UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 2, 2018

 

Purple Innovation, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware   001-37523   47-4078206
(State of Incorporation)  

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

123 East 200 North    
Alpine, Utah   84004
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (801) 756-2600

 

 

(Former name or former address, if changed since last report)

 

 Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencements communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange Act of 1934 (§ 240.12b–2 of this chapter).

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

 

 

INTRODUCTORY NOTE

 

On February 2, 2018 (the “ Closing Date ”), the registrant consummated the previously announced business combination pursuant to that certain Agreement and Plan of Merger (the “ Merger Agreement ”), by and among the registrant, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly owned subsidiary of the registrant (“ Merger Sub ”), Purple Innovation, LLC, a Delaware limited liability company (“ Purple LLC ”), InnoHold, LLC, a Delaware limited liability company and the sole equity holder of Purple LLC (“ InnoHold ”), and Global Partner Sponsor I LLC, solely in its capacity thereunder as the representative of GPAC after the consummation of the transactions contemplated by the Merger Agreement (the “ Parent Representative ” or the “ Sponsor ”), which provided for the registrant’s acquisition of Purple LLC’s business through a merger of Merger Sub with and into Purple LLC, with Purple LLC being the survivor in the merger (the “ Business Combination ,” and together with the other transactions contemplated by the Merger Agreement and agreements attached thereto as an exhibit, the “ Transactions ”).

 

In connection with the closing of the Business Combination (the “ Closing ”), the registrant changed its name from “Global Partner Acquisition Corp.” to “Purple Innovation, Inc.” Unless the context otherwise requires, “we,” “us,” “our,” “Purple” and the “Company” refer to the combined company and its subsidiaries, including Purple LLC and its subsidiaries. “Global Partner Acquisition Corp.” and “GPAC” refer to the registrant prior to the Closing, and the “Purple Business” or “Purple before the Business Combination” refers to the Purple business before it became a wholly owned subsidiary of the Company upon the Closing.

 

ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

 

Exchange Agreement

 

On February 2, 2018, in connection with the Closing, the Company entered into an exchange agreement with Purple LLC and InnoHold (the “ Exchange Agreement ”), which provides for the exchange of Purple LLC Class B Units (the “ Class B Units ”) and shares of Class B common stock of the Company, par value $0.0001 per share (the “ Class B Stock ”) issued in connection with the Business Combination into shares of Class A common stock of the Company, par value $0.0001 per share (the “ Class A Stock ”). The initial exchange ratio will be (i) one Class B Unit plus (ii) one share of Class B Stock for one share of Class A Stock, in each case subject to certain adjustments.

 

Holders of Class B Units may elect to exchange all or any portion of their Class B Units (together with an equal number of shares of Class B Stock) for shares of Class A Stock by delivering a notice to Purple LLC. However, the Class B Units (together with an equal number of shares of Class B Stock) may not be exchanged during the lock-up period under the Lock-Up Agreement (as described below). The exchange will occur automatically upon the occurrence of a change of control or sale of substantially all of the assets of the Company or Purple LLC.

 

In certain cases, adjustments to the exchange ratio will occur in case of a split, reclassification, recapitalization, subdivision or similar transaction of or relating to the Class B Units or the shares of Class A Stock and Class B Stock or a transaction in which the Class A Stock is exchanged or converted into other securities or property. The exchange ratio will also adjust in certain circumstances when the Company acquires Class B Units other than through an exchange for its shares of Class A Stock.

 

The right of a holder of Class B Units to exchange may be limited by the Company if it reasonably determines in good faith that such restrictions are required by applicable law (including securities laws), such exchange would not be permitted under other agreements of such holder with the Company or its subsidiaries, including the Operating Agreement, or if such exchange would cause Purple LLC to be treated as a “publicly traded partnership” under applicable tax laws.

 

The Company and each holder of Class B Units shall bear its own expense regarding the exchange except that the Company shall be responsible for transfer taxes, stamp taxes and similar duties.

 

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The foregoing summary of the Exchange Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Exchange Agreement, a copy of which is attached as Exhibit 10.1 to this report and is incorporated by reference herein. 

 

Tax Receivable Agreement

 

On February 2, 2018, in connection with the Closing, the Company entered into a Tax Receivable Agreement with InnoHold (the “ Tax Receivable Agreement ”). Pursuant to the Tax Receivable Agreement, the Company is required to pay InnoHold 80% of the amount of savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in the case of an early termination payment by the Company, or a change of control of the Company) as a result of the increases in tax basis and certain other tax benefits related to the payment of the Cash Consideration pursuant to the Merger Agreement and the exchange of the Class B Units (together with an equal number of shares of Class B Stock) for Class A Stock. The Company would retain the remaining 20% of cash savings, if any, realized. All payments of tax savings to InnoHold will be the Company’s obligation, and not that of Purple LLC.

 

In general, a cash tax savings results in a year when the tax liability of the Company for the year, computed without regard to the deductions attributable to the amortization of the basis step-up in Purple LLC’s assets and other deductions that arise in connection with the payment of the Cash Consideration and the exchange of the Class B Units (together with an equal number of shares of Class B Stock) for Class A Stock, would be more than the tax liability for the year, taking into account such deductions.

 

Estimating the amount of payments that the Company may be required to make under the Tax Receivable Agreement is imprecise by its nature, because the actual increase in the Company’s share of Purple LLC’s tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including:

 

  the timing of exchanges of Class B Units (together with an equal number of shares of Class B Stock) for shares of Class A Stock, because the increase in the Company’s share of the basis in the assets of Purple LLC, as well as the increase in any tax deductions, will be related to the price of the Class A Stock at the time of these exchanges;

 

  the tax rates in effect at the time the Company utilizes the increased amortization and depreciation deductions; and

 

  the amount and timing of the Company’s income, because the payment is based on the cash tax savings generated, in part, by the amortization of the basis step-up and if the Company does not have taxable income for a year, without taking into account the amortization generated by the exchanges, the Company generally will not be required to make payments under the Tax Receivable Agreement for that taxable year.

