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EXHIBIT 10.4

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THIS WARRANT AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (B) AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.

Right to Purchase up to 45,000 Shares of Common Stock of

STEN CORPORATION

(subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. 109

Issue Date: August 22, 2008

STEN CORPORATION, a corporation organized under the laws of the State of Minnesota (the “Company”), hereby certifies that, for value received, VALENS U.S. SPV I, LLC, or permitted transferees or assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company (as defined herein) from and after the Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, through the close of business August 22, 2013 (the “Expiration Date”), up to 45,000 fully paid and non-assessable shares of Common Stock (as hereinafter defined), $0.01 par value per share, at the applicable Exercise Price per share (as defined below).  The number and character of such shares of Common Stock and the applicable Exercise Price per share are subject to adjustment as provided herein.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)

“Common Stock” means (i) the Company’s Common Stock, par value $0.01 per share; and (ii) any other securities into which or for which any of the securities described in the preceding clause (i) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(b)

“Company” means STEN Corporation and any person or entity which shall succeed, or assume the obligations of, STEN Corporation hereunder.

(c)

“Exercise Price” means a price of $0.01 per share.

(d)

“Other Securities” means any stock (other than Common Stock), including, but not limited to, the Closing Shares (as defined in the Security Agreement) and other securities of the Company or any other person (corporate or otherwise) which the Holder at any time shall be entitled to receive, or shall have received, on the exercise of this Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 4 or otherwise.

(e)

“Security Agreement” means the Security Agreement dated as of the date hereof among the Company, various Subsidiaries of the Company party thereto, the Holder, the other Lenders (as defined therein) from time to time party thereto and LV Administrative Services, Inc., as administrative and collateral agent for the Lenders, as amended, modified, restated and/or supplemented from time to time.

1.

Exercise of Warrant.

1.1

Number of Shares Issuable upon Exercise.  From and after the date hereof through and including the Expiration Date, the Holder shall be entitled to receive, upon proper exercise of this Warrant in whole or in part, by delivery of an original or fax copy of an exercise notice in the form attached hereto as Exhibit A (the “Exercise Notice”) and payment of the Exercise Price (either in cash or securities or on a cashless basis) therefor, shares of Common Stock of the Company, subject to adjustment pursuant to Section 4.

1.2

Fair Market Value.  For purposes hereof, the “Fair Market Value” of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:

(a)

If the Company’s Common Stock is traded on the American Stock Exchange or another national exchange or is quoted on the National or Capital Market of The Nasdaq Stock Market, Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last business day immediately preceding the Determination Date.

(b)

If the Company’s Common Stock is not traded on the American Stock Exchange or another national exchange or on the Nasdaq but is traded on the NASD Over the Counter Bulletin Board, then the mean of the average of the closing bid and asked prices reported for the last business day immediately preceding the Determination Date.

(c)

Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in accordance with the rules then in effect of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided.

(d)

If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of this Warrant are outstanding at the Determination Date.

1.3

Company Acknowledgment.  The Company will, at the time of the exercise of this Warrant, upon the request of the Holder acknowledge in writing its continuing obligation to afford to the Holder any rights to which the Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant.  If the Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to the Holder any such rights.

1.4

Trustee for Warrant Holders.  In the event that a bank or trust company shall have been appointed as trustee for the Holder pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

1.5

Limitation on Sale of Common Stock.  Notwithstanding anything contained herein to the contrary, the Holder shall not be entitled to sell any shares of Common Stock underlying this Warrant, in whole or in part, prior to September 1, 2009 (the “Lock-up Period”).  Notwithstanding the foregoing, the Lock-up Period shall become null and void without any notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Security Agreement).

2.

Procedure for Exercise.

2.1

Delivery of Stock Certificates, Etc., on Exercise.  The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder as the record owner of such shares as of the close of business on the date on which the Exercise Notice is received, this Warrant shall have been surrendered and payment made for such shares in accordance herewith.  As soon as practicable after the exercise of this Warrant in full or in part, and in any event within five (5) business days thereafter, the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as the Holder (upon payment by the Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and non-assessable shares of Common Stock (or Other Securities) to which the Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which the Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share, together with any other stock or other securities and property (including cash, where applicable) to which the Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.2

Exercise.

(a)

Payment may be made either (i) in cash by wire transfer of immediately available funds or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Exercise Price, (ii) by delivery of shares of Common Stock and/or Common Stock issuable upon exercise of this Warrant in accordance with the formula set forth in subsection (b) below, or (iii) by a combination of any of the foregoing methods, for the number of shares of Common Stock specified in such Exercise Notice (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the Holder per the terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

(b)

Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being exercised) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Exercise Notice in which event the Company shall issue to the Holder a number of shares of Common Stock computed using the following formula:

X =

Y(A-B)

    A

Where X =

the number of shares of Common Stock to be issued to the Holder

Y =

the number of shares of Common Stock purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being exercised (at the date of such calculation)

A =

the Fair Market Value of one share of the Company’s Common Stock (at the date of such calculation)

B =

the Exercise Price per share (as adjusted to the date of such calculation)

3.

Effect of Reorganization, Etc.; Adjustment of Exercise Price.

3.1

Reorganization, Consolidation, Merger, Etc.  If there occurs any capital reorganization or any reclassification of the Common Stock of the Company, the consolidation or merger of the Company with or into another person (other than a merger or consolidation of the Company in which the Company is the continuing entity and which does not result in any reorganization or reclassification of its outstanding Common Stock) or the sale or conveyance of all or substantially all of the assets of the Company to another person, then, as a condition precedent to any such reorganization, reclassification, consolidation, merger, sale or conveyance, the Holder will be entitled to receive upon surrender of this Warrant to the Company (x) to the extent there are cash proceeds distributed to holders of Common Stock following the consummation of such reorganization, reclassification, consolidation, merger, sale or conveyance, in exchange for such Warrant, cash in an amount equal to the cash proceeds that would have been payable to the Holder had the Holder exercised such Warrant immediately prior to the consummation of such reorganization, reclassification, consolidation, merger, sale or conveyance, less the aggregate Exercise Price payable upon exercise of this Warrant, and (y) to the extent that the Holder would be entitled to receive Common stock (or Other Securities) (in addition to or in lieu of cash in connection with any such reorganization, reclassification, consolidation, merger, sale or conveyance), the same kind and amounts of securities or other assets, or both, that are issuable or distributable to the holders of outstanding Common Stock (or Other Securities) of the Company with respect to their Common Stock (or Other Securities) upon such reorganization, reclassification, consolidation, merger, sale or conveyance, as would have been deliverable to the Holder had the Holder exercised such Warrant immediately prior to the consummation of such reorganization, reclassification, consolidation, merger, sale or conveyance less an amount of such securities having a value equal to the aggregate Exercise Price payable upon exercise of this Warrant.

