SECURITIES PURCHASE AGREEMENT

Purchase and Sale Agreement

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Minnesota Business Corporation | Select Comfort Corporation | Sterling Capital Partners III, LLC | Sterling SC Investor, LLC

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Title: SECURITIES PURCHASE AGREEMENT
Governing Law: Delaware Date: 5/26/2009
Industry: Furniture and Fixtures Law Firm: Oppenheimer Wolff;Katten Muchin Sector: Consumer Cyclical

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

Dated as of May 22, 2009

by and among

Select Comfort Corporation,

Sterling SC Investor, LLC

and

the other investors, if any, listed on the Schedule of Buyers attached hereto

Table of Contents

			Page

1.	PURCHASE AND SALE OF COMMON SHARES		2

	a.	Purchase and Sale of Common Shares	2
	b.	Closing Date	2
	c.	Form of Payment and Delivery	2

2.	BUYERS’ REPRESENTATIONS AND WARRANTIES		3

	a.	Investment Purpose	3
	b.	Accredited Investor Status	3
	c.	Reliance on Exemptions	3
	d.	Information	3
	e.	No Governmental Review	3
	f.	Transfer or Resale	3
	g.	Legends	4
	h.	Authorization; Enforcement; Validity	5
	i.	Residency	5
	j.	No Other Agreements	5
	k.	Prior Transactions	5
	l.	Available Funds	5
	m.	No General Solicitation	5
	n.	Brokers and Finders	6

3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		6

	a.	Organization and Qualification; Subsidiaries	6
	b.	Authority; Authorization; Enforcement; Validity	6
	c.	Capitalization	7
	d.	Issuance of Securities	9
	e.	No Conflicts	9
	f.	Required Filings and Consents	10
	g.	SEC Documents; Financial Statements	10
	h.	Sarbanes-Oxley Compliance; Internal Accounting Controls; Disclosure Controls and Procedures; Books and Records	12
	i.	Absence of Certain Changes	13
	j.	Absence of Litigation	14
	k.	Full Disclosure; No Undisclosed Events, Liabilities, Developments or Circumstances	14
	l.	Acknowledgment Regarding Buyers’ Purchase of Common Shares	14
	m.	No General Solicitation	14
	n.	No Integrated Offering	15
	o.	Benefit Plans	15
	p.	Employee Relations	18

	q.	Intellectual Property Rights	18
	r.	Environmental Laws	20
	s.	Insurance	20
	t.	Regulatory Permits	21
	u.	Principal Market	21
	v.	Tax Status	21
	w.	Transactions With Related Parties	23
	x.	Application of Takeover Protections; Rights Agreement	23
	y.	Foreign Corrupt Practices	23
	z.	Outstanding Indebtedness; Liens	23
	aa.	Real Property	24
	bb.	Personal Property	24
	cc.	Contracts	24
	dd.	Investment Company	25
	ee.	Fairness Opinion	25

4.	PRE-CLOSING COVENANTS		26

	a.	Shareholders Meeting	26
	b.	Proxy Material	26
	c.	Conduct of Business of the Company	27
	d.	Pre-Closing Access	30
	e.	Reasonable Best Efforts	31
	f.	Registration Rights Agreement	31
	g.	Amended and Restated Credit Agreement	31
	h.	Bylaw Amendment	31
	i.	No Dissenters’ or Appraisal Rights	32
	j.	Board Resignations	32
	k.	No Solicitation of Transactions	32
	l.	Retail Store Closings	35
	m.	Notice of Certain Events	35
	n.	Obligation to Update Schedules	36

5.	OTHER AFFIRMATIVE COVENANTS		36

	a.	Company Board	36
	b.	Disclosure of Transactions and Other Material Information	38
	c.	Form D and Blue Sky	39
	d.	Reporting Status	39
	e.	Financial Information	39
	f.	Internal Accounting Controls	39
	g.	Listing	40
	h.	Patriot Act, Investor Secrecy Act and Office of Foreign Assets Control	40
	i.	Preemptive Rights	40

6.	OTHER NEGATIVE COVENANTS		41

	a.	Restriction on Purchases or Payments	41
	b.	Corporate Existence; Reorganization	41
	c.	Investment Company	42
	d.	No Avoidance of Obligations	42
	e.	Regulation M	42
	f.	No Integrated Offering	42
	g.	Amendments to Articles of Incorporation or Bylaws	42

7.	OTHER AGREEMENTS		42

	a.	Continuing Directors	42
	b.	Vacancies	43
	c.	Voting for Continuing Directors	43
	d.	Directors’ and Officers’ Insurance	44
	e.	Corporate Governance	45
	f.	No Waiver	45

8.	TRANSFER AGENT		45

9.	CONDITIONS TO EACH PARTY’S OBLIGATIONS UNDER THIS AGREEMENT		46

10.	CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO SELL THE COMMON SHARES		46

11.	CONDITIONS TO BUYERS’ OBLIGATIONS TO PURCHASE THE COMMON SHARES		47

12.	TERMINATION, AMENDMENT AND WAIVER		49

	a.	Termination by Mutual Consent	49
	b.	Termination by Either a Majority of the Buyers or the Company	49
	c.	Termination by a Majority of the Buyers	49
	d.	Termination by the Company	50
	e.	Effect of Termination	51
	f.	Termination Fees	51
	g.	Amendment	52
	h.	Extension; Waiver	52

13.	INDEMNIFICATION		53

	a.	Rights to Indemnification	53
	b.	Limitations on Indemnification	55

14.	MISCELLANEOUS		55

iii

a.	Governing Law; Jurisdiction; Jury Trial	55
b.	Counterparts	56
c.	Headings	57
d.	Severability	57
e.	Entire Agreement	57
f.	Notices	57
g.	Successors and Assigns	58
h.	No Third Party Beneficiaries	58
i.	Survival; Time Limits on Indemnification Obligations	58
j.	Further Assurances	59
k.	Placement Agent	59
l.	No Strict Construction	59
m.	Expenses	59
n.	Specific Performance	60
o.	Confidentiality	61
p.	Independent Nature of Buyers	61
q.	Interpretative Matters	61

EXHIBITS

Exhibit A	-	Form of Restated Bylaws

Exhibit B	-	Form of Restated Charter

Exhibit C	-	Form of Guarantee

Exhibit D	-	Form of Registration Rights Agreement

Exhibit E	-	Term Sheet for Amended and Restated Credit Agreement

Exhibit F	-	Form of Company Counsel’s Legal Opinion

Exhibit G	-	Form of Management Services Agreement

Exhibit H	-	Form of Escrow Agreement

Exhibit I		Form of Officer’s Termination Certificate

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “ Agreement ”), dated as of May 22, 2009, by and among Select Comfort Corporation, a Minnesota corporation, with principal offices located at 9800 59th Avenue North, Minneapolis, MN 55442 (the “ Company ”), Sterling SC Investor, LLC, a Delaware limited liability company (“ Sterling ”) and the other investors, if any, listed on the Schedule of Buyers attached hereto (including Sterling, each, a “ Buyer ” and, collectively, the “ Buyers ”). Capitalized terms used and not defined elsewhere in this Agreement have the respective meanings assigned to such terms in the Appendix hereto.

WHEREAS:

A. The Company and the Buyers are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Rule 506 of Regulation D (“ Regulation D ”) as promulgated by the United States Securities and Exchange Commission (the “ SEC ”) under the Securities Act of 1933, as amended (the “ 1933 Act ”).

B. The Buyers, severally and not jointly, desire to purchase from the Company, and the Company wishes to sell to the Buyers, upon the terms and conditions stated in this Agreement, shares of the common stock, par value $.01 per share, of the Company (the “ Common Stock ”) (the shares of Common Stock purchased by all of the Buyers hereunder being collectively referred to herein as the “ Common Shares ” or the “ Securities ,” with the certificates representing the Common Shares being referred to as the “ Share Certificates ”).

C. Each of the Board of Directors of the Company (the “ Company Board ”) and a committee of the Company Board composed solely of “disinterested directors” (as defined in Section 673 Subd.1(d)(3) of the Minnesota Business Corporation Act (as amended, the “ MBCA ”)) (the “ Committee ”) has, by the vote of a requisite majority of the directors serving thereon, (i)(a) determined that it is in the best interests of the Company and its shareholders, and declared it advisable, to enter into this Agreement with the Buyers, and (b) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the issuance of the Common Shares to the Buyers and the adoption of the Second Restated Bylaws of the Company (the “ Restated Bylaws ”), in the form attached hereto as Exhibit A ; (ii) approved a resolution adopting the Fourth Restated Articles of Incorporation of the Company (the “ Restated Charter ”), in the form attached hereto as Exhibit B , and resolved to submit to the shareholders of the Company the Restated Charter for approval at a meeting of the shareholders of the Company; and (iii) resolved to recommend to the shareholders of the Company the approval of the execution, delivery and performance of this Agreement, the issuance of the Common Shares to the Buyers and the approval and adoption of the Restated Charter (collectively, the “ Proposals ”). The recommendations of the Company Board and the Committee that the shareholders vote in favor of each Proposal are collectively referred to herein as the “ Company Board Recommendation ”.