 

Because none of the foregoing factors are known at this time, we cannot determine the amounts (if any) that would be payable under the Tax Receivable Agreement. However, it is expected that, as a result of the size of the increases in the Company’s share of the tax basis of the tangible and intangible assets of Purple LLC attributable to the Company’s interest therein, and assuming that there are no material changes in the relevant tax law, and that the Company earns sufficient taxable income to realize the full tax benefit of the increased depreciation and amortization of the Company’s assets, the payments that the Company makes under the Tax Receivable Agreement will likely be substantial and could have a material adverse effect on the Company’s financial condition. Were the IRS to either successfully challenge the tax basis increases described above or conduct an audit of the Company that results in a lower tax savings to it, the Company would not be reimbursed for any payments previously made under the Tax Receivable Agreement, but such payments would effectively offset any future tax savings payments that must be made under the Tax Receivable Agreement. As a result, in certain circumstances, the Company could make payments under the Tax Receivable Agreement in excess of the Company’s actual cash savings in income tax. The accelerated timing of payments and the increase in the Company’s tax liability without reimbursement could affect the cash available to the Company and could impact the Company’s ability to pay dividends.

 

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In addition, the Tax Receivable Agreement provides that, upon certain mergers, asset sales, other forms of business combinations, liquidations, other changes of control or early terminations of the Tax Receivable Agreement we (or the Company’s successors’) would be obligated to make a payment to InnoHold in order to terminate the Tax Receivable Agreement. That payment would be based on certain assumptions, including that the Company would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreement, that all of the remaining Class B Units would be deemed exchanged at that time and that the discount rate for the net present value calculation of the tax benefits would be LIBOR plus 100 basis points. The Company would also be obligated to make such a payment if it is more than 90 days late in making any payment that is due under the Tax Receivable Agreement. 

 

The foregoing summary of the Tax Receivable Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Tax Receivable Agreement, a copy of which is attached as Exhibit 10.2 to this report and is incorporated by reference herein. 

 

Registration Rights Agreement

 

On February 2, 2018, in connection with the Closing, the Company entered into a Registration Rights Agreement with InnoHold and the Parent Representative (the “ Registration Rights Agreement ”). Under the Registration Rights Agreement, InnoHold holds registration rights that obligate the Company to register for resale under the Securities Act, all or any portion of the Equity Consideration (including Class A Stock issued in exchange for the Equity Consideration pursuant to the Exchange Agreement) (the “ Registrable Securities ”) so long as such shares are not then restricted under the Lock-Up Agreement. InnoHold is entitled to make a written demand for registration under the Securities Act of all or part of its Registrable Securities (up to a maximum of three demands in total), so long as such shares are not then restricted under the Lock-Up Agreement. Subject to certain exceptions, if any time after the Closing, the Company proposes to file a registration statement under the Securities Act with respect to its securities, under the Registration Rights Agreement, the Company shall give notice to InnoHold as to the proposed filing and offer InnoHold an opportunity to register the sale of such number of Registrable Securities as requested by InnoHold in writing. In addition, subject to certain exceptions, InnoHold is entitled under the Registration Rights Agreement to request in writing that the Company register the resale of any or all of its Registrable Securities on Form S-3 and any similar short-form registration that may be available at such time.

 

Under the Registration Rights Agreement, the Company agreed to indemnify InnoHold and certain persons or entities related to InnoHold, such as its officers, directors, employees, agents and representatives, against any losses or damages resulting from any untrue statement or omission of a material fact in any registration statement or prospectus pursuant to which they sell Registrable Securities, unless such liability arose from their misstatement or omission, and InnoHold agreed to indemnify the Company and certain persons or entities related to the Company such as its officers and directors and underwriters against all losses caused by their misstatements or omissions in those documents.

 

The foregoing summary of the Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Registration Rights Agreement, a copy of which is attached as Exhibit 10.3 to this report and is incorporated by reference herein. 

 

Non-Competition and Non-Solicitation Agreements

 

On February 2, 2018, in connection with the Closing, InnoHold and Tony Pearce and Terry Pearce, who together own a majority of InnoHold (collectively with InnoHold, the “ Sellers ”), entered into a Non-Competition and Non-Solicitation Agreement (the “ Non-Competition Agreement ”) with the Company, Purple LLC and their respective successors, affiliates and subsidiaries (referred to as the “ Covered Parties ”). Pursuant to the Non-Competition Agreement, for a period from the Closing until three years thereafter (or if later, until the one year anniversary of the date on which the Sellers, their affiliates or any of their respective officers, directors or employees are no longer directors, officers, managers or employees of the Company or any of its subsidiaries (the “ Termination Date ”)), each Seller and its affiliates will not, without the Company’s prior written consent, directly or indirectly engage in (or own, manage, finance or control, or become engaged or serve as an officer, director, employee, member, partner, agent, consultant, advisor or representative of), an entity that engages in the business of (i) designing and manufacturing comfort technology products worldwide to improve how people sleep, sit, and stand, including mattresses, pillows, platform bases and cushions, and (ii) marketing, licensing and selling its products worldwide through direct-to-consumer, traditional retail channels and partnerships (collectively, the “ Business ”) anywhere in the world, subject to certain specified exceptions for existing relationships. However, the Covered Parties and their affiliates are permitted under the Non-Competition Agreement to own passive portfolio company investments of no more than 2% in a competitor of the Covered Parties, so long as the Sellers, their affiliates and their respective shareholders, directors, officer, managers and employees who were involved with the business of the Covered Parties are not involved in the management or control of such competitor.

