Agent shall
be authorized to take any actions deemed appropriate in order to effect the
foregoing.

     

    SECTION
8.03  Administrative Agent as UK
Security Trustee.  (a) In this Agreement, any rights and
remedies exercisable by, any documents to be delivered to, or any other
indemnities or obligations in favor of the Administrative Agent shall be, as the
case may be, exercisable by, delivered to, or be indemnities or other
obligations in favor of, the Administrative Agent (or any other Person acting in
such capacity) in its capacity as the UK Security Trustee to the extent that the
rights, deliveries, indemnities or other obligations relate to the Pledge
Agreement governed by English law or the security thereby
created.  Any obligations of the Administrative Agent (or any other
Person acting in such capacity) in this Agreement shall be obligations of the
Administrative Agent in its capacity as UK Security Trustee to the extent that
the obligations relate to the Pledge Agreement governed by English law or the
security thereby created.  Additionally, in its capacity as UK
Security Trustee, the Administrative Agent (or any Person acting in such
capacity) shall have all the rights, remedies, and benefits in favor of the
Administrative Agent contained in the provisions of the whole of this Article
VIII and, subject always to the provisions of the Pledge Agreement governed by
English law, (i) all the powers of an absolute owner of the security constituted
by the Pledge Agreement governed by English law and (ii) all the rights,
remedies and powers granted to it and be subject to all the obligations and
duties owed by it under the Pledge Agreement governed by English law and/or any
of the Credit Documents.

     

    (b)           Each
Lender and the Administrative Agent hereby appoint the UK Security Trustee to
act as its trustee under and in relation to the Pledge Agreement governed by
English law and to hold the assets subject to the security thereby created as
trustee for the Administrative Agent and Lenders on the trusts and other terms
contained in the Pledge Agreement governed by English law and the Administrative
Agent and each Lender hereby irrevocably authorize the UK Security Trustee to
exercise such rights, remedies, powers and discretions as are specifically
delegated to the UK Security Trustee by the terms of the Pledge Agreement
governed by English law together with all such rights, remedies, powers and
discretions as are reasonably incidental thereto.

     

    
      
        -
18 -

      

      
         

        
          

        

      

      
         

      

    

    (c)           Any
reference in this Agreement to Liens stated to be in favor of the Administrative
Agent shall be construed so as to include a reference to Liens granted in favor
of the UK Security Trustee.

     

    (d)           The
Lenders agree that at any time that the UK Security Trustee shall be a Person
other than the Administrative Agent, such other Person shall have the rights,
remedies, benefits and powers granted to the Administrative Agent in its
capacity as the UK Security Trustee in this Agreement.

     

    (e)           Nothing
in this Section
8.03 shall require the UK Security Trustee to act as a trustee at common
law or to be holding any property on trust, in any jurisdiction outside the
United States or the United Kingdom which may not operate under principles of
trust or where such trust would not be recognized or its effects would not be
enforceable."

     

    (y)           Section
9.02(b) of the Credit Agreement is hereby amended by restating clause (vi)
thereof as follows:

     

    "(vi)           release
all or substantially all of the Collateral or, in connection with a transaction
permitted by Section
6.03, release any Subsidiary Guarantor from its obligations under the
Subsidiary Guaranty, without the written consent of each Lender"

     

    (z)           Section
9.04(b)(i) of the Credit Agreement is hereby amended by deleting paragraph (A)
thereof in its entirety and replacing it with a reference to
"[Reserved]".

     

    (aa)           Section
9.09(b) of the Credit Agreement is hereby amended by inserting the language "the
Borough of Manhattan in New York City" before  the reference to "New
York County" appearing therein.

     

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

     

    (cc)           Schedule
3.06 of the Credit Agreement is hereby amended and restated as set forth on
Annex II
hereto.

     

    (dd)           As
of the Third Amendment Effective Date, (i) Select Comfort Retail Corporation
shall no longer be a Subsidiary Borrower, (ii) the Company shall no longer have
the right to designate any other Subsidiary as a Subsidiary Borrower and, in
accordance therewith, Sections 2.19, 4.03 and 9.16 of the Agreement and Article
X of the Agreement shall be deleted in their entirety.

     

    (ee)           As
of the Third Amendment Effective Date, the Company shall no longer have the
right to request and no Lender shall make any Revolving Loan denominated in a
Foreign Currency.

