<SEC-DOCUMENT>0000921895-24-002855.txt : 20241202
<SEC-HEADER>0000921895-24-002855.hdr.sgml : 20241202
<ACCEPTANCE-DATETIME>20241202163113
ACCESSION NUMBER:		0000921895-24-002855
CONFORMED SUBMISSION TYPE:	DFAN14A
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20241202
DATE AS OF CHANGE:		20241202

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Sleep Number Corp
		CENTRAL INDEX KEY:			0000827187
		STANDARD INDUSTRIAL CLASSIFICATION:	HOUSEHOLD FURNITURE [2510]
		ORGANIZATION NAME:           	04 Manufacturing
		IRS NUMBER:				411597886
		STATE OF INCORPORATION:			MN
		FISCAL YEAR END:			1228

	FILING VALUES:
		FORM TYPE:		DFAN14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-25121
		FILM NUMBER:		241519491

	BUSINESS ADDRESS:	
		STREET 1:		1001 THIRD AVENUE SOUTH
		CITY:			MINNEAPOLIS
		STATE:			MN
		ZIP:			55404
		BUSINESS PHONE:		7635517000

	MAIL ADDRESS:	
		STREET 1:		1001 THIRD AVENUE SOUTH
		CITY:			MINNEAPOLIS
		STATE:			MN
		ZIP:			55404

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SELECT COMFORT CORP
		DATE OF NAME CHANGE:	19980821

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			STADIUM CAPITAL MANAGEMENT LLC
		CENTRAL INDEX KEY:			0001105087
		ORGANIZATION NAME:           	
		IRS NUMBER:				770500018
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DFAN14A

	BUSINESS ADDRESS:	
		STREET 1:		199 ELM STREET
		CITY:			NEW CANAAN
		STATE:			CT
		ZIP:			06840-5321
		BUSINESS PHONE:		(203) 972-8235

	MAIL ADDRESS:	
		STREET 1:		199 ELM STREET
		CITY:			NEW CANAAN
		STATE:			CT
		ZIP:			06840-5321
</SEC-HEADER>
<DOCUMENT>
<TYPE>DFAN14A
<SEQUENCE>1
<FILENAME>dfan14a07785006_12022024.htm
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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>UNITED
STATES</B></FONT></P>

<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>SECURITIES
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<P STYLE="font: 12pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Washington,
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14A</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">INFORMATION REQUIRED IN PROXY STATEMENT</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; text-align: center; margin-bottom: 0">SCHEDULE 14A INFORMATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Amendment No. )</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Filed by the Registrant &#9744;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Filed by a Party other than the Registrant &#9746;</P>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Preliminary Proxy Statement</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Definitive Proxy Statement</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Definitive Additional Materials</TD></TR></TABLE>



<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9746;</TD><TD>Soliciting Material Under &sect; 240.14a-12</TD></TR></TABLE>



<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;&nbsp;</P>

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<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="width: 100%; text-align: center; vertical-align: top; border-bottom: Black 0.5pt solid">SLEEP NUMBER CORPORATION</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: center; vertical-align: top"><P>(Name of Registrant as Specified In Its Charter)</P>

</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: center; vertical-align: top; border-bottom: Black 0.5pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">STADIUM CAPITAL PARTNERS, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">STADIUM SPECIAL OPPORTUNITY I, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">STADIUM CAPITAL MANAGEMENT GP, L.P.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">STADIUM CAPITAL MANAGEMENT, LLC</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">ALEXANDER M. SEAVER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">KEVIN BAKER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">PATRICK A. HOPF</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">JEFFREY T. JACKSON</P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif">JESSICA M. PRAGER</P>
</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: center; vertical-align: top"><P>(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)</P>

</TD></TR>
</TABLE>

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<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">Payment of Filing Fee (Check all boxes that apply):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9746;</TD><TD>No fee required</TD></TR></TABLE>



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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11</TD></TR></TABLE>



<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Stadium Capital
Partners, L.P., together with the other participants named herein (collectively, &ldquo;Stadium Capital&rdquo;), intend to file a
preliminary proxy statement and accompanying <B>WHITE</B> universal proxy card with the Securities and Exchange Commission to be
used to solicit votes for the election of its highly-qualified director nominees at the 2025 annual meeting of shareholders of
Sleep Number Corporation, a Minnesota corporation (the &ldquo;Company&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: left; text-indent: 0.5in">Item 1: On December 2, 2024,
Stadium Capital issued the following press release and open letter to the Company&rsquo;s shareholders:</P>

