Exhibit 10.3


 


EXHIBIT D


 


REGISTRATION RIGHTS AGREEMENT


 


REGISTRATION RIGHTS AGREEMENT
(this “Agreement”), dated as of May     ,
2009, by and among Select Comfort Corporation, a Minnesota corporation (the “Company”), and the undersigned buyers
(each, a “Buyer” and, collectively, the “Buyers”).


 


WHEREAS:


 


A.                                   In
connection with the Securities Purchase Agreement, by and among the parties
hereto and dated as of May 22, 2009 (the “Securities Purchase Agreement”), the Company has agreed, upon
the terms and subject to the conditions of the Securities Purchase Agreement,
to issue at the Closing (as defined in the Securities Purchase Agreement) to
the Buyers shares (the “Common Shares”)
of the Company’s common stock, $0.01 par value (the “Common Stock”);
and


 


B.                                     Pursuant
to the Securities Purchase Agreement, the Company has agreed to provide to the
Buyers certain registration rights under the Securities Act of 1933, as
amended, or any similar successor statute, and the rules and regulations
thereunder (collectively, the “1933 Act”),
and applicable state securities laws.


 


NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Buyer,
intending to be legally bound, agree as follows:


 


1.                                       DEFINITIONS.


 


As used in this
Agreement, the following terms shall have the following meanings:


 


a.                                       “1934
Act” means, collectively, the Securities Exchange Act of 1934, as
amended, or any similar successor statute, and the rules and regulations
thereunder.


 


b.                                      “Business Day” means any day other than Saturday,
Sunday or any other day on which commercial banks in the City of New York are
authorized or required by law to remain closed.


 


c.                                       “Demand Registration
Filing Deadline”
means the date that is forty-five (45) days after delivery to the Company of a
Demand Registration Request; provided, however, that, in the case of a Demand
Registration for an offering pursuant to Rule 415 (other than the first
such Demand Registration hereunder), the “Demand Registration Filing Deadline”
shall mean the later of such date and the earliest date that the Company is
permitted to file the Registration Statement by the SEC.


 


d.                                      “Form S-3” means such form of registration
statement under the 1933 Act as in effect on the date hereof or any successor
form under the 1933 Act subsequently


 

















 


adopted by the SEC which permits inclusion or incorporation
of substantial information by reference to other documents filed by the Company
with the SEC after the effective date of such registration statement.


 


e.                                       “Investor”
means a Buyer, any transferee or assignee thereof to whom a Buyer assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 10 and any transferee or
assignee thereof to whom a transferee or assignee assigns its rights under this
Agreement and who agrees to become bound by the provisions of this Agreement in
accordance with Section 10.


 


f.                                         “Permitted
Registration Amount”
means the lesser of (i) the total number of Registrable Securities
requested to be included in a Registration Statement for a Demand Registration
or a Piggyback Registration, as applicable and (ii) the maximum number of
Registrable Securities the Company is permitted to include in such Registration
Statement by the SEC (provided that the Company shall have used diligent
efforts to advocate with the Commission for the registration of all of the Registrable
Securities requested to be included in the Registration Statement, in
accordance with applicable SEC guidance).


 


g.                                      “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
governmental or any department or agency thereof, or any other legal entity.


 


h.                                      “Register,” “registered,” and “registration”
refer to a registration effected by preparing and filing one or more
Registration Statements in compliance with the 1933 Act and the declaration or
ordering of effectiveness of such Registration Statement(s) by the SEC.


 


i.                                          “Registrable
Securities” means (i) the
Common Shares and (ii) any shares of capital stock of the Company issued
or issuable with respect to the Common Shares as a result of any stock split,
stock dividend, recapitalization, exchange or similar event or otherwise;
provided, however, that any such Registrable Securities shall cease to be
Registrable Securities when (A) a Registration Statement with respect to
the sale of such securities becomes effective under the 1933 Act and such
securities are disposed of in accordance with such Registration Statement, or (B) such
securities are sold in accordance with Rule 144 (as defined in Section 9).


 


j.                                          “Registration
Statement” means
a registration statement or registration statements of the Company filed under
the 1933 Act covering Registrable Securities.


 


k.                                       “Rule 415” means Rule 415 under the 1933 Act
or any successor rule providing for offering securities on a continuous or
delayed basis.


 


l.                                          “SEC” means the U.S. Securities and Exchange
Commission, or any successor thereto.


 


m.                                    “Trading
Day” means any day on which the Common Stock is traded on the
Principal Market; provided that “Trading Day” shall not include any day on
which the


 


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Common Stock is scheduled to trade, or actually trades, on
the Principal Market for less than 4.5 hours.


 


n.                                      “Principal
Market” means, with respect to the Common Stock, the Nasdaq Global
Select 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, “Principal Market”
shall at such time mean, with respect  to
the Common Stock, such other national stock exchange or trading market; and,
with respect to any other security, “Principal Market” means the principal
national securities exchange or trading market for such security.


 


Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.


 


2.                                      DEMAND REGISTRATION.


 


a.                                       Demand Registrations. 
Subject to the terms of this Agreement, any Investors holding at least two-thirds
(2/3) of the then-outstanding Registrable Securities may at any time following
the Closing Date request (any such request, a “Demand Registration Request”) registration of all or part of
their Registrable Securities. Within five (5) days after receipt of any
request pursuant to this Section 2(a), the Company will give
written notice of such request to all other Investors holding Registrable
Securities.  The Company shall prepare,
and, as soon as practicable but in no event later than the Demand Registration
Filing Deadline, file with the SEC a Registration Statement, and the Company
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion within twenty
(20) days after delivery of the Company’s notice; provided, however, that, if
at the time of issuance of such Demand Registration Request the Registrable
Securities are eligible to be sold on a delayed or continuous basis pursuant to
Rule 415 and the Demand Registration is for an offering pursuant to Rule 415,
the Company shall not be required to include in such Demand Registration a
number of Registrable Securities in excess of the Permitted Registration
Amount.  All registrations requested
pursuant to this Section 2(a) are referred to herein as “Demand Registrations.”  The Company shall be obligated to effect no
more than three (3) Demand Registrations in any 12-month period, and no
more than five (5) Demand Registrations in total.