3.2

Dissolution.  In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, concurrently with any distributions made to holders of its Common Stock, shall at its expense deliver or cause to be delivered to the Holder the stock and other securities and property (including cash, where applicable) receivable by the Holder pursuant to Section 3.1, or, if the Holder shall so instruct the Company, to a bank or trust company specified by the Holder and having its principal office in New York, NY as trustee for the Holder (the “Trustee”).

3.3

Continuation of Terms.  Upon any reorganization, consolidation, merger or transfer in which cash proceeds (and any dissolution following any transfer) referred to in this Section 3 are distributed, either (i) in the event that this Warrant continues in full force and effect, the terms of this Warrant shall be applicable to the shares of stock and other securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any such stock or other securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whether or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4 or (ii) in the event this Warrant does not continue in full force and effect after the consummation of the transactions described in this Section 3, then the Company’s securities and property (including cash, where applicable) receivable by the Holder will be delivered to the Holder under Section 3.1 or the Trustee as contemplated by Section 3.2.

4.

Extraordinary Events Regarding Common Stock.  In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock or any preferred stock issued by the Company, (b) subdivide its outstanding shares of Common Stock or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Exercise Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Exercise Price then in effect.  The Exercise Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4.  The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof as provided in Section I, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 4) be issuable on such exercise by a fraction of which (a) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 4) be in effect, and (b) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 4).  Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock.

5.

Certificate as to Adjustments.  In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of this Warrant, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deemed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant.  The Company will forthwith mail a copy of each such certificate to the Holder and any warrant agent of the Company (appointed pursuant to Section II hereof).

6.

Reservation of Stock, Etc., Issuable on Exercise of Warrant.  The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of this Warrant, shares of Common Stock (or Other Securities) from time to time issuable on the exercise of this Warrant.

7.

Assignment; Exchange of Warrant.  Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a “Transferor”) in whole or in part.  On the surrender for exchange of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the Company demonstrating compliance with applicable securities laws, which shall include, without limitation, a legal opinion from the Transferor’s counsel (at the Company’s expense) that provides that such transfer is exempt from the registration requirements of applicable securities laws, the Company at its expense (but with payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of this Warrant so surrendered by the Transferor.

8.

Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

9.

Intentionally Omitted.

10.

Maximum Exercise.  Notwithstanding anything herein to the contrary, in no event shall the Holder be entitled to exercise any portion of this Warrant in excess of that portion of this Warrant upon exercise of which the sum of (I) the number of shares of Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unexercised portion of this Warrant or the unexercised or unconverted portion of any other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the exercise of the portion of this Warrant with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock).  As used herein, the term “Affiliate” means any person or entity that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person or entity, as such terms are used in and construed under Rule 144 under the Securities Act of 1933, as amended.  For purposes of the second preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such sentence.  For any reason at any time, upon written or oral request of the Holder, the Company shall within one (1) business day confirm orally and in writing to the Holder the number of shares of Common Stock outstanding as of any given date.  The limitations set forth herein (x) shall automatically become null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default (as defined in the Security Agreement) and (y) may be waived by the Holder upon provision of no less than sixty-one (61) days prior written notice to the Company; provided, however, that, such written notice of waiver shall only be effective to the extent that no indebtedness (including principal, interest, fees and charges) of the Company to the Holder or any of its Affiliates is outstanding.  Notwithstanding the foregoing, at no time shall the Company be obligated to issue any shares of Common Stock pursuant to the terms of this Warrant, the Security Agreement, any Ancillary Agreement (as defined in the Security Agreement) or any other applicable agreement if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue pursuant to the terms of this Warrant, the Security Agreement, any Ancillary Agreement or any other applicable agreement without violating the rules or regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules or regulations of the Principal Market for issuances of Common Stock in excess of such amount.

11.

Warrant Agent.  The Company may, by written notice to the Holder of this Warrant, appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such agent.

12.

Transfer on the Company’s Books.  Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

13.

Rights of Shareholders.  The Holder shall not be entitled to vote or receive dividends or be deemed the holder of the shares of Common Stock or any other securities of the Company which may at any time be issuable upon exercise of this Warrant for any purpose (the “Warrant Shares”), nor shall anything contained herein be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote for the election of directors or upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to any corporate action (whether upon the recapitalization, issuance of shares, reclassification of shares, change of nominal value, consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights or otherwise, in each case, until the earlier to occur of (x) the date of actual delivery to Holder (or its designee) of the Warrant Shares issuable upon the exercise hereof or (y) the fifth business day following the date such Warrant Shares first become deliverable to Holder, as provided herein.

14.

Notices, Etc.  All notices and other communications from the Company to the Holder shall be mailed by first class registered or certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by the Holder from time to time.

15.

Miscellaneous.  This Warrant and any term hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.  THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.  ANY ACTION BROUGHT CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN THE STATE COURTS OF NEW YORK OR IN THE FEDERAL COURTS LOCATED IN THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT THE HOLDER MAY CHOOSE TO WAIVE THIS PROVISION AND BRING AN ACTION OUTSIDE THE STATE OF NEW YORK.  The individuals executing this Warrant on behalf of the Company agree to submit to the jurisdiction of such courts and waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorneys’ fees and costs.  In the event that any provision of this Warrant is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Warrant.  The headings in this Warrant are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.  The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision hereof.  The Company acknowledges that legal counsel participated in the preparation of this Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Warrant to favor any party against the other party.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURE PAGE FOLLOWS]

2

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

	WITNESS:

	 	STEN CORPORATION

	/s/  Mark F. Buckrey

	 	By:

	/s/ Kenneth W. Brimmer

	      Mark F. Buckrey

	 	 	Name:

Kenneth W. Brimmer

Title:

Chief Executive Officer

SIGNATURE PAGE TO

COMMON STOCK PURCHASE WARRANT

EXHIBIT A

FORM OF SUBSCRIPTION

(To Be Signed Only On Exercise Of Warrant)

To:

STEN Corporation

10275 Wayzata Blvd., Ste. 310

Minnetonka, MN 55305

Attention:

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____) (the “Warrant”), hereby irrevocably elects to purchase (check applicable box):

	 	 	______ shares of the common stock covered by the Warrant; or 

	 
	 	 	the maximum number of shares of common stock covered by the Warrant pursuant to the cashless exercise procedure set forth in Section 2 of the Warrant.