  

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Under the Non-Competition Agreement, during such restricted period, the Sellers and their affiliates will not, without the Company’s prior written consent, (i) solicit or hire the Covered Parties’ employees, consultants or independent contractors as of such time (or, if earlier, the Termination Date) or during the one year period prior thereto or otherwise interfere with the Covered Parties’ relationships with such persons, (ii) solicit or divert the Covered Parties’ customers as of such time (or, if earlier, the Termination Date) or during the one year period prior thereto relating to the Business or otherwise interfere with the Covered Parties’ contractual relationships with such persons, or (iii) interfere with or disrupt any Covered Parties’ vendors, suppliers, distributors, agents or other service providers for a purpose competitive with a Covered Party as it relates to the Business. The Sellers and their affiliates also agreed to not disparage the Covered Parties and to keep confidential and not use the confidential information of the Covered Parties, subject to certain specified exceptions.

 

The foregoing summary of the Non-Competition Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Non-Competition Agreement, a copy of which is attached as Exhibit 10.4 to this report and is incorporated by reference herein. 

 

Lock-Up Agreement

 

On February 2, 2018, in connection with the Closing, InnoHold entered into a lock-up agreement with the Company and the Parent Representative (“ Lock-Up Agreement ”) with respect to the equity securities of both the Company and Purple LLC received in the Business Combination (the “ Restricted Securities ”). Pursuant to the Lock-Up Agreement, InnoHold agreed that it will not, from the Closing until the earliest of (x) the one year anniversary of the Closing, (y) the date on which the last sale price of the Class A Stock (or any successor publicly traded common equity security) equals or exceeds $12.00 per share (as equitably adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing or (z) the date on which the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange either equity holdings in us for cash, securities or other property: (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of the Restricted Securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of its Restricted Securities, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). However, InnoHold is allowed to transfer any of its Restricted Securities under certain limited exceptions, including to affiliates, to family members or to its equity holders, provided in each such case that the transferee thereof agrees to be bound by the restrictions set forth in the Lock-Up Agreement. InnoHold is also permitted to transfer the Restricted Securities pursuant to an underwritten public offering to which all of the parties to the Lock-Up Agreement shall have consented.

 

The foregoing summary of the Lock-Up Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Lock-Up Agreement, a copy of which is attached as Exhibit 10.5 to this report and is incorporated by reference herein.

 

Employment Agreements

 

On February 2, 2018, in connection with the Closing, Terry Pearce and Tony Pearce each entered into employment agreements with the Company.

 

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Pursuant to their respective agreements, Terry Pearce and Tony Pearce were engaged as Co-Directors of Research and Development of the Company. The employment agreements have an initial term through December 31, 2021 (the “Initial Employment Term”) and will be automatically renewable unless terminated by the Company or the employee. Under the employment agreements, the employees are entitled to receive compensation at the rate of $320,000 per year in 2018, increasing annually by $20,000 and by a minimum of $20,000 per year commencing in 2022. In addition, the employee is entitled to receive bonuses and certain benefits. The employment agreements provide, among other things, that the employees are not required to work a particular number of hours for the Company or to be based at any particular location. The employment agreements also provide certain post-employment benefits if a termination arises without cause (as defined) by the Company or with good reason (as defined) by the employee. In such events, the employee would be entitled to be paid all accrued obligations, together with a lump sum payment equal to the amount of salary and benefits from the termination date until the end of the Initial Employment Term or, if the termination occurs following the Initial Employment Term, during the calendar year in which such termination occurred. In addition, the employment agreements provide for the payment of certain benefits upon the death, permanent disability or incapacity of the employee.

 

Terry Pearce and Tony Pearce are also directors of the Company and indirectly control a majority of the voting shares of the Company.

 

The foregoing summary of the employment agreements with Tony Pearce and Terry Pearce does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such employment agreements, copies of which are attached as Exhibits 10.6 and 10.7, respectively, to this report and are incorporated by reference herein.

 

Incentive Plan

 

Our Board approved the Purple Innovation, Inc. 2017 Equity Incentive Plan (the “ Incentive Plan ”) on January 31, 2018, and stockholders of Global Partners Acquisition Corp. approved the Incentive Plan at a special meeting of its shareholders on February 2, 2018. The purpose of the Incentive Plan is to further align the interests of eligible participants with those of the Company’s stockholders post-Business Combination by providing long-term incentive compensation opportunities tied to the performance of the Company and its Class A Stock. The Incentive Plan is intended to advance the interests of the Company and increase stockholder value by attracting, retaining and motivating key personnel through the granting of stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and/or other stock-based awards consistent with the terms of the Incentive Plan.

 

The foregoing summary of the Incentive Plan does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Incentive Plan, a copy of which is attached as Exhibit 10.8 to this report and is incorporated by reference herein. 

 

Coliseum Credit Agreement

 

On February 2, 2018, Purple LLC entered into a Credit Agreement (the “ Credit Agreement ”) with Coliseum Capital Partners, L.P. (“ CCP ”), Blackwell Partners LLC – Series A (“ Blackwell ”) and Coliseum Co-Invest Debt Fund, L.P. (together with CCP and Blackwell, the “ Lenders ”), pursuant to which the Lenders agreed to make a loan to Purple LLC in an aggregate principal amount of $25 million (the “ Loan ”). The Loan was closed and funded in connection with the Closing of the Business Combination on February 2, 2018. As part of the Credit Agreement, the Sponsor agreed to assign to the Lenders an aggregate of 2,500,000 Sponsor Warrants to purchase 1,250,000 shares of Class A Stock.

