UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
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Filed by the Registrant
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Filed by a party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under Rule 14a-12
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SELECT COMFORT CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11
(set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify
the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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Dear Shareholders,
Sleep Number’s long-term orientation, mission-driven
culture and focus on our customer’s experience are creating value for our shareholders. Over the past five years we have
invested $425 million to transform the company, establish our innovation leadership and strengthen our competitive advantages.
The coordinated investments we have made in digital capabilities, stores, products, technologies and infrastructure have made us
a stronger competitor with superior products and customer experiences. These investments culminate in 2017 as we launch the most
significant innovation in our thirty-year history: Sleep Number 360™ smart beds.
We are capitalizing on momentous consumer trends –
ranging from what consumers value in their lives to how they shop and what they expect from brands. This is an exciting time for
companies like Sleep Number that have digital at their core and the ability to connect with customers from that first engagement
to a life-long relationship. Our consumer innovation strategy has positioned us to succeed in this digitalized, fast-changing world.
We believe sleep is the center of a healthy mind, body
and soul – and that great sleep should be smart and effortless. Our Sleep Number 360 smart beds sense what a person needs
for their best sleep and automatically adjust the bed’s firmness, comfort and support – their Sleep Number® setting
– to keep each person sleeping blissfully, all night long. The Sleep Number 360 smart bed is powered by SleepIQ® technology,
which tracks your biometric sleep data, provides individualized sleep insights and connects to your apps and smart devices. The
bed can even warm your feet to help you fall asleep faster, and can help relieve common, mild snoring. Our new product line was
recognized with 13 awards at CES this year – including being named the Best of Innovation Honoree in the Home Appliances
category. The demand potential and pricing power associated with our Sleep Number 360 smart beds – and our direct-to-consumer
distribution – are significant growth drivers for our brand.
Our innovations, new technology platforms and improved
operations are now delivering greater efficiency and a superior customer experience. We expect accelerated financial returns and
free cash flow through our more efficient vertical business model. At our November 2016 Investor Conference, we outlined our multi-year
path to achieve our goal of $2.75 in earnings per share by 2019.
The year 2016 was one of progress and recovery for Sleep
Number. We delivered 8% net sales growth in fiscal 2016 and a 13% increase in earnings per share, despite a worsening consumer
environment in the back half of the year. We generated a 40% increase in operating cash flows to a record $152 million, increased
our store base 11%, and returned $125 million of cash to shareholders through share repurchases. Our full-year ROIC of 12.2% exceeded
our weighted average cost of capital by 54%.
Following our ERP system implementation recovery, our
customer experience and operational improvements – including in-store scheduling of home delivery and improved inventory
control – led to margin expansion. Operating our vertically integrated business on one technology platform helps us achieve
greater customer convenience, efficiency and scalability.
In one of our most demanding years ever, our talented
team put forth extraordinary effort and remained engaged and committed. Their dedication to our mission of improving lives by
individualizing sleep experiences is the reason we were again ranked “Highest in Customer Satisfaction with Mattresses”
by J.D. Power in 2016 – the second year in a row.
We are all excited about changing lives with our revolutionary
Sleep Number 360 smart beds and the opportunities we have to expand our market share and leverage our business model. We are executing
the consumer innovation strategy that our board of directors and management team believe will create superior shareholder value
for the long term. With our benefit-driven products – and a more convenient, connected customer experience – we expect
to become a more broadly relevant and scalable brand in 2017 and beyond. We envision a future where everyone will sleep on a smart
bed!
On behalf of all of us at Sleep Number, we thank our
shareholders for your ongoing support and confidence in our future.
Sleep well, dream big,
Shelly Ibach, Sleep Number® setting 40, average SleepIQ®
score of 82
President and Chief Executive Officer
9800
59
th
Avenue North
Plymouth, Minnesota 55442
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 17, 2017
TO THE SHAREHOLDERS OF SELECT COMFORT CORPORATION:
Select Comfort Corporation will hold its
Annual Meeting of Shareholders at
8:30 a.m.
Central Time on
Wednesday, May 17, 2017
. The meeting will be conducted
completely as a virtual meeting via the Internet at
www.virtualshareholdermeeting.com/scss2017
. The purposes of the meeting
are to:
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Elect four persons to serve as directors for three-year terms;
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Cast an advisory vote to approve executive compensation;
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Cast an advisory vote to approve the frequency of future advisory votes on executive compensation; and
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Cast an advisory vote to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting
firm for the 2017 fiscal year ending December 30, 2017.
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Shareholders of record at the close of business
on March 21, 2017 will be entitled to vote at the meeting and any adjournments thereof. Your vote is important. Please be sure
to vote your shares in favor of the Board of Directors’ recommendations in time for our May 17, 2017 meeting date. Your attention
is directed to the Proxy Statement for a more complete statement of the matters to be considered at the meeting.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDERS’ MEETING TO BE HELD ON MAY 17, 2017: The Proxy
Statement and Annual Report for the year ended December 31, 2016 and related materials are available at
www.sleepnumber.com/investor-relations
.
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By Order of the Board of Directors,
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Mark A. Kimball
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Senior Vice President,
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Chief Legal and Risk Officer and Secretary
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April
4
,
2017
Plymouth, Minnesota
TABLE OF CONTENTS
As used in this Proxy Statement, the terms “we,”
“us,” “our,” the “company” and “Select Comfort” mean Select Comfort Corporation
and its subsidiaries and the term “common stock” means our common stock, par value $0.01 per share.
9800 59
th
Avenue North
Plymouth, Minnesota 55442
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
May 17, 2017
FREQUENTLY ASKED QUESTIONS ABOUT THE
MEETING AND VOTING
This Proxy Statement is furnished in connection
with the solicitation of proxies by the Board of Directors of Select Comfort Corporation for use at the 2017 Annual Meeting of
Shareholders.
When is the Annual Meeting and who may attend?
The Annual Meeting will be held at 8:30
a.m. Central Time on Wednesday, May 17, 2017. The meeting will be conducted completely as a virtual meeting via the Internet. Shareholders
may attend the meeting, vote their shares and submit questions electronically during the meeting via live webcast by visiting
www.virtualshareholdermeeting.com/scss2017
.
Our 2017 Annual Meeting will be held completely online to enable greater participation and improved communication, and to provide
cost savings for shareholders and the company. Shareholders will need the 16-digit control number included in Notice of Internet
Availability of Proxy Materials, on the proxy card or in the instructions that accompanied the proxy materials to enter the annual
meeting and to vote their shares at the meeting.
Who
is entitled to vote?
Shareholders of record at the close of business
on March 21, 2017 (the “Record Date”) are entitled to vote at the meeting. As of the Record Date, there were 41,804,642
shares of common stock outstanding. Each share is entitled to one vote on each matter to be voted on at the Annual Meeting. Shareholders
are not entitled to cumulative voting rights.
What is the difference
between “Shareholders of Record” and “Beneficial Owners”?
If
your shares are registered in your name in the records maintained by our stock transfer agent, you are a “Shareholder of
Record.” If you are a Shareholder of Record, notice of the meeting was sent directly to you.
If
your shares are held in the name of your bank, broker, nominee or other holder of record, your shares are held in “street
name” and you are considered the “Beneficial Owner.” Notice of the meeting has been forwarded to you by your
bank, broker, nominee or other holder of record, who is considered, with respect to those shares, the Shareholder of Record. As
the Beneficial Owner, you have the right to direct your bank, broker, nominee or other holder of record how to vote your shares
by using the voting instructions you received.
If
you are a Beneficial Owner and you do not give instructions to the organization holding your shares, then that organization cannot
vote your shares and the shares held by that organization will not be considered as present and will not be entitled to vote on
any matter to be considered at the Annual Meeting.
How
can I receive proxy materials?
We are furnishing proxy materials to our
shareholders primarily via the Internet, instead of mailing a full set of printed proxy materials to each shareholder. On or about
April 4, 2017, we will begin mailing to certain of our shareholders a Notice of Internet Availability of Proxy Materials (the “Shareholder
Notice”), which includes instructions on (i) how to access our Proxy Statement and Annual Report on the Internet, (ii) how
to request that a printed copy of these proxy materials be forwarded to you, and (iii) how to vote your shares. If you receive
the Shareholder Notice, you will not receive a printed copy of the proxy materials unless you request a printed copy by following
the instructions in the Shareholder Notice. All other shareholders will be sent the proxy materials by mail beginning on or about
April 4, 2017.
Requests for printed copies of the proxy
materials can be made by Internet at http://www.proxyvote.com, by telephone at 1-800-579-1639 or by email at sendmaterial@proxyvote.com
by sending a blank email with your control number in the subject line.
What does it mean if
I receive more than one proxy card or Shareholder Notice?
If
you received more than one proxy card or Shareholder Notice, it generally means you hold shares registered in more than one account.
If you received a paper copy of the proxy statement and you choose to vote by mail, sign and return each proxy card. If you choose
to vote by Internet or telephone, vote once for each proxy card and/or Shareholder Notice you receive. If you have received more
than one Shareholder Notice, vote once for each Shareholder Notice that you receive.
What are shareholders
being asked to vote on?
There
are four items to be voted on at the meeting:
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The
election of four persons to serve as directors for three-year terms;
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An
advisory vote to approve executive compensation;
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An
advisory vote to approve the frequency of future advisory votes on executive compensation;
and
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An
advisory vote to ratify the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the fiscal year ending December 30, 2017.
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What
are my voting choices?
For
proposal 1, the election of directors, you may:
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Vote
in favor of all nominees;
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Vote
in favor of specific nominees and withhold a favorable vote for specific nominees; or
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Withhold
authority to vote for all nominees.
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For
each of proposal 2 (the advisory vote to approve executive compensation) and proposal 4 (the advisory vote to ratify the selection
of independent auditors) you may:
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Vote
in favor of the proposal;
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Vote
against the proposal; or
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Abstain
from voting on the proposal.
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For
proposal 3 (the advisory vote to approve the frequency of future advisory votes on executive compensation), you may:
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Vote
in favor of every one year (annual vote);
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Vote
in favor of every two years (biennial vote);
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Vote
in favor of every three years (triennial vote); or
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Abstain
from voting on the proposal.
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How
does the Board recommend that I vote?
Select
Comfort’s Board unanimously recommends that you vote your shares:
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“For”
the election of each of the nominees for director nominated herein by the Board of
Select Comfort;
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“For”
the advisory vote to approve executive compensation;
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For
every “one year”
as the frequency of future advisory votes on executive
compensation; and
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“For”
the advisory vote to ratify the selection of Deloitte & Touche LLP as our independent
registered public accounting firm for the fiscal year ending December 30, 2017.
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How
are votes counted?
If
you are a Shareholder of Record and grant a proxy by telephone or Internet without voting instructions, or sign and submit your
proxy card without voting instructions, your shares will be voted “FOR” each director nominee, “FOR” every
“one year” on the frequency of future advisory votes on executive compensation and “FOR” each of the other
proposals outlined above in accordance with the recommendations of the Board.
Proxies
marked “Withhold” on proposal 1 (election of directors), or “Abstain” on proposal 2 (the advisory vote
to approve executive compensation) or proposal 4 (the advisory vote to ratify the selection of independent auditors), will be
counted in determining the total number of shares entitled to vote on such proposals and will have the effect of a vote “Against”
a director or a proposal. If you “Abstain” from voting on proposal 3 (the advisory vote to approve the frequency of
future advisory votes on executive compensation), the abstention will not have an effect on the outcome of the vote.
If
you are a Beneficial Owner and hold your shares in “street name,” such as through a bank, broker or other nominee,
you generally cannot vote your shares directly and must instead instruct the broker how to vote your shares using the voting instruction
form provided by the broker.
What
is a Broker Non-Vote?
If
a Beneficial Owner does not provide timely instructions, the broker will not have the authority to vote on any non-routine proposals
at the Annual Meeting, which includes proposals 1, 2 and 3. Brokers will have discretionary authority to vote on proposal 4 because
the ratification of the appointment of independent auditors is considered a routine matter. If the broker votes on proposal 4
(the advisory vote to ratify the selection of independent auditors), but does not vote on another proposal because the broker
does not have discretionary voting authority and has not received instructions from the Beneficial Owner, this results in a “broker
non-vote” with respect to such proposal(s).
Broker
non-votes on a matter may be counted as present for purposes of establishing a quorum for the meeting, but are not considered
entitled to vote on that particular matter. Consequently, broker non-votes generally will have no effect on the outcome of the
matter. However, if and to the extent that broker non-votes are required to establish the presence of a quorum at the Annual Meeting,
then any broker non-votes will have the same effect as a vote “Withheld” or “Against” any matter that
requires approval of a majority of the minimum number of shares required to constitute a quorum for the transaction of business
at the Annual Meeting.
What
is the vote required to approve each proposal?
Assuming
that a quorum is present to vote on each of the proposals, proposals 1, 2, and 4 before the shareholders will require the affirmative
vote of holders of a majority of the shares represented and entitled to vote in person or by proxy on such action. For proposal
3, the choice that receives the most votes of the shares represented and entitled to vote in person or by proxy will be considered
the preference of the company’s shareholders.
Please
note that each of proposals 2, 3 and 4 are “advisory” votes, meaning that the shareholder votes on these items are
for purposes of enabling shareholders to express their point of view or preference on these proposals, but are not binding on
the company or its board of directors and do not require the company or its board of directors to take any particular action in
response to the shareholder vote. The Board intends to consider fully the votes of our shareholders in the context of any further
action with respect to these proposals.
What
constitutes a “quorum,” or how many shares are required to be present to conduct business at the Annual Meeting?
The
presence, in person or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to vote (i.e.,
at least 20,902,322 shares) will constitute a quorum for the transaction of business at the Annual Meeting. In general, shares
of common stock represented by a properly signed and returned proxy card or properly voted by telephone or via the Internet will
be counted as shares represented and entitled to vote at the Annual Meeting for purposes of determining a quorum, without regard
to whether the card reflects abstentions and withhold votes (or is left blank) or reflects a “broker non-vote” on
a matter.
How
do I vote my shares?
If
you are a
Shareholder of Record
as of the record date, you can vote your shares in any of the following ways:
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Over
the
telephone
by calling the toll-free number on the proxy card;
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Over
the
Internet
by following the instructions on the proxy card;
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Through
the
mail
– if you received a paper copy of the proxy statement, you may
vote by mail by signing, dating and mailing your proxy card in the envelope provided;
or
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Over
the
Internet
during the 2017 annual meeting by going to www.virtualshareholdermeeting.com/scss2017
and using your 16-digit control number (included on the Notice of Internet Availability
of Proxy Materials, on your proxy card or in the instructions that accompanied your proxy
materials).
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The
telephone and Internet voting procedures have been set up for your convenience. We encourage you to save corporate expense by
submitting your vote by telephone or Internet. The procedures have been designed to authenticate your identity, to allow you to
give voting instructions, and to confirm that those instructions have been recorded properly.
If
you are a
Beneficial Owner
of shares held in “street name,” you must vote your shares in the manner prescribed
by your bank, broker or other nominee. Your bank, broker or other nominee has provided notice by email or a printed voting instruction
card for you to use in directing the bank, broker or nominee how to vote your shares. Telephone and Internet voting are also encouraged
for Beneficial Owners who hold their shares in street name.
Beneficial
Owners should be aware that brokers are not permitted to vote shares on non-routine matters, including the election of directors
or matters related to executive compensation, without instructions from the Beneficial Owner. As a result, brokers are not permitted
to vote shares on proposal 1 (election of directors), proposal 2 (the advisory vote to approve executive compensation) or proposal
3 (the advisory vote to approve the frequency of future advisory votes on executive compensation) without instructions from the
Beneficial Owner. Therefore, Beneficial Owners are advised that if they do not timely provide instructions to their bank, broker
or other holder of record with respect to proposals 1, 2 and/or 3, their shares will not be voted in connection with such proposals.
Proposal 4 (the advisory vote to ratify the selection of independent auditors) is considered a routine matter and, as such, brokers
will still be able to vote shares held in brokerage accounts with respect to proposal 4, even if they do not receive instructions
from the Beneficial Owner.
Your
vote is important. Whether or not you plan to attend the meeting, we urge you to vote your shares in time for our May 17, 2017
meeting date.
May
I revoke a proxy and change my vote?
Yes.
Any shareholder giving a proxy may revoke it at any time prior to its use at the Annual Meeting by:
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Delivering
written notice of revocation to the Corporate Secretary before 6:00 p.m., Eastern Daylight
Time, on May 15, 2017;
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Submitting
to the Corporate Secretary before 6:00 p.m., Eastern Daylight Time, on May 15, 2017,
a properly signed proxy card bearing a later date than the prior proxy card;
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Voting
again by Internet or telephone before 11:59 p.m., Eastern Daylight Time, on May 16, 2017;
or
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Participating
in the Annual Meeting and voting your shares electronically during the Annual Meeting.
Participation in the Annual Meeting will not cause your previously granted proxy to be
revoked unless you specifically make that request.
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Can
I receive future proxy materials electronically?
Yes.
If you are a Shareholder of Record and you received a paper copy of the proxy materials, you may elect to receive future proxy
statements and annual reports online as described in the next paragraph. If you elect this feature, you will receive an email
message notifying you when the materials are available, along with a web address for viewing the materials. If you received this
proxy statement electronically, you do not need to do anything to continue receiving proxy materials electronically in the future.
Whether
you are a Shareholder of Record or a Beneficial Owner holding shares through a bank or broker, you can enroll for future electronic
delivery of proxy statements and annual reports by following these steps:
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Go
to our website at
www.sleepnumber.com
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In
the
Investor Relations
section, click on
Electronic Fulfillment
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Click
on the check-marked box next to the statement
“Shareholders can register for
electronic delivery of proxy-related materials.”
; and
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Follow
the prompts to submit your request to receive proxy materials electronically.
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Generally,
banks and brokers offering this choice require that shareholders vote through the Internet in order to enroll. Beneficial Owners
whose bank or broker is not included in this website are encouraged to contact their bank or broker and ask about the availability
of electronic delivery. As is customary with Internet usage, the user must pay all access fees and telephone charges. You may
view this year’s proxy materials at
www.proxyvote.com.
What
are the costs and benefits of electronic delivery of Annual Meeting materials?
There
is no cost to you for electronic delivery of annual meeting materials. You may incur the usual expenses associated with Internet
access as charged by your Internet service provider. Electronic delivery ensures quicker delivery, allows you to view or print
the materials at your computer and makes it convenient to vote your shares online. Electronic delivery also conserves natural
resources and saves the company printing, postage and processing costs.
Who
bears the proxy solicitation costs?
The
proxies being solicited hereby are being solicited by the Board of Directors of the company. The cost of preparing and mailing
the notice of Annual Meeting, this proxy statement and the accompanying proxy and the cost of solicitation of proxies on behalf
of the Board of Directors will be borne by the company. The company may solicit proxies by mail, internet (including by email,
Twitter, the use of our investor relations website and other online channels of communication), telephone, facsimile and other
electronic channels of communication, town hall meetings, personal interviews, press releases, and press interviews. Our directors,
officers and regular employees may, without compensation other than their regular compensation and the reimbursement of expenses,
solicit proxies by telephone or personal conversation. In addition, we may reimburse brokerage firms and others for their reasonable
and documented expenses incurred in connection with forwarding proxy materials to the Beneficial Owners of our common stock.
STOCK
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The
following table shows the beneficial ownership of Select Comfort common stock as of February 25, 2017 (unless another date is
indicated) by (a) each director, each nominee for director recommended by our Board and each executive officer named in the Summary
Compensation Table on page 50 of this Proxy Statement, (b) all directors and executive officers as a group and (c) each person
known by us to be the Beneficial Owner of more than 5% of Select Comfort common stock.
Title
of Class
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Name
and Address of Beneficial Owner
(1)
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Amount
and
Nature of
Beneficial
Ownership
(2)
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Percent
of
Class
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Common
Stock
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Daniel
I. Alegre
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15,120
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*
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Common
Stock
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Andrea
L. Bloomquist
(3)
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100,800
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*
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Common
Stock
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David
R. Callen
(4)
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40,108
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*
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Common
Stock
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Andrew
P. Carlin
(3)
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96,588
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*
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Common
Stock
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Stephen
L. Gulis, Jr.
(5)
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119,783
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*
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Common
Stock
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Michael
J. Harrison
(5)
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37,590
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*
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Common
Stock
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Shelly
R. Ibach
(6)
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388,551
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*
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Common
Stock
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Suresh
Krishna
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24,405
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*
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Common
Stock
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Brenda
J. Lauderback
(5)
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65,549
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*
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Common
Stock
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Barbara
R. Matas
(5)
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1,659
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*
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Common
Stock
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Kathleen
L. Nedorostek
(5)
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36,619
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*
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Common
Stock
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Vicki
A. O’Meara
|
—
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*
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Common
Stock
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Michael
A. Peel
(5)
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108,629
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*
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Common
Stock
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Jean-Michel
Valette
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273,141
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*
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Common
Stock
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All
directors and executive officers as a group (19 persons)
(7)
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1,746,214
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4.0%
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Common
Stock
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Vulcan
Value Partners, LLC
(8)
2801
Highway 280 South, Suite 300
Birmingham, Alabama 35223
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6,033,958
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14.3%
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Common
Stock
|
BlackRock,
Inc.
(9)
55
East 52
nd
Street
New
York, New York 10055
|
5,232,647
|
12.4%
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Common
Stock
|
Disciplined
Growth Investors, Inc.
(10)
150
South Fifth Street, Suite 2550
Minneapolis,
Minnesota 55402
|
3,776,347
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8.9%
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Common
Stock
|
The
Vanguard Group, Inc.
(11)
100
Vanguard Blvd.
Malvern,
Pennsylvania 19355
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3,753,670
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8.9%
|
Common
Stock
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FMR
LLC
(12)
245
Summer Street
Boston,
Massachusetts 02210
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2,768,173
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6.5%
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* Less than 1% of the outstanding
shares.
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(1)
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The
business address for each of the directors and executive officers of the company is c/o
Select Comfort Corporation, 9800 59
th
Avenue North, Plymouth, Minnesota 55442.
