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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-K/A
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 30, 2000

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________ to __________________.

COMMISSION FILE NO. 0-25121
--------------------

SELECT COMFORT CORPORATION
(Exact name of registrant as specified in its charter)

MINNESOTA 41-1597886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

6105 TRENTON LANE NORTH
MINNEAPOLIS, MINNESOTA 55442
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code: (763) 551-7000

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

COMMON STOCK, $.01 PAR VALUE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of March 28, 2001, 18,055,633 shares of Common Stock of the Registrant
were outstanding, and the aggregate market value of the Common Stock of the
Registrant as of that date (based upon the last reported sale price of the
Common Stock at that date as reported by the Nasdaq National Market System),
excluding outstanding shares beneficially owned by directors and executive
officers, was $16,500,517.

DOCUMENTS INCORPORATED BY REFERENCE

None.
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth certain information, as of March 30, 2001,
which has been furnished to us by each executive officer, director and each
person who has been nominated by the Board of Directors to serve as a director
of Select Comfort.

NAME AGE POSITION(S)
- ----------------------------- ---- --------------------------------------------
William R. McLaughlin 44 President and Chief Executive Officer

Noel F. Schenker 47 Senior Vice President, Marketing and New
Business Development

Gregory T. Kliner 63 Senior Vice President of Operations

James C. Raabe 41 Vice President and Chief Financial Officer

Mark A. Kimball 42 Senior Vice President, Chief Administrative
Officer, General Counsel and Secretary

Michael J. Thyken 39 Vice President and Chief Information Officer

Tracey T. Breazeale 34 Senior Vice President, Special Projects

Patrick A. Hopf (1) 52 Chairman of the Board

Christopher P. Kirchen (1)(3) 58 Director

Jean-Michel Valette (3) 40 Director

Ervin R. Shames (1)(3) 60 Director

Thomas J. Albani (2) 58 Director

David T. Kollat (2) 62 Director

- -------------------

(1) Member of the Executive Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee

OTHER INFORMATION ABOUT NOMINEES AND OTHER DIRECTORS

WILLIAM R. MCLAUGHLIN joined Select Comfort in March 2000 as President and Chief
Executive Officer. From December 1988 to March 2000, Mr. McLaughlin served as an
executive of Pepsico Foods International in various capacities, including from
September 1996 to March 2000 as President of Frito Lay Europe, Middle East and
Africa, and from June 1993 to June 1996 as President of Grupo Gamesa, a cookie
and flour company based in Mexico.

NOEL F. SCHENKER joined Select Comfort as Senior Vice President, Marketing and
New Business Development in November, 2000. Ms. Schenker served as Senior Vice
President of Marketing and Strategic Planning at Rollerblade, Inc., from 1992 to
1996, and as an independent consultant from 1996 to 2000. She was with The
Pillsbury Company from 1981 to 1992, serving as Vice President of Marketing for
the Green Giant business. Since 1996, she also has served on the Board of
Directors and Executive Committee of the Fortis Financial Group's Mutual Funds.

GREGORY T. KLINER has served as Senior Vice President of Operations of Select
Comfort since August 1995. From October 1986 to August 1995, Mr. Kliner served
as Director of Operations of the Irrigation Division for The Toro Company, a
manufacturer of lawn care and snow removal products and irrigation systems.

JAMES C. RAABE was elected as Vice President and Chief Financial Officer of
Select Comfort in April 1999. From September 1997 to April 1999, Mr. Raabe
served as Controller of Select Comfort. From May 1992 to September 1997, Mr.
Raabe served as Vice President - Finance of ValueRx, Inc., a pharmacy benefit
management provider. Mr. Raabe held various positions with KPMG LLP from August
1982 to May 1992.

MARK A. KIMBALL joined Select Comfort in May 1999 as Senior Vice President,
Chief Administrative Officer, General Counsel and Secretary. For more than five
years prior to joining Select Comfort, Mr. Kimball was a partner in the law firm
of Oppenheimer Wolff & Donnelly LLP practicing in the area of corporate finance.

MICHAEL J. THYKEN joined Select Comfort in July 2000 as Vice President and Chief
Information Officer. During 1999, Mr. Thyken was Group Director of Application
Development at Jostens, a Minneapolis based manufacturer of scholastic
recognition products. From 1994 to 1999, Mr. Thyken was Director of Technical
Services for Target Stores. From 1984 to 1994, Mr. Thyken served in various
positions with IBM Corporation.

TRACEY T. BREAZEALE was hired as Senior Vice President of Strategic Planning and
Branding of Select Comfort in July 1999. In February 2001, Ms. Breazeale's work
schedule was reduced to 25% of full time, and her title was changed to Senior
Vice President, Special Projects. Ms. Breazeale was with the Boston Consulting
Group from October 1993 to July 1999, initially as a consultant and the last
three years as a manager, where she specialized on strategic and marketing
oriented projects for retail and consumer product companies.

THOMAS J. ALBANI has served as a director of Select Comfort since February 1994.
Mr. Albani served as President and Chief Executive Officer of Electrolux
Corporation, a manufacturer of premium floor care machines, from July 1991 to
May 1998. From September 1984 to April 1989, Mr. Albani was employed by
Allegheny International Inc., a home appliance manufacturing company, in a
number of positions, most recently as Executive Vice President and Chief
Operating Officer. Mr. Albani also serves as a director of Dyersburg
Corporation.

DAVID T. KOLLAT has served as a director of Select Comfort since February 1994.
Mr. Kollat has served as President and Chairman of 22 Inc., a research and
consulting company for retailers and consumer goods manufacturers, since 1987.
From 1976 until 1987, Mr. Kollat served in various capacities for The Limited, a
women's apparel retailer, including Executive Vice President of Marketing and
President of Victoria's Secret Catalogue. Mr. Kollat also

serves as a director of numerous companies, including The Limited, Inc.,
Wolverine World Wide, Inc., Consolidated Stores Corporation, Cooker Restaurant
Corporation and Cone Mills Corporation.

CHRISTOPHER P. KIRCHEN has served as a director of Select Comfort since December
1991. Mr. Kirchen is currently Managing General Partner of Brand Equity
Ventures, a venture capital partnership that he co-founded in March 1997. Mr.
Kirchen is also a General Partner of Consumer Venture Partners, an investor in
the Company, a position he has held since 1986. Mr. Kirchen also serves as a
director of a number of privately held companies.

