Document:

exhibit10_1.htm

    Execution
      Copy

    

     

     

    AMENDMENT
      NO. 1 TO CREDIT AGREEMENT

     

    This
      Amendment (this “First Amendment”) is entered into as of June 28, 2007 by
      and among Select Comfort Corporation, a Minnesota corporation (the
“Company”), the Subsidiary Borrowers party hereto, 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 (the “Credit
      Agreement”).  Unless otherwise specified herein, capitalized terms
      used in this First Amendment shall have the meanings ascribed to them by the
      Credit Agreement.

     

    B.           The
      Company and the Subsidiary Borrowers (collectively, the "Borrowers") have
      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 First 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 adding the following new
      definitions thereto in alphabetical order:

     

    "First
      Amendment" means that certain Amendment No. 1 to Credit Agreement dated as
      of June 28, 2007 among the Company, the Subsidiary Borrowers, the Administrative
      Agent and the Lenders signatory thereto.

     

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

     

    (b)           Section
      1.01 of the Credit Agreement is hereby amended by restating the definition
      of
      Interest Period as follows:

     

    “Interest
      Period” means with respect to any Eurocurrency Borrowing, the period
      commencing on the date of such Borrowing and ending (x) one week thereafter
      or
      (y) on the numerically corresponding day in the calendar month that is one,
      two,
      three or six months (or, with the consent of each Lender, nine or twelve months)
      thereafter, as the Company may elect; provided, that (i) if any Interest
      Period would end on a day other than a Business Day, such Interest Period shall
      be extended to the next succeeding Business Day unless such next succeeding
      Business Day would fall in the next calendar month, in which case such Interest
      Period shall end on the next preceding Business Day and (ii) any Interest Period
      described in subclause (y) above that commences on the last Business Day of
      a
      calendar month (or on a day for which there is no numerically corresponding
      day
      in the last calendar month of such Interest Period) shall end on the last
      Business Day of the last calendar month of such Interest Period.  For
      purposes hereof, the date of a Borrowing initially shall be the date on which
      such Borrowing is made and thereafter shall be the effective date of the most
      recent conversion or continuation of such Borrowing.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c)           Section
      2.02(c) of the Credit Agreement is hereby amended by (i) deleting the reference
      to "$5,000,000" appearing in the first sentence therein and replacing it with
      "$1,000,000" and (ii) restating the third sentence thereof as
      follows:

     

    "Each
      Swingline Loan shall be in an amount that is an integral multiple of $100,000
      and not less than $100,000."

     

    (d)           Section
      2.05(b) of the Credit Agreement is hereby amended by deleting the reference
      to
      "$25,000,000" appearing in the final sentence therein and replacing it with
      "$35,000,000".

     

    (e)           Section
      6.06(d) of the Credit Agreement is hereby amended by restating such clause
      as
      follows:

     

    "(d)
      the
      Company may make other Restricted Payments so long as (A) if the Leverage Ratio
      (calculated on a pro forma basis after giving effect to such other Restricted
      Payment and any Indebtedness incurred in connection therewith) in accordance
      with the most recently delivered Financials is greater than or equal to 2.50
      to
      1.00, (y) the aggregate of all such other Restricted Payments made after the
      First Amendment Effective Date (excluding (i) any portion of a proposed payment
      which on a pro forma basis (including all Indebtedness proposed to be incurred)
      does not cause such Leverage Ratio to exceed 2.50 to 1.00 and (ii) those
      payments made pursuant to clause (B) below) does not
      exceed the sum of $150,000,000 plus 50% of the aggregate of all positive Net
      Income of the Company for each fiscal quarter completed after the First
      Amendment Effective Date and (z) no Default has occurred and is continuing
      or
      would occur after giving effect thereto, and (B) if the Leverage Ratio
      (calculated on a pro forma basis after giving effect to such other Restricted
      Payment and any Indebtedness incurred in connection therewith) in accordance
      with the most recently delivered Financials is less than 2.50 to 1.00, no
      Default has occurred and is continuing or would occur after giving effect
      thereto."