 


b.                                      Form of Registration. Demand Registrations will be on Form S-3;
provided, that, if the Company is a “well-known seasoned issuer” (as defined in
Rule 405 under the 1933 Act) at the time of the Demand Registration
Request, the Company shall use its reasonable best efforts to file the Demand
Registration as an “automatic shelf registration statement” (as defined in Rule 405
under the 1933 Act).  Notwithstanding the
foregoing, in the event that Form S-3 is not available for the
registration of the resale of the Registrable Securities hereunder, the Company
shall (i) register the Registrable Securities on Form S-1 or another
appropriate form reasonably acceptable to the holders of two-thirds (2/3) of
the Registrable Securities requested to be included in the Demand Registration,
and (ii) undertake to register the Registrable Securities included in the
Demand Registration on Form S-3 (by post-effective amendment to the
existing Registration Statement or otherwise) as soon as such form is


 


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available; provided that the Company shall maintain the
effectiveness of the Registration Statement then in effect until such time as a
Form S-3 covering the Registrable Securities has been declared effective
by the SEC. If a Demand Registration is to be an underwritten public offering,
and if the underwriters for marketing or other reasons request the inclusion in
the Registration Statement of information which is not required under the 1933
Act to be included in a Registration Statement on the applicable form for the
Demand Registration, the Company will provide such information as may be
reasonably requested for inclusion by the underwriters in such Registration
Statement.


 


c.                                       Effectiveness Deadline. 
The Company shall use its reasonable best  efforts to have any Registration Statement filed pursuant to
this Section 2 declared effective by the SEC as soon as
practicable.


 


d.                                      Allocation and Priority of Registrable
Securities in a Demand Registration.


 


i.                                          The Company will not include in any
Demand Registration any securities which are not Registrable Securities without
the prior written consent of the Investors holding securities representing at
least two-thirds (2/3) of the Registrable Securities to be included in such
Demand Registration.  If a Demand
Registration is for an offering pursuant to Rule 415 and the number of
Registrable Securities required by the Investors to be included therein exceeds
the Permitted Registration Amount, the initial number of Registrable Securities
included in any Registration Statement in respect of such Demand Registration
and each increase in the number of Registrable Securities included therein
shall be allocated pro rata among the Investors holding Registrable Securities
on the basis of the number of Registrable Securities owned by such Investors,
with further successive pro rata allocations among the Investors if any such
Investor has requested the registration of less than all of the Registrable
Securities such Investor is entitled to register.  In the event that an Investor sells or
otherwise transfers any of such Investor’s Registrable Securities, each
transferee shall be allocated a pro rata portion of the then remaining number
of Registrable Securities included in such Registration Statement for such
transferor.  Any shares of Common Stock
included in a Demand Registration and which remain allocated to any Person
which ceases to hold any Registrable Securities covered by such Demand
Registration shall be allocated to the remaining Investors, pro rata based on
the number of Registrable Securities then held by such Investors which are
covered by such Registration Statement.


 


ii.                                       If a Demand Registration is an
underwritten public offering and the managing underwriters advise the Company
in writing that in their opinion the inclusion of the number of Registrable
Securities and other securities requested to be included therein creates a
substantial risk that the selling price per share of Common Stock in the
offering will be reduced, the Company will include in such registration, prior
to the inclusion of any securities which are not Registrable Securities, the
number of Registrable Securities requested to be included which in the opinion
of such underwriters can be sold without creating such a risk, pro rata among
the respective Investors holding Registrable Securities on the basis of the
number of Registrable Securities owned by such Investors, with further
successive pro rata allocations among the Investors if any such Investor has
requested the registration of less than all such Registrable Securities such
Investor is entitled to register.


 


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e.                                       Selection of Underwriters. 
The Investors holding at least two-thirds (2/3) of the Registrable
Securities included in any Demand Registration shall have the right to elect
that the Demand Registration shall be underwritten and, if so elected, to
select the investment bank(s) and manager(s) to administer the
offering, subject to the Company’s approval, which shall not be unreasonably
withheld, conditioned or delayed.


 


f.                                         Postponement. 
Notwithstanding anything to the contrary herein, the Company shall be
entitled to postpone (but not more than once in any six-month period), for a
reasonable period of time not in excess of 60 days (and not for periods
exceeding, in the aggregate, 75 days during any 12-month period), the filing or
initial effectiveness of a Demand Registration if the Company delivers to the
Investors a certificate signed by the Chief Executive Officer of the Company
certifying that, in the good faith judgment of the Board of Directors of the
Company, such registration, offering or use would reasonably be expected to
materially adversely affect or materially interfere with any bona fide and
reasonably imminent material financing of the Company or any reasonably
imminent material transaction under consideration by the Company or would
require the disclosure of information that has not been, and is not otherwise
required to be, disclosed to the public, the premature disclosure of which would
materially adversely affect the Company.


 


3.                                      PIGGYBACK REGISTRATIONS.


 


a.                                       Right to Piggyback. 
Whenever the Company proposes to register any of its securities under
the 1933 Act (other than pursuant to Section 2 of the Agreement) in
connection with a public offering of such securities for cash (other than a
registration relating solely to the sale of securities to participants in a
stock incentive plan of the Company, in their capacity as such) and the
registration form to be used may be used for the registration of Registrable
Securities (a “Piggyback Registration”),
the Company will give prompt written notice (and in any event within five (5) Business
Days after its receipt of notice of any exercise of demand registration rights
other than under this Agreement), which notice shall describe the offering
contemplated thereby, to all Investors of its intention to effect such a
registration and will include in such registration all Registrable Securities
held by any Investors (in accordance with the priorities set forth in Sections
3(b) and 3(c) below) with respect to which the Company has
received written requests for inclusion within twenty (20) days after the
delivery of the Company’s notice; provided, however, that if the Piggyback
Registration is for an offering pursuant to Rule 415, the Company shall
not be required to include in the applicable Registration Statement a number of
Registrable Securities in excess of the Permitted Registration Amount;
provided, further, that the Company shall have the right to terminate or
withdraw any Piggyback Registration initiated by it under this Section 3(a) before
the effective date of such Piggyback Registration.


 


b.                                      Allocation and Priority of Registrable
Security in a Piggyback Registration.


 


i.                                          If the Registrable Securities are then
eligible for sale on a delayed or continuous basis pursuant to Rule 415
and a Piggyback Registration is for an offering pursuant to Rule 415 and
the number of Registrable Securities required by the Investors to be included
therein exceeds the Permitted Registration Amount, the initial number of
Registrable 


 


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Securities
included in any Registration Statement in respect of such Piggyback
Registration and each increase in the number of Registrable Securities included
therein shall be allocated pro rata among the Investors holding Registrable
Securities on the basis of the number of Registrable Securities owned by such
Investors, with further successive pro rata allocations among the Investors if
any such Investor has requested the registration of less than all of the
Registrable Securities such Investor is entitled to register.  In the event that an Investor sells or
otherwise transfers any of such Investor’s Registrable Securities, each transferee
shall be allocated a pro rata portion of the then remaining number of
Registrable Securities included in such Registration Statement for such
transferor.  Any shares of Common Stock
included in a Piggyback Registration Statement and which remain allocated to
any Person which ceases to hold any Registrable Securities covered by such
Piggyback Registration Statement shall be allocated to the remaining Investors,
pro rata based on the number of Registrable Securities then held by such
Investors which are covered by such Registration Statement.