JEAN-MICHEL VALETTE has served as a director of Select Comfort since 1994. Mr.
Valette is an independent advisor to branded consumer companies. From August
1998 to May 2000, Mr. Valette served as President and Chief Executive Officer of
Franciscan Estates, Inc., the Fine Wine Division of Constellation Brands, Inc.
Mr. Valette was a Managing Director of Hambrecht & Quist LLC from October 1994
to August 1998 and served as a Senior Analyst at Hambrecht & Quist LLC from
November 1992 to October 1994. Hambrecht & Quist LLC was one of the underwriters
of the Company's initial public offering. Mr. Valette also serves as a director
of Peet's Coffee and Tea, Inc. and of Golden State Vinters, Inc., as well as a
number of privately held companies.

PATRICK A. HOPF was elected Chairman of the Board of Directors in April 1999 and
has served as a director of Select Comfort since December 1991. Mr. Hopf also
served as the Chairman of the Board of Directors of the Company from August 1993
to April 1996. Mr. Hopf is President of St. Paul Venture Capital, Inc., a
venture capital firm, and is the Managing General Partner of St. Paul Venture
Capital IV, LLC and St. Paul Venture Capital V, LLC. From August 1988 to January
1999, Mr. Hopf served as Vice President of St. Paul Fire and Marine Insurance
Company. St. Paul Venture Capital IV, LLC, St. Paul Venture Capital V, LLC and
St. Paul Fire and Marine Insurance Company are investors in the Company. Mr.
Hopf also serves as a director of a number of privately held companies.

ERVIN R. SHAMES has served as a director of Select Comfort since April 1996.
From April 1996 to April 1999, Mr. Shames served as Chairman of the Board of
Directors. Since January 1995, Mr. Shames has served as an independent
management consultant to consumer goods and services companies, advising on
management and marketing strategy. Since 1996 he has been a visiting lecturer at
the University of Virginia's Darden Graduate School of Business. From December
1993 to January 1995, Mr. Shames served as the Chief Executive Officer of
Borden, Inc. and was President and Chief Operating Officer of Borden, Inc. from
July 1993 until December 1993. Mr. Shames serves as a director and as chairman
of the compensation committee of the board of directors of Online Resources
Corporation.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and all persons who beneficially own more than 10% of the
outstanding shares of our common stock to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
our common stock.

Executive officers, directors and greater than 10% beneficial owners are also
required to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based upon a review of the copies of such reports furnished to
us during the fiscal year ended December 30, 2000 and written representations by
such persons, one report on Form 4 relating to the purchase by William R.
McLaughlin of 2,000 shares in October, 2000 was inadvertently not timely filed

during 2000. All other transactions were reported on a timely basis.

ITEM 11. EXECUTIVE COMPENSATION

DIRECTOR COMPENSATION

MEETING FEES. All non-employee directors of the Company receive $3,500 for each
meeting of the Board of Directors attended and $500 for each committee meeting
attended.

STOCK OPTIONS. Each newly elected non-employee director is eligible for an
initial grant of options to purchase 20,000 shares of common stock at an
exercise price equal to the fair market value of the common stock on the date of
grant. These initial options become exercisable in equal monthly increments over
a 24-month period, so long as the director remains a director of Select Comfort.
After the vesting of this initial grant, each non-employee director is eligible
for an annual grant, subject to action by the Board and coincident with the
annual meeting of shareholders, of options to purchase 10,000 shares of common
stock at an exercise price equal to the fair market value of the common stock on
the date of the annual meeting of shareholders. These annual options become
exercisable in equal monthly increments over a 36-month period, so long as the
director remains a director of Select Comfort. All of the options granted to
directors remain exercisable for a period of up to 10 years after the date of
grant, subject to continuous service on the Board.

OPTION GRANTS FOR SERVICE AS CHAIRMAN OF THE BOARD. For service as Chairman of
the Board, in May 1999 the Board of Directors granted to St. Paul Venture
Capital V, LLC, an affiliate of Mr. Hopf's employer, St. Paul Venture Capital,
Inc., options to purchase a total of 250,000 shares exercisable at $15.38 per
share, of which 50,000 vest in equal monthly increments over 36 months, 50,000
vest at such time that the trading price of Select Comfort common stock has
exceeded $50.00 per share for at least 30 consecutive trading days, and 150,000
vest at such time that the trading price of Select Comfort common stock has
exceed $100.00 per share for at least 30 consecutive trading days.

OPTION GRANTS FOR SERVICE AS INTERIM PRESIDENT AND CEO. Mr. Hopf received no
cash compensation for his service as Interim President and CEO during 1999 or
2000. In consideration of such service, the Board of Directors granted to St.
Paul Venture Capital V, LLC, an affiliate of Mr. Hopf's employer, St. Paul
Venture Capital, Inc., 10,000 options per month for the months of July through
December 1999, and 27,000 options per month for the months of January and
February of 2000. Mr. Hopf's service as Interim President and CEO ceased after
February of 2000.

REIMBURSEMENT OF EXPENSES. All directors are reimbursed for travel expenses for
attending meetings of the Board and any Board committees.

NO DIRECTOR COMPENSATION FOR EMPLOYEE DIRECTORS. Directors who are employees of
the Company do not receive additional compensation for their services as
directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Hopf, Lansing and Shames served as members of the Compensation Committee
of the Board of Directors through March of fiscal 2000, and thereafter the
Compensation Committee consisted of Messrs. Albani and Kollat. In the last half
of 1999 and the first two months of 2000, Mr. Hopf served as Interim President
and CEO of the Company pending the search for the successor to Mr. McAthie, who
resigned in July 1999. See "Executive Compensation -- Director Compensation."

Mr. Hopf is the President of St. Paul Venture Capital, Inc. and Managing General
Partner of St. Paul Venture Capital IV, LLC, and St. Paul Venture Capital V,
LLC, which are investors in the Company. Mr. Hopf was elected Chairman of the
Board of Directors in April 1999 and previously served as Chairman of the Board
of

Directors of the Company from August 1993 to April 1996.

For a description of certain transactions involving these entities, see "Item 13
- - Certain Transactions."