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(2)
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The
shares shown include the following shares that directors and executive officers have
the right to acquire within 60 days through the exercise of stock options: Mr. Alegre
(7,235 shares); Ms. Bloomquist (55,707 shares); Mr. Callen (14,012 shares); Mr. Carlin
(60,110 shares); Mr. Gulis (45,110 shares); Mr. Harrison (10,704 shares); Ms. Ibach (209,246
shares); Mr. Krishna (4,770 shares); Ms. Lauderback (36,610 shares); Ms. Nedorostek (13,110
shares); Mr. Peel (32,973 shares); and Mr. Valette (18,110 shares). The shares shown
also include the following shares that executive officers have the right to acquire within
60 days through the vesting of restricted stock units: Mr. Callen (4,685 shares) and
Mr. Krishna (19,635 shares).
|
|
(3)
|
Includes
30,448 shares held under performance stock grants that have not vested.
|
|
(4)
|
Includes
10,702 shares held under performance stock grants that have not vested.
|
|
(5)
|
The
Amended and Restated 2010 Omnibus Plan (the Plan) permits non-employee directors to receive
director fees in the form of common stock in lieu of cash, and to defer receipt of such
shares. In addition, the Plan permits non-employee directors to defer receipt of shares
of the company’s common stock under an Incentive Award granted under the Plan (referred
to as Restricted Stock Units or RSUs). The directors are entitled to the deferred shares
and fully-vested RSUs upon separation of service from the company. Mr. Gulis’s
amount includes 49,746 shares that were deferred in lieu of director fees and 11,417
RSUs that were deferred. Mr. Harrison’s amount includes 7,033 shares that were
deferred in lieu of director fees and 7,885 RSUs that were deferred. Ms. Lauderback’s
amount includes 9,337 RSUs that were deferred. Ms. Matas’ amount includes 1,659
shares that were deferred in lieu of director fees. Ms. Nedorostek’s amount includes
12,092 shares that were deferred in lieu of director fees. Mr. Peel’s amount includes
7,885 RSUs that were deferred.
|
|
(6)
|
Includes
76,903 shares held under performance stock grants that have not vested.
|
|
(7)
|
Includes
an aggregate of 667,377 shares that directors and executive officers as a group have
the right to acquire within 60 days through the exercise of stock options. Includes an
aggregate of 225,524 shares held under restricted or performance stock grants that have
not vested and 46,920 shares that directors and executive officers as a group have the
right to acquire within 60 days through the vesting of RSUs. Also includes 70,530 shares
that were deferred by non-employee directors in lieu of director fees and 42,554 RSUs
that were deferred by executive officers and non-employee directors.
|
|
(8)
|
Vulcan
Value Partners, LLC reported in a Schedule 13G/A filed with the Securities and Exchange
Commission on February 14, 2017 that as of December 31, 2016 it beneficially owned 6,033,958
shares of Common Stock of Select Comfort Corporation, had sole power to vote or to direct
the vote with respect to 5,931,863 shares and sole dispositive power with respect to
6,033,958 shares.
|
|
(9)
|
BlackRock,
Inc. reported in a Schedule 13G/A filed with the Securities and Exchange Commission on
January 17, 2017 that as of December 31, 2016 it beneficially owned 5,232,647 shares
of Common Stock of Select Comfort Corporation, had sole power to vote or to direct the
vote with respect to 5,078,461 shares and sole dispositive power with respect to 5,232,647
shares.
|
|
(10)
|
Disciplined
Growth Investors, Inc. reported in a Schedule 13F filed with the Securities and Exchange
Commission on February 13, 2017 that as of December 31, 2016 it beneficially owned 3,776,347
shares of Common Stock of Select Comfort Corporation, had sole dispositive power with
respect to 3,776,347 shares, sole power to vote or to direct the vote with respect to
3,186,187 shares and no voting power with respect to 590,160 shares.
|
|
(11)
|
The
Vanguard Group, Inc. reported in a Schedule 13G/A filed with the Securities and Exchange
Commission on February 13, 2017 that as of December 31, 2016 it beneficially owned 3,753,670
shares of Common Stock of Select Comfort Corporation, had sole power to vote or to direct
the vote with respect to 91,885 shares, shared power to vote or to direct the vote with
respect to 6,230 shares, shared dispositive power with respect to 95,545 shares and sole
dispositive power with respect to 3,658,125 shares.
|
|
(12)
|
FMR
LLC reported in a Schedule 13G/A filed with the Securities and Exchange Commission on
February 14, 2017 that as of December 30, 2016 it beneficially owned 2,768,173 shares
of Common Stock of Select Comfort Corporation, had sole power to vote or to direct the
vote with respect to 211,300 shares and sole dispositive power with respect to 2,768,173
shares.
|
ELECTION
OF DIRECTORS
(Proposal
1)
Nomination
Article
XIV of our Third Restated Articles of Incorporation provides that the number of directors must be at least one but not more than
12 and must be divided into three classes as nearly equal in number as possible. The exact number of directors is determined from
time-to-time by the Board of Directors. The term of each class is three years and the term of one class expires each year in rotation.
Immediately
prior to the 2017 Annual Meeting, our Board will consist of 10 members, four of which will be up for election at the 2017 Annual
Meeting. The Board has nominated
Kathleen L. Nedorostek, Vicki A. O’Meara, Michael A. Peel and Jean-Michel Valette
for
election to the Board, each for a term of three years expiring at the 2020 Annual Meeting, or until their successors are elected
and qualified. Ms. Nedorostek, Ms. O’Meara, Mr. Peel and Mr. Valette have each consented to being named as a nominee in
this proxy statement and to serve as a director if elected. Ms. Nedorostek has served on our Board since 2011; Ms. O’Meara
has served on our Board since 2016; Mr. Peel has served on our Board since 2003 and Mr. Valette has served on our Board since
1994.
Vote
Required
The
election of each nominee for director requires the affirmative vote of a majority of the shares represented and entitled to vote
on the election of directors at the Annual Meeting. Any broker non-votes on the election of each nominee for director will be
treated as shares not entitled to vote on that matter, and thus will not be counted in determining whether the director has been
elected.
Board
Recommendation
The
Board recommends a vote “
For
” the election of each of Ms. Nedorostek, Ms. O’Meara, Mr. Peel and Mr. Valette.
In the absence of other instructions, properly signed and delivered proxies will be voted “
For
” the election
of each of these nominees.
If
prior to the Annual Meeting the Board should learn that any nominee will be unable to serve for any reason, the proxies that otherwise
would have been voted for such nominee will be voted for such substitute nominee as selected by the Board. Alternatively, the
proxies, at the Board’s discretion, may be voted for such fewer number of nominees as results from the inability of any
such nominee to serve. The Board has no reason to believe that any of the nominees will be unable to serve.
Information
about the Board’s Nominees and Other Directors
The
following table provides information as of the date of this Proxy Statement about each individual serving as a Director of our
company and each individual nominated by the Board to serve as a Director. Each Director or Nominee has furnished the information
included below that relates to his or her respective age, principal occupation and business experience, as well as the names of
other boards on which he or she currently serves as a director or has served in the past. In addition, the table below highlights
the relevant experience, qualifications, attributes and skills that led our Board to conclude that each director or nominee should
serve as a director of our company.
Name
and Age of
Nominee
and/or Director
|
|
Principal
Occupation, Business Experience And
Directorships of Other Companies
|
|
Director
Since
|
Nominees
for election this year to three-year terms expiring in 2020:
|
|
|
|
|
|
|
|
Kathleen
L. Nedorostek
Age
64
|
|
Occupation:
Former Global CEO of Nine
West Group, a division of Nine West Holdings, Inc., a leading global designer, marketer and wholesaler of brands in apparel,
footwear and accessories from April 2014 to September 2014; Group President, Global Footwear and Accessories at The Jones
Group from October 2012 until April 2014; President of the North American Wholesale and Global Licensing divisions of Coach
Inc. from 2003 to 2012.
|
|
2011
|
|
|
|
|
|
|
|
Qualifications:
Ms. Nedorostek provides our Board with significant experience leading high-end, multi-national branded consumer products
companies with both manufacturing and retail operations. Her experience includes strategic planning for global businesses,
P&L oversight, organizational strategy and change management, product design, global licensing and distribution, brand
marketing and real estate.
|
|
|
|
|
|
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|
Vicki
A. O’Meara
Age
59
|
|
Occupation:
Chief Executive Officer of
Analytics Pros, Inc., a digital analytics consultancy, since 2014; Executive Vice President of Pitney Bowes, Inc. and President
of Pitney Bowes Service Solutions with responsibility for global document management, marketing services and e-commerce units
from 2010 to 2013; Previously served for over 10 years in various senior management positions at Ryder Systems, Inc., including
as head of Ryder’s U.S. Supply Chain Solutions business from 2005 to 2007; Ms. O’Meara’s career began as
an attorney and Army Captain, and she served in several senior federal government positions.
|
|
2016
|
|
|
|
|
|
|
|
Qualifications:
Ms. O’Meara brings
to our Board extensive global leadership and operational experience in a variety of functional areas relevant to our business
and strategic direction, including supply chain, digital analytics, marketing, corporate governance, environmental health
and safety and government affairs. Ms. O’Meara also brings experience from prior service on two public company boards.
|
|
|
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|
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|
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|
Other
Public Company Boards:
Prior:
Health Management Associates, Inc. and Laidlaw, Inc.
|
|
|
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|
Michael
A. Peel
Age
67
|
|
Occupation:
Elected an Officer of Yale
University in October 2008 and currently Vice President for Human Resources and Administration; Previously a 17-year member
of the top leadership team at General Mills, Inc., a manufacturer and marketer of consumer food products, including serving
as Executive Vice President of Human Resources and Global Business Services; Also 14 years of experience at PepsiCo, Inc.,
including as Chief Human Resources Officer for PepsiCo Worldwide Foods and Pepsi-Cola Bottling Group.
|
|
2003
|
|
|
|
|
|
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|
Qualifications:
Mr. Peel’s experience at large, consumer-oriented, publicly traded companies and large institutions provides our
Board with senior level perspective on organizational effectiveness, talent development, succession planning and executive
compensation.
|
|
|
|
|
|
|
|
|
|
Other
Public Company Boards:
Current:
Pier 1 Imports, Inc.
|
|
|
|
|
|
|
|
Jean-Michel
Valette
Age
56
|
|
Occupation:
Chairman of our Board since
May 2010; Independent adviser to branded consumer companies; Currently serves as Lead Director of The Boston Beer Company;
Served as Chairman of the Board of Directors of Peet’s Coffee and Tea, Inc. from January 2004 to October 2012; Also
served as non-executive Chairman of the Robert Mondavi Winery from April 2005 to October 2006 and was its Managing Director
from October 2004 to April 2005; Head of Branded Consumer Equity Research and Branded Consumer Venture Capital Investments
at Hambrecht & Quist LLC, an investment banking firm, during the 1990s.
|
|
1994
|
|
|
Qualifications:
Mr. Valette provides our Board with significant, relevant leadership and a proven track record of shareholder value creation
with multiple successful branded consumer growth companies as well as valuable perspective in guiding the company on strategy,
financial performance and corporate governance practices.
|
|
|
|
|
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|
|
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|
Other
Public Company Boards:
Current:
Lead Director of The Boston Beer Company
Prior: Peet’s Coffee and Tea, Inc., Golden State Vintners
|
|
|
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE
“FOR”
THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE
|
Directors
not standing for election this year whose terms expire in 2018:
|
|
|
|
|
|
Daniel
I. Alegre
Age
48
|
|
Occupation:
President of Global Partner
Business Solutions for Google, Inc. since November 2012; Held various roles at Google since 2004, including President of Asia
Pacific and Japan, overseeing all regional operations, and Vice President of Latin American and Asia Pacific Business Development;
Previously, Mr. Alegre was Vice President at Bertelsmann, responsible for business development of its ecommerce division.
|
|
2013
|
|
|
|
|
|
|
|
Qualifications:
Mr. Alegre provides the Board with valuable insight into mobile and technology platforms, digital brand building and advertising,
and e-commerce deployment and strategy, as well as extensive leadership in global operations and expansion, partner management
and business development in technology and mass media industries.
|
|
|
|
|
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|
Stephen
L. Gulis, Jr.
Age
59
|
|
Occupation:
Retired Executive Vice President
and President of Global Operations for Wolverine World Wide, Inc. (WWW), a global marketer of branded footwear, apparel and
accessories, a position he held from October 2007 until July 2008; Executive Vice President, CFO and Treasurer of WWW from
April 1996 until October 2007.
|
|
2005
|
|
|
|
|
|
|
|
Qualifications:
Mr. Gulis provides the Board with extensive experience as a senior executive of a publicly traded consumer products company,
including as a chief financial officer and treasurer with responsibility for capital stewardship and cash management, significant
M&A activity and broad oversight of financial reporting and controls. Mr. Gulis also brings expertise in risk management,
implementation of enterprise technology platforms, global operations, human resources and product sourcing and quality directives.
|
|
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|
|
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|
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Other
Public Company Boards:
Current:
Independent Bank Corporation
Prior: Meritage Hospitality
|
|
|
|
|
|
|
|
Brenda
J. Lauderback
Age
66
|
|
Occupation:
Former President of the Retail
and Wholesale Group for the Nine West Group, Inc., a designer and marketer of women’s footwear and accessories, from
May 1995 until January 1998; Previous roles include President of Wholesale and Manufacturing for US Shoe Corporation and more
than 18 years in senior merchandising roles at the Department Store Division of Target Corporation.
|
|
2004
|
|
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Qualifications:
Ms. Lauderback brings to our Board extensive leadership in merchandising, marketing, product development and design and
manufacturing at prominent national wholesale and retail companies. Her breadth of experience as a director on several other
publicly traded company boards also provides our Board with significant insight into leading practices in executive compensation
and corporate governance. Ms. Lauderback is a National Association of Corporate Directors (NACD) Board Leadership Fellow,
having completed NACD’s comprehensive program of study for directors and corporate governance professionals. She supplements
her skill sets through ongoing engagement with the director community, and access to leading practices.
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|
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Other
Public Company Boards:
Current:
Denny’s Corporation and Wolverine World Wide, Inc.
Prior:
Big Lots, Inc., Louisiana-Pacific Corporation, Irwin Financial Corporation, Jostens Corporation
|
|
|
|
Directors
not standing for election this year whose terms expire in 2019:
|
|
|
|
|
|
Michael
J. Harrison
Age
56
|
|
Occupation:
Board Director since January
2016, and previously interim CEO from March 2014 to May 2015, of OOFOS, LLC, a leader in the emerging global category of recovery
footwear for athletes; President & Chief Operating Officer of Grand Circle Corporation, a leading overseas travel company
serving U.S. travelers age 50+, from August 2016 through January 2017; Board Director of Totes Isotoner Corporation, a leading
global marketer of umbrellas, gloves, rainwear, slippers and other weather-related accessories from December 2014 to August
2016; Previously Chief Brand Officer for The Timberland Company, a leading brand of outdoor footwear, apparel and gear from
July 2009 through November 2012; Prior to 2009, Mr. Harrison held various senior leadership roles at Timberland and Procter
& Gamble Co., including positions with significant responsibility for international marketing, global operations and business
development.
|
|
2011
|
|
|
|
|
|
|
|
Qualifications:
Mr. Harrison brings 30 years of business acumen to our Board from his senior executive experience in marketing, product
design and development, retailing and international management with leading consumer brands.
|
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|
|
|
|
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Other
Company Boards (privately held):
Current:
OOFOS, LLC
Prior:
Totes/Isotoner Corporation
|
|
|
|
|
|
|
|
Shelly
R. Ibach
Age
57
|
|
Occupation:
President and Chief Executive
Officer of Select Comfort Corporation since June 2012; Executive Vice President and Chief Operating Officer from June 2011
to June 2012; Executive Vice President, Sales & Merchandising from October 2008 to June 2011; Previously held various
senior executive operations and merchandising roles at Macy’s, Inc. and the Department Store Division at Target Corporation
for more than 25 years.
|
|
2012
|
|
|
|
|
|
|
|
Qualifications:
Ms. Ibach brings experience and perspective as Select Comfort’s President and CEO as well as intimate knowledge
of our customer, culture, strategy, product, marketing, operations and competitive environment gained during nine years in
executive management with the company. Ms. Ibach also brings more than two decades of retail experience with P&L oversight,
brand and product development and customer-focused leadership experience with prominent national retailers.
|
|
|
|
|
|
|
|
Barbara
R. Matas
Age
57
|
|
Occupation:
Former Managing Director
and Chairman, Leveraged Finance, Citigroup Global Markets, Inc. from 2013 to 2016, and co-head from 2006 to 2013; From 1985
to 2006 Ms. Matas held various leadership positions in leveraged finance and high yield capital markets at Citicorp, Salomon
Brothers and Citigroup; Ms. Matas began her career as an auditor at Touche Ross & Co.
|
|
2016
|
|
|
|
|
|
|
|
Qualifications:
Ms. Matas brings to our board substantial expertise in capital structure and financial strategy gained through more than
30 years of professional experience in advising boards and management teams on capital markets, capital structure and risk
assessment and management.
|
|
|
|
|
|
|
|
|
|
Other
Public Company Boards:
Current:
Apollo Investment Corporation
|
|
|
David
T. Kollat retired from the board when his term expired at the 2016 Annual Meeting of Shareholders, after serving more than 20
years as a Select Comfort director. Following his retirement from the Board Mr. Kollat was appointed to continue to serve in a
non-voting advisory role to the board, as Director Emeritus, for a period of twelve months. In this capacity, Mr. Kollat has received
compensation in line with that of non-employee directors.
Corporate
Governance
Information
about the Board of Directors and its Committees
The
Board of Directors has determined that each of the following directors who served as a member of our Board during any part of
fiscal 2016 is an “independent director” as defined by applicable rules of the NASDAQ Stock Market and the rules and
regulations of the Securities and Exchange Commission (“SEC”):
|
Daniel
I. Alegre
|
Stephen
L. Gulis, Jr.
|
Michael
J. Harrison
|
|
Brenda
J. Lauderback
|
Barbara
R. Matas
|
Kathleen
L. Nedorostek
|
|
Vicki
A. O’Meara
|
Michael
A. Peel
|
Jean-Michel
Valette
|
The
Board maintains three standing committees, including an Audit Committee, a Management Development and Compensation Committee and
a Corporate Governance and Nominating Committee. Each of the committees of the Board has a charter and each of these charters
is included in the investor relations section of the company’s website at
http://www.sleepnumber.com/sn/en/investor-relations
.
The information contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy
Statement.
The
current members of each of the Board committees are identified in the table below.
Director
|
|
Audit
Committee
|
|
Management
Development and
Compensation
Committee
|
|
Corporate
Governance and
Nominating Committee
|
|
|
|
|
|
|
|
Daniel I. Alegre
|
|
|
|
X
|
|
|
Stephen L. Gulis, Jr.
|
|
Chair
|
|
|
|
X
|
Michael J. Harrison
|
|
X
|
|
|
|
X
|
Brenda J. Lauderback
|
|
X
|
|
Chair
|
|
|
Barbara R. Matas
|
|
X
|
|
|
|
|
Kathleen L. Nedorostek
|
|
|
|
X
|
|
X
|
Vicki A. O’Meara
|
|
X
|
|
|
|
|
Michael A. Peel
|
|
|
|
X
|
|
Chair
|
Jean-Michel Valette*
|
|
|
|
|
|
|
*In
his capacity as non-executive Chairman of the Board, Mr. Valette generally attends all committee meetings.
The
Board has determined that each director serving on a committee meets the independence and other requirements applicable to such
committee prescribed by applicable rules and regulations of the NASDAQ Stock Market, the SEC and the Internal Revenue Service.
The
Board of Directors has further determined that two current members of the Audit Committee, Stephen L. Gulis, Jr. and Barbara R.
Matas, meet the definition of “audit committee financial expert” under rules and regulations of the SEC and meet the
qualifications of “financial sophistication” under the Marketplace Rules of the NASDAQ Stock Market. These designations
related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters
are disclosure requirements of the SEC and the NASDAQ Stock Market and do not impose upon any of them any duties, obligations
or liabilities that are greater than those generally imposed on a member of our Audit Committee or of our Board of Directors.
The
Board of Directors met in person or by telephone conference six times during 2016. The Audit Committee met in person or by telephone
conference nine times during 2016. The Management Development and Compensation Committee met in person or by telephone conference
four times during 2016. The Corporate Governance and Nominating Committee met in person or by telephone conference nine times
during 2016. All of the members of our Board of Directors serving in 2016 attended 75% or more of all meetings of the Board and
committees on which they served during fiscal 2016.
Audit
Committee.
The Audit Committee is comprised entirely of independent directors, currently including Stephen L. Gulis, Jr. (Chair),
Michael J. Harrison, Brenda J. Lauderback, Barbara R. Matas and Vicki A. O’Meara. The Audit Committee provides assistance
to the Board in satisfying its fiduciary responsibilities relating to accounting, auditing, operating and reporting practices
of our company. The Audit Committee is responsible for providing independent, objective oversight with respect to our company’s
accounting and financial reporting functions, internal and external audit functions, systems of internal controls regarding financial
matters and legal, ethical and regulatory compliance. The responsibilities and functions of the Audit Committee are further described
in the Audit Committee Report beginning on page 66 of this Proxy Statement.
Management
Development and Compensation Committee.
The Management Development and Compensation Committee is comprised entirely of independent
directors, currently including Brenda J. Lauderback (Chair), Daniel I. Alegre, Kathleen L Nedorostek and Michael A. Peel. The
principal function of the Committee is to discharge the responsibilities of the Board relating to executive compensation and development
of current and future leadership resources.
The
Committee is responsible for establishing the procedures for setting annual and long-term performance goals for the Chief Executive
Officer and for the evaluation by the full Board of his or her performance against such goals. The Committee meets at least annually
with the Chief Executive Officer to receive her recommendations concerning such goals. Both the annual goals and the annual performance
evaluation of the Chief Executive Officer are reviewed and discussed by the outside directors at a meeting or executive session
of that group. The Committee is also responsible for setting annual and long-term performance goals and compensation for the direct
reports to the Chief Executive Officer.
The
Committee has the authority under its charter to retain and consult with independent advisors to assist the Committee in fulfilling
these responsibilities and duties.
The
Committee usually meets four to six times per year in person or by telephone conference as needed. The Chairman of the Committee
works with members of our senior management team and with the Committee’s independent compensation consultant to determine
the agenda for each meeting.
At
the beginning of each fiscal year, the Committee reviews and approves compensation for the CEO and each of the other executive
officers, which generally includes:
|
●
|
Changes,
if any, to base salaries;
|
|
●
|
Establishing
the annual cash incentive program, including the target cash incentive levels, the performance measures and goals, and the threshold,
target and maximum payout amounts; and
|
|
●
|
Establishing
the long-term equity incentive program, including the mix of stock options and performance share awards, the performance measures
and goals applicable to the performance shares, the threshold, target and maximum payout amounts applicable to the performance
shares, any special recognition or retention awards, and the grant levels for each of the executive officers.
|
In
connection with this review and approval, the independent compensation consultant provides relevant market data and trends for
the Committee to consider, and the Committee compares each element of total compensation against this market data as it makes
compensation decisions.
