{"url_path":"/sec/snbr/8-k/2026-06-12/item-1-03","section_key":"item-1-03","section_title":"Item 1.03 Bankruptcy","topic":"sec","document":{"doc_type":"8-K","doc_date":"2026-06-12","source_url":"https://www.sec.gov/Archives/edgar/data/827187/0000950103-26-008891-index.html","accession_number":"0000950103-26-008891","cik":"0000827187","ticker":"SNBR","issuer_name":"Sleep Number Corp","edgar_url":"https://www.sec.gov/Archives/edgar/data/827187/0000950103-26-008891-index.html","primary_entity_key":"0000827187","primary_entity_name":"Sleep Number Corp"},"word_count":1475,"has_tables":true,"body_markdown":"**Item 1.03    Bankruptcy\nor Receivership.**\n\n \n\n*Voluntary Petition for Reorganization*\n\n \n\nOn June 12, 2026 (the “Petition\nDate”), Sleep Number Corporation (“Sleep Number” or the “Company”) and its subsidiaries (together with Sleep\nNumber, the “Debtors”) filed voluntary petitions for relief (collectively, the “Bankruptcy Petitions”) under chapter\n11 of title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District\nof New York (the “Bankruptcy Court”). The Bankruptcy Court has granted a motion seeking joint administration of the cases\n(the “Chapter 11 Cases”) under the caption *In re: Sleep Number Corporation, et al.*, Case No. 26-11399.\nThe filing of the Bankruptcy Petitions constituted an event of default under the documents governing the Amended and Restated Credit and\nSecurity Agreement (as defined in item 2.04, the “Prepetition Credit Agreement”) which accelerated the Company’s obligations\nunder the Prepetition Credit Agreement. The Company intends to notify all known or potential creditors of the Debtors of the bankruptcy\nfilings.\n\n \n\n*Debtor-in-Possession Financing*\n\n \n\nAs a proposed amendment to\nthe Prepetition Credit Agreement (the “DIP Amendment”; and the Prepetition Credit Agreement as amended by the DIP Amendment,\nthe “DIP Credit Agreement”), the prepetition lenders under the Prepetition Credit Agreement (collectively, the “DIP\nLenders”) are expected to provide up to approximately $260 million of debtor-in-possession financing in the form of (i) new money\nsuperpriority senior secured term loan commitments in an aggregate principal amount of up to $65 million (the term loans made thereunder,\nthe “DIP Loans”), available in multiple draws in an amount of up to $50 million upon entry of the interim DIP order and in\nan 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\nand (ii) roll-up loans comprising secured obligations under the Prepetition Credit Agreement that shall be converted and exchanged into\nroll-up loans under the DIP Credit Agreement in an aggregate principal amount of up to $195 million (the “Roll-Up Loans”),\nsubject to the entry of the interim DIP order and the final DIP order (as applicable).\n\n \n\nSleep Number’s obligations\nunder the proposed DIP Loans and the Roll-Up Loans are expected to be guaranteed by each subsidiary of the Company. In addition, upon\nentry and 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),\nthe claims of the DIP Lenders will be (i) entitled to superpriority administrative expense claim status and, subject to certain customary\nexclusions in the credit documentation, (ii) secured by (a) a perfected first priority lien on all DIP Collateral (as defined in the interim\nDIP order), to the extent such collateral is unencumbered, (b) a perfected priming senior security interest in and liens on the prepetition\ncollateral, and (c) a perfected junior security interest in and liens on the DIP Collateral to the extent such DIP Collateral is subject\nto permitted prior senior liens.\n\n \n\nUnder the proposed DIP Amendment,\nSleep Number is expected to be able to make optional prepayments of the DIP Loans, in whole or in part, without penalty (other than applicable\nbreakage and redeployment costs and the payment of certain other fees, including an exit fee). In addition, subject to certain exceptions\nand conditions described in the proposed DIP Amendment, we will be obligated to prepay the obligations thereunder with the net cash proceeds\nof certain asset sales, with casualty insurance proceeds, extraordinary receipts or the proceeds of any indebtedness not permitted to\nbe incurred pursuant to the terms of the proposed DIP Amendment.\n\n \n\nThe scheduled maturity date\nof the DIP Loans and the Roll-Up Loans is expected to be the date that is three months from the date of the DIP Amendment. The DIP Loans\nand the Roll-Up Loans are expected to bear an interest rate per annum equal to either SOFR plus 8.00% or the “base rate” plus\n7.00%.