snbr-20250417

Dear Fellow Shareholders,

The bedding industry continued to face a historic recession throughout 2024. Inflation, economic uncertainty and a slow

housing market continued to suppress consumer demand, resulting in sales of U.S. mattress units at their lowest level since

2015.

In response to these challenges, we have begun taking decisive actions to position the Company for greater durability across

market cycles. We have restructured our operations, implementing broad-based cost-reduction and margin improvement

initiatives to support free cash flow generation. I am proud of the team’s progress, but there is still much to do.

The Board of Directors has also made changes to the Company’s leadership and governance. In October 2024, the Company

announced that Shelly Ibach would retire as Chair, President and Chief Executive Officer no later than the 2025 Annual

Meeting.

At the same time, we announced our plan to continue to refresh the Board, rotate committee leadership, strengthen

accountability and enhance shareholder rights. On behalf of the Board, I would like to thank Mike Harrison and Barbara

Matas, two accomplished Directors who will not be standing for reelection at the 2025 Annual Meeting. We appreciate their

valuable contributions to Sleep Number and wish them the very best in their future endeavors.

Throughout the latter part of 2024 and into 2025, the Board – led by a committee of independent Directors – worked to

identify the Company’s next CEO. The Directors engaged with dozens of candidates before reaching a unanimous decision to

appoint Linda Findley as Sleep Number’s new President and CEO, effective April 7, 2025.

Linda served as CEO of Blue Apron from 2019 to 2024 and previously held senior roles at Etsy and Alibaba. She has extensive

experience leading consumer brands, with specific expertise in operations management, organizational transformation and

marketing strategy. The Board is confident that she will serve all stakeholders well as Sleep Number’s next CEO.

Effective upon the conclusion of the 2025 Annual Meeting, I will become the independent Chair of the Board. I am honored

that my fellow Directors have entrusted me with this responsibility.

While the industry environment remains challenging, we continue to make progress in transforming our Company and are

unrelenting in our efforts to improve margins and generate free cash flow. By further strengthening our financial resilience, we

will enable Sleep Number to drive profitable growth opportunities and capitalize when consumer demand recovers.

With the transition to new leadership and the performance focus and dedication of the talented Sleep Number team, I am

confident that our commitment to our mission, strategic differentiation and operational discipline will create long-term value

for our shareholders.


Sincerely,

Phillip M. Eyler Incoming Chair of the Board of Directors

1001 Third Avenue South

Minneapolis, Minnesota 55404

NOTICE OF 2025 ANNUAL MEETING OF SHAREHOLDERS MAY 28, 2025

Sleep Number Corporation will hold its Annual Meeting of Shareholders (Annual Meeting) at 8:30 a.m. Central Time on

Wednesday, May 28, 2025. The meeting will be conducted virtually at www.virtualshareholdermeeting.com/SNBR2025.


				Our Board of Directors Recommends You Vote:
1.To elect as Directors the three persons named in the Proxy Statement, each to serve for a term of three years until the 2028 Annual Meeting				FOR the election of each Director nominee
2. To approve amendments to our Third Restated Articles of Incorporation, as amended, (Articles), and our Restated Bylaws (Bylaws) to declassify the Board of Directors (Board)				FOR the approval of amendments to our Articles and Bylaws to declassify the Board
3. To approve an amendment to our Articles to eliminate the supermajority voting requirement in Article XIV related to Directors				FOR the approval of an amendment to our Articles to eliminate the supermajority voting requirement in Article XIV
4. To approve an amendment to our Articles to eliminate the supermajority voting requirements in Article XV related to approval of certain transactions				FOR the approval of an amendment to our Articles to eliminate the supermajority voting requirements in Article XV
5. To ratify the appointment of Deloitte & Touche LLP as our independent auditors for the 2025 fiscal year ending January 3, 2026				FOR the ratification of the appointment
6. To approve, on an advisory basis, our executive compensation (Say on Pay)				FOR approval, on an advisory basis, our executive compensation
7. To approve the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan (2020 Plan) to increase the number of shares reserved for issuance by 500,000 shares				FOR the approval of the amendment to the 2020 Plan
8. To approve the adjournment of the Annual Meeting to a later date or dates, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes for, or otherwise in connection with, one or more of the other proposals to be voted on at the Annual Meeting				FOR the approval of the adjournment of the Annual Meeting to a later date or dates, if necessary or appropriate
9. To conduct any other business properly brought before the Annual Meeting

Shareholders of record at the close of business on March 31, 2025, will be entitled to vote at the meeting and any

adjournments or postponements thereof. Your vote is important. Please vote your shares in favor of the Board of Directors’

recommendations in time for our May 28, 2025, meeting date. For important information regarding attending and voting at

the Annual Meeting, see "Our Annual Meeting and Voting" in this Proxy Statement.


By Order of the Board of Directors,

Samuel R. Hellfeld
Chief Legal and Risk Officer and Secretary

Minneapolis, Minnesota

April 18, 2025


	Page

OUR BOARD	1
Who We Are
Proposal 1 - Election of Directors	2
How We Are Selected, Elected and Evaluated	9
How We Are Governed and Govern	12
How You Can Communicate With The Board	18
Proposal 2 - Amendments to Our Articles and Bylaws to Declassify the Board	19
Proposal 3 - Amendment to Our Articles to Eliminate the Supermajority Voting Requirement in Article XIV related to Directors	20
Proposal 4 - Amendment to Our Articles to Eliminate the Supermajority Voting Requirements in Article XV related to Approval of Certain Transactions	21
How We Are Paid	22

OUR COMPANY	26
What We Do	24
Who We Are	24
How We Do It	25
Audit Committee Report	26
Proposal 5 - Ratification of Appointment of Independent Registered Public Accounting Firm	28

OUR PAY	30
Compensation Committee Report	30
Compensation Discussion and Analysis	31
Proposal 6 - Advisory Vote to Approve Executive Compensation (Say on Pay)	66
Proposal 7 - Amendment to the Sleep Number Corporation 2020 Equity Incentive Plan, as amended	67

OUR SHAREHOLDERS	84
Stock Ownership of Management and Certain Beneficial Owners	84
Shareholder Proposals for 2026 Annual Meeting	85
Proposal 8 - Vote to Approve Adjournment of the Annual Meeting to a Later Date or Dates, if Necessary and Appropriate	87

OUR ANNUAL MEETING AND VOTING	88
Other Matters	93
Copies of 2024 Annual Report	93
How To Receive Proxy Materials	93
How To Receive Future Proxy Materials Electronically	94
The Company Bears The Proxy Solicitation Costs	94

TABLE OF CONTENTS

As used in this Proxy Statement, the terms “we,” “us,” “our,” the “Company” and “Sleep Number” mean Sleep Number Corporation and its

subsidiaries and the term “common stock” means our common stock, par value $0.01 per share.

This Proxy Statement contains “forward-looking” statements regarding our current expectations within the meaning of the applicable securities laws

and regulations. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from

expectations. These risks and uncertainties include, but are not limited to, the risks detailed in our filings with the Securities and Exchange Commission

(SEC), including the risk factors discussed under the heading "Risk Factors" under Part I: Item 1A. of the Annual Report on Form 10-K for the year

ended December 28, 2024. We assume no obligation to update any of these forward-looking statements.


1 \| 2025 PROXY STATEMENT	OUR BOARD

PROXY STATEMENT FOR ANNUAL MEETING

May 28, 2025

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (Board) of Sleep

Number for use at the 2025 Annual Meeting. These materials were first sent or made available to our shareholders on

April 18, 2025.

OUR BOARD

WHO WE ARE

Article XIV of our Third Restated Articles of Incorporation, as amended, (Articles) and our Restated Bylaws (Bylaws)

provides that the number of Directors must be at least one but not more than 12 and must be divided into three classes

as nearly equal in number as possible. The exact number of Directors is determined from time to time by the Board. The

term of each class is three years and the term of one class expires each year in rotation.

Immediately prior to the 2025 Annual Meeting, our Board will consist of 12 members, three of which will be up for

election at the 2025 Annual Meeting. The Board has nominated Linda A. Findley, Deborah L. Kilpatrick, Ph.D., and Hilary

A. Schneider for election to the Board, each for a term of three years expiring at the 2028 Annual Meeting, or until their

successors are elected and qualified. Mses. Findley, Kilpatrick and Schneider have each consented to being named as a

nominee in this Proxy Statement and to serve as a Director in the class of Directors expiring in 2028, if elected. Following

Michael J. Harrison and Barbara R. Matas’s respective decisions to not stand for reelection in 2025, in order to maintain

Director classes as equal as possible pursuant to our Articles and Bylaws, Ms. Schneider, with her consent, was

reclassified as a Director in the class with a term expiring at the 2025 Annual Meeting. Upon the conclusion of the 2025

Annual Meeting, our Board will consist of nine members following the retirement of Shelly R. Ibach and the decisions not

to stand for reelection by Mr. Harrison and Ms. Matas. The Company and the Board express their appreciation to each of

Ms. Ibach, Mr. Harrison and Ms. Matas for their many contributions and their years of dedicated service to the Company.

The Company and the Board wish them the very best in their future endeavors.


2 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS

The Board, based on the recommendation of the Corporate Governance and Nominating Committee, recommends that

the following three Directors be elected at the Annual Meeting, each of whom will serve three-year terms expiring at the

2028 Annual Meeting or until their successor shall have been elected and qualified.

•Linda A. Findley

•Deborah L. Kilpatrick, Ph.D.

•Hilary A. Schneider

The Board unanimously recommends that you vote “For” each of these Directors because:

They provide a value-add mix of skills, qualifications, backgrounds and tenures to the Board that support and drive the

Company’s efforts to transform its business, capitalize on future market opportunities and deliver meaningful, long-term

value for our shareholders and all stakeholders, as detailed in their individual biographies set forth below.

The Board recommends a vote “For” each of these nominees for election for three-year terms expiring in 2028:


	EXPERIENCE
	2025 - Present	Appointed President, Chief Executive Officer and Director, Sleep Number Corporation, effective April 7, 2025 President, Chief Executive Officer and Director, Blue Apron Holdings, Inc., an ingredient and recipe meal kit company Chief Operating Officer, Etsy, Inc.. an e-commerce company Various senior executive roles at Evernote Corp., a software company, including most recently as Chief Operating Officer Various roles at Alibaba.com Ltd., an e-commerce, retail, internet and technology company
	2019 - 2024
	2016 - 2018
	2012 - 2015
	2009 - 2012
	PUBLIC AND PRIVATE COMPANY BOARDS
	Sleep Number (since 2025) Ralph Lauren (since 2018) PRIOR PUBLIC BOARD Blue Apron Holdings, Inc. (formerly Nasdaq: APRN) (2019 – 2023) PRIVATE BOARD HeliosX (since 2025)

	QUALIFICATIONS AND EXPERTISE
	•Accomplished senior executive leading consumer brands that combine digital and physical products, with specific expertise in operations management, organizational transformation, marketing strategy, and global expansion •At Blue Apron, spearheaded a turnaround strategy that culminated in the company’s sale to a strategic buyer •At Etsy, oversight for global operations, product, marketing and brand strategy, customer support, and international expansion

Linda A. Findley

Age 52

Sleep Number®

setting 45


3 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS


	EXPERIENCE
	2024 - Present	Venture Partner at Sonder Capital, a venture capital firm
	2014 - 2024	Executive Chair of the Board, and Chief Executive Officer, Evidation Health, a digital health company VP, Market Development and Chief Commercial Officer, CardioDx, a molecular diagnostics company Director of R&D, Director of New Ventures, and Research Fellow, Guidant Corporation (acquired by Boston Scientific, NYSE BSX), a medical device company
	2006 - 2014
	1998 - 2006
	PUBLIC AND PRIVATE COMPANY AND NONPROFIT BOARDS
	Sleep Number (since 2018) PRIVATE AND NONPROFIT BOARDS NextGen Jane (private for profit) (since 2019) Sutter Health (not for profit integrated healthcare delivery system in California) (since 2024) Jupiter Endovascular (private, medical device company in California) (since 2024) College of Engineering Advisory Board, Georgia Tech (former Chair) (since 2004)
	QUALIFICATIONS AND EXPERTISE
	•Medical device, molecular diagnostic and digital health expertise and experience •At Evidation Health, commercialized a new technology platform built to refine large-scale sensor data for new digital measures of individual health •At CardioDX, commercialized a novel gene expression test in cardiovascular disease •Multiple patents in medical devices, drug delivery implant technologies •Fellow, American Institute of Medical and Biological Engineering •Digital Health Hall of Fame (UCSF); Engineering Hall of Fame (Georgia Tech)

Deborah L. Kilpatrick,

Ph.D.

Age 57

Sleep Number®

setting 30


	EXPERIENCE
	2020 - 2024	Chief Executive Officer, Shutterfly, Inc., a photography, photography products and image sharing company Chief Executive Officer, WagQ Group Co., a leading on-demand mobile dog walking and dog care service Various leadership roles, including Chief Executive Officer, LifeLock, Inc., an identity theft protection company

	2018 - 2019

	2010 - 2017
	PUBLIC COMPANY BOARDS
	Sleep Number (since 2023) DigitalOcean Holdings (since 2020) Getty Images Holdings (since 2020) Vail Resorts (since 2010)


	QUALIFICATIONS AND EXPERTISE
	•More than two decades of experience leading consumer technology companies •Significant digital and innovation expertise and a track record of delivering superior customer experiences •Led LifeLock through its public listing to its sale to Symantec for $2.3 billion, driving meaningful revenue growth

Hilary A. Schneider

Age 63

Sleep Number®

setting 40


4 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS

Directors not standing for election this year whose terms expire in 2026:


	EXPERIENCE
	2017 - Present	Advisor, Gentherm, a global thermal management technologies company (Dec. 2024 to Present), immediately prior President, Chief Executive Officer and board member, Gentherm (2017 to Dec. 2024) Various leadership roles culminating as President, Connected Car division, Harman International, an audio electronics company
	1997 - 2017

Phillip M. Eyler Age 53 Sleep Number® setting 40	PUBLIC COMPANY BOARDS
	Sleep Number (since 2022) Sensata Technologies (since 2024) PRIOR PUBLIC BOARDS Gentherm Incorporated (2017 – 2014)


	QUALIFICATIONS AND EXPERTISE
	•Visionary and purpose-driven leader with significant global experience in developing connected solutions that meet the needs of the increasingly digital consumer •As CEO of Gentherm, driving transformational growth in thermal and battery technology solutions for automotive and medical consumers across the globe •Served in a series of escalating leadership roles for over 20 years at Harman International, an $8 billion audio electronics company, culminating in a two-year tenure as President of its Connected Car Division


	EXPERIENCE
	2021 - 2023	Most recently Chief Executive Officer, Riveron, a national accounting, finance, technology and operations company Numerous positions at Navigant Consulting, Inc., a publicly traded global professional services firm, most recently as Chief Executive Officer (2012 to 2019) and Chairman of the Board (2014 to 2019)
	2000 - 2019

Julie M. Howard Age 62 Sleep Number® setting 40	PUBLIC COMPANY BOARDS
	Sleep Number (since 2020) ManpowerGroup, Inc. (since 2016) PRIOR PUBLIC BOARDS Kemper Corporation (2010 – 2015) Navigant Consulting, Inc. (2012 – 2019) InnerWorkings, Inc. (2012 – 2020)




	QUALIFICATIONS AND EXPERTISE
	•As former CEO of Riveron and Navigant, she provides the board with significant managerial, transactional, business transformation and operational experience •Has expertise in developing global growth strategies and expansion into adjacent markets, leveraging technology and innovation •Considerable background in investor relations matters


5 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS


	EXPERIENCE
	2020 - Present	Executive Chairman, LevaData, an artificial intelligence company Executive Vice President and Chief Operation Officer, HERE Technologies, a multi-national mapping, location intelligence and data services platform company Senior executive at Cisco. Prior senior supply chain, global procurement and executive roles at Palm, Inc., Gateway, Inc., Citigroup, Allied Signal Aerospace and GE
	2016 - 2020
	2005 - 2015
Angel L. Mendez Age 64 Sleep Number® setting 45
	PUBLIC COMPANY BOARDS
	Sleep Number (since 2022) Kinaxis, Inc. (since 2016) Peloton Interactive (since 2022)


	QUALIFICATIONS AND EXPERTISE
	•Decades of experience managing complex digital supply chains for large consumer technology companies •At Cisco Systems, was responsible for the company’s enterprise transformation program that reinvented the company’s business model and drove significant revenue growth and shareholder value creation •Led HERE’s core business, global operations, product management and corporate transformation

Directors not standing for election this year whose terms expire in 2027:


	EXPERIENCE
	1996 - 2008	Various executive positions at Wolverine World Wide, Inc., a branded footwear wholesale and retailer, most recently as Executive Vice President and President of Global Operations and prior to that, Executive Vice President, Chief Financial Officer and Treasurer.

	PUBLIC COMPANY BOARDS
	Sleep Number (since 2005) Independent Bank Corporation (since 2004)

	QUALIFICATIONS AND EXPERTISE
	•Spent two decades in senior financial roles of a large, publicly-traded consumer products company, where he was responsible for financial and risk management, reporting, investor relations and M&A •During his tenure as CFO of Wolverine World Wide, delivered consistent growth, margin expansion, and record earnings per share

Stephen L. Gulis, Jr.

Age 67

Sleep Number®

setting 45


6 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS


	EXPERIENCE
	1995 - 1998	President, Retail and Wholesale Group for Nine West Group, Inc., a designer and marketer of women’s footwear and accessories Prior roles include President of Wholesale and Manufacturing for US Shoe Corporation and 18 years in senior merchandising at Target Corporation




Brenda J. Lauderback Age 74 Sleep Number® setting 70	PUBLIC COMPANY BOARDS
	Sleep Number (since 2004) Denny’s Corporation (since 2005) Wolverine World Wide, Inc. (since 2003) PRIOR PUBLIC BOARDS Big Lots, Inc. (1997 – 2015) Louisiana-Pacific Corporation (2004 – 2005) Irwin Financial Corporation (1996 – 2010) Jostens, Inc. (1999 – 2000)




	QUALIFICATIONS AND EXPERTISE
	•Deep experience with consumer products companies, having held leadership roles in manufacturing, wholesale and merchandising at Nine West and Target •Decades of public company board experience, including in board leadership roles •Recognized by the National Association of Corporate Directors as one of the Top 100 Directors in 2017


	EXPERIENCE
	2008 - 2019	President and Chief Executive Officer, EnPro Industries, Inc., a manufacturer and provider of precision industrial components, solutions and services Chief Executive Officer, Bluelinx Holdings, Inc., a wholesale distributor of building and industrial products

	2005 - 2008


Stephen E. Macadam Age 64 Sleep Number® setting 60	PUBLIC COMPANY AND NONPROFIT BOARDS
	Sleep Number (since 2023) Atmus Filtration Technologies (since 2023) Louisiana-Pacific Corporation (since 2019) PRIOR PUBLIC BOARDS Veritiv Corporation (2020 – 2023) NONPROFIT BOARDS University of Kentucky, College of Engineering – Dean’s Advisory Board (since 2015) Purpose Built Communities (Nonprofit) (since 2020)




	QUALIFICATIONS AND EXPERTISE
	•Deep understanding of product manufacturing, distribution and procurement •Extensive leadership and operations experience growing and transforming businesses in the U.S. and globally •At EnPro, led the company’s strategic and portfolio transformation to create a more streamlined, higher-margin business


7 \| 2025 PROXY STATEMENT	PROPOSAL 1 - ELECTION OF DIRECTORS

Directors not standing for reelection this year whose terms expire in 2025:


Michael J. Harrison Age 64 Sleep Number® setting 40	EXPERIENCE
	2020 - Present	Non-Executive Chairman, Seasalt Holdings, Ltd. UK-based designer and retailer of apparel and accessories President and Chief Operating Officer of Grand Circle Corporation, overseas group leader for travelers 50+ Interim Chief Executive Officer OOFOS, recovery footwear for athletes, then as advisor on international business Various roles at Timberland including Chief Brand Officer, Co-President and SVP of Worldwide Sales and Marketing and SVP International. Prior marketing, operations and management experience at Procter & Gamble in Europe, Australia, Asia and the US
	2016 - 2017
	2014 - 2016
	2003 - 2012
	PUBLIC AND PRIVATE COMPANY BOARDS
	Sleep Number (since 2011) PRIVATE BOARDS OOFOS (since 2016) Seasalt Holdings, Ltd. (since 2020)

	QUALIFICATIONS AND EXPERTISE
	•Accomplished senior executive and global brand builder in the footwear and consumer goods industries •At OOFOS, oversaw a doubling in total brand sales (US and international) during his tenure •At Timberland, was responsible for all product creation, global marketing and licensed business and led the company’s international business including expansion into China •At Procter & Gamble, led the turnaround of an acquired Japanese cosmetics subsidiary


	EXPERIENCE
	2008 - Present	Chair of the Board since 2022 and former President and Chief Executive Officer, Sleep Number Corporation 2012 to 2025 Prior roles at Sleep Number include EVP and Chief Operating Officer and EVP and President of Sales & Merchandising Over 25 years of prior senior executive experience at Macy’s Inc. and Target Corporation

	Pre-2008
Shelly R. Ibach Age 65 Sleep Number® setting 40	PUBLIC COMPANY AND NONPROFIT BOARDS
	Sleep Number (since 2012) NONPROFIT BOARD Chairperson, Minnesota chapter of American Cancer Society CEOs Against Cancer (since 2020)
	QUALIFICATIONS AND EXPERTISE
	•More than three decades of consumer innovation and brand leadership •Disrupted the commoditized mattress industry with smart beds and transformed Sleep Number to a sleep wellness company •Led development of the Company’s purpose-driven brand and vertically integrated business model with strong cash flow generation


9 \| 2025 PROXY STATEMENT	OUR BOARD

HOW WE ARE SELECTED, ELECTED AND EVALUATED

How We Are Selected

Director Selection and Nomination Processes

The Corporate Governance and Nominating Committee (the CGNC) administers the process for nominating candidates

to serve on our Board. The CGNC recommends candidates for consideration by the Board as a whole, which is

responsible for appointing candidates to fill any vacancy created between shareholder meetings and for nominating

candidates for election by shareholders at our Annual Meeting. Consistent with the Company’s Corporate Governance

Principles, the CGNC periodically reviews with the Board the appropriate skills and characteristics required of Board

members in the context of the current membership of the Board and the strategic direction of the Company.

The CGNC casts a wide net for director candidates including individuals recommended by directors, officers,

shareholders or professional advisors retained by the CGNC pursuant to its charter.

The CGNC considers director candidates in the context of the Board’s overall composition, including whether the Board

has an appropriate combination of professional experience, skills and knowledge and variety of viewpoints and

backgrounds in light of the Company’s current and expected future needs. The Board is committed to seeking director

candidates who reflect diverse perspectives, including a complementary mix of professional and personal backgrounds

and experiences, which we believe is critical to the success of the Company and its ability to create long-term value for

our stakeholders.

Director Selection Criteria

The Board has established selection criteria, which are reviewed at least annually, approved by the Board, applied by the

CGNC, and disclosed in our Corporate Governance Principles. They stress the following characteristics along with

considerations of diversity, including gender identity, race, ethnicity, age, sexual orientation, educational and

professional experience, and differences in viewpoints:

•Independence;

•Integrity;

•Proven record of accomplishment and sound business judgement in areas relevant to the Company’s business;

•Belief in and passion for the Company’s mission, vision and purpose;

•Ability to bring strategic and innovative insights to the discussion and challenge and stimulate management;

•Willingness to both speak one’s mind and consider divergent ideas and opinions;

•Understanding of, and ability to commit sufficient time to, Board responsibilities and duties; and

•Subject matter expertise.


10 \| 2025 PROXY STATEMENT	OUR BOARD

The charts below depict the diversity of our 12 Board members after Linda Findley joined the Board on April 7, 2025,

based on gender identity, race and ethnicity, age and tenure on the Board.

Our Directors exhibit the skills, experiences and diversity listed below and as detailed in their individual bios above, and

these qualifications were considered in their selection to serve on our Board.

Angel

Mendez

Barbara

Matas(2)

Brenda

Lauderback

Deb

Kilpatrick

Hilary

Schneider

Julie

Howard

Linda

Findley(1)

Michael

Harrison(2)

Phillip

Eyler

Shelly

Ibach(2)

Stephen

Gulis, Jr.

Stephen

Macadam

CEO Experience

Executive Leadership

Current Public Company

Boards (incl. Sleep Number)

Retail and Digital

Commerce

Marketing & Brand Building

Product Innovations

Technology

Finance

Supply Chain,

Manufacturing, Logistics,

Delivery

Human Capital and

Diversity, Equity & Inclusion

(DEI)

Information Technology and

Privacy

Cybersecurity

Environmental, Social and

Governance (ESG)

Risk Management

Gender Diversity

Racial or Ethnic Diversity

(1) Ms. Findley began serving as a Director effective upon her start date as President and CEO, April 7, 2025.

(2) Effective upon the conclusion of the 2025 Annual Meeting, Ms. Ibach, Mr. Harrison and Ms. Matas will no longer serve on our Board.

How Board Members Are Elected and Refreshed

Director Elections

Our Articles currently provide for a classified Board serving staggered terms of three years each with a Board size of at

least one but no more than 12 Directors total. The CGNC and Board annually review our Board structure and size. As

part of its regular governance review and consistent with shareholder feedback, the Board has decided to evolve its

structure in line with current trends. In a Letter to Shareholders filed with the SEC on October 30, 2024, the Board

announced its plans to seek shareholder approval at the 2025 Annual Meeting for amendments to the Company’s

Articles and Bylaws to declassify the Board. This Proxy Statement includes Proposal 2 to declassify the Board and, if


11 \| 2025 PROXY STATEMENT	OUR BOARD

approved, will elect Directors to one-year terms starting in 2026 with the entire Board standing for annual elections in

2028 and beyond.

We are also presenting two proposals to amend the Articles to eliminate the supermajority voting requirements in Article

XIV for Directors and in Article XV for approval of certain transactions as further described in Proposals 3 and 4,

respectively, of this Proxy Statement.

Our Articles also provide for a majority voting standard in the case of uncontested elections and a plurality voting

standard in the case of contested elections in order to reduce the risk of a “failed election” in a contested election. If a

Director nominee who is an incumbent is not elected at a shareholder meeting and no successor to the incumbent is

elected at that shareholder meeting, that nominee shall promptly offer to tender their resignation to the Board. The

CGNC shall make a recommendation to the Board on whether to accept or reject the offer, or whether other action

should be taken. The Board, taking into account the CGNC’s recommendation, will publicly disclose its decision and the

rationale within 90 days, and the nominee with be recused from the process. If such nominee’s resignation is not

accepted by the Board, they shall continue to serve until their successor is duly elected, or their earlier death,

resignation, retirement, disqualification or removal.

If prior to the Annual Meeting, the Board should learn that any nominee will be unable to serve, the proxies that

otherwise would have been voted for such nominee will be voted for such substitute nominee as selected by the Board,

or, at the Board’s discretion, may be voted for such fewer number of nominees as result from the inability of any such

nominee to serve.

Director Refreshment

Consistent with the Board’s stated intention to refresh its composition and reduce its size, three current Directors retired

or otherwise decided not to stand for election at the 2025 Annual Meeting. Additionally, Brenda J. Lauderback and

Stephen L. Gulis, Jr. have agreed to accelerate their previously announced retirements. Ms. Lauderback will retire by

December 31, 2025, and Mr. Gulis will retire effective as of the earlier to occur of (i) completion of the Company’s

anticipated debt refinancing, or (ii) the 2026 Annual Meeting.

We have a number of practices or approaches that encourage thoughtful board refreshment including:

•The Board maintains a resignation policy for any Director who reaches the age of 72 or has a material change in their

principal employment or affiliation to promptly tender their resignation to the Chair of the CGNC to review and

come forward with a recommendation to the full Board for final determination;

•The Board considers individual and Board average tenures and refreshment rates as part of its overall nomination

assessments; and

•The Board evaluation process informs its Director refreshment oversight.

How We Are Evaluated

The CGNC oversees the annual evaluation of the Board’s governance and effectiveness, reviews the results and makes

recommendations to the Board. The evaluation process includes an annual self-evaluation of the Board and its

committees, as well as periodic individual Director evaluations. The CGNC periodically retains an independent third

party to facilitate the Board evaluations and to help ensure the evaluation reflects best practices and outcomes.


12 \| 2025 PROXY STATEMENT	OUR BOARD

HOW WE ARE GOVERNED AND GOVERN

How We Are Governed

Provisions Applicable to All Directors and the Board

Our Board of Directors has adopted Corporate Governance Principles that are available in the Investor Relations section

of the Company’s website at http://ir.sleepnumber.com. The information contained in or connected to our website is not

incorporated by reference into, or considered a part of, this Proxy Statement.

Independence

It is our Board’s responsibility to ensure a substantial majority of its members are independent. The Board follows the

independence standards for companies listed on The Nasdaq Stock Market, the Securities and Exchange Commission

(SEC) and the Internal Revenue Service and determined that all committee members and all Directors who served during

any part of fiscal 2024 are independent except our Chief Executive Officer (CEO). The Board believes that the Company

should not enter into paid consulting arrangements with independent Directors.

Service on other Boards or Audit Committees

To help ensure that our Directors have sufficient time to fulfill their responsibilities to the Company, our Board has

adopted guidelines providing that:

•no Director shall serve on more than four public company boards including the Sleep Number Board;

•no Director who is a named executive officer of another public company shall serve on more than a total of two

public company boards including the Sleep Number Board;

•no member of the Company’s Audit Committee shall serve on more than three public company audit committees

including the Sleep Number Audit Committee; and

•the Sleep Number CEO may not serve on more than two public company boards including the Sleep Number

Board.

If any Director exceeds or proposes to exceed these guidelines, the Director must promptly notify the Chair of the

CGNC, and the CGNC will review the facts and circumstances and determine whether such service would interfere with

the Director’s ability to devote sufficient time to fulfilling the Director’s responsibilities to the Company. Currently, none

of the Directors serve on more than four public company boards, including the Sleep Number Board.

Related-Party Transactions Policy

The Board has adopted a written policy governing the reporting and approval of transactions between the Company and

its Directors, Director nominees, executive officers, significant shareholders or entities or persons related to them that

would be required to be disclosed by the Company pursuant to Item 404 or Regulation S-K of the Federal securities

laws. Under this policy, any proposed or existing related party transaction is subject to the approval or ratification of the

CGNC. A copy of the Related Party Transactions Policy can be accessed through our Investor Relations website at http://

ir.sleepnumber.com. The information contained in or connected to our website is not incorporated by reference into, or

considered a part of, this Proxy Statement. There were no related-party transactions during the year ended

December 28, 2024, and there are none currently contemplated.


13 \| 2025 PROXY STATEMENT	OUR BOARD

Board Leadership

Chair

The Board does not have a fixed policy regarding the separation of the offices of Chair of the Board (Chair) and the CEO

and prefers to maintain the flexibility to modify its leadership structure based on the evolving best interests of the

Company and its shareholders. During any period in which the positions of Chair and CEO are combined, the Board will

appoint a Lead Director from among the independent members of the Board. Any such Lead Director will have the

significant Board leadership responsibilities specified in our Corporate Governance Principles and described below.

From May 2022 until April 7, 2025, the roles of Chair and CEO were combined under Ms. Ibach. The Board has valued

the continuity this leadership structure provides. However, Ms. Ibach is not standing for reelection at the Annual

Meeting. The Board has unanimously appointed Phillip M. Eyler as independent Chair, effective upon the conclusion of

the Annual Meeting. Mr. Harrison is also not standing for reelection at the Annual Meeting and will no longer serve as

independent Lead Director, effective upon the conclusion of the Annual Meeting.