<P STYLE="font: 18pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-size: 18pt">Stadium Capital Management
Nominates Four Exceptionally Qualified Director Candidates to Sleep Number&rsquo;s Board of Directors</FONT></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0; text-align: center"><I>Slate Includes Sleep Number&rsquo;s Former
Chairman and Interim CEO and Director Candidates with Significant Shareholdings, Capital Allocation and Product Innovation Expertise and
Track Records Overseeing Value-Enhancing Turnarounds</I></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0; text-align: center"><I>Contends that its Director Candidates &ndash;
Patrick A. Hopf, Jeffrey T. Jackson, Jessica M. Prager and Kevin Baker &ndash; Are Best Positioned to Identify Sleep Number&rsquo;s Next
CEO and Put the Company Back on the Path to Growth and Profitability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">NEW CANAAN, Conn.--(BUSINESS WIRE)&mdash;Stadium Capital
Management, LLC (together with certain of its affiliates, &ldquo;Stadium Capital&rdquo; or &ldquo;we&rdquo;) is the largest shareholder
of Sleep Number Corporation (NASDAQ: SNBR) (&ldquo;Sleep Number&rdquo; or the &ldquo;Company&rdquo;), owning approximately 11.7% of the
Company&rsquo;s outstanding shares. Today, Stadium Capital issued the below letter to shareholders regarding its nomination of four highly
qualified, independent candidates for election to the Company&rsquo;s Board of Directors (the &ldquo;Board&rdquo;) at the 2025 Annual
Meeting of Shareholders (the &ldquo;Annual Meeting&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">***</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right">December 2, 2024</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Fellow Shareholders:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stadium Capital is Sleep Number&rsquo;s largest shareholder,
holding approximately 11.7% of the Company&rsquo;s outstanding shares. Last week, we expressed our grave concerns with Sleep Number&rsquo;s
financial underperformance, corporate governance and flawed CEO search process and made specific proposals to solve these pressing issues.
Based on the conversations we had with many of you both before and after the publication of our letter, we are confident the majority
of you share our frustrations. That is why it was so surprising to see the Board respond by vehemently defending its actions, instead
of pursuing the path of private collaboration with its largest shareholder (as we have done with Sleep Number previously).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Today we are writing to inform you that we have nominated
four exceptionally qualified directors with capital allocation, product innovation, business turnaround and unrivaled industry experience
for election to Sleep Number&rsquo;s Board at the upcoming Annual Meeting. We did not come to this decision lightly, as we strongly prefer
private engagement with the management teams and boards of our portfolio companies on ideas for value creation and improved governance.
In this case, our hand has been forced because Sleep Number&rsquo;s Board is unwilling to work with its largest shareholder to add new
directors to the boardroom to ensure an independent CEO search, and most concerningly, seems intent on continuing on its current perilous
path. This was made particularly evident by the Board&rsquo;s decision to reject our November 12<SUP>th</SUP> and November 25<SUP>th</SUP>
proposals (seemingly without entertaining them whatsoever) that would have ensured a truly independent CEO search process. Concerningly,
the Board&rsquo;s obstinance is occurring in the face of investors embracing the prospect of change, with Sleep Number&rsquo;s shares
appreciating 20% since we highlighted the path to enhanced value in our letter last week.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Most troubling in the Board&rsquo;s response, which
failed to address any of our concerns, was its characterization of our request as &ldquo;unusual&rdquo; for direct participation in the
CEO search &ndash; the most consequential decision facing the Company over the next decade. Under standard circumstances, we believe a
willing and experienced owner who holds more stock than the entire Board by many multiples should have a seat at the table for such a
momentous decision. In these specific circumstances, where the long-tenured directors directly involved in this critical decision have
such abysmal track records of value destruction, it is especially vital. A thoughtful and open-minded Board should welcome the input of
a diligent, patient and large owner who brings a valuable and differentiated perspective to this enormously consequential decision.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Unfortunately for this Board, the facts are starkly
obvious: Sleep Number&rsquo;s long-tenured directors (Shelly Ibach, Stephen Gulis, Brenda Lauderback, Michael Harrison and Barbara Matas,
in particular) have failed all of us as fiduciaries. They have not only harmed but are now also insulting key constituents &ndash; the
shareholders they are supposed to represent and the employees who are the heart and soul of the organization they govern &ndash; by wasting
our money to protect their lucrative roles as directors for as long as possible. Their indefensible long-term record and recent self-serving
actions make it overwhelmingly clear that they cannot be trusted with the important decisions that lie ahead.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To fix this broken situation, we have nominated four
highly qualified individuals who have the necessary expertise and independence to address Sleep Number&rsquo;s most pressing issues. Our
nominees are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B>Patrick A. Hopf</B></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Mr. Hopf is the former Interim CEO and
Chairman of Sleep Number and a successful private investor in consumer-oriented companies. He will bring a positive track record of value
creation as well as strategic change and board development experience.</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Proven Value Creator with Deep Knowledge of Sleep Number</B>: At St. Paul Venture Capital &ndash; one
of the ten largest venture capital firms in the U.S. at its peak &ndash; Mr. Hopf led the firm&rsquo;s investment in Sleep Number (then
called Select Comfort) in 1991 and later became the Company&rsquo;s Interim CEO and Chairman. Mr. Hopf oversaw multiple turnarounds at
Sleep Number and during his leadership, Sleep Number&rsquo;s market value grew to over $1.4 billion. He started the direct response sales
channel at Sleep Number, helped launch the retail channel and Roadshow channel, and was instrumental in establishing the internet channel
in the late 1990s.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Experience in Board Development and CEO Searches</B>: Mr. Hopf has been on the boards of more than
30 private companies and was the Chairman of many of them, including Sleep Number, where he led three separate CEO searches for Sleep
Number.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Strong Alignment with Shareholders</B>: Mr. Hopf has steadfastly represented shareholder interests
as a public market investor, private investor, board member and operating manager for over 40 years. Mr. Hopf also has a significant personal
investment in Sleep Number.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B>Jeffrey T. Jackson</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Mr. Jackson is an experienced CEO and public
company director with an outstanding record of value creation and extensive experience managing cyclical companies across market cycles,
which will be particularly relevant for Sleep Number. </I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Proven Value Creator</B>: After Mr. Jackson was named CEO of PGT Innovations (&ldquo;PGT&rdquo;), the
company&rsquo;s shareholder returns annualized in the high-teens and PGT more than doubled EBITDA through organic growth and M&amp;A activity.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Extensive Experience Managing a Cyclical Business Across All Phases of Growth</B>: Prior to ascending
to the CEO role, Mr. Jackson also served as PGT&rsquo;s CFO, where he helped guide the business through the housing boom, bust and subsequent
recovery, including effectively managing its cost structure to successfully position the company to capitalize on value-enhancing opportunities
when the market recovered.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Experience Selling Products Through Multiple Distribution Channels</B>: Mr. Jackson drove accretive
growth across PGT&rsquo;s portfolio of brands by selling its various products through company-owned retail stores, third-party retailers
and independent dealers.</TD></TR></TABLE>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B>Jessica M. Prager</B></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Ms. Prager has extensive experience
building and scaling high-performing, culturally relevant brands. Her expertise in leveraging consumer data, driving product innovation
and bridging digital and physical touchpoints will be particularly relevant in helping Sleep Number achieve its growth potential.</I></P>


