Document:

Exhibit
10.72

 

COPYRIGHT SECURITY AGREEMENT

 

THIS COPYRIGHT SECURITY AGREEMENT (this “Agreement”)
is made as of April 23, 2003, by and among, FAO, Inc. (“FAO”), a Delaware
corporation, successor by merger to The Right Start, Inc., a California
corporation; FAO Schwarz, Inc. (“Schwarz”), a Delaware corporation, formerly
known as Toy Soldier, Inc., a Delaware corporation; ZB Company, Inc. (“ZB”),
a Delaware corporation, successor in interest to Zany Brainy, Inc., a
Pennsylvania corporation; The Right Start, Inc. (“Right Start”), a Delaware
corporation; and Targoff-RS, LLC (“Targoff”), a New York limited liability
company (FAO, Schwarz, ZB, Right Start, and Targoff being referred to
collectively herein as the “Borrowers” and each, individually, as a “Borrower”),
and Fleet Retail Finance Inc.,  in its capacity as administrative and
collateral agent (in such capacity, together with its successors and assigns,
the “Agent”),
for the benefit of the various financial institutions who are from time to time
Lenders under the Credit Agreement described below (collectively, the Agent and
the Lenders are referred to as the “Secured Parties”).

 

RECITALS

 

A.  Borrowers have executed and delivered to the
Secured Parties a certain Loan and Security Agreement of even date herewith, as
the same may be amended, renewed, restated, replaced, extended, supplemented or
otherwise modified from time to time (the “Credit Agreement”) by and
between the Secured Parties and the Borrowers.

 

B.  Borrowers
have agreed to enter into this Agreement in furtherance of the rights granted
to the Secured Parties under the Credit Agreement.

 

NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by each of the
parties hereto, each Borrower hereby agrees as follows:

 

1.             Security
Interest.  Each
Borrower hereby grants to the Secured Parties a continuing security interest
in, and a collateral assignment and pledge of, all copyrights now or hereafter
owned by such Borrower, whether registered or unregistered, including, but not
limited to, those copyrights of such Borrower listed on Schedule A
attached hereto and made a part hereof (collectively, the “Copyrights”),
together with the goodwill of the business associated with and symbolized by
such Copyrights (collectively, the “Collateral”), as security for the
Obligations (as defined in the Credit Agreement).  Each Borrower hereby requests that the U.S. Copyright Office
record this Agreement with respect to the Copyrights.

 

2.             Representations
and Warranties. 
Each Borrower represents and warrants that:

 

2.1.          Schedule A sets forth as of the
date hereof all United States copyright registrations and applications owned by
such Borrower.

 

 

2.2.          As of the date hereof, the Collateral
set forth on Schedule A is subsisting and has not been adjudged
invalid or unenforceable.

 

2.3.          As of the date hereof, no claim has
been made that the use of any of the Collateral violates the rights of any
third person and such Borrower is not aware of any basis for any such claim to
be asserted.

 

2.4.          Each Borrower is the sole and
exclusive owner of the entire right, title and interest in and to the
Collateral, free and clear of any lien, security interest or other
encumbrances, including without limitation, pledges, assignments, licenses,
registered user agreements and covenants by such Borrower not to sue third
persons (other than the security interest granted hereby, any Permitted Liens
and any of the foregoing entered into in the ordinary course of business).

 

2.5.          Each Borrower has the full power and
authority to enter into this Agreement and perform its terms.

 

2.6.          Each Borrower has used proper
statutory notice in connection with its use of the Collateral to the extent
commercially practicable and customary within the relevant industry.

 

3.             Covenants.  Each Borrower covenants and agrees as
follows:

 

3.1.          Each Borrower will keep the Collateral
free from any lien, security interest or encumbrance (except those in favor of
the Secured Parties and Permitted Liens) and will defend the Collateral and the
title thereto against all claims and demands of all other persons at any time
claiming the same or any interest therein.

 

3.2.          No Borrower shall abandon any
Collateral except such Collateral which could not reasonably be expected to have
a material adverse effect on the business, operations, properties, assets or
condition, financial or otherwise, of such Borrower.

 

3.3.          Each Borrower shall maintain all
rights held by such Borrower relating to the Collateral except such Collateral
which the failure to maintain could not reasonably be expected to have a
material adverse effect on the business, operations, properties, assets or
condition, financial or otherwise, of such Borrower.

 

3.4.          Until all of the Obligations shall
have been indefeasibly paid in full in cash and the termination of the
commitments therefor, no Borrower shall enter into any agreement (including a
license agreement) which conflicts with such Borrower’s obligations under this
Agreement other than agreements that could not reasonably be expected to affect
the value of the Collateral, without the prior written consent of the Secured
Parties.

 

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3.5.          No Borrower will sell or offer to sell
or otherwise transfer the Collateral or any interest therein (other than
non-exclusive licenses granted in the ordinary course of such Borrower’s
business) without the prior written consent of the Secured Parties.

 

3.6.          If such Borrower shall purchase,
register or otherwise acquire rights to any new registrable or registered
copyright, the provisions of Section 1 shall automatically apply thereto
and such Borrower shall give the Secured Parties prompt written notice thereof
and shall promptly execute for recording with the U.S. Copyright Office a new
Copyright Security Agreement in substantially the same form hereof listing each
additional registered Copyright.

 

3.7.          Each Borrower will continue to use
proper statutory notice in connection with its use of the Collateral to the
extent commercially practicable and customary within the relevant industry.

 

3.8.          Each Borrower shall execute, or use
its reasonable efforts at its reasonable expense to cause to be executed, such
further documents as may be reasonably requested by the Secured Parties in
order to effectuate fully the grant of security interest set forth in
Section 1 hereof.

 

4.             Remedies.  After the occurrence and during the
continuance of any Event of Default (as defined in the Credit Agreement), the
Secured Parties may declare all Obligations secured hereby immediately due and
payable and shall have the remedies set forth in Section 13.3 of the Credit
Agreement and the remedies of a secured party under the Uniform Commercial
Code.

 

5.             Attorney-in-Fact.  Each Borrower hereby appoints the Agent as
such Borrower’s attorney-in-fact (with full power of substitution and
resubstitution) with the power and authority, after the occurrence and during
the continuance of any Event of Default, to execute and deliver, in the name of
and on behalf of such Borrower, and to cause the recording of all such further
assignments and other instruments as the Agent deems necessary or desirable in
order to carry out the intent of the Credit Agreement.  Each Borrower agrees that all third parties
may conclusively rely on any such further assignment or other instrument so
executed, delivered and recorded by the Agent (or the Agent’s designee in
accordance with the terms hereof) and on the statements made therein.

 

6.             Further
Assurances.  Upon
the written request of the Agent, and at the sole expense of the Borrowers,
each Borrower will promptly execute and deliver such further instruments and
documents and take such further actions as the Agent may reasonably request in
order to obtain the full benefits of this Agreement and of the rights and
powers herein granted, including without limitation, filing of any financing
statements under the Uniform Commercial Code; execution and filing of
collateral assignments of general intangibles (including without limitation,
the execution and filing of separate memoranda relating thereto for filing with
any governmental office in the United States or abroad, including, without
limitation the U.S. Copyright Office. 
Each Borrower hereby appoints the Agent as each Borrower’s attorney-in-fact
(with full power of substitution and resubstitution) with the power and
authority, after the

 

3

 

occurrence and during the continuance of any Event of Default (as
defined in the Credit Agreement), to execute and deliver, in the name and on
behalf of each Borrower, and to cause the recording of all such further
assignments and other instruments as the Agent may reasonably deem necessary or
desirable in order to carry out the intent of the Credit Agreement and this
Copyright Security Agreement.  Each
Borrower agrees that all third parties may conclusively rely on any such
further assignment or other instrument, so executed, delivered and recorded by
the Agent (or the Agent’s designee in accordance with the terms hereof) and on
the statements made therein.

 

7.             General.

 

7.1.          No course of dealing between the
Borrowers and the Secured Parties, nor any failure to exercise, nor any delay
in exercising on the part of the Secured Parties, any right, power or privilege
hereunder or under the Credit Agreement shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
or thereunder preclude any other or further exercise thereof or the exercise of
any right, power or privilege.  No
waiver by the Secured Parties of any default shall operate as a waiver of any
other default or of a similar default on a future occasion.

 

7.2.          All of the Secured Parties’ rights and
remedies with respect to the Collateral, whether established hereby or by the
Credit Agreement, or by any other agreement or by law shall be cumulative and
may be exercised singularly or concurrently. 
This Agreement is in addition to, and is not limited by nor in
limitation of, the provisions of the Credit Agreement or any other security
agreement or other agreement now or hereafter existing between the Borrowers
and the Secured Parties.

 

7.3.          If any clause or provision of this
Agreement shall be held invalid and unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.

 

7.4.          This Agreement is subject to
modification only by a writing signed by the parties, except as otherwise
provided in Section 3.6 hereof.

 

7.5.          The benefits and obligations of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties.

 

7.6.          THIS AGREEMENT IS A CONTRACT UNDER THE
LAWS OF THE STATE OF NEW YORK, AND SHALL FOR THE PURPOSES HEREOF BE DEEMED TO
BE PERFORMED AND MADE IN THE STATE OF NEW YORK, AND SHALL, PURSUANT TO NEW YORK
GENERAL OBLIGATIONS LAW SECTION 5-1401 FOR ALL PURPOSES BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID STATE OF NEW YORK.

 

4

 

8.             Counterparts.  This Agreement may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.

 

 

[THE NEXT PAGE IS
THE SIGNATURE PAGE]

 

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IN WITNESS WHEREOF, each of the undersigned
has caused this Copyright Security Agreement to be signed by its duly
authorized officer under seal as of the day and year first written above.

