SECURITIES PURCHASE AGREEMENT

Purchase and Sale Agreement

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Minnesota Business Corporation | SELECT COMFORT CORPORATION | Sterling SC Investor, LLC

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Title: SECURITIES PURCHASE AGREEMENT
Governing Law: Delaware Date: 10/5/2009
Industry: Furniture and Fixtures Law Firm: Katten Muchin;Oppenheimer Wolff Sector: Consumer Cyclical

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

DATED AS OF OCTOBER 2, 2009

BY AND BETWEEN

SELECT COMFORT CORPORATION

AND

STERLING SC INVESTOR, LLC

Table of Contents

			Page

1.	PURCHASE AND SALE OF COMMON SHARES AND THE WARRANT		2

	a.	Purchase and Sale of Common Shares and the Warrant	2

	b.	Company Closing Deliveries	3

	c.	Investor Closing Deliveries	3

	d.	Adjustment of Purchase Price and Number of Common Shares; Distributions; Purchase Rights	3

2.	INVESTOR’S REPRESENTATIONS AND WARRANTIES		6

	a.	Investment Purpose	6

	b.	Accredited Investor Status	6

	c.	Reliance on Exemptions	6

	d.	Information	6

	e.	No Governmental Review	7

	f.	Restrictions on Transfer or Resale	7

	g.	Legends	7

	h.	Authorization; Enforcement; Validity	9

	i.	Residency	9

	j.	No Other Agreements	9

	k.	Prior Transactions	9

	l.	Available Funds	9

	m.	No General Solicitation	9

	n.	Brokers and Finders	10

3.	REPRESENTATIONS AND WARRANTIES OF THE COMPANY		10

	a.	Organization and Qualification; Subsidiaries	10

	b.	Authority; Authorization; Enforcement; Validity	10

	c.	Capitalization	11

	d.	Issuance of Securities	12

	e.	No Conflicts	13

	f.	Required Filings and Consents	13

	g.	SEC Documents; Financial Statements	13

	h.	Principal Market	15

	i.	Rights Agreement	15

	j.	Absence of Certain Changes	15

	k.	Acknowledgment Regarding the Investor’s Purchase of Common Shares and the Warrant	15

	l.	No General Solicitation	16

	m.	No Integrated Offering	16

4.	AFFIRMATIVE COVENANTS		16

	a.	Form D and Blue Sky; Other Filings	16

	b.	Material Nonpublic Information	16

	c.	Listing	17

	d.	Preemptive Rights	17

	e.	Backstop of Rights Offering	18

	f.	Confidentiality Of Evaluation Material Produced to the Investor; Standstill	18

5.	TRANSFER AGENT		20

6.	TERMINATION		21

	a.	Termination	21

	b.	Effect of Termination	21

7.	MISCELLANEOUS		21

	a.	Governing Law; Jurisdiction; Jury Trial	21

	b.	Counterparts	22

	c.	Headings	23

	d.	Severability	23

	e.	Entire Agreement	23

	f.	Notices	23

	g.	Successors and Assigns	25

	h.	No Third Party Beneficiaries	25

	i.	Survival	25

	j.	Further Assurances	25

	k.	Placement Agent	25

	l.	No Strict Construction	25

	m.	Specific Performance	25

	n.	Confidentiality	26

	o.	Interpretative Matters	26

EXHIBITS

Exhibit A	-	Mutual Release

Exhibit B	-	Form of Warrant

Exhibit C	-	Form of Registration Rights Agreement

Exhibit D		Form of Guarantee

Exhibit E	-	Closing Notice

Exhibit F	-	Backstop Term Sheet

iii

SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT (the “ Agreement ”), dated as of October 2, 2009, by and between Select Comfort Corporation, a Minnesota corporation, with principal offices located at 9800 59th Avenue North, Minneapolis, MN 55442 (the “ Company ”), and Sterling SC Investor, LLC, a Delaware limited liability company (the “ Investor ”). Capitalized terms used and not defined elsewhere in this Agreement have the respective meanings assigned to such terms in the Appendix hereto.

WHEREAS:

A. On May 22, 2009, the Company and the Investor entered into a Securities Purchase Agreement (the “ SPA ”).

B. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Settlement, Mutual Termination and General Release, substantially in the form attached hereto as Exhibit A (the “ Mutual Release ”), pursuant to which each of the Company and the Investor has agreed to terminate the SPA and release the other from certain claims, upon terms and conditions set forth in the Mutual Release.