 

The Loan bears interest at 12.0% per annum and matures on February 2, 2023. Any pre-payments in the first year are subject to a make-whole payment, while pre-payments in years two through four are subject to certain pre-payment penalties. In addition, Purple LLC may elect for interest in excess of 5.0% per annum to be capitalized and added to the principal amounts of the Loan. The Credit Agreement provides for certain remedies to the Lenders in the event of customary events of default.

 

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The Credit Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants of Purple LLC. While any amounts are outstanding under the Credit Agreement, Purple LLC is subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, investments, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. In particular, Purple LLC is restricted from (i) making capital expenditures in excess of $20 million, (ii) incurring capital lease obligations in excess of $10 million and (iii) incurring asset-based loans in excess of $20 million, subject to limited exceptions. Purple LLC is also restricted from paying dividends or making other distributions or payments on its capital stock, subject to limited exceptions. The foregoing summary of the Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Agreement, a copy of which is attached as Exhibit 10.10 to this report and is incorporated by reference herein.

 

In connection with the Credit Agreement, on February 2, 2018 the Company entered into a Parent Guaranty (the “ Parent Guaranty ”) pursuant to which the Company agreed to an unconditional guaranty of the payment of all obligations and liabilities of Purple LLC under the Credit Agreement. The foregoing summary of the Parent Guaranty does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Parent Guaranty, a copy of which is attached as Exhibit 10.11 to this report and is incorporated by reference herein.

 

Baleen Investment

 

As previously announced in the Company’s Current Report on Form 8-K filed on January 30, 2018, on January 29, 2018, GPAC and the Sponsor entered into a subscription agreement (the “ Baleen Subscription Agreement ”) with Baleen Capital Investors II LLC, Baleen Capital Fund LP, Greenhaven Road Capital Fund 1, L.P., Royce Value Trust, Inc., David Capital Partners Fund, LP, Pleiades Investment Partners – DC, L.P. and Dane Capital Fund LP (the “ Baleen Investors ”), who agreed to acquire an aggregate of $25 million in shares of Class A Stock through open market purchases, private purchases and private placements. On January 31, 2018 the Baleen Investors completed the acquisition of $25 million of Class A Stock all through open market purchases (the “ Baleen Investment ”). The foregoing summary of the Baleen Subscription Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Baleen Subscription Agreement, a copy of which is attached as Exhibit 10.12 to this report and is incorporated by reference herein. 

 

In connection with these investments, on February 2, 2018, GPAC, the Sponsor, the Baleen Investors and Continental Stock Transfer and Trust Company entered into an Agreement to Assign Sponsor Warrants (the “ Baleen Warrant Assignment Agreement ”), pursuant to which the Sponsor agreed to assign to the Baleen Investors an aggregate of 3,750,000 outstanding sponsor warrants (the “ Baleen Warrants ”) that were issued to the Sponsor in a private placement in August 2015. On February 2, 2018 the Sponsor assigned the Baleen Warrants to the Baleen Investors in accordance with the terms of the Baleen Warrant Assignment Agreement. The foregoing summary of the Baleen Warrant Assignment Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Baleen Warrant Assignment Agreement, a copy of which is attached as Exhibit 10.13 to this report and is incorporated by reference herein.

 

Also in connection with the Baleen Subscription Agreement, on February 2, 2018 the Company entered into a Registration Rights Agreement (the “ Baleen Registration Rights Agreement ”) with the Baleen Investors, providing for the registration under the Securities Act of 1933, as amended (the “ Securities Act ”) of the shares acquired by the Baleen Investors pursuant to the Baleen Subscription Agreement and the shares issuable upon exercise of the Baleen Warrants, subject to customary terms and conditions. The foregoing summary of the Baleen Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Baleen Registration Rights Agreement, a copy of which is attached as Exhibit 10.14 to this report and is incorporated by reference herein.

 

Coliseum Private Placement

 

As previously announced in the Company’s Current Report on Form 8-K filed on February 2, 2018, on February 1, 2018 the company entered into a subscription agreement (the “ Coliseum Subscription Agreement ”) with Coliseum Capital Partners, L.P. (“ CCP ”) and Blackwell Partners LLC – Series A (“ Blackwell ” and, together with CCP, together the “ Coliseum Investors ”), pursuant to which CCP agreed to purchase from the Company 2,900,000 shares of Class A Stock of the Company at a purchase price of $10.00 per share and Blackwell agreed to purchase from the Company 1,100,000 shares of Class A Stock of the Company at a purchase price of $10.00 per share (the “ Coliseum Private Placement ”).

 

The Coliseum Subscription Agreement provided that the Company would commit to elect or appoint a designee of CCP to become a member of the board of directors of the Company following the closing of the Business Combination. In connection with the Closing, the Board of Directors of the Company adopted resolutions increasing the number of directors of the Company to eight and appointing Adam Gray, a manager of CCP, as a director.

 

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The Coliseum Subscription Agreement provides the Coliseum Investors (and any other funds or accounts managed by Coliseum Capital Management, LLC) with a right of first refusal to provide all, but not less than all, of any of the following financings by the Company or any of its subsidiaries: (i) preferred equity financing with a preference to or over any of the terms of the Company’s common stock and (ii) any debt financing with a principal amount outstanding (together with all other debt provided by lender or group of lenders) greater than or equal to $10 million, other than (x) the replacement or refinancing of existing indebtedness or (y) an asset based loan on customary terms with an all in interest rate of not greater than 5% per year, by the Company or any of its subsidiaries. The foregoing summary of the Coliseum Subscription Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Coliseum Subscription Agreement, a copy of which is attached as Exhibit 10.15 to this report and is incorporated by reference herein.

