UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________________

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No.    )

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______________________________________________________________________

SLEEP NUMBER CORPORATION

(Name of Registrant as Specified In Its Charter)

______________________________________________________________________

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Dear Fellow Shareholders,

2023 was a year of opportunities and challenges for Sleep Number in the face of a historic, ongoing mattress industry

recession. We took decisive actions to transform our operating model and strengthen our financial resilience while

pursuing opportunities that advance our long-term value proposition:

•To compete more effectively and strengthen our value perception as consumers shifted from selective spending

to scrutinizing purchases in this challenging macro environment, we tailored our marketing messaging and

refined our promotional strategy and selling process;

•To restore our profit margins, we implemented broad-based cost reduction and margin enhancement initiatives

that are driving sustainable change across our organization; and

•To strengthen our balance sheet, we are focusing our capital allocation priorities to preserve liquidity and

increase cash flow to pay down debt.

Additionally, our culture of individuality and wellbeing inspires high engagement and strong execution among our more

than 4,100 mission-driven team members, which propels our transformation and performance outcomes.

While our actions, supported by our vertically integrated business model, are positioning us for accelerating growth

when the mattress demand environment improves, our plans for 2024 assume that industry demand remains under

pressure. Even in this environment, however, we expect to expand margins through a more efficient cost structure and

generate strong free cash flow to pay down debt.

As we navigate the cyclicality in our industry, our long-term strategic opportunity remains intact. The combination of our

pioneering hardware and scalable, dynamic software, with more than 34 billion data points collected by our smart beds

nightly – and our growing community of nearly 3 million connected Smart Sleepers, with a best-in-class monthly active

user rate of approximately 80 percent – differentiates us in our industry and enables us to expand our brand relevance

beyond our traditional category into larger and less cyclical markets over the long-term.

Consumers consistently rank sleep as one of their highest wellness priorities with the most unmet needs, and many

indicate they are looking for data-driven, science-backed sleep solutions that empower them to take more control over

their health outcomes. Inspired by our purpose – to improve the health and wellbeing of society through higher quality

sleep – Sleep Number is uniquely positioned to help solve consumers’ sleep challenges and profitably capitalize on

untapped sleep health opportunities.

As a result of our restructuring, we will be a leaner, more financially resilient business that is poised to deliver higher

margins and increased cash flow as the market improves and demand rebounds. We appreciate your feedback and

support of our efforts to create meaningful shareholder value.

Sleep well, dream big,
Shelly Ibach Chair, President and Chief Executive Officer Sleep Number® setting 40, average SleepIQ® score of 82

1001 Third Avenue South

Minneapolis, Minnesota 55404

NOTICE OF 2024 ANNUAL MEETING OF SHAREHOLDERS

May 21, 2024

Sleep Number Corporation will hold its Annual Meeting of Shareholders at 8:30 a.m. Central Time on Tuesday, May 21,

2024. The meeting will be conducted virtually at www.virtualshareholdermeeting.com/SNBR2024.

Items of Business:	Our Board of Directors Recommends You Vote:
•To elect as Directors the four persons named in the Proxy Statement, each to serve for a term of three years until the 2027 Annual Meeting of Shareholders	FOR the election of each director nominee
•To ratify the appointment of Deloitte & Touche LLP as our independent auditors for the 2024 fiscal year ending December 28, 2024	FOR the ratification of the appointment
•To approve, on an advisory basis, our executive compensation (Say on Pay)	FOR approval, on an advisory basis
•To approve an amendment to the Sleep Number Corporation 2020 Equity Incentive Plan (2020 Plan) to increase the number of shares reserved for issuance by 1,500,000 shares	FOR the approval of the amendment to the 2020 Plan

Shareholders of record at the close of business on March 25, 2024, 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 21, 2024, meeting date.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR MEETING

The Proxy Statement and Annual Report for the fiscal year ended December 30, 2023, 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. These materials were first sent or made available to our shareholders

on April 2, 2024.

By Order of the Board of Directors,

Samuel R. Hellfeld

Chief Legal and Risk Officer and Secretary

Minneapolis, Minnesota

April 2, 2024

	Page
OUR BOARD	1
Proposal 1 - Election of Directors	2
OUR COMPANY	22
Audit Committee Report	25
Proposal 2 - Ratification of Appointment of Independent Registered Public Accounting Firm	27
OUR PAY	29
Proposal 3 - Advisory Vote to Approve Executive Compensation (Say on Pay)	62
Proposal 4 - Approve the Amendment to the Sleep Number Corporation 2020 Equity Incentive Plan	63
OUR SHAREHOLDERS	79
Stock Ownership of Management and Certain Beneficial Owners	79
OUR ANNUAL MEETING AND VOTING	82

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 30, 2023. We assume no obligation to update any of these forward-looking statements.

PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS

May 21, 2024

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

Number Corporation for use at the 2024 Annual Meeting of Shareholders. These materials were first sent or made

available to our shareholders on April 2, 2024.

OUR BOARD

WHO WE ARE

Article XIV of our Third Restated Articles of Incorporation, as amended, 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 of Directors. The term of each class is three years and

the term of one class expires each year in rotation.

Immediately prior to the 2024 Annual Meeting, our Board will consist of 12 members, four of which will be up for

election at the 2024 Annual Meeting. The Board has nominated Stephen L. Gulis, Jr., Brenda J. Lauderback, Stephen

E. Macadam and Hilary A. Schneider for election to the Board, each for a term of three years expiring at the 2027

Annual Meeting, or until their successors are elected and qualified. Mr. Gulis, Ms. Lauderback, Mr. Macadam and Ms.

Schneider have each consented to being named as a nominee in this Proxy Statement and to serve as a Director if

elected. Upon the conclusion of the 2024 Annual Meeting, our Board will consist of 11 members following the retirement

of Daniel I. Alegre, whose term will expire at the conclusion of the 2024 Annual Meeting.

1 | 2024 PROXY STATEMENT OUR BOARD

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

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

2027 Annual Meeting or until their successor shall have been elected and qualified.

•Stephen Gulis

•Brenda Lauderback

•Stephen Macadam

•Hilary Schneider

The Board recommends a 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.

•They complement our commitment to Board diversity with two nominees who self-identify as women and one

who is diverse by race.

•They support the Board’s ability to oversee the Company on behalf of our shareholders, team members,

customers and other stakeholders.

Each of these nominees currently serves as a Director, and the Board expects that each of them will be available to serve

as Directors. If, however, any of them should be unwilling or unable to serve, the Board may decrease the size of the

Board and the proxies may be voted for the remaining number of nominees or the Board may designate substitute

nominees and the proxies will be voted in favor of any such substitute nominees. The election of each Director nominee

requires the affirmative vote of a majority of the shares represented and entitled to vote at the Annual Meeting. Any

broker non-votes on the election of each nominee for Director will be treated as shares not entitled to vote on that

matter, and thus will not be counted in determining whether the Director has been elected.

2 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

The Board recommends a vote “FOR” each of these nominees for election for three-year terms expiring 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

	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 73 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, at other consumer and retail companies •Recognized by the National Association of Corporate Directors as one of the Top 100 Directors in 2017 •Presenter and speaker on Governance for National Association of Corporate Directors

3 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Stephen L. Gulis, Jr.

Age 66

Sleep Number®

setting 45

	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 63 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

	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

4 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Hilary A. Schneider

Age 62

Sleep Number®

setting 40

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

	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,
	2016 - 2017
	2014 - 2016
	2003 - 2012
	PUBLIC AND PRIVATE COMPANY BOARDS
	Sleep Number (since 2011) PRIVATE COMPANY BOARDS OOFOS (since 2016) Seasalt Holdings, Ltd. (since 2020) PRIOR PRIVATE COMPANY BOARD Totes Isotoner (2014 – 2016)
	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

5 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Michael J. Harrison

Age 63

Sleep Number®

setting 40

	EXPERIENCE
	2008 - Present	President and Chief Executive Officer, Sleep Number Corporation since 2012 and Chair of the Board since 2022 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
	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 technology company •Led development of the Company’s purpose-driven brand and vertically integrated business model with strong cash flow generation

	EXPERIENCE
	2017 - Present	Executive Chair of the Board, and former 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
Deborah L. Kilpatrick, Ph.D.  Age 56 Sleep Number® setting 30	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) College of Engineering Advisory Board, Georgia Tech (former Chair) (since 2004)
	QUALIFICATIONS AND EXPERTISE
	•Medical device, molecular diagnostic and digital health expertise and experience in the US and abroad •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)

6 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Shelly R. Ibach

Age 64

Sleep Number®

setting 40

	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

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

	EXPERIENCE
	2017 - Present	President, Chief Executive Officer and board member, Gentherm, a global thermal management technologies company Various leadership roles culminating as President, Connected Car division, Harman International, an audio electronics company
	1997 - 2017
Phillip M. Eyler Age 52 Sleep Number® setting 40	PUBLIC COMPANY BOARDS
	Sleep Number (since 2022) Gentherm Incorporated (since 2017)
	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

7 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

	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 61 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

	EXPERIENCE
	2020 - Present	Executive Chairman, LevaData, an artifical 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 63 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

8 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Director not standing for election this year whose term expires in 2024:

	EXPERIENCE
	2023 - March 2024	Former Chief Executive Officer, Yuga Labs, a web3 developer in the cryptocurrencies, digital media and metaverse sectors President and Chief Operating Officer Activision Blizzard, a leading interactive entertainment company Various roles at Google, Inc. including as President of Google Retail, Shopping and Payment, Global Partnerships and Asia Pacific Japan. Prior ecommerce and business development experience at Bertelsmann
	2020 - 2023
	2004 - 2020
	PUBLIC COMPANY BOARDS
	Sleep Number (since 2013)
	Fomento Economico Mexicano, S.A.B. de C.V. (FEMSA) (since 2023)
	QUALIFICATIONS AND EXPERTISE
	•Deep experience building direct digital relationships with consumers and driving rapid growth, especially in international and early-stage businesses •During his 16 years at Google, launched operations in Latin America, embedded eCommerce across product areas, and helped diversify into retail transactions •Oversaw international delivery and commercialization of successful franchises such as Call of Duty, World of Warcraft, and Candy Crush at Activision Blizzard

After serving 11 years as a Sleep Number Director, Daniel Alegre decided not to stand for election this year and his term

will expire at the conclusion of the 2024 Annual Meeting of Shareholders. The Company sincerely thanks Mr. Alegre for

his service and dedication as a member of the Board.

9 | 2024 PROXY STATEMENT PROPOSAL 1 - ELECTION OF DIRECTORS

Daniel I. Alegre

Age 55

Sleep Number®

setting 40

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 of Directors. 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

diversity considerations, 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 | 2024 PROXY STATEMENT OUR BOARD

The matrix below depicts the gender identity and demographic background of our current Board members. 

Board Diversity Matrix (as of March 13, 2024)
Total Number of Directors - 12
	Female	Male	Non- binary	Did Not Disclose Gender
PART I: Gender Identity
Directors	6	6
PART II: Demographic Background
African American or Black(1)	1
Alaskan Native or Native American
Asian
Hispanic or Latinx(2)		2
Native Hawaiian or Pacific Islander
White(3)	5	4
Two or More Races or Ethnicities
LGBTQ+(4)	1
Did not disclosure demographic background	0

(1) Brenda J. Lauderback self-identifies as female and African American or Black.

(2) Daniel I. Alegre and Angel L. Mendez each self-identify as male and Hispanic or Latinx.

(3) Julie M. Howard, Shelly Ibach, Deborah L. Kilpatrick, Ph.D., Barbara R. Matas and Hilary A. Schneider each self-identify as female and white. Phillip

M. Eyler, Stephen L. Gulis, Jr., Michael J. Harrison and Stephen E. Macadam each self-identify as male and white.

(4) Deborah L. Kilpatrick, Ph.D. self-identifies as LGBTQ+.

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

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

Shelly Ibach

Michael Harrison

Angel Mendez

Barbara Matas

Brenda Lauderback

Daniel Alegre

Deb Kilpatrick

Hilary Schneider

Julie Howard

Phillip Eyler

Stephen Gulis, Jr.