C. The Company and the Investor 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 ”).

D. The Investor desires to purchase from the Company, and the Company wishes to sell to the Investor, upon the terms and conditions stated in this Agreement, (i) 2,500,000 shares of the common stock, par value $.01 per share, of the Company (the “ Common Stock ”) (the shares of Common Stock purchased by the Investor hereunder being collectively referred to herein as the “ Common Shares, ” with the certificates representing the Common Shares being referred to as the “ Share Certificates ”), and (ii) a warrant, substantially in the form attached as Exhibit B , to acquire 2,000,000 shares of Common Stock (such warrant, together with any warrants or other securities issued in exchange or substitution therefor or replacement thereof, and as any of the same may be amended, restated or modified and in effect from time to time, being referred to as the “ Warrant ”; the shares of Common Stock issuable upon exercise of the Warrant being referred to as the “ Warrant Shares ”; the Common Shares, the Warrant and the Warrant Shares being collectively referred to herein as the “ Securities ”).

E. 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) 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 Investor, and (ii) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the issuance of the Common Shares and the Warrant to the Investor.

F. Contemporaneously with the execution and delivery of this Agreement, the Company is delivering to the Investor $1,750,000, by wire transfer of immediately available funds in accordance with the Investor’s wire transfer instructions, as reimbursement for the out-of-pocket expenses incurred by the Investor and its Affiliates in connection with this Agreement, the SPA and the transactions contemplated hereby.

G. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit C (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

H. Contemporaneously with the execution and delivery 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. is executing and delivering a guarantee, substantially in the form attached hereto as Exhibit D , in favor of the Company.

NOW THEREFORE , the Company and the Investor hereby agree as follows:

1. PURCHASE AND SALE OF COMMON SHARES AND THE WARRANT .

a. Purchase and Sale of Common Shares and the Warrant .

(i) Investor Option . At any time on or after the date of this Agreement but at or prior to 5:00 p.m., Chicago time, on June 30, 2010 (the “ Investor Termination Date ”), the Investor may elect (in the Investor’s sole discretion) to purchase from the Company the Common Shares and the Warrant, upon delivery of a written notice to the Company (an “ Investor Closing Notice ”), in the form attached hereto as Exhibit E , on such date as shall be set forth in the Closing Notice (the “ Closing Date ”), provided that the Closing Date shall be no less than five Business Days after the date of the Closing Notice. On the Closing Date, the Company shall issue and sell to the Investor, and the Investor shall purchase from the Company (the “ Closing ”), (i) 2,500,000 Common Shares (subject to adjustment as set forth in Section 1(d) below) at a purchase price of $4.00 per share, and (ii) the Warrant to purchase 2,000,000 Warrant Shares (subject to adjustment as set forth in Section 1(d) below and as set forth in the Warrant). The aggregate purchase price (the “ Purchase Price ”) for the Common Shares and the Warrant at the Closing purchased by the Investor shall be Ten Million Dollars ($10,000,000). The Closing shall occur at the offices of Oppenheimer Wolff & Donnelly LLP, 45 South Seventh Street, Minneapolis, Minnesota 55402, or at such other place as the Company and the Investor may collectively designate in writing. The Investor’s right to deliver an Investor Closing Notice, and the Investor’s right to elect to purchase from the Company the Common Shares and the Warrant in accordance with this Section 1(a)(i) , is not, and shall not be, subject to any condition, other than the delivery of the Investor Closing Notice and the payment of the Purchase Price as set forth in this Section 1(a)(i) , and the Company shall be obligated to issue and deliver the Common Shares and the Warrant, and to close the Transactions, on the Closing Date regardless of any claim or

allegation that the Investor has breached, or is in breach of any of its representations, covenants, or obligations under any of the Transaction Documents.

(ii) Company Option . In the event that at any time on or after the date of this Agreement but at or prior to 5:00 p.m., Chicago time, on March 31, 2010 (the “ Company Termination Date ”) the Company delivers to the Investor a certificate (a “ Company Closing Certificate ”) certifying that the Company and the Lenders have entered into a forbearance agreement under the Existing Credit Facility, and have agreed to an amendment to the Existing Credit Facility, upon terms and conditions approved in writing by the Investor (and the Investor hereby agrees that such approval shall not be unreasonably withheld, conditioned, or delayed), then a Closing shall occur at 10:00 a.m., Chicago time, on the fifth Business Day following the Company’s delivery of a Company Closing Certificate or such other date as the parties hereto collectively designate in writing (any such Closing, a “ Company Triggered Closing ”). The Company’s right to deliver a Company Closing Certificate, and the Company’s right to cause a Company Triggered Closing to occur in accordance with this Section 1(a)(ii) , is not, and shall not be, subject to any condition, other than the delivery of the Company Closing Certificate and the Company and the Lenders having entered into a forbearance agreement under the Existing Credit Facility, and having agreed to an amendment to the Existing Credit Facility, as described in this Section 1(a)(ii) , in which case a Company Triggered Closing shall occur on the Closing Date regardless of any claim or allegation that the Company has breached, or is in breach of any of its representations, covenants, or obligations under any of the Transaction Documents.