 

In connection with the Coliseum Private Placement and the Coliseum Credit Agreement, on February 2, 2018 the Sponsor, the Company, Continental Stock Transfer and Trust Company, Coliseum, Blackwell and Coliseum Co-Invest Debt Fund, L.P. (“ CCDF ”) entered into an Agreement to Assign Sponsor Warrants (the “ Coliseum Warrant Assignment Agreement ”), pursuant to which the Sponsor agreed to assign to the Coliseum Investors and CCDF an aggregate of 5,782,500 outstanding sponsor warrants (the “ Coliseum Warrants ”), including 3,282,500 warrants related to the Coliseum Private Placement and 2,500,000 warrants related to the Credit Agreement. The foregoing summary of the Coliseum Warrant Assignment Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Coliseum Warrant Assignment Agreement, a copy of which is attached as Exhibit 10.16 to this report and is incorporated by reference herein.

 

Also in connection with the Coliseum Private Placement, on February 2, 2018 the Sponsor, the Company, Continental Stock Transfer and Trust Company, Coliseum and Blackwell entered into an Agreement to Assign Founder Shares (the “ Founder Share Assignment Agreement ”), pursuant to which the Sponsor agreed to assign to CCP and Blackwell an aggregate of 1,293,750 outstanding founder shares of the Company (the “ Coliseum Founder Shares ”), 646,874 of which will be subject to certain vesting conditions. The foregoing summary of the Founder Share Assignment Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Founder Share Assignment Agreement, a copy of which is attached as Exhibit 10.17 to this report and is incorporated by reference herein.

 

On February 2, 2018, the Company entered into a registration rights agreement (the “ Coliseum Registration Rights Agreement ”) with CCP, Blackwell and CCDF, providing for the registration under the Securities Act of (i) the shares issued in the Coliseum Private Placement, (ii) the shares issuable upon the exercise of the Coliseum Warrants and (iii) the Coliseum Founder Shares, subject to customary terms and conditions. The foregoing summary of the Coliseum Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Coliseum Registration Rights Agreement, a copy of which is attached as Exhibit 10.18 to this report and is incorporated by reference herein.

 

On February 2, 2018, in connection with the Closing of the Business Combination, the Company and the Coliseum Investors completed the Coliseum Private Placement in accordance with the terms of the Coliseum Subscription Agreement and the assignment of the Coliseum Warrants and the Coliseum Founder Shares in accordance with the terms of the Coliseum Warrant Assignment Agreement and Founder Share Assignment Agreement, respectively.

 

ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

 

The disclosure set forth in the “Introductory Note” above is incorporated into this Item 2.01 by reference. On February 2, 2018 the Business Combination was approved by the Company’s stockholders at the Special Meeting of Global Partner Acquisition Corp. Stockholders (the “ Special Meeting ”).

 

Pursuant to the terms of the Merger Agreement, the aggregate purchase price for the Business Combination and related transactions was approximately $483.0 million. The consideration paid to InnoHold consisted of a combination of cash and stock consideration. The aggregate cash consideration paid to InnoHold was approximately $38.8 million, consisting of (i) approximately $31.1 million of cash available to us from the Company’s trust account that holds the proceeds from the Company’s initial public offering (the “ Trust Account ”), after giving effect to redemptions and the Baleen Investment, plus (ii) approximately $26.8 million of cash on hand at Purple LLC, including approximately $24.0 million of net proceeds received pursuant to the Coliseum Credit Agreement, plus (iii) gross proceeds of approximately $40.0 million from the Coliseum Private Placement, less (iv) certain transaction fees and expenses of approximately $9.2 million, including the payment of deferred expenses agreed to at the time of the Company’s initial public offering, less (v) approximately $50.0 million retained by Purple LLC for working capital needs. The remainder of the consideration paid to InnoHold consisted of equity consideration (“ Equity Consideration ”), including 44,071,318 newly issued shares of Company Class B Stock and 44,071,318 Purple LLC Class B Units.

 

The foregoing consideration paid to InnoHold may be further increased by amounts payable under the Tax Receivable Agreement. The Class B Stock together with an equivalent number of shares of Class B Units may be exchanged by the holders thereof for shares of Class A Stock, in accordance with the Exchange Agreement. In order to facilitate the Business Combination, GPAC’s Sponsor has agreed to the cancellation of approximately 1,293,750 shares of the Company’s Class A Stock held by it, to the acquisition of shares of Class B Stock by InnoHold (pursuant to the Merger Agreement) and the acquisition of shares of Class A Stock by the participants in the Coliseum Private Placement (pursuant to subscription agreements entered into in connection therewith).

 

The material terms and conditions of the Merger Agreement are described on pages 93 to 108 of the Company’s definitive proxy statement filed with the SEC on January 16, 2018 (the “ Proxy Statement ”) in the section entitled “Proposal No. 1 – Approval of the Business Combination” which is incorporated by reference herein.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Statements in this Current Report on Form 8-K that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock price. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for Purple Innovation, Inc. (the “Company” or “Purple”). Specifically, forward-looking statements may include statements relating to:

 

the future financial performance of the Company;

 

 

changes in the markets in which Purple competes;

 

expansion plans and opportunities; and

 

other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

 

These forward-looking statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

the inability to maintain the listing of the Class A Stock and warrants on The NASDAQ Capital Market or any other stock exchange following the proposed Business Combination;

 

the fact that we are a “controlled company” and exempt from certain corporate governance rules primarily relating to board independence and committees, and we intend to rely on certain of these exemptions;

 

costs related to the proposed Business Combination;

 

the risk of legal complaints and proceedings and government investigations;

 

the inability to comply with licensing or other regulatory requirements, laws and regulations;

 

the intense competition in the industry;

 

the inability to profitably expand into new markets;

 

cybersecurity risks and the failure to protect customer information;

 

the possibility that Purple may be adversely affected by other economic, business, and/or competitive factors;

 

the risk of loss of key personnel or inability to recruit talent; and

 

other risks and uncertainties indicated in this Current Report on Form 8-K, including those under “Risk Factors” which incorporate herein by reference the risk factors described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 41 of the Proxy Statement.

