-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HTnz7M81RiWE7lVdap3I5HVtZF5uV//oNYhRx08SeEyS2qfGT46CbVOQhudDfaos kNr6q5eo+/nxbzt1jetiYA== /in/edgar/work/0000912057-00-050596/0000912057-00-050596.txt : 20001117 0000912057-00-050596.hdr.sgml : 20001117 ACCESSION NUMBER: 0000912057-00-050596 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20001116 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SELECT COMFORT CORP CENTRAL INDEX KEY: 0000827187 STANDARD INDUSTRIAL CLASSIFICATION: [2510 ] IRS NUMBER: 410157886 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-55269 FILM NUMBER: 771668 BUSINESS ADDRESS: STREET 1: 6105 TRENTON LANE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55442 BUSINESS PHONE: (763) 551-7000 MAIL ADDRESS: STREET 1: 6105 TRENTON LANE NORTH CITY: MINNEAPOLIS STATE: MN ZIP: 55442 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ST PAUL COMPANIES INC /MN/ CENTRAL INDEX KEY: 0000086312 STANDARD INDUSTRIAL CLASSIFICATION: [6331 ] IRS NUMBER: 410518860 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 385 WASHINGTON ST CITY: SAINT PAUL STATE: MN ZIP: 55102 BUSINESS PHONE: 6123107911 FORMER COMPANY: FORMER CONFORMED NAME: ST PAUL COMPANIES INC /MN/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SAINT PAUL COMPANIES INC DATE OF NAME CHANGE: 19900730 SC 13D/A 1 a2031474zsc13da.txt 13D/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 3) SELECT COMFORT CORPORATION (Name of Issuer) COMMON STOCK, PAR VALUE $.01 PER SHARE (Title of Class of Securities) 81616X 10 3 (CUSIP Number) Bruce A. Backberg Senior Vice President The St. Paul Companies, Inc. 385 Washington Street St. Paul, Minnesota 55102 (651) 310-7916 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) NOVEMBER 15, 2000 (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: / / Page 1 of 11
CUSIP NO. 81616X 10 3 SCHEDULE 13D Page 2 of 11 - ---------------------------- ----------------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (entities only) The St. Paul Companies, Inc. - ---------------------------- ----------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP Not Applicable (a) / / (b) / / - ---------------------------- ----------------------------------------------------------------------------------------- 3 SEC USE ONLY - ---------------------------- ----------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - ---------------------------- ----------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ---------------------------- ----------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Minnesota corporation - ---------------------------- ---------------------- ------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER SHARES 0 ---------------------- ------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 7,010,101 (see Item 5) EACH ---------------------- ------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH ---------------------- ------------------------------------------------------------------ ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 7,010,101 (see Item 5) - ---------------------------- ----------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,010,101 (see Item 5) - ---------------------------- ----------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES / / Not Applicable - ---------------------------- ----------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 37.3% - ---------------------------- ----------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON HC, IC and CO - ---------------------------- ----------------------------------------------------------------------------------------- Page 2 of 11 CUSIP NO. 81616X 10 3 SCHEDULE 13D Page 3 of 11 - ---------------------------- ----------------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS (entities only) St. Paul Fire and Marine Insurance Company - ---------------------------- ----------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP Not Applicable (a) / / (b) / / - ---------------------------- ----------------------------------------------------------------------------------------- 3 SEC USE ONLY - ---------------------------- ----------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS - ---------------------------- ----------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / - ---------------------------- ----------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Minnesota corporation - ---------------------------- ---------------------- ------------------------------------------------------------------ NUMBER OF 7 SOLE VOTING POWER SHARES 0 ---------------------- ------------------------------------------------------------------ BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 7,010,101 (see Item 5) EACH ---------------------- ------------------------------------------------------------------ REPORTING 9 SOLE DISPOSITIVE POWER PERSON 0 WITH ---------------------- ------------------------------------------------------------------ 10 SHARED DISPOSITIVE POWER 7,010,101 (see Item 5) - ---------------------------- ----------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 7,010,101 (see Item 5) - ---------------------------- ----------------------------------------------------------------------------------------- 12 CHECK BOX If THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES / / Not Applicable - ---------------------------- ----------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11 37.3% - ---------------------------- ----------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IC and CO - ---------------------------- -----------------------------------------------------------------------------------------