The Board believes that an effective leadership structure could be achieved either by combining or separating the Chair

and CEO roles, so long as the structure balances the powers of the CEO and independent Directors and enables the

independent Directors to be fully informed and exercise appropriate oversight of management. The Board believes that

separating the roles of Chair and CEO will enable the Company’s new CEO, Linda Findley, to focus her attention on the

business and her responsibilities as CEO, while Mr. Eyler focuses on leadership of the Board. Additionally, the Board

believes that the appointment of Mr. Eyler, who has been a member of the Board since 2022 and is a former public

company CEO, as independent Chair, promotes continuity and facilitates a smooth executive leadership transition.

Lead Director

The Board appointed Michael J. Harrison as independent Lead Director when it combined the roles of Chair and CEO in

May 2022. Once the Chair and CEO roles are separated as described above, there will be no need for an independent

Lead Director. During any period where there is a combined Chair and CEO role, our Corporate Governance Principles

clearly define the Lead Director role with a robust set of responsibilities to ensure the Board’s effective oversight,

governance and independent leadership, including:

•Serve as principal liaison between the independent Directors and the Chair;

•Provide guidance to the Chair and approve the Board meeting schedule, seeking to ensure that independent

Directors can perform their duties responsibly and efficiently with sufficient time for discussion;

•Provide guidance to the Chair and approve the agendas for Board meetings;

•In consultation with the CGNC, advise the Chair regarding the composition of the various Board committees, as well

as the selection of committee chairs;

•Advise the Chair as to the quality, quantity and timeliness of the flow of information from Company management

that is necessary for the independent Directors to effectively and responsibly perform their duties; although

Company management is responsible for the preparation of materials for the Board, the Lead Director may

specifically request the inclusion of certain material;

•Call meetings of the Board’s independent Directors, if needed, and coordinate the agenda for and lead the

executive sessions of the Board’s independent Directors and brief the Chair on matters from the independent

executive sessions;

•Facilitate discussion of independent Directors on matters outside the Board meetings, if needed, and serve as

conduit to the Chair of the views of the independent Directors; and

•If requested by major shareholders, ensure that they are available for consultation and direct communication.


14 \| 2025 PROXY STATEMENT	OUR BOARD

Board Committees

The Board maintains three standing committees: Audit, Management Development and Compensation (the

Compensation Committee) and Corporate Governance and Nominating (the CGNC). In addition, the Board has a Capital

Allocation and Value Enhancement Committee (the Capital Allocation Committee). Each has a charter that is posted on

the Investor Relations section of the Company’s website at http://ir.sleepnumber.com. The information contained in or

connected to our website is not incorporated by reference into, or considered a part of, this Proxy Statement.

The current members of each of the Board committees are identified in the table below.


Director*	Audit Committee	Capital Allocation and Value Enhancement Committee	Management Development and Compensation Committee	Corporate Governance and Nominating Committee
Phillip M. Eyler		X	X
Stephen L. Gulis, Jr.	Chair			X
Michael J. Harrison			X
Julie M. Howard	X		X
Deborah L. Kilpatrick, Ph.D.			X(1)	X
Brenda J. Lauderback			Chair
Barbara R. Matas	X	Co-Chair		X
Stephen E. Macadam	X(2)	Co-Chair		X
Angel L. Mendez	X			Chair
Hilary A. Schneider		X	X(3)

*Ms. Ibach, in her capacity as Chair, and Mr. Harrison, in his capacity as independent Lead Director, generally attend all committee meetings.

(1) On May 13, 2024, Ms. Kilpatrick was appointed a member of the Compensation Committee.

(2) On December 10, 2024, Mr. Macadam was appointed a member of the Audit Committee.

(3) Ms. Schneider was appointed a Chair of the Compensation Committee, effective as of the 2025 Annual Meeting.

The Board has further determined that four current members of the Audit Committee, Stephen L. Gulis, Jr., Julie M.

Howard, Stephen E. Macadam and Barbara R. Matas, meet the definition of “audit committee financial expert” under

rules and regulations of the SEC and meet the qualifications of “financial sophistication” under the Marketplace Rules of

the Nasdaq Stock Market. These designations related to our Audit Committee members’ experience and understanding

with respect to certain accounting and auditing matters are disclosure requirements of the SEC and the Nasdaq Stock

Market and do not impose upon any of them any duties, obligations or liabilities that are greater than those generally

imposed on a member of our Audit Committee or of our Board.

Audit Committee

The Audit Committee provides assistance to the Board in satisfying its fiduciary responsibilities relating to accounting,

auditing, operating and reporting practices of our Company. The Audit Committee is responsible for providing

independent, objective oversight with respect to our Company’s accounting and financial reporting functions, internal

and external audit functions, systems of internal controls regarding financial matters, enterprise risk assessment and

management, information security matters, including cybersecurity and artificial intelligence, and legal, ethical and

regulatory compliance. The responsibilities and functions of the Audit Committee are further described in the Audit

Committee Report beginning on page 26 of this Proxy Statement.

Capital Allocation and Value Enhancement Committee

The Capital Allocation Committee is responsible for reviewing the Company’s use and investment of capital, as well as

related disclosures, and making recommendations to the Board with respect thereto. The Capital Allocation Committee

reviews the Company’s capital spending plan and expected returns as well as proposed significant capital allocation

decisions, strategy and priorities with a view toward maximizing long-term shareholder value, including use of available


15 \| 2025 PROXY STATEMENT	OUR BOARD

funds for debt repayment, investment in the business, capital investments, stock repurchases, dividends, acquisitions,

divestitures and other strategic actions.

Management Development and Compensation Committee

The principal function of the Compensation Committee is to discharge the responsibilities of the Board relating to

compensation and development of current and future leadership resources. The responsibilities and functions of the

Compensation Committee are further described in the Compensation Discussion and Analysis beginning on page 31 of

this Proxy Statement. The Compensation Committee annually reviews the Company’s compensation philosophy and

practices. The Board, through the Compensation Committee, supports and oversees team member compensation

programs that are closely linked to business performance and long-term strategic orientation.

Corporate Governance and Nominating Committee

The primary functions of the CGNC are to develop and recommend to the Board corporate governance principles to

govern the Board, its committees and our executive officers and team members in the conduct of the business and

affairs of our Company; to identify and recommend to the Board individuals qualified to become members of the Board

and its committees; and to develop and oversee the annual Board and committee evaluation process.

How We Govern

Meetings

The full Board met in person or virtually six times during 2024. The Audit Committee met eight times, the Capital

Allocation Committee met eight times, the Compensation Committee met thirteen times and the CGNC met four times

during 2024. Each of the members of our Board serving in 2024 attended 75% or more of all meetings of the Board and

committees on which they served.

The Board’s practice is to meet in executive session with the full Board present and, separately, with just the

independent Directors present, at each regularly scheduled quarterly meeting of the Board. At least annually, the

independent Directors meet in executive session to review the performance and compensation of the CEO and other

executive officers. Additional executive sessions or meetings with just the independent Directors may be held from time

to time as needed. Any member of the Board may request an executive session with the full Board or the independent

Directors only.

Our policy requires our Directors to attend our Annual Meetings unless prevented by causes beyond their reasonable

control. All our Directors attended our 2024 Annual Meeting.

Oversight of the Chief Executive Officer

The Board selects, evaluates, provides oversight and counsel to and creates limited parameters for the CEO. One of

these parameters limits the CEO to serving on no more than one public company board other than the Sleep Number

Board.

Chief Executive Officer Succession Planning

Ensuring that the Company has skilled, seasoned leaders and a plan for management succession remains a top priority

for the Board. The Board has delegated primary oversight responsibility for succession planning to the Management

Development and Compensation Committee. The Committee meets regularly to discuss management succession,

candidates and process and evaluates and updates as appropriate the skills, experience and attributes the Committee

believes are important to be an effective CEO in light of our strategy. The Committee regularly reviews succession

planning with the full Board, including the identification, development and progress of internal candidates.


16 \| 2025 PROXY STATEMENT	OUR BOARD

The Board’s succession planning process is ongoing, even before Ms. Ibach’s announcement of her intention to retire in

October 2024. Following an extensive and thoughtful candidate review and selection process conducted by our

independent Directors with the assistance of a leading executive search firm, the Board appointed Linda Findley as

President, Chief Executive Officer and Director, effective April 7, 2025.

Board Role in Risk Oversight

Our Board is responsible for overseeing the Company’s policies and practices with respect to risk assessment and risk

management and has delegated to the Audit Committee the responsibility of assisting the Board in fulfilling this

role. Among its duties and processes, the Audit Committee: (a) reviews and discusses with management the Company’s

policies and practices with respect to enterprise risk assessment and risk management, including with respect to financial

risk exposures, internal controls over financial reporting and cybersecurity, (b) oversees the Company’s internal audit

function and processes, (c) establishes and oversees procedures for receiving and addressing complaints regarding

accounting, internal controls or auditing matters, (d) reviews compliance and other legal matters with the Company’s

legal counsel and (e) reports to the full Board with respect to matters within its area of responsibility.

The Audit Committee oversees the Company’s internal audit function. The leader of the internal audit function reports

directly to the Audit Committee, and the Audit Committee has authority to review and approve the appointment,

replacement or dismissal of this leader. The Audit Committee reviews and approves, at least annually, the Company’s

internal audit plan and receives quarterly reports on the results of internal audits. The leader of the internal audit function

meets regularly with the Chair of the Audit Committee and/or in executive session with the Audit Committee, as needed,

outside the presence of the Company’s management team. The Company’s risk assessment and risk management

process is led by the Chief Legal and Risk Officer and the leader of the internal audit function, with guidance from

outside advisors as needed. This process includes an annual enterprise risk assessment, ongoing risk identification and

quarterly assessments of enterprise risks and mitigation strategies, with participation from and review by the Audit

Committee and the Board.

In addition to the Audit Committee’s role, each of the other committees considers risks within its respective areas of

responsibility. We believe our Board leadership structure helps ensure proper risk oversight, based on the allocation of

duties among committees and the role of our independent Directors in risk oversight.

Conflicts of Interest

Directors are expected to avoid any action, position or interest which conflicts with an interest of the Company, or that

gives the appearance of a conflict. If any member of the Board becomes aware of any such conflicting or potentially

conflicting interest involving any member of the Board, the Director should immediately bring such information to the

attention of the Chair (and the Lead Director if the Chair and CEO is combined), the CEO and the Chief Legal and Risk

Officer of the Company.

Performance Goals and Evaluation

The Compensation Committee is responsible for establishing procedures for setting annual and long-term performance

goals for the CEO and for evaluation by the full Board of their performance against such goals. The Compensation

Committee meets at least annually with the CEO to receive their recommendations concerning such goals. Both the

annual goals and the annual performance evaluation of the CEO are reviewed and discussed by the independent

Directors at a meeting or executive session. The Compensation Committee is also responsible for setting annual and

long-term performance goals and compensation for all executive officers. Also, the CEO reports to the Board, at least

annually, on senior management depth and development, including a discussion of assessments, leadership

development, succession planning and other relevant factors.


17 \| 2025 PROXY STATEMENT	OUR BOARD

Shareholder Approval of Equity-Based Compensation Plans

Shareholder approval will be sought for equity-based compensation plans as required by our Articles and Minnesota law.

Provisions Applicable to Unsolicited Takeover Attempts or Proposals

The Board periodically reviews (not less often than every three years) our Articles and Bylaws and various provisions that

are designed to maximize shareholder value in the event of an unsolicited takeover attempt or proposal. Such review

includes consideration of matters such as the Company’s state of incorporation, whether the Company should opt in or

out of applicable control share acquisition or business combination statutes and provisions such as the Company’s

classified Board structure. Note that, subject to shareholder approval in accordance with Minnesota law, the Board has

unanimously adopted resolutions approving and declaring the advisability of proposed amendments to the Articles and

Bylaws to declassify the Board as further described below in Proposal 2 (approve amendments to our Articles and Bylaws

to declassify the Board). The objective of this review is to maintain a proper balance of provisions that will not deter bona

fide proposals from coming before the Board and that will position the Board and the Company to maximize the long-

term value of our Company for all shareholders.

Shareholder Engagement

We have regular outreach to and ongoing discussions with many of our largest shareholders to learn more about their

perspectives and gather their feedback on our strategy, performance, governance, compensation and other topics. Our

engagement helps our Board and leadership team understand the issues that matter most to shareholders, so that we

can address them effectively.

Prior to our 2025 Annual Meeting, we reached out to 15 of our largest shareholders collectively representing

approximately 56% of our outstanding shares to discuss topics of interest to them, which included our leadership

transition, Board composition and planned corporate governance changes. Six shareholders representing approximately

31% of our outstanding shares accepted our invitation to speak. Six shareholders representing approximately 16% of our

outstanding shares declined our invitation, and three shareholders representing 9% of our outstanding shares did not

respond. The incoming Chair of the Board, Phil Eyler, led these meetings. Angel Mendez, the Chair of the CGNC, also

participated in these meetings.

In addition to this targeted outreach ahead of the 2025 Annual Meeting, we also regularly engage with our shareholders

in the ordinary course of our investor relations activities. In total, between January 2024 and March 2025, we engaged

with shareholders representing more than 55% of our outstanding shares.


18 \| 2025 PROXY STATEMENT	OUR BOARD

How You Can Communicate with the Board

Our Board casts a wide net to inform and enhance its deliberations and decision making. It also maintains several means

for shareholders and others to engage, ask questions and provide input:

•Shareholders can participate in our Annual Meetings;

•Shareholders can participate in our shareholder engagement program in which members of management and, as

appropriate, Directors have in-person, virtual, phone or email engagements. Director engagements may cover topics

such as strategy, Board and corporate governance, pay and duration drivers including environmental, social and

other factors;

•Shareholders may write to our Board as a whole, its committee chairs or individual Directors, either via email at

investorrelations@sleepnumber.com or by sending a written communication addressed to our Corporate Secretary

by mail to Sleep Number Corporation, 1001 Third Avenue South, Minneapolis, MN 55404. The Corporate Secretary

will promptly forward any communication so received to the Board, any committee of the Board or any individual

Director specifically addressed in the communication;

•Shareholders can raise any concern regarding accounting, internal control or auditing matters with our Audit

Committee, confidentially and anonymously, by calling 1-800-835-5870; or

•Shareholders, team members and others can raise issues more generally by calling or emailing our privacy

department (1-888-250-4436 or privacy@sleepnumber.com) or using our confidential Business Abuse Hotline

1-888-662-5025. Board-level information will be escalated as appropriate.

The Company reserves the right to revise or make exceptions to the above in the event that the process is abused,

becomes unworkable or otherwise does not efficiently serve the purposes of the process.

ARTICLES OF INCORPORATION AND BYLAWS

In a Letter to Shareholders filed with the SEC on October 30, 2024, the Board announced plans to seek shareholder

approval at the 2025 Annual Meeting for amendments to the Company’s Articles and Bylaws to declassify the Board and

amendments to the Articles to eliminate the supermajority voting requirements in Article XIV for Directors and in

Article XV related to approval of certain transactions.

We are seeking to implement these changes in a timely fashion as further described in the following Proposals 2, 3

and 4, yet in a manner that also allows a smooth transition to the new governance structure.


19 \| 2025 PROXY STATEMENT	PROPOSAL 2 - VOTE TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES AND BYLAWS TO DECLASSIFY THE BOARD

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Under our existing Articles and Bylaws, our Board is divided into three classes with members of each class of Directors

serving a three-year term. The classification of the Board results in staggered elections, with a different class of Directors

standing for election each year.

If this Proposal 2 is approved by our shareholders, the proposed amendments to our Articles and Bylaws would

commence declassification of our Board at the Annual Meeting. Directors elected at this Annual Meeting will be elected

to three-year terms expiring at the 2028 Annual Meeting. If such amendments to the Articles and Bylaws are approved

this year, then the Directors to be elected at the 2026 Annual Meeting and thereafter will be elected to one-year terms

expiring at the next Annual Meeting. Directors who were elected prior to the 2026 Annual Meeting would serve out their

remaining terms, including the Directors standing for election at this 2025 Annual Meeting who are elected for full three-

year terms expiring at the 2028 Annual Meeting. If the office of any Director becomes vacant by reason of death,

resignation, retirement, disqualification, removal from office, increase in the number of Directors or otherwise, a majority

of the remaining Directors, although less than a quorum, at a meeting called for that purpose, may choose as successor,

who, unless removed for cause, shall hold office until the expiration of the term of the class or the remainder of the one

year term, as applicable, for which appointed or until a successor shall be elected and qualified. As a result, beginning

with the election of Directors at the 2028 Annual Meeting, all Directors will be elected for one-year terms and the

classification of the Board will terminate.

In proposing these amendments to the Articles and Bylaws, our Board considered shareholder feedback and evolving

governance practices. Subject to shareholder approval, the Board has unanimously adopted resolutions approving and

declaring the advisability of the proposed amendments to the Articles and Bylaws.

If our shareholders approve this Proposal 2, we will file amended and restated Articles after the Annual Meeting

incorporating the revisions in Appendix A. We will also make the conforming revisions reflected in Appendix A to

declassify the Board in our Bylaws, as required by Minnesota law to get shareholder approval for such amendments to

our Bylaws.

The Board believes that the amendments to our Articles and Bylaws to declassify the Board are in the best interests of

the Company and our shareholders at this time.

The Board unanimously recommends a vote “For” approval of amendments to our Articles and our Bylaws to declassify

the Board.


20 \| 2025 PROXY STATEMENT	PROPOSAL 3 - VOTE TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES AND BYLAWS TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT IN ARTICLE XIV RELATED TO DIRECTORS

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Article XIV of our existing Articles provides that it may not be altered, amended or repealed, in whole or in part, unless

authorized by the affirmative vote of the holders of not less than two-thirds of the outstanding voting power entitled to

vote (i.e., a supermajority).

If this Proposal 3 is approved by shareholders, the proposed amendment to our Articles would eliminate the

supermajority voting requirement in Article XIV related to amendments to the number, classification, term of office,

removal, and how to fill vacancies of Directors.

In proposing this amendment to the Articles and seeking to evolve our governance structure, our Board considered

shareholder feedback and evolving governance practices.

Our Board unanimously concluded that it is in the best interests of the Company and our shareholders at this time to

recommend that our shareholders adopt amendments to our Articles to eliminate all supermajority voting requirements

related to Directors, and replace with majority voting requirements. The Board has unanimously adopted resolutions

approving and declaring the advisability of the proposed amendment to the Articles.

If our shareholders approve this Proposal 3, we will file amended and restated Articles after the Annual Meeting

incorporating the revisions in Appendix B.

The Board unanimously recommends a vote “For” approval of the amendment to our Articles to eliminate the

supermajority voting requirement in Article XIV related to Directors.


21 \| 2025 PROXY STATEMENT	PROPOSAL 4 - VOTE TO APPROVE AN AMENDMENT TO THE COMPANY’S ARTICLES TO ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT IN ARTICLE XV RELATED TO APPROVAL OF CERTAIN TRANSACTIONS

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Article XV of our existing Articles provides that it may not be altered, amended or repealed, in whole or in part, unless

authorized by the affirmative vote of the holders of not less than two-thirds of the outstanding voting power entitled to

vote. Article XV also provides that the affirmative vote of not less than two-thirds of the outstanding voting power

entitled to vote is required for certain transactions such as various approvals (or adoptions) of any plan of merger or

exchange of assets, or issuance or delivery of stock or securities.

In proposing this amendment to the Articles and seeking to evolve our governance structure, our Board considered

shareholder feedback and evolving governance practices. Our Board concluded that it is in the best interests of the

Company and our shareholders at this time to recommend that our shareholders adopt amendments to our Articles to

eliminate all supermajority voting requirements and replace with majority voting requirements, including the

requirements in Article XV related to approval of certain transactions. The Board has unanimously adopted resolutions

approving and declaring the advisability of the proposed Articles amendment.

If our shareholders approve this Proposal 4, we will file amended and restated Articles after the Annual Meeting

incorporating the revisions in Appendix C.

The Board unanimously recommends a vote “For” approval of the amendment of our Articles to eliminate the

supermajority voting requirements in Article XV related to certain transactions.


22 \| 2025 PROXY STATEMENT	OUR BOARD

HOW WE ARE PAID

Board compensation should encourage alignment with shareholders’ interests and should be at a level equitable to

comparable companies.

Summary of Non-Employee Director Compensation

The compensation payable to non-employee Directors of Sleep Number Corporation is determined annually by the

Compensation Committee, typically at the quarterly meeting in May.

Annual Cash Retainer

Each of our non-employee Directors receives an annual cash retainer of $95,000, which is paid quarterly. The Chairs of

each of the Committees of the Board receive an additional annual cash retainer of $20,000, with Co-Chairs for any

committee (e.g., the Capital Allocation Committee) splitting the $20,000 cash retainer, each receiving $10,000. The Lead

Director (when the Chair and CEO roles are combined) receives an additional cash retainer of $50,000 per year.

Meeting Fees

In 2024, each non-employee Director received meeting fees for Board and Committee meetings attended beyond the

normal number of regular or typical meetings for the Board and each Committee in a fiscal year, including: (a) Board

meeting fees of $1,000 per in-person meeting and $500 per virtual meeting after a minimum of eight Board meetings for

the fiscal year and (b) Committee meeting fees of $750 per in-person Committee meeting and $500 per virtual

Committee meeting after a minimum of eight meetings for each Committee for the fiscal year.

Equity Compensation

Coincident with the Annual Meeting, non-employee Directors are eligible to receive equity compensation in amounts

determined by the Compensation Committee. In 2024, in alignment with share conservation efforts undertaken for

management, 100% of the grant value was in RSUs, with the grants to vest on the earlier of one year from the date of

grant or the date of the next Annual Meeting at which Directors are elected to the Board, so long as the Director

continues to serve on our Board. At its meeting on May 13, 2024, the Compensation Committee approved the annual

equity compensation for each of our non-employee Directors to remain at $135,000 in grant value for the new equity

awards which were granted on May 21, 2024. In alignment with methodology used to determine awards granted to

NEOs, the number of RSUs granted to our non-employee Directors on May 21, 2024 was based on the average 2023

share price of $24.74. These equity compensation grants to non-employee Directors in the fiscal year are set forth and

described in the “Director Compensation” table below.

Reimbursement of Expenses

Directors are reimbursed for travel expenses for attending in-person meetings of our Board or any of the Committees

and for attending approved director continuing education programs.

No Director Compensation for Employee Directors

Any Director who is an employee of our Company does not receive additional compensation for service as a Director.

Share Ownership Guidelines for Executive Officers and Directors

The Board has established the stock ownership guidelines for executive officers and Directors as further described in the

Compensation Discussion and Analysis beginning on page 31 of this Proxy Statement.


23 \| 2025 PROXY STATEMENT	OUR BOARD

Director Compensation

The following table summarizes the total compensation paid or earned by each of our non-employee Directors for the

2024 fiscal year ended December 28, 2024.


Name	Fees Earned or Paid in Cash ($)	Stock Awards(1) ($)	Option Awards(2) ($)	All Other Compensation ($)	Total ($)
Daniel I. Alegre(5)(6)	$47,500	—	—	—	$47,500
Phillip M. Eyler(3)	$96,500	$83,656	—	—	$180,156
Stephen L. Gulis, Jr.(3)	$115,000	$83,656	—	—	$198,656
Michael J. Harrison	$147,500	$83,656	—	—	$231,156
Julie M. Howard(3)(4)	$97,000	$83,656	—	—	$180,656
Deborah L. Kilpatrick, Ph.D.(3)(4)(5)	$96,500	$83,656	—	—	$180,156
Brenda J. Lauderback	$117,500	$83,656	—	—	$201,156
Stephen E. Macadam(3)(4)	$105,000	$83,656	—	—	$188,656
Barbara R. Matas(3)(4)	$105,000	$83,656	—	—	$188,656
Angel L. Mendez(3)	$115,000	$83,656	—	—	$198,656
Hilary A. Schneider	$97,000	$83,656	—	—	$180,656
Jean-Michel Valette(7)	—	—	—	—	—

(1)Reflects the aggregate grant date fair value of restricted stock awards granted during fiscal year 2024, computed in accordance with FASB ASC

Topic 718. For all Directors except Mr. Alegre and Mr. Valette, 5,457 restricted stock awards were granted. Mr. Alegre did not stand for election in

2024 and his term expired effective as of the conclusion of the 2024 Annual Meeting. Accordingly, no restricted stock awards were granted to Mr.

Alegre. Mr. Valette did not serve as a voting member of the Board in 2024. See footnote 7 for additional information. See Note 8, Shareholders’

Deficit, to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, for a

discussion of the relevant assumptions used in calculating these amounts. As of December 28, 2024, the aggregate number of shares outstanding

under stock awards, including restricted stock, restricted stock units and phantom stock, held by those who served as non-employee Directors

through fiscal year 2024 was as follows: Mr. Eyler, 5,457; Mr. Gulis, 55,203 shares; Mr. Harrison, 5,457 shares; Ms. Howard, 17,690 shares; Ms.

Kilpatrick, 6,073 shares; Ms. Lauderback, 5,457 shares; Mr. Macadam, 11,536; Ms. Matas, 32,177 shares; Mr. Mendez, 5,457 shares; and Ms.

Schneider, 5,457 shares.

(2)No stock option awards were granted during fiscal year 2024. As of December 28, 2024, the aggregate number of stock options outstanding held by

those who served as non-employee Directors through fiscal 2024 was as follows: Mr. Eyler, 4,285; Mr. Gulis, 7,695; Mr. Harrison, 15,477; Ms.

Howard, 5,830; Ms. Kilpatrick, 9,860; Ms. Lauderback, 15,477; Mr. Macadam, 2,373; Ms. Matas, 7,695; Mr. Mendez, 4,285; and Ms. Schneider,

2,373.

(3)Under the Company’s 2020 Equity Incentive Plan, as amended, (2020 Plan) non-employee Directors may elect to defer receipt of any shares of the

Company’s common stock under an Incentive Award granted to non-employee Directors under the 2020 Plan. For fiscal 2024, the following

Directors have elected to defer receipt of their 2024 Incentive Award of 5,457 shares: Mr. Eyler, Mr. Gulis, Ms. Howard, Mr. Macadam, Ms. Matas

and Mr. Mendez. Ms. Kilpatrick elected to defer receipt of 2,728 shares of her 2024 Incentive Award.

(4)Ms. Howard, Ms. Kilpatrick, Mr. Macadam and Ms. Matas elected to receive all or a portion of Director fees in the form of common stock under the

2020 Plan, and to defer receipt of such shares. The number of shares paid is determined by dividing the amount of the Director’s fees to be deferred

by the fair market value per share of our common stock on the date the fees otherwise would have been payable in cash. The number of shares to

be received by Ms. Howard in lieu of cash payments during fiscal 2024 is 5,597 shares and the related grant date fair value was $96,500. The number

of shares to be received by Ms. Kilpatrick in lieu of cash payments during fiscal 2024 is 616 shares and the related grant date fair value was $10,615.

The number of shares to be received by Mr. Macadam in lieu of cash payments during fiscal 2024 is 6,079 shares and the related grant date fair

value was $105,000. The number of shares to be received by Ms. Matas in lieu of cash payments during fiscal 2024 is 6,208 shares and the related

grant date fair value was $107,000.

(5)Mr. Alegre and Ms. Kilpatrick elected to receive a portion of Director fees in the form of common stock under the 2020 Plan. The number of shares

paid is determined by dividing the amount of the Director’s fees to be received in the form of common stock by the fair market value per share of

our common stock on the date the fees otherwise would have been payable in cash. The number of shares received by Mr. Alegre in lieu of cash

payments during fiscal 2024 was 3,179 shares and the related grant date fair value was $48,995. The number of shares received by Ms. Kilpatrick in

lieu of cash payments during fiscal 2024 was 615 shares each and the related grant date fair value was $10,615.

(6)Mr. Alegre decided not to stand for election in 2024 and his term expired effective as of the conclusion of the 2024 Annual Meeting.

(7)Mr. Valette retired from the Board effective upon the conclusion of the 2023 Annual Meeting. Effective upon his retirement, Mr. Valette was

appointed to serve in a non-voting advisory role to the Board, as Director Emeritus, through the end of the Company’s 2024 fiscal year. Mr. Valette’s

non-voting advisory role was concluded early as of September 30, 2024. In his capacity as Director Emeritus, Mr. Valette received compensation

consistent with that of non-employee Directors through September 30, 2024.


24\| 2025 PROXY STATEMENT	OUR COMPANY

WHAT WE DO

Sleep Number is a sleep wellness company and market leader in the design, manufacturing, marketing and distribution

of highly innovative sleep solutions. Our purpose is to improve the health and wellbeing of society through higher

quality sleep; to date, we have improved the lives of approximately 16 million people. Sleep Number’s Smart Sleepers

benefit from individualized sleep experiences, night after night, and are experiencing the physical, mental and emotional

benefits of life-changing sleep.

Sleep Number’s life-changing, differentiated smart beds combine physical and digital innovations, integrating

unparalleled physical comfort with a highly advanced sleep wellness platform. The smart beds offer our signature

firmness adjustability, enabling each sleeper adjustable comfort. Embedded digital sensors learn the sleep needs of each

individual; “sense and do” technology uses the sensed data to automatically adjust the smart bed to keep the sleeper

comfortable throughout the night. Active temperature balancing technology supports the ideal climate for each sleeper

and solves a prevalent sleep challenge.

Additionally, the smart beds are an exceptional value, with personalized sleep insights delivered daily, new features

regularly added to all smart beds through over-the-air updates and prices to meet most budgets. Sleep Number smart

beds provide unmatched features, benefits and comfort that can lead to improved sleep health and wellness for both

sleepers.

WHO WE ARE

Sleep Number’s advantaged business model is supported by our consumer innovation strategy: an individualized, digital

sleep wellness platform, a network of millions of highly engaged Smart Sleepers who are loyal brand advocates, a

vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the

world’s most beloved brands.

And our 3,700 mission-driven team members are dedicated to Sleep Number’s mission of improving lives by

individualizing sleep experiences. They passionately innovate to drive value creation, including our exclusive direct-to-

consumer selling in 640 stores and online, which meets customers whenever and wherever they choose to provide an

exceptional experience and a lifelong relationship.

Additionally, Sleep Number partners with world-leading institutions to bring the power of 31 billion hours of longitudinal

sleep data from four billion sleep sessions to sleep science and research.


25\| 2025 PROXY STATEMENT	OUR COMPANY

HOW WE DO IT

We believe our purpose of improving the health and well-being of society through higher quality sleep is best achieved

with similarly sustainable governance, people and environmental practices.

Ours continually evolve, but highlights include:

•We annually review and train on our Code of Business Conduct;

•Our focus on talent management is reflected in the Board making time annually to review with management our

human capital management, development and succession practices;

•Our sustainability practices are supported by a cross-functional team and informed by a materiality assessment; and

•Our sustainability practices are shared with the full Board and standing committees annually, quarterly or on an

interim basis, as appropriate, including periodic dedicated full Board sessions covering topics such as carbon,

climate, natural resources, supply chain management, waste and toxicity, reuse and recycling, team member

engagement health, wellbeing and belonging; the evolving nature of work; community health and impact;

compliance and internal controls; business ethics and codes of conduct; sustainable, auditable and repeatable

processes for reporting requirements; executive, Director and team member compensation; cybersecurity; and geo-

political and policy issues management.

Code of Conduct and Ethics

Our Code of Business Conduct and Ethics is reviewed annually with the Audit Committee and instructs team members to

comply with applicable laws, engage in ethical and safe conduct in our work environment, avoid conflicts of interests,

conduct our business with integrity and high ethical standards and safeguard our Company’s assets, report potential

violations and periodically receive training and certify commitment. The Code of Business Conduct and Ethics addresses

legal and ethical issues that may be encountered by our team members during their normal course of business.

