UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): FEBRUARY 7, 2005
SELECT COMFORT CORPORATION
(Exact name of registrant as specified in its charter)
MINNESOTA
(State or other jurisdiction of incorporation or organization)
0-25121 41-1597886
(Commission File No.) (IRS Employer Identification No.)
6105 Trenton Lane North, Minneapolis, Minnesota 55442
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(Address of principal executive offices) (Zip Code)
(763) 551-7000
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(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
The Board of Directors of Select Comfort Corporation (the "Company") has
approved the following compensation arrangements relative to our Chief Executive
Officer and the next four most-highly compensated executive officers as of the
end of fiscal 2004 (the "NEOs"):
(a) Payment of Annual Incentive Compensation for Fiscal Year 2004 under the
Company's Executive and Key Employee Incentive Plan
The Company provides annual cash incentive compensation for executive officers
and other employees under the Select Comfort Corporation Executive and Key
Employee Incentive Plan, which plan was previously approved by shareholders.
Consistent with the requirements of this plan, at the beginning of each fiscal
year, the Compensation Committee of the Board of Directors determines:
o The employees by grade level that are eligible to participate in the plan
for the year;
o The quarterly and/or annual performance goal or goals for the year (from
among sales growth and volume, net operating profit, cash flow, earnings per
share, return on capital, and/or return on assets);
o For each eligible employee, (A) the target bonus level as a percentage of
base compensation, (B) the portion of the target bonus level that is based
on achievement of objective company performance goals, and (C) the portion
of the target bonus level, if any, that is based on achievement of objective
individual performance goals; and
o The range of actual bonus payment levels, expressed as percentages of the
target bonus levels, to be paid based on various levels of achievement of
the performance goal or goals for the year.
At the beginning of fiscal 2004, the Compensation Committee: (i) selected
Company-wide net operating profit as the sole performance goal; (ii) maintained
target bonus levels at 75% of base salary for the CEO and 55% of base salary for
senior vice presidents; and (iii) determined, consistent with prior years, that
actual bonus payments may range from 0% to 250% of the target bonus level,
depending on the level of achievement versus Company-wide net operating profit
targets. Consistent with these parameters, the Compensation Committee of the
Board of Directors on February 7, 2005 approved annual bonus payments at 41% of
the target levels, resulting in the following bonus payments to the NEOs for
2004, paid as of February 11, 2005: William R. McLaughlin, Chairman and CEO -
$182,135; Noel F. Schenker, Senior Vice President - $61,336; Keith C. Spurgeon,
Senior Vice President - $60,229; James C. Raabe, Senior Vice President -
$49,025; Mark A. Kimball, Senior Vice President - $48,326.
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(b) Establishment of Performance Goals for 2005 under the Company's Executive
and Key Employee Incentive Plan.
For fiscal year 2005, the Compensation Committee: (i) selected Company-wide net
operating profit as the primary performance goal and unit sales growth as a
secondary performance goal; (ii) maintained target bonus levels at 75% of base
salary for the CEO and 55% of base salary for senior vice presidents; and (iii)
determined, consistent with prior years, that actual bonus payments may range
from 0% to 250% of the target bonus level, depending on the level of achievement
versus performance goals.
(c) Stock Option and Performance Share Awards
Effective as of February 24, 2005, the Compensation Committee approved
the grant of the following stock option and performance share awards to the NEOs
under the Select Comfort Corporation 2004 Stock Incentive Plan, which plan was
previously approved by shareholders.
- ----------------------- ---------------------------- ------------------- -------------------
# of Shares
# of Shares underlying
underlying Stock Performance Share
Name Title Option Grant(1) Award(2)
- ----------------------- ---------------------------- ------------------- -------------------
- ----------------------- ---------------------------- ------------------- -------------------
William R. McLaughlin Chairman & CEO 75,000 12,500
- ----------------------- ---------------------------- ------------------- -------------------
- ----------------------- ---------------------------- ------------------- -------------------
Keith C. Spurgeon Senior Vice President, 18,000 2,500
Sales
- ----------------------- ---------------------------- ------------------- -------------------
- ----------------------- ---------------------------- ------------------- -------------------
James C. Raabe Senior Vice President & CFO 25,000 5,000
- ----------------------- ---------------------------- ------------------- -------------------
- ----------------------- ---------------------------- ------------------- -------------------
Mark A. Kimball Senior Vice President & 20,000 5,000
General Counsel
- ----------------------- ---------------------------- ------------------- -------------------
(1) These stock option grants represent nonqualified stock options with an
exercise price of $20.24 per share, equal to fair market value at the date of
grant, and becoming exercisable in equal increments of 25% of the number of
shares underlying the grant as of each of the first four anniversaries of the
date of grant, subject to continuing service with the Company and subject to the
other applicable terms and conditions of the Select Comfort Corporation 2004
Stock Incentive Plan.
(2) These performance share awards represent grants of restricted stock that are
subject to achievement of performance objectives. The number of shares
underlying each performance share award may be wholly eliminated or increased by
up to 50% depending on the level of achievement against Company-wide net
operating performance objectives in 2005. The number of shares that are
ultimately awarded based on performance in 2005 are then subject to
cliff-vesting at the end of four years from the initial date of grant, subject
to continuing service with the Company and subject to the other applicable terms
and conditions of the Select Comfort Corporation 2004 Stock Incentive Plan.
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(d) Base Salary Levels
The Compensation Committee of the Board of Directors approved,
retroactive to January 30, 2005, the following base salary levels for the NEOs:
- ------------------------------ ----------------------------------- ----------------------------
Name Title Base Salary
- ------------------------------ ----------------------------------- ----------------------------
- ------------------------------ ----------------------------------- ----------------------------
William R. McLaughlin Chairman & CEO $625,000
- ------------------------------ ----------------------------------- ----------------------------
- ------------------------------ ----------------------------------- ----------------------------
Noel F. Schenker Senior Vice President, Marketing $273,000
and New Business Development
- ------------------------------ ----------------------------------- ----------------------------
- ------------------------------ ----------------------------------- ----------------------------
Keith C. Spurgeon Senior Vice President, Sales $276,000
- ------------------------------ ----------------------------------- ----------------------------
- ------------------------------ ----------------------------------- ----------------------------
James C. Raabe Senior Vice President & CFO $245,000
- ------------------------------ ----------------------------------- ----------------------------
- ------------------------------ ----------------------------------- ----------------------------
Mark A. Kimball Senior Vice President & General $235,000
Counsel
- ------------------------------ ----------------------------------- ----------------------------
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SELECT COMFORT CORPORATION
(Registrant)
Dated: March 2, 2005 By: /s/ Mark A. Kimball
---------------------------------
Title: Senior Vice President
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