Following
the end of each fiscal year, the Committee reviews and confirms the level of achievement of performance goals previously established
for the fiscal year and approves any resulting annual cash incentive or performance share payouts that may be applicable.
Also
on an annual basis, the Committee leads the Chief Executive Officer performance evaluation process and reviews the development
and succession plans with respect to the entire executive team.
The
responsibilities and functions of the Management Development and Compensation Committee, as well as its processes and procedures
for consideration and determination of executive and director compensation, are further described in the Compensation Discussion
and Analysis beginning on page 28 of this Proxy Statement.
Corporate
Governance and Nominating Committee.
The Corporate Governance and Nominating Committee is comprised entirely of independent
directors, currently including Michael A. Peel (Chair), Stephen L. Gulis, Jr., Michael J. Harrison and Kathleen L. Nedorostek.
The primary functions of the Corporate Governance and Nominating Committee are to develop and recommend to the Board corporate
governance principles to govern the Board, its committees, and our executive officers and employees in the conduct of the business
and affairs of our company; to identify and recommend to the Board individuals qualified to become members of the Board and its
committees; and to develop and oversee the annual Board and Board committee evaluation process.
Board
Leadership Structure
Our
Board is currently comprised of nine independent directors and one executive director, Shelly R. Ibach, who has served as our
President and Chief Executive Officer since June 2012. Since February 2008, the Board has determined to separate the positions
of Chairman of the Board and Chief Executive Officer. Based on its ongoing review of best practices in corporate governance, and
to enable the President and Chief Executive Officer to focus all of her time and energy in leadership of the day-to-day operations
of the company and its growth and profitability initiatives, the Board continues to believe it is best for the company to separate
these positions. Jean-Michel Valette, an independent director, has served as Chairman of the Board since May 2010.
Consistent
with the company’s Corporate Governance Principles, the Board retains the right to review this determination and to either
continue to maintain these positions as separated positions or to combine the positions, as the Board determines to be in the
best interests of the company at the time. Under the company’s Corporate Governance Principles, during any period in which
the positions of Chairman of the Board and Chief Executive Officer are combined, the Board would appoint a Lead Director from
among the independent members of the Board, who would have certain Board leadership responsibilities specified in our Corporate
Governance Principles.
Board
Role in Risk Oversight
Our
Board is responsible for overseeing the company’s policies and practices with respect to risk assessment and risk management,
and has delegated to the Audit Committee the responsibility of assisting the Board in fulfilling this role. Among its duties and
processes, the Audit Committee (a) reviews and discusses with management the company’s policies and practices with respect
to risk assessment and risk management; (b) oversees the company’s internal audit function and processes; (c) establishes
and oversees procedures for receiving and addressing complaints regarding accounting, internal controls or auditing matters; (d)
reviews legal compliance and other legal matters with the company’s counsel; and (e) reports to the full Board with respect
to matters within its area of responsibility.
The
Audit Committee oversees the company’s internal audit function, which is responsible for undertaking an annual risk assessment
process and reporting to the Audit Committee with respect to this assessment and related risk management strategies. The Audit
Committee reviews and approves, at least annually, the company’s internal audit plan and receives quarterly reports with
respect to the results of internal audits. The leader of the company’s internal audit function reports directly to the Audit
Committee with respect to internal audit matters, and the Audit Committee has authority to review and approve the appointment,
replacement or dismissal of the leader of this function. The leader of the internal audit function meets regularly in executive
session with the Audit Committee without any other members of the company’s management team present.
In
addition to the Audit Committee’s role, each of the other committees considers risks within its respective areas of responsibility.
We believe our current Board leadership structure helps ensure proper risk oversight, based on the allocation of duties among
committees and the role of our independent directors in risk oversight.
Director
Nominations Process
The
Corporate Governance and Nominating Committee (the “CGNC”) administers the process for nominating candidates to serve
on our Board of Directors. The CGNC recommends candidates for consideration by the Board as a whole, which is responsible for
appointing candidates to fill any vacancy that may be created between meetings of the shareholders and for nominating candidates
to be considered for election by shareholders at our Annual Meeting.
Consistent
with the company’s Corporate Governance Principles, the CGNC periodically reviews with the Board the appropriate skills
and characteristics required of Board members in the context of the current membership of the Board and the strategic direction
of the company.
The
Board has established selection criteria to be applied by the CGNC and by the full Board in evaluating candidates for election
to the Board. These criteria include general characteristics, areas of specific expertise and experience, and considerations of
diversity. The general characteristics include:
|
●
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A
proven record of accomplishment and sound judgment in areas relevant to our business;
|
|
●
|
Belief
in and passion for our mission and vision;
|
|
●
|
The
ability to bring strategic and innovative insights to the discussion and challenge and stimulate management;
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|
●
|
Willingness
to both speak one’s mind and consider divergent ideas and opinions;
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|
●
|
Understanding
of, and ability to commit sufficient time to, Board responsibilities and duties; and
|
|
●
|
Subject
matter expertise.
|
The
specific areas of expertise and experience sought by the CGNC and the Board from time to time will vary depending on the composition
of the Board and the strategic direction of the company at the time, but will generally include CEO experience, executive level
experience with analogous businesses and industries, and functional expertise relevant to the strategic direction of the company
or the needs of the committees of the Board.
The
director nomination process specifically includes consideration of diversity, such as diversity of age, gender, race and national
origin, educational and professional experience and differences in viewpoints. The company does not have a formal policy with
respect to diversity. However, the CGNC considers the Board’s overall composition when considering Director candidates,
including whether the Board has an appropriate combination of professional experience, skills, knowledge and variety of viewpoints
and backgrounds in light of the company’s current and expected future needs. In addition, the CGNC also believes that it
is desirable for new candidates to contribute to a variety of viewpoints on the Board, which may be enhanced by a mix of different
professional and personal backgrounds and experiences. Currently, 50% of our Directors are women.
The
CGNC reviews these selection criteria and the overall director nomination process at least annually in connection with the nomination
of directors for election at the company’s annual meeting for consistency with best practices in corporate governance and
effectiveness in meeting the needs of the Board from time-to-time.
The
CGNC may use a variety of methods for identifying potential nominees for election to the Board, including consideration of candidates
recommended by directors, officers or shareholders of the company. The CGNC also has the authority under its charter to engage
professional search firms or other advisors to assist the CGNC in identifying candidates for election to the Board, or to otherwise
assist the CGNC in fulfilling its responsibilities.
Shareholder
nominations of candidates for membership on the Board submitted in accordance with the terms of our Bylaws will be reviewed and
evaluated by the CGNC in the same manner as for any other nominations. Any shareholder who wishes the CGNC to consider a candidate
should submit a written request and related information to our Corporate Secretary. Under our Bylaws, if a shareholder intends
to nominate a person for election to the Board of Directors at a shareholder meeting, the shareholder is required to give written
notice of the proposed nomination to the Corporate Secretary at least 120 days prior to the first anniversary of the date that
the company first released or mailed its proxy materials to shareholders in connection with the preceding year’s regular
or annual meeting. The shareholder’s notice must include, for each nominee whom the shareholder proposes to nominate for
election as a director: (i) the name, age, business address and residence address of the nominee, (ii) the principal occupation
or employment of the nominee, (iii) the class and number of shares of capital stock of the company that are beneficially owned
by the nominee, and (iv) any other information concerning the nominee that would be required under the rules of the Securities
and Exchange Commission in a proxy statement soliciting proxies for the election of such nominee. The shareholder’s notice
must also include: (i) the name and address of the nominating shareholder, as they appear on the company’s books, and (ii)
the class and number of shares of the company that are owned beneficially and of record by the shareholder. The shareholder’s
notice must also be accompanied by the proposed nominee’s signed consent to serve as a director of the company.
Shareholder
Communications with the Board
Shareholders
may communicate with the Board of Directors, its Committees or any individual member of the Board of Directors by sending a written
communication to our Corporate Secretary at 9800 59
th
Avenue North, Plymouth, MN 55442. The Corporate Secretary will
promptly forward any communication so received to the Board, any Committee of the Board or any individual Board member specifically
addressed in the communication. In addition, if any shareholder or other person has a concern regarding any accounting, internal
control or auditing matter, the matter may be brought to the attention of the Audit Committee, confidentially and anonymously,
by calling 1-800-835-5870, inserting the I.D. Code of AUDIT (28348) and following the prompts from the recorded message. The company
reserves the right to revise this policy in the event that the process is abused, becomes unworkable or otherwise does not efficiently
serve the purposes of the policy.
Policy
Regarding Director Attendance at Annual Meeting
Our
policy is to require attendance by all of our directors at our Annual Meeting of Shareholders, except for absences due to causes
beyond the reasonable control of the director. All of the directors then serving on our Board were in attendance at our 2016 Annual
Meeting of Shareholders.
Corporate
Governance Principles
. Our Board of Directors has adopted Corporate Governance Principles that were originally developed and
recommended by the CGNC. These Corporate Governance Principles are available in the investor relations section of the company’s
website at
http://www.sleepnumber.com/sn/en/investor-relations
. The information contained in or connected to our website
is not incorporated by reference into or considered a part of this Proxy Statement. Among these Corporate Governance Principles
are the following:
Independence
.
A substantial majority of the members of the Board should be independent, non-employee directors. It is the responsibility of
the Board to establish the standards for independence and the Board has followed the independence standards for companies listed
on The NASDAQ Stock Market. All of our directors are independent except Shelly R. Ibach. All Committees of the Board are composed
entirely of independent directors.
Chairman
and Chief Executive Officer Positions
. At the present time, the Board believes that it is in the best interests of the company
and its shareholders for the positions of Chairman of the Board and Chief Executive Officer to be separated, and for the position
of Chairman of the Board to be held by a non-executive, independent member of the Board. The Board retains the right to review
this determination and to either continue to maintain these positions as separated positions or to combine the positions, as the
Board determines to be in the best interests of the company at the time. During any period in which the positions of Chairman
of the Board and Chief Executive Officer are combined, the Board will appoint a Lead Director from among the independent members
of the Board.
Classified
Board Structure
. Our Third Restated Articles of Incorporation provide for a classified Board serving staggered terms of three
years each. The Board will periodically review its classified Board structure in the context of other provisions and measures
applicable to unsolicited takeover proposals with the objective of positioning the Board and the company to maximize the long-term
value of our company for all shareholders.
Majority
Voting Standard with Resignation Policy for Board Elections
. Our Third Restated Articles of Incorporation provide for a majority
voting standard in the case of uncontested elections of directors and a plurality voting standard in the case of contested elections
of directors in order to reduce the risk of a “failed election” in the context of a contested director election. If
a nominee for Director who is an incumbent Director is not elected at a meeting of shareholders and no successor to the incumbent
Director is elected at the meeting of shareholders, the incumbent Director shall promptly offer to tender his or her resignation
to the Board. The CGNC may make a recommendation to the Board on whether to accept or reject the offer, or whether other action
should be taken. The Board shall act on whether to accept the Director’s offer, taking into account the CGNC’s recommendation,
and publicly disclose (by press release, a filing with the SEC or other broadly disseminated means of communication) its decision
and the supporting rationale within 90 days after the date of the certification of the election results. The CGNC, in making its
recommendation, and the Board, in making its decision, may each consider any factors or other recommendations that it considers
relevant and appropriate. The incumbent Director who offers to tender his or her resignation shall not participate in the Board’s
decision. If such incumbent Director’s offer to tender his or her resignation is not accepted by the Board, such Director
shall continue to serve until his or her successor is duly elected, or his or her earlier death, resignation, retirement, disqualification
or removal.
Board
Diversity
. The company does not have a formal policy with respect to diversity. However, the CGNC considers the Board’s
overall composition when considering Director candidates, including whether the Board has an appropriate combination of professional
experience, skills, knowledge and variety of viewpoints and backgrounds in light of the company’s current and expected future
needs. In addition, the CGNC believes that it is desirable for new candidates to contribute to a variety of viewpoints on the
Board, which may be enhanced by a mix of different professional and personal backgrounds and experiences.
Approach
to Term and Age Limits
. We believe that specific or fixed term or age limits could cause the company to arbitrarily lose important
contributors to the Board. It is the sense of the Board, however, that a Director who reaches the age of 72 should promptly tender
his or her resignation to the Chair of the CGNC, and the Board should have an opportunity to review the qualifications of the
director for continued Board membership. The CGNC will review the qualifications of the director for continued Board membership
annually and make a recommendation to the Board each year, which will make a final determination with respect to the tendered
resignation.
Change
in Responsibilities
. Directors who retire or who have a change in their principal employment or affiliation after joining
the Board should not necessarily leave the Board. There should, however, be an opportunity for the Board to review the qualifications
of the director for continued Board membership. Any Director who undergoes a material change in principal employment or affiliation
will promptly tender his or her resignation to the Chair of the CGNC. The CGNC will review the qualifications of the director
for continued Board membership and make a recommendation to the Board, which will make a final determination with respect to the
tendered resignation.
Other
Board or Audit Committee Service
. The Board recognizes that service on other boards can in some circumstances limit the time
that Directors may have to devote to fulfilling their responsibilities to the company. It is the Board’s guideline that
no Director shall serve on more than a total of six public company boards (including the Select Comfort Board), and that no member
of the company’s Audit Committee shall serve on more than a total of three public company audit committees (including the
Select Comfort Audit Committee). If any Director exceeds or proposes to exceed these guidelines, the Director is required to promptly
notify the Chair of the CGNC and the committee will review the facts and circumstances and determine whether such service would
interfere with the Director’s ability to devote sufficient time to fulfilling the Director’s responsibilities to the
company. Currently, none of the Directors serve on more than five public company boards, including the Select Comfort Board.
Chief
Executive Officer Service on Other Boards
. The Chief Executive Officer may not serve on more than two public company boards
other than the Select Comfort Board of Directors.
Board
and Committee Evaluations
. The Board believes that the company’s governance and the Board’s effectiveness can
be continually improved through evaluation of both the Board as a whole and its committees. The CGNC is responsible for annually
evaluating effectiveness in these areas and reviewing the results and recommendations for improvement with the full Board.
Board
Executive Sessions
. Executive sessions or meetings of independent directors without management present will be held at least
twice each year. At least one session will be to review the performance criteria applicable to the Chief Executive Officer and
other senior managers, the performance of the Chief Executive Officer against such criteria, and the compensation of the Chief
Executive Officer and other senior managers. Additional executive sessions or meetings of outside directors may be held from time-to-time
as required. The Board’s practice has been to meet in executive session for a portion of each regularly scheduled meeting
of the Board. Any member of the Board may request at any time an executive session without the presence of management.
Paid
Consulting Arrangements
. The Board believes that the company should not enter into paid consulting arrangements with independent
directors.
Board
Compensation
. Board compensation should encourage alignment with shareholders’ interests and should be at a level equitable
to comparable companies. The Management Development and Compensation Committee is responsible for periodic assessments to assure
these standards are being met.
Share
Ownership Guidelines for Executive Officers and Directors
. The Board has established the stock ownership guidelines described
below for executive officers and directors. For purposes of these guidelines, stock ownership includes the fair market value of
(1) all shares of common stock owned outright, (2) unvested restricted stock and restricted stock units that are subject only
to time-vesting, net of an assumed effective tax rate of 40%, and (3) vested stock options, net of an assumed effective tax rate
of 40%. The fair market value of stock options shall mean the then-current market price less the exercise price. Unvested performance
shares, whether in the form of restricted stock or restricted stock units, will not count toward stock ownership.
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●
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Executive
Officer Ownership Guidelines
.
The Chief Executive Officer is expected to achieve
and maintain stock ownership equal to five times the Chief Executive Officer’s
base salary and each of the other executive officers is expected to achieve and maintain
stock ownership equal to three times the executive officer’s base salary. The executive
officers are required to retain at least 50% of net shares after taxes from any grant
until such time as the guideline is met.
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●
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Board
Ownership Guidelines
.
Within five years of joining the company’s Board
of Directors, each director is expected to achieve and maintain stock ownership equal
to five times the director’s annual cash retainer. Any director who has not achieved
the foregoing ownership objective by the required time period will not be permitted to
sell any shares except to the extent required to pay the exercise price, transaction
costs and taxes applicable to the exercise of stock options or the vesting of restricted
shares. Exceptions to these restrictions on sale of shares may be granted by the Board
in its sole discretion for good cause shown by any director.
|
Prohibition
of Hedging or Pledging of Shares
. Under our policy with respect to trading in the company’s securities, directors, officers
and other employees whose duties regularly bring them into contact with confidential or proprietary information (“insiders”)
are prohibited from engaging in any form of hedging or monetization transactions involving the company’s securities. In
addition, insiders are prohibited from engaging in short sales of the company’s securities and from trading in any form
of publicly traded options, puts, calls or other derivatives of the company’s securities. Insiders are also prohibited from
engaging in any form of pledging of the company’s
securities, including (i) purchasing company securities on margin; (ii) holding company securities in any account which has a
margin debt balance; (iii) borrowing against any account in which company securities are held; or (iv) pledging company securities
as collateral for a loan.
Conflicts
of Interest
. Directors are expected to avoid any action, position or interest which conflicts with an interest of the company,
or that gives the appearance of a conflict. If any member of the Board becomes aware of any such conflicting or potentially conflicting
interest involving any member of the Board, the director should immediately bring such information to the attention of the Chairman
of the Board, the Chief Executive Officer and the General Counsel of the company.
Performance
Goals and Evaluation
. The Management Development and Compensation Committee is responsible for establishing the procedures
for setting annual and long-term performance goals for the Chief Executive Officer and for the evaluation by the full Board of
his or her performance against such goals. The Committee meets at least annually with the Chief Executive Officer to receive his
or her recommendations concerning such goals. Both the annual goals and the annual performance evaluation of the Chief Executive
Officer are reviewed and discussed by the outside directors at a meeting or executive session of that group. The Committee is
also responsible for setting annual and long-term performance goals and compensation for the direct reports to the Chief Executive
Officer.
Compensation
Philosophy
. The Board supports and, through the Management Development and Compensation Committee, oversees employee compensation
programs that are closely linked to business performance and emphasize equity ownership.
Senior
Management Depth and Development
. The Chief Executive Officer reports to the Board, at least annually, on senior management
depth and development, including a discussion of assessments, leadership development plans and other relevant factors.
Provisions
Applicable to Unsolicited Takeover Attempts or Proposals
. The Board will periodically review (not less often than every three
years) the company’s Third Restated Articles of Incorporation and Bylaws and various provisions that are designed to maximize
shareholder value in the event of an unsolicited takeover attempt or proposal. Such review includes consideration of matters such
as the company’s state of incorporation, whether the company should opt in or out of applicable control share acquisition
or business combination statutes, and provisions such as the company’s classified Board structure. The objective of this
review is to maintain a proper balance of provisions that will not deter bona fide proposals from coming before the Board, and
that will position the Board and the company to maximize the long-term value of our company for all shareholders.
Shareholder
Approval of Equity-Based Compensation Plans
. Shareholder approval will be sought for all equity-based compensation plans.
Code
of Conduct
We
have developed and circulated to all of our employees a Code of Business Conduct addressing legal and ethical issues that may
be encountered by our employees in the conduct of our business. Among other things, the Code of Business Conduct requires that
our employees comply with applicable laws, engage in ethical and safe conduct in our work environment, avoid conflicts of interests,
conduct our business with integrity and high ethical standards, and safeguard our company’s assets. A copy of the Code of
Business Conduct is included in the investor relations section of our website at
http://www.sleepnumber.com/sn/en/investor-relations
.
We intend to disclose any amendments to and any waivers from a provision of our Code of Business Conduct on our website. The information
contained in or connected to our website is not incorporated by reference into or considered a part of this Proxy Statement.
Employees
are required to report any conduct that they believe in good faith violates our Code of Business Conduct. The Code of Business
Conduct also sets forth procedures under which employees or others may report through our management team and, ultimately, directly
to our Audit Committee (confidentially and anonymously, if so desired) any questions or concerns regarding accounting, internal
accounting controls or auditing matters.
All
of our employees are required to periodically certify their commitment to abide by our Code of Business Conduct. We also provide
training in key areas covered by the Code of Business Conduct to help our employees to comply with their obligations.
Related
Party Transactions Policy
The
Board of Directors has adopted a written policy intended to ensure the proper approval and reporting of transactions between the
company and any of its directors, nominees for director, executive officers or significant shareholders or entities or persons
related to them that would be required to be disclosed by the company pursuant to Item 404 or Regulation S-K of the Federal securities
laws. Under this policy, any proposed or existing related party transaction is subject to the approval or ratification of the
Corporate Governance and Nominating Committee. A copy of the Related Party Transactions Policy can be accessed through our Investor
Relations website at
http://www.sleepnumber.com/sn/en/investor-relations
. The information contained in or connected to
our website is not incorporated by reference into or considered a part of this Proxy Statement. There were no related party transactions
during the year ended December 31, 2016 and there are none currently contemplated.
REPORT
OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
AND COMPENSATION DISCUSSION AND ANALYSIS
COMPENSATION
COMMITTEE REPORT
The
Management Development and Compensation Committee of the Board of Directors (the “Committee”) has reviewed and discussed
the following Compensation Discussion and Analysis (CD&A) with management and, based on this review and discussion, the Committee
recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
The
Management Development and Compensation Committee
Brenda
J. Lauderback, Chair
Daniel
I. Alegre
Kathleen
L. Nedorostek
Michael
A. Peel
This
Compensation Committee Report shall not be deemed to be “filed” with the Securities and Exchange Commission or subject
to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended. Notwithstanding anything to the contrary
set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, that might incorporate future filings, in whole or in part, this Compensation Committee Report shall not be incorporated
by reference into any such filings.
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
This
Compensation Discussion and Analysis describes the key principles and programs used to determine the compensation of the named
executive officers (NEOs) for fiscal 2016 (January 3, 2016 through December 31, 2016) and explains how the company’s practices
align with our pay for performance philosophy.