No other relationships existed during fiscal 2000 with respect to members of the
Compensation Committee that would be required to be disclosed under the rules of
the Securities Act of 1933.

ITEM 12. EXECUTIVE COMPENSATION AND OTHER BENEFITS

-------------------

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides summary information concerning cash and
non-cash compensation paid to or earned by each of the persons serving in the
capacity of Chief Executive Officer in 2000 and the four most highly compensated
executive officers other than the CEO serving as executive officers at the end
of 2000 (the "Named Executive Officers").

SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) ($)(1)
- --------------------------- ---- --------- -------- ---------- ------

William R. McLaughlin (2) 2000 $ 390,372 $ 146,390 600,000 $ 123,428 (4)
PRESIDENT AND CHIEF EXECUTIVE 1999 -- (3) -- --
OFFICER 1998 -- -- -- --
--

Patrick A. Hopf (5) 2000 -- -- 64,000 --
INTERIM PRESIDENT AND CHIEF 1999 -- -- 50,000 --
EXECUTIVE OFFICER 1998 -- -- -- --

Tracey T. Breazeale (6) 2000 200,000 30,808 (3) 36,000 2,400
SENIOR VICE PRESIDENT, 1999 71,923 30,000 100,000 105,008 (7)
SPECIAL PROJECTS 1998 -- -- -- --

Mark A. Kimball (8) 2000 201,243 45,280 (3) 36,000 --
SENIOR VICE PRESIDENT, CHIEF 1999 117,788 -- 125,000 --
ADMINISTRATIVE OFFICER, 1998 -- -- -- --
SECRETARY AND GENERAL COUNSEL

Gregory T. Kliner 2000 186,992 42,073 (3) 28,000 2,400
SENIOR VICE PRESIDENT OF 1999 183,197 -- 15,000 2,139
OPERATIONS 1998 157,574 52,204 15,000 2,628

Ronald E. Mayle (9) 2000 225,000 50,625 36,000 2,400
SENIOR VICE PRESIDENT OF 1999 202,615 -- 80,000 13,077
RETAIL 1998 161,231 50,352 25,000 --

(1) Except as noted, the amounts disclosed for each individual represent Select
Comfort's contributions to the accounts of the named individuals in Select
Comfort's 401(k) defined contribution plan.

(2) Mr. McLaughlin became President and Chief Executive Office on March 21,
2000.

(3) Represents bonuses accrued in 2000, the payment of which is deferred
pending the achievement of quarterly profitability by the Company.

(4) Includes $2,106 in contributions to the account of Mr. McLaughlin in Select
Comfort's 401(k) defined contribution plan and $121,322 in payment for
reimbursement of relocation expenses.

(5) Mr. Hopf was Interim President and Chief Executive Officer of the Company
from July 19, 1999 to March 20, 2000. Includes 114,000 shares issuable upon
exercise of outstanding options issued to St. Paul Venture Capital IV, LLC.

(6) Ms. Breazeale became Senior Vice President of Strategic Planning and
Branding on August 2, 1999. On February 1, 2001 Ms. Breazeale became Senior
Vice President, Special Projects and her work schedule was reduced to 25%
of full time, with a proportionate reduction in salary.

(7) Includes $1,079 in contributions to the account of Ms. Breazeale in Select
Comfort's 401(k) defined contribution plan and $103,929 in payment for
reimbursement of relocation expenses.

(8) Mr. Kimball became Senior Vice President, Chief Administrative Officer,
Secretary and General Counsel on May 3, 1999.

(9) Mr. Mayle has resigned his position with the Company and ceased to serve as
an employee as of April 21, 2001.

OPTION GRANTS AND EXERCISES

The following tables summarize option grants and exercises during the
fiscal year ended December 30, 2000 to or by the Named Executive Officers and
the potential realizable value of the options held by such persons at December
30, 2000.

OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS (1)
-------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE
TOTAL AT ASSUMED ANNUAL RATES
NUMBER OF OPTIONS OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM (2)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% 10%
- ----------------------------- ------------- ----------------- --------- ---------- ------------ ------------

William R. McLaughlin 50,000 (3) 3.8% $5.91 03/21/10 $ 185,473 $ 470,271
100,000 (4) 7.6% 5.91 03/21/10 370,945 940,542
150,000 (5) 11.5% 5.91 03/21/10 556,418 1,410,813
300,000 (6) 22.9% 5.91 03/22/10 1,113,222 2,822,826

Patrick A. Hopf (8) 27,000 (6) 2.1% 3.61 01/15/10 79,527 201,641
10,000 (7) 0.8% 4.72 01/28/10 28,774 72,947
27,000 (6) 2.1% 4.58 02/15/10 80,094 203,023

Tracey T. Breazeale 16,000 (6) 1.2% 4.38 02/02/10 44,349 112,129
20,000 (3) 1.5% 4.82 02/08/10 60,360 153,183

Mark A. Kimball 16,000 (6) 1.2% 4.38 02/02/10 44,349 112,129
20,000 (3) 1.5% 4.82 02/08/10 60,360 153,183

Gregory T. Kliner 8,000 (6) 0.6% 4.38 02/02/10 22,175 56,065
20,000 (3) 1.55 4.82 02/08/10 60,360 153,183

Ronald E. Mayle 16,000 (6) 1.2% 4.38 02/02/10 44,349 112,129
20,000 (3) 1.5% 4.82 02/08/10 60,360 153,183

- -----------------------------

(1) All of the options granted to the Named Executive Officers were granted
under the Company's 1990 and 1997 Stock Incentive Plan.

(2) In accordance with the rules of the Securities and Exchange Commission, the
amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5%
and 10% compounded annually from the date the respective options were
granted to their expiration date and do not reflect the Company's estimates
or projections of future common stock prices. The gains shown are net of
the option price, but do not include deductions for taxes or other expenses
associated with the exercise. Actual gains, if any, on stock option
exercises will depend upon the future performance of the common stock, the
executive's continued employment with the Company or its subsidiaries and
the date on which the options are exercised. The amounts represented in
this table might not necessarily be achieved.

(3) These options become exercisable when the average of the high and low sales
prices of the Company's common stock, as reported by the Nasdaq National
Market System, exceeds $12.00 per share for at least 30 consecutive trading
days.