Page 3 of 11 ITEM 1. SECURITY AND ISSUER. This Statement on Schedule 13D relates to the common stock, par value $.01 per share (the "Common Stock"), of Select Comfort Corporation, a Minnesota corporation ("Select Comfort"). The address of the principal executive offices of Select Comfort is 10400 Viking Drive, Suite 400, Eden Prairie, Minnesota 55344. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is filed by and on behalf of The St. Paul Companies, Inc. ("The St. Paul") and St. Paul Fire and Marine Insurance Company ("F&M"). The St. Paul and F&M are sometimes collectively referred to herein as the "Reporting Persons." (b) The principal business address of each of the Reporting Persons is 385 Washington Street, St. Paul, Minnesota 55102. (c) Each of the Reporting Persons is a Minnesota corporation and is principally engaged in the insurance business. (d) None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, United States federal or state securities laws or finding any violation with respect to such laws. (f) Not applicable Information called for by Items 2-6 of this Schedule 13D concerning the directors and executive officers of each of the Reporting Persons is set forth in Exhibit 1 attached hereto and incorporated herein by this reference. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. On November 15, 2000, St. Paul Venture Capital IV, LLC ("SPVC IV"), St. Paul Venture Capital V, LLC ("SPVC V") and St. Paul Venture Capital VI, LLC ("SPVC VI"), each a subsidiary of each of the Reporting Persons, together with Select Comfort and SleepTec, Inc., a Delaware corporation ("SleepTec"), entered into an Asset Purchase Agreement (the "Agreement"), dated effective as of November 10, 2000, pursuant to which SleepTec agreed to sell certain assets to Select Comfort. As part of the purchase price, Select Comfort issued SleepTec a five-year convertible debenture in the principal amount of $4,000,000. This debenture is convertible at the election of the holder at any time into shares of Common Stock of Select Comfort based on an initial conversion price of $5.50 per share. The St. Paul, F&M, SPVC IV and SPVC V are majority stockholders of SleepTec. SPVC V loaned $4,000,000 and SPVC VI has committed to loan $750,000 to SleepTec in the form of convertible promissory notes. SleepTec intends to transfer a portion of the debenture to SPVC V and a portion of the Page 4 of 11 debenture to SPVC VI as repayment of these notes. As a result of this transaction, The St. Paul, F&M, and SPVC V, and The St. Paul, F&M and SPVC VI may be deemed to beneficially own 590,909 and 136,364 shares of Common Stock of Select Comfort, respectively, with respect to the debenture. A form of the debenture to be transferred to SPVC V and SPVC VI is attached as an exhibit to this Schedule 13D and is incorporated herein by this reference. From September 13, 2000 to September 18, 2000, SPVC V purchased in open market brokerage transactions an aggregate of 80,000 shares of Common Stock of Select Comfort for an aggregate purchase price of $222,500.00. Corporate funds of SPVC V were used to purchase all of these shares. No funds used to purchase any of the shares of Common Stock of Select Comfort or notes of SleepTec reported on this statement were borrowed. ITEM 4. PURPOSE OF TRANSACTION. See Item 3 entitled "Source and Amount of Funds or Other Consideration" above for a description of the transaction being reported on this Amendment to Schedule 13D. The Reporting Persons or their affiliates may from time to time purchase shares of Common Stock, either in brokerage transactions, in the over-the-counter market or in privately negotiated transactions. Any decision to increase their holdings in Select Comfort will depend, however, on numerous factors, including without limitation the price of the shares of Common Stock, the terms and conditions relating to their purchase and sale and the prospects and profitability of Select Comfort, and general economic conditions and stock and money market conditions. At any time, the Reporting Persons may also determine to dispose of some or all of the Common Stock, depending on various similar considerations. Except as otherwise provided in this Item 4 and other than as to matters that Patrick A. Hopf, as Chairman of the Board of Select Comfort, may consider and discuss with other Select Comfort officers and board members from time to time, none of the Reporting Persons or any of their affiliates has any present plans or proposals which relate to or would result in: o the acquisition by any person of additional securities of Select Comfort or the disposition of securities of Select Comfort; o an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Select Comfort; o a sale or transfer of a material amount of assets of Select Comfort; o any change in the present board of directors or management of Select Comfort, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; o any material change in the present capitalization or dividend policy of Select Comfort; o any other material change in Select Comfort's business or corporate structure; Page 5 of 11 o changes in Select Comfort's certificate of incorporation, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of Select Comfort by any person; o causing a class of securities of Select Comfort to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; o a class of equity securities of Select Comfort becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, or o any action similar to any of those listed above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) 1. Amount beneficially owned: As of November 15, 2000, each of the Reporting Persons may be deemed to have owned beneficially 7,010,101 shares of Common Stock of Select Comfort. F&M is a wholly owned subsidiary of The St. Paul. F&M is the 99% owner of SPVC IV, SPVC V and SPVC VI. F&M is the record owner of 4,806,022 shares of Common Stock and 59,769 shares of Common Stock issuable upon exercise of outstanding warrants which are exercisable within 60 days. F&M also beneficially owns, through its 99% ownership interest in SPVC IV, 321,017 shares of Common Stock and 10,926 shares of Common Stock issuable upon exercise of outstanding warrants and options which are exercisable within 60 days. In addition, F&M beneficially owns, through its 99% ownership interest in SPVC V, 955,900 shares of Common Stock, 129,194 shares of Common Stock issuable upon exercise of outstanding options, and 590,909 shares of Common Stock issuable upon conversion of a five-year convertible debenture, all of which are exercisable or convertible within 60 days. Furthermore, F&M beneficially owns, through its 99% ownership interest in SPVC VI, 136,364 shares of Common Stock issuable upon conversion of a five-year convertible debenture which is convertible within 60 days. By virtue of the affiliate relationships between the Reporting Persons, each Reporting Person may be deemed to own beneficially all of the shares described in this Schedule 13D. Hence, each Reporting Person may be deemed to beneficially own 7,010,101 shares of the Common Stock of Select Comfort. 2. Percent of class: The St. Paul: 37.3% and F&M: 37.3%. The foregoing percentages are calculated based on the 17,883,212 shares of Common Stock reported to be outstanding by Select Comfort on its most recently filed quarterly report on Form 10-Q for the quarter ended September 30, 2000.