D. Concurrently with the execution of this Agreement, and as a condition and inducement to the Company’s willingness to enter into this Agreement, Sterling Capital Partners III, L.P. has entered into a guarantee, dated as of the date hereof and in the form attached hereto as Exhibit C , in favor of the Company.

NOW THEREFORE , the Company and each of the Buyers, severally and not jointly, hereby agree as follows:

1. PURCHASE AND SALE OF COMMON SHARES .

a. Purchase and Sale of Common Shares . Subject to the satisfaction (or waiver) of the conditions set forth in Sections 9 , 10 and 11 below, the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees to purchase from the Company (the “ Closing ”), that number of Common Shares set forth opposite such Buyer’s name on the Schedule of Buyers , at a purchase price of $0.70 per share, subject to proportional adjustment for stock splits, stock dividends, stock combinations and similar events after the date of this Agreement and prior to the Closing. The aggregate purchase price (the “ Purchase Price ”) for the Common Shares at the Closing purchased by the Buyers shall be $35,000,000.

b. Closing Date . The date and time of the closing of the purchase and sale of the Common Shares (the “ Closing Date ”) shall be 10:00 a.m., Chicago time, on the third Business Day following the satisfaction (or waiver) of the conditions to the Closing set forth in Sections 9, 10 and 11 below (other than any such condition required to be satisfied at the Closing), or such later or earlier date and time as is mutually agreed to by the Company and a Majority of the Buyers. The Closing shall occur at the offices of Katten Muchin Rosenman LLP, 525 West Monroe Street, Chicago, Illinois 60661, or at such other place as the Company and the Buyers may collectively designate in writing.

c. Form of Payment and Delivery .

(i) On the Closing Date, (A) each Buyer shall pay to the Company for the Common Shares to be issued and sold to such Buyer on the Closing Date an amount equal to the investment amount for the Common Shares purchased by such Buyer as set forth opposite such Buyer’s name on the Schedule of Buyers , by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, provided that any payment to be made by Sterling shall be subject to Sterling’s right of set-off for its Expenses (as defined below) pursuant to Section 14(m) hereof, and (B) the Company shall deliver to each Buyer a Share Certificate representing the Common Shares that such Buyer is purchasing hereunder on the Closing Date, in each case duly executed on behalf of the Company and the transfer agent and registrar for the Common Stock and registered in the name of such Buyer or its designee.

(ii) If any one or more of the Buyers (other than Sterling or any of its Affiliates) shall fail or refuse to fund its obligation under Section 1(c)(i) in a timely manner, or otherwise fail or refuse to purchase the Common Shares that it has or they have agreed to purchase hereunder (such Common Shares, collectively, the “ Defaulting Buyer Common Shares ”), then, at the election of Sterling, in its sole discretion, Sterling, or any of its designees (if Sterling so elects, any such purchaser, a “ Replacement Buyer ,” and, if multiple purchasers, collectively, the “ Replacement Buyers ”), may, but shall not be obligated to, purchase all or any portion of the Defaulting Buyer Common Shares on the Closing Date, and each of the Allocation Percentage and the Schedule of Buyers shall be deemed to reflect such adjustment to the number of Common Shares to

2 be purchased by the Replacement Buyer or Replacement Buyers pursuant to this Section 1(c) . In no event shall the foregoing relieve any Buyer of its obligations under this Agreement, nor shall it act as a cure of, or election of a remedy with respect to, any breach by a defaulting Buyer.

2. BUYERS’ REPRESENTATIONS AND WARRANTIES .

Each Buyer severally (and not jointly) represents and warrants, as of the date of this Agreement and the Closing Date, with respect to only itself, that:

a. Investment Purpose . Such Buyer is acquiring the Securities for such Buyer’s own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under, or exempted from the registration requirements of, the 1933 Act; provided , however , that by making the representations herein, such Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b. Accredited Investor Status . Such Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

c. Reliance on Exemptions . Such Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the Securities Laws and that the Company is relying in part upon the truth and accuracy of, and such Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of such Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of such Buyer to acquire the Securities.

d. Information . Such Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities that have been requested by such Buyer. Such Buyer and its advisors (pursuant to Section 4(d) below or otherwise), if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by such Buyer or its advisors, if any, or its representatives shall modify, amend or affect such Buyer’s right to rely on the Company’s representations and warranties contained in Sections 3 and 14(k) below or contained in any of the other Transaction Documents. Such Buyer understands that its investment in the Securities involves a high degree of risk. Such Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities.

e. No Governmental Review . Such Buyer understands that no Governmental Entity has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of an investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

f. Transfer or Resale . Such Buyer understands that, other than in accordance with the Registration Rights Agreement (as defined in Section 4(f) below): (i) the Securities have not been and are not being registered under the 1933 Act or any other Securities Laws, and may not

be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) such Buyer shall have delivered to the Company an opinion of counsel, in a generally acceptable form, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Buyer provides the Company with reasonable assurance that such Securities have been or are being sold, assigned or transferred pursuant to Rule 144 promulgated under the 1933 Act, as amended (or a successor rule thereto) (“ Rule 144 ”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or any other securities laws; (iii) other than pursuant to the Registration Rights Agreement, neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any other Securities Laws. Notwithstanding the foregoing, the Company acknowledges and agrees that the Securities of a Buyer may be pledged by such Buyer or its transferees (each, including each Buyer, an “ Investor ”) in connection with a bona fide margin agreement or other loan secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Investor effecting any such pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document. The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by an Investor.

g. Legends . Such Buyer understands that, except as set forth below, the Share Certificates shall bear a restrictive legend in the following form (the “ 1933 Act Legend ”) (and a stop-transfer order may be placed against transfer of such Share Certificates):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR (B) AN OPINION OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without the 1933 Act Legend to the holder of the Securities upon which it is stamped, if (i) such Securities are registered for resale under the 1933 Act, (ii) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Securities may be made without

registration under the 1933 Act, or (iii) such holder provides the Company reasonable assurances that the Securities have been or are being sold pursuant to Rule 144. The Company shall be responsible for the fees of its transfer agent and all of The Depository Trust Company (the “ DTC ”) fees associated with the issuance of the Securities to the Buyers and any legend removal in accordance herewith. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holders of the Securities. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 2(g) will be inadequate and agrees that, in the event of a breach or threatened breach of this Section 2(g) , such holder shall be entitled, in addition to all other available remedies, to an injunctive order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

h. Authorization; Enforcement; Validity . Such Buyer is a validly existing corporation, partnership, limited liability company or other entity and has the requisite corporate, partnership, limited liability or other organizational power and authority to purchase the Securities pursuant to this Agreement. Each of this Agreement and the other Transaction Documents to which such Buyer is a party has been duly and validly authorized, executed and delivered on behalf of such Buyer and is a valid and binding agreement of such Buyer enforceable against such Buyer in accordance with its terms. Each of the Registration Rights Agreement and the other Transaction Documents to be entered into and executed by such Buyer in connection with the Transactions as of the Closing will have been duly and validly authorized, executed and delivered on behalf of such Buyer as of the Closing and will constitute a valid and binding agreement of such Buyer, enforceable against such Buyer in accordance with its terms.

i. Residency . Such Buyer is a resident of that jurisdiction specified below its address on the Schedule of Buyers .

j. No Other Agreements . Such Buyer has not, directly or indirectly, made any agreements with the Company relating to the terms or conditions of the Transactions except as set forth in the Transaction Documents.

k. Prior Transactions . During the period commencing on February 9, 2009 and ending on the Business Day immediately preceding the Closing Date (the “ Pre-Closing Period ”), such Buyer did not purchase or sell any shares of Common Stock. Without limiting the foregoing, during the Pre-Closing Period, such Buyer did not engage in any transaction constituting a “short sale” (as defined in Rule 200 of Regulation SHO under the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder (the “ 1934 Act ”)) of shares of Common Stock or establish an open “put equivalent position” (within the meaning of Rule 16a-1(h) under the 1934 Act) with respect to the Common Stock.

l. Available Funds . Such Buyer has, or will have on or prior to the Closing, sufficient funds in its possession to permit such Buyer to acquire and pay for the Common Shares being purchased by such Buyer at the Closing.

m. No General Solicitation . Such Buyer did not learn of the investment in the Common Shares as a result of any public advertising or general solicitation.

n. Brokers and Finders . Other than as contemplated in this Agreement, no Person will have, as a result of the transaction contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company or any Subsidiary for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Buyer.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

The Company represents and warrants, as of the date of this Agreement and on the Closing Date, to each Buyer, that:

a. Organization and Qualification; Subsidiaries . Each of the Company and the Subsidiaries is a corporation, limited liability company, partnership or other entity and is duly organized or formed and validly existing in good standing under the laws of the jurisdiction in which it is incorporated or organized and has the requisite corporate, partnership, limited liability company or other organizational power and authority to own its properties and to carry on its business as now being conducted and as proposed to be conducted by the Company and the Subsidiaries. Schedule 3(a) sets forth a true and correct list of the Subsidiaries and the jurisdiction in which each is organized or incorporated, together with their respective jurisdictions of organization and the percentage of the outstanding Capital Stock or other equity interests of each such entity that is held by the Company or any of the Subsidiaries. Other than with respect to the entities listed on Schedule 3(a) , the Company does not directly or indirectly own any security or beneficial ownership interest, in any other Person (including through joint venture or partnership agreements) or have any interest in any other Person. Except as set forth on Schedule 3(a) , each of the Company and the Subsidiaries is duly qualified to do business and is in good standing in every jurisdiction in which its ownership or lease of property or the nature of the business conducted or proposed to be conducted by the Company and the Subsidiaries will make such qualification necessary, except where such failure to qualify could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except as set forth in Schedule 3(a ), the Company holds all right, title and interest in and to 100% of the Capital Stock, equity or similar interests of each of the Subsidiaries, in each case, free and clear of any Liens, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of free and clear ownership by a current holder, other than the Liens set forth on Schedule 3(a) , and no such Subsidiary owns Capital Stock or holds an equity or similar interest in any other Person.

b. Authority; Authorization; Enforcement; Validity .