Stephen Macadam

CEO Experience

X

X

X

X

X

X

X

X

Executive Leadership

X

X

X

X

X

X

X

X

X

X

X

Current Public Company Boards (incl. Sleep Number)

1

1

3

3

3

2

1

4

2

2

2

3

Retail and Digital Commerce

X

X

X

X

X

X

Marketing & Brand Building

X

X

X

X

X

X

X

X

Product Innovations

X

X

X

X

X

X

X

X

Technology

X

X

X

X

X

X

X

Finance

X

X

X

X

X

X

X

X

X

Supply Chain, Manufacturing, Logistics, Delivery

X

X

X

X

X

X

X

Human Capital and Diversity, Equity & Inclusion (DEI)

X

X

X

X

X

X

X

X

X

X

Information Technology and Privacy

X

X

X

X

X

X

X

Cybersecurity

X

X

Environmental, Social and Governance (ESG)

X

X

X

X

X

X

X

X

X

Risk Management

X

X

X

X

X

X

X

X

11 | 2024 PROXY STATEMENT OUR BOARD

How Board Members Are Elected and Refreshed

Director Elections

Our Third Restated Articles of Incorporation, as amended, (Articles) 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.

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

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

•The Board believes it to be good practice for any director who turns 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.

Upon reaching the age of 72 in 2022, Brenda Lauderback has annually tendered her resignation to the Chair of the

CGNC. Ms. Lauderback is one of the leading public company directors in the country, for which she has been recognized

by the National Association of Corporate Directors. Her vast board experience and deep expertise in building consumer

brands make her a valued member of the Board and a highly effective Chair of the Management Development and

Compensation Committee. The CGNC considered Ms. Lauderback’s resignation and determined that losing her at this

critical time was not in the best interests of the Company and its shareholders, and therefore recommended to the full

Board that she remain a Director. The Board has approved her retention.

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 | 2024 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 2023 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 of Directors 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 30, 2023, and there are none currently contemplated.

13 | 2024 PROXY STATEMENT OUR BOARD

Board Leadership

Chair and Chief Executive Officer

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.

The Board appointed our CEO, Shelly R. Ibach, to the role of Chair effective immediately following our 2022 Annual

Meeting of Shareholders. The Board values the continuity this provides and believes that the combined roles are

currently in the best interests of the Company and its stakeholders.

Lead Director

The Board appointed Michael J. Harrison as independent Lead Director when it appointed our CEO to the role of Chair.

Mr. Harrison has extensive board governance and consumer brand experience. He previously chaired the CGNC, served

on the Audit Committee and serves on the Management Development and Compensation Committee (the

Compensation Committee).

The Lead Director role is clearly defined 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.

The Board values the balance provided by an accomplished Chair/CEO, a strong Lead Director and independent

Committee Chairs, all enabled by robust charters, strong Corporate Governance Principles and well-defined

responsibilities.

14 | 2024 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(1)	Management Development and Compensation Committee	Corporate Governance and Nominating Committee
Daniel I. Alegre			X
Phillip M. Eyler		X	X
Stephen L. Gulis, Jr.	Chair(2)			X(2)
Michael J. Harrison			X(3)
Julie M. Howard	X		X
Deborah L. Kilpatrick, Ph.D.	X			X
Brenda J. Lauderback			Chair
Barbara R. Matas	X(4)	Co-Chair		X(5)
Stephen E. Macadam		Co-Chair		X(6)
Angel L. Mendez	X			Chair(7)
Hilary A. Schneider		X	X (6)

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

(1) On November 7, 2023, the Capital Allocation Committee was formed and all members and co-Chairs appointed.

(2) On November 7, 2023, Mr. Gulis, Jr. was appointed Chair of the Audit Committee and stepped down as Chair of the CGNC while remaining a

member of the CGNC.

(3) On May 11, 2023, Mr. Harrison was appointed a member of the Compensation Committee.

(4) On November 7, 2023, Ms. Matas stepped down as Chair while remaining a member of the Audit Committee.

(5) On May 11, 2023, Ms. Matas was appointed a member of the CGNC.

(6) On November 7, 2023, Mr. Macadam and Ms. Schneider joined the CGNC and Compensation Committee, respectively.

(7) On November 7, 2023, Mr. Mendez was appointed Chair of the CGNC.

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

Howard 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 legal, ethical and regulatory compliance. The

responsibilities and functions of the Audit Committee are further described in the Audit Committee Report beginning on

page 25 of this Proxy Statement.

15 | 2024 PROXY STATEMENT OUR BOARD

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

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 29 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 twelve times during 2023. The Audit Committee met eight times, the Capital

Allocation Committee (formed Nov. 7, 2023) met one time, the Compensation Committee met eight times and the

CGNC met four times during 2023. Each of the members of our Board serving in 2023 attended 75% or more of all

meetings of the Board and committees on which they served.

Executive sessions or meetings of independent Directors without management present will be held at least twice each

year. At least one session will be to review the performance criteria applicable to the CEO and other executive officers,

the performance of the CEO against such criteria and the compensation of the CEO and other executive officers.

Additional executive sessions or meetings of independent Directors may be held from time to time as needed. The

Board’s practice is to meet in executive session for a portion of each regularly scheduled meeting of the Board. Any

member of the Board may request an executive session. Executive sessions or meetings with the CEO shall be held from

time to time for a general discussion of relevant topics.

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

control. All our Directors attended our 2023 Annual Meeting of Shareholders.

16 | 2024 PROXY STATEMENT OUR BOARD

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.

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

17 | 2024 PROXY STATEMENT OUR BOARD

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

development, succession planning and other relevant factors.

Provisions Applicable to Unsolicited Takeover Attempts or Proposals

The Board will periodically review (not less often than every three years) the Company’s Third Restated Articles of

Incorporation 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. 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 Approval of Equity-Based Compensation Plans

Shareholder approval will be sought for all equity-based compensation plans.

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.

18 | 2024 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 receives an additional cash retainer of $50,000 per year.

Meeting Fees

In 2023, 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 of shareholders, non-employee directors are eligible to receive equity compensation

in amounts determined by the Compensation Committee. In 2023, 75% of the grant value was in RSUs and 25% of the

grant value was in stock options, based on Black-Scholes valuation, 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 of Directors. All options granted to directors have an exercise price equal to the

fair market value of our common stock on the date of grant and remain exercisable for a period of up to 10 years, subject

to continuous service on our Board of Directors. At its meeting on May 10, 2023, 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 11, 2023. The number of RSUs granted to our non-employee

directors on May 11, 2023 was based on the 20-day average closing share price prior to the date of grant of $24.14. The

number of stock options granted to our non-employee Directors on May 11, 2023 was based on the 20-day average

closing share price prior to the date of grant of $24.14 and an estimated Black-Scholes value per option of $14.24. The

option exercise price was $20.54. At its meeting on December 14, 2023, the Compensation Committee approved equity

compensation for two non-employee Directors who were appointed to the Board on November 7, 2023 to be prorated

for their service from November 7 to May 10, 2024. The number of RSUs granted to our two non-employee Directors on

December 14, 2023, was based on the 20-day average closing share price prior to the date of grant of $12.09. The

number of stock options granted to our two non-employee Directors on December 14, 2023, was based on the 20-day

average closing share price prior to the date of grant of $12.09 and an estimated Black-Scholes value per option of

$7.25. The option exercise price was $17.14. These equity compensation grants to non-employee Directors in the fiscal

year are set forth and described in the “Director Compensation” table below.

19 | 2024 PROXY STATEMENT OUR BOARD

Reimbursement of Expenses

Directors are reimbursed for travel expenses for attending 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 29 of this Proxy Statement.

Prohibition of Hedging or Pledging of Shares

Under our policy with respect to trading in the Company’s securities, Directors, officers, director-level and above team

members and other team members designated by Sleep Number from time to time as “insiders” are prohibited from

engaging in any form of hedging or monetization transactions involving the Company’s securities, including, but not

limited to, the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange

funds. In addition, insiders are prohibited from engaging in short sales of the Company’s securities and from trading in

any form of publicly traded options, puts, calls or other derivatives of the Company’s securities. Insiders are also

prohibited from engaging in any form of pledging of the Company’s securities, including: (a) purchasing Company

securities on margin, (b) holding Company securities in any account which has a margin debt balance, (c) borrowing

against any account in which Company securities are held or (d) pledging Company securities as collateral for a loan.

20 | 2024 PROXY STATEMENT OUR BOARD

Director Compensation

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

Board of Directors for the 2023 fiscal year ended December 30, 2023.

Name	Fees Earned or Paid in Cash ($)	Stock Awards(1) ($)	Option Awards(2) ($)	All Other Compensation ($)	Total ($)
Daniel I. Alegre(5)	$96,500	$86,165	$29,027	—	$211,692
Phillip M. Eyler(3)	$97,000	$86,165	$29,027	—	$212,192
Stephen L. Gulis, Jr.(3)	$116,500	$86,165	$29,027	—	$231,692
Michael J. Harrison	$147,000	$86,165	$29,027	—	$262,192
Julie M. Howard(3)(4)	$96,500	$86,165	$29,027	$63	$211,755
Deborah L. Kilpatrick, Ph.D.(5)	$96,500	$86,165	$29,027	—	$211,692
Brenda J. Lauderback(3)	$116,500	$86,165	$29,027	—	$231,692
Stephen E. Macadam(6)	$15,577	$73,222	$24,527	—	$113,326
Barbara R. Matas(3)(4)	$115,516	$86,165	$29,027	—	$230,708
Angel L. Mendez(3)	$99,467	$86,165	$29,027	—	$214,659
Hilary A. Schneider(6)	$14,093	$73,222	$24,527	—	$111,842
Jean-Michel Valette(7)	$34,190	—	—	—	$34,190

(1)Reflects the aggregate grant date fair value of restricted stock awards granted during fiscal year 2023, computed in accordance with FASB ASC

Topic 718. For all directors except Mr. Macadam and Ms. Schneider, 4,195 restricted stock awards were granted. Mr. Macadam and Ms. Schneider,

who were newly elected Directors effective November 7, 2023, were granted 4,272 restricted stock awards. 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 30, 2023, for a discussion of the

relevant assumptions used in calculating these amounts. As of December 30, 2023, 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 2023

was as follows: Mr. Alegre, 4,195 shares; Mr. Eyler, 4,195; Mr. Gulis, 53,941 shares; Mr. Harrison, 4,195 shares; Ms. Howard, 10,831 shares; Ms.

Kilpatrick, 4,195 shares; Ms. Lauderback, 4,195 shares; Mr. Macadam, 4,272; Ms. Matas, 24,708 shares; Mr. Mendez, 4,195 shares; and Ms.

Schneider, 4,272 shares.

(2)Reflects the aggregate grant date fair value of stock option awards granted during fiscal year 2023, computed in accordance with FASB ASC Topic

718. For all directors except Mr. Macadam and Ms. Schneider, 2,370 stock option awards were granted. Mr. Macadam and Ms. Schneider, who were

newly elected Directors effective November 7, 2023, were granted 2,373 stock option awards. 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 30, 2023, for a discussion of the

relevant assumptions used in calculating these amounts. As of December 30, 2023, the aggregate number of stock options outstanding held by

those who served as non-employee Directors through fiscal 2023 was as follows: Mr. Alegre, 4,355; Mr. Eyler, 4,285; Mr. Gulis, 7,695; Mr. Harrison,

17,597; Ms. Howard, 5,830; Ms. Kilpatrick, 9,860; Ms. Lauderback, 17,597; Mr. Macadam, 2,373; Ms. Matas, 7,695; Mr. Mendez, 4,285; and Ms.

Schneider, 2,373.

(3)Under the 2020 Equity Incentive 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 Plan. For fiscal 2023, the following Directors have elected to defer receipt of their

2023 Incentive Award of 4,195 shares: Mr. Eyler, Mr. Gulis, Ms. Howard, Ms. Lauderback, Ms. Matas and Mr. Mendez.

(4)Ms. Howard and Ms. Matas elected to receive Director fees in the form of common stock under the Company’s 2020 Equity Incentive 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 2023 is 4,311 shares and the related grant date fair value was $95,000. The number of shares to be

received by Ms. Matas in lieu of cash payments during fiscal 2023 is 5,132 shares and the related grant date fair value was $113,516.

