Select Comfort, Sterling reach agreement

On Oct. 5, air bed maker and retailer Select Comfort reached a new agreement with Sterling Partners that allows the private equity firm to invest about $10 million in exchange for ownership of about 9% of the Minneapolis–based company’s common stock.

Under terms of the agreement, Sterling Partners, which has offices in Baltimore and Chicago, has the right through June 2010 to invest $10 million in exchange for 2.5 million shares of the company’s common stock priced at $4 per share and warrants to purchase 2 million shares of the company’s common stock at an exercise price of $0.01 per share. Select Comfort can require the investment upon securing an acceptable extended credit agreement from its lenders.

The new agreement terminates and releases all claims to a previous purchase agreement that was rejected in August by Select Comfort shareholders, the company said. That deal would have allowed Sterling Partners to purchase 52% of the company’s stock at a price of $0.70 per share.

“This agreement positions us to pursue additional capital, which, combined with the Sterling investment, will strengthen our financial position and increase our financial flexibility,” said Bill McLaughlin, Select Comfort president and chief executive officer. “In addition to exploring additional financing alternatives for the company, we continue to negotiate with our lenders to secure a permanent financing agreement.”

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