(i) Subject to receipt of the Shareholder Approval (as defined below) (prior to the issuance of the Common Shares), and the filing with the Secretary of State of Minnesota of the Restated Charter (prior to the issuance of the Common Shares), the Company and each of the Subsidiaries has the requisite corporate, partnership or limited liability company power and authority to enter into and perform its obligations under this Agreement, including the issuance of the Common Shares, and under the Registration Rights Agreement, the Management Services Agreement (as defined below), the Amended and Restated Credit Agreement and each of the other Transaction Documents and to consummate the Transactions.

(ii) The execution and delivery of the Transaction Documents by the Company and the applicable Subsidiaries and the consummation by the Company and the Subsidiaries of the Transactions, including the issuance of Common Shares and the election or appointment of the Buyer Designees (as defined below) to the Company Board pursuant to Section 5(a) hereof, have been duly authorized by each of the Company Board, the Committee and each of the Subsidiaries’ respective boards of directors, and no further consent or authorization is required by or of the Company, any of the Subsidiaries or any of the Company Board (or any committee thereof, including the Committee) or the shareholders, any of the Subsidiaries’ boards of directors, other equityholders or holders of beneficial interests of the Company, except for the Shareholder Approval. Without limiting the foregoing, each of the Company Board and the Committee has, by the vote of a requisite majority of the directors serving thereon, (A)(I) determined that it is in the best interests of the Company and its shareholders, and declared it advisable, to enter into this Agreement with the Buyers, and (II) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the issuance of the Common Shares to the Buyers and the adoption of a Second Restated Bylaws of the Restated Bylaws; (B) approved a resolution adopting the Restated Charter, and resolved to submit to the shareholders of the Company the Restated Charter for approval at a meeting of the shareholders of the Company; and (C) resolved to recommend the adoption of the Proposals by the shareholders of the Company. The only votes of the Company’s shareholders required to approve and adopt the Transaction Documents and the Transactions are, in the case of each of the Proposals, the affirmative vote of the holders of the greater of (1) a majority of the voting power of the shares of Common Stock present in person or represented by proxy and entitled to vote on such business at a duly called meeting of the Company’s shareholders, and (2) a majority of the voting power of the minimum number of the shares of Common Stock entitled to vote that would constitute a quorum for the transaction of such business at the meeting (the receipt of sufficient votes required to approve all such Proposals is referred to herein as the “ Shareholder Approval ”).

(iii) This Agreement and the other Transaction Documents dated of even date herewith have been duly executed and delivered by the Company and, to the extent applicable, by the Subsidiaries, and constitute the valid and binding obligations of the Company and the Subsidiaries that are party thereto, enforceable against the Company and the Subsidiaries, as applicable, in accordance with their respective terms. As of the Closing, the Transaction Documents dated after the date of this Agreement and on or prior to the Closing Date shall have been duly executed and delivered by the Company and, to the extent applicable, the Subsidiaries, and shall constitute the valid and binding obligations of each of the Company and the Subsidiaries that are party thereto, enforceable against the Company and the Subsidiaries, as applicable, in accordance with their respective terms.

c. Capitalization . The authorized Capital Stock of the Company consists of:

(i) 5,000,000 shares of Preferred Stock, of which no shares are issued or outstanding; and

(ii) 142,500,000 shares of Common Stock, of which:

(A) 45,240,763 shares are issued and outstanding as of the date of this Agreement; and

(B) 6,725,797 shares are reserved for issuance pursuant to the Company’s stock option, restricted stock and employee stock purchase plans described on Schedule 3(c)(ii)(B) (the “ Company Stock Award Plans ”), including no more than 4,853,521 shares issuable pursuant to outstanding awards under the Company Stock Award Plans as of the date of this Agreement.

No shares of Common Stock or Preferred Stock are reserved for issuance under any plan, agreement or arrangement, other than shares of Common Stock reserved for issuance under the Company Stock Award Plans; and except as described in the foregoing provisions of this Section 3(c) , there are no shares of Capital Stock, Options, Convertible Securities or other equity securities of the Company authorized, issued or outstanding. All of the outstanding or issuable shares of Capital Stock of the Company have been duly authorized and have been, or upon issuance will be, validly issued and are, or upon issuance will be, fully paid and nonassessable.

Except as set forth on Schedule 3(c) :

(1) no shares of the Capital Stock of the Company or any of the Subsidiaries are subject to preemptive rights or any other similar rights or any Liens suffered or permitted by the Company or any of the Subsidiaries;

(2) there are no outstanding Options, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable for, any shares of Capital Stock of the Company or any of the Subsidiaries, or Contracts by which the Company or any of the Subsidiaries is or may become bound to issue additional shares of Capital Stock of the Company or any of the Subsidiaries or Options, calls or commitments of any character whatsoever relating to, or securities or rights convertible into or exercisable for, any shares of Capital Stock of the Company or any of the Subsidiaries;

(3) there are no agreements or arrangements under which the Company or any of the Subsidiaries is obligated to register the sale of any of its securities under the 1933 Act;

(4) there are no outstanding securities or instruments of the Company or any of the Subsidiaries that contain any redemption or similar provisions, and there are no Contracts by which the Company or any of the Subsidiaries is or may become bound to redeem a security of the Company or any of the Subsidiaries, and there are no other shareholder agreements or similar agreements to which the Company, any of the Subsidiaries or, to the Company’s Knowledge, any holder of the Company’s Capital Stock is a party;

(5) there are no securities or instruments containing anti-dilution or similar provisions that will or may be triggered by the issuance of the Securities;

(6) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement; and

(7) to the Company’s Knowledge, no officer or director of the Company or beneficial owner of any of the Company’s outstanding Common Stock has pledged Common Stock in connection with a margin account or other loan secured by such Common Stock.

The Company has furnished to each Buyer true and correct copies of:

(W) the Third Restated Articles of Incorporation of the Company, as amended and in effect (the “ Articles of Incorporation ”);

(X) the Restated Bylaws of the Company, as amended and in effect (the “ Bylaws ”);

(Y) the organizational documents of each of the Subsidiaries, as amended and in effect; and

(Z) all documents and instruments containing the terms of all securities, if any, that, directly or indirectly, are convertible into, or exercisable or exchangeable for, Common Stock, and the material rights of the holders thereof in respect thereto.

d. Issuance of Securities . The Securities are duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable and free from Taxes and Liens with respect to the issuance thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. Assuming the accuracy of the representations and warranties of the Buyers set forth in Sections 2(a), 2(b), 2(c), 2(d), 2(e), 2(g), 2(i) and 2(m) , the issuance by the Company of the Securities is exempt from registration under the 1933 Act and any other applicable Securities Laws.

e. No Conflicts . Except as provided on Schedule 3(e) , the execution and delivery of this Agreement and the other Transaction Documents by the Company and each of the Subsidiaries that is a party thereto, the performance by the Company and each of such Subsidiaries of its respective obligations hereunder and thereunder and the consummation by the Company of the Transactions (including the issuance of the Common Shares) will not:

(i) result in a violation of the certificate or articles of incorporation, certificate or articles of organization, bylaws, operating agreement, partnership agreement or any other governing documents, as applicable, of the Company or any of the Subsidiaries;

(ii) conflict with, or constitute a breach or default (or an event which, with the giving of notice or passage of time or both, constitutes or would constitute a

breach or default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or other remedy with respect to, any material agreement, indenture or instrument to which the Company or any Subsidiary is a party; or

(iii) result in a violation of any Law, rule, regulation, order, judgment or decree (including Securities Laws and the rules and regulations of the Principal Market (as defined below)) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected.