\n\n \n\nThe proposed DIP Credit Agreement\nis expected to contain representations, warranties and covenants that are typical and customary for these types of debtor-in-possession\nfacilities, including, but not limited to specified\n\n \n\n \n\n \n\nrestrictions on indebtedness,\nliens, investments, loans and guaranties, mergers and sales of assets, acquisitions, restricted payments, voluntary payments of other\nindebtedness, transactions with affiliates, sale and leaseback transactions and compliance with case milestones (including regarding a\nsale of substantially all of the assets of the Company and its subsidiaries), restrictive agreements, bankruptcy matters, cash management\norder and assumption or rejection of contracts and leases. The proposed DIP Credit Agreement is expected to contain customary events of\ndefault, including as a result of certain events occurring in the Chapter 11 Cases. The proposed DIP Credit Agreement is also expected\nto require compliance with a variance covenant that compares actual operating disbursements and receipts and capital expenditures to the\nbudgeted amounts set forth in the DIP budgets delivered to the DIP Agents and DIP Lenders on or prior to the closing date and updated\nperiodically thereafter pursuant to the terms of the DIP Amendment. The proposed DIP Credit Agreement is subject to approval by the Bankruptcy\nCourt and will be subject to customary conditions precedent.\n\n \n\nThe foregoing description\nreflects the expected terms of the DIP Amendment and DIP Credit Agreement. However, the final terms may differ from the foregoing description\nand there can be no assurance that the Company will be able to successfully complete the debtor-in-possession financing on the terms described\nabove, or at all. The foregoing description does not purport to be complete and is qualified in its entirety by reference to the DIP Amendment\nand DIP Credit Agreement which will be filed as exhibits to a Current Report on Form 8-K after the DIP Amendment and the DIP Credit Agreement\nare entered into.\n\n \n\n*Stalking Horse Asset Purchase\nAgreement*\n\n \n\nOn June 12, 2026, the Company\nentered into a “stalking horse” Asset Purchase Agreement (the “Stalking Horse Purchase Agreement”) with SNBR,\nInc., a wholly-owned subsidiary of Sleep Country Canada Inc. (in such capacity, the “Purchaser”) and Sleep Country Canada\nInc. pursuant to which the Purchaser agreed to purchase substantially all of the assets of the Company (such assets, the “Assets,”\nand such transaction, the “Asset Sale”) for a purchase price of $415 million in cash and the assumption of certain liabilities,\nsubject to certain potential purchase price adjustments, in each case, as set forth in the Purchase Agreement. The Assets to be acquired\npursuant to the Asset Sale do not include, among other things, any executory leases or contracts that the Purchaser chooses to reject\nor are otherwise rejected in the Chapter 11 Cases. Based on the purchase price in the Stalking Horse Purchase Agreement, the common shares\nare significantly out of the money and would likely have no recovery.\n\n \n\nUpon Bankruptcy Court approval,\nthe Purchaser is expected to be approved as the “stalking horse” bidder in connection with the Asset Sale under section 363\nof the Bankruptcy Code. The Asset Sale will be conducted through a Bankruptcy Court-supervised process pursuant to Bankruptcy Court-approved\nbidding procedures. The Asset Sale is subject to the receipt of higher or otherwise better offers from competing bidders at an auction\n(if applicable), approval of the Asset Sale by the Bankruptcy Court, and certain other conditions set forth in the Purchase Agreement.\n\n \n\nThe Purchase Agreement contains\ncustomary representations, warranties and covenants of the parties for a transaction involving the acquisition of assets from a debtor\nin bankruptcy, and the completion of the Asset Sale is subject to a number of conditions, which, among others, include (i) the entry of\nan order of the Bankruptcy Court authorizing and approving the Asset Sale, (ii) the performance by each party of its obligations under\nthe Purchase Agreement (subject to certain materiality qualifiers), (iii) the accuracy of each party’s representations (subject\nto certain materiality qualifiers), (iv) the delivery of certain closing deliverables, (v) the expiration or termination of any applicable\nwaiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (vi) the absence of any judicial or administrative\nproceeding by the Federal Trade Commission or the United States Department of Justice Antitrust Division that seeks to prevent, restrain,\nenjoin or prohibit the Asset Sale under antitrust laws, and (vii) the absence of any order by any governmental authority that restrains,\nenjoins, stays, or prohibits the consummation of the Asset Sale. The obligation of the Purchaser to consummate the Asset Sale is also\nconditioned upon the Company having not experienced a material adverse effect. The Purchase Agreement also provides for a break-up fee\nand expense reimbursement payable to the Purchaser upon the occurrence of certain events, and the forfeiture of a deposit to the Company\nupon the occurrence of certain events.\n\n \n\nThe foregoing description\nof the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement filed\nhereto as Exhibit 2.1."}