Team members are required to report any conduct that they believe in good faith violates our Code of Business Conduct

and Ethics. The Code of Business Conduct and Ethics also sets forth procedures under which team members or others

may report through our management team or, ultimately, directly to our Audit Committee (confidentially and

anonymously, if so desired) any questions or concerns regarding accounting, internal accounting controls or auditing

matters. All of our team members and Board members are required to annually certify their commitment to abide by our

Code of Business Conduct and Ethics. We regularly monitor compliance with the Code of Business Conduct and Ethics

and report findings to our Audit Committee. We also provide training in key areas covered by the Code of Business

Conduct and Ethics to help our team members to comply with their obligations.

A copy of the Code of Business Conduct and Ethics is included in our Investor Relations section of our website at

http://ir.sleepnumber.com. We intend to disclose any amendments to and any waivers from a provision of our Code of

Business Conduct and Ethics on our website. The information contained in or connected to our website and our Code of

Business Conduct and Ethics is not incorporated by reference into, or considered a part of, this Proxy Statement.


26\| 2025 PROXY STATEMENT	OUR COMPANY

Corporate Sustainability

Our sustainability efforts are focused on aligning and integrating environmental stewardship and social progress with our

pursuit of long-term shareholder value creation. Guided by our purpose of improving the health and wellbeing of society

through higher quality sleep, we aim to innovate and improve our Company to deliver benefit to all stakeholders.

We recently published our 2025 Corporate Sustainability Report, which provides an update on enterprise environmental,

social and governance practices, priorities and key metrics. The report underscores our focus on sustainability initiatives

that support the resilience of our business.

•We are strengthening systems and processes that reinforce sound governance, high integrity decision-making and

transparent, consistent reporting practices.

•To attract and retain highly engaged team members, we continue to prioritize programs that promote well-being,

provide opportunities for professional development, and reward strong performance.

•Through volunteerism, financial and in-kind support, and meaningful contributions to sleep science, research and

sleep innovations, we are improving millions of lives – delivering significant value to consumers and their

communities.

•Recognizing the benefit of collaboration in achieving our goals, we are strengthening our relationships with suppliers

and engaging with them to increase our operating model durability and sustainability.

•And we are monitoring – and taking responsible actions to control – our greenhouse gas emissions, waste and other

environmental outputs, including through improved network design, transportation optimization and innovations that

extend the useful life of product components.

A copy of the Corporate Sustainability Report is included in our Investor Relations section of our website at http://

ir.sleepnumber.com. The information contained in or connected to our website and our Corporate Sustainability Report

is not incorporated by reference into, or considered a part of, this Proxy Statement.

Audit Committee Report

The Audit Committee is responsible for providing independent, objective oversight with respect to our Company’s

accounting and financial reporting functions, internal and external audit functions, systems of internal controls regarding

financial matters, risk assessment and risk management, information technology and information security systems,

including cybersecurity and artificial intelligence, and legal, ethical and regulatory compliance.

The Audit Committee is currently composed of five Directors, each of whom is independent as defined by the Nasdaq

listing standards and SEC Rule 10A-3. Stephen L. Gulis, Jr. (Chair), Julie M. Howard, Barbara R. Matas, and Angel L.

Mendez served on the Audit Committee throughout 2024 and through the date of this report. Stephen E. Macadam

joined the Audit Committee effective January 1, 2025. Deborah L. Kilpatrick, Ph.D. served on the Audit Committee

through April 2024.

Management is responsible for our Company’s financial reporting processes and internal control over financial reporting.

Deloitte & Touche LLP, our Independent Registered Public Accounting Firm, is responsible for auditing our Company’s

consolidated financial statements for the 2024 fiscal year. This audit is to be conducted in accordance with the standards

of the Public Company Accounting Oversight Board (United States). The Audit Committee’s responsibility is to monitor

and oversee these processes.

In connection with these responsibilities, the Audit Committee met eight times during 2024 and meetings involved

representatives of management, internal audit and the independent auditors. The Audit Committee meets periodically

with management, internal audit and the independent auditors in separate executive sessions as needed to discuss any

matters that the Audit Committee or each of these groups believe should be discussed privately.


27 \| 2025 PROXY STATEMENT	OUR COMPANY

Management represented to the Audit Committee that our Company’s consolidated financial statements were prepared

in accordance with accounting principles generally accepted in the United States of America. The Audit Committee has

reviewed and discussed the consolidated financial statements, together with the results of management’s assessment of

the Company’s internal control over financial reporting, with management and the Independent Registered Public

Accounting Firm. The Audit Committee discussed with the Independent Registered Public Accounting Firm the matters

required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the

SEC. The Independent Registered Public Accounting Firm provided the Audit Committee with written disclosures and

the letter required by applicable requirements of the Public Company Accounting Oversight Board, and the Audit

Committee discussed with the Independent Registered Public Accounting Firm that firm’s independence.

Based upon the Audit Committee’s discussions with management, internal audit and the Independent Registered Public

Accounting Firm and the Audit Committee’s review of the representations of management and the Independent

Registered Public Accounting Firm, the Audit Committee recommended to the Board of Directors that the audited

consolidated financial statements be included in our Company’s Annual Report on Form 10-K for the year ended

December 28, 2024, for filing with the Securities and Exchange Commission.

This Audit Committee Report shall not be deemed incorporated by reference by any general statement incorporating by

reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except

to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be

deemed filed under such Acts.

The Audit Committee of the Board of Directors

Stephen L. Gulis, Jr., Chair

Julie M. Howard

Stephen E. Macadam

Barbara R. Matas

Angel L. Mendez


28 \| 2025 PROXY STATEMENT	PROPOSAL 5 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

768231 SN 2025 Proxy Statement Banners_v2_5 (002).jpg

The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our

independent auditors. The Audit Committee considers the independence of our independent auditors and participates

in the selection of the independent auditor’s lead engagement partner. The Audit Committee has appointed, and, as a

matter of good corporate governance, is requesting ratification by the shareholders of the appointment of, the

registered public accounting firm of Deloitte & Touche LLP (Deloitte) to serve as independent auditors for the fiscal year

ending January 3, 2026. Deloitte has served as our independent auditor since 2010.

The Audit Committee considered a number of factors in determining whether to re-engage Deloitte as the Company’s

independent registered public accounting firm, including the length of time the firm has served in this role, the firm’s

professional qualifications and resources, the firm’s past performance and the firm’s capabilities in handling the breadth

and complexity of our business, as well as the potential impact of changing independent auditors.

The Board and the Audit Committee believe that the continued retention of Deloitte as the Company’s independent

auditor is in the best interests of the Company and its shareholders. If shareholders do not ratify the appointment of

Deloitte as our independent auditors, the Audit Committee will reconsider whether to retain Deloitte and may determine

to retain it or another firm without resubmitting the matter to shareholders. Even if the appointment of Deloitte is ratified

by shareholders, the Audit Committee may, in its discretion, direct the appointment of a different firm of independent

auditors at any time during the year if it determines that such a change would be in the best interests of the Company

and its shareholders.

Representatives of Deloitte will be present at the Annual Meeting, will have an opportunity to make a statement if they

so desire and will be available to respond to questions from shareholders.

Why the Board recommends you support this Proposal 5:

•The Audit Committee undertakes a robust evaluation process each year to confirm the engagement of Deloitte as

our independent auditor continues to be in our shareholders’ best interests;

•Deloitte has served as our independent auditor since 2010, which means the firm is well-positioned to handle the

breath and complexity of our vertically integrated business; and

•Deloitte provides only limited services other than audit and audit-related services.

The Board recommends a vote “For” ratification of the appointment of Deloitte as our independent auditors for the

fiscal year ending January 3, 2026.


29\| 2025 PROXY STATEMENT	OUR COMPANY

Audit and Other Fees

The aggregate fees billed for professional services by the Independent Auditors in 2024 and 2023 were:


	2024	2023
Audit fees	$923,000	$898,478
Audit-related fees	58,520	1,895
Audit and audit-related fees	981,520	900,373
Tax fees	132,931	137,766
All other fees	—	—
Total	$1,114,451	$1,038,139

Audit fees in 2024 and 2023 include fees incurred for the annual audit and quarterly reviews of the Company’s

consolidated financial statements and the annual audit of the Company’s internal control over financial reporting for the

years ended December 28, 2024 and December 30, 2023, respectively.

Audit-related fees for 2024 are related to benefit plan audit and access to an online accounting research tool while 2023

related to access to an online accounting research tool.

Tax fees for fiscal 2024 and 2023 are primarily for tax compliance services based on time and materials.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002 and the rules of the Securities and Exchange Commission regarding auditor

independence, the engagement of the Company’s Independent Auditors to provide audit or non-audit services for the

Company must either be approved by the Audit Committee before the engagement or entered into pursuant to pre-

approval policies and procedures established by the Audit Committee. Our Audit Committee has not established any

pre-approval policies or procedures and therefore all audit or non-audit services performed for the Company by the

Independent Auditors must be approved in advance of the engagement by the Audit Committee. Under limited

circumstances, certain de minimus non-audit services may be approved by the Audit Committee retroactively. All

services provided to the Company by the Independent Auditors in 2024 were approved in advance of the engagement

by the Audit Committee and no non-audit services were approved retroactively by the Audit Committee pursuant to the

exception for certain de minimus services described above.


30 \| 2025 PROXY STATEMENT	OUR PAY

COMPENSATION COMMITTEE REPORT

Dear Shareholders,

We, the members of Sleep Number’s Compensation Committee believe that the decisions we make about pay, which

we describe in the following pages, reveal of lot about:

•How committed we are to tying long-term strategy to shareholder value creation;

•How much we believe in establishing programs that hold team members accountable and link pay to performance;

•How invested we are in creating a culture that connects team members to our purpose, promotes their wellbeing

and encourages innovation;

•How creative and inclusive we are in searching for and securing top talent;

•How serious we are about retaining and engaging our team members;

•How dedicated we are about meaningful innovation to advance our mission of improving lives by individualizing

sleep experiences; and

•How focused we are on each tool, metric and element that can collectively drive sustainable out performance.

We believe our pay designs, decisions and amounts described in this CD&A reflect each of these. We seek your support,

welcome your ongoing input and value your investment.

The Management Development and Compensation Committee of the Board of Directors (the Compensation

Committee), consisting entirely of independent Directors, has reviewed and discussed the following Compensation

Discussion and Analysis (CD&A) with management, and based on this review and discussion, the Compensation

Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy

Statement.

The Management Development and Compensation Committee

Brenda J. Lauderback, Chair

Philip M. Eyler

Deborah L. Kilpatrick, Ph.D.

Michael J. Harrison

Julie M. Howard

Hilary A. Schneider


31 \| 2025 PROXY STATEMENT	OUR PAY

COMPENSATION DISCUSSION AND ANALYSIS

KEY PAY FACTS

Who Did We Pay?

Sleep Number provides employment to approximately 3,700 team members, each of whom plays an important role in

our operations. We are legally required to focus these disclosures on the compensation of the Company’s Named

Executive Officers (NEOs), even though every one of our team members contributes to our success. This Compensation

Discussion and Analysis (CD&A) describes our executive compensation program, including the objectives and elements

of compensation as well as determinations made by the Compensation Committee regarding our NEOs. In 2024 each of

these individuals qualified as one of our NEOs:

•Shelly Ibach, Chair, President and Chief Executive Officer (until April 7, 2025)

•Francis Lee, Executive Vice President and Chief Financial Officer

•Andrea Bloomquist, Executive Vice President and Chief Innovation Officer

•Melissa Barra, Executive Vice President and Chief Sales and Services Officer

•Samuel Hellfeld, Executive Vice President and Chief Legal and Risk Officer and Secretary

Why: Factors Shaping Our Pay Design and Decision Making

The following pages outline our individual pay components and decisions made for 2024. Collectively, our pay practices

and decisions were shaped and informed considering the details below:

•Shareholder engagement and feedback;

•A belief in a strong link between NEO pay and financial and operational performance;

•A belief that a majority of NEO pay should be at risk and aligned with both near-and long-term performance;

•Peer group benchmarking;

•Advice from an independent compensation consultant;

•Adherence to pay governance best practices including stock ownership guidelines, clawback policies, double trigger

change-in-control provisions and policies against hedging, pledging, insider trading, tax gross ups, options

repricing, NEO employment contracts and dividends on unearned performance awards; and

•Integration of pay with risk management, oversight and compliance best practices.


32 \| 2025 PROXY STATEMENT	OUR PAY

Shareholder Engagement on Executive Compensation

Every year, Sleep Number provides shareholders the opportunity to approve its executive compensation program on an

advisory basis. In 2024, our executive compensation program received the support of 82.7% of votes cast by

shareholders versus our prior five-year average of 88.9%. In addition, we regularly engage with our shareholders to learn

about their perspectives and gather their feedback on a variety of topics, including our executive compensation

program. Our engagement helps our Board and leadership team understand the issues that matter most to

shareholders, so that we can address them effectively.

Changes Made in 2024

In determining our compensation practices for fiscal year 2024, the Compensation Committee was mindful of feedback

provided by shareholders and the results of our most recent advisory vote on executive compensation, as well as the

need to execute on our business transformation to create a more durable operating model. For fiscal year 2024, Sleep

Number took the following actions:


Category	Description of Changes
Proxy Statement Disclosure	We redesigned our proxy statement, including our “Compensation Discussion and Analysis” to facilitate clear and concise disclosure.
Peer Group	Our peer group was updated in 2024 to ensure it continues to reflect our scale, industry and strategic direction as a sleep wellness company.
Annual Incentive Plan (AIP)	We remain committed to defined and measurable AIP goals and metrics. The mid-year progress payment was been removed for the NEOs to emphasize full-year performance. A Shared Strategic Objective modifier was added to the plan to incentivize the expense reduction actions needed. These changes are described in more detail in the AIP section.
Equity Award Mix	We eliminated the use of stock options in 2024 to reduce the dilutive impact to our equity plan.

Changes Made in 2025

In 2025, the Compensation Committee continued to align compensation practices with shareholder interests in mind. In

2025, we introduced a Relative Total Shareholder Return modifier to our Performance Share Unit plan, replacing the

previous Return on Invested Capital (ROIC) modifier.


33 \| 2025 PROXY STATEMENT	OUR PAY

Company Performance

The consumer environment remained challenging in 2024. Economic uncertainty, low consumer sentiment, and high

interest rates leading to ongoing pressure in the housing market, have led to a historic unit decline for the mattress

industry over the past three years; in 2024 U.S. mattress unit demand reached levels lower than 2015. Per capita

spending on mattresses is also at historic lows approaching levels not seen since the 2008/2009 great recession.

*Estimated based on International Sleep Products Association (ISPA) November 2024 Mattress Industry Forecast report. Full-year 2024 ISPA industry

information had not been published at the time of this report.


Full-year financial results include: •Net sales of $1.7 billion (-11% vs. 2023) •Net operating profit (NOP) of $22.9 million (flat vs. 2023) •Total Operating Expense reduction of $85.7 million •Adjusted EBITDA of $119.6 million (-6% vs. 2023) •Diluted loss per share of $0.90 down from diluted loss per share of $0.68 last year •Cash provided by operating activities of $27.1 million and cash used in purchases of capital expenditures of $23.5 million •Adjusted return on invested capital (ROIC) of 7.6% •Net leverage ratio of 4.2x EBITDAR (adjusted EBITDA plus consolidated rent expense) at the end of 2024 vs. covenant maximum of 4.8x; $123.8 million of liquidity remained against current credit facility at the end of 2024			Performance metrics in our compensation program:
			Long-term Incentive Plan
			Net Sales growth
			NOP growth
			Adjusted ROIC
			Share price



			Annual Incentive Plan
			Adjusted EBITDA
			Shared Strategic Objective


34 \| 2025 PROXY STATEMENT	OUR PAY

The following are historical results on key financial metrics and reflect the challenging industry and macroeconomic

conditions that we experienced over the last three years.

Note: For additional information on our non-GAAP financial measures, such as adjusted EBITDA and adjusted ROIC, and

their reconciliation to operating income and net income, as applicable, see “Non-GAAP Data Reconciliations” on pages

44 and 45 of our Annual Report on Form 10-K filed on March 7, 2025.

Refer to our Annual Report on Form 10-K filed on March 7, 2025, and our Corporate Sustainability Report, posted within

the Investor Relations section of our Company website, for additional information on these and other 2024 financial

measures. The information contained in our Corporate Sustainability Report is not incorporated by reference into, or

considered a part of, this Proxy Statement.

Pay and Performance Alignment

The following is a summary of our Company Performance that determined the actual payouts earned for our 2024

Annual Incentive Plan (AIP) and 2022 Performance Stock Units (PSUs). The performance and payouts for these incentive

programs are described in more detail later in this CD&A.


Element	Performance Achieved	Payout Earned
2022 PSUs (performance period of fiscal years 2022 through 2024)	Annual growth rate achieved: - 2022: net sales -3.2% and NOP -64.9% - 2023: net sales -10.7% and NOP -58.2% - 2024: net sales -10.9% and NOP -76.4% Average difference between adjusted ROIC and WACC was 200 basis points	No payout was earned (compared to 43.1% of target for the 2021 PSUs). The 2022 PSU payout was an average of the percent of target earned by year. - 2021: 0% - 2022: 0% - 2023: 0% The ROIC modifier did not apply since no payout was earned.
2024 AIP	Adjusted EBITDA for 2024 was $119.6 million, which was 85% of the goal for target payout. Shared Strategic Objective performance goal was exceeded and resulted in a 120% modifier.	A payout of 59.8% of target was earned.


35 \| 2025 PROXY STATEMENT	OUR PAY

Benchmarking

With the assistance of independent compensation consultant FW Cook, the Compensation Committee considers market

data on base salary, target total cash compensation and target total direct compensation when establishing

compensation levels for executive officers. The sources for this market comparison are from peer group pay data (most

recent disclosures) and certain retail, technology or general industry surveys from third parties. For each executive, we

attempt to match as closely as possible our position to what is most comparable in our peers or the surveys. The

Compensation Committee generally seeks to align target total direct compensation opportunities with the market

median, while providing opportunity for top quartile compensation for Company performance above established goals

and below median compensation for performance below goal. Additionally, performance goals are set with

consideration of peer group and industry performance.

2024 Peer Group

The Compensation Committee, in consultation with independent compensation consultant FW Cook, annually reviews

the appropriateness of the size, structure, business focus and related aspects of the companies in our industry peer

group. The selected peer group consists of publicly traded companies whose net sales and market capitalization are

within a range of one-third to three times our own comparable metrics, and that are involved in household and home

furnishing, appliances, retail or technology industries with a focus on products delivered direct to consumers. The

selection criteria also consider factors such as whether the Company demonstrates high growth particularly through

product development or market expansion or whether the Company has products driven by innovation or services

delivered by technology.

The Compensation Committee at its meeting on September 5, 2023, approved the peer group as listed below. The peer

group was changed from the prior fiscal year to better reflect Sleep Number’s size and strategic direction. This is the

peer group that was utilized in the benchmarking reviewed by the Compensation Committee for compensation actions

approved during 2024 including the actions effective in March 2024 and described in this 2025 Proxy Statement:


The Aaron’s Company, Inc. Arlo Technologies, Inc. Conn’s Inc. Dolby Laboratories, Inc. Ethan Allen Interiors, Inc. HNI Corporation Inspire Medical Systems, Inc. iRobot Corporation	La-Z-Boy Incorporated Leggett & Platt, Incorporated Miller Knoll Peloton Interactive, Inc. RH Steelcase Inc. Sonos, Inc. Somnigroup International Inc. (formerly Tempur Sealy International, Inc.)

At its meeting on September 17, 2024, the Compensation Committee reviewed the peer group composition relative to

the selection criteria utilized in evaluating peer companies while considering the strategic direction of Sleep Number.

The following adjustments were made to the peer group, which was then utilized in benchmarking for compensation

actions considered in early 2025:

•Conn’s, Inc. was removed due to their announced bankruptcy

•Haverty’s was added to provide additional furniture retailer representation


36 \| 2025 PROXY STATEMENT	OUR PAY

Pay Governance Best Practices

In order to meet the key objectives of our executive compensation program, the Company has adopted a strong

corporate governance framework with the following practices and policies that help ensure alignment with shareholder

interests. There have been no changes to these policies or practices since the last disclosure in the 2024 Proxy

Statement.


Compensation Practice	Sleep Number Policy or Practice
Pay for performance	Yes	A significant percentage of the total direct compensation package is performance based.
Robust stock ownership guidelines	Yes	Executive officers and Directors are subject to stock ownership guidelines.
Annual shareholder “Say on Pay”	Yes	We value our shareholders’ input on our executive compensation programs. Our Board of Directors seeks an annual non-binding advisory vote from shareholders to approve the executive compensation disclosed in our CD&A, tabular disclosures and related narrative of this Proxy Statement.
Annual compensation risk assessment	Yes	A risk assessment of our compensation programs is performed on an annual basis.
Clawback provisions	Yes	We adopted a Nasdaq-compliant Executive Clawback and Forfeiture Policy, replacing our prior clawback and forfeiture policy, that requires the Compensation Committee to seek recoupment, forfeiture or cancellation of certain compensation of our Section 16 officers, as identified by us under Item 401(b) of Regulation S-K, in the event of an accounting restatement due to the material noncompliance of the Company with any financial reporting requirements under the securities law, including any required accounting restatement to correct an error in previously issued financial statements. There is also a clawback provision in the both the time- based (RSU) and performance-based (PSU) LTI award agreements that allows for the forfeiture and recovery of LTI granted, earned, vested or paid out if the participant violates a confidentiality agreement that must be accepted as a condition of receiving the LTI award.
Independent compensation consultant	Yes	The Compensation Committee retains an independent compensation consultant to advise on the executive compensation program and practices and assist in the benchmarking of compensation levels.
Double-trigger vesting	Yes	If outstanding LTI grants are assumed or substituted upon a change-in-control, the vesting of the LTI grants will only be accelerated if the executive is terminated without cause or terminates with good reason within two years of the change-in- control (i.e., “double trigger vesting”).
Hedging of Company stock	No	Directors, executive officers, director-level and above team members, and other team members designated by the Company from time to time as insiders may not directly or indirectly engage in transactions intended to hedge or offset the market value of Sleep Number common stock (Company securities) owned by them, including, but not limited to, the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Insiders are also prohibited from engaging in short sales of Company securities and from trading in any form of publicly traded options, such as puts, calls or other derivatives of the Company’s securities.
Pledging of Company stock	No	Directors, executive officers, director-level and above team members, and other team members designated by the Company from time-to-time as insiders may not directly or indirectly pledge Company securities as collateral for any obligation, including purchasing Company securities on margin, holding Company securities in any account which has a margin debt balance, borrowing against any account in which Company securities are held or pledging Company securities as collateral for a loan.
Tax gross-ups	No	We do not provide tax gross-ups to our executive officers, other than for relocation benefits that are applied consistently for all team members.


37 \| 2025 PROXY STATEMENT	OUR PAY


Compensation Practice	Sleep Number Policy or Practice
Option Award Grant Timing	No	In 2024, we adjusted our equity plan design for our executive officers in an effort to conserve shares available under the plan. Therefore, during the last completed fiscal year no options, SARs or similar option-like instruments were awarded to our executive officers or any other team member. In the past when we have granted option awards, we granted those options annually on March 15 which is generally within two weeks of when we publicly announce our financial results for the fourth quarter and full fiscal year. Our interim equity grants during the year (for example, to newly hired or promoted team members) usually occurs on the 15th day of the month following their hire. We have not intentionally timed any prior option, SARs or similar option-like equity awards to coincide with the release of material non- public information.
LTI Grant Practices and Procedures Policy	Yes	We have a policy that documents the practices and procedures for making LTI grants to eligible team members including executive officers. This policy specifies approval procedures, timing of awards and the award formulas that determine the number of options or RSUs granted.
Repricing of stock options	No	Our equity incentive plan does not permit repricing of stock options without shareholder approval or the granting of stock options with an exercise price below fair market value.
Employment contracts	No	None of our NEOs has an employment contract that provides for continued employment for any period of time.


38 \| 2025 PROXY STATEMENT	OUR PAY


Other NEO Compensation Mix
30% Base Salary	21% Target Short-Term Incentive	24% Target Performance Based PSUs	24% Target Time Based RSUs

70% At-Risk

53% Performance-Based

85% At-Risk

45% Performance-Based

PAY ELEMENTS: WHAT WE DESIGNED, TARGETED AND PAID

2024 Compensation Structure

•Our NEOs’ total direct compensation (TDC) is comprised of a base salary, an annual incentive (AIP or bonus) and

stock awards or long-term incentive (LTI). Each NEO also had some additional pay elements which are detailed on

the Summary Compensation Table and in the pages that follow.

•We generally seek to align TDC opportunity within a competitive range of market median.

•53% of our CEO’s and 45% of our other NEOs’ target TDC was performance-based, while 85% of our CEO’s and

70% of our other NEO’s target TDC was at-risk.

•In 2024, to conserve shares utilized, the following changes were made to our LTI practices:

◦We limited the use of Performance Stock Units (PSUs) and eliminated the use of Non-Qualified Stock Options,

which have a more dilutive effect on our share pool.

◦LTI awards for our NEOs were made in 50% Performance Share Units and 50% Restricted Stock Units;

◦We adjusted our methodology for calculating the number of shares issued under the 2020 Plan. (Instead of

basing the number of shares on the average closing price of the 20 days prior to the grant date ($14.88), we

used the average 2023 share price of $24.74.)

•NEOs realized pay varies significantly due to the high percentage of TDC that is at risk, as well as the changes in LTI

practices; the following pages will illustrate how Sleep Number’s compensation plans are closely connected to the

company performance.


2024 CEO Compensation Mix
15% Base Salary	21% Target Short-Term Incentive	32% Target Performance Based PSUs	32% Target Time Based RSUs


39 \| 2025 PROXY STATEMENT	OUR PAY

Base Salary

•The Compensation Committee determines base salaries for NEOs each year considering multiple factors, including

positioning against external benchmarks, personal performance and contributions, internal equity, succession

planning, retention objectives and budget.

•Salaries comprised 15% of our CEO’s and an average of 30% of our other NEOs’ TDC in 2024.

•The Compensation Committee approved the salary adjustments below effective April 14, 2024. These decisions

were based on recognizing individual performance and contributions, as well as the NEOs pay positioning against

external benchmarks.


Name	Base Salary at March 19, 2023 (Annualized)	Base Salary at April 14, 2024 (Annualized)
Shelly R. Ibach	$1,200,000	$1,200,000
Francis Lee	$625,000	$631,250
Andrea L. Bloomquist	$606,375	$623,354
Melissa Barra	$595,140	$614,482
Samuel R. Hellfeld	$525,000	$549,938

Annual Incentive Plan (AIP)

Design Overview

All Sleep Number team members participate in a variable pay program as part of our compensation philosophy to create

alignment between pay and performance. Our Annual Incentive Plan (AIP) provides our executive officers and more than

1,200 of our team members with an annual incentive opportunity contingent upon our adjusted EBITDA performance

and meeting a defined Shared Strategic Objective. Our remaining team members are part of personal performance or

commission-based variable pay programs.

Adjusted EBITDA is a useful indicator of our annual financial performance and our ability to generate cash flow from

operating activities, which we believe to be an important source of our shareholder value creation. We define adjusted

EBITDA as net income plus: income tax expense, interest expense, depreciation and amortization, stock-based

compensation expense, restructuring costs, CEO transition/proxy contest costs and asset impairments (as detailed in our

quarterly and annual financial filings). For additional information on adjusted EBITDA, including a reconciliation to net

income see “Non-GAAP Data Reconciliations” on page 44 of our Annual Report on Form 10-K filed on March 7, 2025.

In 2024 we introduced a new metric to our AIP plan - performance against a Shared Strategic Objective. This metric was

based on benefits realized through the Company’s operational transformation program and initiatives. These initiatives

strategically and rigorously align our resources, optimize our processes, and foster a culture of continuous improvement

and innovation. Our performance against targets for these initiatives had the ability to modify AIP payouts upwards if

adjusted EBITDA performance was above the threshold performance level.


40 \| 2025 PROXY STATEMENT	OUR PAY

The design of our AIP has three main components that determine the amount of the payout earned by our NEOs for

Company performance: (a) base salary earned for the fiscal year, (b) the target incentive opportunity (as a % of base

salary earned), which is set each year by the Compensation Committee considering market data and the NEO’s position

and (c) the percent of the target payout earned for the year (based on Company performance measured against goals for

adjusted EBITDA and benefits realized through our Shared Strategic Objective). It is the combination of these three

components that results in the final AIP payout earned for our NEOs.


Base Salary Earned	X	AIP Target Incentive (% of Base Salary)	X	% of Target Payout (earned for adjusted EBITDA performance vs. goals)	X	Shared Strategic Objective Modifier (earned for benefits realized vs. goals)	=	AIP Annual Payout Earned

Individual Target Incentive

Each executive officer has a target incentive that is expressed as a percent of the actual base salary earned for the fiscal

year. The Compensation Committee reviews these targets annually to ensure that they are aligned within a competitive

range of the median target incentives and total cash opportunities of our peers and the market (See “2024 Peer Group”

on page 35 and approach to “Benchmarking” on page 35). The 2024 AIP target incentive percentage of base salary did

not change for all NEOs.


Name	AIP Target Incentive for 2024 (% of actual base salary earned)
Shelly R. Ibach	140%
Other NEOs	70%

2024 Performance Goals

The Compensation Committee approved the following performance goals and range of payout opportunities for the

2024 AIP. These goals and payout opportunities were set to provide a strong motivation for achievement of performance

objectives and a reasonable sharing rate of incremental adjusted EBITDA. The following is an overview of the goals and

payout levels that were approved for the 2024 AIP:

EBITDA Performance:

•Target - The performance goal for the target payout of 100% was set at adjusted EBITDA of $141.0 million, which

was equal to the Company’s Annual Operating Plan (AOP) for 2024. This represented a 11.3% increase compared to

our 2023 results.

•Maximum - The performance goal for the maximum payout of 200% was set at adjusted EBITDA of $183.0 million,

which was 30% above AOP and a 44.4% increase over 2023 results. The 200% payout opportunity is designed to

reward breakthrough performance.

•Threshold - The performance goal for the threshold payout of 25% was set at adjusted EBITDA of $109.0 million,

which was 23.0% below AOP and 14.0% below 2023 results. This represented an appropriate starting point for the

threshold payout and was aligned with the approach taken by many of our peers and other similarly sized

companies.


41 \| 2025 PROXY STATEMENT	OUR PAY


	AIP Payout Earned (% of Target)	Annual Adjusted EBITDA Goals (in millions)	% of AOP Achieved
Threshold	25%	$109.0	77%
Target	100%	$141.0	100%
Maximum	200%	$183.0	130%

Shared Strategic Modifier Performance:

New for 2024, there was an opportunity to earn a higher payout based on our achievement of benefits through our

operational transformation program and initiatives. A multi-year operational benefit target was identified for specific

percentages of modification available under the plan from 100% to 125%. Achieving these specific targets would allow

for the final AIP payouts to be modified upwards if a minimum of threshold adjusted EBITDA performance was achieved.


Run Rate Benefits Achieved	<$100M	$100-112.5M	$112.5-131M	$131-150M	$150M+
Modifier	100%	110%	115%	120%	125%

2024 AIP Payout

Our adjusted EBITDA for 2024 was $119.6 million, down 5.6% from 2023 actual and 84.8% below the Company’s AOP,

which was the goal for target payout. For this level of adjusted EBITDA, a payout of 49.8% was earned for the 2024

EBITDA portion of the AIP payout. No adjustments were made to our reported adjusted EBITDA results in this

determination of the AIP payout for 2024.

Our operational transformation programs and initiatives realized a multiyear benefit of $139.1 million, resulting in an AIP

modifier of 120%. Our EBITDA performance, combined with the 120% modifier resulted in a final AIP payout of 59.8% of

target.

