Sample Business Contracts

Advertising Agency Agreement - Select Comfort Retail corp. and Messner Vetere Berger McNamee Schmetterer/EURO RSCG Inc.

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                                            As of July 1, 2000

Select Comfort Retail Corporation
10400 Viking Drive
Suite 400
Minneapolis, Minnesota 55344

Attention:     Mr. William McLaughlin
               Chief Executive Officer

Dear Bill:

This will set forth the terms and  conditions  on which  Select  Comfort  Retail
Corporation  ("you" or "your") agree to employ  Messner  Vetere  Berger  McNamee
Schmetterer/EURO  RSCG  Inc.  ("we" or "us")  and we  agree  to  serve,  as your
advertising agency in the United States.

                    I.   BASIC SERVICES

Our services to you shall include  services  customarily  performed by a general
advertising agency. Specifically, we shall do the following:

     (a)  Formulate  and  submit for your  approval  advertising  campaigns  and

     (b) After approval by you, create and prepare  advertising for consumer and
trade print, broadcast and outdoor media.

     (c)  Develop a media  strategy  and plan for an agreed  upon number of test
markets  (the  "Test   Markets")  and  support  the  proposed  media  plan  with
advertising strategy and rationales.

     (d) Purchase all  materials and services  necessary  for the  production of
finished advertisements and commercials.

     (e) Execute advertising in finished form.

     (f) Forward  advertising  material to media with  proper  instructions;  it
being understood and agreed that you will be responsible for all media placement
and payment with respect to such  advertising  material and that for purposes of
our forwarding such material to such media and of


our administering and monitoring any ongoing  obligations,  including talent and
other  payments,  you shall  provide to us (or confirm  that we have) a full and
accurate  media  schedule  a  reasonable  time  prior to the date  that any such
material must be forwarded to the applicable media.

     (g) Pay all charges incurred and assumed by us on your behalf in accordance
with the terms of this agreement.

     (h) Endeavor to do all of the above on the most advantageous  rates,  terms
and conditions available.

     (i) Develop and provide  you with rough  concepts  for certain  significant
collateral  materials  (such as sales promotion  materials,  brochures and store


Our compensation for advertising services set forth in Section I above will be a
minimum  annual  fee of  $2,500,000,  which  you  agree to pay in equal  monthly
installments  of $208,333,  on the first of each month  commencing July 1, 2000.
(For purposes of clarity, the compensation set forth in this Section II does not
cover any of the  services  set forth in  Section  VI below,  including  without
limitation,  media buying and checking services,  and if you should desire us to
perform any of the  services set forth in Section VI below,  including,  without
limitation,  media  buying and  checking  services,  our  compensation  for such
services  shall be negotiated and agreed upon at the time of each such request.)
If this  agreement  terminates  on a date  other  than the  first of a month,  a
prorated share of the minimum fee will be due for the final month.


     (a) You also agree to pay us for all third party  charges  incurred on your
behalf for the production  and purchase of  advertising  materials and programs,
including, without limitation,  typography,  engraving,  printing,  photographs,
artwork, comprehensive layouts, pasteups,  mechanicals,  photoboards,  research,
film, video tapes,  editing,  musical  compositions and arrangements,  radio and
television programs and facilities,  talent, props, scenery,  sound and lighting
effects, rights, royalties, producers' or packagers' fees, at our net cost.

     (b) You also agree to pay us in accordance with our standard charges, which
may be adjusted  from time to time,  for any studio  functions  performed  by us
including,  without limitation,  for any paste-ups,  mechanicals,  comprehensive
production  storyboards  and  photoboards,   printing,  typography,  retouching,
illustration,  graphics,  animation,  designs (including computer aided design),
digital image research,  portable media, and color output and prints prepared or
produced by our personnel.

     (c)  You   agree  to   reimburse   us  for   travel   expenses,   including
transportation,  hotels,  meals,  etc., of our personnel in connection  with the
servicing  of  your  advertising  account  and  any  special  services;  charges
originating  with us for costs of  forwarding,  storing,  shipping  and mailing,
telephoning,  telegraphing,  telecopier,  facsimile transmissions,  duplicating,
courier and  messenger  services  incurred  in the  servicing  of your  account;
charges for talent payment services;  and charges for legal services  authorized
by you, including without limitation, legal


review of advertising and other  materials,  trademark and copyright  advice and
registrations,  negotiation  of talent and other  extraordinary  contracts,  and
representation before industry and governmental regulatory agencies.