     

    
      
        -
19 -

      

      
         

        
          

        

      

      
         

      

    

    2.           Covenants.

     

    (a)           The
Company hereby agrees that the Administrative Agent shall have the right to
engage a restructuring advisor on behalf of the Administrative Agent and the
Lenders, and all fees and expenses of such restructuring advisor shall be paid
by the Company; provided that, unless
a Default has occurred and is continuing, the Company shall not be liable for
fees and expenses of such restructuring advisor in excess of
$1,000,000.

     

    (b)           The
Company hereby agrees that it shall engage AlixPartners (or such other
turnaround advisory firm as shall be reasonably acceptable to the Administrative
Agent and the Lenders) as its turnaround consultant and shall provide a copy of
the executed engagement letter to the Administrative Agent and the Lenders no
later than June 10, 2008.  All fees and expenses of such turnaround
consultant shall be paid by the Company.  No later than August 1,
2008, the Company shall have delivered to the Administrative Agent and the
Lenders an assessment report prepared by AlixPartners (or such other turnaround
advisory firm), which assessment shall detail the projections and operations of
the Company and will provide recommendations as to certain operational and
capital strategies to be implemented by the Company in the event the Company is
unable to satisfy its projected financial results.

     

    (c)           The
Company hereby agrees that, as soon as available and, in any event, not later
than August 1, 2008 (unless such delivery date is extended by the Administrative
Agent in its sole discretion), it shall provide the Administrative Agent with a
copy of an appraisal of its intellectual property and other intangible assets
performed by an appraiser and prepared on a basis satisfactory to the
Administrative Agent, and all fees and expenses in connection with such
appraisal shall be paid by the Company.

     

    (d)           As
soon as possible and, in any event, not later than thirty (30) calendar days
following the Third Amendment Effective Date (unless such time period for
delivery is extended or such delivery is waived by the Administrative Agent in
its sole discretion), the Company shall have delivered or, in the case of items
(i) and (iii) below, shall have used commercially reasonable efforts to deliver,
to the Administrative Agent each of the following items, all in form and
substance reasonably acceptable to the Administrative Agent (the failure by the
Company to deliver or to use commercially reasonable efforts to deliver, as
applicable, any such item constituting an Event of Default):

     

    (i)           Bailee
letters with respect to Collateral held by third parties at the locations listed
on Schedule A
hereto;

     

    (ii)           Deposit
account control agreements with respect to each of the concentration and
operating accounts of the Credit Parties maintained with the financial
institutions listed on Schedule B
hereto;

     

    (iii)           Landlord
waivers with respect to each parcel of real property leased by the Company or
any of its Subsidiaries listed on Schedule C
hereto;

     

    
      
        -
20 -

      

      
         

        
          

        

      

      
         

      

    

    (iv)           A
mortgage with respect to the parcel of real property located in Plymouth,
Minnesota owned by the Company, together with an ALTA or other mortgagee's title
policy, an ALTA survey, an opinion of Minnesota local counsel and such other
documentation as may be reasonably required by the Administrative Agent;
and

     

    (v)           Intellectual
property security agreements with respect to any foreign intellectual property
owned by the Company or any Domestic Subsidiary in form sufficient to assure the
creation of perfected security interests in the Collateral under the laws of
each foreign jurisdiction listed on Schedule D
hereto.

     

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

     

    (a)           The
execution, delivery and performance by the Company of this Third Amendment has
been duly authorized by all necessary corporate action and this Third 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 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 Third Amendment, no Default has occurred and is
continuing.

     

    (d)           As
of the date hereof, the Company has no Subsidiaries other than those
Subsidiaries listed on Annex
III.  Annex III correctly
sets forth, as of the date hereof, (i) the percentage ownership (direct or
indirect) of the Company in each class of capital stock or other equity of its
Subsidiaries and also identifies the direct owner thereof, and (ii) the
jurisdiction of organization of each such Subsidiary.

     

    (e)           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 quarter and the portion of
the fiscal year ended March 31, 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.

