EXHIBIT 10.1
CONSULTING AGREEMENT
THIS AGREEMENT is effective as of May 4, 1999 between Select Comfort
Corporation, a Minnesota corporation (the "Company"), and Xxxxxxxx X. Xxxxxx
(the "Consultant").
WHEREAS, the Consultant has been nominated for election to serve as a
member of the Board of Directors of the Company (the "Board") with a term
expiring at the 2002 annual shareholders' meeting; and
WHEREAS, the Company also desires to engage the Consultant to perform
certain consulting and strategic advisory services in order to benefit from the
Consultant's management experience and abilities, and the Consultant desires to
accept such engagement, all upon the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and the Consultant, each intending to be legally bound, agree as
follows:
1. ENGAGEMENT AND DUTIES.
(a) BOARD SERVICE. The Consultant agrees to serve as a member of the Board
for an initial term commencing at the 1999 annual shareholders' meeting and
expiring at the 2002 annual shareholders' meeting or until his successor
shall have been duly elected and qualified, subject to the earlier
resignation of the Consultant at his discretion. The Company anticipates
that the Board will have four regularly scheduled meetings per year, one or
two of which per year will be held in California.
(b) CONSULTING AND STRATEGIC ADVISORY SERVICES. Subject to all of the terms
and conditions of this Agreement, the Company agrees to engage the
Consultant to provide the Company with various consulting and strategic
advisory services as described herein and the Consultant agrees to accept
such engagement. During the term of this Agreement, the Consultant agrees
to consult with the Board and the Company, and to provide such consulting
and strategic advisory services to the Board and the Company as are
consistent with the Consultant's expertise and experience, including
without limitation, consulting and strategic advisory services with respect
to: (i) overall strategic direction, (ii) acquisitions and new business
development, (iii) corporate marketing and brand development and (iv)
organizational structure and development, all as may be reasonably
requested and further defined by the Board and agreed to by the Consultant.
(c) TERM. The term of this Agreement will commence on the date of execution
and delivery of this Agreement by each of the parties hereto and continue
through the Company's annual shareholders' meeting in 2001.
(d) TIME COMMITMENT. During the first year of the term of this Agreement
expiring at the Company's annual shareholders' meeting in 2000, the
Consultant agrees to devote up to twelve (12) days per semester, including
reasonable travel time, to the performance
of the services provided for in this Agreement. During the second year of
the term of this Agreement expiring at the Company's annual shareholders'
meeting in 2001, the Consultant agrees to devote up to six (6) days per
semester, including reasonable travel time, to the performance of the
services provided for in this Agreement. Time spent in performance of
duties as a director shall be deemed to be time devoted to the Consultant's
duties hereunder. Time in excess of the foregoing base time commitment, as
requested by the Company and on an as available basis for the Consultant,
will be compensated at $7,500 per day. Meeting and travel times are subject
to reasonable advance notice. Participation in Board meetings by telephone
conference will be allowed when necessary.
(e) NATURE OF RELATIONSHIP; AUTHORITY. The services to be rendered by the
Consultant to the Company pursuant to this Agreement will be as an
independent contractor, and this Agreement does not make the Consultant an
employee, agent or legal representative of the Company for any purpose
whatsoever, including without limitation participation in any benefits or
privileges given or extended by the Company to its employees. No right or
authority is granted to the Consultant to assume or create any obligation
or responsibility, express or implied, on behalf of or in the name of the
Company. The Company will not withhold from the amounts paid to the
Consultant under this Agreement for any federal or state taxes, and the
Consultant agrees that he will pay all taxes due on such amounts paid.
(f) OTHER ENGAGEMENTS. Notwithstanding anything to the contrary contained
in this Agreement, other than Section 5 hereof, nothing shall be construed
to limit the ability of the Consultant to consult for or serve on the Board
of Directors of such other corporations, trade associations, charitable
organizations or other entities as the Consultant shall from time to time
deem appropriate and to engage in such other activities as the Consultant
shall reasonably deem not to be in conflict with his duties to the Company.
2. TERMINATION. Subject to the respective continuing obligations of the
Company and the Consultant under Sections 4, 5 and 6 of this Agreement:
(a) This Agreement may be terminated by the Company immediately upon
written notice to the Consultant "for cause," with the basis for
termination specified in such notice. For purposes of this Agreement, "for
cause" will mean (i) dishonesty, fraud, gross misrepresentation,
embezzlement or material and deliberate injury or attempted injury, in each
case related to the Company or its business, (ii) any unlawful or criminal
activity of a serious nature, (iii) any willful breach of duty, habitual
neglect of duty or unreasonable job performance, or (iv) a material breach
of any provision of this Agreement.