 


ii.                                       If a Piggyback Registration is an
underwritten primary offering on behalf of the Company (including any such
offering that is also proposed to include securities to be sold on behalf of
holders thereof) and the managing underwriters advise the Company in writing
that in their opinion the number of securities requested to be included in the
registration creates a substantial risk that the selling price per share of
Common Stock in the offering will be reduced, the Company will include in such
registration first, the securities that the Company proposes to sell, second,
the Registrable Securities requested to be included in such registration, pro
rata among the Investors on the basis of the number of shares of Registrable
Securities owned by the Investors, with further successive pro rata allocations
among the Investors if any such Investor has requested the registration of less
than all of the Registrable Securities such Investor is entitled to register,
and third, any other securities requested to be included in such
registration.


 


iii.                                    If a Piggyback Registration is an
underwritten secondary offering solely on behalf of holders of the Company’s
securities and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in the
registration creates a substantial risk that the selling price per share of
Common Stock in the offering will be reduced, the Company will include in such
registration first, the securities requested to be included therein by
the holders requesting such registration, and second the Registrable
Securities requested to be included in such registration, pro rata among the
holders of the Registrable Securities on the basis of the number of Registrable
Securities owned by such holders, with further successive pro rata allocations
among such holders if any such holder has requested the registration of less
than all of the Registrable Securities such holder is entitled to register, and
third, other securities requested to be included in such registration.


 


c.                                       Selection of Underwriters. 
In connection with any Piggyback Registration, the Company shall have
the right to select the managing underwriters (subject to the approval of
Investors holding securities representing at least two-thirds (2/3) of the
Registrable Securities requested to be registered, which shall not be
unreasonably withheld, conditioned or delayed) to administer any Piggyback
Registration.


 


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4.                                      RELATED OBLIGATIONS.


 


Whenever the Company is obligated to file a Registration Statement with
the SEC pursuant to Section 2 or Section 3,  the holders of Registrable Securities have
requested that any Registrable Securities be registered pursuant to this
Agreement, or the Company is otherwise obligated to file a Registration
Statement pursuant to this Agreement, the Company shall use its reasonable best
efforts to effect the registration of the Registrable Securities in accordance
with the intended method of disposition thereof and, pursuant thereto, the
Company shall have the following obligations:


 


a.                                       The Company shall promptly prepare and
file with the SEC a Registration Statement with respect to the applicable
Registrable Securities (and, in the case of a Demand Registration, in no event
later than the applicable Demand Registration Filing Deadline) and use its
reasonable best efforts to cause such Registration Statement relating to the
Registrable Securities to become effective as soon as practicable after such
filing.  No later than the second
Business Day after such Registration Statement becomes effective, the Company
shall file with the SEC the final prospectus included therein pursuant to Rule 424
(or successor thereto) promulgated under the 1933 Act.  The Company shall keep each Registration
Statement effective at all times until the earlier of (i) the date that is
six months after the effective date of such Registration Statement, and (ii) the
date on which the Investors shall have sold all the Registrable Securities
covered by such Registration Statement to Persons that are not Investors (the “Registration Period”).  Such Registration Statement (including any
amendments or supplements thereto and any prospectuses (preliminary, final,
summary or free writing) contained therein or related thereto shall comply as
to form and content with the applicable requirements  of the 1933 Act and not contain or
incorporate by reference any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading.  In the case of a Demand
Registration, such Registration Statement shall contain a “plan of distribution”
approved by the holders of at least two-thirds (2/3) of the Registrable
Securities included therein.  The term “reasonable
best efforts” shall mean, among other things, that the Company shall respond to
any comments of the staff of the SEC with respect to a Registration Statement
as promptly as reasonably practicable and shall submit to the SEC, as promptly
as reasonably practicable after the Company learns that no review of a
Registration Statement will be made by the staff of the SEC or that the staff
of the SEC has no further comments on the Registration Statement, as the case
may be, a request for acceleration of effectiveness of such Registration
Statement to a time and date not later than 48 hours after the submission of
such request.


 


b.                                      The Company shall prepare and file with
the SEC such amendments (including post-effective amendments) and supplements
to a Registration Statement and any prospectus used in connection with such
Registration Statement (which prospectus supplements shall be filed pursuant to
Rule 424 (or successor thereto) promulgated under the 1933 Act) as may be
necessary to keep such Registration Statement effective at all times during the
Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers


 


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thereof as set forth in such Registration Statement.  In the case of any amendment or supplement to
a Registration Statement or prospectus that is required to be filed pursuant to
this Agreement (including pursuant to this Section 4(b)) by reason
of the Company filing a report under the 1934 Act, the Company shall have
incorporated such report by reference into such Registration Statement, if
applicable and permitted by law, or shall file such amendments or supplements
with the SEC on the same day.  The
Company shall use its reasonable best efforts to cause any post-effective
amendment to a Registration Statement to become effective as soon as
practicable after such filing.  No later
than the second Business Day after a post-effective amendment to a Registration
Statement becomes effective, the Company shall file with the SEC the final
prospectus included therein pursuant to Rule 424 (or successor thereto)
promulgated under the 1933 Act.


 


c.                                       The Investors holding securities
representing at least two-thirds (2/3) of the Registrable Securities to be
included in any Registration Statement shall have the right to select one legal
counsel to review such Registration Statements (“Legal Counsel”), as designated by the holders of at least
two-thirds (2/3) of the Registrable Securities to be included in such
Registration Statement.  The Company
shall reasonably cooperate with Legal Counsel in performing the Company’s
obligations under this Agreement. 
Without limiting the foregoing, the Company shall (A) permit Legal
Counsel to review and comment upon any Registration Statement and any amendment
or supplement to any Registration Statement (or to any prospectus included
therein) at least five (5) Business Days prior to its filing with the SEC,
and (B) not file any Registration Statement, amendment or supplement
described in the foregoing clause (A) in a form to which Legal Counsel
reasonably objects in writing on a timely basis, unless in the good faith
opinion of the Company, after consultation with its outside counsel, such
filing is necessary to comply with applicable law. The Company shall not submit
a request for acceleration of the effectiveness of a Registration Statement or
any amendment or supplement thereto without providing prior notice thereof to
Legal Counsel and each Investor.  The
Company shall furnish (which may be by e-mail) to Legal Counsel, without
charge, (i) promptly after the same is prepared and filed with the SEC,
one copy of any Registration Statement and any amendment(s) thereto,
including financial statements and schedules, all documents incorporated
therein by reference and all exhibits that have not been filed via the SEC’s
EDGAR filing system (or successor thereto) and (ii) upon the effectiveness
of any Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto.  The Company shall reasonably cooperate with
Legal Counsel in performing the Company’s obligations pursuant to this Section 4.