                    IV.  INCENTIVE COMPENSATION

In the event that we continue to provide advertising  services to you after June
30, 2001 (i.e.,  beyond the end of the first  contract  year),  you and we agree
that we shall be eligible to receive  from you  incentive  compensation  for the
second  contract  year and for each  contract  year  thereafter.  The amount and
manner of calculation of such incentive  compensation shall be negotiated by you
and us in good faith prior to the  commencement  of the second contract year and
each contract year thereafter.

                    V.   PAYMENTS

     (a) We will bill you for charges in connection  with our services upon your
approval  of  estimates  for such  charges,  and you agree to pay these  charges
within  thirty (30) days,  except that any  payments we must make on your behalf
must be  collected  from you no later than the  earliest  dates on which we must
make payment on your behalf. In the event that we do not receive payments by the
date set forth  above,  we shall have the right to not  purchase  or contract on
your behalf or to cancel any contracts  previously  entered into on your behalf,
and, in the event that we cancel any such  contracts,  you shall be  responsible
for any charges, commissions and fees incurred prior to, or as a result of, such
cancellation. Billing adjustments will be made for differences between estimated
charges  previously billed and charges actually incurred upon completion of each
job or project.  If any payment is not  received on a timely  basis we will have
the right to assess a finance charge of up to one and one-half  percent (1 1/2%)
per month on the unpaid balance.

                    VI.  SPECIAL SERVICES

In addition to the basic services, we are prepared to render special services to
you in support of traditional  media  advertising.  Any special  services agreed
upon will be  rendered  in  accordance  with any  special  terms  agreed upon in
writing and charged to you in  accordance  with  estimates  which we will supply
you.  Special  services will not be credited  against any minimum fees.  Special
services include, without limitation, the following:

     (a)  Direct  Response  advertising  and sales  promotion  material  such as
point-of-sale materials,  direct mail, leaflets,  inserts, catalogs,  brochures,
sales films,  training films, sales manuals, and other material prepared for use
other  than in  traditional  advertising  media;  provided,  however,  that  the
development  of rough concepts for  significant  collateral  materials  shall be
included in Basic Services, in accordance with Paragraph I(i) hereof.

     (b) Research services, other than copy development, such as studies of your
products or services, studies of consumer or trade attitudes and behavior.

     (c) Design services including packaging,  trademarks and corporate identity


     (d) Special  marketing  services such as investigations of market potential
and distribution problems.

     (e)  Services  relating  to  the  testing  of  new  product  concepts  from
pre-testing activities through active test marketing of new products.

     (f) Staging or conducting sales or other company meetings and designing and
preparing exhibits for trade or industry shows.

     (g)  Services  related  to  promotions  and  events,   including,   without
limitation, conducting and administering promotions and planning events.

     (h) Designing,  creating and producing  interactive and on-line  materials,
Web sites and Web  advertising,  and serving and  maintaining  Web sites and Web

     (i) Media buying and media checking services;  provided,  however,  that if
our  advertising  campaign  performs  well in the Test Markets and you roll such
campaign out to additional markets, you and we will negotiate in good faith with
respect to our providing  media buying services in connection with such roll out
(and  thereafter)  as well as the  amount  of the  fee  (or  other  compensation
arrangement) payable by you to us in connection with such media buying services.

                    VII. GENERAL

     (a) We will obtain your written authorization before making any substantial
expenditures on your behalf. We are authorized to act on your behalf as an agent
for a disclosed  principal in connection  with our services  hereunder  provided
that such  services are in  connection  with a job or project which has been (or
such services have otherwise been) authorized by you.

     (b) If you  should  desire any  advertising  material  or special  material
created by us (or anything  derived from such material) to be placed outside the
United States, you and we will agree upon the terms in advance.

     (c) As  between  you and us,  any plan,  advertising  material  or  special
material which we produce on your behalf will become your property when you have
paid our invoices. Any material or ideas prepared or submitted to you, which you
have  chosen  not to  produce  or for which you have not paid our  corresponding
production  invoices,  will  remain our  property  (regardless  of  whether  the
physical  embodiment of creative work is in your possession in the form of copy,
artwork, plates,  recordings,  films, tapes, etc.) and may be submitted to other
clients for their use, provided that such submission or use does not involve the
release of any  confidential  information  regarding your business or methods of
operation. For purposes hereof, "produce' shall be defined as any material which
is created in tangible form pursuant to a signed production estimate.