(4) These options become exercisable when the average of the high and low sales
prices of the Company's common stock, as reported by the Nasdaq National
Market System, exceeds $24.00 per share for at least 30 consecutive trading
days.

(5) These options become exercisable when the average of the high and low sales
prices of the Company's common stock, as reported by the Nasdaq National
Market System, exceeds $36.00 per share for at least 30 consecutive trading
days.

(6) These options become exercisable in as nearly equal as possible monthly
installments over a 36-month period, so long as the executive remains
employed by the Company or one of its subsidiaries at that date. To the
extent not already exercisable, these options become immediately
exercisable in full upon certain changes in control of the Company and
remain exercisable for the remainder of their term.

(7) These options became immediately exercisable at the date of grant.

(8) Represents options granted to St. Paul Venture Capital V, LLC, an affiliate
of St. Paul Venture Capital, Inc., Mr. Hopf's employer.

AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT DECEMBER 30, 2000 AT DECEMBER 30, 2000 (2)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------

William R. McLaughlin --- --- 75,000 525,000 --- ---

Patrick A. Hopf --- --- 75,750 38,250 --- ---

Tracey T. Breazeale --- --- 48,889 87,111 --- ---

Mark A. Kimball --- --- 69,028 91,972 --- ---

Gregory T. Kliner --- --- 117,450 43,695 --- ---

Ronald E. Mayle --- --- 183,332 92,668 --- ---

- -----------------------

(1) Value based on the difference between the fair market value of one share of
common stock on the date of exercise and the exercise price of the option.

(2) Value based on the difference between the fair market value of one share of
common stock at December 30, 2000 ($1.4375) and the exercise price of the
options ranging from $4.08 to $17.00 per share. Options are in-the-money if
the market price of the shares exceeds the option exercise price.

(3) Includes 114,000 shares issuable upon exercise of outstanding options
granted to St. Paul Venture Capital V, LLC.

EMPLOYMENT AGREEMENTS

WILLIAM R. MCLAUGHLIN. We have entered into a letter agreement with William R.
McLaughlin pursuant to which he serves as President and CEO. Mr. McLaughlin
receives a base salary and is entitled to participate in the Company's incentive
compensation plans. Upon involuntary termination of Mr. McLaughlin's employment
by the Board or constructive dismissal, Mr. McLaughlin is entitled to one year's
salary as severance compensation and the unvested portion of his initial grant
of 300,000 options would become fully vested. Upon an involuntary termination or
constructive dismissal of Mr. McLaughlin's employment following a change in
control of the of Company, Mr. McLaughlin would be entitled to two years' salary
as severance compensation and his stock options would become fully vested.

NOEL F. SCHENKER. We have entered into a letter agreement with Noel F. Schenker
pursuant to which she serves as Senior Vice President, Marketing and New
Business Development of the Company. Ms. Schenker receives a base salary and is
entitled to participate in the Company's incentive compensation plans. Upon the
involuntary termination of Ms. Schenker's employment following a change in
control, a termination without cause or a constructive dismissal, Ms. Schenker
is entitled to one year's salary as severance and the unvested portion of her
initial grant of 100,000 options would become fully vested.

GREGORY T. KLINER. We have entered into a letter agreement with Gregory T.
Kliner pursuant to which he serves as Senior Vice President of Operations of the
Company. Mr. Kliner receives a base salary and is entitled to participate in the
Company's incentive compensation plans.

JAMES C. RAABE. We have entered into a letter agreement with James C. Raabe
pursuant to which he serves as Vice President and Chief Financial Officer of the
Company. Mr. Raabe receives a base salary and is entitled to participate in the
Company's compensation plans.

MARK A. KIMBALL. We have entered into a letter agreement with Mark A. Kimball
pursuant to which he serves as Senior Vice President, Chief Administrative
Officer, General Counsel and Secretary of the Company. Mr. Kimball receives a
base salary and is entitled to participate in the Company's incentive
compensation plans. Upon termination of Mr. Kimball's employment without cause,
Mr. Kimball is entitled to one year's salary as severance compensation.

MICHAEL J. THYKEN. We have entered into a letter agreement with Michael J.
Thyken pursuant to which he serves as Vice President and Chief Information
Officer of the Company. Mr. Thyken receives a base salary and entitled to
participate in the Company's incentive compensation plans.

TRACEY T. BREAZEALE. We have entered into a letter agreement with Tracey T.
Breazeale pursuant to which she serves as a Senior Vice President of the
Company. Ms. Breazeale receives a base salary and is entitled to participate in
the Company's incentive compensation plans. In February 2001, Ms. Breazeale's
work schedule was reduced to 25% of full time, with a proportionate reduction in
salary.

RONALD E. MAYLE. We entered into a letter agreement with Ronald E. Mayle
pursuant to which he served as Senior Vice President of Retail. Mr. Mayle's
employment with the Company terminated as of April 21, 2001

CHANGE IN CONTROL ARRANGEMENTS

Under the Company's 1990 Omnibus Stock Option Plan (the "1990 Plan") and the
1997 Stock Incentive Plan (the "1997 Plan"), if a "change in control" of the
Company occurs, then, unless the Compensation Committee decides otherwise either
at the time of grant of an incentive award or at any time thereafter, all

outstanding options will become immediately exercisable in full and will remain
exercisable for the remainder of their terms, regardless of whether the
participant to whom such options have been granted remains in the employ or
service of the Company or any subsidiary.

In addition, under the 1997 Plan, if a "change in control" of the Company
occurs, then, unless the Compensation Committee decides otherwise either at the
time of grant of an incentive award or at any time thereafter:

o all outstanding stock appreciation rights will become immediately
exercisable in full and will remain exercisable for the remainder of their
terms, regardless of whether the participant to whom such stock
appreciation rights have been granted remains in the employ or service of
the Company or any subsidiary;

o all outstanding restricted stock awards will become immediately fully
vested and non-forfeitable; and

o all outstanding performance units and stock bonuses will vest and/or
continue to vest in the manner determined by the Compensation Committee and
set forth in the agreement evidencing such performance units or stock
bonuses.

In addition, the Compensation Committee may pay cash for all or a portion of the
outstanding options. The amount of cash the participants would receive will
equal (a) the fair market value of such shares immediately prior to the change
in control minus (b) the exercise price per share and any required tax
withholding. The acceleration of the exercisability of options under the 1990
and 1997 Plans may be limited, however, if the acceleration would be subject to
an excise tax imposed upon "excess parachute payments."