(b) This Agreement may be terminated by the Company or the Consultant upon
not less than ninety (90) days prior written notice without cause.
(c) This Agreement will be automatically terminated upon the death of the
Consultant.
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3. COMPENSATION.
(a) CASH COMPENSATION FOR BOARD AND COMMITTEE MEETINGS. The Consultant will
receive the cash compensation per Board meeting attended in person and per
Board Committee meeting attended in person as is fixed from time to time by
the Board of Directors for payment to non-employee directors of the
Company, which compensation is currently $3,500 per Board meeting and $500
per Board Committee meeting.
(b) MONTHLY RETAINER. In consideration of the Consultant's services under
this Agreement, the Company will pay the Consultant a retainer of $8,333
per month payable on the 15th day of each month commencing May 15, 1999.
(c) STOCK OPTIONS. In addition to the cash compensation and monthly
retainer described above, and subject to the terms and conditions set forth
below, the Consultant will be entitled to receive non-qualified stock
options (i.e., options that are not intended to be incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended) as follows:
(i) BOARD SERVICE OPTIONS. In consideration of the Consultant's
service on the Board, the Consultant will receive non-qualified stock
options to purchase fifteen thousand (15,000) shares of the Common
Stock of the Company at an exercise price equal to the average of the
high and low trading prices of the Company's Common Stock on the date
of the Consultant's election to the Board of Directors, which options
will become exercisable in equal increments of one-twenty-fourth
(1/24) of such number of options at the end of each of the first
twenty-four (24) months of the Consultant's term of service on the
Board of Directors so long as the Consultant continues to serve on the
Board. The options provided under this Section 3(c)(i) that become
exercisable will remain exercisable for a minimum period of five (5)
years from the date hereof, regardless of continuing service on the
Board, and thereafter, if the Consultant continues to serve on the
Board beyond such 5-year period, will remain exercisable until the
earlier of (A) ninety (90) days after the Consultant ceases to serve
on the Board or (B) ten (10) years from the date hereof.
(ii) CONSULTING SERVICES OPTIONS. In consideration of the consulting
services to be provided by the Consultant hereunder, the Consultant
will receive non-qualified stock options to purchase sixty thousand
(60,000) shares of the Common Stock of the Company at an exercise
price of $15.38 per share, which options will become exercisable in
equal increments of one-twenty-fourth (1/24) of such number of options
at the end of each of the first twenty-four (24) months of the term of
this Agreement so long as the Consultant continues to serve as a
consultant to the Company. The options provided under this Section
3(c)(ii) that become exercisable will remain exercisable for a minimum
period of five (5) years from the date hereof, regardless of
continuing service as a consultant to the
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Company, and thereafter, if the Consultant continues to serve as a
consultant to the Company beyond such 5-year period, will remain
exercisable until the earlier of (A) ninety (90) days after the
Consultant ceases to serve as a consultant to the Company or (B) ten
(10) years from the date hereof.
(iii) ACCELERATION OF VESTING UPON A CHANGE IN CONTROL. Upon a "Change
in Control," as defined in the Company's 1997 Stock Incentive Plan, if
the Consultant remains engaged as a director (in the case of the
options provided under Section 3(c)(i) above) or consultant to the
Company (in the case of the options provided under Section 3(c)(ii)
above) immediately prior to such Change in Control, all of the
foregoing options that have been provided under Sections 3(c)(i) or
Section 3(c)(ii) above, as the case may be, and remain outstanding as
of the date of such Change in Control will become immediately
exercisable and will remain exercisable until the end of the 10-year
term of such options, regardless of whether the Consultant continues
to serve on the Board or as a consultant to the Company.
(iv) DOCUMENTATION OF STOCK OPTIONS. All of the foregoing options will
be evidenced by the Company's standard form of non-statutory stock
option agreement, except as modified by the terms set forth above,
including standard protection against dilution in the event of any
stock split, stock dividend or similar recapitalization of the
Company.
(c) TRAVEL EXPENSES. The Company will pay or reimburse the Consultant for
first class travel expenses for travel required for the performance of the
Consultant's duties under this Agreement, whether as a member of the Board
or as a consultant, provided that such expenses are incurred and properly
accounted for in accordance with the Company's policies regarding
reimbursement of travel expenses as may be in effect from time to time.
4. CONFIDENTIAL INFORMATION.
(a) "Confidential Information," as used in this Section 6, means
information that is not generally known and that is proprietary to the
Company or that the Company is obligated to treat as proprietary. This
information includes, without limitation:
(i) trade secret or other proprietary information about the Company
and its products; and
(ii) proprietary information concerning any of the Company's past,
current, or possible future products, including (without limitation)
proprietary information about the Company's research, development,
engineering, purchasing, manufacturing, accounting, marketing, selling
or leasing.