 

	
   

  	
  FAO, INC. (successor by merger to The Right 

  Start, Inc., a California corporation)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  FAO SCHWARZ, INC. (formerly known as Toy 

  Soldier, Inc., a Delaware corporation)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  ZB COMPANY, INC. (successor in interest to 

  Zainy Brainy, Inc., a Pennsylvania corporation)

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  THE RIGHT START, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  TARGOFF-RS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By: FAO, Inc., its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry R. Welch

  	
   

  
	
   

  	
   

  	
  Name: Jerry R. Welch

  
	
   

  	
   

  	
  Title: Chief Executive
  Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices to
  any Borrower:

  
	
   

  	
  FAO, Inc.

  
	
   

  	
  2520 Renaissance
  Boulevard

  
	
   

  	
  King of Prussia,
  Pennsylvania 19406

  
	
   

  	
  Attn:  Raymond Springer, CFO

  
	
   

  	
  Fax No.  610-278-7805

  

 

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  FLEET RETAIL FINANCE INC., as Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  Christine M. Scott

  	
   

  
	
   

  	
   

  	
  Name: Christine M.
  Scott

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Address for Notices to Agent
  or any Secured Party:

  
	
   

  	
  Fleet Retail Finance
  Inc.

  
	
   

  	
  40 Broad Street

  
	
   

  	
  Boston, MA 02109

  
	
   

  	
  Attn:  James Dore, Managing Director

  
	
   

  	
  Fax No. 
  617-434-4312

  

 

7EXHIBIT 10.1

 

 

 

 

 

 

 

6,180,000  Shares

 

SELECT COMFORT CORPORATION

 

COMMON STOCK

 

 

 

 

 

 

 

UNDERWRITING AGREEMENT

 

 

Dated May 8, 2003

 

 

 

 

 

 

 

 

 

May 8, 2003

 

 

Thomas Weisel
Partners LLC

U.S. Bancorp Piper
Jaffray Inc.

Adams, Harkness
& Hill, Inc.

Craig-Hallum Capital
Group LLC

As Representatives
of the several Underwriters

c/o  Thomas
Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California  94104

 

 

 

Ladies and
Gentlemen:

 

Introduction. 
Certain shareholders of Select Comfort Corporation, a Minnesota
corporation (the “Company”) named in Schedule B hereto (the “Selling
Shareholders”) severally propose to sell to the several Underwriters
an aggregate of 6,180,000 shares (the “Firm Shares”) of the Common Stock, par
value $0.01 per share, of the Company (the “Common Stock”), with each
Selling Shareholder selling the number of shares set forth opposite such
Selling Shareholder’s name in Schedule B hereto and, at the
election of the Underwriters, an option to purchase up to 927,000 additional
shares of Common Stock to cover over-allotments (the “Additional Shares”; the
Additional Shares, together with the Firm Shares, hereinafter collectively
referred to as the “Shares”).

 

Thomas Weisel
Partners LLC, U.S. Bancorp Piper Jaffray Inc., Adams, Harkness & Hill, Inc.
and Craig-Hallum Capital Group LLC have agreed to act as representatives of the
several Underwriters (in such capacity, the “Representatives”) in
connection with the offering and sale of the Shares.

 

The Company has
filed with the Securities and Exchange Commission (the “Commission”) a registration
statement on Form S-3 (Reg. No. 333-103469), including a prospectus,
relating to the Shares.  The
registration statement as amended at the time it becomes effective, including
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of
1933, as amended (the “Securities Act”),  and all documents
incorporated or deemed to be incorporated by reference therein  is
hereinafter referred to as the “Registration Statement”; the prospectus in
the form first used to confirm sales of Shares is hereinafter referred to as
the “Prospectus”.  If the Company files a registration
statement to register additional shares of Common Stock pursuant to
Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”),
then any reference herein to the term “Registration Statement” shall be deemed to
include the Rule 462 Registration Statement. 
All references in this Agreement to the Registration Statement, the
Rule 462 Registration Statement, a preliminary prospectus, the Prospectus,
or any amendments or supplements to any of the foregoing, shall include any
copy thereof filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval System (“EDGAR”).

 

All references in
this Agreement to financial statements and schedules and other information
which is “contained,” “included” or “stated” in the Registration Statement or
the Prospectus (and all other references of like import) shall be deemed to
mean and include all such financial statements and schedules and other
information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements to the

 

 

2

 

Registration
Statement or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
which is or is deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be.

 

1.             Representations and Warranties
of the Company.  The Company
represents and warrants to and agrees with each of the Underwriters that:

 

1.1.          Effective Registration Statement.  The Registration Statement has become
effective; no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending before
or threatened by the Commission.

 

1.2.          Contents of Registration Statement.  (i) The Registration Statement, when it
became effective, did not contain and, as amended or supplemented, if
applicable, will not contain 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 not misleading, (ii) the Registration Statement and the
Prospectus comply and, as amended or supplemented, if applicable, will comply
in all material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iii) the Prospectus does not
contain and, as amended or supplemented, if applicable, will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and warranties
set forth in this paragraph do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.

 

1.3.          Exchange Act Compliance.  The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or hereafter
are filed with the Commission, complied and will comply in all material
respects with the requirements of the Exchange Act, and, when read together
with the other information in the Prospectus, at the time the Registration
Statement and any amendments thereto become effective and at the Closing Date
and the Option Closing Date, as the case may be, will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

 

1.4.          Due Incorporation.  The Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

 

1.5.          Subsidiaries.  Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.  All of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly by the
Company, free and clear of all liens, encumbrances, equities or claims.  The subsidiaries listed on ­Schedule C
hereto are the only subsidiaries of the Company.  Except for the subsidiaries, the Company

 

 

3

 

owns no beneficial
interest, directly or indirectly, in any corporation, partnership, joint
venture or other business entity.

 

1.6.          Underwriting Agreement.  This Agreement has been duly authorized,
executed and delivered by the Company, and is a valid and binding agreement of
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.

 

1.7.          Description of Capital Stock.  The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Prospectus.

 

1.8.          Authorized Stock.  The shares of Common Stock  (including
the Shares to be sold by the Selling Shareholders) outstanding have been duly
authorized and are validly issued, fully paid and non-assessable.  No preemptive rights of shareholders exist
with respect to any of the Shares that have not been satisfied or waived.  Except as disclosed in the Prospectus, there
are no outstanding (i) securities or obligations of the Company or any of its
subsidiaries convertible into or exchangeable for any capital stock of the
Company or any such subsidiary, (ii) warrants, rights or options to subscribe
for or purchase from the Company or any such subsidiary any such capital stock
or any such convertible or exchangeable securities or obligations, or (iii)
obligations of the Company or any such subsidiary to issue any shares of
capital stock, any such convertible or exchangeable securities or obligations,
or any such warrants, rights or options.

 

1.9.          No Conflict.  The execution and delivery by the Company
of, and the performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the articles of
incorporation or by-laws of the Company or any agreement or other instrument
binding upon the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except such
as may be required by the Securities Act, the National Association of
Securities Dealers, Inc. (the “NASD”) or the securities or Blue Sky laws
of the various states in connection with the offer and sale of the Shares.

 

1.10.        Financial Statements.  The consolidated financial statements
including the related notes of the Company and its subsidiaries included in the
Registration Statement and Prospectus present fairly the financial position of
such entities as of the dates indicated and the results of operations and cash
flows for such entities for the periods specified, all in conformity with
generally accepted accounting principles applied on a consistent basis.  The financial statement schedules included
in the Registration Statement and the amounts in the Prospectus under the
captions “Prospectus Summary—Summary Consolidated Financial Data” and “Selected
Consolidated Financial Data” fairly present the information shown therein and
have been compiled on a basis consistent with the financial statements included
in the Registration Statement and the Prospectus.  The unaudited pro forma financial information (including the
related notes) included in the Prospectus complies as to form in all material
respects with the applicable accounting requirements of the Act and management
of the Company has a reasonable basis for believing and does believe that the
assumptions underlying the pro forma adjustments are reasonable.  Such pro forma adjustments have been
properly applied to the historical amounts in the compilation of the
information and such information fairly presents, with respect to such
entities, the financial position, results of operations and other information
purported to be shown therein at the respective dates and for the respective
periods specified.

 

 

4

 

1.11.        No Material Adverse Change.  There has not occurred any material adverse
change, or any development involving a prospective material adverse change, in
the condition, financial or otherwise, or in the earnings, business or
operations of the Company and its subsidiaries, taken as a whole, from that set
forth in the Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).

 

1.12.        Legal Proceedings; Contracts;
Exhibits.  There are no legal or
governmental proceedings pending or, to the best knowledge of the Company,  threatened
to which the Company or any of its subsidiaries is a party or to which any of
the properties of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus and
are not so described, or any statutes, regulations, contracts or other
documents that are required to be described or incorporated by reference in the
Registration Statement or the Prospectus or to be filed or incorporated by
reference as exhibits to the Registration Statement that are not described or
filed or incorporated  as required.

 

1.13.        Compliance with Securities Act.  The Company meets the requirements for use
of Form S-3 under the Securities Act. 
Each preliminary prospectus filed as part of the registration statement
as originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Securities Act, complied when so filed in all material
respects with the Securities Act and the applicable rules and regulations of
the Commission thereunder.

 

1.14.        Not an Investment Company.  The Company is not and, after giving effect
to the offering and sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an “investment company” as
such term is defined in the Investment Company Act of 1940, as amended.