For
fiscal 2016, our NEOs were:
NAME
|
PRINCIPAL
POSITION
|
Shelly R. Ibach
|
President & Chief Executive Officer (CEO)
|
David R. Callen
|
Senior Vice President & Chief Financial
Officer (CFO)
|
Andrew P. Carlin
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Executive Vice President & Chief Sales and
Service Officer
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Suresh Krishna
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Senior Vice President & Chief Operations,
Supply Chain and Lean Officer
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Andrea L. Bloomquist
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Senior Vice President & Chief Product Officer
|
Our
CD&A is divided into the following sections:
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Compensation
Governance
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Compensation
Framework and Actions
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Executive
Compensation Tables
|
Executive
Summary
Compensation
Philosophy:
Select
Comfort’s executive compensation philosophy is to provide compensation opportunities that attract, retain and motivate talented
key executives to deliver sustainable profitable growth. Our program generally consists of a fixed base salary, variable performance-based
cash incentive and long-term equity awards including performance units and stock option grants. Our program is designed to align
executive compensation with shareholder interests by:
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Linking annual incentive
awards to the achievement of key financial, strategic and operational goals which closely correlate with shareholder value
creation;
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Providing opportunities for company executives
to earn meaningful performance-based equity incentive awards tied to the achievement of pre-established long-term (3 years)
performance goals and stock price appreciation;
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Establishing performance goals with consideration
for recent peer group and broader industry growth and earnings results and our strategic plan, with the objective of requiring
above median performance for incentives to be earned at a level that would increase compensation above median; and
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Evaluating the effectiveness of compensation
programs in motivating superior competitive performance when compared with both industry peers and other prestigious specialty
retailers.
|
Annual
cash and equity-based incentive compensation opportunity is directly tied to achievement of key financial, strategic and operating
performance objectives. Specifically, the annual cash incentive is dependent on achieving an earnings before interest, income
taxes, depreciation and amortization (adjusted EBITDA) performance objective and is awarded to motivate and reward performance
of a large portion of the company’s employee population, including the NEOs. As discussed below, the payout for 2016 was
determined based on an Economic Adjusted EBITDA measure. The long-term equity-based awards are tied to growth in revenue (or net
sales) and growth in net operating profit (NOP) (or operating income). As discussed below, in 2015, the Management Development
and Compensation Committee (for the purposes of this report, the “Committee”) added a return on invested capital (ROIC)
objective to the program to ensure that payouts under the long-term equity-based awards are reduced for failure to generate returns
that are sufficiently above the company’s weighted average cost of capital (WACC). All standard annual and long-term incentive
awards include performance thresholds that must be met for any payout to be issued.
2016
Performance and Incentive Payouts:
In
2016, the Enterprise Resource Planning Technology (“ERP”) implementation impacted sales and costs in the first half
of 2016. However, we recovered from these challenges in the back half of the year and demonstrated improved financial performance
and stock price appreciation. Our 2016 one-year and three-year growth in revenue (or net sales), adjusted EBITDA, NOP (or operating
income), and Total Shareholder Return (TSR)* is summarized below.
|
|
2014 - 2016
|
|
2016 Growth
|
Growth
|
|
|
CAGR
|
Revenue
|
8%
|
11%
|
Adjusted EBITDA
|
9%
|
5%
|
Net Operating Profit
|
2%
|
-5%
|
Total Shareholder Return
|
6%
|
2%
|
*
Total shareholder return refers to the percentage change in the value of a shareholder’s investment in the company over
the relevant time period, as determined by dividends paid and the change in the company’s share price during the period.
However,
because these financial results were below the company’s plans, both for the 2016 Annual Incentive Plan and the 2014-2016
Long-Term Incentive Plan, our compensation payouts were also below target:
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●
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2016
Annual Incentive Plan (AIP) payouts:
With actual Economic Adjusted EBITDA above the
threshold, but below target, the AIP was earned at 43.7% of target for 2016. This decreased
actual total cash compensation close to the 25
th
percentile of the market.
|
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●
|
2014
Long-Term Incentive Awards, earned for 2014-2016 performance:
These awards were earned
at 84.6% of target based on revenue and NOP growth for fiscal years 2014-2016. This payout
reflected above-target performance on revenue growth and below-target performance for
NOP growth resulting from strategically essential investments made in the business during
this period in support of our long-term strategy.
|
As
shown in the chart below, annual cash incentive payouts relative to adjusted EBITDA and NOP performance over a 10-year period
reinforce our compensation philosophy and program design.
The
three-year performance-vested long-term incentive program demonstrates a similar commitment to pay for performance alignment,
as outlined below:
Grant Year
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
Performance Period End
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
Performance Metric(s)
|
|
Market Share
|
|
Market Share
|
|
Net Sales
|
|
Net Sales Growth
|
|
Net Sales Growth
|
|
Net Sales Growth
|
|
|
Free Cash Flow
|
|
|
|
NOP Margin
|
|
NOP Growth
|
|
NOP Growth
|
|
NOP Growth
|
|
|
|
|
|
|
|
|
|
|
ROIC Modifier
|
|
ROIC Modifier
|
3-Year Revenue Growth CAGR
|
|
17%
|
|
16%
|
|
9%
|
|
11%
|
|
TBD
|
|
TBD
|
3-Year NOP Growth CAGR
|
|
20%
|
|
4%
|
|
-16%
|
|
-5%
|
|
TBD
|
|
TBD
|
Final Payout % of Target
|
|
85%
|
|
40%
|
|
20%
|
|
85%
|
|
TBD
|
|
TBD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Vested RSU % of
Total LTI Grant Value
|
|
50%
|
|
50%
|
|
50%
|
|
75%
|
|
75%
|
|
75%
|
*
2011 was the first year we granted performance-vested long-term incentive awards.
For
discussion of the revenue growth and NOP margin growth targets and payouts under the 2014-2016 plan, see the company’s 2016
proxy statement, filed with the SEC on April 1, 2016; for a discussion of the market share targets under the 2012-2014 plan, see
the company’s 2015 proxy statement, filed with the SEC on March 31, 2015, and for a discussion of the market share and free
cash flow targets under the 2011-2013 plan, see the company’s 2014 proxy statement, filed with the SEC on April 4, 2014.
Compensation
Governance
Our
compensation programs are structured to align the interests of our executive officers with the interests of our shareholders.
They are designed to attract, retain and motivate a talented management team to deliver on the company’s strategic and operational
goals, capitalize on our competitive advantages and achieve sustainable profitable growth. Key objectives include:
|
●
|
Performance-Based
Compensation
. We believe that linking pay to performance is critical, and as a result,
we favor variable compensation that is tied to company performance. We target total direct
compensation near the market median, with the opportunity to earn total direct compensation
above the market median when company and/or individual performance exceeds performance
objectives.
|
|
●
|
Reward
Company and Individual Achievement
. In determining annual cash and equity incentive
awards, emphasis is placed on achievement of specific company performance objectives.
However, we may also recognize and reward superior individual performance, primarily
through merit increases in base salaries and long-term equity awards.
|
|
●
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Emphasize
Stock Ownership
. We believe that employee stock ownership is critical in aligning
the interests of employees with those of our shareholders. The company has established
specific stock ownership guidelines for executive officers as well as for members of
the Board of Directors. The company also provides opportunities for broader employee
stock ownership through our long-term incentive plans and our 401(k) savings plan.
|
Practices
and Policies
In
order to meet the key objectives of our executive compensation program, the company has
adopted a strong corporate governance framework with the following practices and policies
that ensure alignment of interests between shareholders and executives.
COMPENSATION
|
|
|
|
PRACTICE
|
SELECT
COMFORT POLICY
|
|
Pay for Performance
|
YES
|
A
significant percentage of the total direct compensation package is performance-based.
|
|
|
|
|
|
Robust stock
ownership guidelines
|
YES
|
We
have stock ownership guidelines for executive officers and Board members. Executive officers & Directors are expected
to achieve and maintain stock ownership of:
● 5x
base salary for the CEO
● 3x
base salary for non-CEO executive officers, and
● 5x
annual cash retainer for Board members
Executives
are required to hold 50% of the after-tax value delivered from LTI vesting and option exercise until meeting the guideline
level of ownership.
Directors
are expected to achieve the guideline level of ownership within 5 years of the appointment to the Board.
Unearned
performance-vested awards are not included in the ownership calculation.
|
|
|
|
|
|
Annual
Shareholder “Say on Pay”
|
YES
|
We
value our shareholders’ input on our executive compensation programs. Our Board of Directors seeks an annual non-binding
advisory vote from shareholders to approve the executive compensation disclosed in our CD&A, tabular disclosures and related
narrative of this proxy statement.
|
|
|
|
|
|
Annual compensation
risk assessment
|
YES
|
A risk assessment
of our compensation programs is performed on an annual basis.
|
|
Clawback
policy
|
YES
|
Our
policy allows recovery of incentive cash and earned equity compensation in the event of inaccurate financial statements or
other actions that would constitute “cause” or “adverse action.” In addition, certain participants
are subject to automatic forfeiture in connection with material noncompliance, as a result of misconduct, resulting in an
accounting restatement.
|
|
|
|
Independent compensation
consultant
|
YES
|
The Management Development
and Compensation Committee retains an independent compensation consultant to advise on the executive compensation program
and practices.
|
|
|
|
Double-Trigger
Vesting
|
YES
|
An executive officer’s
unvested equity awards will vest upon a change in control only if the executive also experiences a qualifying termination
of employment or significant diminution in role.
|
|
|
|
Hedging of Company
stock
|
NO
|
Executive
officers and members of the Board of Directors may not directly or indirectly engage in transactions intended to hedge or
offset the market value of Select Comfort common stock owned by them.
|
|
|
|
Pledging of Company
stock
|
NO
|
Executive officers
and members of the Board of Directors may not directly or indirectly pledge Select Comfort common stock as collateral for
any obligation.
|
|
|
|
Tax gross-ups
|
NO
|
We
do not provide tax gross-ups on any benefits or perquisites, other than for relocation benefits that are applied consistently
for all employees.
|
|
|
|
Repricing of
stock options
|
NO
|
Our
equity incentive plan does not permit repricing of stock options without shareholder approval or the granting of stock options
with an exercise price below fair market value.
|
|
|
|
Employment contracts
|
NO
|
None of our current named executive officers
has an employment contract that provides for continued employment for any period of time.
|
Shareholder
Engagement
As
part of its commitment to strong corporate governance, the company’s management team and its Board of Directors maintain
an active shareholder relations effort and welcome shareholder feedback. During the past year, we conducted shareholder meetings
and calls that included direct shareholder contact with board members. These discussions addressed a variety of topics that are
important to our business, including company strategy, financial performance, capital allocation, corporate governance and executive
compensation. We appreciate the opportunity to hear from our shareholders on relevant business topics and engage in open dialogue
with them. These conversations, as well as our strong commitment to pay for performance, will continue to inform the Management
Development and Compensation Committee’s decisions related to executive compensation in 2017 and beyond.
Board
Compensation Committee and Independent Consultant
The
Committee is comprised entirely of independent, non-employee directors. The responsibilities of the Committee include:
|
●
|
Review and approve the company’s
compensation philosophy
|
|
|
|
|
●
|
Establish executive compensation structure and
programs designed to motivate and reward superior company performance
|
|
|
|
|
●
|
Lead the Board of Directors’ annual process
to evaluate the performance of the Chief Executive Officer
|
|
|
|
|
●
|
Determine the composition and value of compensation
for the Chief Executive Officer and other executive officers including base salaries, annual cash incentive awards, equity-based
awards, benefits, and perquisites
|
|
|
|
|
●
|
Establish, administer, amend and terminate executive
compensation and major employee benefit programs
|
|
|
|
|
●
|
Assess management development progress and talent
depth, organizational strategy, and succession planning for key leadership positions in the context of the company’s
strategic, operational and financial growth objectives
|
|
|
|
|
●
|
Establish structure and amount of non-employee
director compensation
|
Under
its charter, the Committee has the authority to retain and consult with independent advisors to assist in fulfilling these responsibilities
and duties. To maintain the independence of these advisors, use by the company of any of these advisors for work other than that
expressly commissioned by the Committee must be approved in advance by the Committee.
Since
fiscal 2013, the Committee has retained the firm of Frederic W. Cook & Co., Inc. (“FW Cook”) as its independent
compensation consultant. At the Committee’s request, FW Cook provided information addressing its independence as well as
the independence of its individual advisors, including the following disclosures:
|
●
|
any other services it provides
to the company;
|
|
|
|
|
●
|
fees paid by the company as a percentage of
the consulting firm’s total revenue;
|
|
|
|
|
●
|
policies and procedures adopted by the consulting
firm to prevent conflicts of interest;
|
|
|
|
|
●
|
any business or personal relationships between
the individual compensation advisors and a member of the Committee;
|
|
●
|
any company stock owned by
the individual compensation advisors; and
|
|
●
|
any business or personal relationships between
Select Comfort’s executive officers and the individual compensation advisors or consulting firm.
|
The
Committee assessed these factors in light of SEC rules and NASDAQ listing standards and concluded that no conflict of interest
or independence concerns exist in the engagement of FW Cook as Select Comfort’s independent compensation consultant.
In
the course of its engagement, the independent compensation consultant:
|
●
|
Provides on-going assessment
of each of the principal elements of the company’s executive compensation program;
|
|
|
|
|
●
|
Advises the Committee on the design of both
the annual cash incentive plan and the long-term equity incentive program;
|
|
|
|
|
●
|
Works with the Committee and representatives
of senior management to assess and refine the company’s peer group for ongoing comparative analysis purposes;
|
|
|
|
|
●
|
Provides the Committee with updates related
to regulatory and legislative matters;
|
|
|
|
|
●
|
Reviews market data, trends and analyses from
general industry and proxy peer group surveys to inform executive compensation levels and design; and
|
|
|
|
|
●
|
Provides advice and guidance to the Committee
on pay actions for executives.
|
The
Committee usually meets four to six times per year in person, or by telephone conference as needed. The Chair of the Committee
works with members of our senior management team and with the Committee’s independent compensation consultant to determine
the agenda for each meeting. Following the development of the agenda, members of senior management and our human capital function,
along with the Committee’s independent compensation consultant, prepare materials for each meeting of the Committee. These
materials are typically reviewed with the Chair of the Committee in advance of distribution to the entire Committee. Our Chief
Executive Officer, other members of our management team involved in the development and administration of our compensation programs
and the Committee’s independent compensation consultant may be invited to attend all or a portion of a Committee meeting,
depending on the nature of the agenda. The Committee also typically meets in executive session without any members of management
present.
Neither
our Chief Executive Officer nor any other member of our management team votes on any matters before the Committee. The Committee,
however, solicits the views of our Chief Executive Officer on compensation matters generally, other than her own, and particularly
with respect to the compensation of members of the senior management team reporting to the Chief Executive Officer. The Committee
also solicits the views of other members of senior management and the company’s human capital department on topics related
to key compensation elements and broad-based employee benefit plans.
Benchmarking
Using Compensation Peer Groups
In
determining each executive’s annual total direct compensation, the Committee considers peer group market positioning, utilizing
relevant market data developed by management and reviewed by FW Cook. The market data are developed from the Towers Watson Compensation
Data Bank (CDB), General Industry Executive Compensation Survey Report and from compensation data obtained from publicly available
proxy statements for an industry peer group.
The
Committee, in consultation with FW Cook, annually reviews the composition of the industry peer group to ensure that the included
companies are appropriate in terms of size and business focus. The selected peer group generally consists of publicly traded industry
competitors, as well as a representative group of similarly sized companies involved in development, manufacturing and/or retailing
of home furnishings and other consumer durable products, with which we compete for talent and for shareholder investments. In
order to ensure that our peer group includes companies of appropriate size and scope, we generally aim to select peers that have
net sales, EBITDA and market capitalization within a range of one-half to two times our own net sales, EBITDA and market capitalization.
The Committee prefers to limit the amount of change to the peer group year-over-year, however, changes may be necessary to address
industry merger and acquisition activity and/or significant shifts in peer business strategy.
The
following 16 publicly traded companies comprise our current peer group for benchmarking executive compensation:
●
|
Container Store Group, Inc.
|
●
|
La-Z-Boy Inc.
|
●
|
Columbia Sportswear Co.
|
●
|
Lumber Liquidators Holdings Inc.
|
●
|
Deckers Outdoor Corp.
|
●
|
Mattress Firm Holding Corp.
|
●
|
Ethan Allen Interiors Inc.
|
●
|
Pier 1 Imports Inc.
|
●
|
Express Inc.
|
●
|
Restoration Hardware Holdings Inc.
|
●
|
Haverty Furniture Companies Inc.
|
●
|
Steven Madden Ltd.
|
●
|
Kate Spade & Company
|
●
|
Tempur Sealy International Inc.
|
●
|
Kirkland’s Inc.
|
●
|
Vitamin Shoppe Inc.
|
Compensation
Risk Assessment
The
company has established an annual process to assess whether its compensation practices are reasonably likely to have a material
adverse effect on the company. This process includes:
|
●
|
Compilation
of a comprehensive inventory of the company’s compensation policies, practices
and programs;
|
|
●
|
Identification
of potential areas of risk by members of a cross-functional team, comprised of internal
company representatives from Legal, Human Capital and Risk Management;
|
|
●
|
Review
of compensation programs in light of risks identified;
|
|
●
|
Review
of plans and controls in place to mitigate potential risks;
|
|
●
|
Review
of the assessment process and cross-functional team’s conclusions by FW Cook; and
|
|
●
|
Review
of the assessment process and conclusions by the Committee with members of the senior
management team and FW Cook representatives.
|
Based
on this assessment, the company has determined that none of its compensation policies, practices or programs is reasonably likely
to have a material adverse effect on the company.
Results
of 2016 Advisory Vote to Approve Executive Compensation
We
welcome communication with shareholders and value their viewpoints. At our 2016 Annual Meeting, our shareholders approved our
Say on Pay proposal in support of our executive compensation program, with more than 99 percent of the votes cast by our shareholders
on this proposal in favor of the “say on pay” vote (excluding broker non-votes). The Committee believes that these
voting results affirm shareholder support of our approach to executive compensation.
Compensation
Framework and Actions
Compensation
Program Elements and 2016 Actions
Our
executive compensation program is designed to attract, motivate, reward and retain the senior management talent required to achieve
our corporate objectives and create long-term value for our shareholders. We do not have employment agreements with any of our
executive officers that provide for continued employment for any period of time. Our program currently consists of the following
key elements:
|
●
|
Annual
cash incentive compensation;
|
|
●
|
Long-term
equity-based incentive compensation;
|
|
●
|
Non-qualified
deferred compensation plan;
|
|
●
|
Broad-based
benefit plans available to other employees generally;
|
|
●
|
Limited
perquisites; and
|
|
●
|
Severance
compensation upon termination of employment under certain circumstances.
|
With
the assistance of FW Cook, the Committee uses target and actual payouts for incentive compensation to value the total compensation
of executive officers and assess its competitive positioning. This competitive analysis is just one factor considered when making
compensation decisions. However, the Committee generally seeks to align target compensation opportunities with the median of the
market, while providing opportunity for top quartile compensation for performance above target and below median compensation for
performance below target. Additionally, performance goals are set with consideration for historical peer group growth levels,
with the goal of ensuring that above target payouts require performance above the median of the peer group.
The
target compensation mix for NEOs is substantially weighted towards performance oriented programs that only deliver value if the
Company meets pre-determined performance goals. The Annual Incentive Plan focuses NEOs on achievement of the financial plan for
the year. The long-term incentive plan provides alignment with shareholders and focuses NEOs on long-term growth in revenue and
NOP. For the CEO and Other NEOs respectively, 78% and 61% of target compensation is weighted towards these performance-oriented
programs (i.e., only 22% and 39% of target compensation is delivered in salary for CEO and Other NEOs respectively).
Base
Salary
. Base salary for executive officers is a fixed compensation component that is reviewed annually and adjusted as
appropriate. When making base salary decisions, the Committee considers the external market data as well as a variety of internal
criteria, including:
|
●
|
the
scope and complexity of each officer’s responsibilities;
|
|
●
|
each
executive officer’s qualifications, skills and experience;
|
|
●
|
internal
pay equity among senior executives; and
|
|
●
|
individual
job performance, including both impact on current financial results and contributions
to building longer-term competitive advantage and shareholder value.
|
No
specific formula or weight is applied to the various criteria considered.
The
Compensation Committee also considered the following factors when making the salary adjustments for 2016 that are noted in the
table below:
|
●
|
Under
the current leadership, the company has significantly transformed its retail operations,
introduced product innovation and improved its marketing effectiveness, in support of
its long-term strategy.
|
|
●
|
Mr.
Callen’s salary is below the median of the market, and the Committee increased
salary by 5% to align more closely with competitive benchmarks.
|
|
●
|
Mr.
Carlin’s adjustment reflects the increased responsibility tied to his promotion
to EVP Chief Sales and Service Officer.
|
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
Name
|
Title
|
2015
|
2016
|
%
Increase
|
Shelly
R. Ibach
|
President and CEO
|
$800
|
$815
|
1.9%
|
David
R. Callen
|
SVP and CFO
|
$384
|
$404
|
5.0%
|
Andrew
P. Carlin
|
EVP, Chief Sales and Service Officer
|
$380
|
$426
|
12.0%
|
Suresh
Krishna
|
SVP, Chief Operations, Supply Chain and Lean
Officer
|
n/a
|
$390
|
n/a
|
Andrea
L. Bloomquist
|
SVP,
Chief Product Officer
|
$390
|
$406
|
4.0%
|
Salaries
above are represented at the annual rates effective March 29, 2015 and March 27, 2016, with the exception
of Mr. Carlin’s promotional increase with effective date of April 10, 2016. Mr. Krishna’s first day of employment
was April 11, 2016. These values are different from the Summary Compensation Table, which represents actual
salary earned.
|
Annual
Cash Incentive Compensation
. Consistent with the company’s performance-based compensation philosophy, the opportunity
to earn an annual cash incentive is designed to motivate performance at or above the company’s targeted annual financial
objectives. Achievement of these results delivers compensation near the market median. Total compensation can exceed the median
for above-target performance or fall below median for below-target performance. The annual cash incentive program is awarded to
motivate and reward performance of a large portion of the company’s employee population, including NEOs.
Each
fiscal year, the Committee manages three principal elements of the annual cash incentive plan, including:
|
●
|
Performance
Goals
. The Committee determines both the type and the specific targets of the performance
goals for each fiscal year. Since 2001, the Committee has selected an annual profit metric
as the primary company performance measure based on its belief that a measure of profitability
provides a balanced focus on both net sales growth and improved bottom line performance.