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Notwithstanding anything to the contrary contained herein, the term
"Confidential Information" does not include information which (i) is or
becomes available to the public other than as a result of a disclosure by
the Consultant, (ii) was within the Consultant's possession prior to its
being furnished to the Consultant by or on behalf of the Company pursuant
to this Agreement, or (iii) becomes available to the Consultant on a
non-confidential basis from a source other than the Company or its
representatives.
(b) The Consultant will not, either during or after his engagement by the
Company, use or disclose Confidential Information to any person not
authorized by the Company to receive it, except (i) as required in the
performance of the Consultant's duties to the Company, (ii) as required to
enforce this Agreement, or (iii) as otherwise required by law. When the
Consultant's engagement with the Company ends, he will, upon the Company's
request, promptly turn over to the Company all records and any
compositions, articles, devices, apparatus and other items that disclose,
describe or embody Confidential Information, including all copies,
reproductions and specimens of the Confidential Information in his
possession, regardless of who prepared them.
5. COMPETITIVE ACTIVITIES. The Consultant agrees that during the term of
this Agreement and for a period of two (2) years after termination of this
Agreement, regardless of the reason for such termination, he will not alone, or
in any capacity with another firm:
(a) directly or indirectly compete with the Company's business, as the
Company has conducted it during the Consultant's engagement with the
Company, within any state in the United States or any country in which the
Company directly or indirectly markets or services products or provides
services or reasonably plans or intends during Consultant's engagement
period to market or service products or provide services; or
(b) employ or attempt to employ any of the Company's then employees on
behalf of any other entity competing with the Company.
6. NO ADEQUATE REMEDY. The Consultant understands that if he fails to
fulfill his obligations under Sections 4 and 5 of this Agreement, the damages to
the Company would be very difficult to determine. Therefore, in addition to any
other rights or remedies available to the Company at law, in equity or by
statute, the Consultant hereby consents to the specific enforcement by the
Company of Sections 4 and 5 of this Agreement through an injunction or
restraining order issued by an appropriate court.
7. MISCELLANEOUS.
(a) SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by either
party without the other party's prior written consent.
(b) MODIFICATION. This Agreement may be modified or amended only by a
writing signed by each of the parties hereto.
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(c) GOVERNING LAW. The laws of the State of Minnesota will govern the
validity, construction, and performance of this Agreement, without regard
to the conflict of laws provisions of any jurisdictions. Any legal
proceeding related to this Agreement will be brought in an appropriate
Minnesota court, and each of the parties hereto hereby consents to the
exclusive jurisdiction of such courts for this purpose.
(d) CONSTRUCTION. Wherever possible, each provision of this Agreement will
be interpreted so that it is valid under applicable law. If any provision
of this Agreement is to any extent invalid under applicable law in any
jurisdiction, that provision will still be effective to the extent it
remains valid. The remainder of this Agreement also will continue to be
valid, and the entire Agreement will continue to be valid in other
jurisdictions.
(e) NON-WAIVER. No failure or delay by either the Company or the Consultant
in exercising any right or remedy under this Agreement will waive any
provision of the Agreement. Nor will any single or partial exercise by
either the Company or the Consultant of any right or remedy under this
Agreement preclude either of them from otherwise or further exercising
these rights or remedies, or any other rights or remedies granted by any
law or any related document.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will constitute an original, but all of which,
when taken together, will constitute one and the same instrument.
(g) ENTIRE AGREEMENT. This Agreement supersedes all previous and
contemporaneous oral negotiations, commitments, writings and understandings
between the parties hereto concerning the matters in this Agreement,
including, without limitation, any policy or personnel manuals of the
Company or any of its subsidiaries or affiliates.
(h) NOTICES. All notices and other communications required or permitted
under this Agreement will be in writing and hand delivered or sent by
registered first-class mail, postage prepaid, and will be effective upon
receipt, if sent to the following address or such other address as either
party will have notified the other party:
If to the Company: Select Comfort Corporation
0000 Xxxxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: Chief Executive Officer
If to the Consultant: Xxxxxxxx X. Xxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
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IN WITNESS WHEREOF, the Company and the Consultant have executed this
Agreement as of the date first above written.
SELECT COMFORT CORPORATION
By: /s/Xxxxxx X. XxXxxxx
Its: President and Chief Executive Officer
/s/Xxxxxxxx X. Xxxxxx
Xxxxxxxx X. Xxxxxx
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