Under the 1990 and 1997 Plans, a "change in control" will include any of the
following:

o a merger involving the Company where the pre-merger shareholders own less
than 50% of the surviving company's voting stock (whether or not approved
by the Board of Directors);

o a transfer of substantially all of the Company's assets or liquidation of
the Company;

o ownership by any person or group of more than 50% of the Company's voting
stock;

o the "continuity" directors (directors as of the effective date of the Plan
and their future nominees) ceasing to constitute a majority of the Board of
Directors; or

o any change of control that is required by the Securities and Exchange
Commission to be reported.

Notwithstanding anything in the foregoing to the contrary, solely for purposes
of options granted under such plans prior to July 27, 1999, no change in control
will be deemed to have occurred for purposes of the 1990 and 1997 Plans by
virtue of any transaction which was approved by the affirmative vote of at least
a majority of the "continuity" directors, as defined above. For options granted
on or after July 27, 1999, each of the transactions constituting a change in
control as defined above will constitute a change in control for purposes of the
plans regardless of whether the transaction was approved by the continuity
directors.

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

-------------------

The Compensation Committee is comprised solely of non-employee directors and
consisted of Ervin R. Shames, Patrick A. Hopf and William J. Lansing through
March of 2000, and thereafter consisted of Thomas J. Albani and David T. Kollat.
The Compensation Committee makes recommendations to the Board of Directors
concerning the compensation and benefits of the Company's directors, executive
officers and key employees, and acts on such other matters relating to their
compensation as it deems appropriate. The Compensation Committee administers our
stock option plans, pursuant to which incentive stock options, non-statutory
stock options, restricted stock awards, stock appreciation rights, performance
units and stock bonuses may be granted to eligible employees, officers,
directors and consultants. The Compensation Committee also administers our
executive and key employee incentive plan, pursuant to which eligible employees
may be granted incentive compensation for achievement of Company and individual
performance targets.

COMPENSATION PHILOSOPHY AND OBJECTIVES

The philosophy underlying the decisions and recommendations of the Compensation
Committee is to encourage, recognize and reward results and achievements, at
both Company and individual levels, that are aligned with the interests of our
shareholders. Consistent with this philosophy, the objectives for the Company's
executive compensation programs are to:

o Motivate executives to achieve desired Company performance goals by
rewarding such achievements.

o Provide compensation that is competitive with comparable companies to
enable the Company to attract and retain key executive talent.

o Align the interests of the Company's executives with the interests of the
Company's shareholders.

In determining its recommendations as to the compensation of the Company's
executives, the Compensation Committee considers factors, such as Company
performance, both in isolation and in comparison to companies of comparable
size, development and complexity; the individual performance of executive
officers; historical compensation levels at the Company; the overall competitive
environment for executives and the level of compensation necessary to attract
and retain the talent necessary to achieve the Company's objectives. The
Compensation Committee places primary emphasis on Company performance (rather
than individual performance) as measured against goals approved by the
Compensation Committee. In analyzing these factors, the Compensation Committee
from time to time reviews competitive compensation data gathered in comparative
surveys or collected by independent consultants.

EXECUTIVE COMPENSATION PROGRAM COMPONENTS

The three principal components of Select Comfort's executive compensation
programs are base salary, annual incentive bonuses, and long-term incentive
opportunities under our stock option plans. Each of these components is
discussed in greater detail below.

BASE SALARY. The Compensation Committee's recommendations regarding the base
salary of the executive officers of the Company, including the compensation of
the President and Chief Executive Officer, are based on a number of factors,
including each executive officer's experience and qualifications, the potential
impact of the individual on the Company's performance, the level of skill and
responsibility

required fulfill the individual's responsibilities and the other factors
described above. Base salaries are reviewed annually, and the Compensation
Committee seeks to set executive officer base salaries at moderately to
aggressively competitive levels in relation to the companies with which the
Company competes for executives. Base salaries for the executive officers were
increased at the beginning of 2000 in order to retain key members of the
management team to pursue the Company's turnaround plans. For 2001, base
salaries for the executive officers have been maintained at the same levels as
in 2000.

ANNUAL INCENTIVE BONUS. The Company's annual incentive bonus program is designed
to provide a direct financial incentive to the Company's executive officers,
including the President and Chief Executive Officer, as well as other key
employees, for achievement of specific Company performance goals. Consistent
with the requirements of the Company's Executive and Key Employee Incentive
Plan, at the beginning of each fiscal year, the Compensation Committee
determines:

o The employees by grade level that are eligible to participate in the plan
for the year;

o The quarterly and/or annual performance goal or goals (from among sales
growth and volume, net operating profit, cash flow, earnings per share,
return on capital, and/or return on assets) for the year; and

o For each eligible employee, (A) the target bonus level as a percentage of
base compensation, (B) the portion of the target bonus level that is based
on achievement of objective company performance goals, and (C) the portion
of the target bonus level, if any, that is based on achievement of
objective individual performance goals.

In fiscal 2000, the Compensation Committee established incentive compensation
for executive officers based on Company-wide operating profit and cash flow
targets, and also established minimum bonus levels in order to retain key
management team members to enable the Company to pursue its turnaround plans.
Payment of incentive compensation to executive officers related to fiscal 2000
has been deferred pending the return of the Company to quarterly profitability.
For fiscal 2001, incentive compensation for the executive officers is based
exclusively on Company-wide annual operating profit and cash flow performance
targets.

LONG-TERM INCENTIVE COMPENSATION. The Compensation Committee makes long-term
incentive compensation available to the Company's executive officers, as well as
to many other employees of the Company, through the grant of stock options. The
purpose of stock option grants is to advance the interests of the Company and
its shareholders by enabling the Company to attract and retain persons of
ability to perform services for the Company, including persons performing
services for the Company as executive officers. By granting stock options to
executive officers and other employees, the Compensation Committee seeks to
align the long-term interests of these individuals with those of the Company's
shareholders by creating a strong and direct nexus between compensation and
shareholder return and to enable executive officers and key managers to develop
and maintain a significant ownership position in the Company. The Compensation
Committee determines the number of options and the terms and conditions of such
options based on certain factors, including (for grants to executive officers)
the past performance of the executive officer, the executive officer's potential
impact on the achievement of the Company's objectives, past grants or awards of
stock-based compensation, and comparative compensation data regarding option
grants by companies of comparable size and complexity. Additionally, options may
be granted to an executive officer as an incentive at the time the executive
officer joins the Company.