	 
	The undersigned herewith makes payment of the full Exercise Price for such shares at the price per share provided for in the Warrant, which is $ ________.  Such payment takes the form of (check applicable box or boxes):

	 	 	$ _________ in lawful money of the United States; and/or

	 
	 	 	the cancellation of such portion of the Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/or

	 
	 	 	the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2.2 of the Warrant, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2 of the Warrant.

	 

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to __________________________________________________ whose address is _______________________________________________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

	Dated:

	 	 	 
	 	 	 	(Signature must conform to name of holder as specified on the face of the Warrant)

	 	 	 	Address:

	 
	 	 	 	 	 

EXHIBIT B

FORM OF TRANSFEROR ENDORSEMENT

(To Be Signed Only On Transfer Of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading “Transferees” the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of STEN Corporation (the “Company”) into which the within Warrant relates specified under the headings “Percentage Transferred” and “Number Transferred,” respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of the Company with full power of substitution in the premises.

	Transferees

	Address

	Percentage

Transferred

	Number

Transferred

	 	 	 	 
	 	 	 	 
	 	 	 	 

	Dated:

	 	 	 
	 	 	 	(Signature must conform to name of holder as specified on the face of the Warrant)

	 	 	 	Address:

	 
	 	 	 	 	 
	 	 	 	 
	 	 	 	SIGNED IN THE PRESENCE OF:

	 	 	 	

	 	 	 	(Name)

	ACCEPTED AND AGREED:

[TRANSFEREE]

	(Name)exhibit10_1.htm

     

     

     

     

     

     

     

    

      SELECT
COMFORT CORPORATION

       

      EXECUTIVE
SEVERANCE PAY PLAN

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      

       

      Amended
and Restated, August 2008

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

       

      SELECT
COMFORT CORPORATION

      EXECUTIVE
SEVERANCE PAY PLAN

       

      TABLE
OF CONTENTS

       

      
        	
                ARTICLE 1

              	
                Name and
      Purpose

              	
                1

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                ARTICLE 2

                 

              	
                Definitions

                 

              	
                2

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      2.1

                 

              	
                Administrator

                 

              	
                2

                 

              
	
                               
      2.2

                 

              	
                Affiliate

                 

              	
                2

                 

              
	
                               
      2.3

                 

              	
                Base Pay

                 

              	
                2

                 

              
	
                               
      2.4

                 

              	
                Cause

                 

              	
                2

                 

              
	
                               
      2.5

                 

              	
                Change in Control

                 

              	
                2

                 

              
	
                               
      2.6

                 

              	
                Code

                 

              	
                3

                 

              
	
                               
      2.7

                 

              	
                Company

              	
                3

              
	
                               
      2.8

                 

              	
                Employee

                 

              	
                3

                 

              
	
                               
      2.9

                 

              	
                Excluded Employee

                 

              	
                3

                 

              
	
                               
      2.10

                 

              	
                Involuntary Termination

                 

              	
                4

                 

              
	
                               
      2.11

                 

              	
                Participant

                 

              	
                4

                 

              
	
                               
      2.12

                 

              	
                Participating Employer

                 

              	
                4

                 

              
	
                               
      2.13

                 

              	
                Plan

                 

              	
                4

                 

              
	
                               
      2.14

                 

              	
                Premium Reimbursement Period

                 

              	
                4

                 

              
	
                               
      2.15

                 

              	
                Qualified Employee

                 

              	
                4

                 

              
	
                               
      2.16

                 

              	
                Qualified Employee Category

                 

              	
                5

                 

              
	
                               
      2.17

                 

              	
                Release

                 

              	
                5

                 

              
	
                               
      2.18

                 

              	
                Severance Pay

                 

              	
                5

                 

              
	
                               
      2.19

                 

              	
                Termination of Employment

                 

              	
                5

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                ARTICLE 3

                 

              	
                Entitlement to Severance
      Pay

                 

              	
                6

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      3.1

                 

              	
                Eligible Terminations

                 

              	
                6

                 

              
	
                               
      3.2

                 

              	
                Terminations Not Covered

                 

              	
                6

                 

              
	
                               
      3.3

                 

              	
                Release Required

                 

              	
                6

                 

              
	
                               
      3.4

                 

              	
                Return of Property

                 

              	
                6

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                ARTICLE 4

                 

              	
                Amount of Severance
      Pay

                 

              	
                7

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      4.1

                 

              	
                Base Amount

                 

              	
                7

                 

              
	
                               
      4.2

                 

              	
                COBRA Reimbursement

                 

              	
                8

                 

              
	
                               
      4.3

                 

              	
                Reductions

                 

              	
                8

                 

              
	
                               
      4.4

                 

              	
                Period of Payment

                 

              	
                9

                 

              
	
                               
      4.5

                 

              	
                Outplacement Services

                 

              	
                9

                 

              
	
                               
      4.6

                 

              	
                Termination of Severance Pay and
      Outplacement Services

                 

              	
                9

                 

              
	
                               
      4.7

                 

              	
                Death of Participant

                 

              	
                10

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              

      

       

      
        
          i

        

        
          
          

          
            

          

        

        
          
          

        

      

      
        	
                ARTICLE 5

                 

              	
                Administration

                 

              	
                11

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      5.1

                 

              	
                Administrator

                 

              	
                11

                 

              
	
                               
      5.2

                 

              	
                Administrator’s Discretion

                 

              	
                11

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                ARTICLE 6

                 

              	
                Amendment and Termination of
      Plan

                 

              	
                12

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      6.1

                 

              	
                Right to Amend or Terminate the
Plan

                 

              	
                12

                 

              
	
                               
      6.2

                 

              	
                Change in Control

                 

              	
                12

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                ARTICLE 7

                 

              	
                Miscellaneous
      Provisions

                 

              	
                13

                 

              
	
                 

                 

              	
                 

                 

              	
                 

                 

              
	
                               
      7.1

                 

              	
                Participation by Affiliate

                 

              	
                13

                 

              
	
                               
      7.2

                 

              	
                No Benefit Accrues

                 

              	
                13

                 

              
	
                               
      7.3

                 

              	
                Indemnification

                 

              	
                13

                 

              
	
                               
      7.4

                 

              	
                Specialist’s Assistance

                 

              	
                13

                 

              
	
                               
      7.5

                 

              	
                Benefits Claim Procedure

                 

              	
                13

                 

              
	
                               
      7.6

                 

              	
                Disputes

                 

              	
                14

                 

              
	