b. Company Closing Deliveries . At the Closing, the Company shall deliver, or cause to be delivered, to the Investor each of the following:

(i) One or more Share Certificates representing in the aggregate the number of Common Shares that the Investor 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 the Investor or its designee.

(ii) The Warrant (in such denominations as the Investor shall request), duly executed on behalf of the Company.

c. Investor Closing Deliveries . At the Closing, the Investor shall deliver, or cause to be delivered, to the Company, the Purchase Price, by wire transfer of immediately available funds in accordance with the Company’s wire transfer instructions.

d. Adjustment of Purchase Price and Number of Common Shares; Distributions; Purchase Rights .

(i) Adjustment upon Subdivision or Combination of Common Stock . If the Company at any time after the date of this Agreement but prior to, or on, the Closing Date, subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Purchase Price per Common Share immediately prior to such subdivision and the number

of Common Shares issuable to the Investor at the Closing will be proportionately decreased and increased, respectively, and the number of Warrant Shares and the Warrant Exercise Price (as defined in the Warrant) immediately prior to such subdivision will be proportionately increased and decreased, respectively. If the Company at any time after the date of this Agreement combines (by combination, reverse stock split or otherwise) its outstanding shares of Common Stock into a smaller number of shares, the Purchase Price per Common Share immediately prior to such subdivision and the number of Common Shares issuable to the Investor at the Closing will be proportionately increased and decreased, respectively, and the number of Warrant Shares and the Warrant Exercise Price immediately prior to such subdivision will be proportionately decreased and increased, respectively.

(ii) Distributions . If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including any dividend or other distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement or other similar transaction), other than any Rights Offering with respect to which the Company has complied with Section 1(d)(vi)(B) of this Agreement (a “ Distribution ”), at any time after the date of this Agreement but prior to, or on, the Closing Date, then, in each such case, the Investor shall be entitled to receive such Distribution, and the Company shall make such Distribution to the Investor, exactly as if the Company had (A) issued to the Investor, and the Investor had purchased from the Company, the Common Shares (and, as a result, had held all of the Common Shares and the Warrant), and (B) exercised the Warrant in full (and, as a result, had held all of the Warrant Shares that the Investor would have received upon such exercise), immediately prior to the record date for such Distribution, or if there is no record therefor, immediately prior to the effective date of such Distribution (but without the Investor’s actually having to consummate the Closing and purchase the Common Shares and the Warrant, or exercise the Warrant).

(iii) Purchase Rights . If at any time the Company grants, issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of its capital stock, other than any Rights Offering with respect to which the Company has complied with Section 1(d)(vi)(B) of this Agreement (the “ Purchase Rights ”), at any time after the date of this Agreement but prior to, or on, the Closing Date, then the Investor will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights that the Investor could have acquired if the Investor had (A) held the Common Shares upon consummation of the Closing, and (B) held the number of Warrant Shares acquirable upon complete exercise of the Warrant, immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights; provided , however , that the Investor will not be entitled to acquire Purchase Rights pursuant to this Section 1(d)(iii) for grants of equity or rights to acquire equity pursuant to Company Stock Award Plans.

(iv) Organic Change . At any time after the date of this Agreement but prior to, or on, the Closing Date, and prior to the consummation of any (i) sale of all or substantially all of the Company’s assets to an acquiring Person or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “ Acquiring Entity ”) a written agreement (in form and substance satisfactory to the Investor) to deliver to the Investor shares of common stock and a warrant of the Acquiring Entity (in the case of the warrant, evidenced by a written instrument substantially similar in form and substance to the Warrant and satisfactory to the Investor), and reflecting the terms of such consolidation, merger or sale. At any time after the date of this Agreement but prior to, or on, the Closing Date, and prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance satisfactory to the Investor) to ensure that the Investor will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the Common Shares and the Warrant, such shares of stock, securities or assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock that would have been acquirable and receivable pursuant to the Agreement and upon the exercise of the Warrant as of the date of such Organic Change.

