SELECT COMFORT CORPORATION EXECUTIVE SEVERANCE PAY PLAN
February 2007
SELECT COMFORT CORPORATION EXECUTIVE SEVERANCE PAY PLAN TABLE OF CONTENTS ARTICLE 1 ARTICLE 2 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 ARTICLE 3 3.1 3.2 3.3 3.4 ARTICLE 4 4.1 4.2 4.3 4.4 4.5 4.6 ARTICLE 5 5.1 5.2 ARTICLE 6 6.1 6.2 Name and Purpose Definitions Administrator Affiliate Base Pay Cause Change in Control Code Company Employee Excluded Employee Participant Participating Employer Plan Premium Reimbursement Period Qualified Employee Qualified Employee Category Release Severance Pay Entitlement to Severance Pay Eligible Terminations Terminations Not Covered Release Required Return of Property Amount of Severance Pay Base Amount COBRA Reimbursement Reductions Period of Payment Termination of Severance Pay Death of Participant Administration Administrator Administrator's Discretion Amendment and Termination of Plan Right to Amend or Terminate the Plan Change in Control 1 2 2 2 2 2 2 3 3 3 3 3 4 4 4 4 4 4 4 5 5 5 5 5 6 6 7 7 8 8 8 9 9 9 10 10 10
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ARTICLE 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13
Miscellaneous Provisions Participation by Affiliate No Benefit Accrues Indemnification Specialist's Assistance Benefits Claim Procedure Disputes Company Action Status of Plan No Assignment of Benefits Withholding and Offsets Other Benefits No Employment Rights Created Successors
11 11 11 11 11 11 12 12 12 12 13 13 13 13
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SELECT COMFORT CORPORATION EXECUTIVE SEVERANCE PAY PLAN This instrument sets forth the Select Comfort Corporation Executive Severance Pay Plan, effective as of February 22, 2007. The provisions of this instrument will apply to any Qualified Employee who terminates employment after February 22, 2007. ARTICLE 1 Name and Purpose The name of this Plan is the “Select Comfort Corporation Executive Severance Pay Plan.” Its purpose is to provide severance benefits to certain Qualified Employees whose employment is involuntarily terminated without Cause. Severance Pay is in addition to regular earned pay and benefits for accrued paid time off, if any, payable to Qualified Employees upon separation. As stated in Section 4.4, it is not intended that this Plan be treated as a nonqualified deferred compensation plan subject to Code section 409A.
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ARTICLE 2 Definitions The terms listed in this section shall have the meanings given below. 2.1 Administrator. The Administrator is the person designated under the Plan to perform administrative duties on behalf of the Company or, as the context may require, the individual to whom specific administrative duties have been delegated. 2.2 Affiliate. An Affiliate is the Company or another member of a controlled group of corporations, within the meaning of Code section 1563(a) without regard to Code section 1563(a)(4), that includes the Company, any trade or business that is under common control with the Company, within the meaning of Code section 414(c), any member of an “affiliated service group,” within the meaning of Code section 414(m), of which the Company is a member, or any other organization that, together with the Company, is treated as a single employer pursuant to Code section 414(o) and Treasury Regulations. 2.3 Base Pay.
(A) Base Pay means the Employee’s base salary in effect immediately prior to his or her termination of employment and will exclude any commissions, incentive pay, bonus or other addition to pay. (B) Base Pay includes any amounts by which pay is voluntarily reduced under a Code section 125 cafeteria plan, section 401(k) cash or deferred arrangement or the Select Comfort Executive Investment Plan. 2.4 Cause. Cause means any reason for which an Employee may be subject to discipline under the Company’s or Affiliate’s policies, practices and procedures including, but not limited to, the following: (A) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Affiliate, (B) commission of a felony crime, or commission of any criminal or unlawful activity of any nature or degree in the course of or in relation to Employee's employment, (C) failure to satisfactorily perform the duties of the Employee's employment, if the failure to perform would merit termination under the Company's or Affiliate's usual policy or practice,
(D) any material breach of any employment, service, confidentiality or non-compete agreement entered into with the Company or any Affiliate, or (E) 2.5 violation of the Company's Code of Business Conduct.
Change in Control. A "Change in Control" of the Company shall mean:
(A) the sale, lease, exchange or other transfer of all or substantially all of the assets of the Company (in one transaction or in a series of related transactions) to a corporation that is not controlled by the Company, (B) the approval by the shareholders of the Company of any plan or proposal for the liquidation or dissolution of the Company, or
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(C) a change in control of a nature that would be required to be reported (assuming such event has not been “previously reported”) in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the effective date of the Select Comfort Corporation 2004 Stock Incentive Plan, pursuant to Section 13 or 15(d) of the Exchange Act, whether or not the Company is then subject to such reporting requirement; (D) provided that, without limitation, such a Change in Control shall be deemed to have occurred at such time as (1) any Person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of 50% or more of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors or (2) individuals who constitute the Board of Directors on the effective date of the Select Comfort Corporation 2004 Stock Incentive Plan cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the effective date of the Select Comfort Corporation 2004 Stock Incentive Plan whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors comprising the Board of Directors on the effective date of the Select Comfort Corporation 2004 Stock Incentive Plan (either by a specific vote or by approval of the proxy statement of the Company in w