 

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Business

 

Business Overview

 

We are a leading comfort technology company with a vision to improve how people sleep, sit and stand. We offer a range of mattress, bedding and cushioning products. Our products are the result of over 20 years of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes. Our Hyper-Elastic Polymer ® technology underpins many of our comfort products and provides a range of benefits that differentiate our offerings from other competitors’ products. We primarily sell through a direct-to-consumer (“DTC”) distribution model, which has enabled us to rapidly grow our sales and brand.

 

The foundation of our business is core competencies in design, development and manufacturing, with decades of accumulated knowledge that enables us to create all aspects of our innovative products, including the fundamental comfort technologies as well as the machines and processes necessary to bring them to market. We have vertically integrated our operations to include research and development, marketing and manufacturing, resulting in an ability to rapidly test, learn, adapt and scale our product offerings. In order to solve complex manufacturing challenges such as large-format Hyper-Elastic Polymer ® molding (required to make our mattresses), we designed and produced our own manufacturing equipment including our proprietary and patented Mattress Max™ machinery. Our combination of patents and intellectual property, proprietary and patented manufacturing equipment, production processes and decades of acquired knowledge create a distinct advantage over our competitors who rely on commoditized technologies and outsourced manufacturing.

 

We have not only developed transformative products and technologies, but also a brand that has high customer engagement and avid online advocates. We have an experienced digital marketing team that has generated digital marketing content that enables efficient customer acquisition and builds brand affinity. To date, our videos have been seen more than 1 billion times across Facebook and YouTube alone and we have over 600,000 fans and subscribers across our social media. Our digital marketing strategy enables us to market our full product suite to customers and drive frequent interactions online.

 

Currently, we focus primarily on a DTC e-commerce distribution model and participate in the growing DTC macro trend that is transforming the bedding industry. In addition to our DTC channel, we have developed multiple retail relationships with established vendors such as Bed Bath & Beyond, the Hammacher Schlemmer catalog, TravelCenters of America, Veterans Canteen Service and Samsclub.com. Other than Samsclub.com, these retail relationships currently only sell our seat cushions, but we intend to expand our product lines through these relationships as we increase manufacturing capacity. We entered into a Memorandum of Understanding with Mattress Firm whereby we are conducting a test of our brand and products at 51 strategic Mattress Firm stores. We believe that our distinctly differentiated products, marketing strategies, manufacturing capabilities, unique branding and proprietary technologies position us to continue to drive Purple’s growth in comfort products. During the nine months ended September 30, 2017, DTC accounted for 97% of our revenue and retail accounted for 3% of revenue, while sales of mattresses accounted for 72% of our revenue and other products accounted for 28%. As of September 30, 2017, we had backlog of approximately $2.168 million.

 

Industry Opportunity

 

Our portfolio of product offerings spans multiple large and growing markets. Our current offerings improve how people spend much of their day whether they are sleeping or sitting and our addressable market is comprised of these categories.

 

Sleep

 

The sleep category encompasses a variety of products including mattresses, foundations, sheets, mattress protectors and pillows. Meaningful innovation in sleep products has been infrequent and limited over the last 150 years. The first coil spring mattress was introduced in the 1860s and it continues to remain one of the most widely adopted technologies. Over 100 years after the creation of the coil spring mattress, the memory foam-based mattress was launched in 1992. While latex, water and air mattresses also emerged during the latter part of the 20th century, these technologies struggled to gain mass adoption. Our Hyper-Elastic Polymer ® technology represents a meaningful innovation in the mattress industry and we believe is positioned to gain significant consideration and adoption.

 

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The market for bedding products is large, growing and undergoing fundamental transformations on account of digital marketing and DTC distribution. The U.S. mattress industry is predominantly comprised of vendors that rely on retail distribution as well as a growing number of DTC vendors. The traditional market, led by Tempur-Sealy and Simmons, comprises the vast majority of the market. Significant consolidation has occurred within this market with the mergers of Serta and Simmons brands in 2009 and Tempur-Pedic’s acquisition of Sealy in 2013.

 

Over the past several years, growth of the DTC market exceeded that of the broader industry. DTC vendors are typically characterized by e-commerce distribution channels, more affordable pricing, free shipping and returns and limited product offerings. DTC vendors typically use foam cushioning parts that are assembled into a mattress and compressed into a box for distribution. According to published Wall Street research, the DTC market now has over 100 vendors and market share is highly fragmented.

 

Sit

 

Our sit category consists of seating cushions that can be purchased independent of furniture. To the best of our knowledge, there are no independent market analyses that define the size and growth of this category. It is important to note that there is a significantly larger market for cushioning technology embedded within furniture including chairs and sofas as well as seats found in transportation and other categories requiring seating solutions. We believe this is a substantial market opportunity that we could pursue with either branded product offerings or through partnerships to embed our technology.

 

Stand

 

We do not currently sell standing products, but our growth plan includes developing and selling products in the foreseeable future.

 

Operating Strengths

 

  Multi-category portfolio of differentiated products that improve how people sleep and sit — We design and manufacture a range of comfort technology products, including mattresses, pillows and cushions using our patented Hyper-Elastic Polymer ® technology designed to improve comfort. We also offer sheets, mattress protectors, foundations and other proprietary products that are designed to improve the function and comfort of our mattresses. Our extensive product portfolio provides multiple entry points for customers to first experience our products and to continue to engage with our brand over time.

