Sample Business Contracts

Employment Agreement - Select Comfort Corp. and Noel F. Schenker

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October 27, 2000

Noel F. Schenker
1908 west 49th Street
Minneapolis, MN 55409

Dear Noel:

It is with  great  pleasure  that I extend  to you the  following  offer to join
Select Comfort Corporation as Senior Vice President,  Marketing and New Business
Development, effective November 1, 2000:

Your  annual  salary  will be  $250,000.  In  addition,  under  the terms of the
Company's 2000 Management Incentive Plan, you are eligible to receive a bonus of
45% of the base salary  actually paid to you for the year 2000,  and this amount
will be guaranteed to you for 2000. The terms of the  Management  Incentive Plan
for 2001 are currently under development.

You will also be granted stock  options to purchase up to 100,000  shares of our
common stock.  Of these  options,  75,000 will vest in equal monthly  increments
over 36  months  of  employment,  and  25,000  will  vest  upon the  earlier  of
completion of 5 years of employment or such time as the stock price has exceeded
$12 per share for 30  consecutive  trading days. The exercise price of the stock
options will be the average of the high and low trading  prices of the Company's
common stock on the date of grant of the options,  which will be on or near your
first day of employment.

If your  employment is terminated by the Company within one (1) year following a
change  in  control  of the  Company,  or if you are  subject  at any  time to a
termination  without cause,  or to a  constructive  dismissal due to significant
diminution in your  responsibilities,  upon the  termination of your  employment
under such  circumstances,  and  subject to the  execution  and  delivery to the
Company of a standard release of claims, you will be entitled to receive one (1)
year's  base  salary as  severance  compensation,  and the  portion of the stock
options  referred  to above which have not  previously  been  vested,  will vest
immediately  and remain  exercisable for a period not to exceed ninety (90) days
following termination of employment.  The severance compensation described above
will  be  payable  over a  period  of one  (1)  year  following  termination  of
employment in accordance with the Company's normal payroll schedule.

You will be eligible for the following  company  benefits as of the first of the
month following 30 days of employment:  medical,  dental, flex account, life and
AD&D  insurance,  supplemental  life and AD&D insurance,  long-term  disability,
travel accident insurance and Non-Qualified Deferred


Compensation  Plan. You will be eligible to participate in the Company's  401(k)
plan  as of the  first  of the  month  following  your  start  date,  and in the
Company's Employee Stock Purchase Plan (ESPP) as of the first quarterly offering
period  commencing  after your start  date.  You will be  eligible  for  product
discounts  under the  Company's  Employee  Purchase Plan 30 days from your start
date. You will be covered under the Company's  short-term  disability plan after
six months of employment.  You will be eligible for Select  Comfort's  Education
Assistance Program after you have completed one year of full-time employment. We
have  previously  forwarded to you detailed  information  regarding our benefits
package for your review,  and these  benefits can be explained in greater detail
during your new hire orientation.

You will  accrue  Paid  Time  Off  (PTO)  at a rate of 3.69  hours  per week per
calendar  year up to a maximum  of 24 days per year.  Additionally,  you will be
given time off for Company holidays. You will also be eligible to participate in
possible further future  incentive  programs and awards  commensurate  with your
senior management position.

Your  employment is conditioned  upon your signing our standard form of Employee
Inventions,  Confidentiality  and  Non-Compete  Agreement,  a copy of which  was
previously forwarded to you for your review.

You should  understand  that this  letter  does not  constitute  a  contract  of
employment,  nor is it to be construed as a guarantee of  continuing  employment
for any  period  of time.  Employment  with  Select  Comfort  is "at  will."  We
recognize  your right to terminate the employment  relationship  at any time and
for any  reason  and,  similarly,  we  reserve  the  right to  alter,  modify or
terminate the relationship at any time and for any reason.

We are very excited about your joining our management team. Select Comfort is on
the brink of an exciting and  challenging  era, and I feel with your  background
and skills you will be able to provide a significant contribution to our company
and its success.

Please contact me at (952) 918-3010 with any questions you may have.


/s/ William R. McLaughlin

William R. McLaughlin
President & CEO