Neither the Company nor any of the Subsidiaries is in violation of any term of its certificate or articles of incorporation, certificate or articles of organization, bylaws, operating agreement, partnership agreement or any other governing document, as applicable. Neither the Company nor any of the Subsidiaries is or has been in violation of any term of or in default under (or with the giving of notice or passage of time or both would be in violation of or default under) any Contract, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any Law applicable to the Company or the Subsidiaries, except where such violation or default could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or result in the acceleration of any Indebtedness or other obligation. The business of the Company and the Subsidiaries has not been and is not being conducted, in violation of any Law of any Governmental Entity except as could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

f. Required Filings and Consents . The execution, delivery and performance of this Agreement by the Company and the Subsidiaries, as applicable, and the consummation by the Company and the Subsidiaries, as applicable, of the Transactions, including the issuance of the Common Shares to the Buyers, do not and will not require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other Person, which if not obtained would reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect, other than: (i) the filing and recordation of the Restated Charter with the Secretary of State of the State of Minnesota; (ii) applicable requirements of the 1934 Act; (iii) any filings with, and approvals from, relevant state securities administrators or related to the blue sky laws of various states; (iv) the filing with the SEC of the Proxy Statement (as defined below); (v) filings with The NASDAQ Stock Market (“ NASDAQ ”); (vi) the Shareholder Approval; and (vii) those consents, approvals or other authorizations of, or filings with or notifications to, any Governmental Entity or any other Person identified in Schedule 3(f)(vii) , including the waiver and consent by GE Money Bank with respect to the Amended and Restated Private Label Consumer Credit Program Agreement, dated as of December 5, 2005, between the Company and GE Money Bank (the “ GE Consent ”; the GE Consent and the items described in clauses (i) through (vi) of this Section 3(f) , collectively are referred to as the “ Required Company Consents ”).

g. SEC Documents; Financial Statements .

(i) Since December 31, 2006, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the 1934 Act. All of the foregoing items filed with the SEC (but not those items that merely were furnished to the SEC) prior to the

date this representation is made but after December 30, 2007, together with any filings made by the Company with the SEC pursuant to the 1933 Act since December 30, 2007, are referred to herein as the “ SEC Documents .” The Company’s consolidated balance sheet as of January 3, 2009, as included in the Company’s annual report on Form 10-K for the period then ended, as filed with the SEC on March 19, 2009 and amended on Form 10-K/A on May 4, 2009 (the “ Most Recent 10-K ”), is referred to herein as the “ Most Recent Balance Sheet .” A complete and accurate list of the SEC Documents is set forth on Schedule 3(g)(i) . Each of the SEC Documents was filed with the SEC via the SEC’s EDGAR system within the time frames prescribed by the SEC for the filing of such SEC Documents such that each filing was timely filed with the SEC. As of their respective dates, the SEC Documents complied in all material respects with the Securities Laws. None of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Since the filing of each of the SEC Documents, no event has occurred that would require an amendment or supplement to any such SEC Document and as to which such an amendment or supplement has not been filed and made publicly available on the SEC’s EDGAR system no less than five Business Days prior to the date this representation is made. The Company has not received any written comments from the SEC staff that have not been resolved to the satisfaction of the SEC staff.

(ii) As of their respective filing dates, the consolidated financial statements of the Company and the Subsidiaries included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the Securities Laws with respect thereto. Such financial statements have been prepared in accordance with GAAP, consistently applied, during the periods involved (except (A) as may be otherwise indicated in such financial statements or the notes thereto, or (B) in the case of unaudited interim statements, to the extent they may exclude footnotes as permitted under SEC rules) and fairly present in all material respects the financial position of the Company and the Subsidiaries as of the dates thereof and the results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments that are not material individually or in the aggregate).

(iii) Since December 31, 2006, none of the Company, the Subsidiaries and their respective officers and directors has made any filing with the SEC, issued any press release or made, distributed, paid for or approved (or engaged any other Person to make or distribute) any other public statement, report, advertisement or communication on behalf of the Company or any of the Subsidiaries or otherwise relating to the Company or any of the Subsidiaries that contains any untrue statement of a material fact or omits any statement of material fact necessary in order to make the statements therein, in the light of the circumstances under which they are or were made, not misleading or has provided any other information to any Buyer, including information referred to in Section 2(d) , that, considered in the aggregate, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements

therein, in the light of the circumstances under which they are or were made, not misleading.

(iv) Except as required by the Amended and Restated Credit Agreement (as defined in Section 4(g) ), the Company is not required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to the date this representation is made and in effect on the date this representation is made and to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound that has not been previously filed as an exhibit (including by way of incorporation by reference) to its reports filed or made with the SEC under the 1934 Act.

(v) There is no material transaction, arrangement or other relationship between the Company and an unconsolidated or other off-balance-sheet entity that is required to be disclosed by the Company in its reports pursuant to the 1934 Act that has not been so disclosed in the SEC Documents at least five Business Days prior to the date of this Agreement.

(vi) Since December 31, 2006, there have been no internal or SEC inquiries or investigations (formal or informal) regarding accounting or revenue recognition discussed with, reviewed by or initiated at the direction of any executive officer, board of directors or any committee thereof of the Company or any of the Subsidiaries.

(vii) The Company has never been a “shell company” (as defined in Rule 12b-2 under the 1934 Act).

h. Sarbanes-Oxley Compliance; Internal Accounting Controls; Disclosure Controls and Procedures; Books and Records .

(i) The Company and the Subsidiaries are in all material respects in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder (collectively, “ Sarbanes-Oxley ”).

(ii) Since December 31, 2006, neither the Company nor any of the Subsidiaries nor any director or officer of the Company or any of the Subsidiaries has received or otherwise had or obtained Knowledge of any complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any of the Subsidiaries or its internal accounting controls, including any complaint, allegation, assertion or claim that the Company or any of the Subsidiaries has engaged in any improper accounting or auditing practices.

(iii) Since December 31, 2006, no attorney representing the Company or any of the Subsidiaries, whether or not employed by the Company or any of the Subsidiaries, has reported evidence of a material violation of Securities Laws, breach of fiduciary duty or similar violation by the Company or any of the Subsidiaries or any of their respective officers, directors, employees or agents to their respective boards of directors or any committee thereof or pursuant to Section 307 of Sarbanes-Oxley.

(iv) The Company has kept, and has caused each of the Subsidiaries to, at all times since December 31, 2006, keep, books, records and accounts with respect to all of such Person’s business activities, in accordance with GAAP consistently applied. The Company and each of the Subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurance that (A) transactions are executed in accordance with management’s general or specific authorizations, (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset and liability accountability, (C) access to assets or incurrence of liability is permitted only in accordance with management’s general or specific authorization and (D) the recorded accountability for assets and liabilities is compared with the existing assets and liabilities at reasonable intervals and appropriate action is taken with respect to any differences.

(v) The Company has timely filed and made publicly available on the SEC’s EDGAR system no less than five Business Days prior to the date of this representation, all certifications and statements required by (A) Rule 13a-14 or Rule 15d-14 under the 1934 Act and (B) Section 906 of Sarbanes-Oxley with respect to any SEC Documents.

(vi) The Company maintains disclosure controls and procedures required by Rule 13a-15 or Rule 15d-15 under the 1934 Act; such disclosure controls and procedures are, and at all times have been, effective to ensure that the information required to be disclosed by the Company in the reports that it files with or submits to the SEC (A) is recorded, processed, summarized and reported accurately within the time periods specified in the SEC’s rules and forms and (B) is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(vii) The Company maintains internal control over financial reporting required by Rule 13a-14 or Rule 15d-14 under the 1934 Act; and such internal control is effective and does not have any material weaknesses or significant deficiencies.

i. Absence of Certain Changes . Since January 3, 2009, neither the Company nor any of the Subsidiaries has declared or paid any dividends or sold any assets outside of the ordinary course of business. Since January 3, 2009, except as set forth on Schedule 3(i) , neither the Company nor any of the Subsidiaries has had any capital expenditures outside the ordinary course of its business. Since January 3, 2009, except as set forth on Schedule 3(i) , neither the Company nor any of the Subsidiaries has had or made, as applicable, any (i) grant or provision of severance or termination payments or benefits to any director or officer of the Company or any Subsidiary or employee, independent contractor or consultant of the Company or any of the Subsidiaries, (ii) material increase in the compensation, perquisites or benefits payable to any director, officer, employee, independent contractor or consultant of the Company or any of the Subsidiaries, (iii) grant of equity or equity-based awards that may be settled in shares of Common Stock, Preferred Stock or any other securities of the Company or any Subsidiary or the value of which is linked directly or indirectly, in whole or in part, to the price or value of any shares of Common Stock, Preferred Stock or other securities of the Company or any Subsidiary, (iv) acceleration in the vesting or payment of compensation payable or benefits provided or to

become payable or provided to any current or former director, officer, employee, independent contractor or consultant, (v) change in the terms of any outstanding Option with respect to any shares of the Company’s Common Stock or any other securities of the Company or (vi) establishment or adoption of any new arrangement that would be a Company Benefit Plan or termination or material amendment of any existing Company Benefit Plan (other than changes made in the ordinary course of business consistent with past practice or as may be necessary to comply with applicable Laws, in either case that do not materially increase the costs of any such Company Benefit Plans).

