March 3, 2000
Mr. William R. McLaughlin
1 Morella Close
Virginia Water
Surrey GU254AT
England
Dear Bill:
It is with great pleasure that the Board of Directors of Select Comfort formally
offers you the position as President and Chief Executive Officer of the Company.
We are highly confident that this will be a mutually beneficial relationship for
years to come as you lead the organization to realize its potential.
As we discussed over the phone, the key elements of the compensation offer
include the following:
Salary $500,000 annually, effective at start date
Bonus 0-100% of salary earned during the fiscal year;
bonus for "hitting 2000 earnings plan" will be 75%;
Stock Options 300,000 stock options with exercise prices
established currently according to accounting
regulations; three year vesting with 1/36 monthly;
plus
50,000 performance stock options with a current
exercise price; options will vest when the stock
price exceeds $12.00 per share for 30 consecutive
trading days; plus
100,000 performance stock options with a current
exercise price; options will vest when the stock
price exceeds $24.00 per share for 30 consecutive
trading days; plus
150,000 performance stock options with a current
exercise price; options will vest when the stock
price exceeds $36.00 per share for 30 consecutive
trading days.
Benefits Standard Select Comfort benefits, a summary of
which are attached.
Moving Select Comfort will pay for "normal" moving and
transitional living expenses, including but not
limited to: shipment of household goods and
vehicles; transportation for you and your family;
temporary living for up to five months in MN;
travel for you every 2-3 weeks between MN and
England; travel for two housing visits for your
spouse to MN; and other "normal" expenses which you
inform us about in advance.
Severance If you are terminated by the Board, or if you are
placed in a situation which amounts to constructive
dismissal, you will receive one year's salary as
severance, and the portion of the initial 300,000
stock options which have not previously been
vested, will vest immediately.
Company Ownership If there is a change in company
ownership, as defined by a new owner establishing a
50%+ ownership of the common stock of the Company,
your stock options will vest immediately, and you
will be eligible to receive two years of salary as
severance if dismissed.
Start Date Full-time, the week of March 21st, 2000. Prior
to then, you will be in communication with key
people and reviewing company materials.
I believe those are the critical elements of the offer; if I have inadvertently
left off any issues, please let me know.
Also attached to this letter are some details concerning certain issues you
raised, including:
Benefits summary
D&O insurance summary
Officer's indemnity information
Stock option plan
Sample stock option agreement with an individual
Sample performance stock option agreement with an individual
Officer and Director stock trading policy
We are also putting in a Federal Express envelope detailed benefits'
information, as well as some relocation information.
Please call me this weekend with any questions or issues, or with a positive
answer.
We are looking forward to a long, prosperous and enjoyable relationship. Let's
get started!
Sincerely,
/s/Patrick A. Hopf
Patrick A. Hopf
Chairman of the Board of Select Comfort