<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Proven Value Creator: </B>Ms. Prager is Senior Vice President of Product at Roman Health Ventures (&ldquo;Ro&rdquo;),
where she was one of the company&rsquo;s first 10 employees and has been instrumental in scaling the company, which is now valued at $7
billion. She has helped drive Ro&rsquo;s significant growth and cement its position as a leader in the consumer healthcare technology
space.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Expertise in Leveraging Consumer Data and Insights to Drive Growth: </B>Ms. Prager has a proven track
record of using consumer data at scale and analyzing consumer insights to refine customer experiences and optimize growth marketing strategies.
She has deep experience in demand generation, direct-response marketing strategies, brand building and optimizing ecommerce platforms
from her roles at Ro, ClassPass, Bain &amp; Company and PepsiCo.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Track Record of Marrying Brand Vision with Consumer Experience: </B>At ClassPass, Ms. Prager helped
redefine how consumers access fitness and wellness, connecting digital discovery with physical participation. At Warby Parker, she supported
the launch of the company&rsquo;s first permanent physical retail store, creating an omnichannel model that set new industry standards.
Across Ro, ClassPass and Warby Parker, she has demonstrated an ability to scale businesses while maintaining brand integrity and cultural
relevance.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 3pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B>Kevin Baker</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><I>Mr. Baker is a Managing Partner at Stadium
Capital, Sleep Number&rsquo;s largest owner, and will bring a much-needed ownership perspective to Sleep Number&rsquo;s boardroom.</I></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Shareholder Perspective with a Clear Understanding of Sleep Number&rsquo;s Business</B>: Exceptionally
deep research and due diligence is a centerpiece of Stadium Capital&rsquo;s patient investment strategy. As part of Stadium Capital&rsquo;s
investment team, Mr. Baker has led extensive due diligence spanning a decade on Sleep Number and the mattress industry. Mr. Baker will
bring the largest shareholder&rsquo;s perspective to the boardroom and be laser-focused on driving value for all shareholders.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 3pt"></TD><TD STYLE="width: 18pt">-</TD><TD STYLE="text-align: justify"><B>Capital Allocation and Financial Markets Expertise</B>: Mr. Baker has 14 years of experience as an
investor in public companies, with significant experience working directly with the leadership teams of Stadium Capital&rsquo;s portfolio
companies on value-enhancing capital allocation and capital structure decisions.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our nominees&rsquo; highly effective and complementary
skillsets will ensure that a refreshed, unbiased Board works constructively to identify the biggest causes of Sleep Number&rsquo;s underperformance,
uses those insights to identify the best CEO, and empowers and incentivizes Sleep Number&rsquo;s next CEO to reignite the Company&rsquo;s
growth, profitability and market value. Most importantly, this refreshed Board will put Sleep Number&rsquo;s owners&rsquo; interests above
its own.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We continue to believe that it is in the best interest
of all shareholders for Sleep Number to collaborate with us by pursuing the path we articulated in our November 25<SUP>th</SUP> letter:
work with us to refresh the Board, appoint an Executive Chairman and ensure a wholly independent CEO search process to identify the Company&rsquo;s
next leader. That is certainly the overwhelming message we have heard from fellow shareholders, and to be clear, that is our preferred
outcome. However, if the Board continues down a self-serving path and unnecessarily squanders resources to defend those who are most responsible
for the current calamity, then we will look forward to letting the owners decide the future of our Company at the Annual Meeting in spring
2025.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">Sincerely,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The Stadium Capital Investment Team</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: center">***</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify"><B>About Stadium Capital</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Stadium Capital Management, LLC seeks to apply a patient,
private equity approach to public market investing, anchored by deep fundamental research. Since our strategy inception in 1997, we&nbsp;have
invested in a concentrated portfolio of smaller-cap, public companies across North America and Europe with a long-term investment horizon
and a focus on high-quality businesses with durable free cash flow. We have almost three decades of deep investment experience through
multiple full market cycles, working closely and collaboratively with our portfolio companies. For more information, visit <FONT STYLE="color: #467886">www.StadiumCapital.com</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: center"><B>CERTAIN INFORMATION CONCERNING THE PARTICIPANTS</B></P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">Stadium Capital Partners, L.P. (&ldquo;<U>SCP</U>&rdquo;),
together with the other participants named herein (collectively, &ldquo;<U>Stadium Capital</U>&rdquo;), intend to file a preliminary proxy
statement and accompanying <B>WHITE</B> universal proxy card with the Securities and Exchange Commission (&ldquo;<U>SEC</U>&rdquo;) to
be used to solicit votes for the election of Stadium Capital&rsquo;s slate of highly-qualified director nominees at the 2025 annual meeting
of shareholders of Sleep Number Corporation, a Minnesota corporation (the &ldquo;<U>Company</U>&rdquo;).</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">STADIUM CAPITAL STRONGLY ADVISES ALL SHAREHOLDERS
OF THE COMPANY TO READ THE PROXY STATEMENT AND OTHER PROXY MATERIALS, INCLUDING A PROXY CARD, AS THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST.
REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR.</P>