 


d.                                      The Company shall furnish to each
Investor whose Registrable Securities are included in any Registration
Statement, without charge, (i) promptly after the same is prepared and
filed with the SEC, at least one copy of such Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference that have not been filed via the
SEC’s EDGAR filing system (or successor thereto), all exhibits and each
preliminary prospectus, (ii) upon the effectiveness of any Registration
Statement, at least one copy of the prospectus included in such Registration
Statement and all amendments and supplements thereto (or such other number of
copies as such Investor may reasonably request) and (iii) such other
documents, including copies of any prospectus (preliminary, final, summary or
free writing), as such Investor may reasonably 


 


8





















 


request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Investor.


 


e.                                       The Company shall use its reasonable
best efforts to (i) register and qualify, unless an exemption from
registration and qualification applies, the resale by the Investors of the
Registrable Securities covered by a Registration Statement under the securities
or “blue sky” laws of such jurisdictions within the United States reasonably
requested by any Investor, (ii) prepare and file in those jurisdictions,
such amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or as a
condition thereto to (x) qualify to do business in any jurisdiction where
it would not otherwise be required to qualify but for this Section 4(e) or
(y) subject itself to general taxation in any such jurisdiction.  The Company shall promptly notify Legal
Counsel and each Investor that holds Registrable Securities of the receipt by
the Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction or its receipt of actual
notice of the initiation or threatening of any proceeding for such purpose.


 


f.                                         The Company shall notify Legal Counsel
and each Investor in writing of the happening of any event, as promptly as
practicable after becoming aware of such event, as a result of which any
prospectus included in, or relating to, a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omission to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and promptly prepare and file with the SEC a supplement or
amendment to such Registration Statement to correct such untrue statement or
omission, and deliver at least one copy of such supplement or amendment to
Legal Counsel and each Investor.  The
Company shall also promptly notify Legal Counsel and each Investor in writing (i) when
a prospectus or any prospectus supplement or post-effective amendment has been
filed, and when a Registration Statement or any post-effective amendment has
become effective (notification of such effectiveness shall be delivered to
Legal Counsel and each Investor by facsimile on the same day of such
effectiveness), (ii) of any request by the SEC for amendments or
supplements to a Registration Statement or related prospectus or related
information, and (iii) of the Company’s reasonable determination that a
post-effective amendment to a Registration Statement would be appropriate.


 


g.                                      The Company shall use its reasonable
best efforts to prevent the issuance of any stop order or other suspension of
effectiveness of a Registration Statement, or the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
and, if such an order or suspension is issued, to obtain the withdrawal of such
order or suspension at the earliest possible moment and to notify Legal Counsel
and each Investor who holds Registrable Securities being sold of the issuance
of such order and the resolution thereof or its receipt of actual notice of the
initiation or threat of any proceeding for such purpose.


 


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h.                                      At the reasonable request (in the
context of the securities laws) of any Investor, or in the case of an
underwritten offering upon the request of any underwriter, the Company shall
furnish to such Investor or underwriter, as the case may be, on the date of the
effectiveness of the Registration Statement and on such other dates as such
Investor or underwriter may reasonably request (i) a “comfort letter,”
dated such date, from the Company’s independent registered public accountants,
in form and substance as is customarily given by independent registered public
accountants to underwriters in an underwritten public offering, addressed to
the Investors and any underwriters (or if such accountants are prohibited by
generally accepted auditing standards from issuing such a “comfort letter” to
an Investor, the Company shall furnish to such Investor an “agreed upon
procedures” letter covering the same matters to the greatest extent possible,
and otherwise in customary form and substance), and (ii) an opinion, dated
as of such date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given to
underwriters in an underwritten public offering, addressed to such Investor or
underwriter, as the case may be.


 


i.                                          At the reasonable request (in the
context of the securities laws) of any Investor or, in the case of an
underwritten offering, upon the request of any underwriter, the Company shall
make available for inspection during regular business hours by (i) any
Investor, (ii) Legal Counsel and (iii) one firm of accountants or
other agents retained by the Investors (collectively, the “Inspectors”), and in the case of an
underwritten offering by any underwriter and its legal counsel and
representatives, all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the “Records”), as shall be reasonably deemed
necessary by such Inspector or underwriter, as the case may be, and cause the
Company’s officers, directors and employees to supply all information that any
Inspector or underwriter may reasonably request; provided, however,
that each Inspector shall agree to hold in strict confidence and shall not make
any disclosure (except to an Investor or underwriter) or use of any Record or
other information that the Company determines in good faith to be confidential,
and of which determination such Inspectors is so notified, unless (a) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in any Registration Statement or is otherwise required under the 1933
Act, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c) the
information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement of which
such Inspector has knowledge.  Each
Investor agrees that it shall, upon learning that disclosure of such Records is
sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.  Nothing herein (or any other confidentiality
agreement between the Company and any Investor) shall be deemed to limit any
Investor’s ability to sell Registrable Securities in a manner that is otherwise
consistent with applicable laws and regulations, provided that such Investor
receiving information pursuant to this Section 4(i) complies
with its confidentiality obligations pursuant to this Section 4(i).


 


j.                                          The Company shall hold in confidence
and not make any disclosure of information concerning an Investor provided to
the Company unless (i) disclosure of such information is necessary to
comply with federal or state securities laws, (ii) the disclosure of such
information is necessary to avoid or correct a misstatement or omission in any
Registration


 


10

















 


Statement, (iii) the release of such information is
ordered pursuant to a subpoena or other final, non-appealable order from a
court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Agreement or any other agreement.  The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought
in or by a court or governmental body of competent jurisdiction or through
other means, give prompt written notice to such Investor and allow such
Investor, at such Investor’s expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, such information.


 


k.                                       The Company shall use its reasonable
best efforts to cause all the Registrable Securities covered by a Registration
Statement to be listed on each securities exchange or trading market on which
securities of the same class or series issued by the Company are listed.  The Company shall pay all fees and expenses
in connection with satisfying its obligation under this Section 4(k).