(5)Mr. Alegre and Ms. Kilpatrick elected to receive a portion of Director fees in the form of common stock under the Company’s 2020 Equity Incentive

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

each of Ms. Alegre and Ms. Kilpatrick in lieu of cash payments during fiscal 2023 was 4,369 shares each and the related grant date fair value for each

was $94,950.

(6)Mr. Macadam and Ms. Schneider were elected as new directors effective November 7, 2023.

(7)Mr. Valette retired from the Board of Directors effective upon the conclusion of the 2023 Annual Meeting of Shareholders. The amounts presented

for Mr. Valette relate to fees earned prior to his retirement. 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. In that capacity, Mr. Valette received

compensation consistent with that of non-employee Directors.

21 | 2024 PROXY STATEMENT OUR BOARD

WHAT WE DO

Sleep Number is a wellness technology company. We are guided by our purpose to improve the health and wellbeing of

society through higher quality sleep; to date, our sleep innovations have improved over 15 million lives. Our smart beds

combine physical and digital technology to help solve sleep problems, whether it’s providing individualized temperature

control for each sleeper through our Climate360® smart bed or applying billions of hours of longitudinal sleep data and

expertise to research with global institutions.

Our consumer innovation strategy differentiates us from other companies in our industry, strengthens our competitive

position, and offers us continued opportunities to expand our relevance. Our vertically integrated model, which includes

the design, engineering, manufacturing, distribution and marketing of our innovative sleep solutions, enables us to stay

close to the customer and deliver a value-added retail experience that seamlessly integrates Sleep Number’s digital and

physical experiences to meet their needs. Vertical integration also gives us heightened visibility and control of our brand

expression, manufacturing and fulfillment network. We build and nurture lifelong relationships with our customers; our

connected Smart Sleepers demonstrate best-in-class engagement with the Sleep Number app, which offers personalized

sleep and health insights. This group of loyal brand advocates drives approximately 50% of our business through repeat

and referral sales.

Together, these key elements of our business model support our financial viability, and our ability to grow market share,

generate strong free cash flow and deliver long-term value for our shareholders.

WHO WE ARE

Our 4,100 mission-driven team members span 650 retail stores, our home delivery network, manufacturing and

distribution facilities and corporate headquarters. Engagement surveys repeatedly show that our team members find

meaning in their work, and it shows through the exceptional customer experiences they deliver. They are dedicated to

improving lives and creating shareholder value.

We invest in their future—and in our own ability to positively impact more people and drive long-term value for our

shareholders—by partnering with leading research and health institutions to advance sleep science.

We are committed to the highest standards of ethical business practices throughout our Company. Our Company values,

team member training, Company policies and culture underscore our expectations for integrity and provide clear

guidelines for business decisions and behavior.

22 | 2024 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 human rights, human capital, business ethics and natural resources practices are aligned with the

Sustainable Development Goals of the United Nations Global Compact;

•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 a dedicated full Board session each year covering topics such as carbon,

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

engagement health and wellbeing; diversity equity and inclusion; 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 SEC reporting requirements; executive, director and team member compensation;

cybersecurity; and geo-political and policy issues management.

Code of Conduct

Our Code of Business Conduct 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 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. The Code of Business Conduct also sets forth procedures under which team members or others may report

through our management team and, 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 periodically certify their commitment to abide by our Code of

Business Conduct. We regularly monitor compliance with the Code of Business Conduct and report findings to our Audit

Committee. We also provide training in key areas covered by the Code of Business Conduct to help our team members

to comply with their obligations.

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

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

23 | 2024 PROXY STATEMENT OUR COMPANY

Corporate Sustainability

Our commitment to corporate sustainability is deeply rooted in our purpose to improve the health and wellbeing of

society through higher quality sleep. Sustainability considerations are incorporated into the way we design and

manufacture our award-winning innovations, engage and serve our customers, foster the wellbeing of our team

members, support the communities where we operate, work with our suppliers and business partners and pursue

profitable growth to create superior value for our shareholders. In short, our environmental stewardship, social priorities

and strong governance are integrated into our strategy, operations and culture.

Environment

To accelerate the transition to a low-carbon economy, we are working to better understand and reduce the impact of our

facilities, operations and products throughout their life cycles. We are also engaging with industry peers, supply chain

partners, external stakeholders and Sleep Number team members to progress our environmental efforts, including:

•Maturing greenhouse gas measurement methodologies and enhancing documentation for disclosure and

reporting;

•Refining business operations across the fulfillment chain to profitably improve our environmental footprint; and

•Building our material circularity capability to extend the useful life of select components and reduce waste.

Social

At Sleep Number, we are driven by our purpose and are constantly advancing social priorities that benefit our team

members, consumers, communities, suppliers and shareholders. We are:

•Striving to create and sustain a workplace culture of inclusion and belonging, grounded in our shared purpose

and values. By prioritizing wellbeing, we seek to create a safe environment in which each one of our 4,100 team

members can bring their authentic and whole self to work every day and is empowered to reach their highest

potential. As of December 30, 2023, 42% of our team members are ethnically or racially diverse and 40% are

women;

•Committed to advancing sleep health through innovations that, informed by data and scientific expertise,

benefit millions of individuals and contribute to the health and wellbeing of society; and

•Actively engaging our suppliers on commitments to – and compliance with – human rights, health and safety

standards.

This commitment to our team members, customers and suppliers, combined with our innovation, differentiation and

business model efficiency, contribute directly to our shareholder value creation.

Governance

Building on a longstanding record of strong corporate governance, we are proactively taking steps to strengthen

oversight, controls and practices that reinforce our commitment to the highest standards of integrity and accountability

and continue to earn stakeholder trust. Key priorities include:

•Advancing compliance readiness for newly enacted and proposed state and federal disclosure rules;

•Developing internal systems to support reporting under the Task Force on Climate-related Financial Disclosures

framework; and

•Enhancing the relevance and transparency of our public disclosures and reporting process by aligning with

globally and nationally recognized standards and frameworks.

24 | 2024 PROXY STATEMENT OUR COMPANY

Corporate Sustainability Report

We recently published our 2024 Corporate Sustainability Report, which provides an update on enterprise environmental,

social and governance practices, priorities and key metrics. The report underscores our strong commitment to doing the

right thing and making the world a better place. 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 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. Barbara R. Matas (Chair through November 7, 2023), Stephen L. Gulis, Jr. (Chair,

effective November 7, 2023), Julie M. Howard, Deborah L. Kilpatrick, Ph.D. and Angel L. Mendez served on the Audit

Committee throughout 2023 and through the date of this report.

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 2023 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 2023 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.

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 with the auditors under Statement on Auditing Standards No. 61 “Communication with Audit

Committees” (Codification of Statements on Auditing Standards, AU 380), as amended. 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 30, 2023, for filing with the Securities and Exchange Commission.

25 | 2024 PROXY STATEMENT OUR COMPANY

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

Deborah L. Kilpatrick, Ph.D.

Barbara R. Matas

Angel L. Mendez

26 | 2024 PROXY STATEMENT OUR COMPANY

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 December 28, 2024. 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:

•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 December 28, 2024.

27 | 2024 PROXY STATEMENT PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit and Other Fees

The aggregate fees billed for professional services by the Independent Auditors in 2023 and 2022 were:

	2023	2022
Audit fees	$898,478	$815,655
Audit-related fees	$1,895	$1,895
Audit and audit-related fees	$900,373	$817,550
Tax fees	$137,766	$136,368
All other fees	$0	$0
Total	$1,038,139	$953,918

Audit fees in 2023 and 2022 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 30, 2023 and January 1, 2022, respectively.

Audit-related fees for 2023 and 2022 are related to access to an online accounting research tool.

Tax fees for fiscal 2023 and 2022 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 2023 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.

28 | 2023 PROXY STATEMENT PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Daniel I. Alegre

Philip M. Eyler

Michael J. Harrison

Julie M. Howard

Hilary A. Schneider

29 | 2024 PROXY STATEMENT OUR PAY

KEY PAY FACTS

Who Did We Pay?

Sleep Number provides employment to approximately 4,100 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 2023 each of

these individuals qualified as one of our NEOs during at least part of the year:

•Shelly Ibach, Chair, President and Chief Executive Officer

•David Callen, former Executive Vice President and Chief Financial Officer

•Christopher Krusmark, Executive Vice President and Chief Human Resources Officer, former Interim Chief

Financial Officer

•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 2023. 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.

30 | 2024 PROXY STATEMENT OUR PAY

Shareholder Engagement

In 2023, our executive compensation program received the support of 74.3% of votes cast by shareholders versus our

prior five-year average of 92.8%. While we have regular outreach and ongoing discussions with shareholders to learn

more about their perspectives, we reached out to 10 of our largest institutional shareholders representing approximately

41% of our outstanding shares (based on ownership reports as of September 30, 2023) between October and December

2023 to gather their feedback and understand their perspectives on our executive compensation program and other

governance matters. Four shareholders representing 28% of our outstanding shares accepted our invitation to engage

and met with us to share their feedback. Three shareholders representing 6% of our outstanding shares confirmed that

no meeting was necessary and declined our invitation to speak, and three shareholders representing 7% of our

outstanding shares did not respond.

Those meetings were led by Mr. Harrison, our independent Lead Director, and also included members of our senior

management and investor relations team.

In addition to this targeted outreach, we also regularly engage with our shareholders in the ordinary course of our

investor relations activities. In total, between September 2023 to February 2024, we engaged with shareholders

representing more than 51% of our outstanding shares.

Recent Changes and Responsive Actions for 2024

In general, we learned that shareholders were supportive of our approach to compensation and feedback did not

suggest that we make major changes to the structure of our compensation program. Feedback received through our

shareholder outreach relating to executive compensation included:

•Providing additional disclosure on our compensation philosophy and goal setting practices;

•Ensuring our cash incentive plan continues to utilize quantitative metrics aligned with shareholder interest and

excludes discretion;

•Preference for performance stock units and restricted stock units over stock options in long-term incentive plans;

and

•Preference for at least half of executive pay to be equity-based.

31 | 2024 PROXY STATEMENT OUR PAY

The Compensation Committee values this shareholder input and, in 2023, took the following actions that are consistent

with what we heard during our Fall 2023 outreach and aligned with the needs of the business going forward:

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 to ensure it continues to reflect our scale, industry and strategic direction as a technology wellness company.
Annual Incentive Plan (AIP)	We remain committed to defined and measurable AIP goals and metrics. As described in more detail in the AIP section, the mid- year progress payment feature has been removed for the NEOs to emphasize full-year financial performance.
Equity Award Mix	We eliminated the use of stock options to reduce the dilutive impact to our equity plan. 2024 equity awards will consist of PSUs and RSUs.

Company Performance

The Company has maintained market share in a difficult environment. Economic uncertainty, low consumer sentiment,

inflation and other factors have led to a historic unit decline for the mattress industry over the past two years; it is

estimated that mattress unit volumes have returned to 2015 levels and are down more than 25% from their 2020 peak.

While U.S. mattress unit demand is roughly flat versus 2015, Sleep Number’s mattress unit demand is up nearly 6%.

Since 2019 (pre-pandemic), we are down 9% in volume versus the broader industry which is estimated to be down 18%.

In August 2023, consumer purchasing power reached a record low. As a result, consumer mindset and behavior shifted

to scrutinizing spending, which led to a further decline in demand for our category. The Company took swift actions to

execute a broad-based restructuring plan to streamline its cost structure and increase financial resiliency. Its mission-

driven team members made significant progress to transform the Company’s operating model for efficient growth,

increased profitability and cash flow generation, including $85 million reduction in operating expenses in 2023 (before

the impact of restructuring charges) and targeting another $40 to $45 million of operating expense reductions in 2024

for a two-year total reduction of approximately $130 million (before restructuring costs).