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<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">The participants in the anticipated proxy
solicitation are expected to be SCP, Stadium Special Opportunity I, L.P. (&ldquo;<U>SSO</U>&rdquo;), Stadium Capital Management GP, L.P.
(&ldquo;<U>SCMGP</U>&rdquo;), Stadium Capital Management, LLC (&ldquo;<U>SCM</U>&rdquo;), Alexander M. Seaver, Kevin Baker, Patrick A.
Hopf, Jeffrey T. Jackson and Jessica M. Prager.</P>

<P STYLE="font: 10pt/107% Times New Roman, Times, Serif; margin: 0 0 8pt; text-align: justify">As of the date hereof, SCP directly beneficially
owns 2,215,000 shares of Common Stock, par value $0.01 per share (the &ldquo;<U>Common Stock</U>&rdquo;), of the Company. As of the date
hereof, SSO directly beneficially owns 401,459 shares of Common Stock. SCMGP, as the general partner of SCP and SSO, may be deemed to
beneficially own the 2,616,459 shares of Common Stock owned in the aggregate by SCP and SSO. SCM, as the investment advisor to SCP and
SSO and as the general partner of SCMGP, may be deemed to beneficially own the 2,616,459 shares of Common Stock owned in the aggregate
by SCP and SSO. Mr. Seaver, as the manager of SCM, may be deemed to beneficially own the 2,616,459 shares of Common Stock owned in the
aggregate by SCP and SSO. As of the date hereof, Mr. Hopf directly beneficially owns 51,500 shares of Common Stock, which includes 1,500
shares of Common Stock underlying certain call options that are currently exercisable. As of the date hereof, Messrs. Baker and Jackson
and Ms. Prager do not beneficially own any shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">***</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><U>Contacts </U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Longacre Square Partners</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Charlotte Kiaie / Bela Kirpalani, 646-386-0091</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="color: #467886">ckiaie@longacresquare.com</FONT>
/ <FONT STYLE="color: #467886">bkirpalani@longacresquare.com</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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