For 2016, the Committee continued to use Adjusted EBITDA (earnings before interest, taxes,
depreciation & amortization) as the profit metric for the Annual Incentive Plan based
on the following:
|
|
■
|
Belief
that Adjusted EBITDA is a useful indicator of the company’s financial performance
and ability to generate cash from operating activities.
|
|
■
|
Commitment
to align the company’s annual incentive program with operating performance and
cash generation.
|
|
■
|
Desire
to diversify the portfolio of performance metrics in recognition of NEOs accountability
for both revenue and NOP growth in the Long-Term Incentive plan.
|
We
define earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net income plus: income tax expense,
interest expense, depreciation and amortization, stock-based compensation and asset impairments (as detailed in our quarterly
and annual financial filings). For a description of how we calculate Adjusted EBTIDA from Net Income, see “Non-GAAP Data
Reconciliations” on page 23 of the company’s Annual Report on Form 10-K filed on February 24, 2017. For a description
of how we calculate Adjusted EBTIDA from Net Income, see “Non-GAAP Data Reconciliations” on page 23 of the company’s
Annual Report on Form 10-K filed on February 24, 2017.
Starting
in 2015, we measured Adjusted EBITDA for the Annual Incentive Plan by considering the full value of both revenue and expenses
related to SleepIQ
®
technology in the year of the transaction (“Economic Adjusted EBITDA”). This “economic
value” of SleepIQ revenue and expenses is different than the GAAP accounting treatment to defer these amounts and recognize
them over the products’ estimated useful life. We use this Economic Adjusted EBITDA for the following reasons:
|
■
|
To
maintain consistency with our broad-based retail compensation plans, which provide commissions
aligned with the date of the sales transaction.
|
|
■
|
To
motivate and align employees in support of the company’s strategic initiative to
activate SleepIQ
®
accounts and advance the brand.
|
In
2017, the Committee has determined it will no longer use “economic value” treatment in future awards. Historically,
the majority of SleepIQ revenues were generated through an optional add-on by customers purchasing a mattress. Using the “economic
value” approach in 2015 and 2016 provided valuable incentive to successfully launch and advance the Sleep IQ brand. Starting
in 2017, we will use the GAAP accounting treatment of SleepIQ revenue and expenses for the Annual Incentive Plan because SleepIQ
technology will be automatically included as part of our new Sleep Number 360
™
smart bed and no additional incentive
is needed to activate Sleep IQ accounts.
See
below for a reconciliation of the 2016 Adjusted EBITDA as reported in our 2016 Annual Report on Form 10-K and the Economic Adjusted
EBITDA we use for the Annual Incentive Plan ($000s).
|
|
December 31,
|
|
|
|
2016
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
145,689
|
|
Economic adjustment
|
|
|
16,080
|
|
Economic Adjusted EBITDA
|
|
$
|
161,769
|
|
|
|
|
|
|
See
“Non-GAAP Data Reconciliations” on page 23 of the company’s Annual Report on Form 10-K filed on February 24,
2017 for a reconciliation of Adjusted EBTIDA to Net Income.
In
order to maintain focus on near-term, critical business objectives, cash incentive payments were based in part on semi-annual
performance versus targets derived from the annual operating plan, with the opportunity to realize up to 50 percent of pro-rated
target cash incentive levels for achievement of semi-annual performance objectives for the first half of the year. To maintain
a strong continuing incentive, if the semi-annual target was not achieved, the opportunity remained to earn the full-year bonus
if the full-year target was achieved.
The
Economic Adjusted EBITDA target is approved by the Committee with consideration for performance
after
deduction of all
annual cash incentive payments.
|
●
|
Target
and Actual Incentive Levels.
For 2016, Ms. Ibach’s target incentive level was
maintained at 100 percent of base salary (unchanged since 2013), and target incentive
levels were also maintained at 60 percent for Executive Vice Presidents and 55 percent
for Senior Vice Presidents. These target incentive levels are reviewed annually in comparison
with the peer group and general industry market data identified above.
|
The
table below provides detail for the 2016 target incentive and target total cash compensation levels for NEOs, as well as consideration
for actual cash compensation with the 43.7% of target payout for 2016 performance. Both outcomes are consistent with our compensation
payout philosophy, which is to pay close to the median of the market for target performance, and close to 25
th
percentile
for performance that is close to threshold. With the 2016 payout of 43.7% of target, cash compensation (base and annual incentive)
was close to the 25
th
percentile of the market.
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
Annual Target Cash Compensation
|
2016
Actual Total Cash*
|
|
|
Annual
Incentive Target
|
Target
Total Cash
|
Annual
Incentive $
|
Actual
Total Cash
|
Name
|
Title
|
%
of Salary
|
$
|
Shelly
R. Ibach
|
President
and CEO
|
100%
|
$812
|
$1,627
|
$355
|
$1,170
|
David R. Callen
|
SVP and CFO
|
55%
|
$220
|
$623
|
$96
|
$500
|
Andrew P. Carlin
|
EVP, Chief Sales and Service Officer
|
55% / 60%
|
$243
|
$669
|
$106
|
$532
|
Suresh Krishna
|
SVP, Chief Operations, Supply Chain and Lean Officer
|
55%
|
$215
|
$605
|
$70
|
$460
|
Andrea L. Bloomquist
|
SVP, Chief Product
Officer
|
55%
|
$221
|
$627
|
$97
|
$502
|
|
|
|
|
|
|
|
* Cash compensation numbers above represent annualized pay levels for both target and actual. These values may differ from the Summary Compensation Table, which represents actual salary earned for the year. Suresh Krishna total cash payout for 2016 was the full target amount of $215k because he was guaranteed this payout in his first year of employment. The Summary Compensation Table shows the incremental payment of $144k as a discretionary bonus. Andy Carlin's target bonus % was increased from 55% of salary to 60% of salary when he was promoted to EVP on April 11, 2016, and this higher target bonus % applied to earnings after his promotion date.
|
|
●
|
Leverage
Curve of the Annual Cash Incentive Payout
. The Committee seeks to set the leverage
curve of the annual cash incentive payout, or the percentage of incremental Economic
Adjusted EBITDA that is used to fund the overall annual incentive pool, in a manner that
both provides a strong motivation for achievement of stretch performance objectives and
a reasonable sharing rate of incremental Economic Adjusted EBITDA. Our plan provides
for up to 250 percent of target payout opportunity for maximum Economic Adjusted EBITDA
performance, and no payout if threshold levels of Economic Adjusted EBITDA are not achieved.
|
For
the first half of the year, Economic Adjusted EBITDA (before incentive payout) of $72.5 million exceeded our semi-annual target
of $72.2 million, and we therefore paid the 50% of the target opportunity for the first half of the year. The table below provides
the details for this payout for each NEO ($000s):
Full
Name
|
Position
Name
|
First
Half
Eligible
Earnings
|
Target
AIP %
|
First
Half
Target AIP $
|
Actual
Payout: 50%
of First Half
Target $
|
Shelly
R. Ibach
|
President
and CEO
|
$404
|
100%
|
$404
|
$202
|
David
R. Callen
|
SVP
and CFO
|
$197
|
55%
|
$109
|
$54
|
Andrew
P. Carlin*
|
EVP,
Chief Sales and Service Officer
|
$201
|
55%/60%
|
$116
|
$58
|
Suresh
Krishna
|
SVP,
Chief Operations, Supply Chain and Lean Officer
|
$90
|
55%
|
$50
|
$25
|
Andrea
L. Bloomquist
|
SVP,
Chief Product Officer
|
$199
|
55%
|
$110
|
$55
|
|
*
Mr. Carlin was promoted to EVP on April 10, 2016, and his target AIP was increased from 55% of salary to 60% of salary for
eligible earnings for the remainder of the fiscal year.
|
For
the full-year 2016, our actual Economic Adjusted EBITDA (after deduction of annual incentive expense) of $162 million was below
our target of $177 million and above our threshold of $156 million. This performance between threshold and target resulted in
a total Annual Incentive payout of 43.7% of target (inclusive of the mid-year progress payment referenced above). The table below
provides more detail for the performance goals used to determine this result ($ millions):
|
Payout
|
Economic Adjusted EBITDA
After Annual Incentive Payout
|
$
|
% Growth
|
Threshold
|
20%
|
$156
|
10%
|
Actual Performance
|
43.7%
|
$162
|
14%
|
Target
|
100%
|
$177
|
25%
|
Maximum
|
250%
|
$213
|
50%
|
The
table below reflects the total Annual Incentive Payout for the full year at 43.7% of target as well as the incremental payments
made at year-end, in excess of the mid-year payouts ($000s).
Full
Name
|
Position
Name
|
Target
AIP %
|
Full
Year Target
AIP
$
|
Full-Year
Actual
Payout
at 43.7%
of
Target
|
End
of Year
Payout
(Net of
Mid-Year)
|
Shelly
R. Ibach
|
President
and CEO
|
100%
|
$812
|
$355
|
$153
|
David
R. Callen
|
SVP
and CFO
|
55%
|
$220
|
$96
|
$42
|
Andrew
P. Carlin*
|
EVP,
Chief Sales and Service Officer
|
55%/60%
|
$243
|
$106
|
$49
|
Suresh
Krishna**
|
SVP,
Chief Operations, Supply Chain and Lean Officer
|
55%
|
$161
|
$70
|
$46
|
Andrea
L. Bloomquist
|
SVP,
Chief Product Officer
|
55%
|
$221
|
$97
|
$42
|
*
Mr. Carlin was promoted to EVP on April 10, 2016, and his target AIP was increased from 55% of salary to 60% of salary for eligible
earnings for the remainder of the fiscal year.
**
Mr. Krishna was guaranteed a full year target AIP payout in his offer letter. Accordingly, a discretionary bonus in the amount
of $144k was paid at year-end in order to increase the total payout to the $215k, which is equal to his full year target AIP.
|
Long-Term
Equity-Based Incentive Compensation
. The company makes long-term, equity-based incentive compensation grants to its executive
officers and other employees to align their interests with those of our shareholders, as well as to provide total compensation
that is competitive in the marketplaces in which the company competes for top talent. The Committee seeks to grant equity awards
designed to provide total direct compensation that is near the market median, with the potential for greater earnings when the
company outperforms its long-term performance targets and the potential for lower earnings in the event the company underperforms
its performance targets. As the company offers no pension plan, this equity-based pay component is an important enabler of retirement
security for executives and other employees who have dedicated a significant portion of their working careers to our business.
Executive
officers and other key employees are eligible for equity-based grants upon joining the company and thereafter on an annual basis.
In determining the economic value of equity awards to be granted to executive officers, the Committee considers primarily the
competitive position of each executive officer’s targeted total direct compensation, including the current value of proposed
equity awards, in relation to market data. The Committee also considers a variety of other factors, including:
|
●
|
recent
organizational performance relative to the peer group,
|
|
●
|
individual
performance, including levels of responsibility, and the individual’s impact on
current results and our long-term competitive position,
|
|
●
|
prior
awards, including the number of shares awarded and the accumulated “holding power”
of unvested equity to motivate both performance and retention, and
|
|
●
|
the
dilutive impact of equity awards in relation to market data.
|
The
company has historically granted both (i) stock option awards with an exercise price equal to the fair market value on the date
of grant, typically vesting ratably over a period of years, and
(ii) “performance shares” subject to adjustment based on actual performance versus targets established at the date
of grant. The only exceptions have been for new hires and promotions, both of whom typically receive a special award of restricted
stock units that vest for continued service over a period of three years. These awards encourage retention and shareholder alignment,
as well as provide an up-front equity stake upon hire for new executives.
For
the 2016 long-term incentive program, the Committee continued to grant 75% of the annual award value in performance-vested RSUs,
with the remaining 25% in stock options. See “Grant of Plan-Based Awards” table below. These grants were approved
by the Committee in March 2016. Grant value for Ms. Ibach increased slightly (5%, from $2.0 million to $2.1 million) to align
with the median of the market, and annual grant values for other Named Executive Officers remained flat to 2015, with the exception
of Mr. Callen’s award which increased from $300,000 to $400,000 in order to align closer to the median of the market and
other NEOs.
Total
direct compensation for NEOs was aligned with the median of the market. The table below provides detail for total grant value
of long-term incentives (LTI) awarded in 2015 and 2016, as well as the resulting 2016 Target total direct compensation (sum of
base salary, value of target annual incentive opportunity and the grant value of LTI).
($000s)
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
Title
|
LTI Target Grant Value (Annual Award)
|
|
|
2015
|
2016
|
% Increase
|
2016 Target
TDC
|
Shelly R. Ibach
|
President and CEO
|
$2,000
|
$2,100
|
5.0%
|
$3,727
|
David R. Callen
|
SVP and CFO
|
$300
|
$400
|
33.3%
|
$1,023
|
Andrew P. Carlin
|
EVP, Chief Sales and Service Officer
|
$400
|
$400
|
0.0%
|
$1,069
|
Suresh Krishna
|
President and CEO
|
n/a
|
$500
|
n/a
|
$1,105
|
Andrea L. Bloomquist
|
SVP, Chief Product Officer
|
$400
|
$400
|
0.0%
|
$1,027
|
|
|
|
|
|
|
LTI grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price volatility. As such, values in the table above are different from the grant date fair values in the Summary Compensation Table.
|
Performance-vested
share payouts and grants
.
2014
Performance-Vested Shares:
The performance-vested units granted in 2014 were earned at 84.6% of target based on annual growth
during each of 2014 – 2016 in revenue and net operating profit (NOP), and determining the average of each measure. The shares
earned are scheduled to vest in full on the third anniversary of the grant date (March 28, 2017). Revenue (or net sales) and NOP
(or operating income) are both GAAP measures as reported in the company’s Annual Report on Form 10-K.
Revenue
and NOP are equally weighted. This plan is a full three-year performance plan. There is no payout, if any, until the end of the
three-year period and the percentage growth goals (e.g. “performance levels”) are determined at the beginning of the
performance period and are not changed. The performance levels indicated below are applied to each prior year actual revenue and
NOP outcome to develop the goals for each year of the three-year performance period. Each year growth in both revenue and NOP
is measured to determine a total of six performance scores over the three-year period (i.e., three scores for revenue growth and
three scores for NOP growth each year).
Performance
Level
|
Payout
|
Revenue
|
NOP
|
Below
Threshold
|
0%
|
<4%
|
<4%
|
Threshold
|
50%
|
4%
|
4%
|
Target
|
100%
|
7%
|
9%
|
Max
|
200%
|
15%
|
20%
|
The
three revenue scores are averaged to determine the revenue payout for the three-year period, and the three NOP scores are averaged
to determine the NOP payout for the three-year period. Each of the revenue and the NOP scores are weighed 50%. The table below
provides detail for the performance results used to determine the 84.6% of target payout for the 2014 – 2016 performance
period. The payout was positively influenced by strong revenue growth well-above peer group median levels, and negatively impacted
by NOP performance in 2015 and 2016 due largely to ERP implementation impacts and strategic investments made to support our long-term
strategy.
Year
|
Revenue (Net Sales) - GAAP
|
NOP
- Excluding ERP Launch Cost*
|
$
|
Growth
|
Perf
Score
|
$
|
Growth
|
Perf
Score
|
2013
|
$960
|
|
|
$91
|
|
|
2014
|
$1,157
|
20.5%
|
200%
|
$102
|
12.2%
|
129%
|
2015
|
$1,214
|
4.9%
|
65%
|
$87
|
-14.8%
|
0%
|
2016
|
$1,311
|
8.0%
|
113%
|
$77
|
-11.5%
|
0%
|
|
|
|
|
|
|
|
|
|
Average
|
126%
|
|
|
43%
|
|
|
Weighting
|
50%
|
|
|
50%
|
|
|
|
|
|
|
|
|
|
Total
Payout % of Target
|
|
84.6%
|
|
*NOP excludes 2015 ERP Launch
Costs of $11.6 million, including the one-time expenses for system training and implementation. This adjustment ensures that
both 2015 and 2016 annual NOP growth rates accurately reflect the performance of the underlying business, rather than the
impact of one-time, non-recurring expenses. This adjustment ultimately did not change the payout for the award (i.e., the
payout would have still been 84.6% if 2015 performance had been measured inclusive of the $11.6 million in ERP Launch Costs).
|
2016
Performance-Vested Shares:
The performance-vested units granted in 2016 follow a similar structure as the 2014 awards described
above. Performance units will be earned based on annual growth in Revenue and NOP, equally weighted, through 2018, and will vest
in March 2019 depending on performance achievement. Performance below the defined threshold would result in a payout of zero.
The maximum payout is 200 percent of the target number of units granted. The Committee also added a Return on Invested Capital
(ROIC) objective to the program in 2015 to ensure that payouts are reduced for failure to generate returns that are sufficiently
above the company’s Weighted Average Cost of Capital (WACC). If three-year average ROIC does not exceed WACC by a pre-defined
threshold level, then the final payout will be reduced by a minimum of 5% and a maximum of 20% of the target number of units.
See “Non-GAAP Data Reconciliations” in the company’s Annual Report on Form 10-K filed on February, 24, 2017
for more details on how we calculate ROIC.
The
Committee incorporated ROIC for the following reasons:
|
●
|
Belief
that ROIC is a useful indicator of our financial performance and ability to generate
appropriate returns from our capital investments.
|
|
●
|
ROIC
objective ensures that we are investing capital efficiently to generate both net sales
growth and NOP growth over the long-term.
|
As
financial stewards of the company’s assets, both Management and the Board are committed to deploying capital in a prudent
and efficient manner in order to generate a superior return for shareholders.
2016
Special LTI Award:
Consistent with our compensation philosophy and historical practices, the Committee also granted a special
award to Mr. Carlin on April 10, 2016, the effective date of his promotion to Executive Vice President, Chief Sales and Service
Officer. This award, valued at $350,000, was granted in Restricted Stock Units that will vest in full on the third anniversary
of grant (i.e., 3-year cliff vest). In making this award, the Committee recognizes Mr. Carlin’s additional responsibilities,
which now includes delivery of our product with the Field Services team. In addition, the grant reinforces the company’s
confidence in Mr. Carlin’s leadership and strengthens executive alignment with shareholders.
(LTI grant values are converted
to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate short-term stock price
volatility. As such, the value referenced above are different from the grant date fair values in the Summary Compensation Table.)
New
Hire Awards:
Consistent with our compensation philosophy and approach, the Committee granted one-time new hire awards to Mr.
Krishna in 2016. These awards are provided for the following reasons:
|
●
|
Up-front
equity stake that aligns the executive with shareholders and provides retention with
vesting for continued service over a period of three years.
|
|
●
|
Appropriate
incentive for the executive to make the transition to the new role, given that unvested
long-term incentive value may be forfeited upon departure from previous role.
|
|
●
|
Consistent
with standard market practices.
|
The
awards granted to Mr. Krishna, effective on April 11, 2016, his first day of employment, are in addition to the annual awards
described in the table on page 44. They include:
|
●
|
Signing
Bonus delivered in RSUs with a grant value of $100,000 and vesting on the first anniversary
of the grant date.
|
|
●
|
New
Hire RSUs with a grant value of $500,000 and a two-year ratable vesting period (50% on
each of the first two anniversaries of the grant date).
|
|
●
|
Stock
options with both performance-vest and service-vest requirements and a grant value of
$312,000. The performance condition stipulates that the award is earned for a stock price
that exceeds $27.00 for 20 consecutive trading days at any point in the 10-year term
of the option, while the service condition is met on the third anniversary of the grant
date.
|
(LTI
grant values are converted to a number of shares using a 20-day average stock price leading up to date of grant in order to mitigate
short-term stock price volatility. As such, the values referenced above are different from the grant date fair values in the Summary
Compensation Table.)
Severance
Compensation
. In February of 2007, the Board adopted the Select Comfort Corporation Executive Severance Pay Plan (the
“Severance Plan”) to establish consistent severance benefits for senior executives upon termination of their employment
by the company without cause or upon resignation for “good reason” as defined by the Severance Plan. The Severance
Plan was also established to the bring the company’s executive severance arrangements into compliance with IRS regulations
issued under Internal Revenue Code Section 409A that apply to deferred compensation. Prior to the adoption of the Severance Plan
some, but not all, of our senior executives were entitled to severance benefits pursuant to their employment offer letters. The
Severance Plan provides more uniform benefits across the senior management team, including NEOs and others. No executive officer
would be entitled to any severance compensation in excess of the benefits provided under the company’s Severance Plan.
In
developing the Severance Plan and determining the benefits payable under the Severance Plan, the Committee considered market data
received from its independent compensation consultant relative to typical severance benefits and concluded that the benefits payable
under the Severance Plan were generally at or below the market data.
Benefits
under the Severance Plan are conditioned upon execution and delivery to the company of a general release of claims and return
of any company property. In addition, in the event the signed general release of claims is subsequently declared invalid or is
revoked or attempted to be revoked, or in the event of a violation by the former executive of a non-compete or confidentiality
agreement with the company, any unpaid severance compensation would be terminated. Each NEO has signed a non-compete agreement
extending for one year following termination of employment and a confidentiality agreement of indefinite duration.
The
Severance Plan establishes severance benefits payable to the CEO and other executive officers upon termination of their employment
by the company without cause or upon resignation for good reason. Specifically, the CEO would be entitled to a base amount of
severance pay equal to:
|
●
|
two
times the sum of annual base salary and annual target cash incentive, plus
|
|
●
|
a
pro rata target cash incentive for the year of termination.
|
Each
of the other NEOs would be entitled to a base amount of severance pay equal to:
|
●
|
one
times the sum of annual base salary and annual target cash incentive, plus
|
|
●
|
a
pro rata target cash incentive for the year of termination.
|
The
base severance compensation would be paid in a lump sum within a reasonable time following the employee’s termination of
employment and in no event later than March 1 of the year following the year during which the termination occurs. None of the
amounts payable under the Severance Plan are subject to any “gross-up” for tax purposes in the event of the applicability
of any excise or similar taxes.
In
addition to the base severance compensation described above, the Severance Plan provides for reimbursement of the cost of “COBRA”
medical and dental continuation coverage, less the amount paid by an active full-time employee for the same level of coverage,
until the earlier of:
|
●
|
the
end of the period of time reflected in the base severance compensation (i.e., two years
for CEO and one year for the other NEOs);
|
|
●
|
the
end of the participant’s eligibility for COBRA continuation coverage; or
|
|
●
|
the
date the participant becomes eligible to participate in another group medical plan or
dental plan.
|
The
Severance Plan also provides for outplacement services in an amount up to $15,000 for the CEO and up to $10,000 for other senior
executives.
No
severance payment would be triggered solely by a change-in-control of the company. The Severance Plan does provide, however, that
during a 24-month period following a change-in-control of the company, the company may not terminate the Severance Plan and may
not reduce the severance benefits payable to participants who are employed by the company immediately prior to the change-in-control.
For additional information, see “Potential Payments to Named Executive Officers,” below.