32 | 2024 PROXY STATEMENT OUR PAY

Full-year financial results include: •Net sales of $1.9 billion (-11% vs. 2022) •Net operating profit (NOP) of $22.9 million (-66% vs. 2022) •Adjusted EBITDA of $126.7 million (-14% vs. 2022) •Diluted loss per share of $0.68 down from diluted earnings per share of $1.60 last year •Cash used in operating activities of $9.0 million and $57 million in capital expenditures •Adjusted return on invested capital (ROIC) of 7.8% •Leverage ratio of 4.1x EBITDAR (adjusted EBITDA plus consolidated rent expense) at the end of 2023 vs. covenant maximum of 5.0x; $138 million of liquidity remained against current credit facility at the end of 2023	Performance metrics in our compensation program:
	Long-term Incentive Plan
	Net Sales growth
	NOP growth
	Adjusted ROIC
	Share price
	Annual Incentive Plan
	Adjusted EBITDA

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

conditions that we experienced in 2022 and 2023.

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

39 and 40 of our Annual Report on Form 10-K filed on February 23, 2024.

The actions the Company took in 2023 – and continues to execute in 2024 – create a more durable operating model

with greater financial resilience to support strong performance across a broad range of market environments. The

industry is expected to remain pressured in 2024. Even with this backdrop, the Company is targeting $40-45 million of

operating expense reductions in 2024 with $130 million of operating expense reductions over a two-year period. The

Company expects to generate $60 million to $80 million of free cash flow with capital expenditures of $30 million.

While predicting the exact timing for the category to recover from trough levels is difficult, the operating model

transformation the Company is executing – to compete effectively, restore profit margins and increase cash generation –

positions Sleep Number for accelerating growth as the mattress industry demand environment improves. 

33 | 2024 PROXY STATEMENT OUR PAY

The Company continues to be recognized for leadership related to its purpose of improving the health and wellbeing of

society through higher quality sleep, having received the following awards in recent years:

Innovation Awards

•MedTech Breakthrough Award for the Next Generation Sleep Number® smart bed, Best Overall

SleepTech Solution category

•Digital Health Award for the Next Generation Sleep Number smart bed, Gold, Personal Digital Health

Devices/Wearables – Sleep Tracking category

Service Awards

•J.D. Power 2023 U.S. Mattress Satisfaction Study for mattresses purchased in-store, Sleep Number

ranked #1 in terms of price, variety of features and warranty factors

•2024 Forbes Best Customer Service List, Sleep Number

Corporate Awards

•2024 American Cancer Society Game Changer

•2023 Tekne Award finalist, Sustainability Champion category

•Minnesota Manufacturers Alliance’s Manufacturer of the Year, Large Company category

Refer to our Annual Report on Form 10-K filed on February 23, 2024, and our Corporate Sustainability Report, posted

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

accomplishments in 2023. 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 2023

Annual Incentive Plan (AIP) and 2021 Performance Stock Units (PSUs). The performance and payouts for these incentive

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

34 | 2024 PROXY STATEMENT OUR PAY

Element	Performance Achieved	Payout Earned
2021 PSUs (performance period of fiscal years 2021 through 2023)	Annual growth rate achieved: -  2021:  net sales +17.7% and NOP +4.7% -  2022:  net sales -3.2% and NOP -64.9% -  2023:  net sales -10.7% and NOP -58.2% Average difference between adjusted ROIC and WACC was 1,337 basis points	A payout of 43.1% of target was earned (compared to 103.3% of target for the 2020 PSUs).  The 2021 PSU payout was an average of the percent of target earned by year. -  2021:  129.2% -  2022:  0% -  2023:  0% The ROIC modifier did not apply since the average difference between adjusted ROIC and WACC was above the threshold of 300 basis points.
2023 AIP	Adjusted EBITDA for 2023 was $126.7 million, which was 72% of the goal for target payout and below threshold. First-half adjusted EBITDA was $83.5 million, which was above the first-half adjusted EBITDA goal.	No full year payout was earned, however first- half EBITDA targets were met, which qualified participants to receive the first-half progress payment (compared to no payout earned for the 2022 AIP)

Pay earned for 2023 demonstrates that when the Company’s performance falls short of its goals, payouts are reduced.

The following chart illustrates the value at the end of 2023 of a hypothetical $100 invested at the beginning of 2020,

showing the alignment between our incentive payouts and shareholder experience over the three-year period.

2021 AIP Performance: 104% of goal Payout: 122% of target	2022 AIP Performance: 50% of goal Payout: 0% of target	2023 AIP Performance: 72% of goal Payout: 25% of target*
2021 PSU Payout: 43% (Average: 129.2% earned for 2021, 0% earned for 2022 and 0% earned for 2023) Assuming a share price of $14.83 on December 30, 2023 and a payout of 43% of target, 2021 PSU realized value is 3 - 5% of the target grant value for NEOs

35 | 2024 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.

2023 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 20, 2022, approved the peer group as listed below. The

peer group was unchanged from the prior fiscal year. This is the peer group that was utilized in the benchmarking

reviewed by the Compensation Committee for compensation actions approved during 2023 including the actions

effective in March 2023 and described in this 2024 Proxy Statement:

The Aaron’s Company, Inc. Conn’s, Inc. Deckers Outdoor Corporation Dolby Laboratories, Inc. MillerKnoll iRobot Corporation La-Z-Boy Incorporated Leggett & Platt, Incorporated Peloton Interactive, Inc. Poly (fka Plantronics Inc.) RH Steelcase Inc. Sonos, Inc. Tempur Sealy International, Inc.

At its meeting on September 5, 2023, 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 2024:

•Decker’s Outdoor Corporation was removed as it was no longer aligned with Sleep Number’s size. Poly (fka

Plantronics) was removed based on its acquisition by HP; and

•Arlo Technologies, Inc., Ethan Allen Interiors, Inc., HNI Corporation and Inspire Medical Systems, Inc. were

added.

36 | 2024 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. With the exception of the adoption of a new Nasdaq-compliant clawback policy, there have been no changes

to these policies or practices since the last disclosure in the 2023 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 members of the Board of 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 new 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 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	Members of the Board of 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 owned by them.
Pledging of Company stock	No	Members of the Board of 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 Sleep Number common stock as collateral for any obligation.
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.
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.

37 | 2024 PROXY STATEMENT OUR PAY

PAY ELEMENTS: WHAT WE DESIGNED, TARGETED AND PAID

2023 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.

•85% of our CEO’s and 69% of our other NEOs’ target TDC is performance-based and fully at-risk.

•NEOs’ realized pay varies significantly due to the high percentage of TDC that is at risk; the following pages will

illustrate how Sleep Number’s compensation plans are closely connected to the company performance.

•No plan design changes were made to these elements from 2022 to 2023; changes to 2024 plan design are

noted where applicable in the following pages.

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 31% of our other NEOs’ TDC in 2023.

•The Compensation Committee approved the salary adjustments below effective March 19, 2023. 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 20, 2022 (Annualized)	Base Salary at March 19, 2023 (Annualized)
Shelly R. Ibach	$1,200,000	$1,200,000
David R. Callen(1)	$600,000	—
Christopher Krusmark	$412,500	$429,000
Francis Lee(2)	—	$625,000
Andrea L. Bloomquist	$577,500	$606,375
Melissa Barra	$572,250	$595,140
Samuel R. Hellfeld	$500,000	$525,000

(1) Mr. Callen separated from the company effective March 3, 2023.

(2) Reflects Mr. Lee’s base salary upon his hire date effective August 14, 2023.

38 | 2024 PROXY STATEMENT OUR PAY

Other NEOs

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

1,400 of our team members with an annual incentive opportunity contingent upon our adjusted EBITDA performance.

Our remaining team members are part of 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 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

pages 39 and 40 of our Annual Report on Form 10-K filed on February 23, 2024.

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. 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) = AIP Annual Payout Earned

Our AIP includes an opportunity to receive a progress payment if a first-half performance goal for adjusted EBITDA is

achieved or exceeded. The progress payment is equal to half of the AIP target incentive for the first half of the year. If

the progress payment is earned and paid out in July of the fiscal year, it is subtracted from the annual payout earned and

paid out following the end of the fiscal year in February. By having this opportunity for a progress payment in our AIP, it

reinforces the importance of starting out the year with strong first-half performance.

For fiscal year 2024, the Compensation Committee amended the AIP design to remove the first-half progress payment

for executives to emphasize the focus on full year performance.

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 “2023 Peer Group”

on page 36 and approach to “Benchmarking” on page 36). The 2023 AIP target incentive percentage of base salary did

not change for all NEOs.

Name	AIP Target Incentive for 2023 (% of actual base salary earned)
Shelly R. Ibach	140%
Other NEOs	70%

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2023 Performance Goals

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

2023 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 2023 AIP:

•Target - The performance goal for the target payout of 100% was set at adjusted EBITDA of $177.1 million, which

was equal to the Company’s Annual Operating Plan (AOP) for 2023. This represented a 19.7% increase compared

to our 2022 results.

•Maximum - The performance goal for the maximum payout of 200% was set at adjusted EBITDA of $212.5

million, which was 20% above AOP and a 43.5% increase over 2022 results. The 200% payout opportunity is

designed to reward breakthrough performance. This level of upside opportunity was a decrease from our prior

year plan maximums of 250%.

•Threshold - The performance goal for the threshold payout of 25% was set at adjusted EBITDA of $141.7 million,

which was 20% below AOP and 4.3% below 2022 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.

	AIP Payout Earned (% of Target)	Annual Adjusted EBITDA Goals (in millions)	% of AOP Achieved
Threshold	25%	$141.7	80%
Target	100%	$177.1	100%
Maximum	200%	$212.5	120%

For the progress payment opportunity, the Compensation Committee approved a first-half goal for 2023 of $83.3 million

in adjusted EBITDA, which was our AOP for the first half of the year.

2023 AIP Payout

Our adjusted EBITDA for 2023 was $126.7 million, down 14.4% from 2022 actual and 28.5% below the Company’s AOP,

which was the goal for target payout. For this level of adjusted EBITDA, no annual AIP payout was earned for 2023. No

adjustments were made to our reported adjusted EBITDA results in this determination of the AIP payout for 2023.

Our first-half adjusted EBITDA was $83.5 million, which was above the first-half adjusted EBITDA goal to earn a progress

payment for the 2023 AIP. As a result, in alignment with the 2023 AIP plan design, NEOs and all eligible participants

received the first-half progress payment in July 2023. This first-half 2023 EBITDA target was set lower than 2022 actual

first half results, as 2022 first-half results benefited from the delivery of more than $100 million in margin-rich backlog

that was not repeatable in 2023. As previously mentioned, the Compensation Committee amended the 2024 AIP design

to remove the first-half progress payment for NEOs to emphasize the focus on full year performance.

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The following table shows the full-year AIP target, as well as the first-half progress payment earned for 2023 by each

NEO.

Name	2023 Base Salary Earned	2023 AIP Target (% of Salary)	2023 AIP Target Incentive Opportunity	2023 AIP Actual Payout Earned $	2023 Actual Payout Earned %
Shelly R. Ibach	$1,200,000	140.0%	$1,680,000	$420,000	25.0%
David R. Callen(1)	$123,484	70.0%	$86,439	$40,385	46.7%
Christopher Krusmark	$425,192	70.0%	$297,634	$73,742	24.8%
Francis Lee(2)	$228,365	70.0%	$159,856	$—	—%
Andrea L. Bloomquist	$599,712	70.0%	$419,798	$103,783	24.7%
Melissa Barra	$589,858	70.0%	$412,901	$102,301	24.8%
Samuel R. Hellfeld	$519,231	70.0%	$363,462	$89,856	24.7%

(1) Reflects the prorated first-half progress payment Mr. Callen was eligible for a prorated payout under the terms of the AIP.

(2) Mr. Lee was ineligible for the mid-year progress payment due to his hire date of August 14, 2023.

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. There is only payout value if we

achieve long-term Company performance goals or, for stock options, positive 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.

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

2023, our executive officers received an annual total LTI grant value that was split 75% in PSUs and 25% in Stock Options

(same mix as the 2022 LTI grants). This combination is all performance based and appropriately rewards our executive

officers for achieving long-term profitable growth and the creation of shareholder value.