All options have an exercise price equal to 100% of the fair market value of the
common stock on the date of grant. In past periods,

options have typically become exercisable in 36 equal monthly increments over a
36-month period from the date of grant. For option grants made in 2001, the
options typically become exercisable in three equal increments on each of the
first three anniversaries of the date of grant. Options typically remain
exercisable for a period of 10 years from the date of grant, provided the
individual continues to be employed by the Company during such period.
Alternatively, some option grants have been "performance-based" and become fully
exercisable upon the trading price of the Company's common stock reaching or
exceeding certain levels for at least 30 days or upon the end of a five-year
period from the date of grant.

In 2000, the Compensation Committee approved the grant of options to all
executive officers and key managers of the Company. The primary purposes of the
2000 stock option grants was to provide an incentive to newly hired executive
officers and managers, to retain previously employed executive officers and
managers, and to align the interests of all such executive officers and key
managers with the interests of the shareholders of the Company.

CHIEF EXECUTIVE OFFICER COMPENSATION

During fiscal 2000, two different people served in the capacity of President and
CEO for different parts of the year.

Patrick A. Hopf served as interim President and CEO from mid-July 1999 until
mid-March 2000, pending the search for a permanent President and CEO. Mr. Hopf
did not serve as, and was not compensated as, an employee of the Company. In
consideration for Mr. Hopf's service as interim President and CEO, the
Compensation Committee granted to St. Paul Venture Capital V, LLC, which is an
affiliate of Mr. Hopf's employer, 10,000 options per month for the first six
months and 27,000 options per month for the final two months of Mr. Hopf's
tenure.

William R. McLaughlin was hired as President and CEO in March 2000. The
principal terms of Mr. McLaughlin's compensation package include: (A) an annual
base salary of $500,000; (B) a cash bonus of between 0% and 100% of base salary;
and (C) options to purchase an aggregate of up to 600,000 shares of common
stock, including (i) up to 300,000 shares vesting in equal monthly increments
over 36 months, (ii) 50,000 shares vesting at such time that the trading price
of Select Comfort common stock exceeds $12.00 per share for 30 consecutive
trading days, (iii) 100,000 shares vesting at such time that the trading price
of Select Comfort common stock exceeds $24.00 per share for 30 consecutive
trading days, and (iv) 150,000 shares vesting at such time that the trading
price of Select Comfort common stock exceeds $36.00 per share for 30 consecutive
trading days. The payment to Mr. McLaughlin of incentive compensation in the
amount of $146,390 accrued in 2000 has been deferred pending the achievement of
a quarterly operating profit by the Company.

In addition to the foregoing, Mr. McLaughlin (i) is entitled to participate in
standard employee benefit plans offered by the Company, (ii) was entitled to and
received reimbursement of relocation and temporary living expenses aggregating
$121,322 in 2000, (iii) is entitled to severance compensation in certain
circumstances, and (iv) is eligible for additional stock options as may be
granted from time to time by the Compensation Committee. See "Executive
Compensation and Other Benefits - Employment and Consulting Agreements."

The terms of Mr. McLaughlin's compensation were determined in part on the basis
of a survey completed by an independent consultant of compensation and benefits
payable to CEOs for companies of comparable size and complexity to Select
Comfort.

SECTION 162(M)

Section 162(m) of the Internal Revenue Code limits the deductibility of certain
compensation paid to the chief executive officer and each of the four other most
highly compensated executives of a publicly held corporation to

$1,000,000. In 2000, the Company did not pay "compensation" within the meaning
of Section 162(m) to any such executive officers in excess of $1,000,000.

The $1,000,000 limit on deductibility does not apply to compensation that meets
certain requirements for qualified performance-based compensation as further
described in the Internal Revenue Code. The Company's 1997 Stock Incentive Plan,
as well as the Executive and Key Employee Incentive Plan submitted for approval
by shareholders at the Annual Meeting, are designed to permit stock options or
cash incentive awards granted under the respective plans to qualify as
deductible performance-based compensation under the Internal Revenue Code. In
reviewing and adopting other executive compensation programs, the Compensation
Committee plans to continue to consider the impact of Section 162(m) limitations
in light of the materiality of the deductibility of potential benefits and the
impact of such limitations on other compensation objectives. Because the
Compensation Committee seeks to maintain flexibility in accomplishing the
Company's compensation goals, however, it has not adopted a policy that all
compensation must be fully deductible.

COMPENSATION COMMITTEE

Thomas J. Albani
David T. Kollat

COMPARATIVE STOCK PERFORMANCE

-------------------

The graph below compares, for the period from December 3, 1998 through
December 30, 2000, the total cumulative shareholder return on Select Comfort
common stock to the total cumulative return on The Nasdaq Stock Market (U.S.)
Index and the Standard & Poor's 400 Retail (Specialty) Index. The graph assumes
a $100 investment in Select Comfort common stock, The Nasdaq Stock Market (U.S.)
Index and the Standard & Poor's 400 Retail (Specialty) Index on January 2, 2000
and the reinvestment of all dividends.

COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG SELECT COMFORT CORPORATION, THE STANDARD & POOR'S 400 RETAIL (SPECIALTY) INDEX
AND THE NASDAQ STOCK MARKET (U.S.) INDEX
JANUARY 2, 2000 TO DECEMBER 30, 2000

- -----------------------------------------------------------------------------------
| | 12/3/98 | 1/2/99 | 1/01/00 | 12/30/00 |
|----------------------------------|-----------|-----------|-----------|----------|

| Select Comfort Corporation | 100.00 | 155.51 | 23.90 | 8.46 |
|----------------------------------|-----------|-----------|-----------|----------|
| Nasdaq Stock Market (US) | 100.00 | 112.65 | 209.34 | 125.96 |
|----------------------------------|-----------|-----------|-----------|----------|
| Peer Group | 100.00 | 126.37 | 103.23 | 92.31 |
- -----------------------------------------------------------------------------------

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

-------------------

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth information, as of December 31, 2000, with
respect to each person who was known by us to be the beneficial owner of more
than 5% of Select Comfort common stock.

SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
-------------------------------
NAME AMOUNT PERCENT OF CLASS
- ---------------------------------------------- ------------ ----------------
St. Paul Venture Capital, Inc. (2) 7,015,406 37.3%

Consumer Venture Partners II, L. P. (3) 1,962,801 11.0%

General Electric Capital Corporation (4) 1,131,357 6.0%

- ------------------------

(1) Except as otherwise indicated in the footnotes to this table, the persons
named in the table have sole voting and dispositive power with respect to
all shares of common stock. Shares of common stock subject to options or
warrants currently exercisable or exercisable within 60 days are deemed
outstanding for computing the percentage of the person or group holding
such options or warrants but are not deemed outstanding for computing the
percentage of any other person or group.

(2) Includes 4,806,022 shares held by St. Paul Fire and Marine Insurance
Company, 321,017 shares held by St. Paul Venture Capital IV, LLC and
955,900 shares held by St. Paul Venture Capital V, LLC. Includes (i) 59,769
shares issuable upon exercise of outstanding warrants held by St. Paul Fire
and Marine Insurance Co., (ii) 10,926 shares issuable upon exercise of
outstanding warrants and options held by St. Paul Venture Capital IV, LLC.,
(iii) 134,500 shares issuable upon exercise of outstanding options held by
St. Paul Venture Capital V, LLC, and (iv) 727,272 shares issuable upon
conversion of a convertible debenture held by St. Paul Venture Capital V,
LLC. The St. Paul Companies, Inc. owns all of the issued and outstanding
shares of capital stock of St. Paul Fire and Marine Insurance Co. The St.
Paul Fire and Marine Insurance Co. owns 99% of the membership interests in
St. Paul Venture Capital IV, LLC and St. Paul Venture Capital V, LLC.
Patrick A. Hopf, Chairman of the Board of Directors of the Company, is the
Managing General Partner of St. Paul Venture Capital IV, LLC and St. Paul
Venture Capital V, LLC. Does not include shares held of record by Mr. Hopf
or his family members. See "--Security Ownership of Management." The
address of St. Paul Venture Capital, Inc. is 10400 Viking Drive, Suite 550,
Eden Prairie, Minnesota 55344.

(3) Includes 1,962,801 shares held by Consumer Venture Partners II, L.P.
Christopher P. Kirchen, a director of the Company, is the general partner
of Consumer Venture Associates II, L.P., which is the general partner of
Consumer Venture Partners II, L.P. Does not include any shares held of
record by Mr. Kirchen. See "--Security Ownership of Management." The
address of Consumer Venture Partners II, L.P. is One Stamford Plaza, 263
Tresser Blvd., 16th Floor, Stamford, Connecticut 06901.

(4) Includes 1,131,357 shares issuable upon exercise of an outstanding warrant.
The address of General Electric Capital Corporation is 260 Long Ridge Road,
Stamford, Connecticut 06927.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding the beneficial
ownership of Select Comfort common stock as of February 28, 2001 by each
director and nominee for director, by each executive officer named in the
Summary Compensation Table under the heading "Executive Compensation and Other
Benefits" and by all directors and executive officers of Select Comfort as a
group.

SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)
-------------------------------
NAME AMOUNT PERCENT OF CLASS
- ---------------------------------------------- ------------ ----------------

William R. McLaughlin (2) 127,333 *

Tracey T. Breazeale (3) 69,647 *

Mark A. Kimball (4) 108,248 *

Gregory T. Kliner (5) 122,597 *

Ronald E. Mayle (6) 205,352 1.1%

Patrick A. Hopf (7) 7,027,239 38.5%

Thomas J. Albani (8) 44,178 *

Christopher P. Kirchen (9) 2,009,387 11.1%

David T. Kollat (10) 44,178 *

Ervin R. Shames (11) 253,056 1.4%

Jean-Michel Valette (12) 19,914 *

All directors and executive officers
as a group (14 persons) (13) 10,117,317 52.8%
- ------------------------
* Less than 1% of the outstanding shares.

(2) Includes 108,333 shares issuable upon exercise of outstanding options.

(3) Includes 61,778 shares issuable upon exercise of outstanding options.

(4) Includes 84,694 shares issuable upon exercise of outstanding options.

(5) Includes 120,562 shares issuable upon exercise of outstanding options.

(6) Includes 194,556 shares issuable upon exercise of outstanding options.

(7) Includes (i) 8,000 shares held by Mr. Hopf's wife and children and (ii) an
aggregate of (A) 6,082,939 outstanding shares, (B) 209,028 shares issuable
upon exercise of outstanding options and warrants, and (C) 727,272 shares
issuable upon conversion of a convertible debenture, all of which are
beneficially owned by St. Paul Fire and Marine Insurance Company. See
"--Security Ownership of Certain Beneficial Owners." Mr. Hopf's address is
10400 Viking Drive, Suite 550, Eden Prairie, Minnesota 55344.

(8) Includes 6,583 shares issuable upon exercise of outstanding options.

(9) Includes 6,583 shares issuable upon exercise of outstanding options. Also
includes 1,962,801 shares beneficially owned by and Consumer Venture
Partners II, L.P., as to which Mr. Kirchen shares voting and dispositive
power. Mr. Kirchen has the same business address as Consumer Venture
Partners II, L. P. See "--Security Ownership of Certain Beneficial Owners."

(10) Includes 44,083 shares issuable upon exercise of outstanding options.

(11) Includes 103,056 shares issuable upon exercise of outstanding options held
by Mr. Shames and 100,000 shares issuable upon exercise of outstanding
options held by Louise G. Shames, Trustee of the Ervin R. Shames Estate
Reduction Family Trust U/A dated October 30, 1997.

(12) Includes 6,583 shares issuable upon exercise of outstanding options.

(13) Includes an aggregate of 1,111,964 shares issuable upon exercise of
outstanding options and warrants held by officers, directors and their
affiliates. Also includes all shares beneficially owned by St. Paul Fire
and Marine Insurance Company, Inc., H&Q Select Comfort Investors, L.P. and
Consumer Venture Partners II, L. P. See "--Security Ownership of Certain
Beneficial Owners."