j. Absence of Litigation . Except as set forth on Schedule 3(j) , (i) there is no material action, suit, proceeding, inquiry or investigation (“ Litigation ”) before or by any court, public board, Governmental Entity, self-regulatory organization or body pending or, to the Company’s Knowledge, threatened against or affecting the Company or any of the Subsidiaries, and (ii) to the Knowledge of the Company, no director or officer of the Company or any of the Subsidiaries has been involved in securities-related Litigation since January 1, 2004.

k. Full Disclosure; No Undisclosed Events, Liabilities, Developments or Circumstances . Since January 3, 2009, there has been no Company Material Adverse Effect and no circumstances exist that, in the aggregate, would reasonably be expected to be, cause or have a Company Material Adverse Effect. Except (i) as and to the extent disclosed or reserved against on the Most Recent Balance Sheet or specifically described in the notes to the financial statements set forth in the Most Recent 10-K, (ii) as incurred since the date thereof in the ordinary course of business consistent with past practice, (iii) as incurred on the Closing Date under the Transaction Documents, or (iv) as set forth on Schedule 3(k) , neither the Company, nor any of the Subsidiaries has any material liabilities or obligations of any nature, whether fixed or unfixed, known or unknown, secured or unsecured, absolute, accrued, contingent or otherwise and whether due or to become due. To the Company’s Knowledge, no representation or warranty or other statement made by the Company in this Agreement or any of the other Transaction Documents, the Schedules hereto or any certificate or instrument delivered pursuant to this Agreement contains any untrue statement or omits to state a material fact necessary to make any such statement, in light of the circumstances in which it was made, not misleading.

l. Acknowledgment Regarding Buyers’ Purchase of Common Shares . The Company acknowledges and agrees that each Buyer is acting solely in the capacity of an arm’s length purchaser with respect to the Company in connection with this Agreement and the other Transaction Documents and the Transactions. The Company further acknowledges that no Buyer is acting as a financial advisor or fiduciary of any party to this Agreement or any of the other Transaction Documents (or in any similar capacity) with respect to this Agreement and the other Transaction Documents and the Transactions, and any advice given by any Buyer or any of its representatives or agents in connection with the Transaction Documents and the Transactions is merely incidental to such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the decision of the Company to enter into the Transaction Documents has been based solely on the independent evaluation by such Person and its representatives.

m. No General Solicitation . Neither the Company nor any of its Affiliates, nor any Person acting on the behalf of any of the foregoing, has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the 1933

Act), including advertisements, articles, notices, or other communications published in any newspaper, magazine or similar media or broadcast over radio, television or internet or any seminar or meeting whose attendees have been invited by general solicitation or general advertising, in connection with the offer or sale of the Securities.

n. No Integrated Offering . Neither the Company nor any of its Affiliates, nor any Person acting on the behalf of any of the foregoing, has, directly or indirectly, made any offers or sales of any security or solicited any offers to purchase any security, under circumstances that would require registration of any of the Securities under the 1933 Act or cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of the 1933 Act, or the shareholder approval requirements of the Principal Market (as defined in Section 3(u) ), or any other regulatory or self-regulatory authority.

o. Benefit Plans .

(i) Schedule 3(o)(i) contains a true, complete and correct list of each Material Company Benefit Plan. Each Company Stock Award Plan is denoted as such on Schedule 3(o)(i) . No Company Benefit Plan is a “multiemployer plan” (within the meaning of Section 3(37) of ERISA) (a “ Multiemployer Plan ”) or a “multiple employer plan” (within the meaning of Section 4063 of ERISA) (a “ Multiple Employer Plan ”). No entity other than the Company and the Subsidiaries is a member of the Company’s “controlled group” (within the meaning of Section 414 of the Code).

(ii) With respect to each Material Company Benefit Plan, the Company has provided or made available to the Buyers true, complete and correct copies of (A) all such plan texts and agreements and related trust agreements (or other funding vehicles); (B) the most recent summary plan descriptions and material employee communications concerning the extent of the benefits provided under a Material Company Benefit Plan; (C) the three most recent annual reports (including all schedules); (D) the three most recent annual audited financial statements and opinions; (E) if the plan is intended to qualify under Section 401(a) of the Code, the most recent determination letter received from the Internal Revenue Service (the “ IRS ”); and (vi) all material communications with any Governmental Entity given or received since January 1, 2003. There is no present intention that any Material Company Benefit Plan be materially amended, suspended or terminated, or otherwise modified to adversely change benefits (or the level thereof) under any Company Benefit Plan at any time within the 12 months immediately following the date of this Agreement.

(iii) Since December 31, 2007, there has not been any amendment or change in interpretation relating to any Company Benefit Plan, which would, in the case of any Material Company Benefit Plan, materially increase the cost of administering or providing benefits under such Material Company Benefit Plan, or, in the case of any Company Benefit Plan other than a Material Company Benefit Plan, materially increase the aggregate cost to the Company of all Company Benefit Plans that are not Material Company Benefit Plans.

(iv) No Material Company Benefit Plan is subject to Title IV or Section 302 or 303 of ERISA or Section 412, 430 or 4971 of the Code and the Company and each of the Subsidiaries will have no liability with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) which is subject to Title IV or Section 302 or 303 of ERISA or Section 412, 430 or 4971 of the Code. Neither the Company nor any of the Subsidiaries has, at any time during the last six years, contributed to or been obligated to contribute to, or had any liability with respect to, any Multiemployer Plan or Multiple Employer Plan.

(v) Each Company Benefit Plan that requires registration with a Governmental Entity has been properly registered, except where any failure to register would not reasonably be expected to result in material liability to the Company. Each Company Benefit Plan which is intended to qualify under Section 401(a) of the Code has been issued a favorable determination letter by the IRS with respect to such qualification, its related trust has been determined to be exempt from taxation under Section 501(a) of the Code and no event has occurred since the date of such determination that would reasonably be expected to adversely affect such qualification or exemption. Each Company Benefit Plan has been established and administered in compliance with its terms and with the applicable provisions of ERISA, the Code and other applicable Laws, except where such noncompliance would not reasonably be expected to result in material liability to the Company. No event has occurred and no condition exists that would subject the Company by reason of its affiliation with any current or former member of its “controlled group” (within the meaning of Section 414 of the Code) to any material (A) Tax, penalty, fine, (B) Lien (other than a Permitted Lien) or (C) other liability imposed by ERISA, the Code or other applicable Laws.

(vi) There are no (A) Company Benefit Plans under which welfare benefits are provided to past employees or made available to present employees of the Company and the Subsidiaries beyond their retirement or other termination of service, other than coverage mandated by the Consolidated Omnibus Budget Recommendation Act of 1985, as amended or Section 4980B of the Code, the cost of which is fully paid by such employees or their dependents; or (B) unfunded Company Benefit Plan obligations with respect to any past or present employees of the Company and the Subsidiaries that are not fairly reflected by reserves shown on the most recent financial statements contained in the SEC Documents, except as would not have, or reasonably be expected to have, a Company Material Adverse Effect.

(vii) Except as set forth on Schedule 3(o)(vii) , neither the execution and delivery of this Agreement nor the consummation of the Transactions will (either alone or in combination with another event): (A) result in any payment becoming due, or increase the amount of any compensation or benefits due, to any current or former employee of the Company and the Subsidiaries or with respect to any Company Benefit Plan; (B) increase any benefits otherwise payable under any Company Benefit Plan; (C) result in the acceleration of the time of payment or vesting of any such compensation or benefits; (D) result in a non-exempt “prohibited transaction” within the meaning of Section 406 of ERISA or Section 4975 of the Code; (E) limit or restrict the right of the Company to merge, amend or terminate any of the Company Benefit Plans; or (F) result

in the payment of any amount that would, individually or in combination with any other such payment, reasonably be expected to constitute an “excess parachute payment,” as defined in Section 280G(b)(1) of the Code.

(viii) None of the Company, any of the Subsidiaries, or any Company Benefit Plan, nor to the Knowledge of the Company, any “disqualified person” (as defined in Section 4975 of the Code) or “party in interest” (as defined in Section 3(18) of ERISA), has engaged in any non-exempt prohibited transaction (within the meaning of Section 4975 of the Code or Section 406 of ERISA) which has resulted or would reasonably be expected to result in any material liability to the Company and the Subsidiaries, taken as a whole. With respect to any Material Company Benefit Plan (A) no claims, actions, suits, demand letters, judicial, administrative or regulatory proceedings, or hearings, notices of violation, or investigations before any Governmental Entity (including any administrative investigation, audit or other proceeding by the Department of Labor or the IRS but excluding routine claims for benefits in the ordinary course) are pending or, to the Knowledge of the Company, threatened, and (B) to the Knowledge of the Company, no events or conditions have occurred or exist that would reasonably be expected to give rise to any such claims, actions, suits, demand letters, judicial, administrative or regulatory proceedings, or hearings, notices of violation, or investigations before any Governmental Entity, except in each case such as would not reasonably be expected to have a Company Material Adverse Effect.