Total LTI Grant Value	X	75%	=	PSUs (Target Grant Value)	}	These LTI grants only have payout value if Company performance goals are achieved for PSUs or shareholder value is created for stock options
	X	25%	=	Stock Options (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 2023 PSUs, which are the same metrics

as the 2022 PSUs, are annual growth in net sales and NOP over fiscal years 2023, 2024 and 2025. 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

41 | 2024 PROXY STATEMENT OUR PAY

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.

The payout earned for the 2023 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 WACC for

the 2023 to 2025 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 2023 PSUs, covering the 2023 to 2025 period, will be

determined, which is the same design as the 2022 PSUs.

Net Sales			NOP
2023	Net sales annual growth each year	% of target payout earned for net sales each year	2023	NOP annual growth each year	% of target payout earned for NOP each year
2024			2024
2025			2025
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 

The target number of PSUs for the 2023 award was determined by dividing the grant value (equal to 75% of the

executive officer’s total LTI grant value) by the estimated grant date fair value per share, which is calculated using the 20-

day average stock price leading up to grant date to mitigate short-term stock price volatility. 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.

For PSUs granted to our NEOs as part of our annual LTI award process on March 15, 2023, the 20-day average closing

share price was $34.96. For an additional grant of PSUs made to our CFO in connection with his hire on August 15, 2023,

the 20-day average closing share price was $32.41.

Stock Option Grants

Stock options vest in three equal annual installments on each of the anniversaries following the grant date. Their term

expires 10 years after the grant date, provided they have not been exercised or cancelled earlier due to certain events,

and their exercise price is equal to the closing trading price of the Company’s common stock on the grant date.

The number of stock options granted in 2023 was determined by dividing the option grant value (25% of the executive

officer’s total LTI grant value) by the calculated grant date fair value per stock option. In this calculation of the grant-date

option value, we derive a Black-Scholes value under generally accepted accounting principles, using a 20-day average

stock price leading up to grant date to mitigate short-term stock price volatility. See the footnotes to the “Summary

42 | 2024 PROXY STATEMENT OUR PAY

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.

For stock options granted to our NEOs as part of our annual LTI award process on March 15, 2023, the 20-day average

closing share price was $34.96, estimated Black-Scholes value per option was $20.62, and the option exercise price was

$28.41. For special grant made to our CFO in connection with his hire on August 15, 2023, the 20-day average closing

share price was $32.41, estimated Black-Scholes value per option was $19.44, and the option exercise price was $27.28.

RSU Grants

In recognition of his service as interim CFO, Mr. Krusmark received an RSU grant valued at $150,000 September 5, 2023;

the 20-day average closing share price was $25.81.

In connection with his hire, our CFO Mr. Lee received an RSU grant valued at $800,000 August 15, 2023; the 20-day

average closing share price was $32.41.

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.

The following table summarizes the annual LTI grants made to our NEOs in 2023, and the split in grant value between

PSUs (75%) and Stock Options (25%). See “Grants of Plan-Based Awards” for more information on these awards.

Name	Annual LTI Grants during 2023 (Granted March 15, 2023)			PSU grants only have payout value if Company performance goals are achieved.
	PSU Grant Value at Target	Stock Option Grant Value	Total LTI Grant Value
Shelly R. Ibach	$4,237,500	$1,412,500	$5,650,000	Stock options only have value if shareholder value is created.
David R. Callen	$—	$—	$—
Christopher Krusmark(1)	$543,750	$181,250	$725,000
Francis Lee(2)	$—	$—	$—
Andrea L. Bloomquist	$1,012,500	$337,500	$1,350,000
Melissa Barra	$1,012,500	$337,500	$1,350,000
Samuel R. Hellfeld	$843,750	$281,250	$1,125,000

(1) In addition to the amounts shown above, the Compensation Committee approved a special LTI grant for Mr. Krusmark in recognition of his service as

interim CFO. The LTI grant value was $150,000 in the form of time-vested RSUs. The date of the grant was September 5, 2023. The number of RSUs

granted was based on a 20-day average closing share price of $25.81. The RSUs are subject to a two-year ratable vesting requirement with the

award becoming fully vested two 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.

(2) The Compensation Committee approved a special LTI grant for Mr. Lee as part of his CFO hiring package. The LTI grant value was $3,100,000. This

grant was in the form of Non-Qualified Stock Options, PSUs and RSU weighted 45.2%, 29% and 25.8% respectively. The date of the grant was

August 15, 2023. The 20-day average closing share price used to determine the number of shares was $32.41. All awards 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

applicable award agreements. 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 51.

43 | 2024 PROXY STATEMENT OUR PAY

2021 PSU Payout

The 2021 PSUs covering the 2021 to 2023 period, which are similar in design to the 2023 PSUs, were granted on March

15, 2021 and vested and paid out on March 15, 2024 in the form of shares of common stock, less tax withholding settled

in shares of common stock. Based on net sales and NOP annual growth over the three fiscal years (2021, 2022 and

2023), the overall payout earned for the 2021 PSUs was 43.1% of target. As described below, this was an average of the

percent of target payout earned for growth in net sales and NOP in each of the three years covered by the award. The

ROIC modifier, which could have reduced this payout, did not apply. 

The following are the annual growth goals that were established for the 2021 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%

The following chart shows the actual performance achieved for the performance period and how the total payout for

2021 of 43.1% 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
2021	$2,185	17.7%	200.0%	$193.5	4.7%	58.4%	129.2%
2022	$2,114	-3.2%	0%	$67.9	-64.9%	0%	0%
2023	$1,887	-10.7%	0%	$38.7	-58.2%	0%	0%
	Three-year average:		66.7%	Three-year average:		19.5%	43.1%

(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 2021 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 2020 NOP. As 2022 NOP was less than 50% of 2020 NOP, this percentage change for 2023 NOP represents annual growth compared to

50% of fiscal year 2020 NOP.

Total payout actually earned: 43.1% 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
2021	47.2%	7.3%	3,390
2022	17.6%	10.1%	750
2023	7.8%	9.1%	-130
	Three-year average:		1,337

44 | 2024 PROXY STATEMENT OUR PAY

ROIC modifier was not applied to this payout. The three-year average premium of 1,337 basis points was above the

threshold of 300 basis points.

Chief Financial Officer Transition

On January 30, 2023, David Callen stepped down from his position as Executive Vice President and Chief Financial

Officer. He continued to serve in an advisory role to the company through March 3, 2023. This was an involuntary

termination of employment not for cause which made Mr. Callen eligible for severance pay benefits under the

Company’s Executive Severance Pay 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 55.

Upon Mr. Callen’s departure, Mr. Krusmark, Executive Vice President and Chief Human Resources Officer was appointed

as Interim Chief Financial Officer. Mr. Krusmark received a cash and Restricted Stock Unit (RSU) award in recognition for

his service in this role. Details of this can be found in the Summary Compensation Table found on page 49.

Effective August 14, 2023, Francis Lee was appointed Executive Vice President and Chief Financial Officer. Mr. Lee

joined the company with extensive experience in corporate finance and strategy spanning product, retail and technology

companies including Nike, Gap, Inc. and Wyze Labs. As part of his offer of employment, Mr. Lee received target annual

compensation of:

•Annual base salary of $625,000;

•Target Annual Incentive Plan equal to 70% of his base salary; and

•Target annual Long-Term Incentive Plan of $1,200,000, with normal annual grants commencing in 2024.

As a crucial hire for Sleep Number’s executive team, in addition to his target compensation package, Mr. Lee was

offered one time awards to offset pay elements being forfeited by his prior employer:

•Cash sign-on bonus of $300,000, which was paid shortly following his commencement with the Company;

•Stock option award valued at $1,400,000, vesting in three equal annual installments;

•Performance stock unit award valued at $900,000, vesting three years after the date of grant based on 2023,

2024 and 2025 financial performance; and

•Restricted Stock Unit award valued at $800,000, vesting in three equal annual installments.

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 49.

Non-Qualified Deferred Compensation Plan

As described in more detail on page 55, 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.

45 | 2024 PROXY STATEMENT OUR PAY

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

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 2023 that was included in the “All

Other Compensation” column of the “Summary Compensation Table” on page 49 was $83,982, which except for $2,069

represented one-time 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. Mr. Callen

departed as our CFO on January 30, 2023. This was an involuntary termination of employment not for cause which made

Mr. Callen eligible for severance pay benefits under this 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 55.

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

46 | 2024 PROXY STATEMENT OUR PAY

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 the performance of our

Company.

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 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.

The Compensation Committee usually meets five to six times per year, in person or virtually. 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.

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.

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

47 | 2024 PROXY STATEMENT OUR PAY

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 Ms. Ibach’s performance by soliciting input from all members of the Board. The

Board also assesses Ms. Ibach’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 Ms. Ibach’s 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.

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 members

of the Board of 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 of

Directors.

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

48 | 2024 PROXY STATEMENT OUR PAY

except to the extent required to pay the exercise price, transaction costs and taxes applicable to the exercise of stock

options or vesting of RSUs. As of the end of fiscal year 2023, the table below summarizes the current ownership levels

compared to the ownership guideline.

	Ownership Guideline	Current Ownership(1)
CEO	5 x annual base salary	3.5 x
Average of NEOs (other than CEO)(2)	3 x annual base salary	1.3 x
Average of Non-employee Directors	5 x annual cash retainer	2.7 x

(1)  Current ownership as determined under the stock ownership guideline policy and based on a closing share price on December 29, 2023, of $14.83.

The ownership multiples reported last year as of December 30, 2022, were 8.5x for CEO; 2.6x for average of NEOs (other than CEO); and 12.8x for

average of Non-employee Directors.

(2)  Excludes Mr. Callen, who terminated from the company on March 3, 2023, and Mr. Lee, who is within the first five years of becoming an executive

officer.

As the table shows, current ownership levels are below guidelines. This is attributed to the decline in share price in 2023.

Total shares owned outright by each NEO increased in 2023 (not counting what is considered ownership for vested stock

options or the earned portion of outstanding PSUs).

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

29. 

Name And Principal Position	Year	Salary ($)	Bonus ($)(9)	Stock Awards(1)(2) ($)	Option Awards(1) ($)	Non- Equity Incentive Plan Compensation(3) ($)	All Other Compensation(4) ($)	Total ($)
Shelly R. Ibach President and CEO	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	$0	$93,614	$6,702,614
	2021	$1,142,308	—	$4,823,555	$1,616,788	$1,921,280	$95,640	$9,599,571
David R. Callen Former EVP and CFO(7)	2023	$123,484	—	—	—	$40,385	$1,103,661	$1,267,530
	2022	$594,483	—	$857,382	$294,152	$0	$14,748	$1,760,765
	2021	$566,246	—	$914,888	$306,658	$483,574	$17,060	$2,288,426
Christopher D. Krusmark     EVP and Chief     Human Resources     Officer, Former Interim     CFO(6)	2023	$425,192	$70,000	$590,343	$149,579	$73,742	$17,014	$1,325,870
Francis K. Lee     EVP and CFO(5)	2023	$228,365	$300,000	$1,431,245	$1,194,801	$0	$10,488	$3,164,899
Andrea L. Bloomquist EVP and Chief Innovation Officer	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
	2021	$511,791	—	$790,699	$264,908	$437,070	$16,961	$2,021,429
Melissa Barra EVP and Chief Sales and Services Officer	2023	$589,858	—	$823,038	$278,483	$102,301	$24,889	$1,818,569
	2022	$565,962	—	$750,094	$257,343	$0	$20,725	$1,594,124
	2021	$509,099	—	$769,388	$257,888	$434,770	$18,474	$1,989,619
Samuel R. Hellfeld EVP and Chief Legal and Risk Officer(8)	2023	$519,231	—	$685,817	$232,112	$89,856	$20,243	$1,547,259
	2022	$488,115	—	$714,639	$196,101	$0	$18,394	$1,417,249

49 | 2024 PROXY STATEMENT OUR PAY

(1)Reflects the aggregate grant date fair value of equity awards granted during fiscal years 2023, 2022 and 2021, 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 30, 2023, for a discussion of the relevant assumptions used in calculating these amounts.

