UPDATE 1-Select Comfort in deal for $10 mln equity investment

* Sterling Partners has right to buy 2.5 mln shares

* Sterling to receive warrants for 2 mln shrs

* Shares rise 11 pct

Oct 5 (Reuters) - Select Comfort Corp (SCSS.O) said it agreed with private equity firm Sterling Partners for an investment of $10 million through June 2010.

Under the terms, Sterling Partners has the right to purchase 2.5 million shares at $4.00 apiece, and will receive warrants to buy 2 million shares at 1 cent each.

Select Comfort said it can require the investment upon securing an acceptable extended credit agreement from its lenders.

With the close of the investment and exercise of the warrants, Sterling Partners will own about 8.9 percent of the company's common stock, Select Comfort said in a statement.

In August, the company's stockholders rejected a proposed sale of 50 million shares to Sterling Partners for $35 million. [ID:nBNG488849]

Shares of the company rose as much as 11 percent to a 19-month high of $5.27 Monday morning on Nasdaq. (Reporting by Abhishek Takle in Bangalore; Editing by Anne Pallivathuckal)