(b) Number of shares as to which each of the Reporting Persons has: (i) Sole power to vote or to direct the vote.............................. 0 (ii) Shared power to vote or to direct the vote............................ 7,010,101 (iii)Sole power to dispose or to direct the disposition of......................................................... 0 (iv) Shared power to dispose or to direct the disposition of............... 7,010,101
Page 6 of 11 (c) During the past 60 days, SPVC V has purchased the following number of shares of Common Stock in open market brokerage transactions for the prices per share (including brokerage commissions) and on the dates indicated below:
------------------------------------------ ------------------------------- ------------------------------- DATE NUMBER OF SHARES PRICE PER SHARE ------------------------------------------ ------------------------------- ------------------------------- September 13, 2000 50,000 $2.69 ------------------------------------------ ------------------------------- ------------------------------- September 18, 2000 30,000 $2.94 ------------------------------------------ ------------------------------- -------------------------------
(d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. In connection with previous financings, Select Comfort has granted F&M warrants to purchase 59,769 shares of Common Stock and SPVC IV warrants to purchase 7,954 shares of Common Stock. Forms of these warrants are attached as exhibits to this Schedule 13D and are incorporated herein by this reference. In addition, Patrick A. Hopf, Chairman of the Board of Select Comfort and President of St. Paul Venture Capital, Inc., which is the manager of SPVC IV and SPVC V, has transferred to SPVC IV options to purchase 5,000 shares of Common Stock (2,972 shares of which are currently exercisable or exercisable within 60 days of November 15, 2000) and to SPVC V options to purchase 374,000 shares of Common Stock (129,194 shares of which are currently exercisable or exercisable within 60 days of November 15, 2000), which options Mr. Hopf received from Select Comfort as compensation for his director and officer services. Forms of these options are attached as exhibits to this Schedule 13D and are incorporated herein by this reference. Pursuant to Rule 13d-1(k)(1) promulgated under the Exchange Act, the Reporting Persons have entered into an agreement with respect to the joint filing of this Schedule 13D, and any amendment or amendments hereto, a copy of which has been filed as Exhibit 2 to this Schedule 13D and is incorporated herein by this reference. Except as described herein and in Exhibit 1 to this Schedule 13D, there are no contracts, arrangements, understandings or relationships among the persons named in Item 2 or between the Reporting Persons and any other person with respect to any securities of Select Comfort. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Information concerning directors and executive officers of The St. Paul Companies, Inc. and St. Paul Fire and Marine Insurance Company Exhibit 2 Agreement between The St. Paul Companies, Inc. and St. Paul Fire and Marine Insurance Company Exhibit 3 Form of Warrant issued in connection with the sale of Convertible Preferred Stock, Series E Page 7 of 11 Exhibit 4 Form of Warrant issued in connection with the November 1996 Bridge Financing Exhibit 5 Amended and Restated Registration Rights Agreement dated December 28, 1995 Exhibit 6 First Amendment to Series E Stock Purchase Agreement and Amended and Restated Registration Rights Agreement dated April 25, 1996 Exhibit 7 Second Amendment to Amended and Restated Registration Rights Agreement dated as of November 1, 1996 Exhibit 8 Second (sic) Amendment to Amended and Restated Registration Rights Agreement dated March 24, 1997 Exhibit 9 Form of Performance Based Stock Option Agreement under the 1997 Stock Incentive Plan Exhibit 10 Form of Debenture issued in connection with the SleepTec, Inc. Asset Purchase Agreement Page 8 of 11 SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. November 16, 2000 THE ST. PAUL COMPANIES, INC. By: /s/ Bruce A. Backberg ------------------------------------- Bruce A. Backberg Its: Senior Vice President ST. PAUL FIRE AND MARINE INSURANCE COMPANY By: /s/ Bruce A. Backberg ------------------------------------- Bruce A. Backberg Its: Senior Vice President Page 9 of 11 EXHIBIT INDEX
Exhibit No. Description Method of Filing ----------- ----------- ---------------- 1 Information concerning directors and executive officers of The Filed herewith St. Paul Companies, Inc. and St. Paul Fire and Marine Insurance Company........................................................... 2 Agreement between The St. Paul Companies, Inc. and St. Paul Fire Filed herewith and Marine Insurance Company...................................... 3 Form of Warrant issued in connection with the sale of Convertible Incorporated by reference to Preferred Stock, Series E........................................ Exhibit 4.2 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 4 Form of Warrant issued in connection with the November 1996 Bridge Incorporated by reference to Financing........................................................ Exhibit 4.3 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 5 Amended and Restated Registration Rights Agreement dated Incorporated by reference to December 28, 1995................................................ Exhibit 4.4 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 6 First Amendment to Series E Stock Purchase Agreement and Amended Incorporated by reference to and Restated Registration Rights Agreement dated April 25, 1996.. Exhibit 4.5 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 7 Second Amendment to Amended and Restated Registration Rights Incorporated by reference to Agreement dated as of November 1, 1996........................... Exhibit 4.6 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) Page 10 of 11 8 Second (sic) Amendment to Amended and Restated Registration Rights Incorporated by reference to Agreement dated March 24, 1997................................... Exhibit 4.7 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 9 Form of Performance Based Stock Option Agreement under the 1997 Incorporated by reference to Stock Incentive Plan............................................. Exhibit 10.17 contained in Select Comfort's Registration Statement on Form S-1, as amended (File No. 333-62793) 10 Form of Debenture issued in connection with the SleepTec, Inc. Filed herewith Asset Purchase Agreement...........................................
Page 11 of 11 EX-1 2 a2031474zex-1.txt EXHIBIT 1 EXHIBIT 1 DIRECTORS AND EXECUTIVE OFFICERS OF THE ST. PAUL COMPANIES, INC. AND ST. PAUL FIRE AND MARINE INSURANCE COMPANY The names and present principal occupations of the directors and executive officers of The St. Paul Companies, Inc. and St. Paul Fire and Marine Insurance Company are set forth below. During the last five years, none of the individuals has been convicted in any criminal proceeding (excluding traffic violations and similar misdemeanors) or has been a party to any civil proceeding of a judicial or administrative body as a result of which such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding violations with respect to such laws. All of the individuals listed below are citizens of the United States except Douglas West Leatherdale, who is a citizen of Canada, and David John, who is a citizen of the United Kingdom. THE ST. PAUL COMPANIES, INC.