                               
      7.7

                 

              	
                Company Action

                 

              	
                14

                 

              
	
                               
      7.8

                 

              	
                Status of Plan

                 

              	
                14

                 

              
	
                               
      7.9

                 

              	
                No Assignment of Benefits

                 

              	
                14

                 

              
	
                               
      7.10

                 

              	
                Withholding and Offsets

                 

              	
                15

                 

              
	
                               
      7.11

                 

              	
                Other Benefits

                 

              	
                15

                 

              
	
                               
      7.12

                 

              	
                No Employment Rights Created

                 

              	
                15

                 

              
	
                               
      7.13

                 

              	
                Successors

                 

              	
                15

                 

              

      

       

       

       

      

      

      
        
           
ii

        

        
           

          
            

          

        

        
           

        

      

      SELECT
COMFORT CORPORATION

      EXECUTIVE
SEVERANCE PAY PLAN

       

      This
instrument sets forth the Select Comfort Corporation Executive Severance Pay
Plan, amended and restated as of August 21, 2008.  The provisions of
this instrument will apply to any Qualified Employee who terminates employment
after August 21, 2008.

       

      ARTICLE
1

      Name
and Purpose

       

      The name
of this Plan is the “Select Comfort Corporation Executive Severance Pay
Plan.”  Its purpose is to provide severance benefits to certain
Qualified Employees whose employment is involuntarily terminated without
Cause.  Severance Pay is in addition to regular earned pay and
benefits for accrued paid time off, if any, payable to Qualified Employees upon
separation.

       

      As stated
in Section 4.4, it is not intended that
this Plan be treated as a nonqualified deferred compensation plan subject to
Code section 409A.

       

      
        
           
1

        

        
           

          
            

          

        

        
           

        

      

      ARTICLE
2

      Definitions

       

      The terms
listed in this section shall have the meanings given below.

       

      2.1 Administrator.  The
Administrator is the person designated under the Plan to perform administrative
duties on behalf of the Company or, as the context may require, the individual
to whom specific administrative duties have been delegated.

       

      2.2 Affiliate.  An
Affiliate is the Company or another member of a controlled group of
corporations, within the meaning of Code section 414(b) or any trade or business
that is under common control with the Company, within the meaning of Code
section 414(c).

       

      2.3 Base
Pay.

       

      (A) Base Pay
means the Employee’s base salary in effect immediately prior to his or her
Termination of Employment and will exclude any commissions, incentive pay, bonus
or other addition to pay.

       

      (B) Base Pay
includes any amounts by which pay is voluntarily reduced under a Code section
125 cafeteria plan, section 401(k) cash or deferred arrangement or the Select
Comfort Executive Investment Plan.

       

      2.4 Cause.   Cause
means any reason for which an Employee may be subject to discipline under the
Company’s or Affiliate’s policies, practices and procedures including, but not
limited to, the following:

       

      (A) dishonesty,
fraud, misrepresentation, embezzlement or deliberate injury or attempted injury,
in each case related to the Company or any Affiliate,

       

      (B) commission
of a felony crime, or commission of any criminal or unlawful activity of any
nature or degree in the course of or in relation to Employee's
employment,

       

      (C) failure
to satisfactorily perform the duties of the Employee's employment, if the
failure to perform would merit termination under the Company's or Affiliate's
usual policy or practice,

       

      (D) any
material breach of any employment, service, confidentiality or non-compete
agreement entered into with the Company or any Affiliate, or

       

      (E) violation
of the Company's Code of Business Conduct.

       

      2.5 Change in
Control.  A "Change in Control" of the Company shall
mean:

       

      (A) the sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company (in one transaction or in a series of related transactions) to a
corporation that is not controlled by the Company,

       

      (B) the
approval by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company, or

       

      (C) a change
in control of a nature that would be required to be reported (assuming such
event has not been “previously reported”) in response to Item 1(a) of the
Current Report on Form 8-K, as in effect on the effective date of the Select
Comfort Corporation 2004 Stock Incentive Plan, pursuant to Section 13 or 15(d)
of the Exchange Act, whether or not the Company is then subject to such
reporting requirement;

       

      
        
          2

        

        
          
          

          
            

          

        

        
          
          

        

      

      (D) provided
that, without limitation, such a Change in Control shall be deemed to have
occurred at such time as -

       

      (1) any
Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly, of 50% or more of the combined voting
power of the Company’s outstanding securities ordinarily having the right to
vote at elections of directors or

       

      (2) individuals
who constitute the Board of Directors on the effective date of the Select
Comfort Corporation 2004 Stock Incentive Plan cease for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to the effective date of the Select Comfort Corporation 2004 Stock
Incentive Plan whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
comprising the Board of Directors on the effective date of the Select Comfort
Corporation 2004 Stock Incentive Plan (either by a specific vote or by approval
of the proxy statement of the Company in which such person is named as a nominee
for director, without objection to such nomination) shall be, for purposes of
this clause (2), considered as though such person were a member of the Board of
Directors on the effective date of the Select Comfort Corporation 2004 Stock
Incentive Plan.

       

      2.6 Code.  Code means
the Internal Revenue Code of 1986, as amended.  Any reference to a
specific provision of the Code includes any amendment of or successor to that
provision.

       

      2.7 Company.  The
Company is Select Comfort Corporation or its successor.

       

      2.8 Employee.  An
Employee is any individual who performs services for a Participating Employer as
a common-law employee of the Participating Employer.  No
reclassification of an individual as a common-law employee of a Participating
Employer will be given retroactive effect for any purpose under this
Plan.

       

      2.9 Excluded
Employee.  An “Excluded Employee” is an Employee
who:

       

      (A) resides
in the United States but is not a United States citizen, unless he or she is
classified as a permanent resident of the United States;

       

      (B) is
classified by the Participating Employer as a part-time Employee;

       

      (C) is
classified by the Participating Employer as a temporary Employee;
or

       

      (D) is
covered by a collective bargaining agreement that does not specifically provide
for participation in this Plan.