 

  History of innovation that produced new comfort technology — Our founding team has a twenty-four-year history of developing innovative comfort technology products, including the invention of our proprietary and patented Hyper-Elastic Polymer ® technology. Our breakthrough mattress represents what we believe to be the first substantive innovation in the mattress industry since the introduction of memory foam in the 1990s. The unique properties of the Hyper-Elastic Polymer ® material provide support and cushioning to accommodate the varying needs of each region of the body. The result is a mattress that provides pressure relief and firm support. Further, the material is temperature neutral, contributing to optimal rest conditions. The Hyper-Elastic Polymer ® technology has numerous applications beyond mattress products including seat cushions and pillows. The development of the Hyper-Elastic Polymer ® technology is only one of numerous innovations we have achieved to produce a range of unique and effective comfort products across the sleep and sit categories.

 

  Proprietary technologies and manufacturing expertise provide a significant competitive advantage — The combination of patent protection, proprietary manufacturing equipment and decades of accumulated knowledge creates a competitive advantage through barriers of imitation. We own or have the exclusive right to use 102 granted or pending patents that cover current and future products as well as proprietary manufacturing equipment we have designed and fabricated. In addition to intellectual property protection of key products and manufacturing capabilities, our team has decades of experience and unique insights derived from inventing and refining proprietary comfort technologies, machines and products. These capabilities are essential to produce our products efficiently and at scale.

 

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  Memorable brand and excellent marketing capabilities — We have developed a brand that resonates with consumers. Our digital marketing strategy has achieved a level of social media engagement that few competitors can match, including videos that have been seen more than 1 billion times across Facebook and YouTube. Over 600,000 fans and subscribers across our social media channels. Our brand transcends simple awareness of individual products and we have successfully marketed our full suite of products to customers using a DTC strategy.

 

  Vertical integration enables nimble design, development and execution — We design and develop our cushioning products in-house and we have extensive research and development capabilities led by a team of engineers, designers and marketing specialists. The ability to develop and test products in this manner enables us to not only rapidly prototype and deploy new ideas, but also to design and develop manufacturing equipment and processes. Accordingly, we continuously refine our production methods to improve product quality and enhance efficiency. The resulting real-time feedback cycle is a key differentiator compared to other competitors that outsource many of these functions and lack an integrated approach.

 

  Direct-to-consumer distribution model changing a mature market — We are a leader in the DTC category of the bedding market and are helping to drive its accelerated growth compared to the traditional retail industry.

 

  Rare combination of hyper-growth, scale and profitability — Our business model and compelling offerings resonate with consumers, driving financial performance. We achieved net revenue of approximately $134 million as of September 30, 2017 and experienced 227% period-over-period net revenue growth through September 30, 2017. We believe we will realize margin efficiency gains and achieve profitability as the business continues to scale.

 

Growth Opportunities

 

  ●         Further direct-to-consumer growth and penetration — We believe that we are well positioned to leverage our brand, leading product portfolio, vertical integration and strong marketing capacities to continue to attract new customers via our DTC channel. Continued successful execution within the DTC channel represents a significant growth opportunity.

 

  ●         Expanded multi-channel distribution and retail relationships — Expanding retail distribution of our products via new and existing arrangements represents an opportunity to tap into the large brick-and-mortar category of the cushioning markets. We are in discussions with multiple new potential partners to expand our retail distribution capabilities. We have an arrangement with Mattress Firm to sell our products in 51 test locations with the potential to expand nationwide into approximately 3,500 stores. In addition to the Mattress Firm and other potential new opportunities, we have existing arrangements with retailers such as Bed Bath & Beyond, the Hammacher Schlemmer catalog, TravelCenters of America, Veterans Canteen Service, Houzz, QVC and Samsclub.com and could explore expanding the range of products we sell through these retailers, as currently we predominantly sell seat cushions.

 

  ●         Existing product innovation — We have a rich history of product innovation and have developed core competencies in design, prototyping and manufacturing. This vertical integration enables us to continuously refine our existing products and manufacturing processes, as well as to introduce new offerings, with the potential to attract new customers and drive repeat sales.

 

  ●         New product launches across sleep, sit and stand — We have a pipeline of future products we are developing. We are constantly exploring new technologies and ways to expand the benefits of our technologies through new product offerings.

 

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  ●         International expansion — We believe there is a substantial opportunity for international expansion. While we expect to face unique challenges as we expand into various foreign markets, we have begun to replicate our distribution model in Canada and we plan to do so in other foreign markets as well. We believe that our multi-channel distribution strategy, manufacturing capabilities, vertical integration and marketing expertise will enable us to efficiently enter new markets.

 

Our Products

 

Our current product portfolio is as follows:

 

  ●         Mattress — The roots of The Purple ® Bed began in 1998 with the founders recognizing the unique challenges of large format Hyper-Elastic Polymer ® molding required to efficiently produce up to a king-size bed. After 17 years of development, which includes several years of owning and operating a specialty mattress chain and dealing directly with customers, our founders and their team developed machines and specialized processes that could produce up to a king-size bed at a price for the mass market. Our Hyper-Elastic Polymer ® material is manufactured with non-toxic, food-contact-grade ingredients that third-party testing has shown are free from carcinogenic chemicals. We back up the quality and durability of our mattress with a 100-night comfort guarantee and a 10-year warranty.

 

    Our mattress simultaneously provides support and cushioning, leveraging our unique Hyper-Elastic Polymer ® material with collapsible columns. The result is a bed that relaxes under pressure while providing firm support. Competing mattresses are typically uniform in the level of firmness throughout the mattress and are varying degrees of soft or firm. This tradeoff is problematic as regions of the body such as the head, feet, hips and shoulders require different levels of support. Our mattresses are also temperature neutral, which is an advantage as temperature regulation is a key component of achieving optimal sleeping conditions. Competing mattresses that rely on memory foam often become uncomfortably warm and lose support as the material reaches body temperature.