- --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- DESCRIPTION OF ANY CONTRACT, ARRANGEMENT, SHARES OF UNDERSTANDING OR PRESENT SELECT RELATIONSHIP WITH PRINCIPAL COMFORT RESPECT TO ANY POSITION WITH OCCUPATION OR BENEFICIALLY SECURITIES OF NAME THE ST. PAUL EMPLOYMENT BUSINESS ADDRESS OWNED SELECT COMFORT - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- H. Furlong Baldwin Director Chairman, Mercantile 0 None President and Bankshares Chief Corporation Executive 2 Hopkins Plaza Officer , Baltimore, MD 21201 Mercantile Bankshares Corporation - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- John H. Dasburg Director President and Northwest Airlines, 0 None Chief Inc. Executive 5101 Northwest Drive Officer, St. Paul, MN Northwest 55111-3034 Airlines, Inc. - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- W. John Driscoll Director Former Rock Island Company 0 None Chairman and 332 Minnesota St. Chief Execute Suite 2090 Officer, Rock St. Paul, MN Island Company 55101-1308 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Kenneth Marc Director Chairman and The Duberstein Group 0 None Duberstein Chief 2100 Pennsylvania Executive Ave. NW, Suite 500 Officer, The Washington, DC 20037 Duberstein Group - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Pierson MacDonald Director Retired 4900 IDS Center 0 None Grieve Chairman and 80 South 8th Street Chief Minneapolis, MN 55402 Executive Officer, Ecolab, Inc. - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Thomas R. Hodgson Director Former 225 E. Deerpath 0 None President and Suite 222 Chief Lake Forest, IL 60045 Operating Officer, Abbott Laboratories - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- 1 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Sir David G. John, Director Chairman, The The BOC Group 0 None KCMG BOC Group PLC Chertsey Road Windlesham Surrey GU20 6HG England - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- William Hugh Kling Director President, Minnesota Public 1000 None Minnesota Radio Public Radio, 45 E. 7th Street President, St. Paul, MN 55101 Minnesota Communications Group and President, Greenspring Company - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Douglas West Chairman, Chairman, 385 Washington Street 0 None Leatherdale President, President, CEO St. Paul, MN 55102 CEO and and Director Director of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Bruce King MacLaury Director President 5109 Yuma Place, NW 0 None Emeritus, The Washington, DC 20016 Brookings Institution - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Glen D. Nelson Director Vice Chairman, Medtronic, Inc. 0 None Medtronic, Inc. 7000 Central Avenue NE Minneapolis, MN 55432 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Anita Marie Pampusch Director President, The The Bush Foundation 0 None Bush Foundation E-900 First National Bank Building 332 Minnesota Street St. Paul, MN 55101 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Gordon M. Sprenger Director President and Allina Health 0 None Chief Systems, Inc. Executive P.O. Box 9310 Officer, Minneapolis, MN Allina Health 55440-9310 Systems, Inc. - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Bruce Allen Backberg Sr. Vice Sr. Vice 385 Washington Street 0 None President-Legal President-Legal St. Paul, MN 55102 Services Services of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Karen L. Himle Sr. Vice Sr. Vice 385 Washington Street 0 None President- President- St. Paul, MN 55102 Corporate Corporate Affairs Affairs of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Thomas Andrew Sr. Vice Sr. Vice 385 Washington Street 0 None Bradley President- President- St. Paul, MN 55102 Corporate Corporate Controller Controller of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Laura L. Gagnon Vice Vice 385 Washington Street 0 None President- President- St. Paul, MN 55102 Finance Finance & Investor & Investor Relations Relations of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Paul James Liska Executive Executive Vice 385 Washington Street 0 None Vice President and St. Paul, MN 55102 President and Chief Chief Financial Financial Officer of The Officer St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- John A. MacColl Executive Executive Vice 385 Washington Street 0 None Vice President and St. Paul, MN 55102 President and General General Counsel of The Counsel St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- David Nachbar Sr. Vice Sr. Vice 385 Washington Street 0 None President-Human President-Human St. Paul, MN 55102 Resources Resources of The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- 2 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Mark Lindell Pabst Sr. Vice Sr. Vice St. Paul Syndicate 0 None President President of Management The St. Paul 60 Gracechurch Street London EC3V 0HR England - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Sandra Ulsaker Wiese Corporate Corporate 385 Washington Street 0 None Secretary Secretary of St. Paul, MN 55102 The St. Paul - --------------------- --------------- ---------------- ---------------------- --------------- -----------------------
ST. PAUL FIRE AND MARINE INSURANCE COMPANY
- --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ DESCRIPTION OF ANY CONTRACT, ARRANGEMENT, UNDERSTANDING OR SHARES OF RELATIONSHIP WITH PRESENT PRINCIPAL SELECT COMFORT RESPECT TO ANY OCCUPATION OR BENEFICIALLY SECURITIES OF NAME POSITION WITH F&M EMPLOYMENT BUSINESS ADDRESS OWNED SELECT COMFORT - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Bruce Allen Backberg Sr. Vice Sr. Vice 385 Washington 0 None President-Legal President-Legal Street Services Services of F&M St. Paul, MN 55102 - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Thomas Andrew Sr. Vice President- Sr. Vice 385 Washington 0 None Bradley Finance & Corporate President- Street Planning & Finance & St. Paul, MN 55102 Development Corporate Planning & Development of F&M - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Michael James Conroy Executive Vice Executive Vice 385 Washington 0 None President, Chief President, Chief Street Administrative Administrative St. Paul, MN 55102 Officer and Director Officer and Director of F&M - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ James Francis Duffy Sr. Vice President Sr. Vice St. Paul Re, Inc. 0 None President of F&M 195 Broadway New York, NY 10007 - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Karen L. Himle Sr. Vice Sr. Vice 385 Washington 0 None President-Corporate President-Corporate Street Affairs Affairs of F&M St. Paul, MN 55102 - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Robert Jule Sr. Vice President Sr. Vice 385 Washington 0 None Lamendola President of F&M Street St. Paul, MN 55102 - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Douglas West Chairman, Chairman, 385 Washington 0 None Leatherdale President, Chief President, Chief Street Executive Officer Executive Officer St. Paul, MN 55102 and Director and Director of F&M - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Stephen Wright Executive Vice Executive Vice 385 Washington 600 None Lilienthal President and President and Street Director Director of F&M St. Paul, MN 55102 - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ Paul James Liska Executive Vice Executive Vice 385 Washington 0 None President, Chief President, Chief Street Financial Officer Financial Officer St. Paul, MN 55102 and Director and Director of F&M - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ John A. MacColl Executive Vice Executive Vice 385 