       

      2.10           Involuntary Termination of
Employment.  An “Involuntary Termination of Employment” shall
include any Termination of Employment by a Participating Employer other than for
“Cause” and shall also include any resignation by a Qualified Employee for “Good
Reason,” including any refusal to accept:

       

      (A) a
material diminution in the Qualified Employee’s base compensation, which for
purposes of this Plan shall mean a reduction of 10% or more in the Qualified
Employee’s salary plus target bonus;

       

      
        
          3

        

        
          
          

          
            

          

        

        
          
          

        

      

      (B) discontinuation
of eligibility to participate in a material long-term cash or equity award or
equity-based grant program (or in a comparable substitute program) in which
other Qualified Employees at a comparable level are generally eligible to
participate;

       

      (C) following
a Change in Control, any material diminution of authority, duties or
responsibilities, including any change in the authority, duties or
responsibilities of the Qualified Employee that is inconsistent in any material
and adverse respect with the Qualified Employee’s then-current position(s),
authority, duties and responsibilities with the Participating Employer;
provided, however, that “Good Reason” shall not be deemed to exist pursuant to
this clause (C) solely on account of the Company no longer being a publicly
traded entity or solely on account of a change in the reporting relationship of
the Qualified Employee;

       

      (D) a
material change in the geographic location at which the Company requires the
Qualified Employee to be based as compared to the location where the Qualified
Employee was based immediately prior to the change, which for purposes of this
Plan shall mean (i) a relocation that results in an increase in the commuting
distance from the Qualified Employee’s principal residence to his or her new job
location of more than 50 miles, or (ii) a relocation that requires the Qualified
Employee to relocate his or her principal residence.

       

      Notwithstanding
the foregoing, however, “Good Reason” shall not be deemed to exist as a result
of any of the actions stated in clauses (A) or (B) above to the extent that such
actions are in connection with an across-the-board change or termination that
equally affects at least ninety-five percent (95%) of all Qualified
Employees.  An act or omission will not constitute a “Good Reason”
unless the Qualified Employee gives written notice to the Company of the
existence of such act or omission within ninety (90) days of its initial
existence, the Company fails to cure the act or omission within thirty (30) days
after the notification, and actual Termination of Employment occurs within two
(2) years of the initial existence of the act or omission.

       

      2.11           Participant.  A
Participant is a former Qualified Employee who is entitled to Severance Pay
benefits under this Plan.

       

      2.12           Participating
Employer.  A Participating Employer is the Company and any
other U.S. Affiliate that has adopted the Plan, or all of them collectively, as
the context requires, and their respective successors.  An Affiliate
will cease to be a Participating Employer upon a termination of the Plan as to
its Employees or upon its ceasing to be an Affiliate.  The
Participating Employer with respect to any individual is the Affiliate that is
responsible for paying the individual’s wages or salary.

       

      2.13           Plan.  The Plan is
the Select Comfort Corporation Executive Severance Pay Plan set forth in this
instrument as it may be amended from time to time.

       

      2.14           Premium Reimbursement
Period.  The Premium Reimbursement Period is the period of time
during which the Participant is entitled to receive cash reimbursement payments
for COBRA continuation coverage, as described in Section 4.2.

       

      2.15           Qualified
Employee.  A “Qualified Employee” is an Employee who
-

       

      (A) is paid
under a U.S. domestic payroll of the Participating Employer;

       

      (B) is
classified by the Participating Employer in Qualified Employee Category grade
15,  grade 14 or grade 13; and

       

      (C) is not an
Excluded Employee.

       

      
        
          4

        

        
          
          

          
            

          

        

        
          
          

        

      

      2.16           Qualified Employee
Category.  A “Qualified Employee Category” is the employment
grade or classification of a Qualified Employee as determined by the
Participating Employer in its sole discretion.

       

      2.17           Release.  A Release
is a written instrument, prescribed by the Administrator and signed by the
Qualified Employee, under which the Qualified Employee releases all Affiliates,
and the directors, officers and employees of each of them, all employee benefit
plans and all employee benefit plan fiduciaries from any and all claims the
Qualified Employee may have against any of them.  The Release will
waive all claims the Qualified Employee may have under the Age Discrimination in
Employment Act, the Older Workers Benefit Protection Act, the Americans with
Disabilities Act, the Employee Retirement Income Security Act of 1974 (other
than benefits payable following Termination of Employment), and such other
statutes and rules of law as the Company may deem advisable.

       

      2.18           Severance
Pay.  Severance Pay is an amount payable under the terms of
this Plan.

       

      2.19           Termination of
Employment.  Termination of Employment means a termination of
the Qualified Employee’s employment relationship (both as an employee and
independent contractor) with the Company and all Affiliates or such other change
in the Qualified Employee’s employment relationship with the Company and all
Affiliates that would be considered a “separation from service” under Section
409A of the Code.  The Executive’s employment relationship will be
treated as remaining intact while the Qualified Employee is on a military leave,
a sick leave or other bona fide leave of absence (pursuant to which there is a
reasonable expectation that the Qualified Employee will return to perform
services for the Company or an Affiliate) but only if the period of such leave
does not exceed six (6) months, or if longer, so long as the Qualified Employee
retains a right to reemployment by the Company or an Affiliate under applicable
statute or by contract, provided, however, where the Qualified Employee’s leave
is due to any medically determinable physical or mental impairment that can be
expected to result in death or can be expected to last for a continuous period
of not less than six (6) months and such impairment causes the Qualified
Employee to be unable to perform the duties of his or her position of employment
or any substantially similar position of employment, a twenty-nine (29) month
period of absence may be substituted for such six (6) month period of
absence.  In all cases, the Qualified Employee’s Termination of
Employment must constitute a “separation from service” under Section 409A of the
Code and any “separation from service” under Section 409A of the Code shall be
treated as a Termination of Employment.

       

      

      
        
           
5

        

        
           

          
            

          

        

        
           

        

      

      ARTICLE
3

      Entitlement
to Severance Pay

       

      3.1 Eligible
Terminations.  Severance Pay will be paid, subject to the
succeeding provisions of this Plan, only to a Qualified Employee subject to an
Involuntary Termination of Employment by a Participating Employer.

       

      3.2 Terminations Not
Covered.  No Severance Pay will be paid to any person upon
commencement of a leave of absence, including military service leave, or to any
person whose employment is terminated by:

       

      (A) his or
her resignation, retirement or death;

       

      (B) discharge
for Cause;

       

      (C) failure
to be reinstated following a leave of absence; or

       

      (D) refusal
to accept a new job position with a Participating Employer, a transfer to a new
work location or a reduction in wages or salary that does not constitute an
Involuntary Termination of Employment.

       

      3.3 Release
Required.  No Severance Pay will be paid to an individual who
fails to execute a Release in the form provided by the Company and deliver it to
the Administrator within the period prescribed by the Administrator or who
revokes his or her Release.

       

      3.4 Return of
Property.  No Severance Pay will be paid to a Participant prior
to the date on which the Participant returns to his or her employer all property
of the Company and any Affiliate he or she has in his or her possession or
control including, but not limited to, employee identification cards, credit
cards, phone cards, vehicles, equipment, documents and electronic storage
media.

