Exhibit
10.35


 


Form
of Performance Stock Award Agreement


under
the


Select
Comfort Corporation 2004 Stock Incentive Plan


 


PERFORMANCE STOCK AWARD AGREEMENT


 


THIS AGREEMENT is entered
into and effective as of this         
day of                               ,
20     (the “Date of Grant”), by and between Select Comfort
Corporation (the “Company”) and                               
(the “Grantee”).


 


A.                                   The Company has adopted the Select
Comfort Corporation 2004 Stock Incentive Plan (the “Plan”) authorizing the
grant of Performance Stock Awards to employees and non-employee directors,
consultants and independent contractors of the Company and its Subsidiaries (as
defined in the Plan).


 


B.                                     The Company desires to give the Grantee a
proprietary interest in the Company and an added incentive to advance the
interests of the Company by granting to the Grantee a Performance Stock Award pursuant
to the Plan.


 


Accordingly, the parties
agree as follows:


 


1.                                       Grant of Award.


 


The Company hereby grants
to the Grantee a Performance Stock Award (the “Award”) consisting of                                      
(                              )
shares (the “Award Shares”) of the Company’s common stock, par value $0.01 per
share (the “Common Stock”), subject to adjustment based on performance of the
Company as described below and subject to the terms, conditions and restrictions
set forth below and in the Plan.


 


The number of Award
Shares granted hereunder is subject to adjustment based on the Company’s net
operating profit performance in fiscal year 2005 (the “Performance Period”).  Based on the Company’s actual net operating
profit during the Performance Period as a percentage of planned net operating
profit during the Performance Period, the number of Award Shares will be
multiplied by the factor set forth in the table below to determine the “Adjusted
Award Shares.”


 


	
  Actual 2005 Net Operating Profit as a Percentage of

  Planned 2005 Net Operating Profit

  	
   

  	
  Factor to Multiply Award Shares
  by to

  Arrive at Adjusted Award Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Greater than 115% of Plan

  	
   

  	
  1.50X

  	
   

  
	
  Greater than 110% up to 115% of Plan

  	
   

  	
  1.25X

  	
   

  
	
  Greater than 90% up to 110% of Plan

  	
   

  	
  1.00X

  	
   

  
	
  Greater than 85% up to 90% of Plan

  	
   

  	
  0.75X

  	
   

  
	
  Greater than 75% up to 85% of Plan

  	
   

  	
  0.50X

  	
   

  
	
  Up to 75% of Plan

  	
   

  	
  0.20X

  	
   

  



 





















 


For example, if the Award
Shares consist of 1,000 shares of Common Stock, and the Company’s actual net
operating profit in 2005 is equal to 112% of planned 2005 net operating profit,
then the Adjusted Award Shares would consist of 1,250 shares of Common Stock
(1,000 X 1.25 = 1,250).


 


Reference to the Adjusted
Award Shares in this Agreement will be deemed to include the Dividend Proceeds
(as defined in Section 3.3 of this Agreement) with respect to such
Adjusted Award Shares that are retained and held by the Company as provided in Section 3.3
of this Agreement.


 


2.                                       Grant Restriction.


 


2.1                                 Restriction and Forfeiture. 
The Grantee’s right to retain the Award Shares or the Adjusted Award
Shares will be subject to the Grantee remaining in the continuous employ or
service of the Company or any Subsidiary for a period of four (4) years (the “Restriction
Period”) following the Date of Grant; provided, however, that such
employment/service period restrictions (the “Restrictions”) will lapse and
terminate prior to end of the Restriction Period as set forth in Sections 2.2
and 2.3 below.


 


2.2                                 Termination of Employment or Other
Service.


 


(a)                                  Termination Due to Death or Disability. 
In the event that the Grantee’s employment or other service with the
Company and all Subsidiaries is terminated by reason of the Grantee’s death or
Disability (as defined in the Plan) during the Performance Period, the
Restrictions applicable to the Award Shares will immediately lapse and
terminate and the Award Shares will not be subject to further adjustment.  In the event that the Grantee’s employment or
other service with the Company and all Subsidiaries is terminated by reason of
the Grantee’s death or Disability (as defined in the Plan) after the
Performance Period, the Restrictions applicable to the Adjusted Award Shares
will immediately lapse and terminate.


 


(b)                                 Termination Due to Retirement. 
In the event that the Grantee’s employment or other service with the
Company and all Subsidiaries is terminated by reason of the Grantee’s
Retirement (as defined in the Plan) during the Performance Period, the Restrictions
applicable to the Award Shares will immediately lapse and terminate with
respect to a pro rata portion of the Award Shares on the basis of the portion
of the Restriction Period that has passed as of the date of the Retirement and
the Award Shares will not be subject to further adjustment.  In the event that the Grantee’s employment or
other service with the Company and all Subsidiaries is terminated by reason of
the Grantee’s Retirement (as defined in the Plan) after the Performance Period,
the Restrictions applicable to the Adjusted Award Shares will immediately lapse
and terminate with respect to a pro rata portion of the Adjusted Award Shares
on the basis of the portion of the Restriction Period that has passed as of the
date of the Retirement.