Washington 0 None President and President and Street General Counsel General Counsel St. Paul, MN 55102 of F&M - --------------------- --------------------- ------------------- --------------------- ---------------- ------------------------ 3 - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- T. Michael Miller Sr. Vice Sr. Vice 385 Washington Street 0 None President-GlobalPresident-Global St. Paul, MN 55102 Products, and Products, and Director Director of F&M - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Janet Ranjala Nelson Sr. Vice Sr. Vice 385 Washington Street 0 None President- President- St. Paul, MN 55102 Special Special Assistant to Assistant to the President the President of F&M - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Mark Lindell Pabst Executive Executive Vice St. Paul Syndicate 0 None Vice President President of Management F&M 60 Gracechurch Street London EC3V 0HR England - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Kent D. Urness Sr. Vice Sr. Vice 385 Washington Street 0 None President-GlobalPresident-Global St. Paul, MN 55102 Products and Products and Director Director of F&M - --------------------- --------------- ---------------- ---------------------- --------------- ----------------------- Sandra Ulsaker Wiese Corporate Corporate 385 Washington Street 0 None Secretary, Secretary, St. Paul, MN 55102 Assistant Assistant Vice Vice President-Legal President-Legal Services of F&M Services - --------------------- --------------- ---------------- ---------------------- --------------- -----------------------
4 EX-2 3 a2031474zex-2.txt EXHIBIT 2 EXHIBIT 2 AGREEMENT Pursuant to Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, the undersigned hereby agree that only one statement containing the information required on Schedule 13D need be filed with respect to ownership by each of the undersigned of shares of Common Stock of Select Comfort Corporation. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. Dated: November 16, 2000 THE ST. PAUL COMPANIES, INC. By: /s/ Bruce A. Backberg --------------------------------------- Bruce A. Backberg Its: Senior Vice President ST. PAUL FIRE AND MARINE INSURANCE COMPANY By: /s/ Bruce A. Backberg --------------------------------------- Bruce A. Backberg Its: Senior Vice President 5 EX-10 4 a2031474zex-10.txt EXHIBIT 10 EXHIBIT 10 FORM OF CONVERTIBLE SUBORDINATED DEBENTURE $_______________ November __, 2000 Minneapolis, Minnesota Select Comfort Corporation, a Minnesota corporation (the "COMPANY"), for value received, hereby promises to pay to _______________ (the "HOLDER"), at the Holder's office, the principal sum of _________________ ($__________), on November 10, 2005 (the "MATURITY DATE"). This Debenture shall not bear interest from the date of issuance through to the Maturity Date. This Debenture is issued pursuant to the terms of that certain Asset Purchase Agreement dated as of November 10, 2000, by and among the Company, SleepTec, Inc., and St. Paul Venture Capital IV, LLC/St. Paul Venture Capital V, LLC/St. Paul Venture Capital VI, LLC (the "PURCHASE AGREEMENT"). This Debenture is subject to the terms and conditions of the Purchase Agreement, which is hereby incorporated herein by reference. This Debenture is subject to the following terms and conditions: 1. DEFINITIONS As used in this Debenture, the following terms, where used with an initial capital letter, have the following meanings: 1.1. COMPANY. The "Company" means Select Comfort Corporation, a Minnesota corporation, and will also include its successors and assigns. 1.2. CORRESPONDING INDEBTEDNESS. "Corresponding Indebtedness" means any other subordinated indebtedness of the Company that by its terms ranks on parity with this Debenture. 1.3. THE HOLDER. "The Holder" means the registered holder of this Debenture, or any person to whom this Debenture is subsequently properly transferred and who becomes a registered holder of this Debenture. 1.4. PURCHASE MONEY INDEBTEDNESS. "Purchase Money Indebtedness" means indebtedness evidenced by a note, debenture, bond or other written instrument (whether or not secured by any lien or other security interest) issued or assumed as all or a part of the consideration for the acquisition of property, whether by purchase, merger, consolidation or otherwise. 1.5. SENIOR DEBT. "Senior Debt" means (a) the principal of and unpaid interest on indebtedness (other than this Debenture and any Corresponding Indebtedness) of the Company, or with respect to which the Company is a guarantor, (i) for money borrowed evidenced by bonds, notes, debentures or similar written obligations or (ii) constituting Purchase Money Indebtedness or indebtedness secured by property acquired by the Company subject to such indebtedness and for which the Company is directly or contingently liable, whether outstanding on the date of this Debenture or subsequently created, assumed or incurred, unless by the terms of the instrument creating or evidencing the indebtedness it is provided that such indebtedness is Corresponding Indebtedness or is otherwise not superior in right of payment to this Debenture; and (b) any other indebtedness, liability or obligation, contingent or otherwise, of the Company or with respect to which the Company is a guarantor, which is created, assumed or incurred after the date of this Debenture and which, when created, assumed or incurred, is specifically designated by the Company as Senior Debt for the purpose of this Debenture in the instrument creating or evidencing such indebtedness, liability or obligation, or guaranty thereof; and (c) any refundings, renewals or extensions of any indebtedness, liability or obligation described in clauses (a) and (b) above. The term "Senior Debt" does not include any short-term account payable (payable within ninety (90) days or less of its creation) created or assumed by the Company in the ordinary course of its business in connection with the obtaining of materials or services. 2. SUBORDINATION 2.1. GENERALLY. Payment of the principal of and interest on the indebtedness evidenced by this Debenture will be subordinate, and subject in right of payment, to the extent and in the manner stated in this Section 2, to the prior payment in full of all Senior Debt. The provisions of this Section 2 are intended solely for the purpose of defining the relative rights of the Holder, the holders of Senior Debt and the holders of Corresponding Indebtedness. 