       

      
        
           
6

        

        
           

          
            

          

        

        
           

        

      

      

       

      ARTICLE
4

      Amount
of Severance Pay

       

      4.1 Base
Amount.  Subject to the succeeding provisions of this section,
a Participant in each Qualified Employee Category will receive a cash base
amount of Severance Pay determined from the following table.

       

      
        	
                Qualified
      Employee Category

              	
                Base
      Amount - Severance Pay

              
	
                Grade
      15

              	
                An
      amount equal to:

                (a)  two
      times -

                (i) annual
      Base Pay (in effect as of the date of Termination of Employment)
      and

                 

                (ii) target
      annual bonus (in effect as of the date of Termination of
      Employment)

                 

                plus

                (b)  pro-rata
      target bonus for year of Termination of Employment

              
	
                Grade
      14

              	
                An
      amount equal to:

                (a)  one
      times -

                (i)  annual
      Base Pay (in effect as of the date of Termination of
      Employment) and

                 

                (ii) target
      annual bonus (in effect as of the date of Termination of
      Employment)

                 

                plus

                (b)
      pro-rata target bonus for year of Termination of
  Employment

              
	
                Grade
      13

              	
                An
      amount equal to:

                (a)  fifty
      percent of -

                (i) annual
      Base Pay (in effect as of the date of Termination of Employment)
      and

                 

                (ii) target
      annual bonus (in effect as of the date of Termination of
      Employment)

                 

                plus

                (b)
      pro-rata target bonus for year of Termination of
  Employment

              

      

      

      
        
          7

        

        
           

          
            

          

        

        
           

        

      

      

      4.2 COBRA
Reimbursement.  Subject to the succeeding provisions of this
section, if the Participant timely elects continued coverage under the
Participating Employer’s group medical plan or group dental plan pursuant to
section 4980B of the Code (“COBRA”), in accordance with ordinary plan practices
and provides appropriate documentation of such payment as requested by the
Administrator, for the Premium Reimbursement Period the Participating Employer
will reimburse the Participant each month during the Premium Reimbursement
Period an amount equal to the difference between the amount the Participant pays
for such COBRA continuation coverage each such month and the amount paid by a
full-time active employee of the Participating Employer each such month for the
same level of coverage elected by the Participant.  For purposes of
the preceding sentence, the Premium Reimbursement Period is the period that
begins on the date of Termination of Employment and ends on the earlier
of:

       

      (A) the last
date of the Premium Reimbursement Period that applies to the Participant based
on his or her Qualified Employee Category in the table below;

       

      (B) the date
on which the Participant’s eligibility for COBRA continuation coverage under the
Company’s group medical or group dental plan ends; or

       

      (C) the date
on which the Participant becomes eligible to participate in another group
medical plan or group dental plan, as the case may be, because of reemployment
or otherwise, whether or not the Participant elects to participate in such plan
and whether or not such plan provides comparable benefits or includes
limitations or exclusions (unless such other group medical plan contains a
pre-existing condition exclusion that affects the Participant’s coverage under
such plan).

       

      Other
than the Premium Reimbursement Period payments described in this Section 4.2,
the Participant’s coverage under any Employer employee benefit plan is subject
to the terms of such employee benefit plan and applicable law.

       

      
        	
                Qualified
      Employee Category

              	
                Premium
      Reimbursement Period

              
	
                Grade
      15

                 

              	
                Two
      Years after the date of Termination of Employment

              
	
                Grade
      14

                 

              	
                One
      Year after the date of Termination of Employment

              
	
                Grade
      13

                 

              	
                Six
      months after the date of Termination of
  Employment

              

      

      

       

      4.3 Reductions.  Notwithstanding
the foregoing provisions, the total amount of Severance Pay (base amount and
COBRA reimbursements) to which a Participant would otherwise be entitled under
this Plan will be reduced by each of the following:

       

      (A) the full
amount of any payments the Company or any Affiliate is required to make to the
Participant under any provision of law on account of the termination of his or
her employment including, but not limited to, any payments owed to the
Participant under any individual severance, separation or employment agreement
or pursuant to the Worker Adjustment and Retraining Notification Act, 21 U.S.C.
§2101 et seq. (or a
similar law of any state);

       

      (B) the full
amount of any indebtedness of the Participant to the Company or any Affiliate
including, but not limited to, unearned advances, credit card balances and paid
time off in excess of time accrued; and

       

      
        
          8

        

        
          
          

          
            

          

        

        
          
          

        

      

      (C) with
respect to any Participant who terminated employment with the Company or an
Affiliate and is rehired by the Company or an Affiliate, the full amount of
Severance Pay paid to the Participant under this Plan or any individual
severance, separation or employment agreement or pursuant to the Worker
Adjustment and Retraining Notification Act, 21 U.S.C. §2101 et seq. (or a similar law of
any state) within the two year period following such previous Termination of
Employment.

       

      4.4 Period of
Payment.

       

      (A) The base
amount of Severance Pay benefits pursuant to Section 4.1 will be paid in a
single lump sum within a reasonable time following the Participant’s Termination
of Employment and in no event later than March 1st of the calendar year
following the calendar year during which such Termination of Employment
occurs.  These benefits are intended to comply with the short-term
deferral exception to Code section 409A (as described in Treasury Regulations
section 1.409A-1(b)(4)) because such benefits will be paid not later than March
15th of the calendar year following the calendar year in which the employee’s
right to the benefits is no longer subject to a substantial risk of forfeiture
within the meaning of Code section 409A.

       

      (B) The COBRA
reimbursement benefits pursuant to Section 4.2 will be paid in cash within a
reasonable time following the Participant’s monthly payment of the COBRA
premium.  These benefits are intended to comply with the exception to
Code section 409A for reimbursement of medical expenses under a separation pay
plan (as described in Treasury Regulations section 1.409A-1(b)(9)(v)) because
such COBRA reimbursement benefits will be paid no later than December 31st of
the second calendar year following the calendar year during which the
Participant’s Termination of Employment occurred.

       

      (C) The
reasonable outplacement services pursuant to Section 4.5 are intended to comply
with the exception to Code section 409A for the provision of “reasonable
outplacement services” under a separation pay plan as described in Treasury
Regulations section 1.409A-1(b)(9)(v)) because such services will be provided
within eighteen (18) months following the Participant’s Termination of
Employment.