 

1.15.        Compliance with Laws.  The Company and its subsidiaries
(i) are in compliance in all material respects with any and all applicable
foreign, federal, state and local laws and regulations relating to the
protection of human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (“Environmental Laws”),
(ii) have received all permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective businesses
and (iii) are in compliance in all material respects with any such permit,
license or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or approvals
would not, individually or in the aggregate, have a material adverse effect on
the Company and its subsidiaries, taken as a whole.

 

1.16.        No Environmental Costs.  There are no costs or liabilities associated
with Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) which would, individually or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

 

1.17.        No Registration Rights.  There are no contracts, agreements or
understandings between the Company and any person granting such person the
right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to require the
Company to include such securities with the Shares registered pursuant to the
Registration Statement other than as described in the Registration Statement and
as have been waived in writing in connection with the offering contemplated
hereby.

 

1.18.        Absence of Material Changes.  Subsequent to the respective dates as of
which information is given in the Registration Statement and the Prospectus,
(1) the Company and its subsidiaries

 

 

 

5

 

have not incurred
any material liability or obligation, direct or contingent, nor entered into
any material transaction not in the ordinary course of business; (2) the
Company has not purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock other than ordinary and customary dividends; and (3) there has not been
any material change in the capital stock, short-term debt or long-term debt of
the Company and its subsidiaries, except in each case as described in the
Prospectus.

 

1.19.        Compliance
with Sarbanes-Oxley.   The Company
is in compliance in all material respects with all applicable provisions of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) that are effective.

 

1.20         Good Title to Properties.  The Company and its subsidiaries own no real
property and have good and marketable title to all personal property owned by
them which are material to the business of the Company and its subsidiaries, in
each case free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect the value
of such property and do not interfere with the use made and proposed to be made
of such property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held by them
under valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.

 

1.21.        Intellectual Property Rights.  The Company and its subsidiaries own or
possess, or can acquire on reasonable terms, all material patents, patent
rights, licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of the foregoing which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse affect
on the Company and its subsidiaries, taken as a whole.

 

1.22.        No Labor Disputes.  No material labor dispute with the employees
of the Company or any of its subsidiaries exists, or, to the knowledge of the
Company, is imminent; and the Company is not aware of any existing, threatened
or imminent labor disturbance by the employees of any of its principal
suppliers, manufacturers or contractors that could have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

 

1.23.        Insurance.  The Company and its subsidiaries are insured
by the insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which they are engaged; and neither the Company nor any of its subsidiaries has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a material adverse effect on the Company and its subsidiaries, taken
as a whole.

 

1.24.        Governmental Permits.  The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
business, except where the failure to possess such certificates, authorizations
and permits would not result in a material adverse effect on the Company and
its subsidiaries, taken as a whole, and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit which,
individually or in the

 

 

6

 

aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

 

1.25         Accounting
Controls.  To the knowledge of the
Company, KPMG LLP, the accounting firm which has certified the financial
statements filed with or incorporated by reference in and as a part of the
Registration Statement, is an independent public accounting firm within the
meaning of the Securities Act and the Securities Act Rules and Regulations and
such accountants are not in violation of the auditor independence requirements
of the Sarbanes-Oxley Act.  Each of the
Company and its subsidiaries maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (1) transactions are
executed in accordance with management’s general or specific authorizations;
(2) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (3) access to assets is permitted
only in accordance with management’s authorization; and (4) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

1.26.        Listing of Common Stock.  The Common Stock is registered pursuant to
Section 12(g) of the Exchange Act and is listed on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the Exchange
Act or delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the NASD is
contemplating terminating such registration or listing.

 

1.27.        No Price Stabilization or Manipulation.  The Company and it subsidiaries have not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in any prohibited stabilization
or manipulation of the price of any security of the Company  to facilitate the sale or
resale of the Shares.

 

2.             Representations and Warranties
of the Selling Shareholders.  Each
of the Selling Shareholders represents and warrants to and agrees with each of
the Underwriters that:

 

2.1.          Due Authorization.  This Agreement has been duly authorized,
executed and delivered by or on behalf of such Selling Shareholder and is a
valid and binding agreement of such Selling Shareholder, enforceable in
accordance with its terms, except as rights to indemnification hereunder may be
limited by applicable law and except as the enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.

 

2.2.          Selling Shareholder Documents.  The Custody Agreement signed by such Selling
Shareholder and the Custodian named therein, relating to the deposit of the
Shares to be sold by such Selling Shareholder (the “Custody Agreement”) and the
Power of Attorney appointing certain individuals as such Selling Shareholder’s
attorneys-in-fact to the extent set forth therein, relating to the transactions
contemplated hereby and by the Registration Statement (the “Power of Attorney”) have
been duly authorized, executed and delivered by such Selling Shareholder and
are valid and binding agreements of such Selling Shareholder enforceable in
accordance with their respective terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.

 

2.3.          No Conflict.  The execution and delivery by such Selling
Shareholder of, and the performance by such Selling Shareholder of its
obligations under, this Agreement, the Custody Agreement

 

 

7

 

and the Power of
Attorney will not contravene any provision of applicable law, or the articles
of incorporation, or by-laws, or other organizational documents of such
Selling Shareholder (if such Selling Shareholder is not an individual), or any
agreement or other instrument binding upon such Selling Shareholder or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over such Selling Shareholder, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency is required for the performance by such Selling Shareholder of its
obligations under this Agreement, the Custody Agreement or the Power of
Attorney of such Selling Shareholder, except such as may be required by the
Securities Act, the NASD or the securities or Blue Sky laws of the various
states in connection with the offer and sale of the Shares.

 

2.4.          Good Title to Shares.  Such Selling Shareholder has, and on each
Closing Date will have, valid title to the Shares to be sold by such Selling
Shareholder and the legal right and power, and all authorization and approval
required by law, to enter into this Agreement, the Custody Agreement and the
Power of Attorney and to sell, transfer and deliver the Shares to be sold by
such Selling Shareholder.

 

2.5.          Delivery of Common Shares.  Delivery of the Shares to be sold by such
Selling Shareholder pursuant to this Agreement will pass title to such Shares
free and clear of any security interests, claims, liens, equities and other
encumbrances.

 

2.6.          No Registration Rights.  Such Selling Shareholder does not have any
registration or other similar rights to have any equity or debt securities
registered for sale by the Company under the Registration Statement or included
in the offering contemplated by this Agreement, other than as described in the
Registration Statement and as have been waived in writing in connection with
the offering contemplated hereby.

 

2.7.          No Price Stabilization or
Manipulation.  Such Selling
Shareholder has not taken and will not take, directly or indirectly, any action
designed to or that might be reasonably expected to cause or result in any
prohibited stabilization or manipulation of the price of any security of the
Company  to
facilitate the sale or resale of the Shares.

 

2.8.          Disclosure by Selling Shareholder
in Registration Statement.  Such
portion of the Registration Statement comprised of the table and the notes
thereto under the caption “Principal and Selling Shareholders” in the form
supplied to the Selling Shareholder, insofar as such portion specifically
related to the Selling Shareholder, do not contain 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 under
which they were made, not misleading.

 

3.             Purchase and Sale
Agreements.

 

3.1.          Firm Shares.  Each Selling Shareholder, severally and not
jointly, hereby agrees to sell to the several Underwriters, and each
Underwriter, upon the basis of the representations and warranties herein
contained, but subject to the conditions hereinafter stated, agrees, severally
and not jointly, to purchase from such Selling Shareholder at $12.285 a share
(the “Purchase
Price”) the number of Firm Shares (subject to such adjustments to eliminate
fractional shares as you may determine) that bears the same proportion to the
number of Firm Shares to be sold by such Selling Shareholder as the number of
Firm Shares set forth in Schedule A hereto opposite the name of
such Underwriter bears to the total number of Firm Shares.

 

3.2.          Additional Shares.  On the basis of the representations and
warranties contained in this Agreement, and subject to its terms and
conditions, certain of the Selling Shareholders as indicated on Schedule B
hereto agree to grant to the Underwriters a one-time option to purchase up to
927,000 Additional

 

 

8

 

Shares at the
Purchase Price, for the sole purpose of covering over-allotments in the sale of
Firm Shares.  If you, on behalf of the
Underwriters, elect to exercise such option, you shall so notify the Company in
writing not later than thirty (30) days after the date of this Agreement, which
notice shall specify the number of Additional Shares to be purchased by the
Underwriters and the date on which such shares are to be purchased.  Such date may be the same as the Closing
Date (as defined below) but not earlier than the Closing Date nor later than
ten (10) business days after the date of such notice.  Additional Shares may be purchased as provided in Section 4
hereof solely for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. 
If the Underwriters exercise this option in whole or in part, each
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares
as you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth in Schedule A
hereto opposite the name of such Underwriter bears to the total number of Firm
Shares.

 

3.3.          Market Standoff Provision.  The Company and each Selling Shareholder
hereby agrees that, without the prior written consent of Thomas Weisel
Partners, it will not, during the period ending 90 days after the date of the
Prospectus, (i) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers to another,
in whole or in part, any of the economic consequences of ownership of the
Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in
cash or otherwise.  The foregoing
sentence shall not apply to (A) the Shares to be sold hereunder,
(B) the issuance by the Company of shares of Common Stock upon the
exercise of options or warrants or the conversion of any security or note
outstanding on the date hereof of which the Underwriters have been advised in
writing and which is described in the Prospectus, (C) the issuance of shares of
Common Stock or grant of options or other incentive awards pursuant to the
Company’s 1997 Stock Incentive Plan, as amended and restated, the Company’s
1999 Employee Stock Purchase Plan, or the Company’s Profit Sharing and 401(k)
Plan or (D) transactions by any person other than the Company relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the offering of the Shares.  In
addition, each Selling Shareholder, agrees that, without the prior written
consent of Thomas Weisel Partners, it will not, during the period ending 90
days after the date of the Prospectus, make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
security convertible into or exercisable or exchangeable for Common Stock.