The following table shows the full-year AIP target earned for 2024 by each NEO.


Name	2024 Base Salary Earned	2024 AIP Target (% of Salary)	2024 AIP Target Incentive Opportunity	2024 AIP Actual Payout Earned $	2024 Actual Payout Earned %
Shelly R. Ibach	$1,200,000	140.0%	$1,680,000	$1,004,640	59.8%
Francis Lee	$629,327	70.0%	$440,529	$263,436	59.8%
Andrea L. Bloomquist	$618,130	70.0%	$432,691	$258,749	59.8%
Melissa Barra	$608,531	70.0%	$425,971	$254,731	59.8%
Samuel R. Hellfeld	$542,265	70.0%	$379,585	$226,992	59.8%

Long-Term Incentive Plan (LTI)

Design Overview

LTI is the largest component of the total direct compensation opportunity for our executive officers. It provides a reward

opportunity that is directly aligned with the long-term interest of our shareholders. Our Performance Share Units (PSUs)

only payout value if we achieve long-term Company performance goals; and our Restricted Stock Units (RSUs) value is

aligned to our stock price appreciation. The grants have multi-year vesting requirements which also assist in the retention

of our executive team, which we believe is especially important to execute a long-term oriented innovation strategy.


42 \| 2025 PROXY STATEMENT	OUR PAY

In 2024, Sleep Number adjusted its equity plan design for our executive officers in an effort to conserve shares available

under the plan. These changes included:

•Limiting the use of Performance Stock Units (PSUs) and eliminating the use of Non-Qualified Stock Options, which

have a more dilutive effect on the 2020 Plan;

•Adjusting our methodology for calculating the number of shares issued under the 2020 Plan. (Instead of basing the

number of shares on the average closing price of the 20 days prior to the grant date ($14.88), we used the average

2023 share price of $24.74.)

The design of our LTI includes two types of annual equity grants: Performance Stock Units (PSUs) and Restricted Stock

Units (RSUs). For 2024, our executive officers received an annual total LTI grant value that was split 50% in PSUs and 50%

in RSUs (an adjustment from 2023 grants, which were 75% PSUs and 25% Stock Options). This combination balances

performance- and time-based awards to appropriately reward our executive officers for achieving long-term profitable

growth and the creation of shareholder value.


Total LTI Grant Value	X	50%	=	PSUs (Target Grant Value)	}	PSU grants only have payout value if Company performance goals are achieved; RSU value is directly tied to stock price performance

	X	50%	=	RSUs (Grant Value)

As a condition of accepting any LTI grant, our executive officers agree to reasonable restrictions on their activities during

and for a reasonable period of time after their respective termination of employment, including, but not limited to, and

where permitted by law, the assignment of inventions, non-competition, non-solicitation, confidentiality and an

agreement to arbitrate disputes.

PSU Grants

PSUs become vested on the third anniversary of the grant date, and a percent of target is earned, provided performance

exceeds established threshold goals, and paid out based on Company performance against annual growth goals over a

three-year performance period. The payout earned under the PSUs may be reduced based on an ROIC modifier (the

modifier can only reduce a payout, not increase it). The performance metrics for 2024 PSUs, which are the same metrics

as the 2023 PSUs, are annual growth in net sales and NOP over fiscal years 2024, 2025 and 2026. Prior to the grant date,

the Compensation Committee established annual growth goals for each of the three years, considering the Company’s

long-range strategic plan and performance growth targets. Performance against these annual growth goals will

determine the percent of target payout earned for net sales and NOP for the entire performance period. The annual

measurement for either metric can yield a payout ranging from 50% to 200% of target, with no payout being earned if

performance is below the goal for a threshold payout.

At the end of the three-year performance period, the payout for PSUs is determined based on the average of the

payouts earned for each of the three years in the performance period, with net sales and NOP equally weighted each

year. By assessing growth achieved each year relative to long-term growth goals, our executive officers are able to make

the appropriate investments in the business during ever-changing market and competitive environments while

prioritizing long-term sustainable profitable growth.


43 \| 2025 PROXY STATEMENT	OUR PAY

The payout earned for the 2024 PSUs is subject to an ROIC modifier that can reduce (but not increase) the payout by up

to 20%. The reduction occurs if the three-year average basis points difference between adjusted ROIC and Weighted

Average Cost of Capital (WACC) for the 2024 to 2026 period is below a certain threshold established by the

Compensation Committee prior to the grant date. The ROIC modifier reduces the payout earned if capital investments in

the business do not generate returns that are sufficiently above the WACC.

The following chart illustrates how the overall payout for 2024 PSUs, covering the 2024 to 2026 period, will be

determined, which is the same design as the 2023 PSUs.


Net Sales			NOP
2024	Net sales annual growth each year	% of target payout earned for net sales each year	2024	NOP annual growth each year	% of target payout earned for NOP each year
2025			2025
2026			2026
Three-year average % of target earned for net sales			Three-year average % of target earned for NOP


Overall payout:	Average of the % of target payout earned for net sales and NOP each year (equal weighting) times the target number of PSUs granted; then subject to a potential reduction of up to 20% if the difference between adjusted ROIC and WACC is below a certain threshold

In an effort to conserve shares issued under the Plan, the target number of PSUs for the 2024 award was determined by

dividing the grant value (equal to 50% of the executive officer’s total LTI grant value) by the average 2023 share price of

$24.74. See the footnotes to the “Summary Compensation Table” and “Grants of Plan-Based Awards” for a description

of how grant date fair value is determined for purposes of the disclosure in these tables.

RSU Grants

Restricted stock units vest in three equal annual installments on each of the anniversaries following the grant date.

The number of stock options granted in 2024 was determined by dividing the RSU grant value (50% of the executive

officer’s total LTI grant value) by the average 2023 share price of $24.74. See the footnotes to the “Summary

Compensation Table” and “Grants of Plan-Based Awards” for a description of how grant date fair value is determined

for purposes of the disclosure in these tables.

LTI Grant Values

The Compensation Committee approves a total LTI grant value for each executive officer, considering the executive

officer’s performance and level of responsibility, as well as the competitive positioning of the officer’s targeted total

direct compensation. The Compensation Committee seeks to make annual LTI grants to provide a total direct

compensation opportunity that is within a competitive range of the market median.


44 \| 2025 PROXY STATEMENT	OUR PAY

The following table summarizes the annual LTI grants made to our NEOs in 2024, and the split in grant value between

PSUs (50%) and RSUs (50%). See “Grants of Plan-Based Awards” for more information on these awards. As noted earlier,

the number of PSUs and RSUs granted was based on the average 2023 share price of $24.74 rather than basing the

number of shares on the average closing price of the 20 days prior to the grant date ($14.88), which has been our

historical practice for calculating the number of shares issued under the 2020 Plan.


Name	Annual LTI Grants during 2024 (Granted March 15, 2024)
Name	PSU Grant Value at Target	RSU Grant Value	Total LTI Grant Value (Shares Determined Using 2023 Avg Share Price of $24.74)	Grant Date Fair Market Value (Based on Grant Date Share Price of $13.53)
Shelly R. Ibach	$2,250,000	$2,250,000	$4,500,000	$2,460,998
Francis Lee	$600,000	$600,000	$1,200,000	$656,286
Andrea L. Bloomquist	$500,000	$500,000	$1,000,000	$546,910
Melissa Barra	$500,000	$500,000	$1,000,000	$546,910
Samuel R. Hellfeld(1)	$412,500	$412,500	$825,000	$451,198

(1) In addition to the amounts shown above, the Compensation Committee approved a special LTI grant for Mr. Hellfeld in recognition of his 2023

performance. The LTI grant value was $125,000 in the form of time-vested RSUs. The date of the grant was March 15, 2024. The number of PSUs and

RSUs granted was based on the average 2023 share price of $24.74. The RSUs are subject to a three-year ratable vesting requirement with the award

becoming fully vested three years from the date of grant subject to the terms and conditions of the RSU award agreement. See “Grants of Plan-

Based Awards” for more information on this award.

Note: The actual grant date fair value for these LTI grants as disclosed in the Summary Compensation Table varies from the amounts shown above due

to share count rounding and valuation assumptions as described in the footnotes to the “Grants of Plan-Based Awards” table on page 55.

2022 PSU Payout

The 2022 PSUs covering the 2022 to 2024 period, which are similar in design to the 2024 PSUs, were granted on March

15, 2022 and vested on March 15, 2025. Based on net sales and NOP annual growth over the three fiscal years (2022,

2023 and 2024), no payout was earned for the 2022 PSUs.

The following are the annual growth goals that were established for the 2022 PSU grant.


	% of Target Payout Earned	Annual Growth in Net Sales	Annual Growth in NOP	Average Difference in Basis Points Between Adjusted ROIC and WACC	% Reduction in Target Number of PSUs
Threshold	50%	3%	4%	300 or more	No reduction
Target	100%	5%	8%	200 to 299	-5%
Maximum	200%	12%	16%	100 to 199	-10%
				1 to 99	-15%
				0 or less	-20%


45 \| 2025 PROXY STATEMENT	OUR PAY

The following chart shows the actual performance achieved for the performance period and how the total payout for

2022 of 0% of target was determined.


	Net Sales ($M)	% Annual Growth	% of Target Earned	NOP ($M)(1)	% Annual Growth(2)	% of Target Earned	Average % of Target Earned
2022	$2,114	-3.2%	0%	$67.9	-64.9%	0%	0%
2023	$1,887	-10.7%	0%	$38.7	-58.2%	0%	0%
2024	$1,682	-10.9%	0%	$22.9	-76.4%	0%	0%
	Three-year average:		—%	Three-year average:		—%	—%

(1)2023 NOP is adjusted for $15.7M in restructuring costs. See “Reported to Adjusted Statements of Operations Data Reconciliation” on page 11 of

our Form 8-K filed on February 22, 2024.

(2) The 2022 PSU plan provided that the annual NOP percentage growth rate will not in any case be determined from a base NOP level that is less than

50% of the 2021 NOP. As 2023 and 2024 NOP was less than 50% of 2021 NOP, this percentage change for 2023 and 2024 NOP represents annual

growth compared to 50% of fiscal year 2021 NOP.

Total payout actually earned: 0% of target

(equal weighting of average payout earned on Net Sales and NOP)

The following chart shows the calculation of the average difference between adjusted ROIC and WACC for the

performance period.


	Adjusted ROIC	WACC	Adjusted ROIC Premium in Basis Points vs. WACC
2022	17.6%	10.1%	750
2023	7.8%	9.1%	-130
2024	7.6%	7.8%	-20
	Three-year average:		200

ROIC modifier was not applied to this payout due to no payouts being earned. The three-year average premium of 200

basis points would have modified the payout down by 5%.

Benefits and Perquisites

Benefits

Our executive officers participate in the benefit programs provided to our benefit eligible team members. This includes

Company provided medical, dental, basic life, short-term disability, long-term disability and a matched 401(k) plan. Our

NEOs participate in the 401(k) plan on the same basis as all other team members. There is no supplemental matching

program, excess plan or other executive retirement program. The value of the 401(k) matching contribution made by the

Company for our NEOs is included in “All Other Compensation” as disclosed in the “Summary Compensation Table” on

page 54.

Non-Qualified Deferred Compensation Plan

As described in more detail on page 59, our executive officers, along with other leaders, may elect to defer a portion of

their salary, AIP payout and PSU/RSU payout under this non-qualified deferred compensation plan. The Company does

not make any contributions to this plan on behalf of participants. The plan offers a range of investment options for the

tracking of an investment return on the deferrals, and participants can elect how their deferrals will be distributed in the

future.

Executive Benefits and Perquisites

Consistent with our commitment to emphasize pay for performance in our mix of total compensation, our executive

officers receive very few executive benefits and perquisites. The Company provides two perquisites to our executive

officers – financial counseling and an annual executive physical exam. The annual limit for financial counseling was

$20,000 for our CEO and $10,000 for our other NEOs. The Company pays for the cost after insurance coverage of an


46 \| 2025 PROXY STATEMENT	OUR PAY

annual executive physical exam. Amounts reimbursed for financial counseling or the executive physical exam are fully

taxable to the executive, and there is no “gross up” by the Company to cover these taxes for the executive. Additionally,

the Compensation Committee approved the payment of certain one-time security enhancement costs and ongoing

security monitoring expenses for our CEO that were recommended as part of a security study conducted by an

independent third-party security consultant. The total amount paid by the Company in 2024 that was included in the “All

Other Compensation” column of the “Summary Compensation Table” on page 54 was $1,764, which represents security

monitoring costs.

Employment Agreements

We do not have employment agreements with any of our executive officers that provide for continued employment for

any period of time.

Severance Plan

Our executive officers and other key leaders of the Company participate in the Sleep Number Executive Severance Pay

Plan. This plan provides for severance pay, prorated incentive payment and other benefits such as outplacement and

limited COBRA reimbursement in the event of involuntary termination of employment not for cause or termination for

good reason, including for events following a change-in-control, as those terms are defined in the plan. This plan is

described in more detail in the compensation table in the section labeled “Potential Payments Upon Termination or

Change in Control” starting on page 60.

Compensation Related to CEO Transition

CEO Transition and Advisory Agreement

As previously disclosed, on October 24, 2024 we entered into a Transition and Advisory Agreement with Ms. Ibach to

facilitate a smooth leadership transition and ensure that the company continues to benefit from Ms. Ibach’s relationships

with key partners and suppliers and institutional knowledge. Pursuant to the agreement, Ms. Ibach will retire as Chair at

the 2025 Annual Meeting and will thereafter serve as a strategic advisor to the Board of Directors through the end of

2025.

As further described in a Form 8-K filed by Sleep Number on October 30, 2024, in exchange for Ms. Ibach remaining as

an advisor with the Company, Ms. Ibach’s outstanding performance adjusted restricted stock unit (“PSU”) and stock

option awards issued under our 2020 Equity Incentive Plan, as amended, (“2020 Plan”) will be treated in accordance with

the retirement provision of the award agreements, which provides for the treatment of such awards in the event of Ms.

Ibach’s retirement at or beyond age 60 with five or more years of service with Sleep Number; provided, however, the

Compensation Committee waived the requirement, as applicable, that Ms. Ibach provides written notice of her intention

to retire one year before her actual retirement date. Under such retirement treatment, Ms. Ibach’s outstanding PSU and

stock option awards will become fully vested upon her separation of employment from Sleep Number, and options will

remain exercisable for three years after her separation of employment from Sleep Number, subject to a maximum

exercise period of 10 years from the original grant date of the option awards. Ms. Ibach’s outstanding RSU awards issued

under the 2020 Plan will become fully vested upon her separation of employment from Sleep Number and will be

treated in accordance with the RSU award agreements provided that we waived the requirement that Ms. Ibach remain

in continuous employment or service with Sleep Number during the regular vesting period set forth in the RSU award

agreements.

The Summary Compensation Table reflects the grant or modification date fair value of awards modified under Ms.

Ibach’s Transition and Advisory Agreement, computed in accordance with FASB ASC Topic 718. Excluding the value of

awards modified under the Transition and Advisory Agreement, the total compensation paid to Ms. Ibach in 2024 would

be $4,704,277, approximately 29% lower than her total reflected in the Summary Compensation Table below and 26%

lower than the total compensation paid in 2023.


47 \| 2025 PROXY STATEMENT	OUR PAY


Grant Date Fair Value of 2024 Stock and Option Awards (i.e., Summary Compensation Table Pay)	Modification Date Fair Value of Awards Modified Under Transition and Advisory Agreement	Ms. Ibach’s Total 2024 Summary Compensation Table Pay	Summary Compensation Table Pay excluding Modification Date Fair Value of Awards Modified	Difference
$4,340,130	$1,879,132	$6,583,409	$4,704,277	(29)%

New CEO Hire Package

In connection with Linda Findley’s appointment as CEO on April 7, 2025, the Company entered into an offer letter with

Ms. Findley that documents, among other things, her compensation and employment terms. After the letter was

executed, but prior to Ms. Findley’s start date and the grant date under her equity inducement awards, we reported our

financial results for 2024 and provided details of our financial outlook. The Company’s stock price declined significantly

on and after the date of that report. Because Ms. Findley’s inducement grant of equity was to be based, in some

circumstances, on the stock price on the grant date (which was subsequent to the stock price decline), Ms. Findley, the

Compensation Committee and independent Directors, recognized that the inducement grant as originally structured

would create more dilution than they anticipated at the time the offer letter was executed.

The Company and Ms. Findley reached an agreement to restructure the inducement grant, in the interests of

shareholders, by using a notional share price based on the average closing price in 2024 to calculate the number of

shares to be granted, adding additional performance metrics to the vesting conditions and as a multiplier on some of the

equity awards and providing for a cash sign-on bonus, a portion of which Ms. Findley requested to use to purchase the

Company’s stock in the open market subject to our Insider Trading Policy.

The Compensation Committee, together with the other independent Directors, spent a significant amount of time

evaluating and preparing Ms. Findley’s compensation package with the Compensation Committee’s independent

compensation consultant. In approving the final terms of Ms. Findley’s compensation package, including the

amendments to the initial compensation structure, they considered, among other things:

•Sleep Number’s critical need for a qualified leader to continue our ongoing business transformation;

•Ms. Findley’s experience and track record of performance and achievement in her previous roles;

•Ms. Findley’s total target direct compensation and benefits in her previous role;

•Sleep Number’s peer group, and the total compensation opportunity for CEOs of companies with whom the

Company competes for talent;

•Our recent stock price decline; and

•The alignment of Ms. Findley’s compensation package with the Company’s pay for performance philosophy.

Based on such considerations, the Compensation Committee and the other independent Directors ultimately approved a

compensation package for Ms. Findley as summarized below.


Compensation Element	Description	Rationale
Base Salary	Annual base salary of $1,200,000	Provides a predictable level of income
Annual Incentive Award	125% of base salary (target); 25% of target (threshold); 200% of target (maximum)	Ties upside earning opportunity to Company and individual performance results


48 \| 2025 PROXY STATEMENT	OUR PAY


Compensation Element	Description	Rationale
Annual Long-Term Incentive Award	Annual equity awards with a target value of $5,000,000, with normal annual grants commencing in 2026. The current mix of the annual award is comprised of performance stock units (50%) and time vested restricted stock units (50%).	Aligns Ms. Findley’s interests with those of our shareholders and motivates and rewards exceptional performance.
Inducement Equity Grant – Time-Based RSUs with Performance Modifier	One-time RSU with Performance Modifier award of 362,057 shares. •Award vests ratably over 3 years •The final number of shares vesting may be modified based on the average closing share price for the 20-days prior to the vesting, with 100% vesting if the average share price is at or below $13.81, 125% vesting if the average share price is $30.00 and 200% vesting if the average share price is greater than or equal to $50.00. Payouts will be interpolated between the points noted above.	Aligns Ms. Findley’s interests with those of our shareholders and motivates and rewards exceptional performance. Aligns Ms. Findley’s awards with that of all other team members and the Directors by basing the number of shares granted on the share price of $13.81, the average closing price in 2024. Necessary to attract and retain a qualified leader like Ms. Findley.
Inducement Equity Grant – Performance Share Units	2025 PSU award of 181,028 shares. •Award cliff vests in 3 years. •Performance metrics include Net Sales and Net Operating Profit in fiscal years 2025, 2026, and 2027. •The final number of shares vesting may be modified based on the Company’s relative Total Shareholder Return (rTSR) versus the S&P 1500 Specialty Retail Index such that the award may be increased by 20% if the Company’s rTSR is within the top 25th percentile of the index, and may be decreased
Inducement Equity Grant – Time-Based RSUs	2025 RSU award of 181,029 shares. •Award vests ratably over 3 years.


49 \| 2025 PROXY STATEMENT	OUR PAY


Compensation Element	Description	Rationale
Inducement Cash Award	Sign-on cash bonus of $2,500,000 to be paid in three installments: first installment of $1,250,000 on April 15, 2025, the second installment of $625,000 on April 15, 2026, and the third installment of $625,000 on April 15, 2027; Ms. Findley will use the after-tax proceeds from the first installment to buy, or enter into a trading plan to buy, common stock in the open market in the Company’s next open trading window, subject to the Insider Trading Policy.	Aligns Ms. Findley’s interests with those of shareholders by requiring Ms. Findley to use the after-tax proceeds from the first installment to buy, or enter into a trading plan to buy, shares of the Company’s common stock in the open market. Necessary to attract and retain a qualified leader like Ms. Findley.
Benefits and Perquisites	Company-provided medical dental, basic life, short-term disability, long-term disability, matched 401(k) plan, non-qualified deferred compensation plan, financial counseling, executive physical and relocation assistance.	Benefits are substantially similar to what are provided to other company employees Necessary to attract and retain a qualified leader like Ms. Findley.

COMPENSATION OVERSIGHT AND PROCESSES

Compensation Philosophy and Approach

Our executive compensation program is designed to support our long-term strategic orientation. It is competitive,

heavily weighted toward performance-based incentive programs and allows for appropriate risk taking and investments

in the business as we execute our consumer innovation strategy. Our incentive programs reward our executive officers

for superior performance to deliver sustainable, profitable growth. The incentive opportunities are tied to multiple

financial metrics that support our business strategy and are aligned with stakeholder interests.

Our executive compensation program is designed to:

•Attract, motivate and retain a talented management team to achieve superior Company performance that is

sustainable over time;

•Provide a market competitive total compensation opportunity that is predominantly performance based and at risk;

•Reward executives for achieving financial performance goals and creating shareholder value; and

•Reinforce our philosophy of pay for performance with opportunities to earn market competitive compensation.

Tax Considerations

Section 162(m) of the Internal Revenue Code generally places a $1 million limit on the amount a publicly held company

can deduct in any tax year on compensation paid to each “covered employee” which includes our NEOs. While the

Compensation Committee considers tax deductibility as one of many factors in determining executive compensation, the

Compensation Committee will award or modify compensation that it determines to be consistent with the goals of our

executive compensation program even if such compensation is not tax deductible by the Company.

We currently expect that we will continue to structure our executive compensation program consistent with our pay for

performance philosophy so that a significant portion of total executive compensation is linked to Sleep Number’s

performance.


50 \| 2025 PROXY STATEMENT	OUR PAY

Compensation Committee and Governance

The Compensation Committee is comprised entirely of independent, non-employee Directors. The key responsibilities of

the Compensation Committee as outlined in its charter include:

•Review and approve the Company’s compensation philosophy;

•Establish executive compensation structure and programs designed to motivate and reward superior Company

performance;

•Lead the Board of Directors’ annual process to evaluate the performance of the CEO;

•Determine the composition and value of compensation for the CEO and other executive officers including base

salaries, annual cash incentive awards, long-term equity-based awards, benefits and perquisites;

•Establish, administer, amend and terminate executive compensation and major team member benefit programs;

•Periodically review the Company’s succession and management development plans for the CEO and other executive

officers;

•Periodically review the Company’s objectives and programs for talent management, including initiatives focused on

wellbeing and diversity, equity and inclusion;

•Assess management development progress and talent depth, organizational strategy and succession planning for

key leadership positions in the context of the Company’s strategic, operational and financial growth objectives; and

•Establish structure and amount of non-employee Director compensation.

•To the extent determined by the Compensation Committee, and subject to the requirements of applicable law, the

Compensation Committee may delegate duties and responsibilities to one or more members of the Compensation

Committee or others.

The Compensation Committee usually meets five to six times per year, in person or virtually to conduct normal

committee business. Our Chair and CEO, independent Lead Director, certain members of our management team and

the Compensation Committee’s independent compensation consultant may be invited to attend all or a portion of a

Committee meeting, depending on the nature of the agenda. The Compensation Committee meets in executive

session, as needed, without members of management present. In addition to these normal meetings, in 2024 the

Compensation Committee held several additional ad hoc meetings relating to CEO succession planning.

Neither our Chair and CEO nor any other member of our management team votes on any matters before the

Compensation Committee. The Compensation Committee, however, solicits the views of our CEO on compensation

matters, other than her own, and particularly with respect to the compensation of members of the management team

reporting to the CEO. The Compensation Committee also solicits the views of other members of senior management

and the Company’s Human Resources leaders on topics related to key compensation elements and broad-based team

member benefit plans.


51 \| 2025 PROXY STATEMENT	OUR PAY

Role of Independent Compensation Consultant

Under its charter, the Compensation Committee has the authority to retain and consult with independent advisors to

assist in fulfilling their responsibilities and duties. To maintain the independence of these advisors, use by the Company

of any of these advisors for work other than that expressly commissioned by the Compensation Committee must be

approved in advance by the Compensation Committee.

Since fiscal 2013, the Compensation Committee has retained Frederic W. Cook & Co., Inc. (FW Cook) as its independent

compensation consultant. At the Compensation Committee’s request each year, FW Cook certifies that it continues to

be an independent advisor and discloses information in a letter to the Compensation Committee that demonstrates this

independence. The Compensation Committee assessed this certification and disclosure information and concluded that

no conflict of interest or independence concerns exist in the engagement of FW Cook as the Compensation

Committee’s independent compensation consultant. In the course of its engagement, the independent compensation

consultant:

•Provides on-going assessment of each of the principal elements of the Company’s executive compensation program;

•Advises the Compensation Committee on the design of both the annual cash incentive plan and the long-term

equity incentive program;

•Works with the Compensation Committee and representatives of senior management to assess and refine the

Company’s peer group for ongoing comparative analysis purposes;

•Provides the Compensation Committee with updates related to regulatory and legislative matters;

•Reviews market data, trends and analyses based on proxy data for our peers and other data sources to inform

executive compensation levels and design; and

•Provides advice and guidance to the Compensation Committee on pay actions for executives.

CEO Assessment Process

The Compensation Committee evaluates the CEO’s performance by soliciting input from all members of the Board. The

Board also assesses the CEO’s performance against objectives incorporating key strategic and operational factors,

including growth, profitability, innovation, advancement of strategic initiatives, organizational development and

stakeholder relations. The CEO performance feedback from all independent Board members is consolidated into a

report which is the basis of a full Board discussion in Executive Session led by the Chair of the Compensation

Committee. The Board’s assessment of CEO performance is a major consideration in determining any compensation

adjustments for the coming year.

Compensation Risk Assessment

Based on an annual risk assessment, the Company has determined that none of its compensation policies, practices or

programs is reasonably likely to have a material adverse effect on the Company. The results of this risk assessment were

shared with the Compensation Committee.

Insider Trading Policy

We have adopted an Insider Trading Policy that applies to members of our Board, our executive officers and all other

team members who have access to material, nonpublic information regarding Sleep Number. As described in the policy,

filed as Exhibit 19.1 to the Company’s Form 10-K, the policy is reasonably designed to promote compliance with insider

trading laws.


52 \| 2025 PROXY STATEMENT	OUR PAY

Grant of Certain Equity Awards

In 2024, we adjusted our equity plan design for our executive officers in an effort to conserve shares available under the

plan. Therefore, during the last completed fiscal year no options, SARs or similar option-like instruments were awarded

to our executive officers or any other team member. In the past when we have granted option awards, we granted those

options annually on March 15 which is generally within two weeks of when we publicly announce our financial results for

the fourth quarter and full fiscal year. Our interim equity grants during the year (for example, to newly hired or promoted

team members) usually occurs on the 15th of the month following their hire or promotion date.

Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic

Information

During fiscal 2024, we did not grant any stock options or similar awards as part of our equity compensation program.

Our fiscal 2024 equity compensation program for executive officers consisted of a mix of PSU and RSU awards. With

respect to the timing equity awards, it is our policy to make annual executive equity grants on March 15. Our practice

with respect to the timing of annual non-employee Director equity grants is the date of the Annual Meeting. If stock

options or similar awards are granted in the future, we intend to avoid granting stock options or similar awards in

anticipation of the release of material nonpublic information that is likely to result in changes to the price of our common

stock, such as a significant positive or negative earnings announcement, and not time the public release of such

information based on stock option grant dates. We have not intentionally timed any prior option, SARs or similar option-

like equity awards to coincide with the release of material non-public information.

Grant Practices Specific to Stock Options

We do not currently grant stock options as part of our equity compensation programs. If stock options were to be

granted in the future, the Company would not grant such options in anticipation of the release of material nonpublic

information that is likely to result in changes to the price of our common stock. In addition, we generally do not grant

stock options at any time during the four business days prior to or the one business day following the filing of our

periodic reports or the filing or furnishing of a Form 8-K that discloses material nonpublic information. These restrictions

do not apply to RSUs, PSUs, or other types of equity awards that do not include an exercise price related to the market

price of our common stock on the date of grant. During fiscal year 2024, (i) none of our NEOs were awarded stock

options with an effective grant date during any period beginning four business days before the filing or furnishing of a

Form 10-Q, Form 10-K, or Form 8-K that disclosed material nonpublic information, and ending one business day after

the filing or furnishing of such reports, and (ii) we did not time the disclosure of material nonpublic information for the

purpose of affecting the value of executive compensation.

Stock Ownership Guidelines

Encouraging stock ownership among our executive officers is critical in aligning their interests with those of our

shareholders. The Company has a stock ownership guideline policy in place for executive officers as well as for

Directors. Under the policy, all executive officers and non-employee Directors are expected to achieve the ownership

guideline within five years of first becoming an executive officer or being initially elected to the Board.

According to the policy, the stock ownership value for executive officers includes: (a) shares owned outright, (b) shares

held in the Profit Sharing and 401(k) Plan or the Executive Deferral Plan, (c) after-tax intrinsic value of vested and

outstanding stock options, and (d) after-tax value of outstanding PSUs (prorated to the extent that any year of the

performance period has been completed and the payout for that year is known). For non-employee Directors, the stock

ownership value includes: (a) shares owned outright, (b) shares deferred in lieu of Director fees, (c) shares deferred from

vested RSU awards, and (d) unvested and outstanding RSU awards.

Until the guideline is met, executive officers are required to hold 50% of the net shares from the vesting or payout of any

LTI grant or from the exercise of stock options. For non-employee Directors, they are not permitted to sell any shares


54 \| 2025 PROXY STATEMENT	OUR PAY

KEY TABLES AND GRAPHS

Summary Compensation Table

The following table contains compensation information for the last three fiscal years relating to the NEOs. Note that the

AIP awards earned for each fiscal year are reported under the heading “Non-Equity Incentive Plan Compensation.” The

values shown under the headings “Stock Awards” and “Option Awards” are the grant date fair values of the awards

received in each fiscal year. This does not represent what was earned or paid out for these awards due to performance.

The details of our NEOs’ compensation are discussed in the Compensation Discussion and Analysis beginning on

page 31.


Name And Principal Position	Year	Salary ($)	Bonus ($)	Stock Awards(1)(2) ($)	Option Awards(1)(3) ($)	Non- Equity Incentive Plan Compensation(4) ($)	All Other Compensation(5) ($)	Total ($)
Shelly R. Ibach Former President and CEO(8)	2024	$1,200,000	—	$3,357,129	$983,001	$1,004,640	$38,639	$6,583,409
	2023	$1,200,000	—	$3,444,144	$1,165,494	$420,000	$119,553	$6,349,191
	2022	$1,189,615	—	$4,037,198	$1,382,187	$—	$93,614	$6,702,614
Francis K. Lee EVP and CFO(6)	2024	$629,327	—	$656,286	$—	$263,436	$22,298	$1,571,347
Francis K. Lee EVP and CFO(6)	2023	$228,365	$300,000	$1,431,245	$1,194,801	$—	$10,488	$3,164,899
Andrea L. Bloomquist EVP and Chief Innovation Officer	2024	$618,130	—	$546,910	$—	$258,749	$18,201	$1,441,990
	2023	$599,712	—	$823,038	$278,483	$103,783	$18,468	$1,823,484
	2022	$571,154	—	$750,094	$257,343	$0	$17,751	$1,596,342
Melissa Barra EVP and Chief Sales and Services Officer	2024	$608,530	—	$546,910	$—	$254,731	$26,240	$1,436,411
	2023	$589,858	—	$823,038	$278,483	$102,301	$24,889	$1,818,569
	2022	$565,962	—	$750,094	$257,343	$—	$20,725	$1,594,124
Samuel R. Hellfeld EVP and Chief Legal and Risk Officer(7)	2024	$542,265	—	$519,552	$—	$226,992	$19,484	$1,308,293
	2023	$519,231	—	$685,817	$232,112	$89,856	$20,243	$1,547,259
	2022	$488,115	—	$714,639	$196,101	$—	$18,394	$1,417,249

(1)Reflects the aggregate grant date fair value of equity awards granted or modified during fiscal years 2024, 2023 and 2022, computed in accordance

with FASB ASC Topic 718. See Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended

December 28, 2024, for a discussion of the relevant assumptions used in calculating these amounts.