(2)The “Stock Awards” column includes Performance Stock Unit (PSU) awards granted during fiscal years 2023, 2022 and 2021. The amounts included

for these 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 2023 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, $6,888,288 (target of $3,444,144); for Mr. Krusmark, $884,120 (target of $442,060); for Mr. Lee,

$1,515,404 (target of $757,702); for Ms. Bloomquist, $1,646,076 (target of $823,038); for Ms. Barra, $1,646,076 (target of $823,038); and for Mr.

Hellfeld, $1,371,634 (target of $685,817). Also included in this column is the grant date fair value of Restricted Stock Unit (RSU) awards granted

during fiscal year 2023 to Mr. Krusmark ($148,283) and Mr. Lee ($673,543), as disclosed in the “Grants of Plan-Based Awards” table.

(3)Represents annual incentive compensation earned under the AIP. See the discussion in the Compensation Discussion and Analysis under the

heading “Annual Incentive Plan (AIP).” Also included is the prorated AIP payment made to Mr. Callen under the terms of the AIP.

(4)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 2021, 2022 and 2023 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 2023 for those security enhancements

and monitoring was $83,982, which except for $2,069 represented one-time costs. Also includes payment to Mr. Callen as part of his severance

package for $1,097,330.

(5)Mr. Lee assumed the role of Executive Vice President and Chief Financial Officer on August 14, 2023.

(6)Mr. Krusmark assumed the role of Interim Chief Financial Officer from January 30, 2023 to August 14, 2023.

(7)Mr. Callen departed as CFO effective January 30, 2023, but he continued to serve in an advisory role to the Company through March 3, 2023.

(8)Mr. Hellfeld assumed the role of Executive Vice President and Chief Legal and Risk Officer on March 15, 2022.

(9)Reflects cash awards granted to Mr. Krusmark in recognition of his role as interim CFO, and a cash award granted to Mr. Lee in connection with his

hiring.

50 | 2024 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 2023 and the equity awards made during the fiscal year 2023. 

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 ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)(6)
		Thresh- old ($)	Target ($)	Maxi- mum ($)	Thresh- old (#)	Target (#)	Maxi- mum (#)
Shelly R. Ibach		$420,000	$1,680,000	$3,360,000
	3/15/23(2)				10,063	121,230	242,460				$3,444,144
	3/15/23(3)								68,490	$28.41	$1,165,494
David R. Callen		$40,385	$86,439	$172,877
Christopher D. Krusmark		$73,742	$300,300	$600,600
	3/15/23(2)				1,292	15,560	31,120				$442,060
	3/15/23(3)								8,790	$28.41	$149,579
	9/5/23(5)							5,815			$148,283
Francis K. Lee		$41,652	$166,610	$333,219
	8/15/23(2)				2,306	27,775	55,550				$757,702
	8/15/23(4)							24,690			$673,543
	8/15/23(3)								72,005	$27.28	$1,194,801
Andrea L. Bloomquist		$103,783	$424,480	$848,960
	3/15/23(2)				2,405	28,970	57,940				$823,038
	3/15/23(3)								16,365	$28.41	$278,483
Melissa Barra		$102,301	$416,570	$833,140
	3/15/23(2)				2,405	28,970	57,940				$823,038
	3/15/23(3)								16,365	$28.41	$278,483
Samuel R. Hellfeld		$89,856	$367,500	$735,000
	3/15/23(2)				2,004	24,140	48,280				$685,817
	3/15/23(3)								13,640	$28.41	$232,112

(1)This represents the cash annual incentive opportunity for 2023 under the AIP. The actual amounts earned under this plan for 2023 are reported in the

Non-Equity Incentive Plan Compensation column of the Summary Compensation Table. The threshold reflects the amount that would be payable

under the plan if only the minimum performance level for first half of 2023 is achieved, which would result in an AIP payout of only the first-half

progress payment. If the minimum performance level for payment of the threshold amount is not achieved, then no incentive would be payable

under the plan. See discussion in the Compensation Discussion and Analysis under the heading “Annual Incentive Plan (AIP).” Represents prorated

amounts for Messrs. Callen and Lee based on partial year eligibility.

(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 2023, 2024 and 2025. 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)These awards represent stock options described in greater detail in the Compensation Discussion and Analysis under the heading, “Long-Term

Incentive Plan (LTI).” These stock options have an exercise price equal to the closing trading price of the Company’s common stock on the grant

date. The options vest in three equal annual installments on each of the anniversaries following the grant date. These options remain exercisable for

up to 10 years from the grant date, subject to earlier termination upon certain events related to termination of employment.

(4)This RSU award was granted to Mr. Lee in connection with his hiring as Chief Financial Officer and vests 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)This RSU award was granted to Mr. Krusmark in recognition of his service as Interim Chief Financial Officer and vests one-half each year on each of

the first two anniversaries of the date of grant, subject to continuing employment through the applicable vesting date.

(6)Reflects the grant date fair value computed in accordance with FASB ASC Topic 718. The value for PSU awards reflects the target award value.

51 | 2024 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 30, 2023.

	Option Awards				Stock Awards
Name	Number of Securities Underlying Unexercised Options (#)   Exercisable	Number of Securities Underlying Unexercised Options (#)  Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(16)	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 ($)(16)
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	—	—	—	—
	14,587	7,293(1)	$146.97	3/15/2031	—	—	—	—
	—	—	—	—	14,146(2)	$209,785	—	—
	13,517	27,033(3)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	—	—	60,825(5)	$902,035
	1,447	2,893(6)	$41.95	5/16/2032	—	—	—	—
	—	—	—	—	—	—	6,835(7)	$101,363
	—	68,490(8)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	121,230(9)	$1,797,841
David R. Callen	4,420	—	$33.32	3/3/2024	—	—	—	—
	11,600	—	$23.61	3/3/2024	—	—	—	—
	8,940	—	$34.35	3/3/2024	—	—	—	—
	6,845	—	$47.00	3/3/2024	—	—	—	—
	9,824	—	$35.68	3/3/2024	—	—	—	—
	2,097	—	$88.76	3/3/2024	—	—	—	—
	2,716	—	$146.97	3/3/2024	—	—	—	—
	—	—	—	—	1,757(14)	$26,056	—	—
	2,983	—	$61.66	3/3/2024	—	—	—	—
	—	—	—	—	—	—	4,475(15)	$66,364
Christopher D. Krusmark	1,630		$47.00	3/29/2029	—	—	—	—
	3,850		$35.68	3/15/2030	—	—	—	—
	1,383	692(1)	$146.97	3/15/2031	—	—	—	—
	—	—	—	—	1,343(2)	$19,917	—	—
	1,675	3,350(3)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	2,320(4)	$34,406	—	—
	—	—	—	—	—	—	7,535(5)	$111,744
	—	8,790(8)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	15,560(9)	$230,755
	—	—	—	—	5,815(13)	$86,236	0	$—
Francis K. Lee	—	72,005(10)	$27.28	8/15/2033	—	—	—	—
	—	—	—	—	24,690(11)	$366,153	—	—
	—	—	—	—	—	—	27,775(12)	$411,903

52 | 2024 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 ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(16)	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 ($)(16)
Andrea L. Bloomquist	2,555	—	$34.35	3/21/2028	—	—	—	—
	4,346	—	$47.00	3/29/2029	—	—	—	—
	10,260	—	$35.68	3/15/2030	—	—	—	—
	2,390	1,195(1)	$146.97	3/15/2031	—	—	—	—
	—	—	—	—	2,319(2)	$34,391	—	—
	2,704	5,406(3)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	—	—	12,165(5)	$180,407
	—	16,365(8)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	28,970(9)	$429,625
Melissa Barra	4,860	—	$17.77	3/28/2024	—	—	—	—
	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	—	—	—	—
	2,327	1,163(1)	$146.97	3/15/2031	—	—	—	—
	—	—	—	—	2,257(2)	$33,471	—	—
	2,704	5,406(3)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	—	—	12,165(5)	$180,407
	—	16,365(8)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	28,970(9)	$429,625
Samuel R. Hellfeld	1,015	—	$17.77	3/28/2024	—	—	—	—
	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	—	—	—	—
	1,510	755(1)	$146.97	3/15/2031	—	—	—	—
	—	—	—	—	1,464(2)	$21,711	—	—
	2,060	4,120(3)	$61.66	3/15/2032	—	—	—	—
	—	—	—	—	2,320(4)	$34,406	—	—
	—	—	—	—	—	—	9,270(5)	$137,474
	—	13,460(8)	$28.41	3/15/2033	—	—	—	—
	—	—	—	—	—	—	24,140(9)	$357,996

(1)These stock options were granted on March 15, 2021 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 performance stock unit (PSU) awards were granted on March 15, 2021 and will become vested on March 15, 2024, subject to continuing

employment through the vesting date. The number of shares shown above reflects the actual payout that was earned for the 2021 PSUs based on

the performance period that covers fiscal years 2021, 2022 and 2023. The payout for the 2021 PSU awards is described in greater detail in the

Compensation Discussion and Analysis under the heading, “Long-Term Incentive Plan (LTI).”

53 | 2024 PROXY STATEMENT OUR PAY

(3)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.

(4)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. 

(5)These PSU awards were granted on March 15, 2022 and will become vested on March 15, 2025, 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 2022, 2023 and 2024.

(6)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.

(7)These PSU awards were granted on May 16, 2022 and will become vested on May 16, 2025, 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 2022, 2023 and 2024.

(8)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.

(9)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.

(10)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.

(11)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. 

(12)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.

(13)These RSU awards were granted on September 5, 2023 and vest one-half each year on each of the first two anniversaries of the date of grant,

subject to continuing employment through the applicable vesting date. 

(14)These performance stock unit (PSU) awards were granted on March 15, 2021 and will become vested on March 15, 2024. The number of shares

shown above reflects the actual payout that was earned for the 2021 PSUs based on the performance period that covers fiscal years 2021, 2022 and

2023.

(15)These performance stock unit (PSU) awards were granted on March 15, 2022 and will become vested on March 15, 2025, subject to achieving

performance criteria. The number of shares shown above reflects the target award level. The performance period for this award covers fiscal years

2022, 2023 and 2024.

(16)Calculated by multiplying unvested stock awards by $14.83, the closing price of the Company’s common stock on the Nasdaq Stock Market on

December 29, 2023, the last trading day of fiscal year 2023.

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 30, 2023.

	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	—	—	85,543	$2,430,277
David R. Callen	—	—	15,214	$371,806
Christopher D. Krusmark	—	—	7,447(3)	$205,999
Francis K. Lee	—	—	—	—
Andrea L. Bloomquist	—	—	13,037	$370,381
Melissa Barra	—	—	12,629	$358,790
Samuel R. Hellfeld	1,360	$27,209	6,519	$185,205

(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 2020 PSU awards that covered the

performance period of fiscal years 2020, 2021 and 2022 as disclosed in the 2023 Proxy Statement, except for Mr. Krusmark (see footnote 3). For Ms.

Ibach, Ms. Bloomquist, Ms. Barra and Mr. Hellfeld, the 2020 PSU awards became vested on March 15, 2023. For Mr. Callen, there were two separate

2020 PSU awards which vested on September 3, 2023 (12,482 shares with a value realized of $326,154) and December 15, 2023 (2,732 shares with a

value realized of $45,652).

(3)For Mr. Krusmark, a 2020 PSU award for 4,892 shares with a value realized of $138,982 vested on March 15, 2023. In addition, a 2020 RSU award for

2,555 shares with a realized value of $67,017 vested on June 28, 2023.

(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.

54 | 2024 PROXY STATEMENT OUR PAY

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 30, 2023. 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	—	—	$(17,961)	—	$10,307,719
David R. Callen	—	—	$124,579	$(205,780)	$477,063
Christopher D. Krusmark	—	—	—	—	—
Francis Lee	—	—	—	—	—
Andrea L. Bloomquist	—	—	$90,790	—	$593,058
Melissa Barra	—	—	—	—	—
Samuel R. Hellfeld	—	—	—	—	—

(1)These amounts represent the total aggregate notional earnings for fiscal year 2023 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 2023.

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 2023 (as of December 30, 2023). 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.

