Business Context and Reporting Period
This Form 8-K Current Report was filed by Purple Innovation, Inc. on September 21, 2018, regarding events reported on September 25, 2018. The filing announces a significant executive leadership change, specifically the appointment of a new Chief Executive Officer (CEO) and the transition of the interim CEO.
Key Financial Metrics
The filing does not provide financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on executive compensation and employment terms.
- Base Salary: $450,000 annually for the new CEO.
- Short-Term Incentive: Target bonus equal to 70% of base salary, with potential payout ranging from 50% to 150% of the target.
- Equity Grants:
- Initial inducement grant: Option to purchase 538,020 shares of Class A Common Stock.
- Automatic grants: Option to purchase 179,340 shares on the 12, 24, and 36-month anniversaries of the start date.
- Performance Unit Award: Up to 50,000 shares contingent on stock price performance and tenure.
- Relocation and Benefits: Up to $75,000 for relocation expenses, $5,000 monthly housing stipend, and weekly airfare coverage for 12 months.
Material Changes
The primary material change is the appointment of Joseph B. Megibow as Chief Executive Officer and a member of the Board of Directors, effective October 1, 2018. Concurrently, Terry Pearce will resign from his role as Interim Chief Executive Officer but will continue to serve as Chairman of the Board and Co-Director of Research and Development.
Outlook, Risks, and Contingencies
Management Commentary: The appointment of Mr. Megibow follows his background as an independent consultant to Advent International and former Senior Vice President and Chief Digital Officer at American Eagle Outfitters, Inc., where he managed a $550+ million direct-to-consumer business.
Severance and Change in Control:
- Termination: In the event of termination without cause or resignation for "good reason" after March 31, 2019, the CEO is entitled to up to 9 or 12 months of base salary and COBRA coverage.
- Change in Control: If terminated without cause within 12 months of a change in control, the CEO receives severance and immediate vesting of all unvested equity awards.
- Performance Conditions: The performance unit award requires the stock price to close at or above $10.00 per share for 20 trading days over a 30-day period in the 12 months prior to March 31, 2022.
Risks: The filing notes customary non-compete terms lasting 12 to 18 months post-employment.
Investor Verification Checklist
- Verify the exact exercise price of the initial 538,020 share option grant, which is tied to the closing price or trailing 60-day VWAP on the October 1, 2018 start date.
- Confirm the specific financial and non-financial performance targets required to achieve the short-term incentive bonus.
- Review the full text of the Employment Agreement (Exhibit 10.1) for detailed definitions of "good reason" and "change in control."
- Monitor the company's stock price trajectory relative to the $10.00 threshold required for the performance unit award vesting.