(2)The “Stock Awards” column includes Performance Stock Unit (PSU) and Restricted Stock Unit (RSU) awards granted during fiscal years 2024, 2023

and 2022. The amounts included for PSU awards represent the grant date fair value assuming the achievement of the performance goals for a target

payout. If the PSU awards granted during fiscal year 2024 had been calculated assuming that the maximum payout had been earned, the grant date

fair value of these PSU awards would have been as follows: for Ms. Ibach, $2,460,999 (target of $1,230,499); for Mr. Lee, $656,286 (target of

$328,143); for Ms. Bloomquist, $546,910 (target of $273,455); for Ms. Barra, $546,910 (target of $273,455); and for Mr. Hellfeld, $451,198 (target of

$225,599). Also included in this column is the grant date fair value of RSU awards granted during fiscal year 2024, as disclosed in the “Grants of Plan-

Based Awards” table, and the incremental cost associated with the modification of awards for Ms. Ibach.

(3)No new stock option awards were granted in fiscal year 2024. The 2024 amount in the “Option Awards” column for Ms. Ibach represents the

incremental expense related to the modification of certain option awards granted in previous years, in conjunction with the Transition and Advisory

Agreement dated October 24, 2024.

(4)Represents annual incentive compensation earned under the AIP. See the discussion in the Compensation Discussion and Analysis under the

heading “Annual Incentive Plan (AIP).”

(5)The amounts in the “All Other Compensation” column include but are not limited to the costs of (a) reimbursement for personal financial planning

and tax advice; (b) Company sponsored physical exam; and (c) Company matching contribution to the 401(k) Plan according to a matching formula

and contribution limits that are the same for all participants. For the CEO, the amounts shown for fiscal year 2024, 2023 and 2022 include the

payment of certain one-time security enhancement costs and ongoing security monitoring expenses that were recommended as part of a security

study conducted by an independent third-party security consultant. The total amount paid by the Company in 2024 for those security monitoring

was $1,764.

(6)Mr. Lee assumed the role of Executive Vice President and Chief Financial Officer on August 14, 2023.

(7)Mr. Hellfeld assumed the role of Executive Vice President and Chief Legal and Risk Officer on March 15, 2022.

(8)Ms. Ibach was President and CEO through April 6, 2025.


55 \| 2025 PROXY STATEMENT	OUR PAY

Grants of Plan-Based Awards

The following table summarizes for each of the NEOs the non-equity incentive award opportunity under the AIP for fiscal

year 2024 and the equity awards made during the fiscal year 2024.


Name	Grant Date	Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)			Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock or Units (#)	All Other Option Awards: Number of Securities Under- lying Options (#)	Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)(16)
Name	Grant Date	Thresh- old ($)	Target ($)	Maxi- mum ($)	Thresh- old (#)	Target (#)	Maxi- mum (#)			Exercise or Base Price of Option Awards ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)(16)
Shelly R. Ibach		$420,000	$1,680,000	$4,200,000
	3/15/24(2)				7,549	90,946	181,892				$1,230,499
	3/15/24(3)							90,946			$1,230,499
	10/24/24(4)(5)				2,645	31,856	42,465				$146,603
	10/24/24(4)(6)							54,235			$749,528
	10/24/24(4)(7)								53,720	$23.61	$35,241
	10/24/24(4)(8)								51,095	$34.35	$118,428
	10/24/24(4)(9)								40,405	$47.00	$127,845
	10/24/24(4)(10)								10,045	$43.91	$32,133
	10/24/24(4)(11)								67,325	$35.68	$219,237
	10/24/24(4)(12)								21,880	$146.97	$40,463
	10/24/24(4)(13)								40,550	$61.66	$119,822
	10/24/24(4)(14)								4,340	$41.95	$13,966
	10/24/24(4)(15)								68,490	$28.41	$275,866
Francis K. Lee		$110,132	$440,539	$1,101,322
	3/15/24(2)				2,013	24,253	48,506				$328,143
	3/15/24(3)							24,253			$328,143
Andrea L. Bloomquist		$108,173	$432,691	$1,081,727
	3/15/24(2)				1,678	20,211	40,422				$273,455
	3/15/24(3)							20,211			$273,455
Melissa Barra		$106,493	$425,971	$1,064,929
	3/15/24(2)				1,678	20,211	40,422				$273,455
	3/15/24(3)							20,211			$273,455
Samuel R. Hellfeld		$94,896	$379,585	$948,964
	3/15/24(2)				1,384	16,674	33,348				$225,599
	3/15/24(3)							21,726			$293,953

(1)This represents the cash annual incentive opportunity for 2024 under the AIP. The actual amounts earned under this plan for 2024 are reported in the

Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. If the minimum performance level for payment of the

threshold amount is not achieved, then no incentive would be payable under the plan. The performance level for payment of the maximum amount

requires maximum EBITDA performance as well as a maximum performance of the Shared Strategic Objective modifier. See discussion in the

Compensation Discussion and Analysis under the heading “Annual Incentive Plan (AIP).”

(2)This represents PSU awards described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term Incentive Plan

(LTI).” The target number of PSUs will be adjusted based on Company performance against annual growth goals over a three-year performance

period covering fiscal years 2024, 2025 and 2026. There can also be a reduction in the target number of PSUs if the average difference between

Adjusted ROIC and WACC is below a certain threshold. PSUs are also subject to a three-year vesting requirement from the grant date. If any

dividends are paid on our common stock, the holders of the PSUs would receive dividends at the same rate as paid to other shareholders if and

when the PSU award is earned and becomes fully vested.

(3)This represents RSU awards described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term Incentive Plan

(LTI).” These RSUs vest one-third each year on each of the first three anniversaries of the date of grant, subject to continuing employment through

the applicable vesting date.

(4)As further described in a Form 8-K filed by the Company on October 30, 2024, Ms. Ibach and the Company entered into a Transition and Advisory

Agreement (the “Agreement”) on October 24, 2024. Under the Agreement, Ms. Ibach will continue her employment with the Company through the

earlier of the 2025 Annual Meeting or May 31, 2025, outstanding PSU, RSU and option awards will become fully vested upon her separation of

employment from the Company, and options will remain exercisable for three years after her separation of employment from the Company, subject

to a maximum exercise period of 10 years from the original grant date of the option awards.

(5)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2023 PSU award. The target number of units

reflects the incremental units expected to vest at target upon separation of employment due to the modification and the fair value reflects expected

award achievement as of the date of the modification.

(6)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2024 RSU award. The number of units reflects

incremental units expected to vest upon separation of employment due to the modification.


56 \| 2025 PROXY STATEMENT	OUR PAY

(7)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 21, 2017 option award. These options vested

under the original terms of the agreement, but their post-termination exercise period will be extended from one year from the separation date to

March 21, 2027.

(8)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 21, 2018 option award. These options vested

under the original terms of the agreement, but their post-termination exercise period will be extended from one year from the separation date to

March 21, 2028.

(9)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 29, 2019 option award. These options vested

under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three years from the

separation date.

(10)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a September 18, 2019 option award. These options

vested under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three years from the

separation date.

(11)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2020 option award. These options vested

under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three years from the

separation date.

(12)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2021 option award. These options vested

under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three years from the

separation date.

(13)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2022 option award. These options vested or

are expected to vest under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three

years from the separation date.

(14)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a May 16, 2022 option award. These options vested or are

expected to vest under the original terms of the agreement, but their post-termination exercise period will be extended from one year to three years

from the separation date.

(15)Represents the incremental cost under FASB ASC Topic 718 related to the modification of a March 15, 2022 option award. Of these options, 50,539

vested or are expected to vest under the original terms of the agreement, while 17,951 of these options are expected to vest upon separation of

employment due to the modification. For all of these options, their post-termination exercise period will be extended from one year to three years

from the separation date.

(16)Reflects the grant or modification date fair value computed in accordance with FASB ASC Topic 718. The value for March 15, 2024 PSU awards

reflects the target award value.


57 \| 2025 PROXY STATEMENT	OUR PAY

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the total outstanding equity awards for each of the NEOs as of December 28, 2024.


	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(11)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(11)
Shelly R. Ibach	36,575	—	$18.81	3/22/2026	—	—	—	—
	53,720	—	$23.61	3/21/2027	—	—	—	—
	51,095	—	$34.35	3/21/2028	—	—	—	—
	40,405	—	$47.00	3/29/2029	—	—	—	—
	10,045	—	$43.91	9/18/2029	—	—	—	—
	67,325	—	$35.68	3/15/2030	—	—	—	—
	21,880	—	$146.97	3/15/2031	—	—	—	—
	27,033	13,517(1)	$61.66	3/15/2032	—	—	—	—
	2,893	1,447(2)	$41.95	5/16/2032	—	—	—	—
	22,830	45,660(4)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	121,230(5)	$1,842,696
					90,946(9)	$1,382,379
	—	—	—	—	—	—	90,946(10)	$1,382,379
Francis K. Lee	24,002	48,003(6)	$27.28	8/15/2033	—	—	—	—
	—	—	—	—	16,460(7)	$250,192	—	—
	—	—	—	—	—	—	27,775(8)	$422,180
	—	—	—	—	24,253(9)	$368,646	—	—
	—	—	—	—	—	—	24,253(10)	$368,646
Andrea L. Bloomquist	2,555	—	$34.35	3/21/2028	—	—	—	—
	4,346	—	$47.00	3/29/2029	—	—	—	—
	10,260	—	$35.68	3/15/2030	—	—	—	—
	3,585	—	$146.97	3/15/2031	—	—	—	—
	5,407	2,703(1)	$61.66	3/15/2032	—	—	—	—
	5,455	10,910(4)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	28,970(5)	$440,344
	—	—	—	—	20,211(9)	$307,207	—	—
	—	—	—	—	—	—	20,211(10)	$307,207
Melissa Barra	3,315	—	$33.32	3/16/2025	—	—	—	—
	2,128	—	$34.35	3/21/2028	—	—	—	—
	4,563	—	$47.00	3/29/2029	—	—	—	—
	9,940	—	$35.68	3/15/2030	—	—	—	—
	3,490	—	$146.97	3/15/2031	—	—	—	—
	5,407	2,703(1)	$61.66	3/15/2032	—	—	—	—
	5,455	10,910(4)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	28,970(5)	$440,344
	—	—	—	—	20,211(9)	$307,207	—	—
	—	—	—	—	—	—	20,211(10)	$307,207


58 \| 2025 PROXY STATEMENT	OUR PAY

Outstanding Equity Awards at Fiscal Year-End, continued


	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(11)	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(11)
Samuel R. Hellfeld	735	—	$33.32	3/16/2025	—	—	—	—
	2,615	—	$18.81	3/22/2026	—	—	—	—
	1,955	—	$23.61	3/21/2027	—	—	—	—
	1,535	—	$34.35	3/21/2028	—	—	—	—
	3,420	—	$36.81	9/20/2028	—	—	—	—
	4,565	—	$47.00	3/29/2029	—	—	—	—
	5,130	—	$35.68	3/15/2030	—	—	—	—
	2,265	—	$146.97	3/15/2031	—	—	—	—
	4,120	2,060(1)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	2,320(3)	$34,406	—	—
	4,547	9,093(4)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	24,140(5)	$366,928
	—	—	—	—	21,726(9)	$330,235	—	—
	—	—	—	—	—	—	16,674(10)	$253,445

(1)These stock options were granted on March 15, 2022 and vest one-third each year on each of the first three anniversaries of the date of grant,

subject to continuing employment through the applicable vesting date.

(2)These stock options were granted on May 16, 2022 and vest one-third each year on each of the first three anniversaries of the date of grant, subject

to continuing employment through the applicable vesting date.

(3)These restricted stock unit (RSU) awards were granted on March 15, 2022 and will become vested on March 15, 2025, subject to continuing

employment through the vesting date.

(4)These stock options were granted on March 15, 2023 and vest one-third each year on each of the first three anniversaries of the date of grant,

subject to continuing employment through the applicable vesting date.

(5)These PSU awards were granted on March 15, 2023 and will become vested on March 15, 2026, subject to achieving performance criteria and

continuing employment through the vesting date. The number of shares shown above reflects the target award level. The performance period for

this award covers fiscal years 2023, 2024 and 2025.

(6)These stock options were granted on August 15, 2023 and vest one-third each year on each of the first three anniversaries of the date of grant,

subject to continuing employment through the applicable vesting date.

(7)These RSU awards were granted on August 15, 2023 and vest one-third each year on each of the first three anniversaries of the date of grant, subject

to continuing employment through the applicable vesting date.

(8)These PSU awards were granted on August 15, 2023 and will become vested on August 15, 2026, subject to achieving performance criteria and

continuing employment through the vesting date. The number of shares shown above reflects the target award level. The performance period for

this award covers fiscal years 2023, 2024 and 2025.

(9)These RSU awards were granted on March 15, 2024 and vest one-third each year on the first three anniversaries of the date of grant, subject to

continuing employment through the applicable vesting date.

(10)These PSU awards were granted on March 15, 2024 and will become vested on March 15, 2027, subject to achieving performance criteria and

continuing employment through the vesting date. The number of shares shown above reflects the target award level. The performance period for

this award covers fiscal years 2024, 2025 and 2026.

(11)Calculated by multiplying unvested stock awards by $15.20, the closing price of the Company’s common stock on the Nasdaq Stock Market on

December 27, 2024, the last trading day of fiscal year 2024.


59 \| 2025 PROXY STATEMENT	OUR PAY

Option Exercises and Stock Vested

The following table summarizes the stock options that were exercised and the stock awards that became vested for each

of the NEOs during the fiscal year ended December 28, 2024.


	Option Awards		Stock Awards
Name	Number of Shares Acquired on Exercise (#)	Value Realized on Exercise ($)(1)	Number of Shares Acquired on Vesting (#)(2)	Value Realized on Vesting ($)(4)
Shelly R. Ibach	—	—	14,146	$191,395
Francis K. Lee	—	—	8,230 (3)	$100,159
Andrea L. Bloomquist	—	—	2,319	$31,376
Melissa Barra	—	—	2,257	$30,537
Samuel R. Hellfeld	—	—	1,464	$19,807

(1)The value realized on the exercise of stock options for purposes of this table is based on the difference between the fair market value of our common

stock on the date of exercise and the exercise price of the stock option.

(2)The amounts shown in these columns represented the number of shares that were earned and paid out for the 2021 PSU awards that covered the

performance period of fiscal years 2021, 2022 and 2023 as disclosed in the 2024 Proxy Statement, except for Mr. Lee (see footnote 3). For Ms. Ibach,

Ms. Bloomquist, Ms. Barra and Mr. Hellfeld, the 2021 PSU awards became vested on March 15, 2024.

(3)For Mr. Lee, a 2023 RSU award for 8,230 shares with a value realized of $100,159 vested on August 15, 2024. This represents one-third of a 2023

RSU award and the remaining two-thirds vest equally on August 15, 2025 and 2026.

(4)The value realized for purposes of this table is based on the fair market value of our common stock on the date of vesting.

Non-Qualified Deferred Compensation

NEOs are eligible to participate in the Sleep Number Executive Deferral Plan (Deferral Plan), a non-qualified deferred

compensation plan. The Deferral Plan allows executives to defer payment of up to 50% of their base salary, 75% of their

AIP payout and 100% of their payout from PSUs or other stock awards. At the time that executives make their deferral

election, they choose whether their deferrals will be paid out in a lump sum or up to ten annual installments following a

specified future date or their termination of employment. For salary or AIP deferrals, executives choose how to allocate

their deferrals across a range of notional investment alternatives that are similar to the investment fund options in the

Company’s 401(k) Plan. The executive’s deferral account is credited with the earnings as if there was a deemed

investment in the notional investment alternatives offered for the Deferral Plan. For deferrals of PSUs or other stock

awards, the amounts deferred are tracked in deferred share units and distributions are settled in shares of common

stock.

The following table summarizes for each NEO their contributions, earnings and balance for the Deferral Plan for the fiscal

year ended December 28, 2024. Note that the Company does not make any contributions to the Deferral Plan on behalf

of participants.


Name	Executive Contributions in Last Fiscal Year ($)	Registrant Contributions in Last Fiscal Year ($)	Aggregate Earnings (Losses) in Last Fiscal Year(1) ($)	Aggregate Withdrawals/ Distributions ($)	Aggregate Balance at Last Fiscal Year-End(2) ($)
Shelly R. Ibach	—	—	$946,143	—	$11,253,862
Francis Lee	—	—	—	—	—
Andrea L. Bloomquist	—	—	$45,434	$(293,321)	$345,171
Melissa Barra	—	—	—	—	—
Samuel R. Hellfeld	—	—	—	—	—

(1)These amounts represent the total aggregate notional earnings for fiscal year 2024 for the executive’s deferral account under the Deferral Plan.

These are notional earnings based on how the executive has elected to direct their salary or AIP deferrals to various investment alternatives, and the

actual market return of that investment alternative for the year. For PSU deferrals, earnings represent the change in market value of the deferred

share units held in the executive’s deferral account.

(2)This is the aggregate market value of the executive’s deferral account under the Deferral Plan as of the end of fiscal year 2024.


60 \| 2025 PROXY STATEMENT	OUR PAY

Potential Payments Upon Termination or Change in Control

This section describes the potential payments that would be made to the NEOs under various employment termination

scenarios as if they occurred at the end of fiscal year 2024 (as of December 28, 2024). The values shown in the table are

calculated as of this date based on certain estimates or assumptions as described in the footnotes. The actual amounts

received may differ materially from those shown in the table. The table does not include amounts already vested that the

executive would receive if he or she left the Company for any reason, such as the fully vested balance of an executive’s

deferral account, gains from outstanding options that are exercisable, or payments and benefits that are provided on a

non-discriminatory basis to salaried team members generally upon termination.

All Sleep Number team members, including all executive officers, are “at will” team members, meaning that the team

member or the Company may terminate the employment relationship with or without cause and with or without notice,

at any time at the option of either the team member or the Company. Executive officers do not have employment

agreements and do not have any contractual or other right to employment for any term or period of time. In addition,

executive officers are only eligible for the severance pay and other benefits as provided under the Company’s Executive

Severance Pay Plan as shown in the table and described in the footnotes.

The table below shows information about the acceleration of option or stock awards in the event of a change in control

as defined under the Company’s 2020 Equity Incentive Plan, as amended (the 2020 Plan). The 2020 Plan contains a

“double-trigger” change in control provision. Under this provision, if outstanding option or stock awards are assumed or

substituted following a change in control, vesting of the option or stock awards is only accelerated in the event of

involuntary termination not for cause or resignation for good reason of the team member, as those terms are defined

under the 2020 Plan. This is provided that the team member’s termination of employment occurs within two years of the

change in control.

Vesting of stock option, PSU and RSU awards may also be accelerated in the event a NEO qualifies for retirement

treatment under the terms of the award agreements and the 2020 Plan. If an executive is at least age 55 and has five or

more years of service at retirement, the vesting will be accelerated on a pro-rata portion of their option or stock award

based on the portion of the vesting period that was actually worked through the date of retirement. If an executive is at

least age 60 and has five or more years of service at retirement, there is a full acceleration of vesting of stock option or

PSU awards provided that the executive gives a one-year notice of their intention to retire for awards granted prior to

2024, and a three month notice of their intention to retire for awards granted in 2024; there is not full acceleration of

vesting for RSU awards.


61 \| 2025 PROXY STATEMENT	OUR PAY


		Triggering Events
Name	Type of Payment	Voluntary Termination ($)	For Cause Termination ($)	Involuntary Termination (No Change in Control) ($)	Involuntary Termination (Following Change in Control)(1) ($)	Death or Disability ($)
Shelly R. Ibach	Cash Severance(2)	—	—	$5,778,000	$8,658,000	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	$2,187,782	—	$2,187,782	$3,993,846	$3,993,846
	Benefit Reimbursement(5)	—	—	$13,811	$13,811	—
	Total	$2,187,782	—	$7,979,593	$12,665,657	$3,993,846
Francis K. Lee	Cash Severance(2)	—	—	$1,085,625	$2,158,750	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$1,269,078	$1,269,078
	Benefit Reimbursement(5)	—	—	$19,093	$19,093	—
	Total	—	—	$1,104,718	$3,446,921	$1,269,078
Andrea L. Bloomquist	Cash Severance(2)	—	—	$1,072,202	$2,131,904	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	$585,975	—	$585,975	$908,124	$908,124
	Benefit Reimbursement(5)	—	—	—	—	—
	Total	$585,975	—	$1,658,177	$3,040,028	$908,124
Melissa Barra	Cash Severance(2)	—	—	$1,057,119	$2,101,739	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$908,124	$908,124
	Benefit Reimbursement(5)	—	—	$13,563	$13,563	—
	Total	—	—	$1,070,682	$3,023,426	$908,124
Samuel R. Hellfeld	Cash Severance(2)	—	—	$947,395	$1,882,289	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$863,694	$863,694
	Benefit Reimbursement(5)	—	—	$19,191	$19,191	—
	Total	—	—	$966,586	$2,765,174	$863,694

(1)The amounts payable to the NEOs upon a change in control may be subject to reduction under Sections 280G and 4999 of the Internal Revenue

Code.

(2)Our NEOs are participants in the Company’s Executive Severance Pay Plan. Under this plan, a participant is eligible for severance pay and other

benefits in the event of involuntary termination not for cause or resignation for good reason (qualifying termination), as those terms are defined

under the plan. There is no severance pay benefit for voluntary termination or involuntary termination for cause. As a condition of receiving any

severance pay under the plan, the executive must agree to a general release of claims against the Company. The amount of the severance pay

payable for a qualifying termination is a multiple of the sum of the executive’s annual base salary plus the target annual incentive award under AIP, as

of the date of termination. For Ms. Ibach, the multiple is two times and for all other NEOs, the multiple is one times. If the qualifying termination

occurs within a period starting six months before a change in control event and ending two years after a change in control event, the multiple would

be as follows: For Ms. Ibach, three times; for all other NEOs, two times. In order to receive the additional severance pay for qualifying terminations

after a change in control, the executive must agree to refrain from certain restricted activities for an extended period of two years after termination of

employment. The plan defines restricted activities to include certain competitive and solicitation activities. Severance pay benefits are paid in a lump

sum following termination of employment. The cash severance amounts shown above were calculated using annual base salary and target annual

incentive for AIP in effect for each executive as of the end of fiscal 2024. Also under the plan, participants are eligible for outplacement services. The

maximum value of this benefit is included in the cash severance amounts shown above. The plan does provide for a pro-rata annual incentive award

for the period of the year that the participant was actively employed. The calculations for this table are as of the end of the fiscal year, which is when

participants in the AIP become eligible for the full incentive award earned for that fiscal year. As a result, the table does not include any value for a

pro-rata annual incentive.

(3)The value of the acceleration of the vesting of unvested stock options held by a NEO is based on the difference between: (a) the fair market value of

our common stock as of December 27, 2024 ($15.20) and (b) the per share exercise price of the options held by the executive, provided (a) is higher

than (b). The range of exercise prices of unvested stock options held by our NEO as of December 28, 2024 was $27.28 to $61.66. No amounts are

included in the table above for stock options because the respective exercise prices are all above $15.20. For voluntary termination when an

executive is eligible for retirement treatment (age 55 and five or more years of service), the number of unvested stock options is prorated in valuing

the acceleration of vesting.

(4)The value of the acceleration of the vesting of stock awards held by a NEO is based on: (a) the number of unvested PSUs or RSUs held by the

executive as of December 28, 2024, multiplied by (b) the fair market value of our common stock on December 27, 2024 ($15.20). PSUs whose

performance period had been completed as of December 28, 2024 are reflected based on the actual payout earned. All other PSUs are reflected at

the lesser of target or the maximum payout achievement possible. For voluntary termination when an executive is eligible for retirement treatment

(age 55 and five or more years of service), the number of unvested RSUs is prorated in valuing the acceleration of vesting.

(5)For a qualifying termination under the Executive Severance Pay Plan, a NEO is eligible to receive a reimbursement equal to the difference in cost

between the monthly COBRA premium and the monthly cost for the medical and dental plan coverage while an active team member. The

reimbursement is for as long as the executive is covered by COBRA but for a period not to exceed two years for Ms. Ibach and one year for all other

NEOs.


62 \| 2025 PROXY STATEMENT	OUR PAY

OTHER INFORMATION

CEO Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, we are

providing the following information about the relationship of the annual total compensation of our team members and

the annual total compensation of our CEO. For fiscal year 2024, we determined on December 28, 2024 that the annual

total compensation of the team member identified as the median was $59,362 compared to last year’s median of

$59,339. Based on this information, the 2024 ratio of the annual total compensation of our CEO, as reported in the Total

column of the Summary Compensation Table as $6,583,409, to the median annual total compensation of all team

members, excluding our CEO, was estimated to be 111 to 1.

The following is a summary of the methodology and assumptions used in determining the median annual total

compensation of our team members for 2024:

•We used our total active team member population as of the end of fiscal year 2024;

•For measuring total compensation of our team members, we included base wages, incentive compensation,

commissions, over-time, paid time off and holiday pay that was actually paid to each team member during fiscal year

2024; and

•For team members included in the population that were hired during fiscal year 2024, we annualized their actual

total compensation to consider that they worked for only a portion of the year.

It should be noted that under the SEC’s rules and guidance, there are numerous ways to determine the compensation of

a company’s median employee, including the employee population sampled, the elements of total compensation

included, any assumptions made and the use of statistical sampling. In addition, no two companies have identical

employee populations or compensation programs. As such, our pay ratio may not be comparable to the pay ratio

reported by other companies.


63 \| 2025 PROXY STATEMENT	OUR PAY

Pay Versus Performance

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, we are providing the

following information comparing for the last three fiscal years calculated compensation values for disclosure purposes,

financial performance of the Company and total shareholder returns. The table shows a calculated value for the

Compensation Actually Paid (CAP) as required by SEC rules for the CEO and other NEOs. These amounts do not reflect

the actual compensation earned by or paid to the CEO or other NEOs for these fiscal years. For information regarding

the compensation decisions made by our Committee, please see the sections of the Compensation Discussion and

Analysis of the proxy statements for the fiscal years covered in the table below.


Year	Summary Compensation Table Total for CEO(1)	Compensation Actually Paid to CEO(2)	Average Summary Compensation Table Total for Other NEOs(1)(3)	Average Compensation Actually Paid to Other NEOs(2)(3)	Value of Initial Fixed $100 Investment Based On:(4)		Net (Loss) Income ($ millions)(5)	Net Sales Growth(6)
Year	Summary Compensation Table Total for CEO(1)	Compensation Actually Paid to CEO(2)		Average Compensation Actually Paid to Other NEOs(2)(3)	Sleep Number Total Shareholder Return	S&P 400 Specialty Stores Index Total Shareholder Return	Net (Loss) Income ($ millions)(5)	Net Sales Growth(6)
2024	$6,583,409	$4,658,822	$1,439,510	$1,220,875	$31	$195	$(20.3)	(10.9)%
2023	$6,349,191	$2,797,599	$1,824,602	$1,097,590	$30	$199	$(15.3)	(10.7)%
2022	$6,702,614	$(12,847,068)	$1,592,120	$(1,323,910)	$52	$162	$36.6	(3.2)%
2021	$9,599,571	$15,233,052	$2,028,184	$2,806,197	$154	$173	$153.7	17.7%
2020	$8,528,276	$24,411,605	$1,986,114	$4,224,856	$165	$119	$139.2	9.3%

(1) The amounts are reported in the Total column of the Summary Compensation Table for the CEO and for an average of the other NEOs for each

fiscal year.

(2) This is a calculation of CAP for each fiscal year as determined in accordance with SEC rules. See table below for a reconciliation of the estimated

value for CAP to the amounts reported in the Total column of the Summary Compensation Table.

(3) The average for 2024 includes Mr. Lee, Ms. Bloomquist, Ms. Barra and Mr. Hellfeld as the other NEOs. The average for 2023 includes Mr. Callen, Mr.

Krusmark, Mr. Lee, Ms. Bloomquist, Ms. Barra and Mr. Hellfeld as other NEOs. The average for 2022 includes Mr. Callen, Ms. Bloomquist, Ms. Barra

and Mr. Hellfeld as other NEOs. The average for 2021 includes Mr. Callen, Ms. Bloomquist, Ms. Barra and Mr. Saklad as other NEOs. The average

for 2020 includes Mr. Callen, Ms. Bloomquist, Ms. Barra and Mr. Brown as other NEOs.

(4)For the relevant fiscal year, this represents the cumulative Total Shareholder Return (TSR) by measuring what the value of a $100 investment at the

start of fiscal 2020 would be at the end of fiscal years 2020, 2021, 2022, 2023 and 2024. The S&P 400 Specialty Store Index TSR is the total return

assuming reinvestment of dividends and is included in the Comparative Stock Performance chart reported in our Annual Report on Form 10-K for the

fiscal years 2020, 2021, 2022, 2023 and 2024.

(5) This is net income as reported in the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal years 2020, 2021,

2022, 2023 and 2024.

(6) This is the annual growth in net sales as reported in the Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal

years 2020, 2021, 2022, 2023 and 2024. This is the Company-selected measure for this disclosure.

The following table is a reconciliation of the estimated value for CAP to the amounts reported in the Total column of the

Summary Compensation Table for the fiscal years 2020, 2021, 2022, 2023 and 2024.


64 \| 2025 PROXY STATEMENT	OUR PAY


Year	Summary Compensation Table Total	Deduct: Amounts Reported in the Summary Compensation Table for Stock and Option Awards	Add: Value of Awards Granted During the Year, Outstanding and Unvested at Year-end	Add: Change in Value of Awards Granted in Any Prior Year, Outstanding and Unvested at Year- End	Add: Value of Awards Granted and Vested in the Same Year	Add: Change in Value of Awards Granted in Any Prior Year, Vested During the Year	Estimated Compensation Actually Paid (CAP)(1)
CEO
2024	$6,583,409	$(4,340,130)	$3,287,427	$(794,372)	$—	$(77,512)	$4,658,822
2023	$6,349,191	$(4,609,638)	$1,965,546	$(1,212,687)	$—	$305,187	$2,797,599
2022	$6,702,614	$(5,419,385)	$1,280,493	$(12,212,135)	$—	$(3,198,655)	$(12,847,068)
2021	$9,599,571	$(6,440,343)	$4,245,801	$(1,037,718)	$—	$8,865,741	$15,233,052
2020	$8,528,276	$(4,288,094)	$13,788,030	$8,402,774	$1,222,552	$(3,241,933)	$24,411,605
Average for Other NEOs
2024	$1,439,510	$(567,415)	$534,511	$(165,733)	$—	$(19,998)	$1,220,875
2023	$1,824,602	$(1,081,157)	$483,831	$(165,585)	$—	$35,899	$1,097,590
2022	$1,592,120	$(1,019,287)	$238,188	$(1,773,616)	$—	$(361,315)	$(1,323,910)
2021	$2,028,184	$(1,058,309)	$714,143	$(134,889)	$—	$1,257,068	$2,806,197
2020	$1,986,114	$(751,446)	$2,137,874	$1,162,514	$263,097	$(573,297)	$4,224,856

(1) In determining the estimated CAP, stock option grant date fair values are calculated based on the Black-Scholes option pricing model as of date of

grant. Adjustments have been made using stock option fair values as of each measurement date using the stock price as of the measurement date

and updated assumptions (i.e., term, volatility, risk free rates) as of the measurement date. Performance Stock Unit (PSU) grant date fair values are

calculated using the stock price as of date of grant assuming target performance. Adjustments have been made using the stock price and

performance accrual modifier as of year-end and as of each vesting date. Time-vested Restricted Stock Unit (RSU) grant date fair values are

calculated using the stock price as of date of grant. Adjustments have been made using the stock price as of year-end and as of each vesting date.