Non-Qualified
Deferred Compensation Plan
.
As described in more detail on page 56 of this Proxy Statement, certain executive employees
(for example, director level and above) may defer a portion of their compensation and defer payment of restricted stock unit awards
under a non-qualified deferred compensation plan that offers a range of investment options similar to those available under our
401(k) plan. The company may also make discretionary employer credits to this plan although it has not elected to do so.
Benefits
and Perquisites
. Our executive officers generally receive the same menu of benefits offered to other full-time employees
including, but not limited to, our 401(k) plan. After completing an eligibility service period, our employees who have attained
age 21 are eligible to participate in our 401(k) plan. The 401(k) plan includes company stock as an investment option, providing
another opportunity for our senior executives and other employees to build stock ownership in our company. The company has historically
made discretionary matching contributions (at various levels) of a portion of employees’ contributions to the 401(k) plan.
As
the company provides no defined benefit pension plan, we believe the 401(k) plan and the non-qualified deferred compensation plan
are important elements in retirement planning for executives and other eligible employees.
We
generally avoid special executive perquisites. We do offer two executive benefits to senior management that are designed to address
specific corporate purposes:
|
●
|
Annual
Physical Exam
. Members of our senior management team are encouraged to annually undergo
a comprehensive physical examination. The company offers several executive physical options,
which generally range in cost from $2,300 to $4,000. These costs, after insurance coverage,
are paid by the company and constitute taxable wages to the executive that are not “grossed
up” for tax purposes. This benefit is designed to promote preventive care, enhance
the health and wellness of senior management and to catch potential health issues at
an early stage.
|
|
●
|
Tax
and Financial Planning
. Members of our senior management team are eligible for reimbursement
of expenses for tax and financial planning services up to $15,000 per year for the CEO
and up to $8,000 per year for executive or senior vice presidents. Amounts reimbursed
under this benefit represent taxable wages that are not “grossed up” for
tax purposes. This benefit is designed to enhance financial planning, to avoid distraction
of members of the senior management team and to promote tax compliance.
|
Chief
Executive Officer Compensation and Performance
The
compensation for Shelly R. Ibach, our President and Chief Executive Officer, consists of an annual base salary, annual cash incentive
compensation and long-term equity-based incentive compensation. The Committee determines the level for each of these compensation
elements using methods consistent with those used for the company’s other senior executives, including the assessment of
individual performance and review of competitive data. The Committee evaluates Ms. Ibach’s performance by soliciting input
from all members of the Board as well as members of the senior management team. The Board also assesses Ms. Ibach’s performance
against objectives incorporating key operational and strategic factors, including growth, profitability, product innovation, advancement
of strategic initiatives, organizational development and investor relations. The CEO performance feedback from all independent
Board members is consolidated into a detailed performance review which is the basis of a full Board discussion in Executive Session
led by the Chair of the Committee. The Board’s assessment of Ms. Ibach’s performance is a major consideration in determining
any compensation adjustments for the coming year.
Tax
and Accounting Implications
Deductibility
of Executive Compensation
. Section 162(m) of the Internal Revenue Code requires that we meet specific criteria, including
shareholder approval of certain stock and incentive plans, in order to deduct, for federal income tax purposes, compensation over
$1 million per individual paid to our Chief Executive Officer and each of our three other most highly compensated executives (other
than the Chief Financial Officer). Our equity-based incentive plans and our annual cash bonus plan are designed to permit the
grant and payment of equity or cash incentive awards that are fully deductible as performance-based compensation under the Internal
Revenue Code. In reviewing and adopting other executive compensation programs, the Committee plans to continue to consider the
impact of Section 162(m) limitations in light of the materiality of the deductibility of potential benefits and the impact of
such limitations on other compensation objectives. Because the Committee seeks to maintain flexibility in accomplishing the company’s
compensation goals, however, it has not adopted a policy that all compensation must be fully deductible.
Summary
Compensation Table
The
following table summarizes the total compensation paid or earned by each of the named executive officers for the 2016 fiscal year
ended December 31, 2016 (and for the 2015 and 2014 fiscal years if the individual was a named executive officer in those years,
respectively). The details of our named executive officers’ compensation are discussed in detail in the Compensation Discussion
and Analysis beginning on page 28.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
And Principal
Position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
(6)(7)
($)
|
|
|
Stock
Awards
(1)(2)
($)
|
|
|
Option
Awards
(1)(3)
($)
|
|
|
Non-
Equity
Incentive
Plan Compensa-
tion
(4)(7)
($)
|
|
|
All
Other
Compensa-
tion
(5)
($)
|
|
|
Total
($)
|
|
Shelly R.
Ibach
President and CEO
|
|
|
2016
|
|
|
$
|
814,615
|
|
|
|
—
|
|
|
$
|
1,597,928
|
|
|
$
|
493,284
|
|
|
$
|
354,998
|
|
|
$
|
23,205
|
|
|
$
|
3,284,030
|
|
|
|
|
2015
|
|
|
$
|
779,231
|
|
|
|
—
|
|
|
$
|
1,561,875
|
|
|
$
|
484,356
|
|
|
$
|
188,462
|
|
|
$
|
12,700
|
|
|
$
|
3,026,624
|
|
|
|
|
2014
|
|
|
$
|
697,846
|
|
|
|
—
|
|
|
$
|
1,388,066
|
|
|
$
|
260,799
|
|
|
$
|
1,049,478
|
|
|
$
|
20,360
|
|
|
$
|
3,416,549
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Callen
SVP and CFO
|
|
|
2016
|
|
|
$
|
400,637
|
|
|
|
—
|
|
|
$
|
304,346
|
|
|
$
|
93,979
|
|
|
$
|
96,034
|
|
|
$
|
9,327
|
|
|
$
|
904,323
|
|
|
|
|
2015
|
|
|
$
|
383,618
|
|
|
|
—
|
|
|
$
|
234,240
|
|
|
$
|
72,621
|
|
|
$
|
52,257
|
|
|
$
|
8,570
|
|
|
$
|
751,306
|
|
|
|
|
2014
|
|
|
$
|
278,365
|
|
|
$
|
173,329
|
|
|
$
|
463,599
|
|
|
$
|
68,600
|
|
|
$
|
224,993
|
|
|
$
|
193,197
|
|
|
$
|
1,402,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew P. Carlin
EVP, Chief Sales and
Services Officer
|
|
|
2016
|
|
|
$
|
415,369
|
|
|
|
—
|
|
|
$
|
670,240
|
|
|
$
|
93,979
|
|
|
$
|
106,385
|
|
|
$
|
8,025
|
|
|
$
|
1,293,998
|
|
|
|
|
2015
|
|
|
$
|
354,728
|
|
|
|
—
|
|
|
$
|
312,375
|
|
|
$
|
96,855
|
|
|
$
|
46,156
|
|
|
$
|
7,950
|
|
|
$
|
818,064
|
|
|
|
|
2014
|
|
|
$
|
324,607
|
|
|
|
—
|
|
|
$
|
536,250
|
|
|
$
|
88,898
|
|
|
$
|
268,468
|
|
|
$
|
12,147
|
|
|
$
|
1,230,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suresh Krishna
SVP and Chief Operations,
Supply Chain and Lean Officer
|
|
|
2016
|
|
|
$
|
285,000
|
|
|
$
|
144,127
|
|
|
$
|
1,059,989
|
|
|
$
|
437,402
|
|
|
$
|
70,373
|
|
|
$
|
17,095
|
|
|
$
|
2,013,986
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrea L. Bloomquist
SVP and Chief Product Officer
|
|
|
2016
|
|
|
$
|
403,500
|
|
|
|
—
|
|
|
$
|
304,346
|
|
|
$
|
93,979
|
|
|
$
|
96,718
|
|
|
$
|
11,960
|
|
|
$
|
910,503
|
|
|
|
|
2015
|
|
|
$
|
355,915
|
|
|
|
—
|
|
|
$
|
312,375
|
|
|
$
|
96,855
|
|
|
$
|
45,563
|
|
|
$
|
7,950
|
|
|
$
|
818,658
|
|
|
|
|
2014
|
|
|
$
|
317,146
|
|
|
|
—
|
|
|
$
|
536,250
|
|
|
$
|
88,898
|
|
|
$
|
262,146
|
|
|
$
|
8,901
|
|
|
$
|
1,213,341
|
|
(1) Reflects
the aggregate grant date fair value of stock and option awards granted during fiscal years 2016, 2015 and 2014, computed in accordance
with FASB ASC Topic 718. See Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2016, for a discussion of the relevant assumptions used in calculating these amounts.
(2) The “Stock Awards”
column includes performance stock awards. The amounts included for the performance stock awards represent the grant date fair
value assuming the achievement of the target performance award level. The following table presents the grant date fair value of
the performance stock awards included in the “Stock Awards” column and the maximum grant date fair value of these
awards assuming that the highest level of performance conditions would be achieved.
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
|
|
Grant Date
|
|
|
Maximum
|
|
|
Grant Date
|
|
|
Maximum
|
|
|
Grant Date
|
|
|
Maximum
|
|
|
|
Fair
Value
|
|
|
Value
|
|
|
Fair
Value
|
|
|
Value
|
|
|
Fair
Value
|
|
|
Value
|
|
Ms. Ibach
|
|
$
|
1,597,928
|
|
|
$
|
3,195,857
|
|
|
$
|
1,561,875
|
|
|
$
|
3,123,750
|
|
|
$
|
833,413
|
|
|
$
|
1,666,826
|
|
Mr. Callen
|
|
$
|
304,346
|
|
|
$
|
608,692
|
|
|
$
|
234,240
|
|
|
$
|
468,480
|
|
|
$
|
219,604
|
|
|
$
|
439,208
|
|
Mr. Carlin
|
|
$
|
304,346
|
|
|
$
|
608,692
|
|
|
$
|
312,375
|
|
|
$
|
624,750
|
|
|
$
|
284,142
|
|
|
$
|
568,285
|
|
Mr. Krishna
|
|
$
|
407,658
|
|
|
$
|
815,317
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Ms. Bloomquist
|
|
$
|
304,346
|
|
|
$
|
608,692
|
|
|
$
|
312,375
|
|
|
$
|
624,750
|
|
|
$
|
284,142
|
|
|
$
|
568,285
|
|
(3) The “Option Awards”
column includes a market-based option award in 2016 for Mr. Krishna. The associated $312,625 grant date fair value included in
the “Option Awards” column is also the maximum value of the award assuming that the market condition would be achieved.
The market condition requires the company’s closing stock price to exceed $27.00 for 20 consecutive trading days and can
be achieved any time prior to April 11, 2026, subject to continuing employment.
(4) Represents annual incentive
compensation earned under the AIP. See discussion in the Compensation Discussion and Analysis under the heading “Annual
Cash Incentive Compensation.”
(5) All other compensation includes
the costs of (i) reimbursement for personal financial planning and tax advice; (ii) company sponsored physical exam; and (iii)
company contribution to the executive’s 401(k) account. For 2014, includes relocation reimbursements for Mr. Callen of $126,671
and the related tax gross-up of the relocation benefits of $60,085.
(6) In 2014, Mr. Callen received
sign-on and discretionary relocation benefits.
(7) For 2016, Mr. Krishna was guaranteed a minimum payment equal to the
target incentive level under the AIP. The amount in the Non-Equity Incentive Plan Compensation column reflects the amount that
would have been earned under the plan if there had been no guarantee. The amount in the Bonus column reflects the difference between
the guaranteed minimum payment and the amounts that would have been earned under the plan if there had been no guarantee.
See
discussion in the Compensation Discussion and Analysis under the heading “Annual Cash Incentive Compensation.”
Grant
of Plan-Based Awards
The
following table summarizes grants of equity and non-equity plan-based awards to each of the named executive officers during the
2016 fiscal year ended December 31, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards
(1)
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
Awards:
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Number
|
|
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
of
|
|
|
Exercise
|
|
|
Fair
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Securities
|
|
|
or Base
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
Under-
|
|
|
Price of
|
|
|
Stock and
|
|
|
|
|
|
|
Thresh-
|
|
|
|
|
|
Maxi-
|
|
|
Thresh-
|
|
|
|
|
|
Maxi-
|
|
|
of Stock
|
|
|
lying
|
|
|
Option
|
|
|
Option
|
|
|
|
Grant
|
|
|
old
|
|
|
Target
|
|
|
mum
|
|
|
old
|
|
|
Target
|
|
|
mum
|
|
|
or Units
|
|
|
Options
|
|
|
Awards
|
|
|
Awards
|
|
Name
|
|
Date
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
(#)
|
|
|
($/Sh)
|
|
|
($)
(8)
|
|
Shelly R. Ibach
|
|
|
|
|
$
|
162,308
|
|
|
$
|
811,538
|
|
|
$
|
2,028,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/16
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,051
|
|
|
84,951
|
|
|
169,902
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,597,928
|
|
|
|
3/22/16
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,790
|
|
|
$
|
18.81
|
|
|
$
|
493,284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Callen
|
|
|
|
|
$
|
43,907
|
|
|
$
|
219,537
|
|
|
$
|
548,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/16
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,343
|
|
|
16,180
|
|
|
32,360
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
304,346
|
|
|
|
3/22/16
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,010
|
|
|
$
|
18.81
|
|
|
$
|
93,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew P. Carlin
|
|
|
|
|
$
|
48,640
|
|
|
$
|
243,200
|
|
|
$
|
608,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/16
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,343
|
|
|
16,180
|
|
|
32,360
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
304,346
|
|
|
|
3/22/16
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,010
|
|
|
$
|
18.81
|
|
|
$
|
93,979
|
|
|
|
4/11/16
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,880
|
|
|
|
|
|
|
|
|
|
$
|
365,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Suresh Krishna
|
|
|
|
|
$
|
214,500
|
|
|
$
|
214,500
|
|
|
$
|
536,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4/11/16
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,746
|
|
|
21,035
|
|
|
42,070
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
407,658
|
|
|
|
4/11/16
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,610
|
|
|
|
|
|
|
|
|
|
$
|
108,722
|
|
|
|
4/11/16
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,050
|
|
|
|
|
|
|
|
|
|
$
|
543,609
|
|
|
|
4/11/16
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,310
|
|
|
$
|
19.38
|
|
|
$
|
124,777
|
|
|
|
4/11/16
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,500
|
|
|
30,500
|
|
|
30,500
|
|
|
|
|
|
|
|
|
$
|
19.38
|
|
|
$
|
312,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrea L. Bloomquist
|
|
|
|
|
$
|
44,220
|
|
|
$
|
221,100
|
|
|
$
|
552,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/22/16
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,343
|
|
|
16,180
|
|
|
32,360
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
304,346
|
|
|
|
3/22/16
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,010
|
|
|
$
|
18.81
|
|
|
$
|
93,979
|
|
(1) This
represents the cash incentive opportunity for 2016 under the AIP. For all named executive officers except for Mr. Krishna, the
actual amounts earned under this plan for 2016 are reported in the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table. Except for Mr. Krishna, the threshold reflects the amount that would be payable under the plan if the minimum
performance level is achieved for annual company-wide performance goals. If the minimum performance level for payment of the threshold
amount is not achieved, then no annual incentive would be payable under the plan. For 2016, Mr. Krishna was guaranteed a minimum
payment equal to the target incentive level and therefore the threshold and target amounts are the same. For Mr. Krishna, the
amounts that would have been earned under the plan if there had been no guarantee are reported in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table and the difference between the guaranteed minimum payment and the amounts
that would have been earned under the plan if there had been no guarantee are reflected in the Bonus column of the Summary Compensation
Table. Grantees had the opportunity to realize up to 50 percent of pro-rated target incentive levels for achievement of semi-annual
performance objectives for the first half of the year. See discussion in the Compensation Discussion and Analysis under the heading
“Annual Cash Incentive Compensation.”
(2) These
awards represent performance stock unit awards described in greater detail in the Compensation Discussion and Analysis under the
heading, “Long-Term Equity-Based Incentive Compensation.” The target number of units may be adjusted based on company
performance during the performance period which ends December 29, 2018 (fiscal 2018 year-end). The adjusted amount of the award
then fully vests after three years from the grant date. If any dividends are paid on our common stock, the holders of the performance
stock units awards would receive dividends at the same rate as paid to other shareholders if and when the performance stock unit
award becomes fully vested.
(3) These awards represent restricted
stock units which vest 100% on the one-year anniversary of the grant date, subject to continuing employment.
(4) These awards represent restricted
stock units which vest one-half each year on each of the first two anniversaries of the grant date, subject to continuing employment.
(5) These
awards represent stock options described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term
Equity-Based Incentive Compensation.” These stock options have an exercise price equal to the closing trading price of the
company’s common stock on the grant date. The options become exercisable in installments of one-third of the options awarded
on each of the first three anniversaries of the grant date. These options remain exercisable for up to 10 years from the grant
date, subject to earlier termination upon certain events related to termination of employment.
(6) These
awards represent market-based stock options described in greater detail in the Compensation Discussion and Analysis under the
heading, “New Hire Awards.” These stock options have an exercise price equal to the closing trading price of the company’s
common stock on the grant date. The options vest 100% on the third anniversary of the grant date, subject to continuing employment
and achievement of the market condition. The market condition requires the company’s closing stock price to exceed $27.00
for 20 consecutive trading days and can be achieved any time prior to April 11, 2026, subject to continuing employment. These
options remain exercisable for up to 10 years from the grant date, subject to earlier termination upon certain events related
to termination of employment.
(7) These
awards represent restricted stock units which vest 100% on the three-year anniversary of the grant date, subject to continuing
employment.
(8) Reflects
the grant date fair value computed in accordance with FASB ASC Topic 718. The value for awards subject to market or performance
conditions reflects the target payout.
Outstanding
Equity Awards at Fiscal Year-End
The
following table summarizes the total outstanding equity awards for each of the named executive officers as of December 31, 2016.
|
|
|
Option
Awards
|
|
|
|
Stock
Awards
|
|
Name
|
|
|
Number
of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration Date
|
|
|
|
Number
of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
(17)
|
|
|
|
Equity
Incentive
Plan
Awards: Number of Unearned Shares, Units or Other
Rights That Have Not
Vested
(#)
|
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
(17)
|
|
Shelly
R. Ibach
|
|
|
9,700
|
|
|
|
—
|
|
|
$
|
18.22
|
|
|
4/2/2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
14,000
|
|
|
|
—
|
|
|
$
|
10.63
|
|
|
11/27/2017
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
6,610
|
|
|
|
—
|
|
|
$
|
3.76
|
|
|
3/7/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
7,500
|
|
|
|
—
|
|
|
$
|
0.79
|
|
|
6/18/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
27,375
|
|
|
|
—
|
|
|
$
|
9.75
|
|
|
6/4/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
14,038
|
|
|
|
—
|
|
|
$
|
17.34
|
|
|
5/11/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
17,900
|
|
|
|
—
|
|
|
$
|
28.99
|
|
|
2/23/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
13,526
|
|
|
|
—
|
|
|
$
|
25.99
|
|
|
6/1/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
41,950
|
|
|
|
—
|
|
|
$
|
21.15
|
|
|
4/1/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
18,287
|
|
|
|
9,143
|
(1)
|
|
$
|
17.77
|
|
|
3/28/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
39,678
|
(2)
|
|
$
|
897,516
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
37,225
|
(3)
|
|
$
|
842,030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
9,827
|
|
|
|
19,653
|
(7)
|
|
$
|
33.32
|
|
|
3/16/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
46,875
|
(8)
|
|
$
|
1,060,313
|
|
|
|
|
—
|
|
|
|
57,790
|
(9)
|
|
$
|
18.81
|
|
|
3/22/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
84,951
|
(10)
|
|
$
|
1,921,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David R. Callen
|
|
|
4,930
|
|
|
|
2,465
|
(4)
|
|
$
|
17.36
|
|
|
4/7/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
4,685
|
(5)
|
|
$
|
105,975
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
10,702
|
(6)
|
|
$
|
242,079
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,474
|
|
|
|
2,946
|
(7)
|
|
$
|
33.32
|
|
|
3/16/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,030
|
(8)
|
|
$
|
159,019
|
|
|
|
|
—
|
|
|
|
11,010
|
(9)
|
|
$
|
18.81
|
|
|
3/22/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,180
|
(10)
|
|
$
|
365,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrew P. Carlin
|
|
|
4,000
|
|
|
|
—
|
|
|
$
|
3.76
|
|
|
3/7/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
10,500
|
|
|
|
—
|
|
|
$
|
0.94
|
|
|
6/1/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
9,845
|
|
|
|
—
|
|
|
$
|
9.75
|
|
|
6/4/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
200
|
|
|
|
—
|
|
|
$
|
17.34
|
|
|
5/11/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
3,000
|
|
|
|
—
|
|
|
$
|
28.99
|
|
|
2/23/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
4,165
|
|
|
|
—
|
|
|
$
|
25.99
|
|
|
6/1/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11,450
|
|
|
|
—
|
|
|
$
|
21.15
|
|
|
4/1/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
6,233
|
|
|
|
3,117
|
(1)
|
|
$
|
17.77
|
|
|
3/28/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
13,528
|
(2)
|
|
$
|
306,003
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
16,920
|
(3)
|
|
$
|
382,730
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,965
|
|
|
|
3,930
|
(7)
|
|
$
|
33.32
|
|
|
3/16/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,375
|
(8)
|
|
$
|
212,063
|
|
|
|
|
—
|
|
|
|
11,010
|
(9)
|
|
$
|
18.81
|
|
|
3/22/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,180
|
(10)
|
|
$
|
365,992
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
18,880
|
(11)
|
|
$
|
427,066
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
Equity Awards at Fiscal Year-End, continued
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration Date
|
|
|
Number of Shares or Units of Stock That Have Not Vested
(#)
|
|
|
Market Value of Shares or Units of Stock That Have Not Vested
($)
(17)
|
|
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
|
|
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
(17)
|
|
Suresh Krishna
|
|
|
—
|
|
|
|
14,310
|
(12)
|
|
$
|
19.38
|
|
|
4/11/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
30,500
|
(13)
|
|
$
|
19.38
|
|
|
4/11/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
5,610
|
(14)
|
|
$
|
126,898
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
28,050
|
(15)
|
|
$
|
634,491
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,035
|
(16)
|
|
$
|
475,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrea L. Bloomquist
|
|
|
3,000
|
|
|
|
—
|
|
|
$
|
3.07
|
|
|
5/5/2018
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,750
|
|
|
|
—
|
|
|
$
|
0.94
|
|
|
6/1/2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
13,125
|
|
|
|
—
|
|
|
$
|
9.75
|
|
|
6/4/2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
3,100
|
|
|
|
—
|
|
|
$
|
17.34
|
|
|
5/11/2021
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
3,000
|
|
|
|
—
|
|
|
$
|
28.99
|
|
|
2/23/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
3,332
|
|
|
|
—
|
|
|
$
|
25.99
|
|
|
6/1/2022
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
11,450
|
|
|
|
—
|
|
|
$
|
21.15
|
|
|
4/1/2023
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
6,233
|
|
|
|
3,117
|
(1)
|
|
$
|
17.77
|
|
|
3/28/2024
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
13,528
|
(2)
|
|
$
|
306,003
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
16,920
|
(3)
|
|
$
|
382,730
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,965
|
|
|
|
3,930
|
(7)
|
|
$
|
33.32
|
|
|
3/16/2025
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,375
|
(8)
|
|
$
|
212,063
|
|
|
|
|
—
|
|
|
|
11,010
|
(9)
|
|
$
|
18.81
|
|
|
3/22/2026
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,180
|
(10)
|
|
$
|
365,992
|
|
(1)
These stock options were granted on March 28, 2014 and vest one-third each year on each of the first three anniversaries of
the date of grant, subject to continuing employment through the applicable vesting date.