       

      4.5 Outplacement
Services.  In addition to Severance Pay, a Participant will be
eligible to receive outplacement services through a provider selected by the
Company and at the expense of the Company, subject to the limits set forth below
and subject to all of the other terms and conditions of this Plan.  A
Participant at Grade 13 will be eligible to receive up to six (6) months of
outplacement services at a cost to the Company of up to eight thousand dollars
($8,000); a Participant at Grade 14 will be eligible to receive up to twelve
(12) months of outplacement services at a cost to the Company of up to ten
thousand dollars ($10,000); and a Participant at Grade 15 will be eligible to
receive up to eighteen (18) months of outplacement services at a cost to the
Company of up to fifteen thousand dollars ($15,000).  Eligibility for
outplacement services under this Section 4.5 will terminate immediately upon the
acceptance by the Participant of employment with another employer at a level of
compensation and benefits reasonably comparable to the compensation and benefits
that the Participant was entitled to immediately prior to the Participant’s
Termination of Employment with the Company or any Affiliate.

       

      4.6 Termination of Severance Pay and
Outplacement Services.  A Participant’s right to receive
Severance Pay and outplacement services will terminate before the last scheduled
payment upon the occurrence of any of the following events.

       

      (A) The
Participant becomes employed by the Company or any Affiliate.

       

      (B) The
Participant’s Release is declared invalid or the Participant revokes (or
attempts to revoke) the Release or commences or is part of a legal or
administrative action against the Company, any of its Affiliates, or the
directors, officers or employees of any of them that is based on any claim
waived under the Release.  Upon the occurrence of any such event, the
Participant shall, upon demand of the Administrator, repay to the Employer the
full amount of Severance Pay he or she received, to the extent such amount would
not have been payable under this Plan if the Participant had not executed the
Release.

       

      
        
          9

        

        
          
          

          
            

          

        

        
          
          

        

      

      (C) The
office of the Company’s general counsel informs the Administrator that the
Participant is in violation of a non-compete or confidentiality agreement with
the Company or any Affiliate.

       

      4.7 Death of
Participant.  If a Participant dies prior to receiving all of
the Severance Pay to which he or she is entitled, any remaining payments will be
made to the Participant’s estate.   If the Participant dies
during the COBRA reimbursement period pursuant to Section 4.2, COBRA premium
reimbursement payments still owed (if any) will continue to be paid to the
Participant’s estate.

       

      
        
           
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      ARTICLE
5

      Administration

       

      5.1 Administrator.  The
Company will be the Administrator and Named Fiduciary of the
Plan.  The Senior Vice President, Human Resources of the Company will
perform administrative duties on behalf of the Company and will have overall
responsibility for administration of the Plan.  The Senior Vice
President, Human Resources may delegate to any person such administrative duties
as he or she deems advisable and may revoke any such delegation at any
time.  Any delegation to a person who is not an Employee of an
Affiliate will be in writing, and any delegation to an Employee of an Affiliate
will terminate upon the termination of his or her employment.  If the
name of position of Senior Vice President, Human Resources of the Company
changes or the duties of such position are transferred to another position, such
other position will be substituted for the Senior Vice President, Human
Resources of the Company in this provision.

       

      5.2 Administrator’s
Discretion.  The Administrator will have the discretionary
power and authority to establish, modify or terminate Plan policies, rules or
procedures, to interpret, construe, apply and enforce the terms of the Plan or
any such Plan rules, polices or procedures whenever he or she deems necessary in
its administration.  Such discretion will include, without limitation,
the discretionary power and authority to (A) determine whether an individual is
a Qualified Employee, the amount of a Qualified Employee’s benefit and whether a
Qualified Employee has satisfied applicable conditions or is subject to
limitations and (B) remedy ambiguities, inconsistencies, omissions and erroneous
benefit calculations.  In exercising such discretionary power and
authority, the Administrator will treat all individuals determined by the
Administrator to be similarly situated in a uniform manner.  All acts
and decisions of the Administrator made in good faith are binding on all
interested persons.

       

      
        
           
11

        

        
           

          
            

          

        

        
           

        

      

      

       

      ARTICLE
6

      Amendment
and Termination of Plan

       

      6.1 Right to Amend or Terminate the
Plan.  Subject to Section 6.2, the Company reserves the right
to amend or terminate this Plan at any time by a written instrument signed by
the Senior Vice President, Human Resources and General Counsel of the Company; provided
that any amendment that applies to the Chief Executive Officer or any Senior
Vice President of the Company must be approved in advance or ratified by the
Compensation Committee of the Company’s board of directors.  Subject
to Section 6.2, the amendment or termination of the Plan shall be effective as
of the date specified in such instrument and may apply to any Qualified Employee
or Participant, except that no amendment will be effective to reduce the total
amount of Severance Pay payable to a Participant whose employment with all
Affiliates terminated before the date the amendment is adopted.  Any
Employee whose employment terminates on or after the effective date of the
termination of the Plan will be ineligible for Severance Pay.

       

      6.2 Change in
Control.  Notwithstanding Section 6.1:

       

      (A) the
Company or any successor to the Company may not terminate the Plan during the
24-month period that begins on the date of a Change in Control and

       

      (B) any
Severance Pay payable to any individual who is a Participant in this Plan as of
the day immediately prior to the date of the Change in Control and whose
employment with all Affiliates terminates during the 24-month period beginning
on the date of a Change in Control, will be no less than the Severance Pay such
Participant would have been entitled to receive if he or she had become entitled
to Severance Pay upon terminating employment with all Affiliates on the day
immediately prior to the date of the Change in Control.

       

      
        
           
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      ARTICLE
7

      Miscellaneous
Provisions

       

      7.1 Participation by
Affiliate.  An Affiliate may, when authorized by its board of
directors, adopt this Plan for the benefit of its Employees, subject to the
approval of the Administrator.  Upon adoption of this Plan, the
Participating Employer is subject to the terms of this Plan, as amended by the
Company.  Subject to Section 6.2, any Participating Employer may
terminate this Plan with respect to its Employees at any time when authorized by
its board of directors.

       

      7.2 No Benefit
Accrues.  No Employee of any Affiliate will accrue any right to
benefits under this Plan before satisfying all of the requirements for Plan
benefits in effect at the termination of his or her employment.  No
Participant will accrue any right to continued benefits under this Plan unless
he or she satisfies the conditions for eligibility as of the date each benefit
installment becomes payable.