As noted above, the estimate of CAP reflects adjusted values to unvested and vested equity awards during the years

shown in the table based on year-end stock prices, various accounting valuation assumptions, and projected

performance modifiers but does not reflect actual amounts paid out for those awards. CAP generally fluctuates due to

stock price achievement and varying levels of projected and actual achievement of performance goals (as reflected in the

significant decrease to 2022 CAP). For a discussion of how our Committee assessed Company performance and made

pay decisions each year for our NEOs, see the Compensation Discussion and Analysis in this Proxy Statement and in the

proxy statements for 2020, 2021, 2022 and 2023.

Below are graphs comparing the estimated CAP values for our CEO and other NEOs to: (1) TSR for Sleep Number and

the S&P 400 Specialty Stores Index, (2) net income and (3) annual net sales growth.


65 \| 2025 PROXY STATEMENT	OUR PAY

As described in various sections of our Compensation Discussion and Analysis, the following are key performance

measures that determine the incentive compensation earned by the CEO and other NEOs for Company performance. By

design, our executive compensation mix is heavily weighted toward incentive compensation which is all performance-

based and only earned with achievement of financial goals for AIP and PSUs or appreciation of our share price for stock

options.


Metric	How This Metric Influences Pay
Net Sales Growth	This is one of two key measures in our PSU design. Half of the PSU payout opportunity is to tied to our achievement of annual growth goals for net sales over a three year period.
NOP Growth	This is one of two key measures in our PSU design. Half of the PSU payout opportunity is tied to our achievement of annual growth goals for NOP over a three year period.
Adjusted ROIC	There is an ROIC modifier in our PSU design. This potential reduction in the number of target PSUs applies if the average difference between Adjusted ROIC and WACC is below a certain threshold.
Adjusted EBITDA	This is the only measure in our AIP design. The AIP payout opportunity is tied to our achievement of fiscal year goals for Adjusted EBITDA.
Share Price	Stock options require share price appreciation above the exercise price in order to have any value. The value of PSUs earned and paid out also depends on share price.


66 \| 2025 PROXY STATEMENT	PROPOSAL 6 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

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Background

Consistent with the views expressed by shareholders at our 2023 Annual Meeting when we last asked our shareholders

to cast an advisory vote as to whether future advisory votes on executive compensation, or “say-on-pay” votes, should

occur every year, every two years or every three years, the Board has determined to hold an advisory vote to approve

executive compensation annually. The next advisory vote on the frequency of our “say-on-pay” vote will be put to our

shareholders at our 2029 Annual Meeting.

This advisory resolution, commonly referred to as “say-on-pay,” is being provided to our shareholders as required

pursuant to Section 14A of the Securities Exchange Act and is non-binding on the Company and the Board. However,

the Board and the Compensation Committee value the opinions of our shareholders and will carefully consider the

outcome of the vote when making future compensation decisions. The next “say-on-pay” vote will be held at our 2026

Annual Meeting.

As described more fully in the Compensation Discussion and Analysis (CD&A) section of this Proxy Statement, our

compensation programs are structured to align the interests of our executive officers with the interests of our

shareholders. They are designed to attract, motivate and retain, a talented management team to achieve superior

results. Shareholders are urged to read the CD&A, which discusses in-depth how our executive compensation programs

are aligned with our performance and the creation of shareholder value.

Board Recommendation

The Board unanimously recommends a vote “For” approval of, on a non-binding basis, the compensation of the

Company’s named executive officers as described in the CD&A, tabular disclosures and other executive compensation

narrative provided in this Proxy Statement for the Company’s 2025 Annual Meeting.

Vote Required

The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote directly or

by proxy on this matter at the Annual Meeting, and at least a majority of the minimum number of shares necessary for a

quorum, is necessary for approval of the foregoing resolution. Unless a contrary choice is specified, proxies solicited by

the Board will be voted “For” approval of, on a non-binding basis, the compensation of the Company’s named

executive officers as described in this Proxy Statement.


67 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

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Introduction

On May 13, 2020, our shareholders approved the Sleep Number Corporation 2020 Equity Incentive Plan at our 2020

Annual Meeting. The Sleep Number Corporation 2020 Equity Incentive Plan permits the Compensation Committee, or a

subcommittee thereof, to grant to eligible team members, non-employee Directors and consultants of Sleep Number

(each a participant) non-statutory and incentive stock options, stock appreciation rights (also known as SARs), restricted

stock awards, restricted stock units, deferred stock units, annual performance cash awards and other cash-based awards

and other stock-based awards. On May 21, 2024, our shareholders approved Amendment No. 1 to the Sleep Number

Corporation 2020 Equity Incentive Plan (as amended, the “2020 Plan”) to increase the number of authorized shares by

1,500,000. Subject to adjustment, the maximum number of shares of our common stock authorized for issuance under

the 2020 Plan is 4,740,000 shares.

The purpose of the 2020 Plan is to advance the interests of the Company and its shareholders by enabling the Company

and its subsidiaries to (i) attract, motivate and retain a talented management team to achieve superior results, (ii) provide

market competitive equity incentive opportunities that are linked to the growth and profitability of the Company and

increases in shareholder value, and (iii) align the interests of key executives, team members and Directors with those of

our shareholders.

Our equity compensation program provides our team members with an incentive to deliver our long-term strategic

objectives and achieve superior results. We believe equity is a critical tool for attracting, retaining and rewarding our

team, and aligning their interests with those of our shareholders over the long term. We believe that providing at-risk,

equity-based compensation is a fundamental component of our compensation program, is essential to creating

compensation opportunities that are competitive relative to market levels and aligns incentives with our shareholders’

interests in a manner that promotes long term performance.

Background to this Proposal 7

Three years of sustained macroeconomic challenges and a historic industry recession has resulted in a prolonged stock

price decline. Given the decline in our stock price, our modeling in 2024 indicated we would not have enough shares

available under the 2020 Plan to make our standard annual equity grants using our historical practices in 2024. To

address this issue, the Company took actions to reduce share usage in 2024, and proposed an amendment to the 2020

Plan to provide enough additional shares to issue 2025 annual grants. On May 21, 2024 shareholders approved the

addition of 1,500,000 shares to the 2020 Plan.

The industry remains in a historic recession in 2025, and the Company’s share price remaining depressed, the Company

was again in the position of needing to take steps to limit share usage for our annual 2025 grants and conserve equity in

light of our current situation. These steps include:

•Limiting the use of Performance Stock Units (PSUs) and eliminating the use of Non-Qualified Stock Options, which

have a more dilutive effect on the 2020 Plan;

•Limiting the number of team members that receive equity grants; and

•Limiting the ability of our non-employee Directors to receive their cash retainer payments in stock.

While these actions were necessary to enable us to continue to use equity awards to compensate our team members in

2025, they are not long-term solutions. As of March 17, 2025, after our annual grants, including the conservation


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measures described above, we are left with approximately 1,022,000 shares available under the 2020 Plan. We do not

believe that this is sufficient to provide competitive equity-based compensation to our team members beyond 2025.

To address this issue, and to enable the Company to retain critical talent as we execute the important task of

transforming our operating model for greater financial resiliency and positioning the business for accelerating growth as

the mattress industry recovers, on March 19, 2025, the Compensation Committee adopted an amendment to the 2020

Plan to increase the number of shares of our common stock available for issuance by an additional 500,000 shares (the

Plan Amendment). The Plan Amendment is subject to the approval of shareholders. We are asking shareholders to

approve the Plan Amendment so that we can effectively maintain the vital equity component of our

compensation program going forward.

Our Board believes that equity compensation plays an important role in the Company’s success by motivating and

engaging our executives, team members and non-employee Directors and allowing them to participate in shareholder

value creation through their ownership interest in the Company. The Board therefore recommends that you vote to

approve the Plan Amendment.

If our shareholders approve the Plan Amendment, the Plan Amendment will become effective as of the date of

shareholder approval. If our shareholders to not approve the Plan Amendment, the 2020 Plan, as currently in effect, will

remain in effect until it terminates in accordance with its terms.

Key Vote Considerations

Without sufficient shares to grant to our team members, we would be forced to rely on other forms of compensation,

including cash. The retention value of non-stock-based awards may not be sufficient to retain key talent. As a result, we

may need to deliver long-term incentive awards in the form of cash, which would reduce our financial flexibility and

impact our ability to pay down debt, which is a top priority in 2025. Cash-based awards are also suboptimal because

they are limited in their ability to align team member interests with shareholder interests over the long-term.

Our Board recommends you vote to approve the Plan Amendment because the Board believes an increase in the

number of shares available for issuance under the 2020 Plan is in the best interests of our Company and our shareholders

for the following reasons:

•We have been responsible stewards of shareholder equity. In response to our current situation, we have taken

targeted steps over the last two years to significantly reduce share usage and operate within the constraints of the

2020 Plan with respect to the number of shares available.

•The Plan Amendment will advance Company and shareholder interests by allowing us to attract, motivate, and retain

key talent. Having a talented and motivated management team is essential to executing our business strategies and

achieving superior results. Stock-based incentive compensation has been an important component of the total direct

compensation opportunity for our management team. It helps us provide a market competitive compensation

opportunity that is predominantly performance-based and at risk.

•Our ability to award equity is essential to our ability to retain team members during an important time. The 2020

Plan is a broad-based plan under which the Company grants awards to NEOs, non-employee Directors and many

current and prospective team members. The market for talent in our industry is competitive, and it is critical that we

retain our team members as we execute an important and complex transformation. Any impairment to our ability to

attract and retain talent could limit our ability to realize the benefits of this initiative.

•The Plan Amendment is consistent with our pay-for-performance compensation philosophy. We believe that stock-

based incentive compensation rewards our management team for superior performance in delivering sustainable

and profitable growth. It is performance-based, fully at-risk, and only has value if the Company performance meets


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or exceeds predetermined financial goals, or if shareholder value increases. This reinforces our pay for performance

culture.

•The Plan Amendment will enable us to continue aligning the interests of our executives with those of our

shareholders. We have designed our stock-based incentive compensation so that our management team is

motivated to achieve financial performance goals and increase shareholder value. This creates a strong alignment

between our rewards and shareholder interests. Also, with our stock ownership guidelines, the ownership levels of

our common stock that are maintained by our non-employee Directors and executives foster further alignment with

the interests of our shareholders.

•The Plan Amendment protects shareholder interests and embraces sound stock-based compensation practices. As

described in more detail below under the heading “Summary of Sound Governance Features of the 2020 Plan,” the

2020 Plan includes a number of features that are consistent with protecting the interests of our shareholders and

sound corporate governance practices.

Summary of Sound Governance Features of the 2020 Plan

The Board and the Compensation Committee believe that the 2020 Plan contains several features that are consistent

with protecting the interests of our shareholders and sound corporate governance practices, including the following:

•No “evergreen” provision;

•No liberal share “recycling” for stock options or SARs;

•No reloads;

•Stock option exercise prices and SAR grant prices will not be lower than the fair market value on the grant date;

•No re-pricing or exchange of “underwater” options or SARs without shareholder approval;

•Stock options and SARs are not entitled to dividend equivalent rights;

•No dividends or dividend equivalents will be paid out on unvested awards;

•Shareholder approval is required for material revisions to the 2020 Plan;

•“Clawback” provisions; and

•“Double-Trigger” vesting in change in control.

Equity Compensation Plan Information and Share Usage Information

In determining the number of shares of common stock by which to increase the 2020 Plan, the Board and the

Compensation Committee considered a number of factors, which are discussed further below, including:

•Shares currently available under the 2020 Plan and total outstanding equity awards;

•Historical equity and award granting practice, including share usage (commonly referred to as “burn rate”); and

•Overhang and dilution.


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Shares Currently Available and Total Outstanding Equity Awards


(all data as of March 17, 2025)
New Shares Requested	500,000
Shares Remaining Available for Issuance Under 2020 Plan	1,021,916
Common Shares Outstanding	22,567,075
Stock Options/SARs Outstanding	927,064
Weighted-Average Exercise Price of Outstanding Stock Options/SARs	$40.99
Weighted-Average Remaining Term of Outstanding Stock Options/SARS	5.4
Total Stock-Settled Full-Value Awards Outstanding	2,242,748

Share Usage

In determining the number of shares of common stock by which to increase the 2020 Plan, the Board and the

Compensation Committee considered the historical number of equity awards granted under the 2020 Plan. The

following table sets forth information regarding stock-settled, time-vested equity awards granted, and performance-

based equity awards earned, over each of the last three fiscal years:


	2024	2023	2022	3-Year Average
Stock Options/Stock Appreciation Rights (SARs) Granted	—	305,000	148,000
Stock-Settled Time-Vested Restricted Shares/Units Granted	674,000	304,000	189,000
Stock-Settled Performance-Based Shares/ Units Vested	45,000	201,000	251,000
Weighted-Average Basic Common Shares Outstanding	22,606,000	22,429,000	22,396,000
Share Usage Rate	3.2%	3.6%	2.6%	3.1%

Based on historical and anticipated granting practices, we expect the additional shares authorized for issuance by the

Plan Amendment to cover awards through our 2026 annual grant. Expectations regarding future share usage could be

impacted by a number of factors such as award type mix, hiring and promotion activity at the executive level, the rate at

which shares are returned to the share reserve under permitted addbacks, the future performance of our stock price, the

consequences of acquiring other companies and other factors. While we believe that the assumptions we used are

reasonable, future share usage may differ from current expectations.

Overhang

The following table sets forth certain information as of December 28, 2024, unless otherwise noted, with respect to the

Company’s equity compensation plans:


Stock Options/SARs Outstanding	942,102
Weighted-Average Exercise Price of Outstanding Stock Options/SARs	$40.85
Weighted-Average Remaining Term of Outstanding Stock Options/SARS	5.6 years
Total Stock-Settled Full-Value Awards Outstanding	1,685,285
Share reserve under the 2020 Plan	4,740,000
Proposed Amended Share reserve under the 2020 Plan	5,240,000


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Dilution and Expected Duration

Our Board recognizes the impact of dilution on our shareholders and has evaluated the Plan Amendment carefully in the

context of the need to motivate, retain and ensure that our leadership team and key team members remain focused on

our strategic priorities. The total fully-diluted overhang as of December 28, 2024, assuming that the entire share reserve

is granted in stock options, SARs, or full-value awards would be 17.6%. In this context, fully-diluted overhang is

calculated as the sum of grants outstanding and shares available for future awards (numerator) divided by the sum of the

numerator and basic common shares outstanding, with all data effective as of December 28, 2024. Our Board believes

that the increase included in the Plan Amendment represents a reasonable amount of potential equity dilution to

accommodate our long-term strategic and growth priorities.

Summary of the 2020 Plan Features

Below is a summary of the major features of the 2020 Plan, assuming approval of the Plan Amendment. Other than

increasing the shares of common stock available for issuance, the Plan Amendment does not modify the terms of the

2020 Plan. The summary is qualified in its entirety by reference to the full text of the 2020 Plan, a copy of which may be

obtained upon request to Investor Relations at 1001 Third Avenue South, Minneapolis, Minnesota, 55404 or by

telephone at 763-551-7498. A copy of the Plan Amendment has also been filed electronically with the SEC as

Appendix D to this Proxy Statement, available through the SEC’s website at www.sec.gov.

Purpose

The purpose of the 2020 Plan is to advance the interests of the Company and its shareholders by enabling the Company

and its subsidiaries to (i) attract, retain, and motivate our management team for achievement of company results and

creation of shareholder value, (ii) provide stock-based incentive compensation opportunities that are linked to the

growth and profitability of the company and increases in shareholder value, and (iii) provide opportunities for equity

ownership that align the interests of key team members and Board members with those of our shareholders.

Plan Administration

The 2020 Plan will be administered by the Compensation Committee, or by a subcommittee thereof, or any other

committee designated by the Board in accordance with the 2020 Plan. All members of the Compensation Committee

administering the 2020 Plan will be “non-employee Directors” within the meaning of Rule 16b-3 under the Exchange Act

and “independent” under the Nasdaq listing rules, the rules and regulations of the SEC and other applicable laws.

Under the terms of the 2020 Plan, subject to certain limitations, the Compensation Committee has the authority to,

among other things:

•Select eligible participants to whom awards are granted;

•Determine the types, amounts and terms of awards to be granted and when;

•Determine the provisions of such awards, including the applicable performance measures, if any, and the duration,

restrictions and conditions of such awards;

•Interpret the 2020 Plan and any instrument evidencing an award under the 2020 Plan and establish rules and

regulations pertaining to its administration;

•Determine fair market value in accordance with the 2020 Plan;

•Subject to shareholder approval requirements for some amendments, determine whether and under what

circumstances and terms to amend the 2020 Plan or any outstanding award agreement;

•Adopt subplans or special provisions applicable to awards regulated by the laws of jurisdictions other than the

United States;

•Authorize any person to execute on behalf of the Company an award agreement or other instrument required to

effect a grant;


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•Determine whether awards will be settled in shares of common stock, cash or in any combination thereof;

•Determine whether an award will be eligible for dividend equivalent rights;

•Impose restrictions, conditions or limitations on resales and subsequent transfers; and

•Make any other determination and take any other action that the Compensation Committee deems necessary or

desirable for administration of the 2020 Plan.

Delegation

To the extent permitted by applicable law, the Compensation Committee may delegate to one or more of its members

or to one or more officers of the Company such administrative duties or powers, as it may deem advisable. The

Compensation Committee may authorize one or more Directors or officers of the Company to designate team members,

other than officers, Directors or 10% shareholders of the Company, to receive awards under the plan and determine the

size of any such awards, subject to certain limitations.

No Re-pricing or Exchange

Except in connection with a change in control, the Compensation Committee may not, except as described below under

the heading “Adjustments,” without prior approval of our shareholders, seek to effect any re-pricing of any previously

granted option or SAR by: (i) amending or modifying the terms of the option or SAR to lower the exercise price, (ii)

canceling an underwater option or SAR in exchange for (A) cash, (B) replacement options or SARs having a lower exercise

price or (C) other awards, or (iii) repurchasing the underwater options or SARs and granting new awards under the 2020

Plan. An option or SAR will be deemed to be “underwater” at any time when the fair market value of the common stock

is less than the exercise price of the option or SAR.

Shares Authorized

Subject to adjustment, the maximum number of shares of our common stock authorized for issuance under the 2020

Plan, assuming the Plan Amendment is approved, is 5,240,000 shares less one share for every share subject to an award

granted under the Prior Plan between December 28, 2019, and the date of shareholder approval of the 2020 Plan. No

more than 5,240,000 shares may be granted as incentive stock options.

If (i) any shares subject to an award are forfeited, an award expires or an award is settled for cash (in whole or in part) or

(ii) after December 28, 2019 any shares subject to an award under the Prior Plan is forfeited, expires or settled for cash (in

whole or in part), then in each such case the shares subject to such award will, to the extent of such forfeiture, expiration

or cash settlement, be added to the shares available for awards under the 2020 Plan. In the event that withholding tax

liabilities arising from an award (other than an option or SAR) or, after December 28, 2019, an award under the Prior Plan

(other than an option or SAR) is satisfied by the tendering of shares (either actually or by attestation) or by the

withholding of shares by the Company, the shares so tendered or withheld will be added to the shares available for

awards under the 2020 Plan. However, the following shares will not be added to the shares authorized for grant under

the 2020 Plan: (i) shares tendered by a participant or withheld by the Company in payment of the exercise price of an

option under the 2020 Plan or the Prior Plan, (ii) shares tendered by a participant or withheld by the Company to satisfy

any tax withholding obligation with respect to options or SARs under the 2020 Plan or the Prior Plan, (iii) shares subject

to a SAR under the 2020 Plan or the Prior Plan that are not issued in connection with its stock settlement on exercise

thereof and (iv) shares reacquired by the Company on the open market or otherwise using cash proceeds from the

exercise of options under the 2020 Plan or the Prior Plan.


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Limits on Non-Employee Director Awards

Awards granted during a single fiscal year to any non-employee Director, taken together with any cash fees paid during

the fiscal year to the non-employee Director, in respect of the Director’s service as a member of the Board during such

year, shall not exceed $500,000 in total value. The independent members of the Board may make exceptions to this limit

for a non-executive chair of the Board, provided that the non-employee Director receiving such additional compensation

may not participate in the decision to award such compensation.

Minimum Vesting Requirement

Awards granted under the 2020 Plan (other than annual performance cash awards and other cash-based awards) shall

vest no earlier than the first anniversary of the date on which the award is granted; provided, that the following awards

shall not be subject to the foregoing minimum vesting requirement: any (i) substitute awards granted in connection with

awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into

by the Company or any of its subsidiaries in accordance with Section 20 of the 2020 Plan, (ii) shares delivered in lieu of

fully vested cash obligations, (iii) awards to non-employee Directors that vest on the earlier of the one-year anniversary of

the grant date and the next annual meeting of shareholders of the Company which is at least 50 weeks after the

immediately preceding year’s annual meeting and (iv) any additional awards the Compensation Committee may grant,

up to a maximum of 5% of the available share reserve authorized for issuance under the 2020 Plan; and, provided,

further, that the foregoing restriction does not apply to the Compensation Committee’s discretion to provide for

accelerated exercisability or vesting of any award, including in cases of retirement, death, disability or a change in

control, in the terms of the award agreement or otherwise.

Adjustments

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend,

stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin off) or other

similar change in the corporate structure or shares of the Company, the Compensation Committee will make the

appropriate adjustment. These adjustments may be to the number and kind of securities and property that may be

available for issuance under the 2020 Plan or the terms and conditions of any outstanding awards, including any

performance goals or criteria with respect thereto. In order to prevent dilution or enlargement of the rights of

participants, the Compensation Committee may also adjust the number, kind, and exercise price of securities or other

property subject to outstanding awards.

Participation

Awards may be granted to team members, non-employee Directors and consultants of the Company or any of its

subsidiaries. A “consultant” is one who renders services that are not in connection with the offer and sale of our

securities in a capital raising transaction and does not directly or indirectly promote or maintain a market for our

securities. As of March 14, 2025, approximately 587 team members and ten non-employee Directors would have been

eligible to participate in the 2020 Plan.

Types of Awards

The 2020 Plan will permit us to grant non-statutory and incentive stock options, SARs, restricted stock awards, restricted

stock units, deferred stock units, annual performance cash awards, other cash-based awards and other stock-based

awards. Awards may be granted either alone or in addition to or in tandem with any other type of award.

Non-Statutory and Incentive Stock Options

Stock options entitle the holder to purchase a specified number of shares of our common stock at a specified price,

which is called the exercise price, subject to the terms and conditions of the stock option grant. The 2020 Plan permits

the grant of both non-statutory and incentive stock options, though incentive stock options may be granted only to team

members. Each stock option granted under the 2020 Plan must be evidenced by an award agreement that specifies the

exercise price, the term, the number of shares underlying the stock option, the vesting and any other conditions. Except


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for substitute awards grated under Section 20 of the 2020 Plan, the exercise price of each stock option granted under

the 2020 Plan must be at least 100% of the fair market value of a share of our common stock as of the date the award is

granted to a participant. Fair market value is the closing price of our common stock, as reported on the Nasdaq. The

closing price of our common stock, as reported on the Nasdaq, on March 14, 2025, was $7.35 per share. The

Compensation Committee will fix the terms and conditions of each stock option, subject to certain restrictions. The

Compensation Committee will fix the term of each stock option, but stock options granted under the 2020 Plan will not

be exercisable more than 10 years after the date the stock option is granted. Stock options may be exercised, in whole

or in part, by payment in full of the exercise price in cash or its equivalent. In the discretion of the Compensation

Committee, payment may also be made by the delivery of common stock already owned by the participant prior to such

delivery or to be issued upon the exercise of the option being exercised, by broker-assisted cashless exercise, by “net

exercise,” or by a combination of such methods; or such other method as may be permitted by the Compensation

Committee. In the case of a “net exercise” of a stock option, we will not require payment of the exercise price or any

required tax withholding obligations related to the exercise, but will reduce the number of shares issued upon the

exercise by the largest number of whole shares that has a fair market value that does not exceed the aggregate exercise

price for the shares underlying the stock option and any required tax withholding obligations.

Stock Appreciation Rights

A stock appreciation right, or SAR, is a right granted to receive payment of cash, stock or a combination of both, equal

to the difference between the fair market value of shares of our common stock and the exercise price of such shares.

Each SAR granted must be evidenced by an award agreement that specifies the exercise price, the term, and such other

provisions as the Compensation Committee may determine. Except for substitute awards granted under Section 20 of

the 2020 Plan, the exercise price of a SAR must be at least 100% of the fair market value of our common stock on the

date of grant. The Compensation Committee will fix the term of each SAR, but SARs granted under the 2020 Plan will

not be exercisable more than 10 years after the date the SAR is granted.

Restricted Stock Awards, Restricted Stock Units and Deferred Stock Units

Restricted stock awards, restricted stock units and/or deferred stock units may be granted under the 2020 Plan. A

restricted stock award is an award of common stock that is subject to restrictions on transfer and risk of forfeiture upon

certain events, typically including termination of service. Restricted stock units are similar to restricted stock awards,

except that no shares are actually awarded to the participant on the grant date. A deferred stock unit is a right that

allows a participant to receive shares of our common stock at a future time as determined by the Compensation

Committee or the participant, subject to certain guidelines. The Compensation Committee shall determine, and set forth

in an award agreement, the period of restriction, the number of shares of restricted stock awards or the number of

restricted stock units granted, and other such conditions or restrictions, including, in the case of a performance award,

any performance goals upon which the performance award is subject and any performance period during which any

performance goals must be achieved. Participants holding shares of restricted stock awards may be granted voting rights

with respect to their shares, but participants holding restricted stock units and/or deferred stock units will not have

voting rights with respect to their restricted stock units and/or deferred stock units. After all conditions and restrictions

applicable to restricted stock awards, restricted stock units and/or deferred stock units have been satisfied or have

lapsed (including the satisfaction of any applicable tax withholding obligations), shares of restricted stock awards will

become freely transferable (except as otherwise provided in the 2020 Plan), and restricted stock units will be paid in

cash, shares of our common stock, or some combination of cash and shares of our common stock as determined by the

Compensation Committee. The Compensation Committee may provide that a restricted stock award is conditioned

upon the participant making or refraining from making an election with respect to the award under Section 83(b) of the

IRC.


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Annual Performance Cash Awards

Annual performance cash awards may be granted under the 2020 Plan in such amounts and upon such terms as the

Compensation Committee may determine, based on the achievement of specified performance goals for annual periods

or other time periods, as determined by the Compensation Committee.

Non-Employee Director Awards

The Compensation Committee at any time and from time to time may grant to non-employee Directors non-statutory

stock options, SARs or full value awards. Any such awards may be granted singly, in combination or in tandem, and may

be granted pursuant to such terms, conditions and limitations as the Compensation Committee may establish in its sole

discretion consistent with the provisions of the 2020 Plan.

The 2020 Plan permits non-employee Directors to elect to receive shares of our common stock in lieu of their Director

fees otherwise payable in cash. The election to receive our common stock in lieu of cash must be made in the calendar

quarter preceding the date any such fees are payable. The number of shares to be issued is determined by dividing the

dollar amount of reserved fees by the fair market value of our common stock on the date such fees would otherwise have

been payable.

Other Cash-Based Awards and Other Stock-Based Awards

Cash-based awards that are not annual performance cash awards may be granted to participants in such amounts and

upon such terms as the Compensation Committee may determine. These other cash-based awards will be paid in cash

only. Other stock-based awards (including the grant or offer for sale of unrestricted shares of our common stock or the

payment in cash or otherwise of amounts based on the value of shares of our common stock) may be granted in such

amounts and subject to such terms and conditions (including performance goals) as determined by the Compensation

Committee. These other stock-based awards shall be expressed in terms of shares of our common stock or units based

on shares of our common stock, as determined by the Compensation Committee. Other stock-based awards will be paid

in cash or shares of our common stock, as determined by the Compensation Committee.

Performance Measure Elements

The performance goals upon which the payment or vesting of a performance award depends may include, without

limitation, one or more of the following performance measure elements:

•Sales and revenue measure elements, including gross revenue or sales, sales allowances, net revenue or net sales,

invoiced revenue or sales, collected revenue or sales, revenues from new products and bad debts;

•Expense measurement elements, including direct material costs, direct labor costs, indirect labor costs, direct

manufacturing costs, indirect manufacturing costs, cost of goods sold, sales, general and administrative expenses,

operating expenses, non-cash expenses, tax expense, non-operating expenses and total expenses;

•Profitability and productivity measure elements, including gross margin, net operating income, EBITDA (earnings

before interest, taxes, depreciation and amortization), EBIT (earnings before interest and taxes), NOPAT (net

operating income after taxes), net income, net cash flow and net cash flow from operations;

•Asset utilization and effectiveness measure elements, including cash, excess cash, accounts receivable, inventory

(WIP or finished goods), current assets, working capital, total capital, fixed assets, total assets, standard hours, plant

utilization, purchase price variance and manufacturing overhead variance;

•Debt and equity measure elements, including accounts payable, current accrued liabilities, total current liabilities,

total debt, debt principal payments, net current borrowings, total long-term debt, credit rating, retained earnings,

total preferred equity, total common equity and total equity;


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•Shareholder and return measure elements, including earnings per share (diluted and fully diluted), stock price,

dividends, shares repurchased, total return to shareholders, debt coverage ratios, return on assets, return on equity,

return on invested capital and economic profit (for example, economic value added);

•Customer and market measure elements, including dealer/channel size/scope, dealer/channel performance/

effectiveness, order fill rate, customer satisfaction, customer service/care, brand awareness and perception, market

share, warranty rates, product quality and channel inventory; and

•Organizational and team member measure elements, including headcount, team member performance, team

member productivity, standard hours, team member engagement/satisfaction, team member turnover and team

member diversity.

The Compensation Committee may amend or modify the vesting criteria (including any performance goals, performance

measures or performance periods) of any outstanding awards based in whole or in part on the financial performance of

the Company (or any subsidiary or division, business unit or other sub-unit thereof) in recognition of unusual or

nonrecurring events affecting the Company or the financial statements of the Company or of changes in applicable laws,

regulations or accounting principles, whenever the Compensation Committee determines that such adjustments are

appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be

made available under the 2020 Plan.

Dividend Equivalents

With the exception of stock options and SARs, awards under the 2020 Plan may, in the Compensation Committee’s

discretion, earn dividend equivalents with respect to the cash or stock dividends or other distributions that would have

been paid on the shares of our common stock covered by such award had such shares been issued and outstanding on

the dividend payment date. Such dividend equivalents will be converted to cash or additional shares of our common

stock by such formula and at such time and subject to such limitations as determined by the Compensation Committee,

and only paid out once the award becomes vested.

Termination of Service

Unless otherwise expressly set forth in an individual agreement, the Compensation Committee will have the sole

discretion to determine and set forth in an award agreement the effect that the termination of a participant’s

employment or other service with the Company and all subsidiaries may have on any award.