    

    
      
        -
21 -

      

      
         

        
          

        

      

      
         

      

    

    (f)           As
of the date hereof, after giving effect to the consummation of the transactions
contemplated hereby and the payment of all fees, costs and expenses payable by
the Company with respect to the transactions contemplated hereby, (i) the fair
saleable value of the assets of each of the Company and each Subsidiary is in
excess of the total amount of the present value of its liabilities (including
for purposes of this definition all liabilities (including loss reserves as
determined by such Person), whether or not reflected on a balance sheet prepared
in accordance with GAAP and whether direct or indirect, fixed or contingent,
secured or unsecured, disputed or undisputed), (b) each of the Company and each
Subsidiary is able to pay its debts or obligations in the ordinary course as
they mature and (c) each of the Company and each Subsidiary does not have
unreasonably small capital to carry out its business as conducted and as
proposed to be conducted.

     

    4.           Effective
Date.  This Third Amendment shall become effective upon
satisfaction of the following conditions (the date of such satisfaction being
the "Third Amendment
Effective Date"):

     

    (a)           Executed
Amendment.  Receipt by the Administrative Agent of duly
executed counterparts of this Third Amendment from the Company and the Required
Lenders.

     

    (b)           Security
Documents.  Except as otherwise provided in Section 2(d)
hereof, the Administrative Agent shall have received from each party to any
Security Document a counterpart of each Security Document to which it is a party
signed on behalf of such party.

     

    (c)           Financing Statements; Lien
Searches.  The Administrative Agent shall have received such
duly completed and executed UCC-1 financing statements as the Administrative
Agent shall have requested to perfect its security interest in the Collateral
and such copies of searches of financing statements filed under the UCC,
together with tax lien and judgment searches with respect to the assets of the
Company and its Subsidiaries, in both cases in such jurisdictions as the
Administrative Agent may request.

     

    (d)           Terminations.  The
Administrative Agent shall have received such duly executed UCC-3 termination
statements, mortgage releases, intellectual property releases, and all other
releases and similar documents as the Administrative Agent may request with
respect to any mortgages or security interests securing indebtedness being
repaid in full on the Third Amendment Effective Date.

     

    (e)           Insurance
Certificates.  The Administrative Agent shall have received
insurance certificates or binders for all insurance as the Administrative Agent
shall request naming the Collateral Agent, on behalf of the Secured Creditors,
as loss payee for any casualty policies and additional insured for any liability
policies, in form and substance acceptable to the Administrative
Agent.

     

    
      
        -
22 -

      

      
         

        
          

        

      

      
         

      

    

    (f)           Pledged Stock; Pledged
Notes.  The Administrative Agent shall have received all stock
(or unit) certificates evidencing 100% of the Equity Interests of the Domestic
Subsidiaries and 65% of each class of Equity Interests of the Foreign
Subsidiaries to be pledged pursuant to the Pledge Agreement, accompanied by
stock (or unit) powers executed in blank, and all notes to be pledged pursuant
to the Pledge Agreement, accompanied by note powers executed in
blank.

     

    (g)           Reaffirmation of Guaranty;
Joinder.  The Reaffirmation of Guaranty dated as of the date
hereof in the form attached hereto as Exhibit A executed by
each of the Subsidiary Guarantors.  The Company shall deliver to the
Administrative Agent a joinder to the Subsidiary Guaranty executed by any
Domestic Subsidiary which is not, as of the date hereof, a Subsidiary
Guarantor.

     

    (h)           Opinion.  The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent and the Lenders and dated the Third Amendment
Effective Date) of Oppenheimer Wolff & Donnelly LLP, counsel for the Company
and the Subsidiary Guarantors, covering such matters relating to the Company,
the Subsidiary Guarantors, the Credit Documents or the Transactions as the
Required Lenders shall reasonably request.

     

    (i)           Organizational
Documents.  The Administrative Agent shall have received such
documents and certificates as the Administrative Agent or its counsel may
reasonably request relating to the organization, existence and good standing of
the Company and the Subsidiary Guarantors, the authorization of the Transactions
and any other legal matters relating to the Company, the Subsidiary Guarantors,
the Credit Documents or the Transactions, all in form and substance reasonably
satisfactory to the Administrative Agent and its counsel.

     

    (j)           Amendment
Fees.  The Company shall have paid to the Administrative Agent
(i) an amendment fee in an amount equal to 0.50% of the existing Commitment of
each Lender executing this Third Amendment on the Third Amendment Effective Date
and (ii) the fee in the amount set forth in the fee letter dated as of the Third
Amendment Effective Date by and between Company and Administrative
Agent.