(v) Certain Events . If any event occurs of the type contemplated by the provisions of this Section 1(d) but not expressly provided for by such provisions, other than the grant, sale or issuance of rights to purchase or subscription rights in any Rights Offering with respect to which the Company has complied with Section 1(d)(vi)(B) of this Agreement, then the Company Board will make an appropriate adjustment in the Purchase Price per Common Share and the number of Common Shares issuable to the Investor at the Closing, and the number of Warrant Shares and the Warrant Exercise Price; provided that no such adjustment will decrease the number of Common Shares issuable to the Investor at the Closing or the number of Warrant Shares issuable upon exercise of the Warrant, or increase the Purchase Price per Common Share or Warrant Exercise Price, as otherwise determined pursuant to this Section 1(d) .

(vi) Notices .

(A) As soon as reasonably practicable, but in no event later than ten (10) Business Days prior to any adjustment of the Purchase Price per Common Share or the number of Common Shares issuable to the Investor pursuant to this Agreement, or any adjustment of the Warrant Exercise Price or the number of Warrant Shares issuable to the Investor upon exercise of the Warrant, the Company will give written notice thereof to the Investor, setting forth in reasonable detail, and certifying, the calculation of such adjustment; provided , however , that neither the timing of giving any such notice nor any failure by the Company to give such a notice shall effect any such adjustment or the effective date thereof.

(B) The Company will give written notice to the Investor at least ten (10) Business Days prior to the date on which the Company closes its

books or takes a record (A) with respect to any dividend or distribution upon the Common Stock, (B) with respect to any pro rata subscription offer to holders of Common Stock, including any Rights Offering, or (C) for determining rights to vote with respect to any Organic Change, dissolution or liquidation, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Investor.

(C) The Company will also give written notice to the Investor at least ten (10) Business Days prior to the date on which any Organic Change, dissolution or liquidation will take place, provided that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Investor.

2. INVESTOR’S REPRESENTATIONS AND WARRANTIES .

The Investor represents and warrants as of the date of this Agreement to the Company that:

a. Investment Purpose . The Investor (i) is acquiring the Common Shares and the Warrant purchased by the Investor hereunder, and (ii) upon exercise of the Warrant issued to the Investor, will acquire the Warrant Shares issuable upon such exercise thereof, for the Investor’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, the Investor 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 . The Investor is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

c. Reliance on Exemptions . The Investor 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 the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.

d. Information . The Investor 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 the Investor. The Investor and its advisors, if any, have been afforded the opportunity to ask questions of the Company. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its advisors, if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in Sections 3 and 7(k) below or contained in any of the other Transaction Documents. The Investor understands that its

investment in the Securities involves a high degree of risk. The Investor 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 . The Investor 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. Restrictions on Transfer or Resale . Subject to the terms and conditions of the Registration Rights Agreement, the Investor understands and agrees that: (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 only pursuant to an effective registration statement under, and in compliance with the requirements of, the 1933 Act, (B) the Investor shall have delivered to the Company an opinion of counsel, in form and substance reasonably satisfactory to the Company’s transfer agent, 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) the Investor provides the Company with reasonable written assurance (in the form of seller and broker representation letters) 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 ”), or can be sold without limitation pursuant to Rule 144 (whether or not subject to any current public information requirement thereunder); (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 held by the Investor may be pledged by the Investor or its transferees (each, including the Investor, a “ Covered Investor ”) in connection with a bona fide margin account or bona fide financing agreement 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 Covered 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 a Covered Investor.