(ix) Each “nonqualified deferred compensation plan” (as defined in Section 409A(d)(1) of the Code) of the Company is in a form which complies with the requirements of Code Section 409A so that the additional tax (described in Code Section 409A(a)(1)(B)) will not be assessed with respect to amounts that are or may become due thereunder. Each Company Option is exempt from being considered deferred compensation for purposes of Code Section 409A as a result of compliance with Treasury Regulation Section 1.409A-1(b)(5)(i)(A).

(x) Every Option issued by the Company was issued in compliance with the terms of the plan under which it was issued and in compliance with applicable laws, rules and regulations, including the rules and regulations of NASDAQ, and (ii) has been accounted for in accordance with GAAP and otherwise been disclosed accurately and completely and in accordance with the requirements of the 1933 Act and the 1934 Act and the rules and regulations thereunder, including Rule 402 of Regulation S-K, and the Company has paid, or properly reserved for, all taxes payable with respect to each such Option (including the issuance and exercise thereof), and has not deducted any amounts from its taxable income that it is not entitled to deduct with respect to any such Option (including the issuance and exercise thereof).

(xi) Each Company Benefit Plan that has been adopted or maintained by the Company or any of its Affiliates, whether informally or formally, or with respect to which the Company or any of its Affiliates will or may have any liability, for the benefit of employees of the Company or any of the Subsidiaries who perform services outside the United States (each a “ Company International Employee Plan ”) has been established, maintained and administered in material compliance with its terms and

conditions and with the requirements prescribed by any and all statutory or regulatory laws that are applicable to such Company International Employee Plan. No Company International Employee Plan is a defined benefit pension plan. Furthermore, no Company International Employee Plan has unfunded liabilities that, as of the Closing, will not be offset by insurance or fully accrued on the Company’s balance sheets included in or incorporated by reference into the SEC Documents. Except as required by law, no condition exists that would prevent the Company from terminating or amending any Company International Employee Plan at any time for any reason without liability to the Company or any of its Affiliates (other than ordinary administration expenses or routine claims for benefits). Except as would not reasonably be expected to result in a material liability to the Company, each Company International Employee Plan (A) has been maintained in accordance with all applicable requirements, and (B) is intended to qualify for special tax treatment, meets all requirements for such treatment.

p. Employee Relations . Neither the Company nor any of the Subsidiaries is involved in any labor union dispute nor, to the Knowledge of the Company, is any such dispute threatened. None of the employees of the Company or any of the Subsidiaries is or has been a member of a union that relates to such employee’s relationship with the Company, and neither the Company nor any of the Subsidiaries is a party to any collective bargaining agreement. No executive officer (as defined in Rule 3b-7 under the 1934 Act), nor any other individual whose termination would be required to be disclosed on a current report on Form 8-K, has notified the Company that such individual intends to leave the Company or otherwise terminate such individual’s employment with the Company. To the Knowledge of the Company, no executive officer of the Company is, or has been, in violation of any material term of any employment Contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other Contract or any restrictive covenant, and the employment of each such individual does not, has not and will not subject the Company or any of the Subsidiaries to any liability with respect to any of the foregoing matters. To the Knowledge of the Company, and each of the Subsidiaries, it is and has been since December 31, 2006, in compliance in all material respects with all Laws relating to employment and employment practices, terms and conditions of employment and wages and hours.

q. Intellectual Property Rights .

(i) The Company or one of the Subsidiaries owns all right, title and interest in and to, or has a valid license to use and distribute, in the manner in which it is used and/or distributed, all Intellectual Property used or distributed in connection with the business of the Company and the Subsidiaries (“ Company IP ”). The consummation of the Transactions will not impair the validity, enforceability, ownership or right of the Company or any of the Subsidiaries to use or distribute, in the manner in which it is used and/or distributed, any Intellectual Property currently owned, used or distributed by the Company or any of the Subsidiaries.

(ii) Schedule 3(q)(ii) sets forth all registered and material unregistered trademarks and service marks, trademark and service mark registration applications, domain name registrations, copyright registrations, copyright registration applications,

patents and patent applications, currently owned by, or exclusively licensed to, the Company or any of the Subsidiaries (“ Listed IP ”).

(iii) Each trademark registration, service mark registration, copyright registration, domain name registration and patent that is owned by the Company or any of the Subsidiaries has been maintained in compliance in all material respects with all legal requirements applicable to post-filing maintenance and post-registration maintenance thereof (including the timely post-registration filing of affidavits of use and incontestability and renewal applications with respect to trademarks, and the payment of filing, examination and annuity and maintenance fees with respect to patents). All Intellectual Property owned by the Company or the Subsidiaries (“ Owned IP ”) is owned free and clear of all Liens, except for the Liens set forth on Schedule 3(q)(iii) and the Permitted Liens. Except as set forth on Schedule 3(q)(iii) , no Owned IP is currently involved in any opposition, cancellation, interference, reissue or re-examination proceeding, or other challenge to its validity or enforceability, and no such action has been threatened in writing against the Company within the three years prior to the date of this Agreement. To the Knowledge of the Company, neither the Company’s in-house legal counsel nor outside intellectual property counsel retained by the Company has formally concluded that any of the Listed IP is, or may be, invalid or unenforceable.

(iv) There are no, and have not been within the previous three years any, claims, actions, causes of action, proceedings, judgments or investigations pending or instituted against the Company or any of the Subsidiaries or, to the Knowledge of the Company, threatened by any Person, contesting or challenging the right of the Company or any of the Subsidiaries to use or distribute, or the validity or enforceability of, any of the Company IP or alleging that any Company IP infringes, misappropriates, dilutes or otherwise violates the Intellectual Property of any third party. Neither the Company nor any of the Subsidiaries has received any notice (written or oral) claiming that it has infringed, misappropriated, diluted or otherwise violated any Intellectual Property of any third party. The Company has not undertaken or authorized legal counsel to undertake any investigation as to whether any Company IP infringes, misappropriates or otherwise violates any third party Intellectual Property and, without limiting the generality of the foregoing, the Company has not received a non-infringement legal opinion with respect to any Company IP. Except as set forth in Schedule 3(q)(iv) , to the Knowledge of the Company, no Person is infringing, misappropriating, diluting or otherwise violating any of the Owned IP.

(v) The Company and the Subsidiaries make reasonable efforts to secure ownership, protect and maintain the Owned IP, including, (A) requiring each employee and independent contractor involved in the development of any Intellectual Property on behalf of the Company or the Subsidiaries to assign all rights, title and interest in and to such Intellectual Property to the Company or the Subsidiaries, as applicable, and (B) assuring that all agreements granting to third parties the right to manufacture or distribute products under the Company or any of the Subsidiaries trademarks give the Company or the Subsidiaries rights to control the quality of such products sold under the agreements. To the Knowledge of the Company, there has been

no material unauthorized disclosure of any confidential information or trade secrets used in connection with the conduct of the business of the Company or any Subsidiary.

(vi) Except as set forth on Schedule 3(q)(vi) , none of the products of the Company or any Subsidiary contain any software commonly referred to as “open source,” “free” or “public library” software (such as, but not limited to, software licensed under the GNU General Public License, BSD License or Apache) (collectively, “ Open Source Software ,” and all licenses under which such Open Source Software is used is herein, collectively, the “ Open Source Licenses ”). Except as set forth on Schedule 3(q)(vi) , (A) the Company and the Subsidiaries have complied with all of the material requirements of the Open Source Licenses, including, all notice requirements of the Open Source Licenses, (B) none of the Open Source Software as incorporated in any product of the Company or any Subsidiary has been modified by either the Company or any of the Subsidiaries, and (C) neither the Company nor any of the Subsidiaries is required to provide any source code for any product of the Company or any Subsidiary to any party pursuant to any of the Open Source Licenses or as a result of using any of the Open Source Software.

(vii) The computer software, hardware, systems and databases used internally in, or outsourced to others for, the operation of the businesses of the Company and the Subsidiaries, has not suffered any material failures, errors or breakdowns in within the past 12 months which have caused any substantial disruption or interruption in their business.