     

    5.           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 Third 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
Third 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.

     

    
      
        -
23 -

      

      
         

        
          

        

      

      
         

      

    

    6.           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 Third 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.

     

    7.           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 Third Amendment, including but not limited to the
reasonable fees, charges and disbursements of attorneys for the Administrative
Agent with respect thereto.

     

    8.           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).

     

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

     

    10.           Counterparts.  This
Third 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]

     

    
      
         
- 24 -

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties have executed this Third 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:  SVP
and CFO

    

     

                            SELECT COMFORT RETAIL
CORPORATION

     

                            By  /s/ James C.
Raabe                                                                           

                            Name:  James
C. Raabe

                            Title:  SVP
and CFO

    

     

    
      
         
- 25 -

      

      
         

        
          

        

      

      
         

      

    

     

                                             JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, individually

                                            as Administrative
Agent and as Collateral Agent

     

            By  /s/ James M.
Sumoski                                                                           

            Name:  James
M. Sumoski

            Title:  Vice
President

                            

    

    
      
         
- 26 -

      

      
         

        
          

        

      

      
         

      

    

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

    
       

               By  /s/ Steven K.
Kessler                                                                           

              
Name:  Steven K. Kessler

              Title:  Senior
Vice President

    

     

    
      
        -
27 -  

      

      
         

        
          

        

      

      
         

      

    

                            CITICORP USA, INC.,
as a Lender

     

                            By  /s/ Carol
Flaton                                                                           

                            Name:  Carol
Flaton

                            Title:  Managing
Director

    

     

    
      
         
- 28 -

      

      
         

        
          

        

      

      
         

      

    

                            WELLS FARGO BANK,
NATIONAL ASSOCIATION, as a Lender

     

                            By  /s/ Troy F.
Jefferson                                                                           

                                 
         
Name:  Troy F. Jefferson

                                                                           
Title:  Vice President/Principal

     

    

     

    
      
         
- 29 -

      

      
         

        
          

        

      

      
         

      

    

                            BRANCH BANKING AND
TRUST CO., as a Lender

     

                            By /s/ Troy R.
Weaver                                                                           

                                                            Name:  Troy R.
Weaver

                                                            Title:  Senior Vice
President

     

    

     

    
      
        -
30 -  

      

      
         

        
          

        

      

      
         

      

    

    ANNEX I

    

    Schedule
1.01

    

    PRICING
SCHEDULE

    

    

    
      	
              Applicable
      Rate

            	
              Level
      I Status

            	
              Level
      II Status

            	
              Level
      III Status

            	
              Level
      IV Status

            
	
              Eurocurrency

              Spread

            	
               

              2.15%

            	
               

              2.35%

            	
               

              2.55%

            	
               

              3.00%

            
	
              Facility
      Fee Rate

            	
              0.35%

            	
              0.40%

            	
              0.45%

            	
              0.50%

            
	
              ABR
      Spread

            	
              1.00%

            	
              1.25%

            	
              1.50%

            	
              2.00%

            

    

    

    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.

    

    
      
        -
31 -

      

      
         

        
          

        

      

      
         

      

    

    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
December 31, 2008, Level IV Status shall be deemed to exist.

    

    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.

    

    
      
         
- 32 -

      

      
         

        
          

        

      

      
         

      

    

    ANNEX II

    

    Schedule
3.06

    

    DISCLOSED
MATTERS

    

    On April
25, 2008, a lawsuit was filed against one of the Company’s subsidiaries in
Superior Court in Santa Clara County, California by one of the Company's
customers.  The complaint asserts various claims related to products
liability, breach of warranty, concealment, intentional misrepresentation and
negligent misrepresentation and seeks class certification.  The
complaint alleges that products sold by the Company prior to 2006 had a unique
propensity to develop mold, alleges that the plaintiff suffered adverse health
effects from exposure to one of the Company’s products, and seeks various forms
of legal and equitable relief, including without limitation, unspecified
damages, punitive and exemplary damages, attorneys’ fees and costs, and
injunctive relief.  The Company intends to vigorously defend the
claims, however the Company believes that the complaint is without merit and
that there is not a reasonable probability of an adverse determination with
respect thereto that would result in a Material Adverse Effect.

