SELECT COMFORT CORPORATION
SERIES E PREFERRED STOCK
SHAREHOLDER VOTING AGREEMENT
AND IRREVOCABLE PROXY
This Shareholder Voting Agreement and Irrevocable Proxy (this "AGREEMENT")
is made as of this 11th day of November, 1998, by and among Select Comfort
Corporation, a Minnesota corporation (the "COMPANY"), and each of the
undersigned holders of Series E Convertible Preferred Stock, par value $1.00 per
share, of the Company (the "SERIES E PREFERRED").
WHEREAS, this Agreement shall constitute a shareholder voting agreement
binding all of the parties who have executed a counterpart of this Agreement
pursuant to the terms of Section 302A.455 of the Minnesota Business Corporation
Act ("MBCA"), and shall constitute an irrevocable proxy pursuant to the terms of
Section 302A.447 of the MBCA, whether or not all or a majority of the holders of
the Series E Preferred shall have executed a counterpart of this Agreement; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Holders agree as
follows:
1. AGREEMENT TO VOTE IN FAVOR OF AMENDMENT OF THE ARTICLES OF
INCORPORATION. Each of the undersigned holders of shares of Series E Preferred
hereby agrees to vote all of the shares of the capital stock of the Company held
beneficially or of record by the undersigned in favor of the proposed amendment
of the Second Restated Articles of Incorporation of the Company attached hereto
as Exhibit A (the "AMENDMENT") at the next annual or special meeting of the
shareholders of the Company or by written consent as requested by the Company.
2. GRANT OF IRREVOCABLE PROXY. In furtherance of the foregoing and not
in limitation thereof, each of the undersigned holders of shares of Series E
Preferred hereby appoints H. Robert Hawthorne and Daniel J. McAthie, or either
of them, as Proxies, each with full power to act alone and each with full power
of substitution, and hereby authorizes each of them to represent and to vote all
of the shares of the capital stock of the Company held beneficially or of record
by the undersigned as of the date hereof at the next annual or special meeting
of shareholders of the Company, and at any adjournment or adjournments thereof,
in favor of the Amendment as set forth above. The proxy granted hereby by each
of the undersigned holders of shares of Series E Preferred is coupled with an
interest within the meaning of such term under Subdivision 3 of Section 302A.449
of the MBCA and is therefore not terminable or revocable by any of the
undersigned holders of shares of Series E Preferred.
3. INJUNCTIVE RELIEF. Each of the parties hereto acknowledges and agrees
that in the event of a breach of this Agreement the damage to the nonbreaching
party or parties would be irreparable and extremely difficult to estimate or
determine, making any remedy at law or in damages inadequate. Thus, in addition
to any other right or remedy available at law or in equity,
a nonbreaching party or parties shall be entitled to an injunction
restraining such breach or threatened breach and to specific performance of
any of the provisions of the Agreement, and in any such case no bond or other
security shall be required.
4. GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Minnesota without regard to the conflicts of laws provisions
thereof.
5. COUNTERPARTS. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and each of the undersigned holders of
Series E Preferred has caused this Agreement to be duly executed and delivered
as of November 11, 1998.
SELECT COMFORT CORPORATION,
a Minnesota corporation
By: /s/ Daniel J. McAthie
--------------------------------
Its: Chief Financial Officer
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ST. PAUL FIRE AND MARINE
INSURANCE CO., a Minnesota corporation
By:
--------------------------------
Its:
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NORWEST EQUITY PARTNERS V,
a Minnesota Limited Partnership
By: Itasca Partners V
Its General Partner
By: /s/ Itasca Partners V
--------------------------------
Its: Partner
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MARQUETTE VENTURE PARTNERS II,
L.P.
By: MARQUETTE GENERAL II, L.P.
Its General Partner
By: /s/ James E. Daverman or
Lloyd D. Ruth
--------------------------------
James E. Daverman or Lloyd D. Ruth
Authorized Signatory
MVP II AFFILIATES FUND, L.P.
By: MARQUETTE GENERAL II, L.P.
