Via Messenger
July 23, 2003
Mr. Scott F. Peterson
6020 Whitney Circle
Shorewood, MN 55331
Dear Scott:
Pursuant to our discussions and correspondence, it is with great pleasure that
we extend you the following offer to join Select Comfort Corporation:
Position: Senior Vice President, Human Resources
Start Date: August 18, 2003
Salary: $188,000
Bonus Eligibility: In accordance with the terms of the management incentive
plan in place for 2003, you will be eligible for a target
bonus of 55% of the base salary actually paid to you in
2003. The actual bonus amount payable is dependent on
Company performance versus plan.
Stock Options: Subject to final approval of our Compensation Committee, we
would grant you options to purchase 100,000 shares of our
common stock, of which 75,000 will vest in equal annual
increments over three years of employment, and 25,000 will
vest upon the earlier of such time as the stock price has
exceeded $34 per share for 30 consecutive trading days or
completion of 5 years of employment. The exercise price of
the stock options will be the average of the high and low
trading prices of the Company's common stock on the date of
grant of the options, which will be on or near your first
day of employment.
Severance: If your employment is terminated by the Company within one
(1) year following a change in control of the Company, or if
you are subject at any time to a termination without cause,
upon the
termination of your employment under such circumstances, and
subject to the execution and delivery to the Company of a
standard release of claims, you will be entitled to receive
one (1) year's base salary as severance compensation, and
the portion of the stock options referred to above which
have not previously been vested, will vest immediately and
remain exercisable for a period not to exceed ninety (90)
days following termination of employment. At your option,
the severance compensation described above will be payable
(a) over a period of one (1) year following termination of
employment in accordance with the Company's normal payroll
schedule, or (b) in a lump sum equal to the present value of
such stream of payments discounted at a capitalization rate
of 10%.
In addition, if such termination occurs more than half-way
through a fiscal year of the Company, and subject to the
execution and delivery to the Company of a standard release
of claims, you will be entitled to receive a pro rata
portion of any bonus payment that is ultimately earned for
such fiscal year, payable at the time such bonus payments
are paid to other eligible employees.
Benefits: You will be eligible for the standard benefits applicable to
director level and above employees. Please see the attached
summary for a description of these benefits. You will be
entitled to a minimum of four (4) weeks of paid vacation
annually.
Transition Specific:We will provide you with a sign-on bonus payment of $12,000
within two weeks of your start date, and this amount will be
deducted from the year-end bonus amount payable under the
management incentive plan described above.
You will be entitled to full participation, on the same
basis as other members of the Senior Management team, in
2004 salary review and long-term incentive programs.
Per our plans, you will be eligible for coverage under our
medical and dental plans as of the first day of the first
full calendar month following 30 days of employment.
We understand that prior to joining our team, you would like to spend time with
the direct reports in the key functional areas of the HR group. We will work
with you to arrange these meetings at mutually convenient times as soon as
practical.
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You should understand that this letter does not constitute a contract of
employment, nor is it to be construed as a guarantee of continuing employment
for any period of time. Employment with Select Comfort is "at will."
Employment with Select Comfort would be conditioned upon your signing our
standard form of Employee Inventions, Confidentiality and Non-Compete Agreement.
We are very excited about your joining our management team.
Please contact me at (763) 551-7007 with any questions you may have.
Sincerely,
/s/ William R. McLaughlin
William R. McLaughlin
President & CEO
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