     (d) We hereby agree to indemnify and hold you harmless from and against any
and  all  claims,  demands,   regulatory  proceedings  and  all  damages,  costs
(including,  without  limitation,  settlement  costs) and  expenses  (including,
without  limitation,   reasonable   attorneys'  fees)  arising  from  any  claim
pertaining to libel, slander,  defamation,  copyright infringement,  invasion of


privacy, piracy and/or plagiarism arising from your use consistent with releases
and  agreements  with third parties of any materials we create or supply to you,
except to the extent that such claims arises from materials  created or supplied
by you.

     (e) Other than that for which we agree to  indemnify  and hold you harmless
pursuant to Section  VII(d)  above,  you hereby agree to  indemnify  and hold us
harmless from and against any and all claims,  demands,  regulatory  proceedings
and all damages,  costs (including,  without  limitation,  settlement costs) and
expenses  (including,  without limitation,  reasonable  attorneys' fees) arising
from or relating to any activities  undertaken by us on your behalf,  the use by
you,  your  retailers or dealers,  or anyone else of any  materials we create or
supply to you, or your products or services.

     (f) We will use our  reasonable  best efforts to guard  against any loss to
you caused by the failure of media, suppliers or others to perform in accordance
with  their  commitments,  but we will not be  responsible  for any such loss or
failure on their part, or any destruction or unauthorized  use by others of your

     (g) You  have the  right at any time to  direct  us to  cancel  any  plans,
schedules or work in  progress,  but you agree to indemnify us against any loss,
cost or liability we may sustain as a result of such action. We will be entitled
to our  commissions,  fees and  payments for  services  performed  prior to your
instructions to cancel,  and for  advertising and materials  placed or delivered
thereafter  if we are  unable  to halt  such  placement  or  delivery.  Under no
circumstances will we be obliged to breach any lawful contractual  commitment to

     (h) In the event that we are required to resort to collection procedures or
litigation for the collection of any  compensation  due us, we shall be entitled
to collect  from you  reasonable  attorneys'  fees and costs in addition to such

     (i) At reasonable times and on reasonable notice to us, you may examine our
files and records which pertain specifically to your advertising.


                    VIII. TERMINATION

     (a) We shall continue to serve as your  advertising  agency until you or we
shall terminate our services with or without cause, or with respect to specified
products or services  assigned to us by giving not less than ninety  days' prior
written  notice by  registered  mail to the  principal  place of business of the
other.  However,  you agree not to give notice of termination  prior to April 1,
2001.  Notice of termination  shall become effective upon receipt of such notice
by the party to whom it is addressed.

     (b) Our rights and duties hereunder shall continue in full force during the
ninety  day  notice  period,  but  our  responsibilities  shall  be  limited  to
supervising and administering then existing advertising campaigns.

     (c) Any  reservation,  contract or arrangement  made by us for you prior to
the termination date which continues beyond the termination date will be carried
to completion by us and paid for by you in accordance with this agreement unless
you direct us to transfer such  reservation,  contract or arrangement to another
entity and you release and  indemnify us, in which event we will attempt to make
such transfer,  subject to obtaining any necessary consent of third parties.  We
will be entitled to our  commissions,  fees and payments for services  performed
prior to accomplishing the transfer. Upon termination, provided that you have no
outstanding  indebtedness  to us and you  assume  any  third  party  obligations
(including,  without  limitation,  any  applicable  union or  guild  obligations
relating  to the  production  and use of  commercials),  we  shall  transfer  in
accordance with your  instructions all property and materials owned by you which
are under our control.

     (d) All  indemnification  obligations  shall survive the termination of our
services or the termination or expiration of this agreement.

                    IX.  MISCELLANEOUS

     (a) This agreement  contains the entire  understanding  between the parties
and may not be altered or waived except by a writing signed by both parties.  No
waiver by either party of the breach of any term or condition of this  agreement
will constitute a waiver of, or consent to, any subsequent breach of the same or
any other term or condition of this agreement.

     (b) This  agreement will be governed by the law of the State of New York to
contracts executed and to be performed entirely in the State of New York.


               Please  indicate your  acceptance of the terms and  conditions by
signing the enclosed copy of this letter and returning it to us.

                                        Very truly yours,

                                        MESSNER VETERE BERGER MCNAMEE
                                        RSCG INC.

                                        By:  /s/Larry Dexheimer
                                                Authorized Officer



By:  /s/William R. McLaughlin
        Authorized Officer