 

3.4.          Terms of Public Offering.  The Selling Shareholders are advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable.  The Sellers are further advised by you that
the Shares are to be offered to the public initially at $13.00 a share (the “Public
Offering Price”) and to certain dealers selected by you at a price
that represents a concession not in excess of $0.429 a share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $0.10 a share, to any Underwriter or to
certain other dealers.

 

4.             Payment and Delivery.

 

4.1.          Firm Shares.  Payment for the Firm Shares to be sold by
each Selling Shareholder shall be made to such Selling Shareholder in
immediately available funds against delivery of such Firm Shares for the
respective accounts of the several Underwriters at 10:00 a.m., New York City
time, on May 14, 2003, or at such other time on the same or such other date,
not later than May 21, 2003, as shall be designated in writing by you.  The time and date of such payment are
hereinafter referred to as the “Closing Date”.

 

 

9

 

4.2.          Additional Shares.  Payment for any Additional Shares shall be
made to each Selling Shareholder in immediately available funds in New York
City against delivery of such Additional Shares for the respective accounts of
the several Underwriters at 10:00 a.m., New York City time, on the date
specified in the notice described in Section 3(b) or at such other time on
the same or on such other date, in any event not later than June 20, 2003, as
shall be designated in writing by you. 
The time and date of such payment are hereinafter referred to as the “Option
Closing Date”.

 

4.3.          Delivery of Certificates.  Certificates for the Firm Shares and
Additional Shares shall be in definitive form and registered in such names and
in such denominations as you shall request in writing not later than one (1)
full business day prior to the Closing Date or the Option Closing Date, as the
case may be.  The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes
payable in connection with the transfer of the Shares to the Underwriters duly
paid, against payment of the Purchase Price therefor.

 

5.             Covenants of the
Company.  In further consideration
of the agreements of the Underwriters herein contained, the Company covenants
with each Underwriter as follows:

 

5.1.          Furnish Copies of Registration
Statement and Prospectus.  To
furnish to you, without charge, five signed copies of the Registration
Statement (including exhibits thereto) and for delivery to each other
Underwriter a conformed copy of the Registration Statement (without exhibits
thereto) and to furnish to you in New York City, without charge, prior to
10:00 a.m. New York City time on the business day next succeeding the date
of this Agreement and during the period mentioned in Section 5.3 below, as
many copies of the Prospectus and any supplements and amendments thereto
(including any documents incorporated or deemed incorporated by reference
therein or to the Registration Statement as you may reasonably request).

 

5.2.          Notification of Amendments or
Supplements.  Before amending or
supplementing the Registration Statement or the Prospectus (including any
amendment or supplement through incorporation by reference of any report filed
under the Exchange Act), to furnish to you a copy of each such proposed
amendment or supplement and not to file any such proposed amendment or
supplement to which you reasonably object, and to file with the Commission
within the applicable period specified in Rule 424(b) under the Securities
Act any prospectus required to be filed pursuant to such rule.

 

5.3.          Filings of Amendments or
Supplements.  If, during such period
after the first date of the public offering of the Shares the Prospectus is
required by law to be delivered in connection with sales by an Underwriter or
dealer (the “Prospectus Delivery Period”), any event shall occur or
condition exist as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Prospectus to comply with
applicable law, forthwith to prepare, file with the Commission and furnish, at
its own expense, to the Underwriters and to the dealers (whose names and
addresses you will furnish to the Company) to which Shares may have been sold
by you on behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the statements in
the Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.

 

5.4.          Blue Sky Laws.  To endeavor to qualify the Shares for offer
and sale under the securities or Blue Sky laws of such jurisdictions as you
shall reasonably request.

 

 

10

 

5.5.          Earnings Statement.  To make generally available to its
securityholders as soon as practicable, but in any event not later than
eighteen (18) months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Securities Act), an earnings statement of the
Company and its subsidiaries (which need not be audited) complying with Section
11(a) of the Securities Act and the rules and regulations thereunder
(including, at the option of the Company, Rule 158).

 

5.6.          Transfer Agent.  The Company shall maintain, at its expense,
a registrar and transfer agent for the Common Stock.

 

5.7.          Periodic Reporting Obligations.  During the Prospectus Delivery Period, the
Company shall file, on a timely basis, with the Commission and the Nasdaq
National Market all reports and documents required to be filed under the
Exchange Act.

 

5.8.          Exchange Act Compliance.  During the Prospectus Delivery Period, the
Company will file all documents required to be filed with the Commission
pursuant to Section 13, 14 or 15 of the Exchange Age in the manner and within
the time periods required by the Exchange Act.

 

5.9           Sarbanes-Oxley Controls and
Procedures.  The Company and its
subsidiaries will maintain such controls and other procedures, including
without limitation those required by Sections 302 and 906 of the Sarbanes-Oxley
Act and the applicable regulations thereunder, that are reasonably designed to
ensure that material information required to be disclosed by the Company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the Commission’s
rules and forms, including without limitation, controls and procedures
reasonably designed to ensure that material information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is accumulated and communicated to the Company’s management,
including its Chief Executive Officer and its Principal Financial Officer, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure, to ensure that material information relating to
Company, including its subsidiaries, is made known to them by others within
those entities.

 

5.10         Sarbanes-Oxley Compliance. The
Company and its subsidiaries will comply, in all material respects, with all
effective applicable provisions of the Sarbanes-Oxley Act.

 

6.             Conditions to the
Underwriters’ Obligations.  The
obligations of the Selling Shareholders to sell the Shares to the several
Underwriters and the several obligations of the Underwriters to purchase and
pay for the Shares on the Closing Date are subject to the following conditions:

 

6.1.          Effective Registration Statement.    The Registration Statement shall have
become effective not later than 5:00 p.m., Eastern Time, on the date hereof.

 

6.2.          Rule 462 Registration Statement.  If the Company elects to rely upon Rule
462(b), the Company shall file a Rule 462 Registration Statement with the
Commission in compliance with Rule 462(b) by 9:30 a.m., Eastern Time, on the
day following the date of this Agreement, and the Company shall at the time of
filing either pay to the Commission the filing fee for the Rule 462
Registration Statement or give irrevocable instructions for the payment of such
fee pursuant to Rule 111(b) under the Securities Act.

 

6.3.          Prospectus Filed with Commission.  The Company shall have filed the Prospectus
with the Commission (including the information required by Rule 430A under
the Securities Act) in the manner and within the time period required by
Rule 424(b) under the Securities Act; or the Company shall have filed a
post-effective amendment to the Registration Statement containing the
information required by such Rule 430A, and such post-effective amendment
shall have become effective.

 

 

11

 

6.4.          No Stop Order.  No stop order suspending the effectiveness
of the Registration Statement, any Rule 462 Registration Statement, or any
post-effective amendment to the Registration Statement, shall be in effect and
no proceedings for such purpose shall have been instituted or threatened by the
Commission.

 

6.5.          No NASD Objection.  The NASD shall have raised no unresolved
objection to the fairness and reasonableness of the underwriting terms and
arrangements.

 

6.6.          No Material Adverse Change.  There shall not have occurred any change, or
any development involving a prospective change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement) that, in your reasonable judgment, is material and adverse and
that makes it, in your reasonable judgment, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.

 

6.7.          Officer’s Certificate.  The Underwriters shall have received on the
Closing Date a certificate, dated the Closing Date and signed by the Chief
Executive Officer or President of the Company, to the effect set forth in
Sections 6.4 and 6.6 above and to the effect that the representations and
warranties of the Company contained in this Agreement are true and correct as
of the Closing Date and that the Company has complied with all of the
agreements and satisfied all of the conditions on its part to be performed or
satisfied hereunder on or before the Closing Date.

 

6.8.          Opinions of Company Counsel.  The Underwriters shall have received on the
Closing Date opinions of Oppenheimer Wolff & Donnelly LLP, counsel for the
Company, dated the Closing Date, the forms of which are attached hereto as Exhibit A
and Exhibit A-1.  The opinion
shall be rendered to the Underwriters at the request of the Company and shall
so state therein.

 

6.9.          Opinion of General Counsel.  The Underwriters shall have received on the
Closing Date an opinion of Mark Kimball, General Counsel of the Company, dated
the Closing Date, the form of which is attached hereto as Exhibit B.  The opinion shall be rendered to the
Underwriters at the request of the Company and shall so state therein.        

 

6.10.        Opinion of Selling Shareholders’
Counsel.  The Underwriters shall
have received on the Closing Date an opinion of Faegre & Benson LLP,
counsel for the Selling Shareholders, dated the Closing Date, the form of which
is attached hereto as Exhibit C. The opinion shall be rendered to
the Underwriters at the request of the Selling Shareholders and shall so state
therein.

 

6.11.        Opinion of Underwriters’ Counsel.  The Underwriters shall have received on the
Closing Date an opinion of Morgan, Lewis & Bockius LLP , counsel for the
Underwriters, dated the Closing Date, covering the matters referred to in Exhibit A,
paragraphs (iv) and (v) (but only as to the statements in the Prospectus
under “Description of Capital Stock” and “Underwriting”), and the matters
referred to in Exhibit A-1.  With
respect to Exhibit A-1, such counsel may state that their opinion
and belief are based upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or supplements thereto
and review and discussion of the contents thereof, but are without independent
check or verification, except as specified.