     

    2.           Representations
      and Warranties of the Borrowers.  The Borrowers represent and
      warrant that:

     

     

     

     

     

     

    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    

    (a)           The
      execution, delivery and performance by the Borrowers of this First Amendment
      have been duly authorized by all necessary corporate action and this First
      Amendment is a legal, valid and binding obligation of the Borrowers enforceable
      against the Borrowers 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); and

     

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

     

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

     

    (a)           Executed
      Amendment.  Receipt by the Administrative Agent of duly executed
      counterparts of this First Amendment from the Company, the Subsidiary Borrowers
      and the Required Lenders executing the same.

     

    (b)           Amendment
      Fees.  The Company shall have paid to the Administrative Agent (i)
      an amendment fee in an amount equal to $3,000 for each Lender executing this
      First Amendment on the First Amendment Effective Date and (ii) the fee in the
      amount set forth in the fee letter dated as of the First Amendment Effective
      Date by and between Company and Administrative Agent.

     

    (c)           Reaffirmation
      of Guaranty.  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.

     

    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 First 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
      First 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.

     

     

     

     

     

     

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    6.           Costs
      and Expenses.  The Borrowers hereby affirm their 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 First Amendment, including but not limited to the
      reasonable fees, charges and disbursements of attorneys for the Administrative
      Agent with respect thereto.

     

    7.           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).

     

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

     

    9.           Counterparts.  This
      First 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.

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

                SELECT
      COMFORT
      CORPORATION, as a Borrower

     

                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

    

     

                SELECT
      COMFORT RETAIL
      CORPORATION, as a Borrower

     

                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

    

     

                SELECT
      COMFORT DIRECT
      CORPORATION, as a Borrower

     

                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

    

     

                SELECT
      COMFORT SC
      CORPORATION, as a Borrower

     

                By 
/s/
      James
      Stoffel

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        5

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

                By 
/s/
      James M.
      Sumoski                                                                          

                Name: 
James
      M.
      Sumoski

                Title: 
Vice
      President

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        6

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

                By 
/s/
      Steven
      K.
      Kessler                                                                           

                Name: 
Steven
      K.
      Kessler

                Title: 
Senior
      Vice President

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        7

      

      
        
        

        
          

        

      

      
        
        

      

    

                CITICORP
      USA, INC.,
      as a Lender

     

                By 
/s/
      C.
      Murphy 
                                                                          

                Name: 
      Christopher Murphy

                Title: 
Managing
      Director

    

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        8

      

      
        
        

        
          

        

      

      
        
        

      

    

                WELLS
      FARGO BANK,
      NATIONAL ASSOCIATION, as a Lender

     

                   
      By  /s/  Sharlyn
      Rekenthaler                                                                          

                  Name: 
Sharlyn
        Rekenthaler

                  Title: 
Vice
        President

    

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        9

      

      
        
        

        
          

        

      

      
        
        

      

    

                BRANCH
      BANKING AND
      TRUST CO., as a Lender

     

                                                By 
/s/
      Troy R.
      Weaver                                                                          
                  Name: 
Troy
        R.
        Weaver

                  Title: 
Senior
        Vice President

    

    

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        10

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

     

    REAFFIRMATION
      OF GUARANTY

     

    Each
      of
      the undersigned hereby acknowledges receipt of a copy of Amendment No. 1 to
      the
      Credit Agreement (the “First Amendment”) dated as of June 28, 2007, 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 First Amendment).

