Exhibit 10.4
EXHIBIT G
MANAGEMENT SERVICES
AGREEMENT
THIS MANAGEMENT SERVICES
AGREEMENT (this “
Agreement ”) is made and entered into as of
,
2009, by and between Select Comfort Corporation, a Minnesota
corporation (the “ Company ”), and Sterling Fund
Management, LLC, a Delaware limited liability company (“
SFM ”).
WHEREAS, on the terms and subject to the conditions
contained in this Agreement, the Company desires to receive certain
management, consulting and financial services from SFM, and SFM
desires to perform such services for the Company.
NOW, THEREFORE,
in consideration of the foregoing
premises and the respective mutual agreements, covenants,
representations and warranties contained in this Agreement, the
receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1.
Appointment of SFM
. On the
terms and conditions provided in this Agreement, the Company
appoints SFM, and SFM accepts appointment, as a management
consultant and financial advisor to the Company and its
subsidiaries, including the business of any corporations hereafter
formed or acquired by the Company or any such
subsidiary.
2.
Services of SFM
. SFM will
render management, consulting and financial services to the Company
and its subsidiaries, which services will include advice and
assistance concerning any and all aspects of the operations,
planning and financing of the Company and its subsidiaries (the
“ Services ”), as needed from time to time,
including advising the Company and its subsidiaries in their
relationships with banks and other financial institutions and with
accountants, attorneys, financial advisors and other
professionals. SFM will cause its employees and agents to
provide the Company and its subsidiaries with the benefit of their
special knowledge, skill and business expertise to the extent
relevant to the business and affairs of the Company and its
subsidiaries. In addition, SFM will render advice and
assistance in connection with any acquisitions, dispositions or
financing transactions undertaken by the Company and its
subsidiaries.
3.
Reimbursement of
Expenses . The Company will
reimburse SFM for all reasonable and documented out-of-pocket
expenses incurred by SFM in the performance of the Services;
provided that SFM obtains prior written approval of the Company for
any such expenses. SFM will not be obligated to make any advance
to, or for the account of, the Company or to pay any sums, except
out of funds held in accounts maintained by the Company, nor will
SFM be obligated to incur any liability or obligation for the
account of the Company without assurance that the necessary funds
for the discharge of the liability or obligation will be
provided.
4.
Other Activities of SFM;
Investment Opportunities . The Company
acknowledges and agrees that neither SFM nor any of its employees,
officers, directors, affiliates or associates will devote its, his
or her full time and business efforts to the duties of SFM
specified in this Agreement, but only so much of such time and
efforts as SFM reasonably deems necessary or appropriate. The
Company further acknowledges and agrees that SFM and its affiliates
and associates are or may be engaged in the business of investing
in, acquiring and/or managing businesses for their own respective
accounts and for the account of other unaffiliated parties and
that, subject to SFM’s obligations under Article 10
hereof, no aspect or element of these activities will be deemed to
be engaged in for the benefit of the Company nor to constitute a
conflict of interest or breach of any duty hereunder. SFM
will be required to bring only those investments and/or business
opportunities to the attention of the Company which SFM, in its
sole discretion, deems appropriate.
5.
Compensation of SFM
.
5.1
Management
Fee . During the term of
this Agreement, in consideration for the Services to be rendered
hereunder, SFM will receive an annual fee of $500,000 (“
Base Compensation ”), payable to SFM by the Company in
arrears on a quarterly basis. The Base Compensation shall be
paid within 10 business
days of the end
of the preceding calendar quarter. The Base Compensation
shall increase as of January 1 of each year during the term of
this Agreement by the positive percentage change, if any, in the
CPI from the month of January of the preceding year to the
month of January of such year. For purposes hereof,
“CPI,” for any month of January, means the Consumer
Price Index for All Urban Consumers, U.S. City Average, all items,
not seasonally adjusted, for such month and compiled upon data
(with the base 1982-84 equals 100) for such month (the
“Index”). In the event that publication or
issuance of the Index is discontinued or suspended, the CPI shall
be an index published or issued by the United States Department of
Labor or any bureau or agency thereof that computes information
from substantially the same statistical categories and
substantially the same geographic areas as those computed in the
Index and that weights such categories in a substantially similar
way to the weighting of the Index as of the date hereof. In
the event that the Index is calculated upon a base year other than
1982-84, such adjustments to the CPI for each calendar year shall
be calculated as necessary to ensure that the CPI for each such
calendar year is based on the same Index.
5.2
Subordination
.
Notwithstanding the foregoing, SFM agrees to subordinate its right
to payment of the Base Compensation if and to the extent required
by the primary secured lender and any other secured creditors of
the Company pursuant to the terms and conditions of those credit
agreements then in effect, provided that, if at any time all or any
portion of the Base Compensation is deferred pursuant to
SFM’s obligation to subordinate under this Section 5.2,
or the Base Compensation or any other amount payable hereunder (in
the aggregate, the “ Unpaid Amounts ”) is
otherwise not paid in a timely manner, then any such accrued Unpaid
Amounts shall accrue interest from and after the date on which they
were otherwise payable at an annual rate equal to the Prime Rate
plus five percent (5%) calculated on the basis of a 360-day year
and for the actual number of calendar days elapsed prior to payment
thereof. The term “Prime Rate,” as used herein,
shall mean a fluctuating interest rate per annum equal to the rate
of interest announced publicly from time to time by Citibank, N.A.
as its base rate, provided that if, at any time, SFM is unable to
determine such rate, SFM may choose such
2
other published version of
the prevailing prime rate of interest as SFM shall deem appropriate
in its reasonable discretion.
6.
Term . This Agreement will
commence as of
,
2009 and will remain in effect until the earlier of
,
2012 or such time as Sterling Capital Partners III, L.P., a
Delaware limited partnership, and any other affiliate or associate
of SFM no longer beneficially own, in the aggregate, greater than
twenty percent (20%) of the then outstanding voting securities of
the Company or any entity or entities which, directly or
indirectly, beneficially own, in the aggregate, a majority of the
then outstanding voting securities of the Company.
7.
Standard of Care
. SFM
(including any person or entity acting for or on behalf of SFM)
will perform the Services using such skill, care, quality and
efficiency as it exercises in performing the same or similar
services for itself and those entities in which SFM owns a majority
of the voting securities. SFM (including any person or entity
acting for or on behalf of SFM) will not be liable for any mistakes
of fact, errors of judgment, for losses sustained by the Company or
any subsidiary or for any acts or omissions of any kind,
unless
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