 

6.12.        Accountant’s Comfort Letter.  The Underwriters shall have received, on
each of the date hereof and the Closing Date, a letter dated the date hereof or
the Closing Date, as the case may be, in form and substance satisfactory to the
Underwriters, from KPMG LLP, independent public accountants, containing
statements and information of the type ordinarily included in accountants’
“comfort letters” to

 

 

12

 

underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a “cut-off date” not earlier than
the date hereof.

 

6.13.        Lock-Up Agreements.  The “lock-up” agreements, each
substantially in the form of Exhibit D hereto, between you and
certain shareholders, officers and directors of the Company, delivered to you
on or before the date hereof, shall be in full force and effect on the Closing
Date.

 

6.14.        Selling Shareholders’ Certificates.  The Underwriters shall have received on the
Closing Date a certificate, dated the Closing Date and signed by or on behalf
of each Selling Shareholder, to the effect that the representations and
warranties of such Selling Shareholder contained in this Agreement are true and
correct as of the Closing Date and that such Selling Shareholder has complied
with all of the agreements and satisfied all of the conditions on its part to
be performed or satisfied hereunder on or before the Closing Date.

 

6.15.        Selling Shareholder Documents.  On the date hereof, the Company and the
Selling Shareholders shall have furnished for review by the Representatives
copies of the Powers of Attorney and Custody Agreements executed by each of the
Selling Shareholders and such further information, certificates and documents
as the Representatives may reasonably request.

 

6.16.        Additional Documents.  On the Closing Date, the Representatives and
counsel for the Underwriters shall have received such information, documents
and opinions as they may reasonably require for the purposes of enabling them
to pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.

 

The several
obligations of the Underwriters to purchase Additional Shares hereunder are
subject to the satisfaction of each of the above conditions on or prior to the
Option Closing Date and to the delivery to you on the Option Closing Date of
such documents as you may reasonably request with respect to the good standing
of the Company, the due authorization and issuance of the Additional Shares and
other matters related to the issuance of the Additional Shares.

 

7.             Expenses.  Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the Company
agrees to pay or cause to be paid all expenses incident to the performance of
its and the Selling Shareholders’ obligations under this Agreement, including:
(i) the fees, disbursements and expenses of the Company’s counsel, the
Company’s accountants and a single counsel for the Selling Shareholders in
connection with the registration and delivery of the Shares under the
Securities Act and all other fees or expenses in connection with the
preparation and filing of the Registration Statement, any preliminary
prospectus, the Prospectus and amendments and supplements to any of the
foregoing, including all printing costs associated therewith, and the mailing
and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to
the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection with the
offer and sale of the Shares under state securities laws, if any, and all
expenses in connection with the qualification of the Shares for offer and sale
under state securities laws as contemplated by Section 5.4 hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Underwriters in connection with such qualification and in connection with
the Blue Sky or legal investment memorandum, if any (iv) all filing fees
and the reasonable fees and disbursements of counsel to the Underwriters incurred
in connection with the review and qualification of the offering of the Shares
by the NASD, (v) all fees and expenses incident to listing the Shares on
the Nasdaq National Market, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer
agent, registrar or depositary, (viii) the

 

 

13

 

costs and expenses
of the Company relating to investor presentations on any “road show” undertaken
in connection with the marketing of the offering of the Shares, including,
without limitation, expenses associated with the production of road show slides
and graphics, fees and expenses of any consultants engaged in connection with
the road show presentations with the prior approval of the Company, travel and
lodging expenses of the representatives and officers of the Company and any
such consultants, and the cost of any aircraft chartered in connection with the
road show, (ix) all expenses in connection with any offer and sale of the
Shares outside of the United States, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection with
offers and sales outside of the United States, and (x) all other costs and
expenses incident to the performance of the obligations of the Company
hereunder for which provision is not otherwise made in this Section.  It is understood, however, that except as
provided in this Section, Section 8 entitled “Indemnity and Contribution”,
and Section 12, the Underwriters will pay all of their costs and expenses,
including fees and disbursements of their counsel and any advertising expenses
connected with any offers they may make.

 

8.             Indemnity and
Contribution.

 

8.1.          Indemnification of the Underwriters.  The Company agrees to indemnify and hold
harmless each Underwriter and each person, if any, who controls any Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except (i) insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you expressly
for use therein and (ii) that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage or liability purchased
Shares, or any person controlling such Underwriter, if copies of the Prospectus
were timely delivered to the Underwriter pursuant to Section 5 and a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of such Underwriter to such person, if required by law so to have been
delivered, at or prior to the written confirmation of the sale of the Shares to
such person, and if the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage, liability or expense.

 

8.2.          Indemnification of the Underwriters
by the Selling Shareholders.  Each
Selling Shareholder agrees, severally and not jointly, to indemnify and hold
harmless each Underwriter and each person, if any, who controls such
Underwriter within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses,
claims, damages and liabilities (including, without limitation, any legal or
other expenses reasonably incurred in connection with defending or investigating
any such action or claim) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or any
amendment thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only with reference to information relating to such
Selling Shareholder furnished in writing by or on behalf of such Selling
Shareholder expressly for use in the Registration Statement, any preliminary
prospectus, the Prospectus or any amendments or supplements thereto.

 

 

14

 

8.3.          Indemnification by the Underwriters.  Each Underwriter agrees, severally and not
jointly, to indemnify and hold harmless the Company, the Selling Shareholders,
the directors of the Company, the officers of the Company who sign the
Registration Statement and each person, if any, who controls the Company or any
Selling Shareholder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and
all losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through you expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto.

 

8.4.          Indemnification Procedures.  In case any proceeding (including any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to this Section 8, such person
(the “indemnified
party”) shall promptly notify the person against whom such indemnity
may be sought (the “indemnifying party”) in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding
and shall pay the fees and disbursements of such counsel related to such
proceeding.  In any such proceeding, any
indemnified party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party and the indemnified party shall have
mutually agreed to the retention of such counsel or (ii) the named parties
to any such proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them.  It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for (i) the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Underwriters
and all persons, if any, who control any Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange
Act, (ii) the fees and expenses of more than one separate firm (in
addition to any local counsel) for the Company, its directors, its officers who
sign the Registration Statement and each person, if any, who controls the
Company within the meaning of either such Section and (iii) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Selling Shareholders and all persons, if any, who control any Selling
Shareholder within the meaning of either such Section, and that all such fees
and expenses shall be reimbursed as they are incurred.  In the case of any such separate firm for
the Underwriters and such control persons of any Underwriters, such firm shall
be designated in writing by Thomas Weisel Partners.  In the case of any such separate firm for the Company, and such
directors, officers and control persons of the Company, such firm shall be designated
in writing by the Company.  In the case
of any such separate firm for the Selling Shareholders and such control persons
of any Selling Shareholders, such firm shall be designated in writing by the
persons named as attorneys-in-fact for the Selling Shareholders
under the Powers of Attorney.  The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff (after all appeals have been
exhausted), the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.  Notwithstanding the foregoing
sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of this paragraph,
the indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is

 

 

15

 

entered into more
than 60 days after receipt by such indemnifying party of the aforesaid request
and (ii) such indemnifying party shall not have reimbursed the indemnified
party in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.

 

8.5.          Limitation of Selling
Shareholder Liability.  The
liability of each Selling Shareholder under the indemnity and contribution
provisions of this Section 8 shall be limited, in the aggregate, to an amount
equal to the public offering price of the Shares sold by such Selling
Shareholder, less the underwriting discount, as set forth on the front cover
page of the Prospectus.  The Company and
the Selling Shareholders may agree, as among themselves and without limiting
the rights of the Underwriters under this Agreement, as to the respective
amounts of such liability for which they each shall be responsible.

 

8.6.          Contribution Agreement.  To the extent the indemnification provided
for in this Section 8 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the indemnifying party or parties on the one
hand and the indemnified party or parties on the other hand from the offering
of the Shares or (ii) if the allocation provided by Section 8.4 above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in Section 8.4 above
but also the relative fault of the indemnifying party or parties on the one
hand and of the indemnified party or parties on the other hand in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the
Company and the Selling Shareholders on the one hand and the Underwriters on
the other hand in connection with the offering of the Shares shall be deemed to
be in the same respective proportions as the net proceeds from the offering of
the Shares (before deducting expenses) received by the Selling Shareholders and
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate Public Offering Price of the Shares.  The relative fault of the Company, the Selling Shareholders and
the Underwriters shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company, the Selling Shareholders or the Underwriters and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. 
The Underwriters’ respective obligations to contribute pursuant to this
Section 8 are several in proportion to the respective number of Shares
they have purchased hereunder, and not joint. 
The Selling Shareholders’ respective obligations to contribute pursuant
to this Section 8 are several in proportion to the respective number of Shares
they have sold hereunder, and not joint. 
No party shall be liable for contribution with respect to any settlement
of any losses, claims, damages or liabilities if such settlement was effected
by the party seeking contribution without the contributing party’s prior
written consent.  Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel as contemplated by the second and third sentences of Section 8.4 above,
the indemnifying party agrees that is shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 60 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed
the indemnified party in accordance with such request prior to the date of such
settlement.

 

8.7.          Contribution Amounts.  The Company, the Selling Shareholders and
the Underwriters agree that it would not be just or equitable if contribution
pursuant to this Section 8 were

 

 

16

 

determined by pro
rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 8.6.  The amount paid or payable by an indemnified
party as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding the
provisions of this Section 8, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages that such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.  The remedies provided for in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.

 

8.8.          Survival of Provisions.  The indemnity and contribution provisions
contained in this Section 8 and the representations, warranties and other
statements of the Company and the Selling Shareholders contained in this
Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by
or on behalf of any Underwriter or any person controlling any Underwriter, any
Selling Shareholder or any person controlling any Selling Shareholder, or the
Company, its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Shares.