     

    Dated
      as
      of June 28, 2007

     

    

     

                SELECT
      COMFORT RETAIL
      CORPORATION

     

                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

    

     

                SELECT
      COMFORT DIRECT
      CORPORATION

     

                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

    

     

                SELECT
      COMFORT SC
      CORPORATION

                                                

                                                By 
/s/
      James
      Stoffel                                                                           

                Name: 
James
      Stoffel

                Title: 
VP
      -
      Treasurer

                

     

     

     

     

     

    
 

    
      
        11exhibit10_2.htm

    Execution
      Copy

    

     

     

    AMENDMENT
      NO. 2 TO CREDIT AGREEMENT

     

    This
      Amendment (this “Second Amendment”) is entered into as of February 1,
      2008 by and among Select Comfort Corporation, a Minnesota corporation (the
      “Company”), the Subsidiary Borrowers party hereto, 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 (the
      “Credit Agreement”).  Unless otherwise specified herein,
      capitalized terms used in this Second Amendment shall have the meanings ascribed
      to them by the Credit Agreement.

     

    B.           The
      Company and the Subsidiary Borrowers (collectively, the "Borrowers") have
      requested that the Administrative Agent and the Lenders amend the Credit
      Agreement to reflect certain changes thereto and grant a limited waiver with
      respect to the Credit Agreement.

     

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

     

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

     

    1.           Amendments
      to Credit Agreement.  Upon the Second Amendment Effective Date (as
      defined below), the Credit Agreement is hereby amended as follows:

     

    (a)           The
      definition of "EBITDA" set forth in Section 1.01 of the Credit Agreement is
      hereby amended by (i) deleting the "and" appearing before clause (c) thereof
      and
      inserting a "," prior to clause (c) and (ii) inserting new clauses (d) and
      (e)
      as follows:

     

    ",(d)
      non-cash impairment expenses relating to store closures and/or remodelings
      during such period, and (e) non-cash charges or gains which are unusual,
      non-recurring or extraordinary during such period."

     

    (b)           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 the end of any fiscal quarter of the
      Company to be less than the applicable ratio set forth below:

     

    
      	
              Fiscal
                Quarter

              Ending
                On or About

               

            	
              Interest

              Coverage
                Ratio

            
	
              March
                31, 2008

               

            	
              1.75
                to 1.00

            
	
              June
                30, 2008

               

            	
              1.75
                to 1.00

            
	
              September
                30, 2008

               

            	
              1.75
                to 1.00

            
	
              December
                31, 2008

               

            	
              1.75
                to 1.00

            
	
              March
                31, 2009

               

            	
              1.75
                to 1.00

            
	
              June
                30, 2009

               

            	
              1.75
                to 1.00

            
	
              September
                30, 2009

               

            	
              2.00
                to 1.00

            
	
              December
                31, 2009

               

            	
              2.00
                to 1.00

            
	
              March
                31, 2010

               

            	
              2.25
                to 1.00

            
	
              June
                30, 2010

               

            	
              2.25
                to 1.00

            
	
              September
                30, 2010

               

            	
              2.50
                to 1.00

            
	
              December
                31, 2010

               

            	
              2.50
                to 1.00

            
	
              March
                31, 2011 and each fiscal quarter ending thereafter

            	
              2.75
                to 1.00"

            

    

    

     

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

     

    2.           Limited
      Waiver.  Subject to the terms and conditions herein, the
      Administrative Agent and the Lenders signatory hereto hereby waive the
      requirement that the Company comply with the financial covenant set forth in
      Section 6.09 of the Credit Agreement for the fiscal quarter ending on December
      29, 2007.

     

    3.           Representations
      and Warranties of the Borrowers.  The Borrowers represent and
      warrant that:

     

    (a)           The
      execution, delivery and performance by the Borrowers of this Second Amendment
      have been duly authorized by all necessary corporate action and this Second
      Amendment is a legal, valid and binding obligation of the Borrowers enforceable
      against the Borrowers 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;

     

     

     

     

     

     

    
      
        2

      

      
        
        

        
          

        

      

      
        
        

      

    

    (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); and

     

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

     

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

     

    (a)           Executed
      Amendment.  Receipt by the Administrative Agent of duly executed
      counterparts of this Second Amendment from the Company, the Subsidiary Borrowers
      and the Required Lenders executing the same.

     

    (b)           Amendment
      Fees.  The Company shall have paid to the Administrative Agent the
      fees in the amounts set forth in the fee letter dated as of the Second Amendment
      Effective Date by and between Company and Administrative Agent.