2.2. LIQUIDATION. Upon any full or partial payment or distribution of the assets of the Company upon any dissolution, winding up, total liquidation or reorganization of the Company (whether in bankruptcy, insolvency, reorganization or receivership proceedings, upon an assignment for the benefit of creditors or upon any other marshalling of the assets and liabilities of the Company): 2.2.1 All Senior Debt (including interest accruing on such Senior Debt after the date of filing of a petition or other action commencing any such proceeding) will first be paid in full before the Holder will be entitled to receive any payment or distribution of any character from or by the Company, whether in cash, securities or other property, on account of the principal of or interest on the indebtedness evidenced by this Debenture; 2.2.2 Any payment or distribution of assets of the Company of any character, whether in cash, securities or other property, on account of the principal of or interest on the indebtedness evidenced by this Debenture, which would, except for this Section 2, be payable or deliverable in respect of this Debenture, will be paid or delivered directly to the holders of the Senior Debt in the proportions in which they hold the same, until the Senior Debt is paid in full; and 2.2.3 In the event that, despite the foregoing provisions, any payment or distribution of assets of the Company of any character, whether in cash, securities or other property (other than shares of Common Stock issued upon conversion of this Debenture in accordance with Section 4.2 hereof), is received by the Holder 2 before all Senior Debt is paid in full, such payment or distribution will be held in trust for the benefit of, and will be paid over or delivered to, the holders of such Senior Debt in the proportions in which they hold the same, until the Senior Debt is paid in full. 2.3. DEFAULT ON SENIOR DEBT. In the event and during the continuation of any default in respect of any Senior Debt, or under any agreement under which any Senior Debt was issued, continuing beyond the period of grace, if any, specified in such agreement, then unless and until such default is cured or waived or has ceased to exist, no payment or distribution of assets of the Company of any character, whether cash, securities or other property, will be paid or delivered with respect to the principal of or interest on this Debenture. 2.4. DEFAULT ON DEBENTURE. In the event that, pursuant to the terms of Section 6 hereof, this Debenture shall be declared due and payable because of an Event of Default, no payments shall be made to the Holder, on account of principal or interest or otherwise, while any Senior Debt shall be outstanding; provided, however, that if, within thirty (30) days after the holders of all such Senior Debt have received written notice of such Event of Default, the maturity of none of the Senior Debt shall have been accelerated by such holders, the restriction contained in this Section 2.4 with respect to payments to the Holder shall terminate and be no longer in effect. The Company agrees, for the benefit of the holders of Senior Debt, that in the event that this Debenture shall be declared due and payable because of an Event of Default hereunder, it will promptly give written notice thereof to the holder or holders of all Senior Debt or to its or their representative or representatives. 2.5. NONIMPAIRMENT. Nothing contained in this Debenture is intended to or will (a) impair, as between the Company, its creditors and the Holder, the obligation of the Company, which is absolute and unconditional, to pay to the Holder the principal of and interest on this Debenture, as and when the same becomes due and payable in accordance with its terms, or (b) affect the relative rights of the Holder and other creditors of the Company other than the holders of Senior Debt. Nothing contained in this Debenture will prevent the Holder from exercising all remedies otherwise permitted by applicable law upon any default under this Debenture, subject to the rights, if any, under this Section 2, of the holders of the Senior Debt in respect of cash, securities or other property of the Company received upon exercise of any such remedy. 2.6. CONTINUING RIGHTS OF SENIOR DEBT. No right of any present or future holder of the Senior Debt to enforce subordination as provided in this Section 2 will at any time in any way be prejudiced or impaired by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms, provisions and covenants of this Debenture, regardless of any knowledge thereof which any such holder may have or may be charged with having. 2.7. EXECUTION OF SUBORDINATION AGREEMENTS. The Holder of this Debenture agrees to execute and deliver to the holder or holders of Senior Debt such subordination agreements as may be reasonably requested by the holder or holders of Senior Debt and as may be consistent with the terms and conditions set forth in this Section 2. 3 3. NO PREPAYMENT This Debenture may not be prepaid in whole or in part at any time. 4. CONVERSION 4.1. CONVERSION PRICE. This Debenture is convertible into shares of the Company's common stock, par value $0.01 per share (the "COMMON STOCK") at an initial conversion price equal to $5.50 per share (the "CONVERSION PRICE"). The Conversion Price is subject to adjustment pursuant to Section 4.5 below. 4.2. OPTIONAL CONVERSION. Subject to the Company obtaining shareholder approval if necessary under the applicable Nasdaq rules, the Holder shall have the right, exercisable at any time in accordance with the terms of this Section 4.2, to convert all or any portion of the principal balance under this Debenture into shares of Common Stock. In the case of optional conversion by the Holder pursuant to this Section 4.2, this Debenture must be surrendered and accompanied by a written conversion notice in the form attached hereto as Exhibit A (hereinafter referred to as the "CONVERSION NOTICE") delivered to the Company at its principal office during usual business hours. 4.3. CONVERSION SHARES. The shares of Common Stock issuable upon conversion of this Debenture pursuant to this Section 4 are referred to herein as the "CONVERSION SHARES." The number of Conversion Shares shall be calculated by dividing the principal amount of the Debenture or portion thereof to be converted by the Conversion Price as adjusted from time to time as provided herein. 4.4. ISSUANCE OF COMMON STOCK. The conversion of this Debenture will be deemed to have been made at the close of business on the date on which this Debenture has been surrendered for conversion with the Conversion Notice duly executed (the "CONVERSION DATE"). As of the Conversion Date, the rights of the Holder as a holder of this Debenture will cease and the Holder will be treated for all purposes as having become the record holder of the Conversion Shares as of such Conversion Date. No fractional shares will be issued upon the conversion of this Debenture, but, instead of any fraction of a share that would otherwise be issuable, the Company will deliver an amount of cash equal to such fraction multiplied by the then applicable Conversion Price. 4.5. ADJUSTMENT OF CONVERSION PRICE. The Conversion Price shall be subject to adjustment from time to time as follows: 4.5.1 In case the Company shall subdivide its outstanding shares of Common Stock into a greater number of shares at any time, the then applicable Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Common Stock of the Company shall be combined into a smaller number of shares, the then applicable Conversion Price in effect immediately prior to such combination shall be proportionately increased. 4.5.2 If any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation, 4 or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the Holder shall thereafter have the right to receive upon the terms and conditions specified herein and in lieu of the Conversion Shares immediately theretofore receivable upon the conversion of this Debenture, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal to the number theretofore receivable upon the conversion of this Debenture had such reorganization, reclassification, consolidation, merger or sale not taken place, and in any such case appropriate provision shall be made with respect to the rights and interests of the Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the then applicable Conversion Price and of the number of securities receivable upon the conversion of this Debenture) shall thereafter be applicable, as nearly as may be practicable, in relation to any shares of stock, securities or assets thereafter receivable upon the conversion of this Debenture. 