    

    
      
        -
33 -

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
III

    

    SUBSIDIARIES

    

    

    
      	
              NAME
      OF SUBSIDIARY

            	
              OWNER

            	
              JURISDICTION
      OF ORGANIZATION

            	
              OWNERSHIP
      INTEREST

            
	
              Select
      Comfort Retail Corporation

            	
              Select
      Comfort Corporation

            	
              Minnesota

            	
              100%

            
	
              Select
      Comfort Canada Holding Inc.

            	
              Select
      Comfort Corporation

            	
              Minnesota

            	
              100%

            
	
              selectcomfort.com
      corporation

            	
              Select
      Comfort Corporation

            	
              Minnesota

            	
              100%

            
	
              Select
      Comfort COSC Canada ULC

            	
              Select
      Comfort Canada Holding Inc.

            	
              Alberta,
      Canada

            	
              100%

            
	
              Select
      Comfort Limited

            	
              Select
      Comfort Corporation

            	
              United
      Kingdom

            	
              100%

            

    

    
      
         
- 34 -

      

      
         

        
          

        

      

      
         

      

    

    Schedule
A

    

    Bailee
Locations

    

    
      	
              1.  

            	
              The Plastics Group
      (TPG)

            

    

    7409 Quincy St.

    Willowbrook, IL 60527

    
      
         
- 35 -

      

      
         

        
          

        

      

      
         

      

    

    Schedule
B

    

    Deposit
Accounts

    

    
      	
              Name
      on Account

               

            	
              Bank

            	
              Account
      Number

            	
              Type
      of Account

            
	
              Select
      Comfort Corporation

               

            	
              Wells
      Fargo

            	
              XXXXXXXXXX

            	
              Operating
      Account

            
	
              Select
      Comfort Corporation

               

            	
              Wells
      Fargo

            	
              XXXXXXXXXX

            	
              Operating
      Account

            
	
              Select
      Comfort Retail Corporation

               

            	
              Wells
      Fargo

            	
              XXXXXXXXXX

            	
              Operating
      Account

            
	
              Select
      Comfort Retail Corporation

               

            	
              Wells
      Fargo

            	
              XXXXXXXXXX

            	
              Operating
      Account

            
	
              Select
      Comfort Retail Corporation

               

            	
              Bank
      of America

            	
              XXXXXXXXXX

            	
              Concentration
      Account

            

    

    

    

    
      
         
- 36 -

      

      
         

        
          

        

      

      
         

      

    

    Schedule
C

    

    Leased
Locations

    

    

    
      	
              1.  

            	
              630 Western
  Lane

            

    

    Irmo, SC  29063

    

    
      	
              2.  

            	
              6105 Trenton Lane
      North

            

    

    Plymouth,
MN  55442

    

    
      	
              3.  

            	
              675 N. Wright Brothers
      Drive

            

    

    Salt Lake City,
UT  84116

    

    
      	
              4.  

            	
              8619 South 137th Circle, Suite
      3

            

    

    Omaha, NE  68138

    

    
      	
              5.  

            	
              9800 59th Avenue
      North

            

    

    Plymouth,
MN  55442

    

    
      	
              6.  

            	
              9800 59th Avenue
      North

            

    

    Minneapolis,
MN  55442

    

    
      	
              7.  

            	
              1125 Energy Park Drive, Suite
      100

            

    

    St. Paul, MN 55180

    

    
      	
              8.  

            	
              6960 Madison Ave
    West

            

    

    Golden Valley, MN 55427

    

    
      
         
- 37 -

      

      
         

        
          

        

      

      
         

      

    

    Schedule
D

    

    Intellectual
Property

    

    United
Kingdom

    Canada

    
      
         
- 38 -

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    REAFFIRMATION OF
GUARANTY

     

    The
undersigned hereby acknowledges receipt of a copy of Amendment No. 3 to the
Credit Agreement (the “Third Amendment”)
dated as of May 30, 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 Third
Amendment).

     

    Dated as
of May 30, 2008

     

    

     

                        SELECT COMFORT RETAIL
CORPORATION

     

                        By  /s/ James C.
Raabe                                                                           

                        Name:  James
C. Raabe

                        Title:  SVP
and CFO

    

     

    

    
      
         
- 39 -

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