Material Agreement (Form 8-K)

Item 1.01 Entry into a Material Definitive Agreement

On June 16, 2026, Sleep Number Corporation ("Sleep Number" or the "Company") and its subsidiaries (together with Sleep Number, the "Debtors") entered into the Fourteenth Amendment (the "DIP Amendment") to Amended and Restated Credit and Security Agreement (the "Prepetition Credit Agreement", and as amended by the DIP Amendment, the "DIP Credit Agreement"). Pursuant to the DIP Credit Agreement, the prepetition lenders under the Prepetition Credit Agreement (collectively, the "DIP Lenders") have committed to provide up to $260 million of debtor-in-possession financing in the form of (i) new money superpriority senior secured term loan commitments in an aggregate principal amount of up to $65 million (the term loans made thereunder, the "DIP Loans"), available in multiple draws in an amount of up to $50 million upon entry of the interim DIP order and in an amount up to the difference between $65 million and the amount of DIP Loans actually funded prior to the entry of the final DIP order and (ii) roll-up loans comprising secured obligations under the Prepetition Credit Agreement that shall be converted and exchanged into roll-up loans under the DIP Credit Agreement in an aggregate principal amount of up to $195 million (the "Roll-Up Loans"). On June 15, 2026, the Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court") entered the interim DIP order approving the transaction on an interim basis through the final hearing which is currently scheduled for July 9, 2026.

Sleep Number's obligations under the DIP Loans and the Roll-Up Loans are guaranteed by each subsidiary of the Company. In addition, subject to the terms of the interim DIP order approving the DIP Loans and the Roll-Up Loans (or the final DIP order, when entered), the claims of the DIP Lenders are (or are expected to be) (i) entitled to superpriority administrative expense claim status and, subject to certain customary exclusions in the credit documentation, (ii) secured by (a) a perfected first priority lien on all DIP Collateral (as defined in the interim DIP order), to the extent such collateral is unencumbered, (b) a perfected priming senior security interest in and liens on the prepetition collateral, and (c) a perfected junior security interest in and liens on the DIP Collateral to the extent such DIP Collateral is subject to permitted prior senior liens.

Pursuant to the DIP Amendment, Sleep Number may make optional prepayments of the DIP Loans, in whole or in part, without penalty (other than applicable breakage and redeployment costs and the payment of certain other fees, including an exit fee). In addition, subject to certain exceptions and conditions described in the DIP Amendment, Sleep Number is obligated to prepay the obligations thereunder with the net cash proceeds of certain asset sales, casualty insurance proceeds, extraordinary receipts or the proceeds of any indebtedness not permitted to be incurred pursuant to the terms of the DIP Amendment.

The scheduled maturity date of the DIP Loans and the Roll-Up Loans is September 16, 2026. The DIP Loans and the Roll-Up Loans will bear an interest rate per annum equal to either SOFR plus 8.00% or the "base rate" plus 7.00%.

The DIP Credit Agreement contains representations, warranties and covenants that are typical and customary for these types of debtor-in-possession facilities, including, but not limited to specified restrictions on indebtedness, liens, investments, loans and guaranties, mergers and sales of assets, acquisitions, restricted payments, voluntary payments of other indebtedness, transactions with affiliates, sale and leaseback transactions and compliance with case milestones (including regarding a sale of substantially all of the assets of the Company and its subsidiaries), restrictive agreements, bankruptcy matters, cash management order and assumption or rejection of contracts and leases. The DIP Credit Agreement contains customary events of default, including as a result of certain events occurring in the Chapter 11 Cases. The DIP Credit Agreement requires compliance with variance covenants that compare actual operating disbursements, expenditures and receipts to the budgeted amounts set forth in the DIP budgets delivered to the DIP Agent and DIP Lenders on or prior to the closing date and updated periodically thereafter pursuant to the terms of the DIP Amendment. The proposed DIP facility remains subject to final approval by the Bankruptcy Court and each drawing thereunder is subject to certain conditions precedent.

The foregoing description of the DIP Amendment and DIP Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the DIP Amendment and DIP Credit Agreement filed hereto as Exhibit 10.1.