4.5.3 In any case in which this Section 4.5 shall require that an adjustment shall become effective immediately after a record date for an event, and if the Holder should convert this Debenture after such record date and before the occurrence of such event, then the Company may defer until the occurrence of such event (i) issuing the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares issuable upon such conversion before giving effect to such adjustment and (ii) paying to the Holder any amount of cash in lieu of a fractional share pursuant to Section 4.4 above. 4.5.4 All calculations under this Section 4 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. 4.5.5 Upon any adjustment of the Conversion Price, then and in each such case, the Company shall give written notice thereof, by first-class mail, postage prepaid, addressed to the Holder, at the address of the Holder as shown on the books of the Company, which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of Conversion Shares issuable upon conversion of this Debenture at such price, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4.5.6 The Company shall give the Holder five (5) days' written notice prior to the effective date of any of the events described in Sections 4.5.1 or 4.5.2 above. 4.6. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Conversion Price pursuant to Section 4.5, the number of Conversion Shares shall be adjusted by dividing the then unpaid principal amount hereof by the applicable per share Conversion Price in effect immediately following such adjustment. 5 4.7. COVENANTS OF COMPANY. The Company covenants that all of the Conversion Shares will, upon issuance, be duly authorized and issued, fully paid, nonassessable and free from all taxes, liens and charges with respect to the issue thereof. The Company further covenants that during the period within which this Debenture may be converted, the Company will at all times have authorized, and reserved free of preemptive or other rights for the purpose of issue, such number of shares of Conversion Shares as shall then be issuable upon conversion of this Debenture as herein provided. 4.8. NO REGISTRATION. The Holder understands that neither the Debenture nor the Conversion Shares have been registered under the Act, or applicable securities laws, and the Debenture is (and the Conversion Shares will be) issued pursuant to exemptions from registration under the Act and the state securities laws. The Holder acknowledges that the Debenture, and the Conversion Shares if issued, must be held indefinitely unless exemptions from such registration are available. The Holder understands that the Debenture may not be sold or transferred by the Holder except pursuant to an effective registration statement under the Act and any applicable securities laws, or an opinion of counsel acceptable to the Company that such registration is not required. The Company agrees (for any Holder that is a party to, or affiliated with any person that is a party to, the Amended and Restated Registration Rights Agreement executed by the Company as of December 28, 1995 (the "Registration Rights Agreement")), to extend registration rights for the Conversion Shares that are equivalent to the registration rights granted under the Registration Rights Agreement. 5. CONSOLIDATION, MERGER, SALE OR CONVEYANCE 5.1. GENERALLY. Nothing contained in this Debenture will prevent any consolidation or merger of the Company with or into any other corporation or corporations or successive consolidations or mergers in which the Company or its successor or successors is a party or parties, or will prevent any sale or conveyance of the property of the Company as an entirety or substantially as an entirety to any other corporation authorized to acquire and operate the same. However, the Company hereby covenants and agrees that any such consolidation, merger, sale or conveyance will be upon the condition that (a) immediately after such consolidation, merger, sale or conveyance the corporation (whether the Company or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale or conveyance will have been made, will not be in default in the performance or observance of any of the terms, covenants and conditions of this Debenture to be kept or performed by the Company; and (b) the corporation (whether the Company or such other corporation) formed by or surviving any such consolidation or merger, or to which such sale or conveyance will have been made, will expressly assume the due and punctual payment of the principal of this Debenture, according to the terms of this Debenture, and the faithful performance and observance of all of the covenants, conditions, and requirements of this Debenture to be performed by the Company by a supplemental instrument executed and delivered to the Holder by such corporation. 5.2. RELEASE; LIABILITY OF SUCCESSOR CORPORATION. In case of any such consolidation, merger, sale or conveyance, and upon the assumption by any successor corporation pursuant to Section 5.1 above, such successor corporation will succeed to and be substituted for the Company, with the same effect as if it had been named in this 6 Debenture in the Company's place, and the Company (including any intervening successor to the Company which has become obligated under this Debenture) will be relieved of any further obligation under this Debenture. All of the covenants, stipulations, promises, and agreements contained in this Debenture by or on behalf of the Company will bind its successors and assigns, whether so expressed or not. 6. DEFAULT 6.1. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" will be deemed to occur upon the happening of any of the following: (a) the failure to pay when due any amount of principal payable hereunder, (b) the filing against the Company which is not dismissed within sixty (60) days thereafter, or by the Company, of a petition in bankruptcy or for an arrangement or reorganization, (c) the making by the Company of a general assignment for the benefit of creditors, (d) the appointment of a receiver or trustee for the Company, (e) the institution of liquidation or dissolution or reorganization proceedings with respect to the Company, or (f) the Company becoming unable or admitting in writing an inability to pay its debts generally as they become due. 6.2. RIGHTS ON DEFAULT. If an Event of Default occurs and is continuing, the Holder may declare the principal of this Debenture, together with any accrued and unpaid interest, if not already due, to be due and payable immediately, by written notice to the Company; PROVIDED, HOWEVER, that all amounts due under this Debenture shall be automatically due and payable, without any action of the Holder, upon an Event of Default pursuant to Sections 6.1(b) - 6.1(f) above. Upon any such declaration, such principal and interest will become due and payable immediately, anything contained in this Debenture to the contrary notwithstanding. 6.3. ENFORCEMENT. If the principal of this Debenture, together with all accrued and unpaid interest on this Debenture, becomes due and payable immediately, whether by declaration of the Holder or automatically, the Holder may proceed to protect and enforce its rights by an action at law, suit in equity, or other appropriate proceeding. The Company shall pay all costs and expenses of collection, including, without limitation, attorneys' fees and disbursements in the event that any action, suit or proceeding shall be brought by the Holder hereof to collect this Debenture. 