55 | 2024 PROXY STATEMENT OUR PAY

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 (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 option or stock 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 the option or stock award

provided that the executive gives a one-year notice of their intention to retire. This additional acceleration of vesting

provision does not apply to any option or stock award granted within less than a year of retirement.

56 | 2024 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)	$1,264,894	—	$1,264,894	$3,011,024	$3,011,024
	Benefit Reimbursement(5)	—	—	$12,486	$12,486	—
	Total	$1,264,894	—	$7,055,380	$11,681,510	$3,011,024
David R. Callen	Cash Severance(6)	—	—	$1,097,330	—	—
	Option Award Acceleration(6)	—	—	$10,007	—	—
	Stock Award Acceleration(6)	—	—	$832,337	—	—
	Benefit Reimbursement(6)	—	—	$17,227	—	—
	Total	—	—	$1,956,901	—	—
Christopher D. Krusmark	Cash Severance(2)	—	—	$741,800	$1,471,100	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$483,058	$483,058
	Benefit Reimbursement(5)	—	—	$6,243	$6,243	—
	Total	—	—	$748,043	$1,960,401	$483,058
Francis K. Lee	Cash Severance(2)	—	—	$1,075,000	$2,137,500	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$778,056	$778,056
	Benefit Reimbursement(5)	—	—	$16,608	$16,608	—
	Total	—	—	$1,091,608	$2,932,164	$778,056
Andrea L. Bloomquist	Cash Severance(2)	—	—	$1,043,338	$2,074,175	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$644,423	$644,423
	Benefit Reimbursement(5)	—	—	—	—	—
	Total	—	—	$1,043,338	$2,718,598	$644,423
Melissa Barra	Cash Severance(2)	—	—	$1,024,238	$2,035,976	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$643,503	$643,503
	Benefit Reimbursement(5)	—	—	$17,180	$17,180	—
	Total	—	—	$1,041,418	$2,696,659	$643,503
Samuel R. Hellfeld	Cash Severance(2)	—	—	$905,000	$1,797,500	—
	Option Award Acceleration(3)	—	—	—	—	—
	Stock Award Acceleration(4)	—	—	—	$551,587	$551,587
	Benefit Reimbursement(5)	—	—	$17,180	$17,180	—
	Total	—	—	$922,180	$2,366,267	$551,587

(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 2023. 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.

57 | 2024 PROXY STATEMENT OUR PAY

(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 29, 2023 ($14.83) 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 30, 2023 was $27.28 to $146.97. No amounts are

included in the table above for stock options because the respective exercise prices are all above $14.83. 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 30, 2023, multiplied by (b) the fair market value of our common stock on December 29, 2023 ($14.83). PSUs whose

performance period had been completed as of December 30, 2023 are reflected based on the actual payout earned. All other PSUs are reflected at

target. 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.

(6)As Mr. Callen’s employment terminated effective March 3, 2023, the chart above illustrates the actual incremental benefits he received in connection

with the termination of his employment. The value of the acceleration of the vesting of unvested stock options is based on the difference between:

(a) the fair market value of our common stock as of March 3, 2023 ($38.81) and (b) the per share exercise price of the accelerated options, provided

(a) is higher than (b). The value of the acceleration of the vesting of stock awards is based on: (a) the number of accelerated PSUs as of March 3,

2023, multiplied by (b) the fair market value of our common stock on March 3, 2023 ($38.81). PSUs whose performance period had been completed

as of December 30, 2023 are reflected based on the actual payout earned. All other PSUs are reflected at target.

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 2023, we determined on December 30, 2023 that the annual

total compensation of the team member identified as the median was $59,339 compared to last year’s median of

$56,397. Based on this information, the 2023 ratio of the annual total compensation of our CEO, as reported in the Total

column of the Summary Compensation Table as $6,349,191, to the median annual total compensation of all team

members, excluding our CEO, was estimated to be 107 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 2023:

•We used our total active team member population as of the end of fiscal year 2023;

•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 2023; and

•For team members included in the population that were hired during fiscal year 2023, 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.

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

58 | 2024 PROXY STATEMENT OUR PAY

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)
					Sleep Number Total Shareholder Return	S&P 400 Specialty Stores Index Total Shareholder Return
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)	$53	$162	$36.6	(3.2)%
2021	$9,599,571	$15,233,052	$2,028,184	$2,806,197	$155	$173	$153.7	17.7%
2020	$8,528,276	$24,411,605	$1,986,114	$4,224,856	$166	$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 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 and 2023. 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 and 2023.

(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 and 2023.

(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 and 2023. 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 and 2023.

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
2023	$6,349,191	$(4,609,638)	$1,965,546	$(1,212,687)	$0	$305,187	$2,797,599
2022	$6,702,614	$(5,419,385)	$1,280,493	$(12,212,135)	$0	$(3,198,655)	$(12,847,068)
2021	$9,599,571	$(6,440,343)	$4,245,801	$(1,037,718)	$0	$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
2023	$1,824,602	$(1,081,157)	$483,831	$(165,585)	$0	$35,899	$1,097,590
2022	$1,592,120	$(1,019,287)	$238,188	$(1,773,616)	$0	$(361,315)	$(1,323,910)
2021	$2,028,184	$(1,058,309)	$714,143	$(134,889)	$0	$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

59 | 2024 PROXY STATEMENT OUR PAY

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 and 2021.

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.

60 | 2024 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.

61 | 2024 PROXY STATEMENT OUR PAY

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 of Directors 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 2025

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 recommends a vote “For” approval of, on a non-binding basis, the compensation of the Company’s named

executive officers as described in the Compensation Discussion and Analysis, tabular disclosures and other executive

compensation narrative provided in this Proxy Statement for the Company’s 2024 Annual Meeting of Shareholders.

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 of Directors 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.

62 | 2024 PROXY STATEMENT PROPOSAL 3 - ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Introduction

On May 13, 2020, our shareholders approved the Sleep Number Corporation 2020 Equity Incentive Plan (the 2020 Plan)

at our 2020 Annual Meeting of Shareholders. The 2020 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. Subject to adjustment, the maximum number of shares of our common stock authorized for

issuance under the 2020 Plan is 3,240,000 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 the Proposal

2023 was a challenging year for our Company as we faced sustained macroeconomic challenges and a historic industry

recession. As a result, our stock price declined approximately 44% in 2023. Given the decline in our stock price, our

modeling 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.

We recognize that equity is a valuable and limited resource, and we have taken steps to reduce share usage for our

annual 2024 grants and conserve equity in light of our current situation. These steps include:

•Limiting the use of Performance Stock Units (PSUs) and 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

•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.)

While these actions were necessary to enable us to continue to use equity awards to compensate our team members in

2024, they are not long-term solutions. As of March 18, 2024, after our annual grants, including the conservation

measures described above, we are left with approximately 266,000 shares available under the 2020 Plan.

63 | 2024 PROXY STATEMENT PROPOSAL 4 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN

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 12, 2024, 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 1,500,000 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 2024. 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 of Directors 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 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 or exceeds predetermined financial goals, or if shareholder value increases. This reinforces

our pay for performance culture.

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•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.

Shares Currently Available and Total Outstanding Equity Awards

(all data as of March 18, 2024)
New Shares Requested	1,500,000
Shares Remaining Available for Issuance Under 2020 Plan	265,859
Common Shares Outstanding	22,326,492
Stock Options/SARs Outstanding	979,506
Weighted-Average Exercise Price of Outstanding Stock Options/SARs	$40.60
Weighted-Average Remaining Term of Outstanding Stock Options/SARS	6.3 years
Total Stock-Settled Full-Value Awards Outstanding	1,783,191

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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:

	2023	2022	2021	3-Year Average
Stock Options/Stock Appreciation Rights (SARs) Granted	305,000	148,000	63,000
Stock-Settled Time-Vested Restricted Shares/Units Granted	304,000	189,000	70,000
Stock-Settled Performance-Based Shares/ Units Granted	201,000	251,000	247,000
Weighted-Average Basic Common Shares Outstanding	22,429,000	22,396,000	24,038,000
Share Usage Rate	3.6%	2.6%	1.6%	2.6%

Based on historical and anticipated granting practices, we expect the additional shares authorized for issuance by the

Plan Amendment to cover awards through our 2025 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 30, 2023, unless otherwise noted, with respect to the

Company’s equity compensation plans:

Stock Options/SARs Outstanding	1,045,962
Weighted-Average Exercise Price of Outstanding Stock Options/SARs	$40.80
Weighted-Average Remaining Term of Outstanding Stock Options/SARS	6.2 years
Total Stock-Settled Full-Value Awards Outstanding	1,176,734
Share reserve under the 2020 Plan	3,240,000
Proposed Amended Share reserve under the 2020 Plan	4,740,000

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 focused on our

strategic priorities. The total fully-diluted overhang as of December 30, 2023, assuming that the entire share reserve is

granted in stock options, SARs, or full-value awards would be 13.3%. 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 30, 2023. 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.

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Summary of the 2020 Plan Features

Below is a summary of the major features of the 2020 Plan, assuming approval of the Plan Amendment. 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 A 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;

•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.

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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 4,740,000 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 4,740,000 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.

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.

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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 December 28, 2019, approximately 658 team members and nine non-employee directors would have

been eligible to participate in the 2020 Plan had it been approved by our shareholders at such time.

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

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 18, 2024, was $13.25 per share. The

Compensation Committee will fix the terms and conditions of each stock option, subject to certain restrictions. The

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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.

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.

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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:

i.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;

ii.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;

iii.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;

iv.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;

v.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;

vi.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);

vii.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

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viii.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

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

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“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

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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

74 | 2024 PROXY STATEMENT PROPOSAL 4 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN

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.

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.

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 of Shareholders 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.

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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

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,

76 | 2024 PROXY STATEMENT PROPOSAL 4 - VOTE TO APPROVE AMENDMENT TO 2020 EQUITY INCENTIVE PLAN

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.

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

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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.

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	2,222,696	(2)	$40.80	1,198,490
Equity compensation plans not approved by security holders	None		Not applicable	None
Total	2,222,696		$40.80	1,198,490

(1)Includes the Sleep Number Corporation 2020 Equity Incentive Plan and the Sleep Number Corporation 2010 Omnibus Incentive Plan.

(2)This amount includes 397,307 restricted stock units, 698,500 performance-based stock units and 80,927 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 Sleep Number Corporation 2020 Equity Incentive Plan.

Board Recommendation

The Board of Directors recommends that the shareholders vote “For” approval of the amendment to the Sleep Number

Corporation 2020 Equity Incentive Plan to increase the number of shares authorized for issuance by 1,500,000.

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 of Directors will be voted “For” approval of the Plan Amendment.

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STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

The following table shows the beneficial ownership of Sleep Number common stock as of February 24, 2024 (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 49 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	Daniel I. Alegre	22,795	*
Common Stock	Melissa Barra	104,861	*
Common Stock	Andrea L. Bloomquist	120,044	*
Common Stock	Phillip M. Eyler(4)	4,935	*
Common Stock	Stephen L. Gulis, Jr.(4)	83,982	*
Common Stock	Michael J. Harrison	59,150	*
Common Stock	Samuel R. Hellfeld	58,673	*
Common Stock	Julie M. Howard(4)	23,766	*
Common Stock	Shelly R. Ibach	713,525	3.1%
Common Stock	Deborah L. Kilpatrick, Ph.D.	27,952	*
Common Stock	Christopher D. Krusmark	29,387	*
Common Stock	Brenda J. Lauderback(4)	50,193	*
Common Stock	Francis K. Lee	—	*
Common Stock	Stephen E. Macadam	50,137	*
Common Stock	Barbara R. Matas(4)	47,789	*
Common Stock	Angel L. Mendez(4)	4,935	*
Common Stock	Hilary A. Schneider	—	*
Common Stock	All directors and executive officers as a group (20 persons)(5)	1,560,171	6.8%
Common Stock	Stadium Capital Management LLC(6) 199 Elm Street New Canaan, CT 06840	2,023,178	9.1%
Common Stock	BlackRock, Inc.(7) 55 East 52nd Street New York, New York 10055	1,705,239	7.7%
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: Mr. Alegre, 1,985; Ms. Barra, 39,158; Ms. Bloomquist, 31,608; Mr. Eyler, 1,915; Mr. Gulis, 5,325; Mr. Harrison, 15,227; Mr. Hellfeld,

31,902; Ms. Howard, 3,460; Ms. Ibach, 332,355; Ms. Kilpatrick, 7,490; Mr. Krusmark, 13,835; Ms. Lauderback, 15,227; Ms. Matas, 5,325; and Mr.