(viii) The Company and the Subsidiaries are in compliance in all material respects with applicable Laws relating to data protection and privacy and their own privacy policies. Except as set forth on Schedule 3(q)(viii) , neither the Company nor the Subsidiaries have been the subject of a security breach which, under any applicable Law, required notice thereof to any Person. To the Company’s Knowledge, the Company has not experienced any such breach of security of personally identifiable information maintained, processed or transmitted by the Company whether or not such security breach required notice thereof to any Person under any applicable Law.

r. Environmental Laws . To the Knowledge of the Company, each of the Company and the Subsidiaries (i) is, and has at all times been, in compliance with any and all, and has not violated any, Environmental Laws, (ii) has no, and has never had any, liability for failure to comply with any Environmental Law, (iii) has received all permits, licenses or other approvals required of it under applicable Environmental Laws to conduct its business as presently conducted, and (iv) is in compliance with all terms and conditions of any such permit, license or approval.

s. Insurance . Schedule 3(s) sets forth a list of all material insurance policies of the Company and each Subsidiary (including the insurer, the type of policy and the policy limits) relating to the business of the Company and each Subsidiary. The Company and each of the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. Neither the Company

nor any such Subsidiary has been refused any insurance coverage sought or applied for, and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Company Material Adverse Effect.

t. Regulatory Permits . To the Company’s Knowledge, the Company and the Subsidiaries possess all certificates, authorizations, approvals, licenses and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses as conducted at the time this representation is made (“ Permits ”), and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such Permit. The Company and the Subsidiaries have no reason to believe that they will not be able to obtain necessary Permits as and when necessary to enable the Company and the Subsidiaries to conduct their respective businesses.

u. Principal Market . The Company is not in violation of any of the rules, regulations or requirements of the NASDAQ Global Select Market (the “ Principal Market ;” provided however , that, if at any time after the date of this Agreement the principal national stock exchange or trading market for Common Stock is other than the NASDAQ Global Select Market, the term “ Principal Market ” shall at such time mean such other national stock exchange or trading market) and has no Knowledge of any facts or circumstances which would reasonably lead to delisting or suspension, or termination of the trading of, the Common Stock by the Principal Market in the foreseeable future. Since December 30, 2006, (i) the Common Stock has been quoted on the Principal Market, (ii) trading in the Common Stock has not been suspended by the SEC or the Principal Market and (iii) the Company has received no communication, written or oral, from the SEC or the Principal Market regarding the suspension or delisting, or termination of the trading, of the Common Stock from the Principal Market.

v. Tax Status .

(i) The Company and each of the Subsidiaries (A) has made or filed all federal, state, local and foreign income and all other Tax returns, reports and declarations required by any jurisdiction to which it is subject and all such Tax returns are true, correct and complete in all material respects, (B) has paid fully and timely all Taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and for which the Company has made appropriate reserves on its books, and (C) has set aside on its books provisions reasonably adequate for the payment of all Taxes for periods subsequent to the periods to which such returns, reports or declarations (referred to in clause (A) above) apply. There are no unpaid Taxes claimed to be due from the Company or any of the Subsidiaries by the taxing authority of any jurisdiction, and, to the Company’s Knowledge, there is no basis for any such claim.

(ii) Except as set forth on Schedule 3(v)(ii) , there are no outstanding agreements extending or waiving the statutory period of limitations applicable to any claim for, or the period for the collection, assessment or reassessment of, Taxes due from the Company or any of the Subsidiaries for any taxable period and no request for any

such waiver or extension is currently pending. The Company has not received any requests for information by any Tax authority that are currently outstanding that would reasonably be expected to adversely affect in any material respect the Taxes of the Company or any of the Subsidiaries.

(iii) Except as set forth on Schedule 3(v)(iii) , no audit or other proceeding by any Governmental Entity is pending or, to the Knowledge of the Company, threatened with respect to any Taxes due from or with respect to the Company or any of the Subsidiaries.

(iv) Neither the Company nor any of the Subsidiaries is a party to any Tax sharing or similar Tax agreement (other than an agreement exclusively between or among the Company and the Subsidiaries) pursuant to which it will have any obligation to make any payments on account of indemnification for Taxes. Neither the Company nor any of the Subsidiaries has any liability as a result of being or having been a member of an affiliated, consolidated, combined or unitary group, other than a group of which the Company and the Subsidiaries are currently members, or as a result of a Tax sharing, Tax indemnity or Tax allocation agreement.

(v) Neither the Company nor any of the Subsidiaries has distributed stock of another Person or, to the Company’s Knowledge, had its stock distributed by another Person in a transaction that was intended to be governed in whole or in part by Section 355 or 361 of the Code in the two years prior to the date of this Agreement.

(vi) To the Company’s Knowledge, neither the Company nor any of the Subsidiaries will be required based upon actions taken by the Company or any of the Subsidiaries prior to the Closing to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date, (B) “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date, (C) installment sale or open transaction disposition made on or prior to the Closing Date or (D) prepaid amount received on or prior to the Closing Date.

(vii) Neither the Company nor any of the Subsidiaries is a party to any understanding or arrangement described in Section 6111(d) or Section 6662(d)(2)(C)(ii) of the Code, or has “participated” in a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4 (without regard to Section (b)(3) thereof) (each a “ Prohibited Transaction ”).

(viii) Neither the Company nor any of the Subsidiaries has participated in or cooperated with an international boycott within the meaning of Section 999 of the Code or been requested to do so in connection with any transaction or proposed transaction.

(ix) Neither the Company nor any of the Subsidiaries is a “United States real property holding corporation” (“ USRPHC ”) as that term is defined in Section 897(c)(2) of the Code, and the Treasury Regulations promulgated thereunder.

(x) The Company has provided or made available to Buyer true, complete and correct copies of (A) all material Tax returns filed by the Company or any of the Subsidiaries for Tax years ending in 2005 and thereafter and (B) all material ruling requests, private letter rulings, notices of proposed deficiencies, closing agreements, settlement agreements, and similar documents sent to or received by the Company or any of the Subsidiaries relating to Taxes.

w. Transactions With Related Parties . Except as set forth on Schedule 3(w) , there have been no transactions that are required to be reported under 17 C.F.R. 229.404(a) (“ Related Party Transactions ”), that have not already been disclosed in the SEC Documents.

x. Application of Takeover Protections; Rights Agreement . The Company, the Company Board and the Committee have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, or other similar takeover, anti-takeover, moratorium, fair price, interested shareholder or similar provision under the Articles of Incorporation or any certificates of designations or the Laws of the State of Minnesota to the Transactions, the Company’s issuance of the Securities in accordance with the terms hereof and any Buyer’s ownership of the Securities. The Company has not adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.

y. Foreign Corrupt Practices . Neither the Company, nor any of the Subsidiaries, nor to the Knowledge of the Company, any director, officer, agent, employee or other person acting on behalf of the Company or any of the Subsidiaries has, in the course of its actions for, or on behalf of, the Company, used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

z. Outstanding Indebtedness; Liens . Except as set forth on Schedule 3(z)(i) , (i) neither the Company nor any of the Subsidiaries has any, nor upon consummation of the Transactions will have any, outstanding Indebtedness, (ii) there are no, and upon consummation of the Transactions there will not be any, Liens on any of the assets of the Company and the Subsidiaries other than Permitted Liens, and (iii) there are no, and upon consummation of the Transactions there will not be any, financing statements securing obligations of any amounts filed against the Company or any of the Subsidiaries or any of their respective assets. Other than the “Defaults” and “Events of Default” (each as defined in the Existing Credit Agreement (as defined below)) identified on Schedule 3(z)(ii) (collectively, the “ Existing Credit Defaults ”), there are no other “Defaults” or “Events of Default.”

aa. Real Property . Except as set forth on Schedule 3(aa)(i) , neither the Company nor any of the Subsidiaries owns in fee any real property. All of the Real Property Leases (as defined below) are valid and in full force and effect and are enforceable against all parties thereto. Neither the Company nor any of the Subsidiaries nor, to the Company’s Knowledge, any other party thereto is in default in any material respect under any of such Real Property Leases and no event has occurred which with the giving of notice or the passage of time or both could constitute a default under, or otherwise give any party the right to terminate, any of such Real Property Leases, or could adversely affect the Company’s or any of the Subsidiaries’ interest in and title to the Real Property subject to any of such Real Property Leases. Except as set forth on Schedule 3(aa)(ii) , no Real Property Lease is subject to termination, modification or acceleration as a result of the sale of the Common Shares or any of the other Transactions. For purposes hereof, “ Real Property Lease ” means each lease and other agreement with respect to which the Company or any of the Subsidiaries is a party or otherwise bound or affected with respect to the Real Property, except easements, rights of way, access agreements, surface damage agreements, surface use agreements or similar agreements that pertain to Real Property that is contained wholly within the boundaries of any leased Real Property; and “ Real Property ” means all the real property, facilities and fixtures that (i) are leased or, in the case of fixtures, otherwise owned or possessed by the Company or any of the Subsidiaries, (ii) in connection with which the Company or any of the Subsidiaries has entered into an option agreement, participation agreement or acquisition agreement or (iii) the Company or any of the Subsidiaries has agreed to lease or otherwise acquire or may be obligated to lease or otherwise acquire in connection with the conduct of its business.

bb. Personal Property . The Company and the Subsidiaries have good and marketable title to all of the personal property owned by them that are material to their businesses, in each case free and clear of any Lien, other than Permitted Liens, and holds any leased personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made thereof by them (the “ Assets ”). The Assets include all personal property necessary for the conduct of the Company’s and the Subsidiaries’ businesses as presently proposed to be conducted. The Assets that are facilities, fixtures, equipment, and other personal property have been maintained in accordance with normal industry practice, and are in good operating condition and repair (subject to normal wear and tear), and are suitable for the purposes for which they are now used and proposed to be used. There are no existing agreements, options, commitments or rights with, of or to any Person to acquire any such Assets, or any interests therein, that would be material to the business of the Company or any of the Subsidiaries.

cc. Contracts .