ITEM 13. CERTAIN TRANSACTIONS

DIRECTOR RELATIONSHIPS

Patrick A. Hopf, Chairman of the Board of Directors of Select Comfort, is the
President of St. Paul Venture Capital, Inc. Mr. Hopf is the Managing General
Partner of St. Paul Venture Capital IV, LLC and St. Paul Venture Capital V, LLC.
St. Paul Venture Capital IV, LLC, St. Paul Venture Capital V, LLC, St. Paul
Venture Capital Affiliates Fund I, LLC (each of which funds is managed by St.
Paul Venture Capital, Inc.) and St. Paul Fire and Marine Insurance Co. are
significant shareholders of the Company.

Christopher P. Kirchen, a director of Select Comfort, is a general partner of
Consumer Venture Associates II, L.P., which is the general partner of Consumer
Venture Partners II, L.P., a significant shareholder of the Company.

Jean-Michel Valette, a director of Select Comfort, was a Managing Director of
Hambrecht & Quist LLC from October 1994 to August 1998 and a Senior Analyst of
Hambrecht & Quist LLC from November 1992 to October 1994. Mr. Valette was also a
member of the general partner of H&Q Select Comfort Investors, L.P., an investor
in the Company and a related party to Hambrecht & Quist LLC. Hambrecht & Quist
LLC was one of the underwriters of the Company's initial public offering
completed in December 1998.

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

Certain holders of our common stock and warrants to purchase shares of our
common stock, including certain directors and more than 5% shareholders, have
certain demand and incidental registration rights covering such shares pursuant
to a certain Amended and Restated Registration Rights Agreement dated December
28, 1995, as amended, among the Company and the other parties thereto.

EMPLOYMENT AGREEMENTS

For a discussion of the employment agreements entered into by the Company and
certain Named Executive Officers, see "Executive Compensation and Other
Benefits--Employment Agreements."

GE FINANCING AND RESTRUCTURING OF GE WARRANTS

In March 1997, we entered into a Purchase Agreement with General Electric
Capital Corporation ("GECC"), pursuant to which we issued to GECC a senior
subordinated promissory note in the principal amount of $15.0 million. We repaid
this note in full in December 1998 with a portion of the net proceeds of our
initial public offering. In addition to this note, we issued to GECC a warrant
to purchase 1,100,000 shares of common stock exercisable through March 31, 2005
at an exercise price of $10.50 and a warrant providing contingent rights to
purchase up to 1,000,000 shares of common stock at an exercise price of $.01
after May 1, 1999, subject to adjustment and cancellation upon the occurrence of
certain events.

Effective in March 1998, the Company and GECC restructured these warrants by
combining them into one warrant to purchase 1,309,583 shares of common stock at
an exercise price of $8.82. In November 1998, in connection with the reduction
of the conversion price of our Series E preferred stock, we issued an additional
warrant to GECC to purchase 5,513 shares of common stock at an exercise price of
$8.82 per share. In December 1998, in connection with our initial public
offering, GECC exercised a portion of this warrant and as of January 1, 2000,
held a combined warrant to purchase 1,076,098 shares of common stock. By
operation of certain anti-dilution provisions in GECC's warrant, as of December
31, 2000, GECC's warrant represented the rights to acquire 1,131,357 shares at
an exercise price of $8.39 per share. GECC has certain demand and incidental
registration rights covering the shares

of common stock issuable upon exercise of this warrant.

ACQUISITION OF ASSETS OF SLEEPTEC, INC.

In May 1999, the Company entered into a Series C Preferred Stock Purchase
Agreement pursuant to which the Company invested $2,000,000 in SleepTec, Inc., a
developer and manufacturer of sofa sleepers with air supported mattresses, in
exchange for 57% of the Series C Convertible Preferred Stock of SleepTec,
representing approximately 10.3% of the fully diluted equity of SleepTec at that
time. In December 1999, the Series C Convertible Preferred Stock of SleepTec was
split on a 1.45714 for 1 basis. As a result of this stock split, the Company's
investment in the Series C Convertible Preferred Stock of SleepTec represented
approximately 13.55% of the fully diluted equity of SleepTec at that time.

Affiliates of St. Paul Venture Capital, Inc. own a majority of the outstanding
capital stock of SleepTec. Patrick A. Hopf, the Chairman of the Board of
Directors of Select Comfort, is the President of St. Paul Venture Capital, Inc.
and a member of the Board of Directors of SleepTec, Inc.

In November 2000, the Company acquired substantially all of the business and
assets of SleepTec. The aggregate purchase price paid by the Company for the
assets of SleepTec consisted of (i) a non-interest-bearing subordinated
convertible debenture in the original principal amount $4,000,000 due November
10, 2005 and convertible at any time into shares of the Company's common stock
at the rate of $5.50 per share; (ii) $400,000 in cash; and (iii) $250,000 in a
combination of cash and equity (in the form of options) to employees of SleepTec
for transition services and severance compensation.

In fiscal 2000, the Company purchased product in the amount of $377,000 from
SleepTec.

All of the terms of the Company's relationship with and acquisition of SleepTec
were determined through arm's-length negotiations and management believes that
all such terms are no less favorable than terms available from any unrelated
party.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SELECT COMFORT CORPORATION

Dated: April 30, 2001 By: /s/ William R. McLaughlin
-----------------------------------------------
William R. McLaughlin
President and Chief Executive Officer
(principal executive officer)

By: /s/ James C. Raabe
-----------------------------------------------
James C. Raabe
Chief Financial Officer
(principal financial and accounting officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

NAME TITLE DATE

/s/ Patrick A. Hopf Chairman of the Board April 30, 2001
- ---------------------------------
Patrick A. Hopf

/s/ William R. McLaughlin President and Chief April 29, 2001
- --------------------------------- Executive Officer, Director
William R. McLaughlin

/s/ Ervin R. Shames Director April 27, 2001
- ---------------------------------
Ervin R. Shames

/s/ Thomas J. Albani Director April 30, 2001
- ---------------------------------
Thomas J. Albani

/s/ Christopher P. Kirchen Director April 30, 2001
- ---------------------------------
Christopher P. Kirchen

/s/ David T. Kollat Director April 27, 2001
- ---------------------------------
David T. Kollat

/s/ Jean-Michel Valette Director April 27, 2001
- ---------------------------------
Jean-Michel Valette