 


l.                                          The Company shall cooperate with the
Investors who hold Registrable Securities being offered and the underwriters,
if any, and, to the extent applicable, facilitate the timely preparation and
delivery of certificates or uncertificated shares (not bearing any restrictive
legend) representing the Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates or uncertificated shares to
be in such denominations or amounts, as the case may be, as the Investors may
reasonably request and registered in such names as the Investors may request.


 


m.                                    The Company shall provide a transfer
agent and registrar of all such Registrable Securities not later than the
effective date of the applicable Registration Statement.


 


n.                                      If requested by an Investor, the
Company shall (i) as soon as reasonably practicable incorporate in a
prospectus supplement or post-effective amendment such information as such
Investor requests to be included therein relating to the sale and distribution
of Registrable Securities, including information with respect to such Investor,
the number of Registrable Securities being offered or sold, the purchase price
being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering; (ii) as soon as practicable make
all required filings of such prospectus supplement or post-effective amendment
after being notified of the matters to be incorporated in such prospectus
supplement or post-effective amendment; and (iii) as soon as reasonably
practicable, supplement or make amendments to any Registration Statement or
prospectus if reasonably requested by an Investor.


 


o.                                      The Company shall use its reasonable
best efforts to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary
to consummate the disposition of such Registrable Securities.


 


p.                                      The Company shall make generally
available to its security holders as soon as practical, but not later than
ninety (90) days after the close of the period covered thereby, an earnings
statement (in form complying with the provisions of Rule 158 under the
1933 Act) covering a 12-month period beginning not later than the first day of
the Company’s fiscal quarter next following the effective date of a
Registration Statement.


 


11

















 


q.                                      The Company shall otherwise use its
reasonable best  efforts to comply
with all applicable rules and regulations of the SEC in connection with
any registration hereunder.


 


r.                                         Within two (2) Business Days after
a Registration Statement that covers applicable Registrable Securities is
ordered effective by the SEC, the Company shall deliver, and shall cause legal
counsel for the Company to deliver, to the transfer agent for such Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC in substantially the form
attached hereto as Exhibit A, provided that if the Company changes
its transfer agent, it shall immediately deliver any previously delivered
notices under this Section 4(r) and any subsequent notices to
such new transfer agent.


 


s.                                       To the extent not made by the
underwriters in the case of an underwritten offering, the Company shall make
such filings with FINRA, pursuant to NASD Rule 2710 or otherwise
(including providing all required information and paying required fees
thereto), as and when requested by any Investor, or in the case of an
underwritten offering, by any underwriter, and make all other filings and take
all other actions reasonably necessary to expedite and facilitate the
disposition by the Investors of Registrable Securities pursuant to a
Registration Statement, including reasonably cooperating with any broker-dealer
through which any Investor proposes to resell Registrable Securities and
promptly responding to any comments received from FINRA.


 


t.                                         Notwithstanding anything to the
contrary in Section 4(f), in the case of an offering pursuant to Rule 415,
at any time after the applicable Registration Statement has been declared
effective by the SEC, the Company may delay the disclosure of material non-public
information concerning the Company the disclosure of which at the time is not,
in the good faith opinion of the Board of Directors of the Company and its
counsel, in the best interest of the Company and not, in the opinion of counsel
to the Company, otherwise required (a “Grace
Period”); provided, that the Company shall promptly (i) notify
the Investors in writing of the existence of material non-public information
giving rise to a Grace Period (provided that in each notice the Company shall
not disclose the content of such material non-public information to the
Investors) and the date on which the Grace Period will begin, and (ii) notify
the Investors in writing of the date on which the Grace Period ends; and,
provided further, that (A) no Grace Period shall exceed ten (10) consecutive
days, (B) during any Registration Period such Grace Periods shall not
exceed an aggregate of twenty (20) days and (C) the first day of any Grace
Period must be at least ten (10) Trading Days after the last day of any
prior Grace Period (a Grace Period that satisfies all of the requirements of
this Section 4(t) being referred to as an “Allowable Grace Period”).  For purposes of determining the length of a
Grace Period above, the Grace Period shall begin on and include the date the
Investors receive the notice referred to in clause (i) and shall end on
and include the later of the date the Investors receive the notice referred to
in clause (ii) and the date referred to in such notice.  The provisions of Section 4(g) hereof
shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the
Company shall again be bound by the provisions of the first sentence of Section 4(f) with
respect to the information giving rise thereto unless such material non-public
information is no longer applicable.


 


12





















 


u.                                      The Company shall not register any of
its securities for sale for its own account (other than for issuance to
employees, directors and consultants, of the Company under an employee benefit
plan or for issuance in a business combination transaction), except pursuant to
a firm commitment underwritten offering.


 


v.                                      The Company shall enter into such
customary agreements (including, in the case of underwritten offering, an
underwriting agreement) and take such other actions as the any of the Investors
or underwriters, if any, may reasonably request in order to expedite and
facilitate the disposition of the Registrable Securities and any other securities
covered by a Registration Statement. 
Without limiting the foregoing, in connection with any underwritten
offering and taking into account the Company’s business needs, the Company
shall make appropriate officers of the Company available for meetings with
prospective purchasers of the Registrable Securities and prepare and present to
potential investors customary “road show” materials, in each case in accordance
with the recommendations of the underwriters and in all respects in a manner
consistent with other issuances of securities in an offering of a similar size
to such offering of the Registrable Securities.


 


5.                                      OBLIGATIONS OF THE INVESTORS.


 


a.                                       At least seven (7) Business Days
prior to the first anticipated filing date of a Registration Statement and at
lease five (5) Business Days prior to the filing of any amendment or
supplement to a Registration Statement or prospectus, the Company shall notify
each Investor in writing of the information, if any, the Company requires from
each such Investor if such Investor elects to have any of such Investor’s
Registrable Securities included in such Registration Statement or, with respect
to an amendment or a supplement, if such Investor’s Registrable Securities are
included in such Registration Statement (each an “Information Request”). Provided that the Company shall have
complied with its obligations set forth in the preceding sentence, it shall be
a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company, in response to an Information Request, such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request.


 


b.                                      Each Investor agrees to cooperate with
the Company as reasonably requested by the Company in connection with the
preparation and filing of any Registration Statement in which any Registrable
Securities held by such Investors are being included.