       

      7.3 Indemnification.  Each
Affiliate will indemnify and hold harmless, to the extent permitted by law, each
of its directors, officers and employees against any and all liabilities,
losses, costs and expenses (including legal fees) of every kind and nature that
may be imposed on, incurred by or asserted against such person at any time by
reason of such individual’s services at the request of the Affiliate in
connection with the Plan, but only if such individual did not act dishonestly or
in bad faith or in willful violation of the law, regulation or Company by-law
under which such liability, loss, cost or expense arises.  An
Affiliate has the right, but not the obligation, to select counsel and control
the defense and settlement of any action for which an individual may be entitled
to indemnification under this provision.

       

      7.4 Specialist’s
Assistance.  The Administrator may retain such actuarial,
accounting, legal, clerical and other services as may reasonably be required in
the administration of the Plan, and may pay reasonable compensation for such
services.  All costs of administering the Plan will be paid by the
Company.

       

      7.5 Benefits Claim
Procedure.  The claim and appeal review procedures set forth
below will apply to this Plan.

       

      (A) The
Participant (“Claimant”), or the Participating Employer on the Participant’s
behalf, must make a claim for benefits under the Plan with the
Administrator.  A claim for benefits must be made no later than 60
days following the Termination of Employment.

       

      (1) Within 30
days after receipt of a claim for benefits, the Administrator will render a
written decision on the claim to the Claimant.

       

      (2) If the
claim is denied, in whole or in part, the Administrator will send notification
of the denial to the Claimant.  Such notification will comply with the
requirements set forth in Department of Labor regulation
2560.503-1(g).

       

      (B) Appeals
of denied claims will be subject to the following procedures.

       

      (1) To appeal
the denial, the Claimant or his or her representative must file a written
request for review with the Administrator not later than 60 days after the
Claimant receives the Administrator’s written decision on the
claim.

       

      (2) The
Claimant or his or her representative may submit written comments, documents,
records, and other information relating to the claim for benefits to the
Administrator for consideration by the Administrator without regard to whether
such information was submitted or considered in the initial review
determination.

       

      
        
          13

        

        
          
          

          
            

          

        

        
          
          

        

      

      (3) The
Claimant will be provided, upon request and free of charge, reasonable access
to, and copies of, all documents, records, and other information relevant to the
Claimant’s claim for benefits.

       

      (4) The
Administrator will make a decision on review within 60 days of the receipt of
the request for review and will provide the decision on review in writing to the
Claimant.

       

      (5) If the
denial is upheld in whole or part, the Administrator will notify the
Claimant.  The notification will include the reasons for the denial,
the reference to the Plan provisions on which the denial is based and the Plan’s
response to any additional information provided by the Claimant following the
initial review determination.

       

      (C) The 30-
and 60-day periods during which the Administrator must respond to the Claimant,
may be extended by up to an additional 30- or 60- days, respectively, if
circumstances beyond the Administrator’s control so require and if notice of
such extension is given to the Claimant.  If the time for rendering a
written decision on a claim is extended due to the Claimant’s failure to provide
information necessary to decide the claim, the time period for making the
determination will be tolled from the date on which the notification of the
extension is sent to the Claimant until the date on which the Claimant responds
to the request for additional information.

       

      (D) Any
individual who fails to follow the claim and appeal procedure will be barred
from asserting his or her claim in any judicial or administrative
proceeding.

       

      7.6 Disputes. The United States
District Court for the District of Minnesota is the exclusive proper venue for
any action involving a dispute between any individual and any Affiliate, the
Administrator or any other person relating to or arising from the Plan, and such
court will have personal jurisdiction over any Qualified Employee named in the
action.  The law as stated and applied by the United States Court of
Appeals for the Eighth Circuit or the United States District Court for the
District of Minnesota will apply to and control all actions relating to the Plan
brought against the Plan.  No action relating to or arising from the
Plan may be commenced against the Plan, the Plan Administrator or the Company
more than six months following termination of the involved individual’s
employment with an Affiliate or, if later, 90 days after the issuance of the
Administrator’s final decision on the request for review of a denied claim under
the Plan’s benefit claim procedure.

       

      7.7 Company Action.  The
Company’s decisions and actions pursuant to the Plan (other than those decisions
which the Plan requires to be made by the Administrator when the Company is
acting in that capacity) will be made or taken in the Company’s own interest,
and the Company is not required to consider the interest of any Qualified
Employee or other individual, it being intended that any such decision or action
will be made or taken by the Company in its settlor capacity rather than in a
fiduciary capacity.

       

      7.8 Status of
Plan.  Nothing contained in the Plan is to be construed as
providing for assets to be held for the benefit of any Qualified Employee or any
other person to whom benefits are to be paid pursuant to the terms of this Plan,
the Qualified Employee’s or other person’s only interest under the Plan being
the right to receive the benefits specified in this instrument.  To
the extent the Qualified Employee or any other person acquires a right to
receive benefits under this Plan, such right is no greater than the right of any
unsecured general creditor of the Company.

       

      7.9 No Assignment of
Benefits.  The benefits payable under the Plan and the right to
receive future benefits under the Plan may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered or subjected to any charge or legal
process.

       

      
        
          14

        

        
          
          

          
            

          

        

        
          
          

        

      

      7.10 Withholding and
Offsets.  The Company retains the right to withhold from any
benefit payment pursuant to the Plan any and all income, employment, excise and
other taxes as the Company deems necessary, and the Company may offset against
amounts otherwise then distributable to any person under the Plan any amounts
such person then owes the Company.

       

      7.11 Other Benefits.  No
amounts paid pursuant to the Plan constitute salary or compensation for the
purpose of computing benefits under any other benefit plan, practice, policy or
procedure of the Company that does not expressly provide otherwise.

       

      7.12 No Employment Rights
Created.  Neither the maintenance of nor participation in the
Plan gives any employee a right to continued employment or limits the right of
the Company to discharge, transfer, demote or modify the terms and conditions of
employment or otherwise deal with any employee without regard to the effect such
action might have on him or her with respect to the Plan.

       

      7.13 Successors.  Except
as otherwise expressly provided in the Plan, all obligations of the Company
under the Plan are binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or other transfer of all or substantially all of the
business or assets of the Company.

       

      IN WITNESS WHEREOF, the
Company has caused this instrument to be executed by its authorized officers on
the date written below.

       

      

       

      
        	 
      	
                SELECT
      COMFORT CORPORATION

                 

                 

                 

              
	
                Dated:  August
      21, 2008

              	
                By:           /s/ Mark A. Kimball

                Senior
      Vice President & General Counsel

                 

              
	
                Dated:  August
      21, 2008

              	
                By:           /s/
      Scott F. Peterson

                        Senior Vice President,
      Human Resources

                 

              

      

      

      
        

      

      

       

      

      
        
          15

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