     

    (c)           Reaffirmation
      of Guaranty.  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.

     

    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 Second 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
      Second 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.

     

    6.           Costs
      and Expenses.  The Borrowers hereby affirm their 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 Second Amendment, including but not limited to the
      reasonable fees, charges and disbursements of attorneys for the Administrative
      Agent with respect thereto.

     

     

     

     

     

    
      
        3

      

      
        
        

        
          

        

      

      
        
        

      

    

    7.           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).

     

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

     

    9.           Counterparts.  This
      Second 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.

     

     

     

     

     

     

    
 

    
      
        4

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

            SELECT
      COMFORT
      CORPORATION, as a Borrower

     

            By  /s/
      James
      Stoffel                                                                           

            Name: 
James
      Stoffel

            Title: 
VP
      -
      Finance - International & Treasurer

    

     

            SELECT
      COMFORT RETAIL
      CORPORATION, as a Borrower

     

            By 
/s/
      James
      Stoffel                                                                           

            Name: 
James
      Stoffel

            Title: 
VP
      -
      Finance - International & Treasurer

    

     

     

     

     

     

     

    
      
        5

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

            By 
/s/
      James M.
      Sumoski                                                                           

            Name: 
James
      M.
      Sumoski

            Title: 
Vice
      President

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

     

            By 
/s/
      Steven
      K.
      Kessler                                                                           

            Name: 
Steven
      K.
      Kessler

            Title: 
Senior
      Vice President

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

            CITICORP
      USA, INC.,
      as a Lender

     

            By 
/s/
      Joshua
      D. Weiner  

            Name: 
Joshua
      D.
      Weiner

            Title: 
Vice
      President

    

     

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

            WELLS
      FARGO BANK,
      NATIONAL ASSOCIATION, as a Lender

     

                                            By 
/s/
      Sharlyn
      Rekenthaler  
              Name: 
Sharlyn
        Rekenthaler

              Title: 
Vice
        President

      

    

            

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

            BRANCH
      BANKING AND
      TRUST CO., as a Lender

     

                                            By 
/s/
      Troy R.
      Weaver  
              Name: 
Troy
        R.
        Weaver

              Title: 
Senior
        Vice President

      

    

    

     

     

     

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ANNEX
      I

    

    Schedule
      1.01

    

    PRICING
      SCHEDULE

    

    

    
      	
              Applicable
                Rate

            	
              Level
                I Status

            	
              Level
                II Status

            	
              Level
                III Status

            
	
              Eurocurrency

              Spread

            	
               

              0.60%

            	
               

              0.70%

            	
               

              0.80%

            
	
              Facility
                Fee Rate

            	
              0.15%

            	
              0.175%

            	
              0.20%

            

    

    

    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 or
      quarterly 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 2.00 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 2.50 to 1.00.

    

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

    

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

    

    The
      Applicable Rate shall be determined
      in accordance with the foregoing table based on the Company’s Status as
      reflected in the then most recent Financials.  Adjustments, if any, to
      the Applicable Rate shall be effective five Business Days after the
      Administrative Agent has received the applicable Financials.  If the
      Company fails to deliver the Financials to the Administrative Agent at the
      time
      required pursuant to the Credit Agreement, then the Applicable Rate shall be
      the
      highest Applicable Rate set forth in the foregoing table until five days after
      such Financials are so delivered.

     

     

     

     

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    EXHIBIT
      A

     

     

    REAFFIRMATION
      OF GUARANTY

     

    Each
      of
      the undersigned hereby acknowledges receipt of a copy of Amendment No. 2 to
      the
      Credit Agreement (the “Second Amendment”) dated as of February 1, 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 Second Amendment).

     

    Dated
      as
      of February 1, 2008

     

    

     

            SELECT
      COMFORT RETAIL
      CORPORATION

     

            By 
/s/
      James
      Stoffel                                                                           

            Name: 
James
      Stoffel

            Title: 
VP
      -
      Finance - International & Treasurer

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