Mendez, 1,915.

(3)The shares shown include the following shares that executive officers have the right to acquire within 60 days through the vesting of performance

restricted stock units: Ms. Barra, 2,257; Ms. Bloomquist, 2,319; Mr. Hellfeld, 1,464; Mr. Krusmark, 1,343; and Ms. Ibach, 14,146. In addition, Ms.

Ibach’s amount includes 88,009 performance stock restricted units that were deferred.

79 | 2024 PROXY STATEMENT OUR SHAREHOLDERS

(4)The Sleep Number Corporation 2020 Equity Incentive Plan (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 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 3,020 RSUs that were deferred. Mr. Gulis’ amount includes 49,746 shares that were deferred in lieu of Director fees and

27,081 RSUs that were deferred. Ms. Lauderback’s amount includes 8,126 RSUs that were deferred. Ms. Matas’ amount includes 20,513 shares that

were deferred in lieu of Director fees and 7,245 RSUs that were deferred. Ms. Howard’s amount includes 6,636 shares that were deferred in lieu of

Director fees and 3,085 RSUs that were deferred. Mr. Mendez’s amount includes 3,020 RSUs that were deferred.

(5)Includes an aggregate of 563,032 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 25,068 shares held under performance stock units that have not vested and 796 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

76,895 shares that were deferred by non-employee Directors in lieu of Director fees and 139,586 stock units that were deferred by executive officers

and non-employee Directors.

(6)Stadium Capital Management LLC reported in a Schedule 13F filed with the Securities and Exchange Commission on February 14, 2024 that as of

December 31, 2023 it beneficially owned 2,023,178 shares of Common Stock of Sleep Number Corporation, and had sole power to vote or to direct

the vote and sole dispositive power with respect to 2,023,178 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 OUTREACH

Our Board of Directors and management team maintain a deep commitment to strong corporate governance.

Engagement with, and accountability to, our shareholders are cornerstones of this commitment. Accordingly, we

maintain an active shareholder engagement program that facilitates channels of communication and aims to foster

relationships with our shareholders to drive sustainable, long-term growth and shareholder value. As part of our

engagement program, members of our management team regularly meet with shareholders, in-person, virtually or by

phone, occasionally joined by one or more members of our Board, to discuss strategy, governance, pay for performance

orientation and other matters of shareholder interest. In 2023, we engaged with large institutional shareholders on key

environmental, social and governance topics, such as executive compensation, privacy and cybersecurity. See

“Shareholder Engagement” on page 31 of this Proxy Statement for more information on our shareholder engagement.

Our ongoing shareholder engagement and commitment to long-term value creation will continue to inform our Board’s

deliberations in 2024 and beyond.

SHAREHOLDER PROPOSALS FOR 2025 ANNUAL MEETING

Any shareholder proposal requested to be included in the proxy materials for the 2025 Annual Meeting of Shareholders

must (a) be received by our Chief Legal and Risk Officer and Secretary on or before December 3, 2024, 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 of Rule 14a-19(b).

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 of shareholders. 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

80 | 2024 PROXY STATEMENT OUR SHAREHOLDERS

annual meeting. Under these provisions, notice of a shareholder proposal to be presented at the 2025 Annual Meeting

of Shareholders (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 3, 2024. 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.

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.

In addition, to comply with the universal proxy rules, shareholders who intend to solicit proxies in support of director

nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule

14a-19 under the Exchange Act no later than March 22, 2025.

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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 21, 2024.

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/SNBR2024. 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 21, 2024.

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/SNBR2024. 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.

What is up for shareholder vote?

There are four proposals up for shareholder vote:

•Proposal 1: Elect four persons to serve as Directors for three-year terms;

•Proposal 2: Ratify the selection of Deloitte & Touche LLP as our independent registered public accounting

firm for the 2024 fiscal year ending December 28, 2024;

•Proposal 3: Cast an advisory vote to approve executive compensation (Say on Pay); and

•Proposal 4: Approve the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan to

increase the number of shares reserved for issuance by 1,500,000 shares.

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What are the voting choices?

For proposal 1 (the election of Directors) you may:

•Vote in favor of all nominees;

•Vote in favor of specific nominees and withhold a favorable vote for specific nominees; or

•Withhold authority to vote for all nominees.

For proposal 2 (ratification of the appointment of independent auditors) you may:

•Vote in favor of the proposal;

•Vote against the proposal; or

•Abstain from voting on the proposal.

For proposal 3 (the advisory vote to approve executive compensation (Say on Pay)) you may:

•Vote in favor of the proposal;

•Vote against the proposal; or

•Abstain from voting on the proposal.

For proposal 4 (approve the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan) 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” the ratification of the appointment of Deloitte & Touche LLP as our independent registered

public accounting firm for the fiscal year ending December 28, 2024.

•Proposal 3: “For” the advisory vote to approve executive compensation (Say on Pay).

•Proposal 4: “For” the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan to increase the

number of shares reserved for issuance by 1,500,000 shares.

Who is eligible to vote?

Shareholders of record at the close of business on March 25, 2024 (the Record Date) are entitled to vote at the meeting.

As of the Record Date, there were 22,326,492 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

83 | 2024 PROXY STATEMENT OUR ANNUAL MEETING AND VOTING

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 19, 2024 or

•Over the Internet during the 2024 annual meeting by going to www.virtualshareholdermeeting.com/

SNBR2024 and using your 16-digit control number (included on the 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 21, 2024 meeting date.

How Beneficial Owners vote

If you are a Beneficial Owner of shares held in “street name,” you must 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.

Beneficial Owners should be aware that brokers are not permitted to vote shares on non-routine matters, including the

election of Directors or matters related to equity plans or executive compensation, without instructions from the

Beneficial Owner. As a result, brokers are not permitted to vote shares on proposal 1 (election of Directors), proposal 3

(the advisory vote to approve executive compensation) or proposal 4 (approve the amendment to the Sleep Number

Corporation 2020 Equity Incentive Plan) without instructions from the Beneficial Owner. Therefore, Beneficial Owners are

advised that if they do not timely provide instructions to their bank, broker or other holder of record with respect to

proposals 1, 3 or 4, their shares will not be voted in connection with any such proposal for which they do not provide

instructions. Proposal 2 (ratification of the appointment of independent auditors) is considered a routine matter and, as

such, brokers will still be able to vote shares held in brokerage accounts with respect to proposal 2, even if they do not

receive instructions from the Beneficial Owner.

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 19, 2024;

•Submitting to the corporate Secretary before 6:00 p.m., Eastern Daylight Time, on May 19, 2024, a properly

signed proxy card bearing a later date than the prior proxy card;

•Voting again by Internet or telephone before 11:59 p.m., Eastern Daylight Time, on May 20, 2024; 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.

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What does it mean if I receive more than one proxy card or Shareholder Notice?

If you receive more than one proxy card or Shareholder Notice, it generally means you hold shares registered in more

than one account and you should vote once for each proxy card or Shareholder Notice that you receive. If you receive a

paper copy of the Proxy Statement and you choose to vote by mail, sign and return each proxy card you receive. If you

choose to vote by Internet or telephone, vote once for each proxy card and/or Shareholder Notice you receive.

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.

How are votes counted?

If you are a Shareholder of Record 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.

Proxies marked “Withhold” on proposal 1 (election of Directors), or “Abstain” on proposal 2 (ratification of the

appointment of independent auditors), proposal 3 (the advisory vote to approve executive compensation) or proposal 4

(approve the amendment to the Sleep Number Corporation 2020 Equity Incentive Plan), will be counted in determining

the total number of shares entitled to vote on such proposals and will have the effect of a vote “Against” a Director or

such proposal.

If you are a Beneficial Owner and hold your shares 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 instruct the broker how to vote your

shares using the voting instruction form provided by the broker.

What is the vote required to approve each proposal?

Assuming that a quorum is present to vote on each of the proposals, proposals 1, 2, 3 and 4 will require the affirmative

vote of holders of a majority of the shares represented and entitled to vote in person or by proxy on such action. Please

note that proposals 2 and 3 are “advisory” votes, meaning that the shareholder votes on these items are for purposes of

enabling shareholders to express their point of view or preference on these proposals, but are not binding on the

Company or its Board of Directors and do not require the Company or its Board of Directors 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.

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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, 3 and 4. Brokers will have discretionary authority to

vote on proposal 2 because the ratification of the appointment of independent auditors is considered a routine matter. If

the broker votes on proposal 2 (ratification of the appointment of independent auditors) 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).

Broker non-votes on a matter may be counted as present for purposes of establishing a quorum for the meeting but are

not considered entitled to vote on that particular matter. Consequently, broker non-votes generally will have no effect on

the outcome of the matter. However, if and to the extent that broker non-votes are required to establish the presence of

a quorum at the Annual Meeting, then any broker non-votes will have the same effect as a vote “Withheld” or

“Abstained” on any matter that requires approval of a majority of the minimum number of shares required to constitute

a quorum for the transaction of business at the Annual Meeting.

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 11,163,247 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 2023 ANNUAL REPORT

We will furnish to our shareholders without charge a copy of our Annual Report on Form 10-K (without exhibits) for the

2023 fiscal year ended December 30, 2023. 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 2, 2024, 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

86 | 2024 PROXY STATEMENT OUR ANNUAL MEETING AND VOTING

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 2, 2024.

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 30, 2023, 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.

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 of Directors of the Company. 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 of Directors 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.

87 | 2024 PROXY STATEMENT OUR ANNUAL MEETING AND VOTING

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 and 4 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 2, 2024

Minneapolis, Minnesota

88 | 2024 PROXY STATEMENT SIGNATURE

APPENDIX A

AMENDMENT NO. 1 TO THE

SLEEP NUMBER CORPORATION 2020 EQUITY INCENTIVE PLAN

This Amendment No. 1 to the Sleep Number Corporation 2020 Equity Incentive Plan (this “Amendment”) is made and

adopted by Sleep Number Corporation (the “Company”) effective as of __________, 2024, 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 Sleep Number Corporation 2020 Equity Incentive Plan (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 12,

2024, 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 1,500,000 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 4,740,000 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.

SLEEP NUMBER CORPORATION

ANNUAL MEETING OF SHAREHOLDERS

Tuesday, May 21, 2024

8:30 a.m. Central Time 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Annual Report on Form 10-K and Proxy Statement are available at www.proxyvote.com.

V02785-P83535

Sleep Number Corporation

1001 Third Avenue South

Minneapolis, Minnesota 55404

This proxy is solicited by the Board of Directors of Sleep Number Corporation for use at the Annual

Meeting of Shareholders to be held on May 21, 2024.

The undersigned hereby appoints Shelly R. Ibach and Samuel R. Hellfeld (collectively, the Proxies), and each of them, with

full power of substitution, as Proxies, to vote the shares which the undersigned is entitled to vote at the Annual Meeting

of Shareholders of Sleep Number Corporation to be held on May 21, 2024, at 8:30 a.m. Central Time, and at any

adjournment or postponement thereof. Such shares will be voted as directed with respect to the proposals listed on the

reverse side hereof and, in the Proxies’ discretion, as to any other matter that may properly come before the meeting or

at any adjournment or postponement thereof.

You are encouraged to specify your choices by marking the appropriate boxes on the reverse side. WHEN

PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE

VOTED “FOR” EACH OF THE NOMINEES NAMED ON THE REVERSE SIDE, “FOR” PROPOSAL 2, “FOR”

PROPOSAL 3 AND “FOR” PROPOSAL 4, SET FORTH ON THE REVERSE SIDE, and in the discretion of

management with respect to such other business as may properly come before the meeting or any adjournment

thereof.

See reverse for voting instructions.