 


(c)                                  Termination for Reasons other than Death,
Disability or Retirement.  In the event the Grantee’s
employment or other service with the Company and all Subsidiaries is terminated
for any reason other than death, Disability or Retirement, or the Grantee is in
the employ or service of a Subsidiary and the Subsidiary ceases to be a
Subsidiary of the Company (unless the Grantee continues in the employ or
service of the Company or another Subsidiary), all rights of the Grantee under
the Plan and this Agreement will terminate immediately without notice of any


 


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kind, and this Award will be terminated and all Award
Shares or Adjusted Award Shares with respect to which the Restrictions have not
lapsed will be forfeited.


 


2.3                                 Change in Control.  If
a Change in Control (as defined in the Plan) of the Company occurs during the
Performance Period, the Restrictions applicable to the Award Shares will
immediately lapse and terminate.  If a
Change in Control (as defined in the Plan) of the Company occurs after the
Performance Period, the Restrictions applicable to the Adjusted Award Shares
will immediately lapse and terminate.


 


3.                                       Issuance of Award Shares.


 


3.1                                 Privileges of a Shareholder;
Transferability.  As soon as practicable after the execution
and delivery of this Agreement and the satisfaction of any conditions to the
effective issuance of the Award Shares, the Grantee will be recorded on the
books of the Company as the owner of the Award Shares, and the Company will
issue one or more duly issued and executed stock certificates evidencing the
Award Shares.  As soon as practicable
after the determination of the results of the Performance Period, if any
adjustment of the Award Shares is required, the certificate representing the
Award Shares will be cancelled and the Grantee will be recorded on the books of
the Company as the owner of the Adjusted Award Shares, and the Company will
issue one or more duly issued and executed stock certificates evidencing the Adjusted
Award Shares.  Except as otherwise
expressly provided in this Agreement, the Grantee will have all voting,
dividend, liquidation and other rights with respect to the Award Shares or the
Adjusted Award Shares in accordance with their terms upon becoming the holder
of record of the Award Shares or the Adjusted Award Shares; provided, however,
that prior to the lapse or other termination of the Restrictions applicable to the
Award Shares or the Adjusted Award Shares, such Award Shares or Adjusted Award
Shares will not be assignable or transferable by the Grantee, either
voluntarily or involuntarily, and may not be subjected to any lien, directly or
indirectly, by operation of law or otherwise. 
Any attempt to transfer, assign or encumber the Award Shares or the
Adjusted Award Shares other than in accordance with this Agreement and the Plan
will be null and void and will void the Award, and all Award Shares or Adjusted
Award Shares for which the Restrictions have not lapsed will be forfeited and
immediately returned to the Company.


 


3.2                                 Enforcement of Restrictions. 
To enforce the Restrictions imposed by this Agreement and the Plan, the
Company may place a legend on the stock certificates referring to the Restrictions
and may require the Grantee, until the Restrictions have lapsed with respect to
Award Shares or the Adjusted Award Shares, to keep the stock certificates
evidencing such Award Shares or Adjusted Award Shares, together with duly
endorsed stock powers, in the custody of the Company or its transfer agent or
to maintain evidence of stock ownership of such Award Shares or Adjusted Award
Shares, together with duly endorsed stock powers, in a certificateless
book-entry stock account with the Company’s transfer agent.


 


3.3                                 Dividends and Other Distributions. 
Unless the Compensation Committee of the Board of Directors (the “Committee”)
determines otherwise in its sole discretion (including, without limitation, at
any time after the grant of the Performance Stock Award), any dividends or
distributions (including, without limitation, any cash dividends, stock
dividends or dividends in kind, the proceeds of any stock split or the proceeds
resulting from any changes or exchanges described in Section 6 of this Agreement,
all of which are referred to herein collectively as the “Dividend Proceeds”)
that are paid or payable with respect to shares of Common Stock subject


 


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to the unvested
portion of a Performance Stock Award will be subject to the same rights and
restrictions under this Agreement as the shares to which such dividends or
distributions relate.  The Committee may,
in its sole discretion, distribute such Dividend Proceeds to the Grantee or it
may retain and hold such Dividend Proceeds subject to the Restrictions and the
other terms and conditions of this Agreement. 
In the event the Committee determines not to pay such Dividend Proceeds
currently, the Committee will determine in its sole discretion whether any
interest will be paid on such Dividend Proceeds.  In addition, the Committee in its sole
discretion may require such Dividend Proceeds to be reinvested (and in such
case the Committee may require the Participant’s consent to such reinvestment)
in shares of Common Stock that will be subject to the same restrictions as the
shares to which such Dividend Proceeds relate. 
In addition, the Committee may, in its sole discretion, cause such
Dividend Proceeds to be paid to the Company pursuant to Section 5 of this
Agreement in order to satisfy any federal, state or local withholding or other
employment-related tax requirements attributable to such dividends or
distributions or to the Grantee’s receipt of the Award or the lapse or
termination of the Restrictions applicable to Award Shares or Adjusted Award
Shares.