Its General Partner
By: /s/ James E. Daverman or
Lloyd D. Ruth
--------------------------------
James E. Daverman or Lloyd D. Ruth
Authorized Signatory
APEX INVESTMENT FUND, L.P.,
a Delaware Limited Partnership
By: Apex Management Partnership,
Its General Partner
By: Stellar Investment Co.,
Its Managing General Partner
By:
--------------------------------
James A. Johnson, President
THE PRODUCTIVITY FUND II, L.P.,
a Delaware Limited Partnership
By: First Analysis Management Company II,
Its General Partner
By: First Analysis Corporation,
Its General Partner
By:
--------------------------------
Its:
--------------------------------
GROSSMAN INVESTMENTS,
a General Partnership
By:
--------------------------------
Its General Partner
H & Q SELECT COMFORT INVESTORS
L.P., a limited partnership
By: H & Q Select Comfort Investors L.L.C.
Its General Partner
By:
--------------------------------
Its:
--------------------------------
H & Q LONDON VENTURES
By:
--------------------------------
Its:
--------------------------------
MACKE LIMITED PARTNERSHIP
By:
--------------------------------
Its:
--------------------------------
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PAINE WEBBER INCORPORATED,
CUSTODIAN OF FRED W. REESE
DECEDENT IRA
By:
--------------------------------
Its:
--------------------------------
BAYVIEW INVESTORS, LTD.
By:
--------------------------------
Its:
--------------------------------
ALEX. BROWN & SONS EMPLOYEES
VENTURE FUND LP
By:
--------------------------------
Its:
--------------------------------
MONTGOMERY ASSOCIATES, 1992 L.P.
By:
--------------------------------
Its:
--------------------------------
-----------------------------------
Patrick A. Hopf
/s/ Daniel J. McAthie
-----------------------------------
Daniel J. McAthie
-----------------------------------
Theodore H. Ashford
-----------------------------------
John Sculley
-----------------------------------
Lynn Elliott
-----------------------------------
Everett V. Cox
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-----------------------------------
Michael B. Gorman
-----------------------------------
Terral Jordan
-----------------------------------
Erwin A. Kelen
-----------------------------------
John A. Rollwagen
-----------------------------------
Dewey K. Shay
-----------------------------------
Doug Hickman
-----------------------------------
Brian D. Jacobs
-----------------------------------
Barbro E. Shronts
-----------------------------------
Sharon Pearson
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EXHIBIT A TO
SHAREHOLDER
VOTING AGREEMENT
AND IRREVOCABLE PROXY
AMENDMENT
OF THE
ARTICLES OF INCORPORATION
OF
SELECT COMFORT CORPORATION
The undersigned, Daniel J. McAthie, being the Secretary of Select Comfort
Corporation (the "Corporation"), a corporation organized under and subject to
the provisions of Chapter 302A, Minnesota Statutes, does hereby certify that
pursuant to actions duly taken by the Board of Directors and shareholders of the
Corporation, the following resolutions were adopted:
RESOLVED, That section B.6(b) of Article III of the Second Restated
Articles of Incorporation of the Corporation is hereby amended in its entirety
to read as follows:
"(b) AUTOMATIC CONVERSION. Preferred Stock shall be automatically
converted into Conversion Stock upon the election of the Corporation and
delivery of written notice of such election to the holders of Preferred
Stock (which election and notice may be delivered within ninety (90) days
before or after the automatic conversion events described below without
affecting the effective time of such automatic conversion) if the
Corporation closes the issuance and sale of Common Stock in a public
offering underwritten on a firm commitment basis by an underwriter, or
group of underwriters represented by an underwriter or underwriters, which
is a member of the New York Stock Exchange, pursuant to an effective
registration statement under the Securities Act of 1933, as amended (a
"Public Offering"), in which (i) the gross proceeds received by the
Corporation equal or exceed $20,000,000 and (ii) the public offering price
equals or exceeds $14.25 per share (as adjusted to reflect stock splits or
combinations, stock dividends or other corporate recapitalizations effected
after adoption of this amendment of Article III), or, solely with respect
to the Series E Preferred Stock, the public offering price equals or
exceeds $15.00 per share (as adjusted to reflect stock splits or
combinations, stock dividends or other corporate recapitalizations effected
after adoption of this amendment of Article III) (a "Qualified Public
Offering"). Any provision in these Second Restated Articles of
Incorporation which terminates upon completion of a Qualified Public
Offering shall not terminate as to the Series E Preferred Stock until the
Series E Preferred Stock is automatically converted into Conversion Stock
pursuant to the terms of this Section 6(b). The effective date of such
automatic conversion shall be the date upon which the registration
statement filed by the Corporation with the Securities and Exchange
Commission is declared to be effective. As used herein, the term "closes"
shall mean delivery by the Corporation to the underwriters of certificates
representing the
shares of Common Stock of the Corporation offered to the public against
delivery to the Corporation by such underwriters of payment therefor.