(2)
These performance stock units were granted on March 28, 2014 and vest 100% on March 28, 2017, subject to continuing
employment through the vesting date. The shares are reflected at actual performance achievement level. The performance period
was completed as of fiscal 2016 year end.
(3)
These market-based stock units were granted on March 28, 2014 and vest 100% on March 28, 2017, subject to continuing
employment through the vesting date. The shares are reflected at the target award level, which is the same as the maximum
award level. The market condition performance period continues through March 28, 2017. However, all market conditions were
met in fiscal 2014.
(4)
These stock options were granted on April 7, 2014 and vest one-third each year on each of the first three anniversaries of
the date of grant, subject to continuing employment through the applicable vesting date.
(5)
These restricted stock units were granted on April 7, 2014 and vest one-third each year on each of the first three
anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.
(6)
These performance stock units were granted on April 7, 2014 and vest 100% on April 7, 2017, subject to continuing employment
through the vesting date. The shares are reflected at actual performance achievement level. The performance period was
completed as of fiscal 2016 year end.
(7)
These stock options were granted on March 16, 2015 and vest one-third each year on each of the first three anniversaries of
the date of grant, subject to continuing employment through the applicable vesting date.
(8)
These performance stock units were granted on March 16, 2015 and vest 100% on March 16, 2018, subject to achieving
performance criteria and continuing employment through the vesting date. The shares are reflected at the target award level.
The performance period continues through fiscal 2017 year end.
(9)
These stock options were granted on March 22, 2016 and vest one-third each year on each of the first three anniversaries of
the date of grant, subject to continuing employment through the applicable vesting date.
(10) These performance stock units were granted on March 22, 2016 and vest 100% on
March 22, 2019, subject to achieving performance criteria and continuing employment through the vesting date. The shares are
reflected at the target award level. The performance period continues through fiscal 2018 year end.
(11) These restricted stock units were granted on April 11, 2016 and vest one-third each year on each of the first three anniversaries
of the date of grant, subject to continuing employment through the applicable vesting date.
(12) These
stock options were granted on April 11, 2016 and vest one-third each year on each of the first three anniversaries of the date
of grant, subject to continuing employment through the applicable vesting date.
(13) These
market-based stock options were granted on April 11, 2016 and vest 100% on April 11, 2019, subject to continuing employment through
the vesting date; provided, however, that the options will only become exercisable if the market condition is achieved. The shares
are reflected at the target award level, which is the same as the maximum award level. The market condition requires the company’s
closing stock price to exceed $27.00 for 20 consecutive trading days and can be achieved any time prior to April 11, 2026, subject
to continuing employment. As of December 31, 2016, the market condition had not been achieved.
(14) These
restricted stock units were granted on April 11, 2016 and vest 100% on April 11, 2017, subject to continuing employment through
the vesting date.
(15) These
restricted stock units were granted on April 11, 2016 and vest one-half each year on each of the first two anniversaries of the
date of grant, subject to continuing employment through the applicable vesting date.
(16) These performance stock units were granted on April 11, 2016 and vest 100% on April 11, 2019, subject to achieving performance
criteria and continuing employment through the vesting date. The shares are reflected at the target award level. The performance
period continues through fiscal 2018 year end.
(17) Calculated
by multiplying unvested shares by $22.62, the closing price of the company’s common stock on the Nasdaq Stock Market on
December 30, 2016.
Option
Exercises and Stock Vested
The
following table summarizes the stock options exercised and restricted stock awards vested for each of the named executive officers
during the fiscal year ended December 31, 2016.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of Shares Acquired
on Exercise
(#)
|
|
|
Value Realized
on Exercise
($)
(1)
|
|
|
Number of Shares Acquired
on Vesting
(#)
|
|
|
Value Realized on Vesting
($)
(2)
|
|
Shelly R. Ibach
|
|
|
11,800
|
|
|
$
|
156,616
|
|
|
|
11,350
|
|
|
$
|
223,293
|
|
David R. Callen
|
|
|
—
|
|
|
|
—
|
|
|
|
4,685
|
|
|
$
|
89,811
|
|
Andrew P. Carlin
|
|
|
3,200
|
|
|
$
|
34,119
|
|
|
|
2,830
|
|
|
$
|
56,932
|
|
Suresh Krishna
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Andrea L. Bloomquist
|
|
|
—
|
|
|
|
—
|
|
|
|
2,653
|
|
|
$
|
52,844
|
|
|
(1)
|
The
value realized on the exercise of stock options for purposes of this table is based on
the difference between the fair market value of our common stock on the date of exercise
and the exercise price of the stock option.
|
|
(2)
|
The
value realized on the vesting of stock awards for purposes of this table is based on
the fair market value of our common stock on the date of vesting of the award.
|
Nonqualified
Deferred Compensation
The
following table summarizes the aggregate earnings and balances for each of the named executive officers under the Select Comfort
Executive Investment Plan, the company’s non-qualified deferred compensation plan (described in greater detail below), for
the 2016 fiscal year ended December 31, 2016.
Name
|
|
Executive Contributions in Last Fiscal Year
($)
|
|
|
Registrant Contributions in Last Fiscal Year
($)
|
|
|
Aggregate Earnings in Last Fiscal Year
($)
|
|
|
Aggregate Withdrawals/
Distributions
($)
|
|
|
Aggregate Balance
at Last
Fiscal
Year-End
(1)
($)
|
|
Shelly R. Ibach
|
|
$
|
154,591
|
|
|
|
—
|
|
|
$
|
23,637
|
|
|
|
—
|
|
|
$
|
387,965
|
|
David R. Callen
|
|
$
|
739
|
|
|
|
—
|
|
|
$
|
826
|
|
|
|
—
|
|
|
$
|
37,529
|
|
Andrew P. Carlin
|
|
$
|
234,957
|
|
|
|
—
|
|
|
$
|
51,419
|
|
|
|
—
|
|
|
$
|
599,201
|
|
Suresh Krishna
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Andrea L. Bloomquist
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1) Among
the named executive officers, Ms. Ibach, Mr. Callen and Mr. Carlin had account balances under the plan as of December 31, 2016.
Mr. Krishna and Ms. Bloomquist did not elect to participate in the plan in fiscal year 2016.
As
determined by the plan administrator each year, certain executive employees (for example, director level and above) may be eligible
to participate in the Select Comfort Executive Investment Plan, a non-qualified deferred compensation plan. Under this plan, eligible
employees may defer up to 50% of base salary and up to 75% of bonus compensation on a pre-tax basis. These voluntary employee
salary and bonus deferrals are credited to the participant’s “savings account.” (Elective deferrals made by
eligible employees prior to January 1, 2009 could have been credited to a “fixed period account.”) No employees were
eligible to make deferrals of base salary or bonus during the 2009, 2010 and 2011 plan years and the first six months of the 2012
plan year.
In
addition to deferrals made by eligible employees, the company may elect to credit eligible employees with discretionary employer
credits to a “retirement account.” The company has not elected to make any discretionary employer credits under this
plan.
A
participant’s account under the plan is also credited with earnings credits which are based on deemed investment in a variety
of funds made available by the plan administrator and which are currently similar to the investment fund options available under
the company’s 401(k) plan. The participant selects the funds into which the account balance is deemed to be invested and
these allocations may be changed by the participant at any time.
Amounts
credited to savings and retirement accounts are paid out no later than 90 days (or six months for executive officers) after the
participant’s “termination date” (which means the date the participant separates from service as defined under
Internal Revenue Code Section 409A). Payment of the fixed period account depends on the date (or dates) of distribution elected
by the participant at the time he or she made the election to defer salary or bonus to a fixed period account. Distributions to
the participant may be made in a lump sum payment or in annual installment payments. Prior to the termination date (or the fixed
payment date of a fixed period account), a participant may be allowed to receive a lump sum distribution from his or her account
in the event of certain unforeseeable emergencies. The participant’s account (if any) upon his or her date of death is paid
in a lump sum to the participant’s plan beneficiary or beneficiaries.
Employment
Arrangements, Potential Payments upon Change in Control
No
Employment Agreements
. All Select Comfort employees, including all executive officers, are “at will” employees,
meaning that the employee or the company may terminate the employment relationship with or without cause and with or without notice,
at any time at the option of either the employee or the company. No executive officer of the company has any contractual or other
right to employment for any term or period of time. In addition, no executive officer would be entitled to any severance compensation
in excess of the benefits provided under the company’s Severance Plan described above.
Change
in Control Provisions –2004 Stock Incentive Plans
Under
our company’s 2004 Stock Incentive Plan (the “2004 Plan”), if a “change in control” of our company
occurs, then, unless the Compensation Committee decides otherwise either at the time of grant of an incentive award or at any
time thereafter, all outstanding stock options will become immediately exercisable in full and will remain exercisable for the
remainder of their terms, regardless of whether the participant to whom such options have been granted remains in the employ or
service of our company or any subsidiary.
In
addition, under the 2004 Plan, if a “change in control” of our company occurs, then, unless the Compensation Committee
decides otherwise either at the time of grant of an incentive award or at any time thereafter:
|
●
|
All
outstanding stock appreciation rights will become immediately exercisable in full and
will remain exercisable for the remainder of their terms, regardless of whether the participant
to whom such stock appreciation rights have been granted remains in the employ or service
of our company or any subsidiary;
|
|
●
|
All
outstanding restricted stock awards will become immediately fully vested and non-forfeitable;
and
|
|
●
|
All
outstanding performance units, stock bonuses and performance stock awards will vest and/or
continue to vest in the manner determined by the Compensation Committee and set forth
in the agreement evidencing such performance units or stock bonuses.
|
There
are presently no outstanding stock appreciation rights, performance units or stock bonuses.
In
the event of a change in control, the Compensation Committee may pay cash for all or a portion of the outstanding options. The
amount of cash the participants would receive will equal (a) the fair market value of such shares immediately prior to the change
in control minus (b) the exercise price per share and any required tax withholding.
Under
the 2004 Plan, a “change in control” will include any of the following:
|
●
|
The
sale, lease, exchange or other transfer of all or substantially all of the assets of
our company to a corporation not controlled by our company;
|
|
●
|
The
approval by our shareholders of a plan or proposal for the liquidation or dissolution
of our company;
|
|
●
|
Any
change in control that is required by the Securities and Exchange Commission to be reported;
|
|
●
|
Any
person who was not a shareholder of our company on the effective date of the Plan becomes
the beneficial owner of 50% or more of the voting power of our company’s outstanding
common stock; or
|
|
●
|
The
“continuity” directors (directors as of the effective date of the Plan and
their future nominees) ceasing to constitute a majority of the Board of Directors.
|
The
foregoing provisions applicable to changes in control under our 2004 Plan apply equally to all employees holding incentive awards
under this plan.
Change
in Control Provisions – 2010 Omnibus Incentive Plan
While
the events that are considered a change in control under our 2004 Plan and Amended and Restated 2010 Omnibus Incentive Plan (the
“2010 Plan”) are identical, our 2010 Plan, which governs incentive awards granted in 2010 and future years, contains
a “double-trigger” change in control provision. Under this provision, if the company is the surviving company, or
the surviving or acquiring company assumes our outstanding incentive awards or provides for their equivalent substitutes, then
vesting of incentive awards is accelerated only upon the termination of the employee’s service, a material reduction in
an employee’s base salary, a discontinuation of participation in certain long-term cash or equity benefits provided to comparable
employees, a significant change in job responsibilities or the need to relocate, provided these events occur within two years
following a change in control.
Potential
Payments to Named Executive Officers
The
following table summarizes the amount of compensation and benefits payable to each named executive officer in the event of (i)
any voluntary termination or resignation or termination for cause, (ii) an involuntary termination without cause, (iii) a change
in control, (iv) a qualifying change in control termination, and (v) termination by reason of an executive’s death or disability.
The amounts shown assume that the applicable triggering event occurred on December 31, 2016 (fiscal year-end).
|
|
|
|
|
Triggering Events
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Type of Payment
|
|
|
Voluntary/
Involuntary
Termination
For Cause
($)
|
|
|
Involuntary
Termination
without
Cause
(1)
($)
|
|
|
Change in
Control
($)
|
|
|
Qualifying
Change in
Control
Termination
(2)
($)
|
|
|
Death or
Disability
($)
|
|
Shelly R. Ibach
|
|
Cash Severance
(3)
|
|
|
—
|
|
|
$
|
4,075,000
|
|
|
|
—
|
|
|
$
|
4,075,000
|
|
|
|
—
|
|
|
|
Option Award Acceleration
(4)
|
|
|
—
|
|
|
$
|
88,303
|
|
|
|
—
|
|
|
$
|
264,523
|
|
|
$
|
264,523
|
|
|
|
Stock Award Acceleration
(5)
|
|
|
—
|
|
|
$
|
2,693,522
|
|
|
|
—
|
|
|
$
|
4,721,450
|
|
|
$
|
4,721,450
|
|
|
|
Benefit Continuation
(6)
|
|
|
—
|
|
|
$
|
14,567
|
|
|
|
—
|
|
|
$
|
14,567
|
|
|
|
—
|
|
|
|
Outplacement
|
|
|
—
|
|
|
$
|
15,000
|
|
|
|
—
|
|
|
$
|
15,000
|
|
|
|
—
|
|
|
|
Total
|
|
|
—
|
|
|
$
|
6,886,392
|
|
|
|
—
|
|
|
$
|
9,090,540
|
|
|
$
|
4,985,973
|
|
David R. Callen
|
|
Cash Severance
(3)
|
|
|
—
|
|
|
$
|
847,547
|
|
|
|
—
|
|
|
$
|
847,547
|
|
|
|
—
|
|
|
|
Option Award Acceleration
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
54,914
|
|
|
$
|
54,914
|
|
|
|
Stock Award Acceleration
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
873,064
|
|
|
$
|
873,064
|
|
|
|
Benefit Continuation
(6)
|
|
|
—
|
|
|
$
|
19,229
|
|
|
|
—
|
|
|
$
|
19,229
|
|
|
|
—
|
|
|
|
Outplacement
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
|
Total
|
|
|
—
|
|
|
$
|
876,776
|
|
|
|
—
|
|
|
$
|
1,804,754
|
|
|
$
|
927,978
|
|
Andrew P. Carlin
|
|
Cash Severance
(3)
|
|
|
—
|
|
|
$
|
893,760
|
|
|
|
—
|
|
|
$
|
893,760
|
|
|
|
—
|
|
|
|
Option Award Acceleration
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
57,066
|
|
|
$
|
57,066
|
|
|
|
Stock Award Acceleration
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,693,853
|
|
|
$
|
1,693,853
|
|
|
|
Benefit Continuation
(6)
|
|
|
—
|
|
|
$
|
19,044
|
|
|
|
—
|
|
|
$
|
19,044
|
|
|
|
—
|
|
|
|
Outplacement
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
|
Total
|
|
|
—
|
|
|
$
|
922,804
|
|
|
|
—
|
|
|
$
|
2,673,723
|
|
|
$
|
1,750,919
|
|
Suresh Krishna
|
|
Cash Severance
(3)
|
|
|
—
|
|
|
$
|
819,000
|
|
|
|
—
|
|
|
$
|
819,000
|
|
|
|
—
|
|
|
|
Option Award Acceleration
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
145,184
|
|
|
$
|
145,184
|
|
|
|
Stock Award Acceleration
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,237,201
|
|
|
$
|
1,237,201
|
|
|
|
Benefit Continuation
(6)
|
|
|
—
|
|
|
$
|
16,502
|
|
|
|
—
|
|
|
$
|
16,502
|
|
|
|
—
|
|
|
|
Outplacement
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
|
Total
|
|
|
—
|
|
|
$
|
845,502
|
|
|
|
—
|
|
|
$
|
2,227,887
|
|
|
$
|
1,382,385
|
|
Andrea L. Bloomquist
|
|
Cash Severance
(3)
|
|
|
—
|
|
|
$
|
851,760
|
|
|
|
—
|
|
|
$
|
851,760
|
|
|
|
—
|
|
|
|
Option Award Acceleration
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
57,066
|
|
|
$
|
57,066
|
|
|
|
Stock Award Acceleration
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
1,266,788
|
|
|
$
|
1,266,788
|
|
|
|
Benefit Continuation
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Outplacement
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
$
|
10,000
|
|
|
|
—
|
|
|
|
Total
|
|
|
—
|
|
|
$
|
861,760
|
|
|
|
—
|
|
|
$
|
2,185,614
|
|
|
$
|
1,323,854
|
|
(1)
If a named executive officer’s employment is terminated by reason of involuntary termination without cause or
their retirement at or beyond age fifty-five (55) and they have five (5) or more years of service with the company prior to
retirement, the named executive officer will become vested in the stock and option awards pro rata based on the number of
months elapsed in the restriction period as of the date of retirement.
(2)
The
amounts payable to the named executive officers upon a change in control may be subject to reduction under Sections 280G and 4999
of the Internal Revenue Code.
(3)
For
the CEO, the cash severance compensation is equal to (a) two times the sum of (i) annual base salary and (ii) annual target bonus,
plus (b) a pro rata target bonus for the year of termination. For each of the other named executive officers, the cash severance
compensation is equal to (a) one times the sum of (i) annual base salary and (ii) annual target bonus, plus (b) a pro rata target
bonus for the year of termination.
(4)
The
value of the automatic acceleration of the vesting of unvested stock options held by a named executive officer is based on the
difference between: (i) the fair market value of our common stock as of December 30, 2016 ($22.62), and (ii) the per share exercise
price of the options held by the executive. The range of exercise prices of unvested stock options held by our named executive
officers included in the table as of December 31, 2016 was $17.36 to $33.32.
(5)
The
value of the automatic acceleration of the vesting of stock awards held by a named executive officer is based on: (i) the number
of unvested stock awards held by the executive as of December 31, 2016, multiplied by (ii) the fair market value of our common
stock on December 30, 2016 ($22.62).
(6)
Represents
the cost of “COBRA” medical and dental continuation coverage, less the amount paid by an active full-time employee
for the same level of coverage.
Director
Compensation
The
following table summarizes the total compensation paid or earned by each of the non-employee members of our Board of Directors
for the 2016 fiscal year ended December 31, 2016.
Name
|
|
Fees Earned or
Paid in
Cash
($)
|
|
|
Stock Awards
(1)(5)
($)
|
|
|
Option Awards
(2)
($)
|
|
|
All Other Compensation
($)
|
|
|
Total
($)
|
|
Daniel I. Alegre
|
|
$
|
76,500
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
172,400
|
|
Stephen L. Gulis, Jr.
(3)
|
|
$
|
89,000
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
184,900
|
|
Michael J. Harrison
(3)
|
|
$
|
78,500
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
174,400
|
|
Brenda J. Lauderback
(3)
|
|
$
|
87,000
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
182,900
|
|
Barbara R. Matas
(3) (4)
|
|
$
|
56,250
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
152,150
|
|
Kathleen L. Nedorostek
|
|
$
|
78,500
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
174,400
|
|
Vicki A. O’Meara
|
|
$
|
56,250
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
152,150
|
|
Michael A. Peel
(3)
|
|
$
|
88,500
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
184,400
|
|
Jean-Michel Valette
|
|
$
|
175,000
|
|
|
$
|
71,807
|
|
|
$
|
24,093
|
|
|
|
—
|
|
|
$
|
270,900
|
|
(1) Reflects
the aggregate grant date fair value of 3,303 restricted stock awards granted during fiscal year 2016, computed in accordance with
FASB ASC Topic 718. See Note 10,
Shareholders’ Equity
, to the Consolidated Financial Statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, for a discussion of the relevant assumptions used in calculating
these amounts.
(2) Reflects
the aggregate grant date fair value of 2,247 stock option awards granted during fiscal year 2016, computed in accordance with
FASB ASC Topic 718. See Note 10,
Shareholders’ Equity
, to the Consolidated Financial Statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2016, for a discussion of the relevant assumptions used in calculating
these amounts. As of December 31, 2016, the aggregate number of stock options outstanding held by those who served as non-employee
directors during fiscal 2016 was as follows: Mr. Alegre, 9,482; Mr. Gulis, 47,357; Mr. Harrison, 12,951; Ms. Lauderback, 47,357;
Ms. Matas, 2,247; Ms. Nedorostek, 15,357;
Ms. O’Meara, 2,247; Mr. Peel 35,220; and Mr. Valette, 20,357.
(3) Under
the 2010 Omnibus Incentive Plan, non-employee directors may elect to defer receipt of any shares of the company’s common
stock under an Incentive Award granted to non-employee directors under the Plan. For fiscal 2016, the following Directors have
elected to defer receipt of their 2016 Incentive Award: Mr. Gulis, 3,303 shares; Mr. Harrison, 3,303 shares; Ms. Lauderback, 3,303
shares; Ms. Matas, 2,642 shares; and Mr. Peel, 3,303 shares.
(4) Beginning
in June 2016, Ms. Matas elected to receive all director fees in the form of common stock under the company’s 2010 Omnibus
Incentive Plan, and to defer receipt of such shares. The number of shares paid is determined by dividing the amount of the director’s
fees to be deferred by the fair market value per share of our common stock on the date the fees otherwise would have been payable
in cash. The number of shares to be received by this director in lieu of cash compensation for fiscal 2016 is 1,659 shares and
the related grant date fair value was $37,500.