 


c.                                       Each Investor agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in Section 4(g) or the first sentence of Section 4(f) or,
in the case of an offering pursuant to Rule 415, written notice from the
Company of an Allowable Grace Period, such Investor will promptly discontinue
disposition of Registrable Securities pursuant to any Registration Statement(s) covering
such Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 4(g) or
the first sentence of  Section 4(f) or
receipt of notice that no supplement or amendment is required or that the
Allowable Grace Period has ended. 
Notwithstanding anything


 


13





















 


to the contrary, the Company shall cause its transfer agent
to deliver unlegended shares of Common Stock to a transferee of an Investor in
accordance with the terms of the Securities Purchase Agreement in connection
with any sale of Registrable Securities with respect to which an Investor
provides reasonable evidence that such Investor has entered into a contract for
sale prior to the Investor’s receipt of a notice from the Company of the
happening of any event of the kind described in Section 4(g) or
the first sentence of Section 4(f) and for which the Investor
has not yet settled.


 


d.                                      Each Investor agrees, in connection
with any underwritten offering made pursuant to a Registration Statement filed
pursuant to this Agreement in which such Investor has elected to include
Registrable Securities, if requested (pursuant to a written notice) by the
managing underwriter(s) not to effect any public sale or distribution of
any common equity securities of the Company (or securities convertible into or
exchangeable or exercisable for such common equity securities) (except as part
of such underwritten offering) during the period commencing not earlier than
7 days prior to and continuing for not more than 90 days (or such
shorter period as the managing underwriter(s) may permit) after the
effective date of the related Registration Statement (or date of the prospectus
supplement if the offering is made pursuant to a “shelf” registration) pursuant
to which such underwritten offering shall be made; provided, that such
Investors shall only be so bound so long as and to the extent that each
executive officer and director of the Company and other stockholder having
registration rights with respect to the securities of the Company is similarly
bound.


 


6.                                      EXPENSES OF REGISTRATION.


 


All
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings and qualifications pursuant to, or
otherwise in connection with the Company’s compliance with its obligations
under, Sections 2, 3 and 4, including all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements
of counsel for the Company, shall be paid by the Company.  The Company shall also reimburse the Investors
for the reasonable fees and disbursements of Legal Counsel in connection with
registrations, filings and qualifications pursuant to Sections 2, 3 and 4,
of this Agreement.


 


7.                                      INDEMNIFICATION.


 


In
the event any Registrable Securities are included in a Registration Statement
under this Agreement:


 


a.                                       To the fullest extent permitted by law,
the Company will, and hereby does, indemnify, hold harmless and defend each
Investor and any underwriter, and the directors, officers, partners, members,
managers, employees, agents, representatives of, and each Person, if any, who
controls any Investor or underwriter within the meaning of the 1933 Act or the
1934 Act (each, an “Indemnified Person”),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys’ fees, amounts paid in settlement or
expenses, joint or several, (collectively, “Claims”)
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory agency


 


14





















 


authority, or body (including the SEC or any state
securities commission, authority or self-regulatory organization, in the United
States or anywhere else in the world), whether pending or threatened, whether
or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i) any
untrue statement or alleged untrue statement of a material fact in (including
by way of incorporation be reference) a Registration Statement or any post-effective
amendment thereto or in any filing made in connection with the qualification of
the offering under the securities or other “blue sky” laws of any jurisdiction
in which Registrable Securities are offered (“Blue
Sky Filings”), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) any untrue statement or alleged untrue
statement of a material fact contained (including by way of incorporation by reference)
in any preliminary, final, summary or free writing prospectus (as amended or
supplemented, if the Company files any amendment thereof or supplement thereto
with the SEC) or the omission or alleged omission to state therein (including
by way of incorporation be reference) any material fact necessary to make the
statements made therein, in light of the circumstances under which the
statements therein (including by way of incorporation be reference) were made,
not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including any state securities
law, or any rule or regulation thereunder relating to the offer or sale of
the Registrable Securities pursuant to a Registration Statement (the matters in
the foregoing clauses (i) through (iii) being, collectively, “Violations”).  Subject to Section 7(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any
such Claim.  Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this Section 7(a):
(i) shall not apply to a Claim by an Indemnified Person arising out of or
based upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person for
such Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto
if such prospectus (or amendment or supplement thereto) was timely filed with
the SEC and furnished by the Company to such Investor pursuant to Section 4(d),
(ii) shall not apply to a Claim by an Indemnified Person arising out of or
based upon sales of Registrable Securities by such Indemnified Person pursuant
to a Registration Statement in violation of Section 5(c), and (iii) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld, conditioned or delayed.  Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Investors pursuant to Section 10.


 


b.                                      In connection with any Registration
Statement in which an Investor is participating, each such Investor agrees to
severally and not jointly indemnify, hold harmless and defend, to the same
extent and in the same manner as is set forth in Section 7(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, and each Person, if any, who controls the Company within the meaning
of the 1933 Act or the 1934 Act (each an “Indemnified
Party”), against any Claim or Indemnified Damages to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim or Indemnified Damages arise out of or are based upon (i) any
Violation, in each case to the extent,


 


15





















 


and only to the extent, that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement or (ii) sales of Registrable Securities by such Indemnified
Person pursuant to a Registration Statement in violation of Section 5(c) and,
subject to Section 7(c), such Investor will reimburse any legal or
other expenses reasonably incurred by an Indemnified Party in connection with
investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 7(b) and
the agreement with respect to contribution contained in Section 8
shall not apply to amounts paid in settlement of any Claim if such settlement
is effected without the prior written consent of such Investor, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, further,
however, that the aggregate liability of the Investor in connection with
any Violation shall not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to the Registration Statement
giving rise to such Claim.  Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive any transfer
of the Registrable Securities by an Investor pursuant to Section 10.


 


c.                                       Promptly after receipt by an
Indemnified Person or Indemnified Party under this Section 7 of
notice of the commencement of any action or proceeding (including any
governmental action or proceeding) involving a Claim, such Indemnified Person
or Indemnified Party shall, if a Claim in respect thereof is to be made against
any indemnifying party under this Section 7, deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be. In any such proceeding, any
Indemnified Person or Indemnified Party may retain its own counsel, but, except
as provided in the following sentence, the fees and expenses of that counsel
will be at the expense of that Indemnified Person or Indemnified Party, as the
case may be, unless (i) the indemnifying party and the Indemnified Person
or Indemnified Party, as applicable, shall have mutually agreed to the retention
of that counsel, (ii) the indemnifying party does not assume the defense
of such proceeding in a timely manner or (iii) in the reasonable opinion
of counsel retained by the Indemnified Person or Indemnified Party, the
representation by such counsel for the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any other party represented by such counsel in such proceeding.  The Company shall pay reasonable fees for up
to one separate legal counsel (plus local counsel) for the Investors, and such
legal counsel shall be selected by the Investors holding at least two-thirds
(2/3) in interest of the Registrable Securities included in the Registration
Statement to which the Claim relates. 
The indemnifying party shall keep the Indemnified Person or Indemnified
Party fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto.  No
indemnifying party shall be liable for any settlement of any action, claim or
proceeding effected without its prior written consent, provided, however,
that the indemnifying party shall not unreasonably withhold, delay or condition
its consent.  No indemnifying party
shall, without the prior written consent of the Indemnified Person or
Indemnified Party, consent to entry of any judgment or enter into any
settlement or other compromise with respect to any pending or threatened action
or claim in respect of which indemnification or contribution may be or has been
sought hereunder (whether or not the Indemnified Person or Indemnified Party is
an actual or potential party to such action