 


4.                                       Rights of Grantee.


 


4.1                                 Employment or Service. 
Nothing in this Agreement will interfere with or limit in any way the
right of the Company or any Subsidiary to terminate the employment or service
of the Grantee at any time, nor confer upon the Grantee any right to continue
in the employ or service of the Company or any Subsidiary at any particular
position or rate of pay or for any particular period of time.


 


4.2                                 Rights as a Shareholder. 
The Grantee will have no rights as a shareholder until the Grantee
becomes the holder of record of such Award Shares or Adjusted Award Shares, and
no adjustment will be made for dividends or distributions with respect to the
Award Shares or Adjusted Award Shares as to which there is a record date
preceding the date the Grantee becomes the holder of record of the Award Shares
or Adjusted Award Shares, except as may otherwise be provided in the Plan or
determined by the Committee in its sole discretion.


 


5.                                       Withholding Taxes.


 


The Company is entitled
to (a) withhold and deduct from future wages of the Grantee (or from other
amounts that may be due and owing to the Grantee from the Company), or cause to
be paid to the Company out of Dividend Proceeds, or make other arrangements for
the collection of, all legally required amounts necessary to satisfy any
federal, state or local withholding and employment-related tax requirements
attributable to the receipt of the Award, the receipt of dividends or
distributions on Award Shares or Adjusted Award Shares, or the lapse or
termination of the Restrictions applicable to Award Shares or Adjusted Award
Shares, or (b) require the Grantee promptly to remit the amount of such
withholding to the Company.  In the event
that the Company is unable to withhold such amounts, for whatever reason, the
Grantee agrees to pay to the Company an amount equal to the amount the Company
would otherwise be required to withhold under federal, state or local law.


 


6.                                       Adjustments.


 


In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering or divestiture


 


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(including a
spin-off) or any other change in the corporate structure or shares of the
Company, the Committee (or, if the Company is not the surviving corporation in
any such transaction, the board of directors of the surviving corporation), in
order to prevent dilution or enlargement of the rights of the Grantee, will
make appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities or other property (including cash) subject to
this Award.


 


7.                                       Subject to Plan.


 


The Award and the Award
Shares or Adjusted Award Shares granted pursuant to this Agreement have been
granted under, and are subject to the terms of, the Plan.  Terms of the Plan are incorporated by
reference in this Agreement in their entirety, and the Grantee, by execution
hereof, acknowledges having received a copy of the Plan.  The provisions of this Agreement will be
interpreted as to be consistent with the Plan, and any ambiguities in this
Agreement will be interpreted by reference to the Plan.  In the event that any provision of this
Agreement is inconsistent with the terms of the Plan, the terms of the Plan
will prevail.


 


8.                                       Miscellaneous.


 


8.1                                 Binding Effect. 
This Agreement will be binding upon the heirs, executors, administrators
and successors of the parties to this Agreement.


 


8.2                                 Governing Law. 
This Agreement and all rights and obligations under this Agreement will
be construed in accordance with the Plan and governed by the laws of the State
of Minnesota, without regard to conflicts of laws provisions.  Any legal proceeding related to this
Agreement will be brought in an appropriate Minnesota court, and the parties to
this Agreement consent to the exclusive jurisdiction of the court for this
purpose.


 


8.3                                 Entire Agreement. 
This Agreement and the Plan set forth the entire agreement and understanding
of the parties to this Agreement with respect to the grant and vesting of this
Award and the administration of the Plan and supersede all prior agreements,
arrangements, plans and understandings relating to the grant and vesting of
this Award and the administration of the Plan.


 


8.4                                 Amendment and Waiver. 
Other than as provided in the Plan, this Agreement may be amended,
waived, modified or canceled only by a written instrument executed by the
parties to this Agreement or, in the case of a waiver, by the party waiving
compliance.


 


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The parties hereto have
executed this Agreement effective the day and year first above written.


 


	
   

  	
  SELECT COMFORT CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By execution of this Agreement,

  	
  GRANTEE

  
	
  the Grantee acknowledges having

  	
   

  	
   

  
	
  received a copy of the Plan.

  	
   

  	
   

  
	
   

  	
   

  	
         (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name and Address)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
					



 


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