g. Legends . The Investor understands that, except as set forth below, the Share Certificates and the stock certificates representing the Warrant Shares 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 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 BONA FIDE FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate or instrument, as applicable, without the 1933 Act Legend to the holder of the Securities upon which it is stamped, (or, in the case of any Warrant Shares being acquired upon exercise of a Warrant, the Company shall issue the certificate representing such Warrant Shares without the 1933 Act Legend), 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 form and substance reasonably satisfactory to the Company’s transfer agent, to the effect that a public sale, assignment or transfer of the Securities may be made without registration under the 1933 Act, (iii) such holder provides the Company reasonable written assurances (in the form of seller and broker representation letters) that the Securities have been or are being sold pursuant to Rule 144 or can be sold without limitation pursuant to Rule 144 (whether or not subject to a current public information requirement thereunder), (iv) with respect to any of the Common Shares or Warrant Shares acquired pursuant to a Cashless Exercise (as defined in the Warrant) of the Warrant, such holder certifies, on or after the date that is six (6) months after the Closing Date, that such holder is not an “affiliate” of the Company (as defined in Rule 144), or (v) with respect to any Warrant Shares acquired other than pursuant to a cashless exercise of the Warrant, such holder certifies, on or after the date that is six (6) months after the Deemed Delivery Date (as defined in the Warrant) of such Warrant Shares, that such holder is not an “affiliate” of the Company. 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 Investor and any legend removal in accordance herewith. At such time as a legend is no longer required for certain Common Shares or Warrant Shares, the Company will no later than three (3) trading days following the delivery by the Investor to the Company or its transfer agent (with notice to the Company) of a legended certificate representing such Common Shares or Warrant Shares (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer), deliver or cause to be delivered to the Investor or the transferee of the Investor, as applicable, a certificate representing such Common Shares or Warrant Shares that is free from all restrictive and other legends. Certificates for Common Shares or Warrant Shares subject to legend removal hereunder may be transmitted by the Company’s transfer agent to the Investor by crediting the account of the Investor’s prime broker with DTC. 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 . There is no agreement to which either the Investor or Sterling Capital Partners III, L.P. is a party with an existing shareholder of the Company regarding any equity interest in the Investor other than as has been publicly disclosed prior to the date of this Agreement. The Investor 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 the Investor is a party has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms. Each of the Registration Rights Agreement and the other Transaction Documents to be entered into and executed by the Investor in connection with the Transactions as of the Closing will have been duly and validly authorized, executed and delivered on behalf of the Investor as of the Closing and will constitute a valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms.

i. Residency . The Investor is a limited liability company organized under the laws of the State of Delaware.

j. No Other Agreements . From August 27, 2009 through and including the date of this Agreement, neither Investor nor any of its Affiliates has entered into any agreement with any Person that, as of the date of this Agreement, is a shareholder of the Company with respect to any right to any interest in any of the Securities. If, at any time after the date of this Agreement but on or prior to the Closing Date, Investor or any of its Affiliates enters into any such agreement with any Person that, as of the date of this Agreement, is a shareholder of the Company, Investor will promptly notify the Company thereof.

k. Prior Transactions . During the period commencing on February 9, 2009 and ending on the Business Day immediately prior to the date of this Agreement (the “ Pre-Signing Period ”), the Investor did not purchase or sell any shares of Common Stock. Without limiting the foregoing, during the Pre-Signing Period, the Investor 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 . The Investor has, or will have sufficient funds in its possession to permit the Investor to acquire and pay for the Securities being purchased by the Investor and to perform it obligations under the Transaction Documents.

m. No General Solicitation . The Investor did not learn of the investment in the Common Shares and the Warrant 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 the Investor.

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .

The Company represents and warrants as of the date of this Agreement and, as of the Closing Date solely with respect to Sections 3(a) , 3(b) , 3(d) , 3(e)(i) , 3(e)(ii) , and 3(f) , to the Investor 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.

b. Authority; Authorization; Enforcement; Validity .

(i) 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 Securities, and under 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 reservation for issuance and the issuance of the Common Shares, the Warrant and the Warrant Shares issuable upon exercise of the Warrant, 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. 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) 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 Investor, (B) approved the execution, delivery and performance of this Agreement and the consummation of the Transactions, including the issuance of the Common Shares and the Warrant to the Investor, and (C) approved the Transactions for purposes of Section 673 of the MBCA, including the Investor potentially becoming an “interested shareholder,” as defined in Section 011 Subd. 49 of the MBCA, pursuant to the Rights Offering or otherwise, subject to the limitations set forth in Section 4(f)(iii) of this Agreement.