 


16





















 


or claim) which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Person or
Indemnified Party of a release from all liability in respect to such Claim or
litigation, and such settlement shall not include any admission as to fault on
the part of the Indemnified Person or Indemnified Party.  Following indemnification as provided for
hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Person or Indemnified Party with respect to all third parties,
firms or corporations relating to the matter for which indemnification has been
made.  The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action shall not relieve such indemnifying party of any liability
to the Indemnified Person or Indemnified Party under this Section 7,
except to the extent that the indemnifying party is prejudiced in its ability
to defend such action.


 


d.                                      The indemnification required by this Section 7
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Damages are incurred.


 


e.                                       The indemnity agreements contained
herein shall be in addition to (i) any cause of action or similar right of
the Indemnified Person or Indemnified Party against the indemnifying party or
others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.


 


8.                                      CONTRIBUTION.


 


To the extent any indemnification by an
indemnifying party is prohibited or limited by law, the indemnifying party
agrees to make the maximum contribution with respect to any amounts for which
it would otherwise be liable under Section 7 to the fullest extent
permitted by law; provided, however, that:  (i) no Person involved in the sale of
Registrable Securities who is guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the 1933 Act) in connection with such
sale, shall be entitled to contribution from any Person involved in such sale
of Registrable Securities who was not guilty of fraudulent misrepresentation;
and (ii) contribution by any Investor shall be limited to an amount equal
to the net amount of proceeds received by such Investor from the sale of such Registrable
Securities pursuant to the Registration Statement giving rise to such action or
claim for indemnification, less the amount of any damages that such Investor
has otherwise been required to pay in connection with such sale.


 


9.                                      REPORTS UNDER THE 1934 ACT.


 


With a view to making
available to the Investors the benefits of Rule 144 promulgated under the
1933 Act or any other similar rule or regulation of the SEC that may at
any time permit the Investors to sell securities of the Company to the public
without registration (“Rule 144”),
the Company agrees to:


 


a.                                       make and keep public information
available, as those terms are understood and defined in Rule 144;


 


b.                                      use its reasonable best efforts to file
with the SEC in a timely manner all reports and other documents required of the
Company under the 1934 Act so long as the


 


17




















 


Company
remains subject to such requirements (it being understood that nothing herein
shall limit the Company’s obligations under Section 5(d) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and


 


c.                                       furnish to each Investor so long as
such Investor owns Registrable Securities, promptly upon request, (i) a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports and
documents so filed by the Company (or information regarding the locations
thereof on the SEC’s EDGAR filing system or successor thereto), and (iii) such
other information as may be reasonably requested to permit the Investors to
sell such securities pursuant to Rule 144 without registration.


 


10.                                ASSIGNMENT OF REGISTRATION RIGHTS.


 


The rights under this Agreement shall be automatically assignable by any
of the Investors to any transferee or assignee of all or any portion of
Registrable Securities if: (i) such Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
furnished to the Company within a reasonable time after such transfer or
assignment; (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect
to which such registration rights are being transferred or assigned; (iii) immediately
following such transfer or assignment the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act or
applicable state securities laws; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence,
the transferee or assignee agrees in writing with the Company to be bound by
all of the provisions contained herein; and (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement.


 


11.                                AMENDMENT OF REGISTRATION RIGHTS.


 


Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and Investors who then hold at least two-thirds (2/3) of the Registrable
Securities.  Any amendment or waiver
effected in accordance with this Section 11 shall be binding upon
each Investor and the Company.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the Registrable Securities. 
No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.


 


12.                                MISCELLANEOUS.


 


a.                                       A Person is deemed to be a holder of
Registrable Securities whenever such Person owns or is deemed to own of record
such Registrable Securities.  If the
Company receives conflicting instructions, notices or elections from two or
more Persons with respect to the same


 


18





















 


Registrable Securities, the Company shall act upon the basis
of instructions, notice or election received from the registered owner of such
Registrable Securities.


 


b.                                      Any notice, consent, waiver, request,
instruction or other communication required or permitted to be given under the
terms of this Agreement shall be in writing and will be deemed to have been
duly given:  (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one (1) Business Day
after deposit with a nationally recognized overnight delivery service, in each
case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such
communications shall be:


 


If to the Company:


 


Select Comfort Corporation

9800 59th Avenue North

Minneapolis, Minnesota 55442

Attention: Mark Kimball

Facsimile: (763) 551-6888


 


With a copy to:


 


Oppenheimer Wolff Donnelly LLP


Plaza VII, Suite 3300


45 South Seventh Street


Minneapolis, MN 55402-1609


Attention: Thomas R. Marek


Facsimile: (612) 607-7100


 


If to Legal Counsel, to its address and facsimile number provided by
the holders of Registrable Securities designating such Legal Counsel pursuant
to Section 4(c).


 


If to a Buyer, to its address and facsimile number set forth on the Schedule
of Buyers attached to the Securities Purchase Agreement, with copies to
such Buyer’s representatives as set forth on such Schedule of Buyers,
or, in the case of a Buyer or other party named above, to such other address
and/or facsimile number and/or to the attention of such other person as the recipient
party has specified by written notice given to each other party at least 5 days
prior to the effectiveness of such change.


 


If to an Investor (other than the Buyer), to such Investor at the
address and/or facsimile number reflected in the records or the Company.


 


Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a courier or overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or
deposit with a nationally recognized


 


19

















 


overnight delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.  Notwithstanding the
foregoing, the Company or its counsel may transmit versions of any Registration
Statement (or any amendments or supplements thereto) to Legal Counsel in
satisfaction of its obligations under Section 4(c) to permit
Legal Counsel to review such Registration Statement prior to filing (and solely
for such purpose) by email to such e-mail address as has been provided for such
purpose by Legal Counsel, provided that delivery and receipt of such
transmission shall be confirmed by electronic, telephonic or other means.


 


c.                                       Failure of any party to exercise any
right or remedy under this Agreement or otherwise, or delay by a party in
exercising such right or remedy, shall not operate as a waiver thereof.