Modification of Rights upon Termination

Upon a participant’s termination of employment or other service with the Company or any subsidiary, the Compensation

Committee may, in its sole discretion (which may be exercised at any time on or after the grant date, including following

such termination) cause stock options or SARs (or any part thereof) held by such participant as of the effective date of

such termination to terminate, become or continue to become exercisable or remain exercisable following such

termination of employment or service, and restricted stock, restricted stock units, deferred stock units, performance

awards, annual performance cash awards, non-employee Director awards, other cash-based awards and other stock-

based awards held by such participant as of the effective date of such termination to terminate, vest or become free of

restrictions and conditions to payment, as the case may be, following such termination of employment or service, in each

case in the manner determined by the Compensation Committee; provided, however, that no stock option or SAR may

remain exercisable beyond its expiration date.

Determination of Termination

The change in a participant’s status from a team member to a consultant will be deemed a termination unless the

Compensation Committee determines otherwise, in its sole discretion. The change in a participant’s status from a

consultant to a team member or from that of a team member to that of a Director will not be deemed a termination of

the participant’s service as a consultant or team member, respectively. Unless the Compensation Committee determines


77 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

otherwise, a participant’s termination date will be deemed to be the date recorded on personnel or other records of the

Company or any subsidiary. If the payment of an award that is subject to Section 409A of the IRC is triggered by

termination of a participant’s employment or other service, the termination must also constitute a “separation from

service” within the meaning of Section 409A of the IRC, and any change in employment status that constitutes a

“separation from service” under Section 409A of the IRC will be treated as a termination of employment or service, as

the case may be.

Forfeiture and Recoupment

If a participant is determined by the Compensation Committee to have taken any action while providing services to the

Company or after termination of such services, that would constitute “cause” or an “adverse action,” as such terms are

defined in the 2020 Plan, all rights of the participant under the 2020 Plan and any agreements evidencing an award then

held by the participant will terminate and be forfeited. The Compensation Committee has the authority to rescind the

exercise, vesting, issuance or payment in respect of any awards of the participant that were exercised, vested, issued or

paid, and require the participant to pay to the Company, within ten days of receipt of notice, any amount received or the

amount gained as a result of any such rescinded exercise, vesting, issuance or payment. The Company may defer the

exercise of any stock option or SAR for up to six months after receipt of notice of exercise in order for the Compensation

Committee to determine whether “cause” or “adverse action” exists. The Company is entitled to withhold and deduct

future wages to collect any amount due. In addition, if the Company is required to prepare an accounting restatement

due to material noncompliance, as a result of misconduct, with any financial reporting requirement under the securities

laws, then any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the

Sarbanes-Oxley Act of 2002 will reimburse the Company for the amount of any award received by such individual under

the 2020 Plan during the 12-month period following the first public issuance or filing with the Securities and Exchange

Commission, as the case may be, of the financial document embodying such financial reporting requirement. The

Company may also seek to recover any award made as required by the provisions of the Dodd-Frank Wall Street Reform

and Consumer Protection Act or any other clawback, forfeiture or recoupment provision required by applicable law or

under the requirements of any stock exchange or market upon which our common stock is then listed or traded. In

addition, all awards under the 2020 Plan will be subject to forfeiture and other penalties pursuant to any standalone

clawback or forfeiture policy of the Company, as in effect from time to time, including the Sleep Number Corporation

Clawback and Forfeiture Policy, and such forfeiture and/or penalty conditions or provisions as determined by the

Compensation Committee and set forth in the applicable award agreement.

Change in Control and Acceleration of Vesting

Generally, a change in control means the occurrence of any one of the following events:

•During any 24 month period, individuals who, as of the beginning of such period, constitute the Board cease for any

reason to constitute at least a majority of the Board, subject to certain exceptions;

•Any person is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or

indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company’s

then outstanding securities eligible to vote for the election of the Board, subject to certain exceptions;

•The consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction

involving the Company or any of its subsidiaries that requires the approval of the Company’s shareholders, unless

certain criteria are met; or

•The consummation of a sale of all or substantially all of the Company’s assets or the approval by shareholders of the

Company of a plan of complete liquidation or dissolution of the Company.

Notwithstanding the foregoing, such a change in control shall not be deemed to occur solely because any person

acquires beneficial ownership of more than 35% of the Company’s voting securities as a result of the acquisition of

Company voting securities by the Company which reduces the number of our voting securities outstanding. However, if

after such acquisition by the Company such person becomes the beneficial owner of additional voting securities of the


78 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

Company that increases the percentage of our outstanding voting securities beneficially owned by such person, a

change in control of the Company shall then occur.

Without limiting the authority of the Compensation Committee to adjust awards as discussed under the headings “Plan

Administration” and “Adjustments,” if a change in control of the Company occurs, then, unless otherwise provided in

the Award Agreement, if the Company is not the surviving corporation or the acquiring corporation does not assume the

outstanding awards or substitute equivalent awards, then:

•All outstanding stock options and SARs 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 options or SARs have been

granted remains in employment or service with the Company or any subsidiary;

•All restrictions and vesting requirements applicable to any award based solely on the continued service of the

participant will terminate; and

•All awards, the vesting or payment of which are based on performance goals, will vest as though such performance

goals were fully achieved at target and will become immediately payable.

However, no award that provides for a deferral of compensation within the meaning of Section 409A of the Internal

Revenue Code of 1986, as amended (IRC) will be cashed out upon the occurrence of a change in control unless the

event or circumstances constituting the change in control also constitute a “change in the ownership” of the Company, a

“change in the effective control” of the Company or a “change in the ownership of a substantial portion of the assets” of

the Company, in each case as determined under Section 409A of the IRC. The treatment of any other awards in the

event of a change in control will be as determined by the Compensation Committee in connection with the grant

thereof, as reflected in the applicable award agreement. The Compensation Committee is given the power under the

2020 Plan to alternatively provide that upon a change in control, any or all outstanding stock-based awards will be

canceled and terminated and the holders will receive a payment of cash or stock equal to the difference, if any, between

the consideration received by shareholders in respect of a share of common stock in connection with the change in

control and the purchase price per share, if any, under the award, multiplied by the number of shares subject to such

award, provided that if such product is zero or less, or the award is not exercisable, the award may be canceled and

terminated without payment for such award.

If a participant’s employment or other service with the Company is terminated without “cause” or “adverse action” (as

such terms are defined in the 2020 Plan) within two years following a change in control, and the Company is the surviving

corporation following such change in control, or the acquiror assumes the outstanding awards or substitutes equivalent

equity awards relating to the securities of such acquiror or its affiliates for such awards, then:

•All outstanding options and SARs 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 or SARs have been granted

remains in employment or service with the Company;

•All restrictions and vesting requirements applicable to any award based solely on the continued service of the

participant will terminate; and

•All awards, the vesting or payment of which is based on performance goals, will vest as though such performance

goals were fully achieved at target and will become immediately payable.

However, no award that provides for a deferral of compensation within the meaning of Section 409A of the IRC will be

cashed out upon the occurrence of a change in control unless the event or circumstances constituting the change in

control also constitute a “change in the ownership” of the Company, a “change in the effective control” of the Company

or a “change in the ownership of a substantial portion of the assets” of the Company, in each case as determined under

Section 409A of the IRC. The treatment of any other awards in the event of a change in control will be as determined by

the Compensation Committee in connection with the grant thereof, as reflected in the applicable award agreement.


79 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

Substituted Awards

The Compensation Committee may grant awards under the 2020 Plan in substitution for stock and stock-based awards

held by team members of another entity who become team members of the Company or a subsidiary as a result of a

merger or consolidation of the former employing entity with the Company or a subsidiary or the acquisition by the

Company or a subsidiary of property or stock of the former employing corporation. The Compensation Committee may

direct that the substitute awards be granted on such terms and conditions as the Compensation Committee considers

appropriate in the circumstances, subject to compliance with the rules under Sections 409A, 422 and 424 of the IRC, as

and where applicable.

Term, Termination and Amendment

Unless sooner terminated by the Board, the 2020 Plan will terminate at midnight on May 12, 2030. No award will be

granted after termination of the 2020 Plan, but awards outstanding upon termination of the 2020 Plan will remain

outstanding in accordance with their applicable terms and conditions and the terms and conditions of the 2020 Plan.

Subject to certain exceptions, the Board has the authority to terminate and the Compensation Committee has the

authority to amend the 2020 Plan or any outstanding award agreement at any time and from time to time, provided that

certain amendments to the 2020 Plan will not become effective without shareholder approval, as set forth below. No

termination, suspension or amendment of the 2020 Plan may materially adversely affect any outstanding award without

the consent of the affected participant.

No amendments to the 2020 Plan will be effective without approval of the Company’s shareholders if: (a) shareholder

approval of the amendment is then required pursuant to Section 422 of the IRC, the rules of the primary stock exchange

on which the common stock is then traded, applicable U.S. state and federal laws or regulations and the applicable laws

of any foreign country or jurisdiction where awards are, or will be, granted under the 2020 Plan or (b) such amendment

would: (i) modify the restrictions on re-pricing, (ii) materially increase benefits accruing to participants, (iii) subject to

certain adjustments, increase the aggregate number of shares of common stock issued or issuable under the 2020 Plan,

(iv) modify the eligibility requirements for participants in the 2020 Plan or (v) reduce the minimum exercise price as set

forth in the 2020 Plan.

Plan Benefits

It is not presently possible to determine the benefits or amounts that will be received by or allocated to participants

under the 2020 Plan or that would have been received by or allocated to participants for the last completed fiscal year if

the 2020 Plan had then been in effect because awards under the 2020 Plan will be made at the discretion of the

Compensation Committee.


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Awards Previously Granted Under 2020 Plan

The following table sets forth the total number of shares of our common stock subject to awards that have been granted

(even if not currently outstanding) under the 2020 Plan as of March 14, 2025:


Name and Position	Number of Shares Underlying Stock Options	Target Number of PSUs	Number of Shares Underlying RSUs
Shelly Ibach, President and CEO	135,260	312,656	90,946
Francis Lee, EVP, CFO	72,005	52,028	48,943
Andrea Bloomquist, EVP, Chief Innovation Officer	28,060	66,726	20,211
Melissa Barra, EVP, Chief Sales and Services Officer	27,965	66,581	20,211
Samuel Hellfeld, EVP, Chief Legal and Risk Officer	22,085	53,479	24,046
Executive Group	357,000	704,983	255,287
Non-Employee Director Group	63,996	—	163,418
All Other Employee Group	112,910	265,042	862,320

Federal Income Tax Information

The following is a general summary, as of the date of this Proxy Statement, of the federal income tax consequences to

participants and the Company of transactions under the 2020 Plan. This summary is intended for the information of

shareholders considering how to vote at the 2020 Annual Meeting and not as tax guidance to participants in the 2020

Plan, as the consequences may vary with the types of grants made, the identity of the participant, including the

participant’s individual tax situation, and the method of payment or settlement. The summary does not address the

effects of other federal taxes or taxes imposed under state, local or foreign tax laws. Participants are encouraged to seek

the advice of a qualified tax advisor regarding the tax consequences of participation in the 2020 Plan.

Incentive Stock Options

With respect to statutory stock options, which are more commonly referred to as incentive stock options, generally, the

participant is not taxed, and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock

option so long as the requirements of Section 422 of the IRC continue to be met (the participant may, however, need to

determine whether there are any alternative minimum tax (AMT) implications upon exercise). If the participant meets the

employment requirements and does not dispose of the shares of our common stock acquired upon exercise of an

incentive stock option until at least one year after date of the exercise of the stock option and at least two years after the

date the stock option was granted, gain or loss realized on sale of the shares will be treated as long-term capital gain or

loss. If the shares of our common stock are disposed of before those periods expire, which is called a disqualifying

disposition, the participant will be required to recognize ordinary income in an amount equal to the lesser of (i) the

excess, if any, of the fair market value of our common stock on the date of exercise over the exercise price or (ii) if the

disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying disposition, we will generally

be entitled, in the same tax year, to a deduction equal to the amount of ordinary income recognized by the participant,

assuming that a deduction is allowed under Section 162(m) of the IRC.

Non-Statutory Stock Options

The grant of a stock option that does not qualify for treatment as an incentive stock option, which is generally referred to

as a non-statutory stock option, is generally not a taxable event for the participant. Upon exercise of the stock option,

the participant will generally be required to recognize ordinary income in an amount equal to the excess of the fair

market value of our common stock acquired upon exercise (determined as of the date of exercise) over the exercise price

of the stock option, and we will be entitled to a deduction in an equal amount in the same tax year, assuming that a

deduction is allowed under Section 162(m) of the IRC. At the time of a subsequent sale or disposition of shares obtained


81 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

upon exercise of a non-statutory stock option, any gain or loss will be a capital gain or loss, which will be either a long-

term or short-term capital gain or loss, depending on how long the shares have been held.

Stock Appreciation Rights (SARs)

The grant of a SAR will not cause the participant to recognize ordinary income or entitle us to a deduction for federal

income tax purposes. Upon the exercise of a SAR, the participant will recognize ordinary income in the amount of the

cash or the value of shares payable to the participant (before reduction for any withholding taxes), and we will receive a

corresponding deduction in an amount equal to the ordinary income recognized by the participant, assuming that a

deduction is allowed under Section 162(m) of the IRC.

Restricted Stock, Restricted Stock Units, Deferred Stock Units and Other Stock-Based Awards

The federal income tax consequences with respect to restricted stock, restricted stock units, deferred stock units and

other stock unit and stock-based awards depend on the facts and circumstances of each award, including, in particular,

the nature of any restrictions imposed with respect to the awards. In general, if an award granted to the participant is

subject to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the future performance of substantial

services by the participant) and is nontransferable, a taxable event occurs when the risk of forfeiture ceases or the awards

become transferable, whichever first occurs. At such time, the participant will recognize ordinary income to the extent of

the excess of the fair market value of the stock on such date over the participant’s cost for such stock (if any), and the

same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the IRC. Under certain

circumstances, the participant, by making an election under Section 83(b) of the IRC within thirty days of the grant date

of an award, can accelerate federal income tax recognition with respect to an award of stock that is subject to a

substantial risk of forfeiture and transferability restrictions, in which event the ordinary income amount and our deduction

will be measured and timed as of the grant date of the award. If the award granted to the participant is not subject to a

substantial risk of forfeiture or transferability restrictions, the participant will recognize ordinary income with respect to

the award to the extent of the excess of the fair market value of the stock at the time of grant over the participant’s cost,

if any, and the same amount is deductible by us, assuming that a deduction is allowed under Section 162(m) of the IRC.

If a stock unit award or other stock-based award is granted but no stock is actually issued to the participant at the time

the award is granted, the participant will recognize ordinary income at the time the participant receives stock free of any

substantial risk of forfeiture (or receives cash in lieu of such stock) and the amount of such income will be equal to the fair

market value of the stock at such time over the participant’s cost, if any, and the same amount is then deductible by us,

assuming that a deduction is allowed under Section 162(m) of the IRC.


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Annual Performance Cash Awards and Other Cash-Based Awards

Annual performance cash awards and other cash-based awards will be taxable as ordinary income to the participant in

the amount of the cash received by the participant (before reduction for any withholding taxes), and we will receive a

corresponding deduction in an amount equal to the ordinary income recognized by the participant, assuming that a

deduction is allowed under Section 162(m) of the IRC.

Withholding Obligations

We are entitled to withhold and deduct from future wages of the participant, to make other arrangements for the

collection of, or to require the recipient to pay to us, an amount necessary for us to satisfy the recipient’s federal, state or

local tax withholding obligations with respect to awards granted under the 2020 Plan. Withholding for taxes may be

calculated based on the maximum applicable tax rate for the participant’s jurisdiction or such other rate that will not

trigger a negative accounting impact on the Company. The Compensation Committee may permit a participant to satisfy

a tax withholding obligation by withholding shares of common stock underlying an award, tendering previously acquired

shares, delivery of a broker exercise notice or a combination of these methods.

Code Section 409A

A participant may be subject to a 20% penalty tax, in addition to ordinary income tax, at the time the grant becomes

vested, plus an interest penalty tax, if the grant constitutes deferred compensation under Section 409A of the IRC and

the requirements of Section 409A of the IRC, including any exceptions thereto, are not satisfied.

Code Section 162(m)

Pursuant to Section 162(m) of the IRC, the annual compensation paid to an individual who is a “covered employee” is

not deductible by us to the extent it exceeds $1 million. The Tax Cuts and Jobs Act, signed into law on December 22,

2017, amended Section 162(m), effective for tax years beginning after December 31, 2017, (i) to expand the definition of

a “covered employee” to include any person who was the CEO or the Chief Financial Officer at any time during the year

and the three most highly compensated officers (other than the CEO and Chief Financial Officer) who were employed at

any time during the year whether or not the compensation is reported in the Summary Compensation Table included in

our Proxy Statement; (ii) to treat any individual who is considered a covered employee at any time during a tax year

beginning after December 31, 2016 as remaining a covered employee permanently; and (iii) to eliminate the

performance-based compensation exception to the $1 million deduction limit (with a transition provision continuing the

performance-based exception for certain compensation covered by a written binding contract in existence on November

2, 2017).

Excise Tax on Excess Parachute Payments

Unless otherwise provided in a separate agreement between a participant and the Company, if, with respect to a

participant, the acceleration of the vesting of an award or the payment of cash in exchange for all or part of an award,

together with any other payments that such participant has the right to receive from the Company, would constitute an

“excess parachute payment” under Section 280G of the IRC, then the payments to such participant will be reduced to

the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999

of the IRC. Such reduction, however, will only be made if the aggregate amount of the payments after such reduction

exceeds the difference between the amount of such payments absent such reduction minus the aggregate amount of

the excise tax imposed under Section 4999 of the IRC attributable to any such excess parachute payments. If such

provisions are applicable and if a team member will be subject to a 20% excise tax on any “excess parachute payment”

pursuant to Section 4999 of the IRC, we will be denied a deduction with respect to such excess parachute payment

pursuant to Section 280G of the IRC.


83 \| 2025 PROXY STATEMENT	PROPOSAL 7 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN, AS AMENDED

Equity Compensation Plan Information


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) (a)		Weighted average exercise price of outstanding options, warrants and rights(3) (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(4) (c)
Equity compensation plans approved by security holders	2,627,387	(2)	$40.85	2,191,695
Equity compensation plans not approved by security holders	None		Not applicable	None
Total	2,627,387		$40.85	2,191,695

(1)Includes the 2020 Plan and the Sleep Number Corporation 2010 Omnibus Incentive Plan.

(2)This amount includes 812,671 restricted stock units, 777,220 performance-based stock units and 95,394 phantom shares. Performance-based stock

units are shown at target. The actual number of shares to be issued under performance-based stock unit awards depends on Company performance

against goals.

(3)The weighted average exercise price does not take into account the unvested restricted stock units, performance-based stock units or phantom

shares, which have no exercise price.

(4)This represents the number of shares of common stock available for issuance under the 2020 Plan.

Board Recommendation

The Board unanimously recommends that the shareholders vote “For” approval of the amendment to the Sleep Number

Corporation 2020 Equity Incentive Plan, as amended, to increase the number of shares authorized for issuance by

500,000 shares.

Vote Required

The affirmative vote of the holders of a majority of the shares of common stock present and entitled to vote in person or

by proxy on this matter at the Annual Meeting, and at least a majority of the minimum number of votes necessary for a

quorum, is necessary for approval of the Plan Amendment. Unless a contrary choice is specified, proxies solicited by the

Board will be voted “For” approval of the Plan Amendment.


84 \| 2025 PROXY STATEMENT	OUR SHAREHOLDERS

STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table shows the beneficial ownership of Sleep Number common stock as of February 22, 2025 (unless

another date is indicated) by: (a) each Director, each nominee for Director recommended by our Board and each

executive officer named in the Summary Compensation Table on page 54 of this Proxy Statement, (b) all Directors and

executive officers as a group and (c) each person known by us to be the Beneficial Owner of more than 5% of Sleep

Number common stock.


Title of Class	Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)(3)	Percent of Class
Common Stock	Melissa Barra	113,578	*
Common Stock	Andrea L. Bloomquist	134,121	*
Common Stock	Phillip M. Eyler(4)	11,500	*
Common Stock	Stephen L. Gulis, Jr.(4)	90,547	*
Common Stock	Michael J. Harrison	63,595	*
Common Stock	Samuel R. Hellfeld	74,494	*
Common Stock	Julie M. Howard(4)	35,928	*
Common Stock	Shelly R. Ibach	781,634	3.4%
Common Stock	Deborah L. Kilpatrick, Ph.D.(4)	35,747	*
Common Stock	Brenda J. Lauderback(4)	54,638	*
Common Stock	Francis K. Lee	37,317	*
Common Stock	Stephen E. Macadam(4)	105,861	*
Common Stock	Barbara R. Matas(4)	60,561	*
Common Stock	Angel L. Mendez(4)	11,500	*
Common Stock	Hilary A. Schneider	6,645	*
Common Stock	All Directors and executive officers as a group (18 persons)(5)	1,757,658	7.5%
Common Stock	Stadium Capital Management LLC(6) 199 Elm Street New Canaan, CT 06840	2,616,459	11.7%
Common Stock	BlackRock, Inc.(7) 55 East 52nd Street New York, New York 10055	1,705,239	7.6%
Common Stock	The Vanguard Group, Inc.(8) 100 Vanguard Blvd. Malvern, Pennsylvania 19355	1,246,460	5.6%

* Less than 1% of the outstanding shares.

(1)The business address for each of the Directors and executive officers of the Company is c/o Sleep Number Corporation, 1001 Third Avenue South,

Minneapolis, Minnesota 55404.

(2)The shares shown include the following shares that Directors and executive officers have the right to acquire within 60 days through the exercise of

stock options: Ms. Barra, 42,456; Ms. Bloomquist, 39,766; Mr. Eyler, 4,285; Mr. Gulis, 7,695; Mr. Harrison, 15,477; Mr. Hellfeld, 37,493; Ms. Howard,

5,830; Ms. Ibach, 370,148; Ms. Kilpatrick, 9,860; Ms. Lauderback, 15,477; Mr. Lee, 24,002, Mr. Macadam, 2,373, Ms. Matas, 7,695; Mr. Mendez,

4,285; and Ms. Schneider, 2,373.

(3)The shares shown include the following shares that executive officers have the right to acquire within 60 days through the vesting of restricted stock

units: Ms. Barra, 6,737; Ms. Bloomquist, 6,737; Mr. Hellfeld, 9,562; Ms. Ibach, 30,316; and Mr. Lee, 8,085. In addition, Ms. Ibach’s amount includes

88,009 performance stock restricted units that were previously deferred and are scheduled to lapse within 60 days.

(4)The 2020 Plan permits non-employee Directors to receive Director fees in the form of common stock in lieu of cash and to defer receipt of such

shares. In addition, the 2020 Plan permits non-employee Directors to defer receipt of shares of the Company’s common stock under an Incentive


85 \| 2025 PROXY STATEMENT	OUR SHAREHOLDERS

Award granted under the 2020 Plan (referred to as Restricted Stock Units or RSUs). The Directors are entitled to the deferred shares and fully-vested

RSUs until the earlier of an elected date or separation of service from the Company. Mr. Eyler’s amount includes 7,215 RSUs that were deferred. Mr.

Gulis’ amount includes 49,746 shares that were deferred in lieu of Director fees and 31,276 RSUs that were deferred. Ms. Kilpatrick’s amount

includes 616 shares that were deferred in lieu of Director fees. Ms. Lauderback’s amount includes 7,306 RSUs that were deferred. Ms. Matas’

amount includes 26,720 shares that were deferred in lieu of Director fees and 11,440 RSUs that were deferred. Ms. Howard’s amount includes

12,233 shares that were deferred in lieu of Director fees and 7,280 RSUs that were deferred. Mr. Macadam’s amount includes 6,079 shares that were

deferred in lieu of Director fees. Mr. Mendez’s amount includes 7,215 RSUs that were deferred. In fiscal year 2025, non-employee Directors are not

entitled to receive Director fees in the form of common stock in lieu of cash.

(5)Includes an aggregate of 649,863 shares that Directors and executive officers as a group have the right to acquire within 60 days through the

exercise of stock options. Includes an aggregate of 74,467 shares that Directors and executive officers as a group have the right to acquire within 60

days through the vesting of restricted stock units. Also includes 95,394 shares that were deferred by non-employee Directors in lieu of Director fees

and 159,741 stock units that were deferred by executive officers and non-employee Directors.

(6)Stadium Capital Management LLC reported in a Schedule 13D/A filed with the Securities and Exchange Commission on December 2, 2024 that as

of December 2, 2024 it beneficially owned 2,616,459 shares of Common Stock of Sleep Number Corporation, and had shared power to vote or to

direct the vote and shared dispositive power with respect to 2,616,459 shares.

(7)BlackRock, Inc. reported in a Schedule 13G/A filed with the Securities and Exchange Commission on January 8, 2024 that as of December 31, 2023

it beneficially owned 1,705,239 shares of Common Stock of Sleep Number Corporation, had sole power to vote or to direct the vote with respect to

1,671,183 shares and sole dispositive power with respect to 1,705,239 shares.

(8)The Vanguard Group, Inc. reported in a Schedule 13G/A filed with the Securities and Exchange Commission on January 10, 2024 that as of

December 29, 2023 it beneficially owned 1,246,460 shares of Common Stock of Sleep Number Corporation, had no sole power to vote or to direct

the vote with respect to any shares, shared power to vote or to direct the vote with respect to 27,467 shares, shared dispositive power with respect

to 49,348 shares and sole dispositive power with respect to 1,197,112 shares.

SHAREHOLDER PROPOSALS FOR 2026 ANNUAL MEETING

Any shareholder proposal requested to be included in the proxy materials for the 2026 Annual Meeting must (a) be

received by our Chief Legal and Risk Officer and Secretary on or before December 12, 2025, and (b) satisfy all of the

requirements of, and not otherwise be permitted to be excluded under, Rule 14a-8 promulgated by the SEC and our

Bylaws. In addition, shareholders who intend to solicit proxies in support of director nominees other than the Company’s

nominees must also comply with the additional requirements the universal proxy rules that sets forth the information

required in Rule 14a-19(b) under the Exchange Act no later than March 29, 2026.

Our Bylaws require advance written notice to our Company of shareholder-proposed business or of a shareholder’s

intention to make a nomination for Director at an Annual Meeting. They also limit the business which may be conducted

at any special meeting of shareholders to business brought by the Board.

Specifically, the Bylaws provide that business may be brought before an Annual Meeting by a shareholder only if the

shareholder provides written notice to the Secretary of our Company not less than 120 days prior to the first anniversary

of the date that we first released or mailed our proxy materials to shareholders in connection with the preceding year’s

Annual Meeting. Under these provisions, notice of a shareholder proposal to be presented at the 2026 Annual Meeting

(but that is not requested to be included in the proxy materials) must be provided to the Secretary of our Company on or

before December 12, 2025. In the event, however, that the date of the Annual Meeting is advanced by more than 30

days or delayed by more than 60 days from the anniversary of the preceding year’s Annual Meeting date, notice by the

shareholder to be timely must be so delivered not later than the close of business on the later of the 120th day prior to

such Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is

first made.


86 \| 2025 PROXY STATEMENT	OUR SHAREHOLDERS

A shareholder’s notice must set forth:

•A description of the proposed business and the reasons for it;

•The name and address of the shareholder making the proposal;

•The class and number of shares of common stock owned by the shareholder; and

•A description of any material interest of the shareholder in the proposed business.

Our Bylaws also provide that a shareholder may nominate a Director at an Annual Meeting only after providing advance

written notice to the Secretary of our Company within the time limits described above. The shareholder’s notice must set

forth all information about each nominee that would be required under SEC rules in a proxy statement soliciting proxies

for the election of such nominee, as well as the nominee’s business and residence address. The notice must also set forth

the name and record address of the shareholder making the nomination and the class and number of shares of common

stock owned by that shareholder.

Shareholders wishing to nominate director candidates must submit a written request with related and required

information to our corporate Secretary in accordance with the terms of our Bylaws at least 120 days prior to the first

anniversary of the date that the Company first released or mailed its proxy materials to shareholders in connection with

the preceding year’s regular or Annual Meeting. The CGNC will review and evaluate these candidates in the same

manner as other nominations.

The shareholder’s notice must include, for each director nominee: (a) the name, age, business address and residence

address of the nominee, (b) the principal occupation or employment of the nominee, (c) the class and number of shares

of capital stock of the Company that are beneficially owned by the nominee and (d) any other information concerning the

nominee that would be required under the rules of the SEC in a proxy statement soliciting proxies for the election of

such nominee. The shareholder’s notice must also include: (a) the name and address of the nominating shareholder, as

they appear on the Company’s books and (b) the class and number of shares of the Company that are owned beneficially

and of record by the shareholder. The shareholder’s notice must also be accompanied by the proposed nominee’s

signed consent to serve as a Director of the Company.


87 \| 2025 PROXY STATEMENT	PROPOSAL 8 - VOTE TO APPROVE ADJOURNMENT OF THE ANNUAL MEETING

768231 SN 2025 Proxy Statement Banners_v2_8 (002).jpg

We are asking our shareholders to approve a proposal to approve one or more adjournments of the Annual Meeting to a

later date or dates if necessary or appropriate to permit further solicitation of proxies if there are insufficient votes to

approve any of the proposals at the time of the Annual Meeting or if we do not have a quorum at the Annual Meeting. If

our shareholders approve this Proposal 8, we could adjourn the Annual Meeting and any reconvened session of the

Annual Meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from

shareholders that have previously returned properly executed proxies voting against approval of any of the proposals.

Among other things, approval of this Proposal 8 could mean that, even if we had received proxies representing a

sufficient number of votes against approval of a proposal such that the proposal would be defeated, we could adjourn

the Annual Meeting without a vote on the approval of such proposal and seek to convince the holders of those shares to

change their votes to votes in favor of approval of such proposal. Additionally, we may seek to adjourn the Annual

Meeting if a quorum is not present at the Annual Meeting.

The Board believes that it is in the best interests of our Company and our shareholders to be able to adjourn the Annual

Meeting to a later date or dates if necessary or appropriate for the purpose of soliciting additional proxies in respect of

the approval of any of the proposals if there are insufficient votes to approve such proposal at the time of the Annual

Meeting or in the absence of a quorum.

The Board unanimously recommends a vote “For” adjournment of the Annual Meeting to a later date or dates, if

necessary and appropriate.


88 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

FREQUENTLY ASKED QUESTIONS ABOUT THE MEETING AND VOTING

When is the Annual Meeting?

The Annual Meeting will be held at 8:30 a.m. Central Time on May 28, 2025.

If we determine to make any change to the date, time or procedures of our Annual Meeting, we will announce such

changes in advance on our website http://ir.sleepnumber.com and file with the Securities and Exchange Commission as

additional proxy materials.

How can shareholders attend?

The meeting will be conducted as a virtual meeting via the internet. Shareholders may participate in the meeting and

submit questions electronically during the meeting via live webcast by visiting the virtual meeting platform at

www.virtualshareholdermeeting.com/SNBR2025. Shareholders must enter the 16-digit control number included in

Notice of Internet Availability of Proxy Materials, on the proxy card or in the instructions that accompanied the proxy

materials to enter the Annual Meeting. Shareholders may log into the virtual meeting platform beginning at 8:15 a.m.

Central Time on May 28, 2025.

The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and

devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and

plugins. Participants should confirm that they have a strong Internet connection and log in early to ensure that they can

hear streaming audio prior to the start of the meeting. If you encounter any technical difficulties, please call the technical

support number that will be posted on the virtual meeting platform log-in page.

If you wish to submit a question, you may do so during the meeting. Detailed guidelines for submitting written questions

during the meeting will be available at www.virtualshareholdermeeting.com/SNBR2025. Questions pertinent to

meeting matters will be recognized and answered during the meeting, subject to time constraints. We reserve the right

to edit or reject questions that are profane or otherwise inappropriate. Appropriate questions pertinent to meeting

matters that cannot be answered during the meeting due to time constraints will be posted and answered online at

http://ir.sleepnumber.com and be available as soon as practical after the meeting. The information contained in or

connected to our website is not incorporated by reference into, or considered a part of, this Proxy Statement.