(i) As of the date of this Agreement, except for those Contracts listed on Schedule 3(cc)(i) or as an exhibit to the Most Recent 10-K (the “ Company Contracts ”), neither the Company nor any of the Subsidiaries is a party to or bound by any Contract: (A) which is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K promulgated under the 1933 Act) to be performed in full or in part after the date of this Agreement; (B) which constitutes a Contract relating to Indebtedness for borrowed money (whether incurred, assumed, guaranteed or secured by any asset) by it; (C) which constitutes a Contract relating to the deferred purchase price

of property (whether incurred, assumed, guaranteed or secured by any asset) in excess of $250,000; (D) with any sole source supplier material to the conduct of the business of the Company or the Subsidiaries; (E) which grants any third party any exclusive rights or pursuant to which the Company has licensed any Owned IP to any third party (other than to distributors or manufacturers in the ordinary course of business of the Company or any Subsidiary); or (F) which contains any provision that would restrict or limit, in any material respect, the conduct of business of the Company, any Subsidiary or any of their respective Affiliates (or any Affiliate of any such Affiliate of the Company or any of the Subsidiaries) after the Closing. The Company has provided the Buyers access to true, complete and correct copies of each Contract of the type described in clause (i) of this Section 3(cc) .

(ii) Each Company Contract is valid and binding on the Company and any of the Subsidiaries that is a party thereto, as applicable, and in full force and effect, other than any such Company Contract that expires or is terminated after the date of this Agreement in accordance with its terms or amended by agreement with the counterparty thereto (provided that, if any such Company Contract is so amended in accordance with its terms after the date of this Agreement (provided such amendment is not prohibited by the terms of this Agreement), then to the extent the representation and warranty contained in this sentence is made or deemed made as of any date that is after the date of such amendment, the reference to “ Company Contract ” in the first clause of this sentence shall be deemed to be a reference to such contract as so amended). Except as set forth on Schedule 3(cc)(ii) , to the Knowledge of the Company, each Company Contract is in good standing, valid and effective against the counterparties thereto, in accordance with its terms, and there is not, under any of such Company Contracts, any existing default by the Company or any of the Subsidiaries or, to the Knowledge of the Company, the counterparties thereto, or any event or circumstance which, with notice or lapse of time or both, would become a default by the Company or any of the Subsidiaries or, to the Knowledge of the Company, the counterparties thereto, other than failures to be in good standing and defaults under such Company Contracts which would not reasonably be expected to result in the non-renewal, termination or material modification of the terms of any Company Contract or otherwise have a Company Material Adverse Effect. No party to any Company Contract has notified the Company or any Subsidiary that such party intends to cancel, not renew or terminate the Company Contract, exercise any rights or remedies under a Company Contract that would be adverse to the Company, or exercise or not exercise any option under a Company Contract. Except as set forth on Schedule 3(cc)(ii) , no Company Contract is subject to termination, modification or acceleration as a result of the sale of the Common Shares or any of the other Transactions.

dd. Investment Company . The Company is not, and upon the Closing will not be, an “investment company,” a company controlled by an “investment company,” or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company,” as such terms are defined in the Investment Company Act.

ee. Fairness Opinion . The Company has received a written opinion from Duff & Phelps LLC, financial advisor to the Company Board, to the effect that, as of the date of such opinion, and based upon and subject to the matters set forth therein, the Purchase Price to be

25

received by the Company in exchange for the issuance and sale of the Common Shares is fair, from a financial point of view, to the common shareholders of the Company (without giving effect to any impact of the proposed Transaction on any particular shareholder other than in its capacity as a shareholder).

4. PRE-CLOSING COVENANTS . Unless otherwise waived and consented to by a Majority of the Buyers from the date of this Agreement until the Closing Date or the date this Agreement terminates:

a. Shareholders Meeting . The Company shall take all action necessary to duly call, give notice of, convene and hold a meeting of shareholders (the “ Company Shareholders Meeting ”) for the purpose of obtaining the Shareholder Approval as promptly as reasonably practicable after the SEC confirms that it has no further comments on the Proxy Statement or the Company otherwise determines in good faith that such Proxy Statement will not be reviewed by the SEC. The Company shall use its reasonable best efforts to obtain the Shareholder Approval at the Company Shareholders Meeting.

b. Proxy Material .

(i) In connection with the Company Shareholders Meeting, the Company will (A) as promptly as reasonably practicable after the date of this Agreement prepare and file with the SEC a proxy statement (as it may be amended or supplemented from time to time, the “ Proxy Statement ”) related to the consideration of the Proposals at the Company Shareholders Meeting, (B) respond as promptly as reasonably practicable to any comments received from the SEC with respect to such filings and provide copies of such comments to Sterling promptly upon receipt and provide copies of proposed responses to Sterling a reasonable time prior to filing to allow Sterling the opportunity to provide meaningful comment, (C) as promptly as reasonably practicable prepare and file any amendments or supplements necessary to be filed in response to any SEC comments or as otherwise required by applicable Law, (D) mail to its shareholders as promptly as reasonably practicable the Proxy Statement and all other customary proxy or other materials for meetings such as the Company Shareholders Meeting, (E) to the extent required by applicable Law, as promptly as reasonably practicable prepare, file and distribute to the Company’s shareholders any supplement or amendment to the Proxy Statement if any event shall occur which requires such action at any time prior to the Company Shareholders Meeting, and (F) otherwise comply with all requirements of Law applicable to any Company Shareholders Meeting. The Buyers shall cooperate with the Company in connection with the preparation of the Proxy Statement and any amendments or supplements thereto, including promptly furnishing the Company, upon request, with any and all information as may be required to be set forth in the Proxy Statement under applicable law. The Company will provide Sterling a reasonable opportunity to review and comment upon the Proxy Statement, or any amendments or supplements thereto, and shall give reasonable consideration to any such comments proposed, prior to mailing the Proxy Statement to the Company’s shareholders. The Proxy Statement shall include the Company Board Recommendation.

(ii) If, at any time prior to the Company Shareholders Meeting, any information relating to the Company or any of the Buyers or any of their respective Affiliates should be discovered by the Company or any of the Buyers which should be set forth in an amendment or supplement to the Proxy Statement so that the Proxy Statement shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, the party that discovers such information shall promptly notify the other parties and, to the extent required by applicable law, the Company shall disseminate an appropriate amendment thereof or supplement thereto describing such information to the Company’s shareholders.

(iii) The Company represents, warrants, covenants and agrees that (A) none of the information included or incorporated by reference in the Proxy Statement or any other document filed with the SEC in connection with the Transactions (all such other documents, the “ Other Filings ”) shall, in the case of the Proxy Statement, at the date it is first mailed to the Company’s shareholders or at the time of the Company Shareholders Meeting or at the time of any amendment or supplement thereof, or, in the case of any Other Filing, at the date it is first mailed to the Company’s shareholders or at the date it is first filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no covenant is made by the Company with respect to statements made or incorporated by reference therein in reliance on, and conformity with, information supplied in writing by or on behalf of the Buyers or in connection with the preparation of the Proxy Statement or the Other Filings expressly for inclusion therein, and (B) the Proxy Statement and the Other Filings that are filed by the Company shall comply as to form in all material respects with the requirements of the 1934 Act.

(iv) Each of the Buyers severally and not jointly, represents, warrants, covenants and agrees that none of the information supplied in writing by or on behalf of such Buyer expressly for inclusion in the Proxy Statement or the Other Filings will, in the case of the Proxy Statement, at the date it is first mailed to the Company’s shareholders or at the time of the Company Shareholders Meeting or at the time of any amendment or supplement thereof, or, in the case of any Other Filing, at the date it is first mailed to the Company’s shareholders or at the date it is first filed with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

c. Conduct of Business of the Company . Except as expressly required or expressly contemplated by this Agreement or as set forth on Schedule 4(c) , the Company will, and will cause each of the Subsidiaries to, (A) conduct its operations only in the ordinary course of business consistent with past practice and (B) use its reasonable best efforts to maintain and preserve intact its business organization, including the services of its key employees and the goodwill of its commercial dealings with customers, lenders, distributors, suppliers, customers, financing sources and other Persons with whom it has material business relationships. Without limiting the generality of the foregoing, except as expressly contemplated by this Agreement or

as set forth on Schedule 4(c) , the Company will not, and will cause each of the Subsidiaries not to, take any of the following actions:

(i) propose or adopt any changes to the Articles of Incorporation, the Bylaws or any of the organizational documents of the Subsidiaries;

(ii) make, declare, set aside, or pay any dividend or distribution on any shares of its Capital Stock, other than dividends paid by a wholly-owned Subsidiary to its parent corporation in the ordinary course of business;

(iii) (A) adjust, split, combine or reclassify or otherwise amend the terms of its Capital Stock, (B) repurchase, redeem, purchase, acquire, encumber, pledge, dispose of or otherwise transfer, directly or indirectly, any shares of its Capital Stock or any securities or other rights convertible or exchangeable into or exercisable for any shares of its Capital Stock or such securities or other rights, or offer to do the same, (C) issue, grant, deliver or sell any shares of its Capital Stock or any securities or other rights convertible or exchangeable into or exercisable for any shares of

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