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SCSS > SEC Filings for SCSS > Form 8-K on 26-Jun-2014All Recent SEC Filings

Show all filings for SELECT COMFORT CORP



Entry into a Material Definitive Agreement

On June 24, 2014, Select Comfort Corporation and its wholly-owned subsidiary Select Comfort Retail Corporation (collectively, the "Company") entered into a Retailer Program Agreement (the "Agreement") with Synchrony Bank (the "Bank"), formerly known as GE Capital Retail Bank. The Agreement replaces a prior agreement between the Company and the Bank under which the Bank has been offering our qualified customers revolving credit terms to finance purchases of our products. The prior agreement, originally entered into as of May 17, 1999, had been amended and restated as of December 14, 2005. It has since been amended and extended several times. As amended and extended, the restated prior agreement was scheduled to expire February 15, 2016, subject to automatic extension for additional two-year terms unless either party gave notice of termination twelve (12) months prior to the then-current term. The new Agreement will expire on December 31, 2020, subject to earlier termination upon certain events.
Under the Agreement, consistent with the prior agreement, the Bank sets the minimum acceptable credit ratings for qualified customers, the interest rates, fees and all other terms and conditions of the customer accounts, including collection policies and procedures. Further, the Bank retains ownership of all cardholder accounts.
In connection with all purchases financed under the program established by the Agreement, the Bank pays the Company (a) an amount equal to the total amount of such purchases less promotional related discounts and fees, which may be adjusted periodically, and (b) certain additional amounts if the Company meets specified volume and growth targets under the program. Further and consistent with the prior agreements, the Company is liable to the Bank for certain chargebacks arising out of certain situations including, but not limited to, bona fide customer disputes concerning the goods or services purchased and the warranties associated therewith, the Company's failure to follow the operating procedures established by the Bank for the program or applicable law, or any fraudulent activity that involves the Company's employees. Additionally, the Company and the Bank will share equally, subject to a maximum amount set forth in the Agreement, the cost of any fraud which neither the Company nor the Bank could reasonably have deterred. After the maximum amount is reached, the Company is liable for such fraud losses. The Company is not liable to the Bank for credit losses arising out of our customers' credit defaults. If the Company does not comply with certain financial covenants, it is obligated to provide the Bank a letter of credit as security for the Company's obligation under the Agreement, and if the Company fails to do so, the Bank may retain payments otherwise due the Company, as the Bank deems necessary to fund a reserve account for such security.
Consistent with the prior agreement, the Bank is not required to continue to finance purchases if the total unpaid outstanding amount of customer accounts under the program exceeds a specified amount.
Under the Agreement and consistent with the prior agreement, the Company has the right but not the obligation to purchase the portfolio upon termination of the Agreement.

Among other rights of the Company to terminate the Agreement, the Company has the right to terminate the Agreement (i) in order to implement an internal customer credit program, (ii) if the Bank increases the fees applicable to the program in an amount which triggers the Company's right to seek a competing offer and the Bank cannot match such competing offer, (iii) if the Bank changes its credit criteria such that the approval rate on customers' application is materially impacted, or (iv) if the Bank elects to not increase the limit on the total unpaid outstanding amounts of customer accounts under the program. Among other rights of the Bank to terminate the Agreement, the Bank has the right to terminate the Agreement (i) if there is a change of law that materially impacts the program, or (ii) if the Company fails to meet certain financial covenants and does not furnish the required letter of credit. As to each cause of termination, there are specific provisions relating to notice and the termination effective date designed to allow sufficient time for the Company to replace the program if desired.
Except for an approved "second source" program for customers who do not meet the Bank's credit criteria or for programs which the Company may acquire through acquisition of another entity or entities, the Company, during the term of the Agreement, cannot offer any other payment program which offers promotional credit to its customers.
The foregoing description of the Agreement is qualified in its entirety by reference to the full text of the Agreement which the Company will file with the Securities and Exchange Commission as an exhibit to the Company's Form 10-Q for the quarter ending June 28, 2014. The Company intends to seek confidential treatment of certain terms of the Agreement in connection with the filing of the Agreement in accordance with the procedures of the Securities and Exchange Commission.

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