 


d.                                      All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the laws of the State of Delaware, without giving effect to any
choice of law or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of Delaware. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting the State of Delaware, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party
hereby irrevocably waives personal service of process and consents to process
being served in any such suit, action or proceeding by mailing a copy thereof
by registered or certified mail, return receipt requested, or by deposit with a
nationally recognized overnight delivery service, to such party at the address
for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit
in any way any right to serve process in any manner permitted by law.  If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.  EACH PARTY HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION
HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.


 


e.                                       This Agreement and the other
Transaction Documents constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof.  There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and therein.  This Agreement and the
other Transaction Documents supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.


 


20





















 


f.                                         Subject to the requirements of Section 10,
this Agreement shall inure to the benefit of and be binding upon the permitted
successors and assigns of each of the parties hereto.


 


g.                                      The headings in this Agreement are for
convenience of reference only and shall not form part of, or affect the meaning
or interpretation of, this Agreement.


 


h.                                      This Agreement and any amendments
hereto may be executed and delivered in two or more identical counterparts, and
by the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement. This Agreement shall become
effective and binding upon each party hereto when counterparts have been signed
by each party hereto and delivered to the other parties hereto, it being
understood that all parties need not sign the same counterpart.  In the event that any signature to this
Agreement or any amendment hereto is delivered by facsimile transmission or by
e-mail delivery of a “.pdf” format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof. 
No party hereto shall raise the use of a facsimile machine or e-mail
delivery of a “.pdf” format data file to deliver a signature to this Agreement
or any amendment hereto or the fact that such signature was transmitted or
communicated through the use of a facsimile machine or e-mail delivery of a “.pdf”
format data file as a defense to the formation or enforceability of a contract
and each party hereto forever waives any such defense.


 


i.                                          Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.


 


j.                                          All consents and other determinations
to be made by the Investors pursuant to this Agreement shall be made, unless
otherwise specified in this Agreement, only by Investors holding at least
two-thirds (2/3) of the Registrable Securities. 
Any consent or other determination approved by Investors as provided in
the immediately preceding sentence shall be binding on all Investors.


 


k.                                       The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent and no rules of strict construction will be applied against any
party.


 


l.                                          Each Buyer and each holder of the
Registrable Securities shall have all rights and remedies set forth in the
Transaction Documents and all rights and remedies that such Buyers and holders
have been granted at any time under any other agreement or contract and all of
the rights that such Buyers and holders have under any law.  Any Person having any rights under any
provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security or proving actual
damages), to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law or in equity.


 


21





















 


m.                                    This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and, to the extent provided in Sections 7(a) and 7(b) hereof,
each Investor, any underwriter, and the directors, officers, partners, members,
managers, employees, agents, representatives of, and each Person, if any, who
controls any Investor or underwriter within the meaning of the 1933 Act or the
1934 Act and each of the Company’s directors, each of the Company’s officers
who signs the Registration Statement, and each Person, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.


 


n.                                      The Company shall not grant any Person
any registration rights with respect to shares of Common Stock or any other
securities of the Company other than registration rights that will not
adversely affect the rights of the Investors hereunder (including by limiting
in any way the number of Registrable Securities that could be included in any
Registration Statement pursuant to Rule 415) and shall not otherwise enter
into any agreement that is inconsistent with the rights granted to the
Investors hereunder.


 


o.                                      The obligations of each Investor
hereunder are several and not joint with the obligations of any other Investor,
and no provision of this Agreement is intended to confer any obligations on any
Investor vis-à-vis any other Investor. 
Nothing contained herein, and no action taken by any Investor pursuant
hereto, shall be deemed to constitute the Investors as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.


 


p.                                      Unless the context otherwise requires, (i) all
references to Sections, Schedules or Exhibits are to Sections, Schedules or
Exhibits contained in or attached to this Agreement, (ii) words in the
singular or plural include the singular and plural and pronouns stated in
either the masculine, the feminine or neuter gender shall include the
masculine, feminine and neuter and (iii) the use of the word “including”
in this Agreement shall be by way of example rather than limitation.


 


* * * * * *


 


22

















 


IN WITNESS WHEREOF, each party
hereto has caused this Registration Rights Agreement to be duly executed as of
the date first written above.


 


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  Select Comfort Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BUYERS:

  
	
   

  	
   

  
	
   

  	
  Sterling SC Investor, LLC

  
	
   

  	
  By: Sterling Capital Partners III, L.P.

  
	
   

  	
  Its: Sole Member

  
	
   

  	
   

  
	
   

  	
  By: SC Partners III, L.P.

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  
	
   

  	
  By: Sterling Capital Partners III, LLC

  
	
   

  	
  Its: General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: R. Christopher Hoehn-Saric

  
	
   

  	
  Title: Senior Managing Director

  



 

















 


EXHIBIT A


 


FORM OF NOTICE OF
EFFECTIVENESS


OF REGISTRATION STATEMENT


 


[TRANSFER AGENT]


Attn:


 


Re:                             Select Comfort Corporation


 


Ladies and Gentlemen:


 


We are counsel to Select Comfort Corporation, a Minnesota corporation
(the “Company”), and have
represented the Company in connection with that certain Securities Purchase
Agreement (the “Purchase Agreement”)
entered into by and among the Company and the buyers named therein
(collectively, the “Holders”)
pursuant to which the Company issued to the Holders shares of Common Stock of
the Company.  Pursuant to the Purchase
Agreement, the Company also has entered into a Registration Rights Agreement
with the Holders (the “Registration Rights
Agreement”), pursuant to which the Company agreed, among other
things, to register the Registrable Securities (as defined in the Registration
Rights Agreement), under the Securities Act of 1933, as amended (the “1933 Act”). 
In connection with the Company’s obligations under the Registration
Rights Agreement, on
                        
      , 200 , the Company filed a
Registration Statement on Form [S-    ]
(File No. 333-                          )
(the “Registration Statement”)
with the Securities and Exchange Commission (the “SEC”) relating to the Registrable Securities, which names each
of the Holders as a selling stockholder thereunder.


 


In connection with the foregoing, we advise you that a member of the
SEC’s staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have
no knowledge, after telephonic inquiry of a member of the SEC’s staff, that any
stop order suspending its effectiveness has been issued or that any proceedings
for that purpose are pending before, or threatened by, the SEC, and the
Registrable Securities are available for resale under the 1933 Act pursuant to
the Registration Statement.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  [ISSUER’S COUNSEL]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  
	
  cc:

  	
  [LIST NAMES OF HOLDERS]