(5) As
of December 31, 2016, the aggregate number of shares outstanding under stock awards, including restricted stock, restricted stock
units and phantom stock, held by those who served as non-employee directors during fiscal year 2016 was as follows: Mr. Alegre,
3,303 shares; Mr. Gulis, 64,466 shares; Mr. Harrison, 18,221 shares; Ms. Lauderback, 12,640 shares; Ms. Matas, 4,962 shares; Ms.
Nedorostek, 15,395 shares;
Ms. O’Meara, 3,303 shares; Mr. Peel, 11,188 shares, and Mr. Valette, 3,303 shares.
Annual
Retainer.
For each of the last two years, all of our non-employee directors have received an annual cash retainer of $75,000.
The Chairs of each of the Committees of the Board receive additional compensation of $10,000 per year. No Committee members other
than the Chair receive additional compensation for service on any Committee. The non-executive Chairman of the Board receives
an additional retainer of $100,000 per year.
Meeting
Fees
. Non-employee directors are entitled to payment of meeting fees for Board and Committee meetings beyond the normal number
of regular or typical meetings for the Board and each Committee in a fiscal year. Pursuant to this approval, non-employee directors
(other than the Chairman of the Board) are entitled to (i) Board meeting fees of $1,000 per in-person meeting and $500 per telephonic
meeting after a minimum of four Board meetings for the fiscal year, and (ii) Committee meeting fees of $750 per in-person Committee
meeting and $500 per telephonic Committee meeting after a minimum of eight Audit Committee meetings and after a minimum of four
meetings of each other Committee for the fiscal year.
Equity
Compensation.
Coincident with the annual meeting of shareholders, non-employee directors are eligible to receive equity compensation
in amounts determined by the Management Development and Compensation Committee, of which generally 75 percent would be paid in
the form of restricted stock and 25 percent in stock options, based on Black-Scholes valuation, with the grants to vest on the
earlier of one year from the date of grant or the date of the next annual meeting at which directors are elected to the Board,
so long as the director continues to serve on our Board of Directors. All options granted to directors have an exercise price
equal to the fair market value of our common stock on the date of grant and remain exercisable for a period of up to 10 years,
subject to earlier termination following retirement from the Board.
Reimbursement
of Expenses.
All of our directors are reimbursed for travel expenses for attending meetings of our Board or any Board committee
and for attending director continuing education programs.
No
Director Compensation for Employee Directors.
Any director who is also an employee of our company does not receive additional
compensation for service as a director.
ADVISORY
VOTE TO APPROVE EXECUTIVE COMPENSATION (“Say-on-Pay”)
(Proposal
2)
Background
Consistent
with the views expressed by shareholders at our 2011 Annual Meeting, the Board of Directors has determined to hold an advisory
vote to approve executive compensation annually. Subject to the outcome of the advisory vote on the frequency of future advisory
votes on executive compensation (see proposal 3), the company expects to continue to hold such votes annually.
This
advisory resolution, commonly referred to as “say-on-pay”, is non-binding on the company and the Board of Directors.
However, the Board and the Compensation Committee value the opinions of our shareholders and will carefully consider the outcome
of the vote when making future compensation decisions.
As
described more fully in the Compensation Discussion and Analysis section of this Proxy Statement, our compensation programs are
structured to align the interests of our executive officers with the interests of our shareholders. They are designed to attract,
retain, and motivate a talented management team to preserve its competitive advantage in the marketplace and deliver sustainable
profitable growth. Shareholders are urged to read the CD&A, which discusses in-depth how our executive compensation programs
are aligned with our performance and the creation of shareholder value.
Proposal
The
Board of Directors recommends that shareholders vote “For” approval of the following non-binding advisory resolution
at the 2017 annual meeting:
RESOLVED,
that the shareholders of Select Comfort Corporation approve, on an advisory basis, the compensation of the company’s named
executive officers as described in the Compensation Discussion and Analysis, tabular disclosures and other executive compensation
narrative provided in this Proxy Statement for the company’s 2017 Annual Meeting of Shareholders.
Vote
Required
The
affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote in person or by proxy
on this matter at the Annual Meeting, and at least a majority of the minimum number of shares necessary for a quorum, is necessary
for approval of the foregoing resolution. Unless a contrary choice is specified, proxies solicited by the Board of Directors will
be voted “
For
” approval of the foregoing resolution.
ADVISORY
VOTE TO APPROVE THE FREQUENCY OF
FUTURE
ADVISORY VOTES ON EXECUTIVE COMPENSATION
(Proposal
3)
Background
Pursuant
to the Dodd-Frank Act, we are required to ask our shareholders to cast an advisory vote at least every six years as to whether
future advisory votes on executive compensation, or “say-on-pay” votes, should occur every year, every two years or
every three years.
We
initially asked shareholders to cast an advisory vote to approve the frequency of say-on-pay votes at our 2011 annual meeting.
At that time, approximately 64% of the votes cast by shareholders on the question were in favor of annual say-on-pay votes. Our
Board determined to conduct annual say-on-pay votes and we have continued to do so.
The
Board of Directors believes that it is in the best interests of our shareholders to continue to conduct annual say-on-pay votes
for a number of reasons, including that annual votes (1) will enable shareholders to review and provide input on our executive
compensation program every year, and (2) are consistent with our cycle for annual review of the principal elements of our executive
compensation program.
Proposal
Shareholders
have four choices on the proxy card for their preference for the frequency of future say-on-pay votes: every year, every two years,
every three years, or abstain. Shareholders are not voting to approve or disapprove the Board’s recommendation. This advisory
vote to approve the frequency of future advisory votes on executive compensation will not be binding on the company or the Board
of Directors. However, the Board of Directors will take the outcome of the vote into account in determining the frequency of future
advisory votes on executive compensation. Notwithstanding the Board’s recommendation, or the outcome of the shareholder
vote, the Board may in the future decide to conduct advisory votes on a more or less frequent basis and may vary its practice
based on evolving trends in corporate governance, discussions with shareholders, changes in compensation programs or other considerations.
Board
Recommendation
The
Board of Directors recommends that shareholders vote for every year (annually) for the frequency of future advisory votes on executive
compensation.
Vote
Required
No
particular vote is required to approve or disapprove this matter. The choice that receives the most votes of the shares of common
stock present and entitled to vote in person or by proxy on this matter at the Annual Meeting will be considered the preference
of the company’s shareholders. Unless a contrary choice is specified, proxies solicited by the Board of Directors will be
voted for every year (annually) for the frequency of future advisory votes on executive compensation.
Equity
Compensation Plan Information
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(1)
|
|
Weighted average exercise price of outstanding options, warrants and rights
(3)
|
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
(4)
|
|
Equity compensation plans approved by security holders
|
|
|
2,835,148
|
(2)
|
|
$
|
18.70
|
|
|
|
3,914,705
|
|
Equity compensation plans not approved by security holders
|
|
|
None
|
|
|
|
Not applicable
|
|
|
|
None
|
|
Total
|
|
|
2,835,148
|
|
|
$
|
18.70
|
|
|
|
3,914,705
|
|
|
(1)
|
Includes
the Select Comfort Corporation 2004 Stock Incentive Plan and the Select Comfort Corporation
2010 Omnibus Incentive Plan.
|
|
(2)
|
This
amount includes 511,461 restricted stock units, 779,054 performance-based stock units,
119,783 market-based stock units, and 70,530 phantom shares. Performance-based stock
units for which the performance period has not yet been completed are shown at target.
The actual number of shares to be issued under performance-based stock unit awards depends
on company performance against goals.
|
|
(3)
|
The
weighted average exercise price does not take into account the unvested restricted stock
units, performance-based stock units, market-based stock units or phantom shares, which
have no exercise price.
|
|
(4)
|
The
number of shares of common stock available for issuance under the 2010 Plan is reduced
by 1.15 shares for each share issued pursuant to a “full value” award or
potentially issuable pursuant to a “full value” award, which are awards other
than stock options or SARs that are settled by the issuance of shares of our common stock.
|
AUDIT
COMMITTEE REPORT
The
Audit Committee of the Board of Directors is responsible for providing independent, objective oversight with respect to our company’s
accounting and financial reporting functions, internal and external audit functions, systems of internal controls regarding financial
matters and legal, ethical and regulatory compliance. The Audit Committee operates under a written charter approved by the Board
of Directors. A copy of the charter is available at the investor relations section of the company’s website at
http://www.sleepnumber.com/sn/en/investor-relations
.
The
Audit Committee is currently composed of five directors, each of whom is independent as defined by the NASDAQ listing standards
and SEC Rule 10A-3. Stephen L. Gulis, Jr. (Chair), Michael J. Harrison and Brenda Lauderback served on the Audit Committee throughout
2016 and through the date of this report. Kathleen L. Nedorostek and Jean-Michel Valette served on the Audit Committee from the
beginning of 2016 and through the annual meeting of shareholders in May of 2016. Barbara R. Matas and Vicki A. O’Meara joined
the Audit Committee upon their appointment to the Board effective as of April 25, 2016 and have continued to serve through the
date of this report.
Management
is responsible for our company’s financial reporting processes and internal control over financial reporting. Deloitte &
Touche LLP, our Independent Registered Public Accounting Firm, is responsible for auditing our company’s consolidated financial
statements for the 2016 fiscal year. This audit is to be conducted in accordance with the standards of the Public Company Accounting
Oversight Board (United States). The Audit Committee’s responsibility is to monitor and oversee these processes.
In
connection with these responsibilities, the Audit Committee met in person or by telephone conference nine times during 2016. These
meetings involved representatives of management, internal audit and the independent auditors. At each of its regularly scheduled
quarterly meetings, the Audit Committee meets in executive session and also meets in separate executive sessions with representatives
of the Independent Registered Public Accounting Firm and with the executive who leads our internal audit function.
Management
represented to the Audit Committee that our company’s consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America. The Audit Committee has reviewed and discussed the consolidated
financial statements, together with the results of management’s assessment of the company’s internal control over
financial reporting, with management and the Independent Registered Public Accounting Firm. The Audit Committee discussed with
the Independent Registered Public Accounting Firm the matters required to be discussed with the auditors under Statement on Auditing
Standards No. 61 “Communication with Audit Committees” (Codification of Statements on Auditing Standards, AU 380),
as amended. The Independent Registered Public Accounting Firm provided the Audit Committee with written disclosures and the letter
required by applicable requirements of the Public Company Accounting Oversight Board, and the Audit Committee discussed with the
Independent Registered Public Accounting Firm that firm’s independence.
Based
upon the Audit Committee’s discussions with management, internal audit and the Independent Registered Public Accounting
Firm, and the Audit Committee’s review of the representations of management and the Independent Registered Public Accounting
Firm, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included
in our company’s Annual Report on Form 10-K for the year ended December 31, 2016, for filing with the Securities and Exchange
Commission.
This
Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this
Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the
company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.
The
Audit Committee of the Board of Directors
Stephen
L. Gulis, Jr., Chair
Michael
J. Harrison
Brenda
J. Lauderback
Barbara
R. Matas
Vicki
A. O’Meara
RATIFICATION
OF SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal
4)
Selection
of Independent Registered Public Accounting Firm
The
Audit Committee of our Board of Directors selected Deloitte & Touche LLP (“Deloitte”) as the company’s independent
registered public accounting firm (“Independent Auditors”) for the 2017 fiscal year ending December 30, 2017. Deloitte
has served as our Independent Auditors since the 2010 fiscal year.
Although
the Board is not required to submit the selection of Independent Auditors to shareholders for ratification, and the Board would
not be bound by shareholder ratification or failure to ratify the selection, the Board wishes to submit the selection of Deloitte
to serve as our Independent Auditors for the 2017 fiscal year to our shareholders for ratification consistent with best practices
in corporate governance.
If
shareholders do not ratify the selection of Deloitte as our Independent Auditors, the Audit Committee will reconsider whether
to retain Deloitte and may determine to retain that firm or another firm without resubmitting the matter to shareholders. Even
if the selection of Deloitte is ratified by shareholders, the Audit Committee may, in its discretion, direct the appointment of
a different firm of Independent Auditors at any time during the year if it determines that such a change would be in the best
interests of the company and our shareholders.
Representatives
of Deloitte will be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and will be
available to respond to questions from shareholders.
Audit
and Other Fees
The
aggregate fees billed for professional services by the Independent Auditors in 2016 and 2015 were:
|
|
2016
|
|
|
2015
|
|
Audit fees
(1)
|
|
$
|
554,000
|
|
|
$
|
791,830
|
|
Audit-related fees
(2)
|
|
|
2,000
|
|
|
|
2,000
|
|
Audit and audit-related fees
|
|
$
|
556,000
|
|
|
$
|
793,830
|
|
Tax fees
(3)
|
|
|
124,119
|
|
|
|
182,788
|
|
All other fees
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
680,119
|
|
|
$
|
976,618
|
|
|
(1)
|
The
2015 and 2016 fees include incremental audit fees of $340,000 and $60,000, respectively,
related to our new enterprise resource planning system that was implemented during the
fourth quarter of 2015.
|
|
(2)
|
These
fees related to access to an online accounting research tool.
|
|
(3)
|
These
fees are primarily for tax compliance services based on time and materials. The 2015
and 2016 amounts also include fees of $96,000 and $51,000, respectively, related to our
acquisition of BAM Labs, Inc.
|
Under
the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission regarding auditor independence, the engagement
of the company’s Independent Auditors to provide audit or non-audit services for the company must either be approved by
the Audit Committee before the engagement or entered into pursuant to pre-approval policies and procedures established by the
Audit Committee. Our Audit Committee has not established any pre-approval policies or procedures and therefore all audit or non-audit
services performed for the company by the Independent Auditors must be approved in advance of the engagement by the Audit Committee.
Under limited circumstances, certain de minimus non-audit services may be approved by the Audit Committee retroactively. All services
provided to the company by the Independent Auditors in 2016 were approved in advance of the engagement by the Audit Committee
and no non-audit services were approved retroactively by the Audit Committee pursuant to the exception for certain de minimus
services described above.
Board
Recommendation
The
Board recommends a vote “
For
” ratification of the selection of Deloitte as our Independent Auditors for the
2017 fiscal year ending December 30, 2017. Unless a contrary choice is specified, proxies solicited by the Board will be voted
“
For
” the ratification of the selection of Deloitte as Independent Auditors.
Vote
Required
Assuming
a quorum is present, the affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote
in person or by proxy on this matter at the Annual Meeting is necessary for approval of this proposal. Unless a contrary choice
is specified, proxies solicited by the Board of Directors will be voted “For” approval of this proposal.
OTHER
MATTERS
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and all persons who beneficially own
more than 10% of the outstanding shares of our common stock to file with the Securities and Exchange Commission initial reports
of ownership and reports of changes in ownership of our common stock. Executive officers, directors and greater than 10% beneficial
owners are also required to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based upon a review
of the copies of such reports furnished to us during the 2016 fiscal year ended December 31, 2016 and written representations
by such persons, all reports were filed on a timely basis.
Shareholder
Proposals for 2018 Annual Meeting
Any
shareholder proposal requested to be included in the proxy materials for the 2018 Annual Meeting of Shareholders must (i) be received
by our Senior Vice President, General Counsel and Secretary on or before December 4, 2017 and (ii) satisfy all of the requirements
of, and not otherwise be permitted to be excluded under, Rule 14a-8 promulgated by the SEC and our Bylaws.
Our
Bylaws require advance written notice to our company of shareholder-proposed business or of a shareholder’s intention to
make a nomination for director at an annual meeting of shareholders. They also limit the business which may be conducted at any
special meeting of shareholders to business brought by the Board.
Specifically,
the Bylaws provide that business may be brought before an annual meeting by a shareholder only if the shareholder provides written
notice to the Secretary of our company not less than 120 days prior to the first anniversary of the date that we first released
or mailed our proxy materials to shareholders in connection with the preceding year’s annual meeting. Under these provisions,
notice of a shareholder proposal to be presented at the 2018 Annual Meeting of Shareholders (but that is not requested to be included
in the proxy materials) must be provided to the Secretary of our company on or before December 5, 2017. In the event, however,
that the date of the annual meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of the
preceding year’s annual meeting date, notice by the shareholder to be timely must be so delivered not later than the close
of business on the later of the 120th day prior to such annual meeting or the 10th day following the day on which public announcement
of the date of such meeting is first made.
A
shareholder’s notice must set forth:
|
●
|
A
description of the proposed business and the reasons for it,
|
|
●
|
The
name and address of the shareholder making the proposal,
|
|
●
|
The
class and number of shares of common stock owned by the shareholder, and
|
|
●
|
A
description of any material interest of the shareholder in the proposed business.
|
Our
Bylaws also provide that a shareholder may nominate a director at an annual meeting only after providing advance written notice
to the Secretary of our company within the time limits described above. The shareholder’s notice must set forth all information
about each nominee that would be required under SEC rules in a proxy statement soliciting proxies for the election of such nominee,
as well as the nominee’s business and residence address. The notice must also set forth the name and record address of the
shareholder making the nomination and the class and number of shares of common stock owned by that shareholder. The required procedures
for a shareholder to nominate a director are described in more detail above under the heading “Corporate Governance –
Director Nominations Process.”
Other
Business
Management
of our company does not intend to present other items of business and knows of no items of business that are likely to be brought
before the Annual Meeting except those described in this Proxy Statement. However, if any other matters should properly come before
the Annual Meeting, the persons named in the enclosed proxy will have discretionary authority to vote such proxy in accordance
with the best judgment on such matters.
Copies
of 2016 Annual Report
We
will furnish to our shareholders without charge a copy of our Annual Report on Form 10-K (without exhibits) for the 2016 fiscal
year ended December 31, 2016. Any request for an Annual Report should be sent to:
|
|
|
|
Select Comfort Corporation
|
|
|
Investor Relations Department
|
|
|
9800 59
th
Avenue North
|
|
|
Plymouth, Minnesota 55442
|
|
Householding
Information
“Householding”
is a program, approved by the SEC, which allows companies and intermediaries (e.g. banks and brokers or other nominees) to satisfy
the delivery requirements for proxy statements and annual reports by delivering only one package of shareholder proxy material
to any household at which two or more shareholders reside. If you and other residents at your mailing address own shares of our
common stock in a “street name,” your broker or bank may have notified you that your household will receive only one
copy of our proxy materials. Once you have received notice from your broker that they will be “householding” materials
to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. Any
shareholder who is receiving multiple copies of these documents and would like to receive only one copy per household should contact
the shareholder’s bank, broker or other nominee record holder. If you hold shares of our common stock in your own name as
a holder of record, “householding” will not apply to your shares.
We
will promptly deliver an additional copy of any of these documents to you if you call us at (763) 551-7498 or write us at the
following address:
|
|
|
|
Select Comfort Corporation
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Investor Relations Department
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9800 59
th
Avenue North
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Plymouth, Minnesota 55442
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Your
vote is important. Whether or not you plan to attend the Annual Meeting, please vote your shares of common stock “For”
the Board’s nominees and “For” each of the other proposals before you at the Annual Meeting promptly by mail,
telephone, or Internet as instructed on your proxy card.
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By Order of the Board of Directors
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Mark A. Kimball
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Senior Vice President,
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Chief Legal and Risk Officer and Secretary
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April
4, 2017
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Plymouth, Minnesota
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SELECT
COMFORT CORPORATION
9800
59TH AVENUE NORTH
PLYMOUTH,
MN 55442
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VOTE
BY INTERNET
Before
The Meeting
- Go to
www.proxyvote.com
Use
the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time
the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain
your records and to create an electronic voting instruction form.
During
The Meeting
- Go to
www.virtualshareholdermeeting.com/scss2017
You
may attend the Meeting via the Internet and vote during the Meeting. Have the information that is printed in the box marked by
the arrow available and follow the instructions.
VOTE
BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date.
Have your proxy card in hand when you call and then follow the instructions.
VOTE
BY MAIL
Mark,
sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE
OR BLACK INK AS FOLLOWS:
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E25154-P89084
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KEEP
THIS PORTION FOR YOUR RECORDS
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THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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DETACH
AND RETURN THIS PORTION ONLY
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SELECT COMFORT CORPORATION
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For
All
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Withhold
All
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For All
Except
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To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
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The Board of Directors recommends you vote FOR the following:
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1.
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Election of Directors
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☐
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☐
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☐
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Nominees:
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01) Kathleen L. Nedorostek
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02) Vicki A. O’Meara
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03) Michael A. Peel
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04) Jean-Michel Valette
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The Board of Directors recommends you vote FOR proposals 2 and 4, and 1 YEAR on proposal 3.
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For
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Against
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Abstain
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2.
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Advisory Vote on Executive Compensation (Say-on-Pay).
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☐
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☐
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☐
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1 Year
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2 Years
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3 Years
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Abstain
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3.
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Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation.
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☐
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☐
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☐
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☐
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For
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Against
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Abstain
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4.
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Ratification of Selection of Independent Registered Public Accounting Firm.
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☐
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☐
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☐
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NOTE:
Such other business as may properly come before the meeting or any adjournment thereof.
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Please
sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership,
please sign in full corporate or partnership name by authorized officer.
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Signature [PLEASE SIGN WITHIN BOX]
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Date
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Signature (Joint Owners)
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Date
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V.1.
SELECT
COMFORT CORPORATION
ANNUAL
MEETING OF SHAREHOLDERS
Wednesday, May 17, 2017
8:30
a.m. Local Time
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The
Combined Document is available at www.proxyvote.com.
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Select Comfort Corporation
9800 59th Avenue
North
Plymouth, MN 55442
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This
proxy is solicited by the Board of Directors of Select Comfort Corporation for use at the
Annual Meeting of Shareholders to be held on May 17, 2017.
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The undersigned hereby appoints Shelly R. Ibach and Mark A. Kimball (collectively, the “Proxies”), and each of them, with full power of substitution, as Proxies, to vote the shares which the undersigned is entitled to vote at the Annual Meeting of Shareholders of Select Comfort Corporation to be held on May 17, 2017, at 8:30 a.m. Local Time, and at any adjournment or postponement thereof. Such shares will be voted as directed with respect to the proposals listed on the reverse side hereof and, in the Proxies’ discretion, as to any other matter that may properly come before the meeting or at any adjournment or postponement thereof.
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You are encouraged to specify your choices by marking the appropriate boxes on the reverse side. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED “FOR” EACH OF THE NOMINEES NAMED ON THE REVERSE SIDE, “FOR” PROPOSALS 2 AND 4, “1 YEAR” ON PROPOSAL 3, SET FORTH ON THE REVERSE SIDE, and in the discretion of management with respect to such other business as may properly come before the meeting or any adjournment thereof.
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See reverse for voting instructions.
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V.1.
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