 

9.             Effectiveness.  This Agreement shall become effective upon
the execution and delivery hereof by the parties hereto.

 

10.           Termination.  This Agreement shall be subject to
termination by notice given by you to the Company and the Selling Shareholders
if (a) after the execution and delivery of this Agreement and prior to the
Closing Date (i) trading generally shall have been suspended or materially
limited on or by, as the case may be, any of the New York Stock Exchange, the
American Stock Exchange, the National Association of Securities Dealers, Inc.,
the Chicago Board of Options Exchange, the Chicago Mercantile Exchange or the
Chicago Board of Trade, (ii) trading of any securities of the Company
shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New
York or California shall have been declared by either federal or New York or
California state authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your reasonable judgment, is material and adverse,
(v) in the judgment of the Representatives, there shall have occurred any
material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of the
Company and its subsidiaries, taken as a whole, or (vi) there shall be any
failure or refusal on the part of the Company or any Selling Shareholder to
comply with the terms or to fulfill any of the conditions of this Agreement or
the Company or any Selling Shareholder shall for any reason be unable to
perform its obligations under this Agreement, and (b) in the case of any of the
events specified in Sections 10(a)(i) through 10(a)(vi), such event,
individually or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.

 

11.           Defaulting Underwriters.  If, on the Closing Date or the Option
Closing Date, as the case may be, any one or more of the Underwriters shall
fail or refuse to purchase Shares that it has or they have agreed to purchase
hereunder on such date, and the aggregate number of Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to purchase
is not more than one-tenth of the

 

 

17

 

aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule A bears to the
aggregate number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number
of Shares that any Underwriter has agreed to purchase pursuant to this
Agreement be increased pursuant to this Section 11 by an amount in excess
of one-ninth of such number of Shares without the written consent of such
Underwriter.  If, on the Closing Date,
any Underwriter or Underwriters shall fail or refuse to purchase Firm Shares
and the aggregate number of Firm Shares with respect to which such default
occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you, the Company and the Selling
Shareholders for the purchase of such Firm Shares are not made within 36 hours
after such default, this Agreement shall terminate without liability on the
part of any non-defaulting Underwriter, the Company or the Selling
Shareholders.  In any such case either
you or the relevant Selling Shareholders shall have the right to postpone the
Closing Date, but in no event for longer than seven (7) days, in order that the
required changes, if any, in the Registration Statement and in the Prospectus
or in any other documents or arrangements may be effected.  If, on the Option Closing Date, any
Underwriter or Underwriters shall fail or refuse to purchase Additional Shares
and the aggregate number of Additional Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Additional
Shares to be purchased, the non-defaulting Underwriters shall have the option
to (i) terminate their obligation hereunder to purchase Additional Shares
or (ii) purchase not less than the number of Additional Shares that such
non-defaulting Underwriters would have been obligated to purchase in the
absence of such default.  Any action
taken under this paragraph shall not relieve any defaulting Underwriter from
liability in respect of any default of such Underwriter under this Agreement.

 

12.           Reimbursement of Underwriters’
Expenses.  If this Agreement shall
be terminated by the Underwriters, or any of them, pursuant to Section
10(a)(ii), 10(a)(v) or 10(a)(vi) hereof, the Company will reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves for all out-of-pocket expenses (including the
fees and disbursements of their counsel) reasonably incurred by such
Underwriters in connection with this Agreement or the offering contemplated
hereunder.

 

13.           Counterparts.  This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

 

14.           Headings; Table of Contents.  The headings of the sections of this
Agreement and the table of contents have been inserted for convenience of
reference only and shall not be deemed a part of this Agreement.

 

15.           Notices.  All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to the
parties hereto as follows:

 

If to the
Representatives:

 

Thomas Weisel
Partners LLC

One Montgomery
Street, Suite 3700

San Francisco, California
94104

Facsimile:  (415) 364-2694

Attention:  Alexander Chefetz

 

with a copy to:

 

 

18

 

Thomas Weisel
Partners LLC

One Montgomery
Street, Suite 3700

San Francisco,
California 94104

Facsimile:  (415) 364-2694

Attention:  David A. Baylor

 

If to the Company:

 

Select Comfort
Corporation

6105 Trenton Lane
North

Minneapolis,
Minnesota 55442

Facsimile:  (763) 551-7826

Attention:  Mark A. Kimball

 

with a copy to:

 

Oppenheimer Wolff
& Donnelly, LLP

45 South 7th
Street

Minneapolis,
Minnesota  55402

Facsimile:  (612) 607-7100

Attention:  Thomas R. Marek

 

If to St. Paul
Fire and Marine Insurance Company, St. Paul Venture Capital IV, LLC, St. Paul
Venture Capital V, LLC, St. Paul Venture Capital Affiliates Fund I, LLC or St.
Paul Venture Capital VI, LLC:

 

St. Paul Venture
Capital, Inc.

10400 Viking Drive

Suite 500

Eden Prarie,
MN  55344

Facsimile:  (952) 995-7475

Attention:  James Simons

 

with a copy to:

 

Faegre &
Benson LLP

2200 Wells Fargo
Center

90 South Seventh Street

Minneapolis,
Minnesota  55402

Facsimile:  (612) 766-1600

Attention:  Steven Kennedy

 

If to Renaissance
US Growth & Income Trust PLC or BFS US Special Opportunities Trust PLC:

 

Select Comfort
Corporation

6105 Trenton Lane
North

Minneapolis,
Minnesota 55442

Facsimile:  (763) 551-7826

Attention:  Mark A. Kimball

 

with a copy to:

 

 

19

 

Faegre &
Benson LLP

2200 Wells Fargo
Center

90 South Seventh
Street

Minneapolis,
Minnesota  55402

Facsimile:  (612) 766-1600

Attention:  Steven Kennedy

 

Any party hereto
may change the address for receipt of communications by giving written notice
to the others.

 

16.           Successors.  This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 11 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 8, and in each case their
respective successors, and no other person will have any right or obligation hereunder.  The term “successors” shall not include any
purchaser of the Shares as such from any of the Underwriters merely by reason
of such purchase.

 

17.           Partial Unenforceability.  The invalidity or unenforceability of any
Section, paragraph or provision of this Agreement shall not affect the validity
or enforceability of any other Section, paragraph or provision hereof.  If any Section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.

 

18.           Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE.

 

19.           Consent to Jurisdiction.  Any legal suit, action or proceeding arising
out of or based upon this Agreement or the transactions contemplated hereby (“Related
Proceedings”) may be instituted in the federal courts of the United
States of America located in the City and County of San Francisco or the courts
of the State of California, in each case located in the City and County of San
Francisco (collectively, the “Specified Courts”), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a “Related
Judgment”), as to which such jurisdiction is non-exclusive) of such
courts in any such suit, action or proceeding. 
Service of any process, summons, notice or document by mail to such
party’s address set forth above shall be effective service of process for any
suit, action or other proceeding brought in any such court.  The parties irrevocably and unconditionally
waive any objection to the laying of venue of any suit, action or other
proceeding in the Specified Courts and irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such suit, action or
other proceeding brought in any such court has been brought in an inconvenient
forum.

 

20.           Failure of the Selling
Shareholders to Sell and Deliver Shares. 
If one or more of the Selling Shareholders shall fail to sell and
deliver to the Underwriters the Shares to be sold and delivered by such Selling
Shareholders at the Closing Date pursuant to this Agreement, and the remaining
Selling Shareholders do not exercise the right hereby granted to increase, pro
rata or otherwise, the number of Shares to be sold by them hereunder to the
total number of Shares to be sold by all Selling Shareholders as set forth in Schedule
B, then the Underwriters may at their option, by written notice from the
Representatives to the Company and the Selling Shareholders, either (i)
terminate this Agreement without any liability on the part of any Underwriter
or, except as provided in Sections 7, 8 and 12 hereof, the Company or the
Selling

 

 

20

 

Shareholders, or
(ii) purchase the Shares which the other Selling Shareholders have agreed to
sell and deliver in accordance with the terms hereof.  If one or more of the Selling Shareholders shall fail to sell and
deliver to the Underwriters the Shares to be sold and delivered by such Selling
Shareholders pursuant to this Agreement at the Closing Date or the Option
Closing Date, then the Underwriters (and any Selling Shareholder which
increases the number of Shares to be sold by it) shall have the right, by
written notice from the Representatives to the Company and the Selling
Shareholders (or from such Selling Shareholder to the Representatives and the
Compnay), to postpone the Closing Date or the Option Closing Date, as the case
may be, but in no event for longer than seven (7) days in order that the required
changes, if any, to the Registration Statement and the Prospectus or any other
documents or arrangements may be effected.

 

21.           Entire Agreement.  This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof.

 

22.           Amendments.  This Agreement may only be amended or
modified in writing, signed by all of the parties hereto, and no condition
herein (express or implied) may be waived unless waived in writing by each
party whom the condition is meant to benefit.

 

23.           Sophisticated Parties.  Each of the parties hereto acknowledges that
it is a sophisticated business person who or which was adequately represented
by counsel during negotiations regarding the provisions hereof, including,
without limitation, the indemnification and contribution provisions of Section
8, and is fully informed regarding said provisions.  Each of the parties hereto further acknowledges that the
provisions of Section 8 hereto fairly allocate the risks in light of the
ability of the parties to investigate the Company, its affairs and its business
in order to assure that adequate disclosure has been made in the Registration
Statement, any preliminary prospectus and the Prospectus (and any amendments
and supplements thereto), as required by the Securities Act and the Exchange
Act.