The term "firm commitment basis" with respect to the underwriting of such
public offering shall mean a commitment pursuant to a written underwriting
agreement under which the nature of the underwriters' commitment is such
that all securities will be purchased by such underwriters if any
securities are purchased by such underwriters."
RESOLVED, That paragraph B.6(c)(vi) of Article III of the Second Restated
Articles of Incorporation, as amended, of the Corporation is hereby amended in
its entirety to read as follows:
"Except for (A) the grant of options to purchase shares from the pool
of Reserved Option Shares and the issuance of shares upon the exercise of
such options, (B) the grant of an aggregate of 171,429 warrants, each to
purchase one share of Common Stock at an exercise price of $5.25 per share
of Common Stock, to the holders of the Series E Preferred Stock and the
issuance of shares upon the exercise of such warrants, (C) the grant of an
aggregate of up to 119,210 warrants, each to purchase one share of Common
Stock at an exercise price of $5.25 per share of Common Stock, to the
participants in the bridge financing in the aggregate principal amount of
$1,251,700 completed by the Corporation in November 1996 and the issuance
of shares upon the exercise of such warrants, and (D) the grant of an
aggregate of 1,315,096 warrants to General Electric Capital Corporation
("GECC") pursuant to the terms of that certain Purchase Agreement dated as
of March 27, 1997 between the Corporation and GECC, as amended, and the
issuance of shares upon the exercise of such warrants, if and whenever the
Corporation shall issue or sell any shares of Common Stock for a
consideration per share less than the Series E Conversion Price then in
effect (other than dividends payable in Common Stock) or shall issue any
convertible securities, options, warrants or other rights for the purchase
of such shares at a consideration per share that is less than the Series E
Conversion Price then in effect, then, upon such issuance or sale of such
shares, convertible securities, options, warrants, or other purchase
rights, the Conversion Price in effect immediately prior to such issuance
or sale shall be reduced to (y) if such issuance or sale occurs on or
before December 31, 1997, the price at which such shares of Common Stock
were sold or at which shares of Common Stock are issuable upon the exercise
of such convertible securities, options, warrants or other purchase rights
or (z) if such issuance or sale occurs after December 31, 1997, the price
(calculated to the nearest cent) determined by dividing (aa) an amount
equal to the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale multiplied by the then existing
Conversion Price and (2) the consideration, if any, received by the
Corporation upon such issuance or sale, by (bb) an amount equal to the sum
of (1) the number of shares of Common Stock outstanding immediately prior
to such issuance or sale and (2) the number of shares of Common Stock thus
issued or sold and the number of shares of Common Stock issuable upon the
exercise of such convertible securities, options, warrants or other
purchase rights. Solely for purposes of (aa) and (bb) above, the term
"Common Stock outstanding" shall include those shares of Common Stock
issuable upon conversion of outstanding shares of Preferred Stock. If any
options or purchase rights that
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are taken into account in any such adjustment of the Series E Conversion
Price described above subsequently expire without exercise, the Series E
Conversion Price shall be recomputed at the time of expiration by deleting
such options or purchase rights.
"In addition to the foregoing, (i) in the event that the Corporation
completes a Public Offering (as defined in Section B.6(b) above) in 1998,
then the Series E Conversion Price shall be reduced to $8.20 per share (as
adjusted to reflect stock splits or combinations, stock dividends or other
corporate recapitalizations effected after adoption of this amendment of
Article III); and (ii) in the event that the Corporation completes a Public
Offering after 1998, then the Series E Conversion Price shall be reduced to
the lower of $8.20 per share (as adjusted to reflect stock splits or
combinations, stock dividends or other corporate recapitalizations effected
after adoption of this amendment of Article III) or 46.02% of the mid-point
of the filing range of public offering prices set forth in the prospectus
included in the last amendment of the registration statement filed before
the registration statement is declared effective, but in no event below
$5.25 per share."
FURTHER RESOLVED, that the Secretary of the Corporation be and hereby is
authorized and directed to make, execute and acknowledge Articles of Amendment
of the Corporation evidencing the amendments to the Second Restated Articles of
Incorporation set forth above and to cause such Articles of Amendment to be
filed for record with the Secretary of State of the State of Minnesota in the
manner required by law, and to become effective upon the date of such filing.
IN WITNESS WHEREOF, I have hereunto set my hand this ___ day of November,
1998.
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Daniel J. McAthie
Secretary
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