7. COMPANY'S RIGHTS TO OFFSET CLAIMS AGAINST DEBENTURE As a non-exclusive remedy for claims of indemnification under the Purchase Agreement, the Company shall be entitled to offset its claims for indemnification under the Purchase Agreement against any amount that may be owed by the Company under this Debenture. The Company may effect such rights of offset by giving written notice thereof to the Holder, specifying the nature and amount of the claims to be offset. The Company agrees to give the Holder not less than thirty (30) days notice of its intention to exercise its rights to offset hereunder in order to give the Holder adequate opportunity to satisfy any such claims in cash. The Holder shall not be entitled to convert this Debenture pursuant to Section 4 hereof during the pendency of any notice of offset given as described above. 7 8. MISCELLANEOUS 8.1. NO VOTING RIGHTS. This Debenture shall not entitle the Holder to any voting rights or other rights as a shareholder of the Company. 8.2. GOVERNING LAW. This Debenture and all acts and transactions pursuant to this Debenture and the rights and obligations of the parties to this Debenture shall be governed, controlled, interpreted and defined by and under the laws of the State of Minnesota and the laws of the United States of America applicable therein, without regard to that body of law known as conflicts of law. 8.3. SUCCESSORS AND ASSIGNS. Each party agrees that its rights and obligations under this Debenture may not be transferred or assigned directly or indirectly without the prior written consent of the other party, which consent shall not be unreasonably withheld, except in connection with the sale of all or substantially all of the assigning party's related business. Subject to the foregoing sentence, this Debenture shall be binding upon and inure to, the benefit of the parties, their successors and assigns. 8.4. ENTIRE AGREEMENT; AMENDMENT. This Debenture and the other documents delivered pursuant to this Debenture which are incorporated in this Debenture by reference, constitutes the entire agreement of the parties with respect to the subject matter, and supersedes all prior or contemporaneous understandings or agreements, whether written or oral, between the parties hereto with respect to such subject matter. No amendment or modification of this Debenture or any term of this Debenture shall be valid or binding upon the parties unless made in writing and signed by the duly authorized representatives of both parties. 8.5. NOTICES AND DATES. Unless otherwise provided in this Debenture, any notice required or permitted by this Debenture shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by overnight courier and addressed to the party to be notified at such party's address as set forth on the signature page to this Debenture or as subsequently modified by written notice. If any date provided for in this Debenture falls on a Saturday, Sunday or legal holiday, such date shall be deemed extended to the next business day. 8.6. PARTIAL INVALIDITY. If any term, provision, covenant or restriction of this Debenture is held to be invalid, void or unenforceable by a court of competent jurisdiction, then the remaining provisions shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The parties agree to renegotiate in good faith any term held invalid and to be bound by the mutually agreed substitute provision in order to give the most approximate effect intended by the parties. 8.7. NO WAIVER. No waiver of any term or condition of this Debenture shall be valid or binding on either party unless agreed in writing by the Party to be charged. The failure of either party to enforce at any time any of the provisions of this Debenture, or the failure to require at any time performance by the other party of any of the provisions of this Debenture, shall in no way be construed to be a present or future waiver of such 8 provisions, nor in any way affect the validity of either party to enforce each and every such provision thereafter. 8.8. CAPTIONS AND HEADINGS. The section headings contained in this Debenture are for reference purposes only and shall not affect in any way the meaning or interpretation of this Debenture. The captions and headings used herein are for convenience and ease of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Debenture. 8.9. COUNTERPARTS. This Debenture may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 8.10. FURTHER ASSURANCES. Each of the parties hereto from time to time at the request and expense of the requesting party and without further consideration shall execute and deliver such other instruments of transfer, conveyance and assignment and take such further action as the requesting party may require to more effectively complete any matter provided for herein. IN WITNESS WHEREOF, the Company has caused this Debenture to be signed by its duly authorized officer and this Debenture to be dated as of November 10, 2000. SELECT COMFORT CORPORATION By_________________________________________ William R. McLaughlin President and CEO Address: 6105 Trenton Lane North Minneapolis, MN 55442 Agreed and accepted by: [THE HOLDER] By:______________________________________________ Its:_____________________________________________ Address:_________________________________________ _________________________________________ _________________________________________ 9 RESTRICTION ON TRANSFER THIS DEBENTURE MAY NOT BE RESOLD OR TRANSFERRED UNDER ANY CIRCUMSTANCES. THE CONVERSION SHARES ISSUABLE UPON CONVERSION HEREOF MAY NOT BE RESOLD OR TRANSFERRED UNLESS SUCH RESALE OR TRANSFER IS EXEMPTED FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE SECURITIES LAWS, AND THE COMPANY RECEIVES, PRIOR TO RESALE OR TRANSFER, WRITTEN REPRESENTATIONS OF THE HOLDER AND PROPOSED TRANSFEREE SATISFACTORY TO THE COMPANY REGARDING SUCH TRANSFER OR, AT THE ELECTION OF THE COMPANY, AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT THE PROPOSED TRANSFER OF THE CONVERSION SHARES MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT OR QUALIFICATION UNDER THE APPLICABLE SECURITIES LAWS, OR THE RESALE OR TRANSFER OF THE CONVERSION SHARES IS REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS. 10 EXHIBIT A TO CONVERTIBLE SUBORDINATED DEBENTURE FORM OF CONVERSION NOTICE _______________, 20__ Select Comfort Corporation 6105 Trenton Lane North Minneapolis, MN 55442 Attention: President and CEO Pursuant to the terms of Section 4.2 of that certain Convertible Subordinated Debenture dated _______________, 2000 and issued by Select Comfort Corporation (the "Debenture"), notice is hereby given that the Holder elects to convert $_________ of the principal amount of the Debenture into shares of Common Stock (as defined in the Debenture). The originally issued Debenture accompanies this Conversion Notice and is surrendered by the Holder for conversion of the principal amount stated above in accordance with the terms of the Debenture. The shares of Common Stock issuable upon conversion of the Debenture (and, if applicable, a check for any amount payable in lieu of a fractional share interest and a replacement debenture instrument in the principal amount of the Debenture that remains outstanding following the conversion effected hereby) shall be issued in the name of the Holder and forwarded to: __________________________________ __________________________________ __________________________________ [THE HOLDER] By:__________________________________________________ Its:_________________________________________________ 11 -----END PRIVACY-ENHANCED MESSAGE-----