 

 

 

 

[Remainder of page
intentionally left blank]

 

 

21

 

If the foregoing
is in accordance with your understanding of our agreement, kindly sign and
return to the Company the enclosed copies hereof, whereupon this instrument,
along with all counterparts hereof, shall become a binding agreement in accordance
with its terms.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  SELECT
  COMFORT CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  ST.
  PAUL FIRE AND MARINE INSURANCE COMPANY,

  ST. PAUL VENTURE CAPITAL IV, LLC,

  ST. PAUL VENTURE CAPITAL V, LLC,

  ST. PAUL VENTURE CAPITAL AFFILIATES FUND I, LLC

  and ST. PAUL VENTURE CAPITAL VI, LLC,

  acting severally

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  Simons

  
	
   

  	
   

  	
  Title:

  	
  Attorney-in-Fact

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RENAISSANCE
  US GROWTH & INCOME TRUST PLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BFS US
  SPECIAL OPPORTUNITIES TRUST PLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

Accepted as of the date
hereof

 

Thomas Weisel Partners
LLC

U.S. Bancorp Piper
Jaffray Inc.

Adams, Harkness
& Hill, Inc.

Craig-Hallum Capital
Group, LLC

 

Acting severally on
behalf

  of themselves and as representatives

  of the several Underwriters named

  in Schedule A hereto.

 

	
  By:

  	
   

  	
  Thomas
  Weisel Partners LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

 

 

Schedules

 

A         List of Underwriters

B         List of Selling Shareholders

C         List of Subsidiaries

 

Exhibits

 

A         Form of Legal Opinion of Company
Counsel

A-1     Form of Legal Opinion of Company Counsel

B         Form of Legal Opinion of General
Counsel

C         Form of Legal Opinion of Selling
Shareholders’ Counsel

D         Form of Lock-Up Agreement

 

 

 

 

SCHEDULE A

 

 

	
  Underwriter

  	
   

  	
  Number of
  Firm Shares

  To Be Purchased

  	
   

  
	
  Thomas Weisel
  Partners LLC

  	
   

  	
  2,556,000

  	
   

  
	
  U.S. Bancorp
  Piper Jaffray Inc.

  	
   

  	
  1,420,000

  	
   

  
	
  Adams, Harkness
  & Hill, Inc.

  	
   

  	
  1,278,000

  	
   

  
	
  Craig-Hallum
  Capital Group LLC

  	
   

  	
  426,000

  	
   

  
	
  RBC Dain
  Rauscher Inc.

  	
   

  	
  250,000

  	
   

  
	
  Wedbush Morgan
  Securities, Inc.

  	
   

  	
  250,000

  	
   

  
	
  Total

  	
   

  	
  6,180,000

  	
   

  

 

 

 

 

SCHEDULE B

 

 

	
  Selling
  Shareholder

  	
   

  	
  Number of
  Firm

  Shares To Be Sold

  	
   

  	
  Maximum
  Number of

  Additional Shares to be Sold

  	
   

  
	
  St. Paul Fire
  and Marine Insurance Company

  	
   

  	
  2,165,539

  	
   

  	
  357,314

  	
   

  
	
  St. Paul Venture
  Capital IV, LLC

  	
   

  	
  147,313

  	
   

  	
  24,306

  	
   

  
	
  St. Paul Venture
  Capital V, LLC

  	
   

  	
  806,974

  	
   

  	
  133,151

  	
   

  
	
  St. Paul Venture
  Capital Affiliates Fund I, LLC

  	
   

  	
  119

  	
   

  	
  20

  	
   

  
	
  St. Paul Venture
  Capital VI, LLC

  	
   

  	
  2,498,237

  	
   

  	
  412,209

  	
   

  
	
  Renaissance US
  Growth & Income Trust PLC

  	
   

  	
  280,909

  	
   

  	
  —

  	
   

  
	
  BFS US Special
  Opportunities Trust PLC

  	
   

  	
  280,909

  	
   

  	
  —

  	
   

  
	
  Total

  	
   

  	
  6,180,000

  	
   

  	
  927,000

  	
   

  

 

 

 

 

SCHEDULE C

 

LIST OF SUBSIDIARIES

 

1.  Select Comfort Retail Corporation

2.  Select Comfort Direct Corporation

3.  Select Comfort SC Corporation

4.  Direct Call Centers, Inc.

5.  selectcomfort.com corporation

6.  Select Comfort Wholesale Corporation

 

 

 

 

EXHIBIT A

FORM OF LEGAL OPINION OF COMPANY
COUNSEL

i.  The Company
has been duly incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its business
as described in the Prospectus and is duly qualified to transact business and
is in good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification, except to
the extent that the failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its subsidiaries, taken as a
whole.

 

ii.  The
Company has an authorized capitalization as set forth in the Registration
Statement and the Prospectus.

 

iii.  The
Shares to be sold by the Selling Shareholders have been duly authorized and are
validly issued, fully paid and non-assessable (assuming the receipt by the
Company of the full consideration therefor as stated in the resolutions of the
Company’s Board authorizing the issuance of such Shares), and such Shares are
free of statutory preemptive rights and, to our knowledge, contractual
preemptive rights, rights of co-sale, rights of first refusal and similar
rights.  To our knowledge, all rights of
persons to have the Company register shares of capital stock or other
securities of the Company under the Securities Act have either been complied
with or waived in writing in connection with the sale of the Shares to the
Underwriters.

 

iv.  The
Underwriting Agreement has been duly authorized, executed and delivered by the
Company.

 

v.  The
statements in the Prospectus under the captions “Business-Intellectual
Property”, “Description of Capital Stock—Common Stock” and “Description of
Capital Stock—Undesignated Preferred Stock”, insofar as such statements
constitute summaries of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects the information called for
with respect to such legal matters, documents and proceedings and fairly
summarize in all material respects the matters referred to therein.

 

vi.  To our
knowledge, there are no (A) legal or governmental proceedings pending or
overtly threatened to which the Company or any of its subsidiaries is a party
or to which any of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration Statement or the
Prospectus and are not so described or (B) contracts or other documents that
are required to be described or incorporated by reference in the Registration
Statement or the Prospectus or to be filed or incorporated by reference as
exhibits to the Registration Statement that are not described or filed or
incorporated as required.

 

vii.  The
Company is not an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.

 

viii.  Each
document filed by the Company pursuant to the Exchange Act (except for
financial statements and schedules and other financial and statistical data
included therein as to which we express no opinion whatsoever) and incorporated
or deemed to be incorporated by reference in the Prospectus complied when so
filed as to form in all material respects with the Exchange Act.

 

 

 

 

EXHIBIT A-1

FORM OF LEGAL OPINION OF COMPANY
COUNSEL

May 13, 2003

 

 

 

Thomas Weisel Partners LLC

U.S. Bancorp Piper Jaffray Inc.

Adams, Harkness & Hill, Inc.

Craig-Hallum Capital Group LLC

c/o Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California
94104

Ladies and Gentlemen:

We have acted as counsel
to Select Comfort Corporation, a Minnesota corporation (the “Company”), in
connection with the sale by the Selling Shareholders of an aggregate of
7,107,000 shares (the “Shares”) of the Company’s common stock, par value $.01
per share (“Common Stock”), including 927,000 shares of Common Stock that may
be purchased at the option of the Underwriters (as hereinafter defined) to
cover over-allotments, if any, to the several underwriters (the “Underwriters”)
named in Schedule B to that certain Underwriting Agreement dated May 8, 2003
among the Company, the Selling Shareholders who are parties thereto and the
Underwriters (the “Underwriting Agreement”) for which Thomas Weisel Partners
LLC, U.S. Bancorp Piper Jaffray Inc., Adams, Harkness & Hill, Inc. and
Craig-Hallum Capital Group LLC are acting as representatives.  This letter is delivered to you pursuant to
Section 6.8 of the Underwriting Agreement. 
Capitalized terms used in this letter are as defined in the Underwriting
Agreement unless otherwise specifically provided herein.

Because the primary
purpose of our professional engagement by the Company in connection with the
transactions contemplated by the Underwriting Agreement was not to establish
factual matters, and because many determinations involved in the preparation of
the Registration Statement and the Prospectus were of a wholly or partially
nonlegal character, we have not, except as provided in subparagraphs (ii) and
(v) in our accompanying opinion, passed upon and do not assume any
responsibility for the accuracy, completeness or fairness of statements
contained in the Registration Statement or the Prospectus and make no
representation that we have independently verified the accuracy, completeness
or fairness of such statements.

In the course of acting
pursuant to our engagement by the Company, however, we met in conferences in
connection with the Registration Statement with (i) representatives of the
Company, (ii) representatives of Morgan, Lewis & Bockius LLP, counsel to
the Underwriters, (iii) representatives of KPMG LLP, independent accountants
for the Company, and (iv) the Underwriters, during which conferences the
contents of the Registration Statement and related matters were discussed.  In addition, we reviewed copies of the
documents referred to in the Registration Statement, copies of the exhibits
filed with the Registration Statement, as furnished to us by the Company, the
minutes of meetings of the Board of Directors (and all committees thereof) and
the shareholders of the Company, which minutes were represented to us by the
Company to be all such minutes since the Company’s initial public offering of
its Common Stock, and various other corporate documents and performed such
other procedures as we deemed appropriate.