(iii) This Agreement and the other Transaction Documents dated on or prior to the date of this Agreement, 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 Warrant and any other Transaction Documents dated after the date of this Agreement and on or prior to the date of the Closing shall have been duly executed and delivered by the Company and shall constitute the valid and binding obligations of the Company, enforceable against the Company 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) 45,583,724 shares are issued and outstanding as of the date of this Agreement; and

(B) 6,488,575 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 5,546,821 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) or as described in Section 3(d) , 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

The Company has furnished to the Investor true and correct copies of:

(W) the Third Restated Articles of Incorporation of the Company, as amended and in effect as of the date of this Agreement;

(X) the Restated Bylaws of the Company, as amended and in effect as of the date of this Agreement;

(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. At least 2,500,000 shares of Common Stock have been duly authorized and reserved for issuance of the Common Shares upon consummation of the Closing, and at least 2,000,000 additional shares of Common Stock have been duly authorized and reserved for issuance upon exercise of the Warrant. At Closing, the Common Shares and, upon exercise in accordance with the Warrant, the Warrant Shares will be validly issued, fully paid and nonassessable and free from all Taxes and Liens with respect to the issue 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 Investor 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 . 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 reservation for issuance and issuance of the Common Shares and the Warrant and the reservation for issuance and issuance of the Warrant 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 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) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected.

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 reservation for issuance and the issuance of the Common Shares, the Warrant and the Warrant Shares issuable upon exercise of the Warrant, 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, except as specifically contemplated by Section 4(a) hereof.

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 July 4, 2009, as included in the Company’s quarterly report on Form 10-Q for the period then ended, as filed with the SEC on August 7, 2009 (the “ Most Recent 10-Q ”), is referred to herein as the “ Most Recent Balance Sheet .” 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) The Company is not required to file any agreement, note, lease, mortgage, deed or other instrument entered into prior to, and in effect on, the date of this Agreement 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.

(iv) 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.

(v) 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.

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

h. Principal Market . The Company is not in violation of any of the rules, regulations or requirements of the Principal 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.

i. Rights Agreement . 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.

j. Absence of Certain Changes . Since July 4, 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 July 4, 2009, neither the Company nor any of the Subsidiaries has had any capital expenditures outside the ordinary course of its business. Since July 4, 2009, other than the grant of options or restricted stock awards under existing Company Stock Award Plans in the aggregate of not more than 10,000 shares of Common Stock, 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).

k. Acknowledgment Regarding the Investor’s Purchase of Common Shares and the Warrant . The Company acknowledges and agrees that the Investor 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 the Investor is not 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 the Investor or any of its representatives or agents in connection with the Transaction Documents and the Transactions is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor 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.

l. 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.

m. 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, or any other regulatory or self-regulatory authority.

4. AFFIRMATIVE COVENANTS . Unless otherwise waived and consented to by the Investor:

a. Form D and Blue Sky; Other Filings . The Company agrees to timely file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Investor promptly after such filing. The Company shall make all filings and reports relating to the offer and sale of the Securities required under applicable Securities Laws of the states of the United States following the Closing Date. The Company further agrees to timely file a notification of Listing of Additional Shares with NASDAQ with respect to the Securities, and timely file a current report on Form 8-K with the SEC describing the terms of the Transactions, including the sale and issuance of the Securities to the Investor.

b. Material Nonpublic Information . Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, and except with the express written consent of the Investor and unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information, the Company and each Subsidiary shall instruct each of their respective officers, directors, employees and agents, not to, and the Investor shall not directly solicit the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents to provide the Investor with any material, non-public information regarding the Company or any of its Subsidiaries.

c. Listing . During the period commencing on the date of this Agreement and ending on the first date after the Closing on which the Investor and its Affiliates, in the aggregate, beneficially own less than 5% of the Common Stock (determined in accordance with Rule 13d-3 (as defined below)) (the period ending on such latest date, the “ Reporting Period ”), the Company shall use commercially reasonable efforts to promptly secure the listing of all of the Common Shares, and upon exercise of the Warrant, all of the Warrant Shares, upon each national securities exchange and automated quotation system, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all of the Common Shares and the Warrant Shares. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 4(c) .

d. Preemptive Rights. In case at any time on or before June 30, 2010, the Company shall sell or otherwise issue to any Person any Equity Securities (as defined below), other than any Exempted Issuances (as defined below), and so long as the Investor and its Affiliates, in the aggregate, beneficially own a number of shares of Common Stock representing greater than 5% of the Common Stock Deemed Outstanding (as defined below) as of such date, the Company shall offer to the Investor the right, at the same price as that paid, or to be paid by the other Person who participated or will participate in such sale or other issuance, to purchase the amount of such Equity Securities equal to the product of (x) the total amount of such Equity Securities sold or otherwise issued and (y) a fraction, the numerator of which is the number of Investor Shares (as defined below) immediately prior to such sale of Equity Securities and the denominator of which is the number of shares of Common Stock Deemed Outstanding immediately prior to the sale of Equity

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