89 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

What is up for shareholder vote?

There are eight proposals up for shareholder vote:

•Proposal 1: Elect three persons to serve as Directors for three-year terms;

•Proposal 2: Approve amendments to our Articles and Bylaws to declassify the Board;

•Proposal 3: Approve an amendment to our Articles to eliminate the supermajority voting requirement in Article XIV

related to our Directors;

•Proposal 4: Approve an amendment to our Articles to eliminate the supermajority voting requirements in Article XV

related to approval of certain transactions;

•Proposal 5: Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for

the 2025 fiscal year ending January 3, 2026;

•Proposal 6: Cast an advisory vote to approve executive compensation (Say on Pay);

•Proposal 7: Approve the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan, as amended,

(2020 Plan) to increase the number of shares reserved for issuance by 500,000 shares; and

•Proposal 8: Approve the adjournment of the Annual Meeting to a later date or dates, if necessary or appropriate,

including to solicit additional proxies if there are insufficient votes for, or otherwise in connection with, one or more

of the other proposals to be voted on at the Annual Meeting.

What are the voting choices?

For Proposal 1 (the election of Directors) you may vote in favor of up to three nominees. You may mark instructions with

respect to any or all of the nominees, but you should mark a vote “For” only three nominees in total. If you vote for

more than three nominees, your votes on Proposal 1 will be invalid and will not be counted. You are permitted to vote

for fewer than three nominees.

For each of Proposal 2 (approve amendments to our Articles and Bylaws to declassify the Board); Proposal 3 (approve an

amendment to our Articles to eliminate the supermajority voting requirement in Article XIV); Proposal 4 (approve an

amendment to our Articles to eliminate the supermajority voting requirements in Article XV); Proposal 5 (ratify the

appointment of independent auditors); Proposal 6 (advisory vote to approve executive compensation (Say on Pay));

Proposal 7 (approve the amendment to the 2020 Plan); and Proposal 8 (approve the adjournment of the Annual Meeting

to a later date or dates, if necessary and appropriate) you may:

•Vote in favor of the proposal;

•Vote against the proposal; or

•Abstain from voting on the proposal.

How does the Board recommend that shareholders vote?

Sleep Number’s Board unanimously recommends that shareholders vote as follows:

•Proposal 1: “For” the election of each of the nominees for Director nominated herein by the Board of Sleep

Number.

•Proposal 2: “For” amendments to our Articles and our Bylaws to declassify the Board.

•Proposal 3: “For” an amendment to our Articles to eliminate the supermajority voting requirement in Article XIV

related to our Directors.

•Proposal 4: “For” an amendment to our Articles to eliminate the supermajority voting requirements in Article XV

related to certain transactions.

•Proposal 5: “For” the ratification of the appointment of Deloitte & Touche LLP as our independent registered public

accounting firm for the fiscal year ending January 3, 2026.


90 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

•Proposal 6: “For” the advisory vote to approve executive compensation (Say on Pay).

•Proposal 7: “For” the amendment to the 2020 Plan to increase the number of shares reserved for issuance by

500,000 shares.

•Proposal 8: “For” the adjournment of the Annual Meeting to a later date or dates, if necessary or appropriate,

including to solicit additional proxies if there are insufficient votes for, or otherwise in connection with, one or more

of the other proposals to be voted on at the Annual Meeting.

If you are a Shareholder of Record, as defined below, and grant a proxy by telephone or Internet without voting

instructions, or sign and submit your proxy card without voting instructions, your shares will be voted “For” each Director

nominee and “For” each of the other proposals outlined above in accordance with the recommendations of the Board.

Who is eligible to vote?

Shareholders of record at the close of business on March 31, 2025 (the Record Date) are entitled to vote at the meeting.

As of the Record Date, there were 22,660,357 shares of common stock outstanding. Each share is entitled to one vote

on each matter to be voted on at the Annual Meeting. Shareholders do not have cumulative voting rights.

What is the difference between “Shareholders of Record” and “Beneficial Owners”?

If your shares are registered in your name in the records maintained by our stock transfer agent, you are a “Shareholder

of Record.” If you are a Shareholder of Record, notice of the meeting was sent directly to you.

If your shares are held in the name of your bank, broker, nominee or other holder of record, your shares are held in

“street name” and you are considered the “Beneficial Owner.” Notice of the meeting has been forwarded to you by

your bank, broker, nominee or other holder of record, who is considered, with respect to those shares, the Shareholder

of Record. As the Beneficial Owner, you have the right to direct your bank, broker, nominee or other holder of record

how to vote your shares by using the voting instructions you received.

How do shareholders vote their shares?

If you are a Shareholder of Record as of the record date, you can vote your shares in any of the following ways:

•Over the telephone by calling the toll-free number on the proxy card,

•Over the Internet by following the instructions on the proxy card,

•Through the mail – if you received a paper copy of the Proxy Statement, you may vote by mail by signing, dating

and mailing your proxy card in the envelope provided to be received no later than May 26, 2025 or

•Over the Internet during the 2025 Annual Meeting by going to www.virtualshareholdermeeting.com/SNBR2025

and using your 16-digit control number (included on Notice of Internet Availability of Proxy Materials, on your proxy

card or in the instructions that accompanied your proxy materials).

Your vote is important. Whether or not you plan to attend the meeting, we urge you to vote your shares in time for our

May 28, 2025 meeting date.

How Beneficial Owners vote

If you are a Beneficial Owner of shares held in “street name,” such as through a bank, broker, nominee or other holder of

record, you generally cannot vote your shares directly and must instead vote your shares in the manner prescribed by

your bank, broker, nominee or other holder of record. Your bank, broker, nominee or other holder of record has

provided notice by email or a printed voting instruction card for you to use in directing the bank, broker, nominee or

other holder of record how to vote your shares. Telephone and Internet voting are also encouraged for Beneficial

Owners who hold their shares in street name.


91 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

What is a Broker Non-Vote?

If a Beneficial Owner does not provide timely instructions, the broker will not have the authority to vote on any non-

routine proposals at the Annual Meeting, which includes Proposals 1, 2, 3, 4, 6 and 7. Brokers will have discretionary

authority to vote on Proposal 5 and Proposal 8 because the ratification of the appointment of independent auditors and

adjournment are considered routine matters. If the broker votes on Proposal 5 (appointment of independent auditors)

and Proposal 8 (adjournment of the Annual Meeting to a later date or dates, if necessary and appropriate) but does not

vote on another proposal because the broker does not have discretionary voting authority and has not received

instructions from the Beneficial Owner, this results in a “broker non-vote” with respect to such other proposal(s) and has

the effect on each proposal as is set forth in the above table.

How to Revoke a Proxy or Change a Vote

Any shareholder giving a proxy may revoke it at any time prior to its use at the Annual Meeting by:

•Delivering written notice of revocation to the corporate Secretary before 6:00 p.m., Eastern Daylight Time, on

May 26, 2025;

•Submitting to the corporate Secretary before 6:00 p.m., Eastern Daylight Time, on May 26, 2025, a properly signed

proxy card bearing a later date than the prior proxy card; or

•Voting again by Internet or telephone before 11:59 p.m., Eastern Daylight Time, on May 27, 2025; or

•Participating in the Annual Meeting and voting your shares electronically during the Annual Meeting. Participation in

the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically make that

request.

What does it mean if I receive more than one proxy card or Shareholder Notice?

You will receive multiple proxy cards if you hold your shares of common stock in different ways (e.g., different names,

trusts, custodial accounts, joint tenancy) or in multiple accounts. If your shares of common stock are held by a broker,

bank or other nominee (i.e., in “street name”), you will receive a voting instruction form directly from your broker, bank

or other nominee. It is important that you complete, sign and date each proxy card or voting instruction form you

receive, or by using the Internet as described in the instructions included herein and on your proxy card(s).

Householding Information

“Householding” is a program, approved by the SEC, which allows companies and intermediaries (e.g., banks and

brokers or other nominees) to satisfy the delivery requirements for proxy statements and annual reports by delivering

only one package of shareholder proxy material to any household at which two or more shareholders reside. If you and

other residents at your mailing address own shares of our common stock in a “street name,” your broker or bank may

have notified you that your household will receive only one copy of our proxy materials. Once you have received notice

from your broker that they will be “householding” materials to your address, “householding” will continue until you are

notified otherwise or until you revoke your consent. Any shareholder who is receiving multiple copies of these

documents and would like to receive only one copy per household should contact the shareholder’s bank, broker or

other nominee record holder. If you hold shares of our common stock in your own name as a holder of record,

“householding” will not apply to your shares.

We will promptly deliver an additional copy of any of these documents to you if you call us at (763) 551-7498, email us at

investorrelations@sleepnumber.com, or write us at the following address: Sleep Number Corporation, Investor Relations

Department, 1001 Third Avenue South, Minneapolis, Minnesota 55404.


92 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

What is the vote required to approve each proposal?

The below table summarizes each of the proposals, votes required, and the effects of: votes withheld, abstentions and

broker non-votes.


Proposal	Votes Required	Effect of Votes Withheld / Abstentions	Effect of Broker Non-Votes
Proposal 1: Election of Directors	For uncontested elections, affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote in person or by proxy on such action.	In this contested election, votes withheld will have no effect.	Broker non-votes will have no effect.
Proposal 2: Amendments of our Articles and Bylaws to Declassify the Board	Affirmative vote of two- thirds of the shares of common stock outstanding as of the Record Date for the Annual Meeting.	Abstentions will have the effect of a vote against the proposal.	Broker non-votes will have the effect of a vote against the proposal.
Proposal 3: Amendment to our Articles to Eliminate the Supermajority Voting Requirements in Article XIV	Affirmative vote of two- thirds of the shares of common stock outstanding as of the Record Date for the Annual Meeting.	Abstentions will have the effect of a vote against the proposal.	Broker non-votes will have the effect of a vote against the proposal.
Proposal 4: Amendment to our Articles to Eliminate the Supermajority Voting Requirements in Article XIV	Affirmative vote of two- thirds of the shares of common stock outstanding as of the Record Date for the Annual Meeting.	Abstentions will have the effect of a vote against the proposal.	Broker non-votes will have the effect of a vote against the proposal.
Proposal 5: Appointment of Independent Auditors(1)	Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote in person or by proxy on such action.	Abstentions will have the effect of a vote against the proposal.	We do not expect any broker non-votes on this proposal.
Proposal 6: Executive Compensation(1)	Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote in person or by proxy on such action.	Abstentions will have the effect of a vote against the proposal.	Broker non-votes will have no effect.
Proposal 7: Amendment to the 2020 Plan	Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote in person or by proxy on such action.	Abstention will have the effect of a vote against the proposal.	Broker non-votes will have no effect.
Proposal 8: Adjournment of the Annual Meeting to a later date or dates, if necessary or appropriate	Affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote in person or by proxy on such action.	Abstentions will have the effect of a vote against the proposal.	We do not expect any broker non-votes on this proposal.

(1) These proposals are an “advisory” vote, meaning that the shareholder votes on this item are for purposes of enabling shareholders to express their

point of view or preference on the proposal, but are not binding on the Company or the Board and do not require the Company or the Board to

take any particular action in response to the shareholder vote. The Board intends to consider fully the votes of our shareholders in the context of any

further action with respect to these proposals.


93 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

What constitutes a “quorum,” or how many shares are required to be present to conduct business at the Annual

Meeting?

The presence, directly or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to

vote (i.e., at least 11,330,180 shares) will constitute a quorum for the transaction of business at the Annual Meeting. In

general, shares of common stock represented by a properly signed and returned proxy card or properly voted by

telephone or via the Internet will be counted as shares represented and entitled to vote at the Annual Meeting for

purposes of determining a quorum, without regard to whether the card reflects abstentions and withhold votes (or is left

blank) or reflects a “broker non-vote” on a matter.

OTHER MATTERS

Management of our Company does not intend to present other items of business and knows of no items of business that

are likely to be brought before the Annual Meeting except those described in this Proxy Statement. However, if any

other matters should properly come before the Annual Meeting, the persons named in the enclosed proxy will have

discretionary authority to vote such proxy in accordance with the best judgment on such matters.

COPIES OF 2024 ANNUAL REPORT

We will furnish to our shareholders without charge a copy of our Annual Report on Form 10-K (without exhibits) for the

2024 fiscal year ended December 28, 2024. Any request for an Annual Report should be sent to:

Sleep Number Corporation

Investor Relations Department

1001 Third Avenue South

Minneapolis, Minnesota 55404

HOW TO RECEIVE PROXY MATERIALS

We furnish proxy materials to our shareholders primarily via the Internet. On or about April 18, 2025, we will begin

mailing to certain of our shareholders a Notice of Internet Availability of Proxy Materials (the Shareholder Notice), which

includes instructions on: (a) how to access our Proxy Statement and Annual Report on the Internet, (b) how to request

that a printed copy of these proxy materials be forwarded to you and (c) how to vote your shares. If you receive the

Shareholder Notice, you will not receive a printed copy of the proxy materials unless you request a printed copy by

following the instructions in the Shareholder Notice. All other shareholders will be sent the proxy materials by mail

beginning on or about April 18, 2025.

Requests for printed copies of the proxy materials can be made by Internet at www.proxyvote.com, by telephone at

1-800-579-1639 or by email at sendmaterial@proxyvote.com by sending a blank email with your control number in the

subject line. The Proxy Statement and Annual Report for the year ended December 28, 2024, and related materials are

available at http://ir.sleepnumber.com. The information contained in or connected to our website is not incorporated by

reference into, or considered a part of, this Proxy Statement.


94 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

HOW TO RECEIVE FUTURE PROXY MATERIALS ELECTRONICALLY

Shareholder of Record who received a paper copy of the proxy materials may elect to receive future Proxy Statements

and Annual Reports online as described in the next paragraph. Shareholders electing this feature will receive an email

message notification when the materials are available, along with a web address for viewing the materials. No action is

necessary to continue receiving proxy materials electronically in the future.

Whether you are a Shareholder of Record or a Beneficial Owner holding shares through a bank or broker, you can enroll

for future electronic delivery of Proxy Statements and Annual Reports by following these steps:

•Go to our website at www.sleepnumber.com;

•In the Investors section, click on Resources and then Electronic Fulfillment;

•Click on the check-marked box next to the statement “Shareholders can register for electronic delivery of proxy-

related materials”; and

•Follow the prompts to submit your request to receive proxy materials electronically.

You may view this year’s proxy materials at www.proxyvote.com. Generally, banks and brokers offering this choice

require that shareholders vote through the Internet in order to enroll. Beneficial Owners whose bank or broker is not

included in this website are encouraged to contact their bank or broker and ask about the availability of electronic

delivery. As is customary with Internet usage, the user must pay all access fees.

There is no cost to you for electronic delivery of Annual Meeting materials. You may incur the usual expenses associated

with Internet access as charged by your Internet service provider. Electronic delivery enables quicker delivery, allows you

to view or print the materials at your computer and makes it convenient to vote your shares online. Electronic delivery

also conserves natural resources and saves the Company printing, postage and processing costs.

THE COMPANY BEARS THE PROXY SOLICITATION COSTS

The proxies being solicited hereby are being solicited by the Board. The cost of preparing and mailing the notice of

Annual Meeting, this Proxy Statement and the accompanying proxy and the cost of solicitation of proxies on behalf of

the Board will be borne by the Company. The Company may solicit proxies by mail, Internet (including by email, social

media, the use of our Investor Relations website and other online channels of communication), telephone and other

electronic channels of communication, town hall meetings, personal interviews, press releases and press interviews. Our

Directors, officers and regular team members may, without compensation other than their regular compensation and the

reimbursement of expenses, solicit proxies by telephone or personal conversation. In addition, we may reimburse

brokerage firms and others for their reasonable and documented expenses incurred in connection with forwarding proxy

materials to the Beneficial Owners of our common stock.


95 \| 2025 PROXY STATEMENT	OUR ANNUAL MEETING AND VOTING

INCORPORATION BY REFERENCE

In accordance with SEC rules, notwithstanding anything to the contrary set forth in any of our previous or future filings

under the Securities Act of 1933, as amended, or the Exchange Act that might incorporate this Proxy Statement or future

filings made by the Company under those statutes, the information included under the section entitled “Compensation

Committee Report” and those portions of the information included under the section entitled “Audit Committee

Report” required by the SEC’s rules to be included therein, shall not be deemed to be “soliciting material” nor shall the

information included under the section entitled “Compensation Committee Report,” or those portions of the information

included under the section entitled “Audit Committee Report” required by the SEC’s rules to be included therein, be

“filed” with the SEC or, along with the information included under the section entitled “Pay Versus Performance,” be

deemed incorporated by reference into any of those prior filings or into any future filings made by the Company under

those statutes, except to the extent we specifically incorporate these items by reference.

Web links throughout this document are provided for convenience only, and the content on the referenced websites

does not constitute a part of this Proxy Statement.

Your vote is important. Whether or not you plan to attend the Annual Meeting, please vote your shares of common stock

“For” the Board’s nominees and “For” each of Proposals 2, 3, 4, 5, 6, 7 and 8 promptly by mail, telephone or Internet as

instructed on your proxy card.


	By Order of the Board of Directors

	Samuel R. Hellfeld
	Chief Legal and Risk Officer and Secretary

April 18, 2025

Minneapolis, Minnesota


96 \| 2025 PROXY STATEMENT	APPENDIX A

APPENDIX A

PROPOSED AMENDMENTS TO OUR ARTICLES AND OUR BYLAWS TO DECLASSIFY THE BOARD

The following are proposed changes to our Third Restated Articles of Incorporation, as amended, and to our Restated

Bylaws to declassify our Board of Directors as described in Proposal 2 (new text appears in blue underline and deleted

text appears in red strikethrough).

***************

ARTICLES OF AMENDMENT TO

THIRD RESTATED ARTICLES OF INCORPORATION OF

SLEEP NUMBER CORPORATION

The undersigned, Samuel R. Hellfeld, being the Secretary of Sleep Number Corporation (the “Corporation”), a

corporation organized under and subject to the provisions of Minnesota Statutes, Chapter 302A, does hereby certify that

pursuant to actions duly taken by the Board of Directors and shareholders of the Corporation, a resolution was adopted

that the first three sentences of Article XIV of the Third Restated Articles of Incorporation of the Corporation, as

amended, and be amended and restated in their entirety as follows:

ARTICLE XIV

The number of directors which shall constitute the entire Board of Directors shall not be less than one (1) nor

more than twelve (12), which number shall be determined from time to time by the Board of Directors. The

directors shall, until the election of directors at the regular meeting of shareholders to be held in 2028, be

divided into three (3) classes, as nearly equal in number as possible. The term of office of, the first class shall

expire being the class originally elected for a term expiring at the 1999 annual meeting of the shareholders of

the Corporation; the and most recently elected at the annual meeting of shareholders held in 2023 for a term of

office of expiring at the annual meeting of shareholders to be held in 2026, and the second class shall expire

being the class originally elected for a term expiring at the 2000 annual meeting of the shareholders of the

Corporation; and the term of office of and most recently elected at the annual meeting of shareholders held in

2024 for a term expiring at the annual meeting of shareholders to be held in 2027, and the third class shall

expire being the class originally elected for a term expiring at the 2001 annual meeting of the shareholders of

the Corporation. At each and to be elected at the annual meeting of shareholders to be held in 2025 for a term

expiring at the annual meeting of the shareholders after such classification, the number to be held in 2028.

Commencing with the election of directors equal to at the number annual meeting of the class whose term

expires on the day shareholders to be held in 2026, all directors shall be elected for a one year term expiring at

the next annual meeting of such meeting shall be elected for a term shareholders, and commencing with the

election of three (3) years the directors at the annual meeting of shareholders to be held in 2028, the

classification of the Board of Directors shall terminate. Directors shall hold office until expiration of the terms for

which they were elected and qualified; provided, however, that a director may be removed from office as a

director at any time by the shareholders, but only for cause, and only by the affirmative vote of a majority of the

outstanding voting power entitled to elect such director. If the office of any director becomes vacant by reason

of death, resignation, retirement, disqualification, removal from office, increase in the number of directors or

otherwise, a majority of the remaining directors, although less than a quorum, at a meeting called for that

purpose, may choose as successor, who, unless removed for cause as set forth above, shall hold office until the

expiration of the term of the class or the remainder of the one year term, as applicable, for which appointed or

until a successor shall be elected and qualified. This Article XIV may not be altered, amended or repealed, in

whole or in part, unless authorized by the affirmative vote of the holders of not less than two-thirds of the

outstanding voting power entitled to vote.


97 \| 2025 PROXY STATEMENT	APPENDIX A

***************

AMENDMENT TO RESTATED BYLAWS OF

SLEEP NUMBER CORPORATION

The undersigned, Samuel R. Hellfeld, being the Secretary of Sleep Number Corporation (the “Corporation”), a

corporation organized under and subject to the provisions of Minnesota Statutes, Chapter 302A, does hereby certify that

pursuant to actions duly taken by the Board of Directors and shareholders of the Corporation, a resolution was adopted

that Article III, Section 2 of the Restated Bylaws of the Corporation be amended and restated in its entirety as follows:

ARTICLE III

Board of Directors

*****

Section 2. Number and Term of Office. The number of directors which shall constitute the entire Board of

Directors shall not be less than one (1) nor more than twelve (12), which number shall be determined from time

to time by the Board of Directors. The directors shall, until the election of directors at the regular meeting of

shareholders to be held in 2028, be divided into three (3) classes, as nearly equal in number as possible. The

term of office of, the first class shall expire being the class originally elected for a term expiring at the 1999

annual meeting of the shareholders of the Corporation; the and most recently elected at the annual meeting of

shareholders held in 2023 for a term of office of expiring at the annual meeting of shareholders to be held in

2026, and the second class shall expire being the class originally elected for a term expiring at the 2000 annual

meeting of the shareholders of the Corporation; and the term of office of and most recently elected at the

annual meeting of shareholders held in 2024 for a term expiring at the annual meeting of shareholders to be

held in 2027, and the third class shall expire being the class originally elected for a term expiring at the 2001

annual meeting of the shareholders of the Corporation. At each and to be elected at the annual meeting of

shareholders to be held in 2025 for a term expiring at the annual meeting of the shareholders after such

classification, the number to be held in 2028. Commencing with the election of directors equal to at the number

annual meeting of the class whose term expires on the day shareholders to be held in 2026, all directors shall be

elected for a one year term expiring at the next annual meeting of such meeting shall be elected for a term

shareholders, and commencing with the election of three (3) years the directors at the annual meeting of

shareholders to be held in 2028, the classification of the Board of Directors shall terminate. Directors shall hold

office until expiration of the terms for which they were elected and qualified.


98 \| 2025 PROXY STATEMENT	APPENDIX B

APPENDIX B

PROPOSED AMENDMENT TO OUR THIRD RESTATED ARTICLES OF INCORPORATION, AS AMENDED, TO

ELIMINATE THE SUPERMAJORITY VOTING REQUIREMENT IN ARTICLE XIV RELATED TO OUR DIRECTORS

The following are proposed changes to our Third Restated Articles of Incorporation, as amended, to eliminate the

supermajority voting requirement in Article XIV related to our Directors as described in Proposal 3 (new text appears in

blue underline and deleted text appears in red strikethrough).

***************

ARTICLES OF AMENDMENT TO

THIRD RESTATED ARTICLES OF INCORPORATION OF

SLEEP NUMBER CORPORATION

The undersigned, Samuel R. Hellfeld, being the Secretary of Sleep Number Corporation (the “Corporation”), a

corporation organized under and subject to the provisions of Minnesota Statutes, Chapter 302A, does hereby certify that

pursuant to actions duly taken by the Board of Directors and shareholders of the Corporation, a resolution was adopted

that the last sentence of Article XIV of the Third Restated Articles of Incorporation of the Corporation, as amended, be

amended and restated in its entirety as follows:

ARTICLE XIV

The number of directors which shall constitute the entire Board of Directors shall not be less than one (1) nor

more than twelve (12), which number shall be determined from time to time by the Board of Directors. The

Directors shall be divided into three (3) classes, as nearly equal in number as possible. The term of office of the

first class shall expire at the 1999 annual meeting of the shareholders of the Corporation; the term of office of

the second class shall expire at the 2000 annual meeting of the shareholders of the Corporation; and the term of

office of the third class shall expire at the 2001 annual meeting of the shareholders of the Corporation. At each

annual meeting of the shareholders after such classification, the number of directors equal to the number of the

class whose term expires on the day of such meeting shall be elected for a term of three (3) years. Directors shall

hold office until expiration of the terms for which they were elected and qualified; provided, however, that a

director may be removed from office as a director at any time by the shareholders, but only for cause, and only

by the affirmative vote of a majority of the outstanding voting power entitled to elect such director. If the office

of any director becomes vacant by reason of death, resignation, retirement, disqualification, removal from office,

increase in the number of directors or otherwise, a majority of the remaining directors, although less than a

quorum, at a meeting called for that purpose, may choose as successor, who, unless removed for cause as set

forth above, shall hold office until the expiration of the term of the class for which appointed or until a successor

shall be elected and qualified. This Article XIV may not be altered, amended or repealed, in whole or in part,

unless authorized by the affirmative vote of the holders of not less than two-thirds a majority of the outstanding

voting power entitled to vote.


99 \| 2025 PROXY STATEMENT	APPENDIX C

APPENDIX C

AMENDMENT TO OUR THIRD RESTATED ARTICLES OF INCORPORATION, AS AMENDED, TO ELIMINATE THE

SUPERMAJORITY VOTING REQUIREMENTS IN ARTICLE XV

RELATED TO APPROVAL OF CERTAIN TRANSACTIONS

The following are proposed changes to our Third Restated Articles of Incorporation, as amended, to eliminate the

supermajority voting requirements in Article XV related to certain transactions as described in Proposal 4 (new text

appears in blue underline and deleted text appears in red strikethrough).

***************

ARTICLES OF AMENDMENT TO

THIRD RESTATED ARTICLES OF INCORPORATION OF

SLEEP NUMBER CORPORATION

The undersigned, Samuel R. Hellfeld, being the Secretary of Sleep Number Corporation (the “Corporation”), a

corporation organized under and subject to the provisions of Minnesota Statutes, Chapter 302A, does hereby certify that

pursuant to actions duly taken by the Board of Directors and shareholders of the Corporation, a resolution was adopted

that Article XV of the Third Restated Articles of Incorporation of the Corporation, as amended, and be amended and

restated in its entirety as follows:

ARTICLE XV

The affirmative vote of the holders of not less than two-thirds a majority of the outstanding voting power of the

corporation entitled to vote for approval shall be required if (a) this Corporation merges or consolidates with any

other corporation, or if (b) this Corporation sells or exchanges all or a substantial part of its assets to or with any

other corporation, or if (c) this Corporation issues or delivers any stock or other securities of its issue in exchange

or payment for any properties or assets of any other corporation, or securities issued by any other corporation, or

in a merger of any subsidiary of this Corporation (80% or more of the common stock of which is held by this

Corporation) with or into any other corporation; provided, however, that the foregoing shall not apply to any

plan of merger or consolidation, or sale or exchange of assets, or issuance or delivery of stock or other securities

which was approved (or adopted) and recommended without condition by the affirmative vote of not less than

two-thirds of the directors, nor shall it apply to any such transaction solely between this Corporation and another

corporation 50% or more of the voting stock of which is owned, directly or indirectly, by this Corporation. The

Board of Directors shall be permitted to condition its approval (or adoption) of any plan of merger or exchange

of assets, or issuance or delivery of stock or securities upon the approval of holders of two-thirds a majority of

the outstanding stock of this Corporation entitled to vote on such plan of merger or consolidation, or sale or

exchange of assets, or issuance or delivery of stock or securities. This Article XV may not be altered, amended or

repealed, in whole or in part, unless authorized by the affirmative vote of the holders of not less than two-thirds a

majority of the outstanding voting power entitled to vote.


100 \| 2025 PROXY STATEMENT	APPENDIX D

APPENDIX D

AMENDMENT NO. 2 TO THE

SLEEP NUMBER CORPORATION 2020 EQUITY INCENTIVE PLAN

This Amendment No. 2 (this “Amendment”) to the Sleep Number Corporation 2020 Equity Incentive Plan (as amended,

the “Plan”) made and adopted by Sleep Number Corporation (the “Company”) effective as of __________, 2025, the

date it was approved by the Company’s shareholders. Capitalized terms used but not otherwise defined herein shall

have the meanings ascribed to them in the Plan.

WHEREAS, the Company maintains the Plan.

WHEREAS, pursuant to Section 19.1 of the Plan, the Management Development and Compensation Committee,

at any time and from time to time, may amend the Plan.

WHEREAS, pursuant to Section 19.2 of the Plan, no amendments to the Plan will be effective without approval of

the Company’s shareholders if, among other things, such amendment would, subject to Section 4.5 of the Plan, increase

the aggregate number of shares of Common Stock issued or issuable under the Plan.

WHEREAS, the Management Development and Compensation Committee approved this Amendment on March

19, 2025, subject to the approval of the Company’s shareholders, to increase the number of shares of Common Stock

reserved for issuance under the Plan by 500,000 shares, as set forth in this Amendment.

NOW, THEREFORE, in consideration of the foregoing, the Plan is hereby amended as follows:

1.Section 4.1 of the Plan is hereby amended and restated in its entirety to read as follows:

4.1 Maximum Number of Shares Available. Subject to adjustment as provided in Section 4.5 of this

Plan, the maximum number of shares of Common Stock that will be available for issuance under this Plan

will be 5,240,000 shares less one share for every share subject to an Award granted under the Prior Plan

after December 28, 2019. Upon effectiveness of this Plan, no further awards will be granted under the

Prior Plan.

2.This Amendment shall be and is hereby incorporated in and forms a part of the Plan.

3.Except as expressly provided herein, all other terms and provisions of the Plan shall remain unchanged and in full

force and effect.


☑	Filed by the Registrant
¨	Filed by a party other than the Registrant
CHECK THE APPROPRIATE BOX:
¨	Preliminary Proxy Statement
¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☑	Definitive Proxy Statement
¨	Definitive Additional Materials
¨	Soliciting Material under §240.14a-12


PAYMENT OF FILING FEE (CHECK ALL BOXES THAT APPLY):
☑	No fee required.
¨	Fee paid previously with preliminary materials.
¨	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.


	EXPERIENCE
	2013 - 2016	Chairman, Leveraged Finance, Citigroup Global Markets Head of Leveraged Finance, Citigroup Global Markets Various leadership positions in High Yield Capital Markets at Salomon Brothers, Salomon Smith Barney and Citicorp
	2006 - 2013
	1985 - 2006


Barbara R. Matas Age 64 Sleep Number® setting 30	PUBLIC AND PRIVATE COMPANY BOARDS
	Sleep Number (since 2016) MidCap Financial Investment Corporation (since 2017) BRP Group (Baldwin Risk Partners) (since 2020) PRIVATE BOARD Middle Market Apollo Institutional Private Lending BDC (MMAIPL) a registered investment company under the ’40 Act (since 2024)



	QUALIFICATIONS AND EXPERTISE
	•More than three decades of experience advising public and private companies on corporate finance, capital allocation and capital structure •Secured and executed numerous ground-breaking transactions at Citigroup in leveraged finance and high yield capital markets •Serves on three audit committees and has extensive experience in financial reporting, accounting, risk management and internal and external audit functions


	Ownership Guideline	Current Ownership(1)
CEO	5 x annual base salary	5.6 x
Average of NEOs (other than CEO)	3 x annual base salary	1.6 x
Average of Non-employee Directors	5 x annual cash retainer	6.4 x