Based on our participation in the above mentioned conferences, our
review of the documents described above, our understanding of applicable law
and the experience we have gained in our practice under the Securities Act, we
advise you that, although we cannot guarantee the accuracy, completeness or
fairness of any of the statements contained in the Registration Statement or
Prospectus except as provided in subparagraphs (ii) and (v) in our accompanying
opinion, in connection with our representation, investigation and due inquiry
of the Company in preparation of the Registration Statement, nothing has come
to our attention which causes us to believe that the Registration Statement or
any amendment thereof (except as to the financial statements and schedules and
other financial and statistical data, as to which we express no view) at the
time the Registration Statement became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein

 

 

 

not misleading, or that
the Prospectus (except as to the financial statements and schedules and other
financial and statistical data, as to which we express no view) as amended or
supplemented, as of its date, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.

We are furnishing this
letter to you solely for your benefit in connection with the above-described
transaction.  It is not to be used, circulated,
quoted or otherwise referred to for any other purpose, and no one other than
you is entitled to rely on this letter. 
This letter speaks only as of the date above written, and we hereby
expressly disclaim any duty to update any of the statements made herein.

Very truly yours,

 

 

 

EXHIBIT B

FORM OF LEGAL OPINION OF GENERAL
COUNSEL

i.  Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is in good standing
in each jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

 

ii.  All of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and are owned directly by the
Company, free and clear of all liens, encumbrances, equities or claims.

 

iii.  The execution and delivery by the Company
of, and the performance by the Company of its obligations under, the
Underwriting Agreement will not contravene any provision of the articles of
incorporation or by-laws of the Company or, to my knowledge, any agreement or
other instrument binding upon the Company or any of its subsidiaries that has
been filed by the Company as an exhibit to the Registration Statement or any
report filed by the Company with the Commission pursuant to the Exchange Act
and incorporated by reference into the Registration Statement, or, to my
knowledge, any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, or any provision
of applicable law, except applicable state securities or Blue Sky laws and with
respect to performance by the Company of any obligations relating to
indemnification or contribution under the Underwriting Agreement, in each case
as to which I express no opinion.  No
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under the Underwriting Agreement, except such as (A) have been
obtained under the Securities Act, (B) may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale of
the Shares or (C) may be required by the NASD, in each case as to which I
express no opinion.

 

iv.  The outstanding shares of capital stock of
the Company have been duly authorized and are validly issued, fully paid and
non-assessable (assuming the receipt by the Company of the full consideration
therefor as stated in the resolutions of the Company’s Board authorizing the
issuance of such shares), and such shares are free of statutory preemptive
rights and, to my knowledge, contractual preemptive rights, resale rights,
rights of first refusal and similar rights.

 

v.  The statements in the Prospectus under the
caption “Business- Governmental Regulation,” insofar as such statements
constitute summaries of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects the information called for
with respect to such legal matters, documents and proceedings and fairly
summarize in all material respects the matters referred to therein.

 

 

 

22

 

EXHIBIT C

 

FORM OF LEGAL OPINION OF SELLING SHAREHOLDERS’ COUNSEL

 

1.             The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of each of the Selling Shareholders.

 

2.             The execution and delivery by each Selling Shareholder
of, and the performance by such Selling Shareholder of its obligations under,
the Underwriting Agreement, the Custody Agreement and the Power of Attorney of
such Selling Shareholder will not contravene any provision of applicable law,
or the articles of incorporation, by-laws or other organizational
documents of such Selling Shareholder (if such Selling Shareholder is not an
individual), or, to the best of our knowledge, any agreement or other
instrument binding upon such Selling Shareholder or, to the best of our
knowledge, any judgment, order or decree of any governmental body, agency or
court having jurisdiction over such Selling Shareholder, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by such Selling Shareholder of
its obligations under the Underwriting Agreement, the Custody Agreement or the
Power of Attorney of such Selling Shareholder, except such as may be required
by the Securities Act, the NASD or the securities or Blue Sky laws of the
various states in connection with offer and sale of the Shares.

 

3.             To the best of our knowledge, each of the Selling
Shareholders has valid title to the Shares to be sold by such Selling
Shareholder and the legal right and power, and all authorization and approval
required by law, to enter into the Underwriting Agreement, the Custody
Agreement and the Power of Attorney of such Selling Shareholder and to sell,
transfer and deliver the Shares to be sold by such Selling Shareholder.

 

4.             The Custody Agreement and the Power of Attorney of each
Selling Shareholder have been duly authorized, executed and delivered by or on
behalf of such Selling Shareholder and are valid and binding agreements of such
Selling Shareholder, except as rights to indemnification thereunder may be
limited by applicable law and except as the enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles.

 

5.             Assuming that the Underwriters purchase the Shares which
are sold by each Selling Shareholder pursuant to the Underwriting Agreement for
value, in good faith and without notice of any adverse claim, the delivery of
such Shares pursuant to the Underwriting Agreement will pass title to such
Shares free and clear of any security interests, claims, liens, equities and
other encumbrances.

 

 

 

 

 

EXHIBIT D

 

FORM OF LOCK-UP AGREEMENT

 

                       ,
2003

 

 

Thomas Weisel Partners LLC

U.S. Bancorp Piper Jaffray Inc.

Adams, Harkness & Hill, Inc.

Craig-Hallum Capital Group, Inc.

As Representatives of the several Underwriters

c/o Thomas Weisel Partners LLC

One Montgomery Street, Suite 3700

San Francisco, California 94104

 

RE: Lock-Up Agreement (the “Agreement”)

 

Ladies and Gentlemen:

 

The undersigned is an owner of record or beneficially
of certain shares of Common Stock, par value $________ per share (the “Common Stock”),
of Select Comfort Corporation, a Minnesota Corporation (the “Company”).
The undersigned understands that you, as representatives (the “Representatives”),
propose to enter into an Underwriting Agreement on behalf of the several
Underwriters named in Schedule A to such agreement (collectively, the “Underwriters”),
with the Company and certain Selling Shareholders providing for a public
offering of the Common Stock of the Company pursuant to a Registration
Statement on Form S-3 to be filed with the Securities and Exchange Commission
(the “Offering”).
The undersigned recognizes that the Offering will be of benefit to the
undersigned and will benefit the Company. The undersigned acknowledges that you
and the other Underwriters are relying on the representations and agreements of
the undersigned contained in this letter in carrying out the Offering and in
entering into underwriting arrangements with the Company and such Selling
Shareholders with respect to the Offering.

 

To induce the Underwriters that may participate in the
Offering to continue their efforts in connection with the Offering, the
undersigned hereby agrees that, without the prior written consent of Thomas
Weisel Partners (which consent may be withheld in its sole discretion), it will
not, during the period commencing on the date hereof and ending 90 days after
the date of the final prospectus relating to the Offering (the “Prospectus”),
(1) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (2) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. In addition,
the undersigned agrees that, without the prior written consent of Thomas Weisel
Partners (which consent may be withheld in its sole discretion), it will not,
during the period commencing on the date hereof and ending 90 days after the
date of the Prospectus, make any demand for or exercise any right with respect
to, the registration of any shares of Common Stock or any security convertible
into or exercisable or exchangeable for Common Stock. With respect to the
Offering, the undersigned waives any registration rights relating to
registration under the Securities Act of any Common Stock owned either of
record or beneficially by the undersigned, including any rights to receive
notice of the Offering.

 

 

 

 

The foregoing restrictions are expressly agreed to
preclude the undersigned from engaging in any hedging or other transaction
which is designed to or reasonably expected to lead to or result in a sale or
disposition of the Common Stock even if such Common Stock would be disposed of
by someone other than the undersigned. Such prohibited hedging or other
transactions would include without limitation any short sale or any purchase,
sale or grant of any right (including without limitation any put option or put
equivalent position or call option or call equivalent position) with respect to
any of the Common Stock or with respect to any security that includes, relates
to, or derives any significant part of its value from such Common Stock.

 

Notwithstanding the foregoing, the undersigned may
transfer shares of Common Stock (i) as a bona fide gift or gifts, provided that
the donee or donees thereof agree to be bound by the restrictions set forth
herein, (ii) to any trust for the direct or indirect benefit of the undersigned
or the immediate family of the undersigned, provided that the trustee of the
trust agrees to be bound by the restrictions set forth herein, and provided
further that any such transfer shall not involve a disposition for value, (iii)
to the Underwriters pursuant to the Underwriting Agreement, or (iv) in
transactions relating to shares of Common Stock acquired by the undersigned in
open market transactions after the completion of the Offering. For purposes of
this Agreement, “immediate family” shall mean any relationship by blood,
marriage or adoption, not more remote than first cousin. In addition,
notwithstanding the foregoing, if the undersigned is a corporation, business
trust, association, limited liability company, partnership, limited liability
partnership or other entity (collectively, the “Entities” or individually,
the “Entity”),
the undersigned may transfer the capital stock of the Company to any Entity
which is directly or indirectly controlled by, or is under common control with
the undersigned; provided, however, that in any such case, it shall be a
condition to the transfer that the transferee execute an agreement stating that
the transferee is receiving and holding such capital stock subject to the
provisions of this Agreement and there shall be no further transfer of such
capital stock except in accordance with this Agreement, and provided further
that any such transfer shall not involve a disposition for value.

 

The undersigned understands that whether or not the
Offering actually occurs depends on a number of factors, including stock market
conditions. The Offering will only be made pursuant to an Underwriting
Agreement, the terms of which are subject to negotiation among the Company and
the Underwriters.

 

The undersigned agrees and consents to the entry of
stop transfer instructions with the Company’s transfer agent and registrar
against the transfer of shares of Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock held by the undersigned except
in compliance with the foregoing restrictions.

 

This agreement is irrevocable and will be binding on
the undersigned and the respective successors, heirs, personal representatives,
and assigns of the undersigned.

 

	
  Very truly yours,

  
	
   

  
	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
  (Address)

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