 

  Seat Cushions — Our founders invented their first version of a seat cushion nearly two decades ago to solve the extreme use case of people in wheelchairs suffering from compression sores (decubitus ulcers). These exacting requirements, coupled with the unique demands of the medical equipment marketplace, such as lighter weight, safety, incontinence protection, sterility, non-toxicity and durability, became foundational to our unique product differentiation. The evolution of our portfolio of seat cushions has resulted from seven years of in-house manufacturing experience including development of proprietary machines and trade secrets. The cushions utilize Hyper-Elastic Polymer ® material in our Smart Comfort Grid™ design to provide a comfortable seating experience and are designed to maximize airflow and maintain the neutral temperature of the seat. The Smart Comfort Grid™ allows our seat cushions to relax under pressure, providing pressure-releasing comfort. Our seat cushions include nine consumer models plus variants for the medical industry.

 

  Pillows — We believe our pillow is a category creator, with no other product in the market like it in appearance, design or comfort. The pillow also utilizes the Hyper-Elastic Polymer ® material in a head-specific triangular Smart Comfort Grid™ to protect against breaking down or losing shape. The pillow is designed to relax under pressure without losing support. We back up the quality and durability of our pillows with a 100-night comfort guarantee.

 

  Sheets — Our sheets and pillow cases are designed to maximize the functionality of the Hyper-Elastic Polymer ® material in our mattresses and pillows. They are bamboo-based Viscose, stretchy and breathable. Recognizing that conventional sheets are often too taut to allow a mattress to correctly conform and adapt, we developed our own technology to enable customers to experience the full performance potential of our mattress (or any other mattress).

 

  Mattress Protector — Like our sheets, our mattress protector is designed to optimize the functionality of the Hyper-Elastic Polymer ® material in our mattress. Our mattress protector is stretchy, breathable, protective against liquids and stain resistant.

 

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  Platform Base — Our platform base is designed for standard beds without box springs and fits all current Purple ® bed sizes. Constructed from lightweight steel, our Purple™ platform is more hygienic compared to box-spring foundations and also does not squeak with motion. The platform also provides optimal support and prevents the mattress from sagging. We have strength-tested this platform at 4,800 pounds (uniform load).

 

  Adjustable Foundation — Our Purple™ PowerBase complements our mattresses by adding electrically powered functions, such as adjustable positions, massagers with five different settings, under bed lighting and an app for smartphone control.

 

We have plans to expand our comfort technology products to include new sleeping, sitting and standing products.

 

Technology

 

Technology is key to our unique position within the comfort industry. With our proprietary Hyper-Elastic Polymer ® we have introduced the first major innovation to the mattress category in decades. Mattresses from our competitors are typically manufactured using one or more layers of springs, standard polyurethane foam, memory foam, air chambers or latex foam. These technologies have existed for decades and are undifferentiated from competitors within their product type.

 

Proprietary Technologies

 

The Purple team, through their scientific journey to get to the root causes of pressure sores, designed the Hyper-Elastic Polymer ® material and other proprietary comfort technologies in order to improve the lives of millions of people. Each different cushioning product line requires unique molding techniques.

 

Our Hyper-Elastic Polymer ® material is food-grade, non-toxic and hypoallergenic, making it safe to use. Our Hyper-Elastic Polymer ® material is durable and does not develop body impressions (compression set) from use over time. It is elastic and can stretch up to 15 times its original size and return without losing its shape. It sleeps and sits temperature neutral and has good ventilation to inhibit moisture build-up.

 

Proprietary Machinery

 

Internally designed, developed and built, our Mattress Max™ machines are the only machines able to mold our Hyper-Elastic Polymer ® material into king-sized mattresses at scale and priced for mass adoption. We have modified our molding machines to manufacture other products containing Hyper-Elastic Polymer ® such as pillows and seat cushions. The process of molding our Hyper-Elastic Polymer ® material using our Mattress Max™ machinery is proprietary, patent-protected and complex, requiring specific knowledge and expertise to successfully execute manufacturing. We have a machine shop with mechanics and engineers at each of our factories to maintain these machines and our other equipment. Further, we have extensive fabrication capabilities, which enables us to design, manufacture, install and maintain new equipment as well as optimize the performance and efficiency of our machinery based on real-time insights gained from our vertically integrated operations.

 

Marketing

 

We have developed a brand that resonates with consumers. Our marketing efforts are focused on attracting, acquiring and retaining customers, primarily through digital campaigns and use online advertising as our main form of communication. Our campaigns are unique and memorable featuring product demonstrations unlike anything being done by our competition. As a result, we have created a brand with a loyal audience that frequently interacts with our content. This enables us to increase interaction with customers throughout replacement cycles as well as drive additional product sales across our portfolio of offerings. However, our marketing efficiency has been impacted by capacity constraints and the Ghost Bed litigation.

 

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Our digital marketing strategy has delivered high social media engagement. We have been able to harness the viral efficiencies associated with popular social media-based marketing campaigns. We have launched hundreds of different marketing campaigns, many of which have received hundreds of millions of social media views and billions of impressions. To date, our videos have been seen more than 1 billion times across Facebook and YouTube alone. We have over 600,000 fans and subscribers across our social media assets and have over 10,000 online five-star reviews. The success we have achieved through these social marketing campaigns has been key in our branding and awareness. Our digital marketing team has developed expertise across a broad range of marketing capabilities including audience segmentation, communication and targeting.

 

We actively pursue business relationships that extend our brand reach. For example, Purple recently was approached by Disney-Pixar to jointly work on co-branding opportunities. The first project was a marketing campaign associated with Disney’s animated feature Coco. We believe this type of opportunity along with a range of other potential relationships will further extend our brand reach.

 

Our Sales Channels

 

The majority of our sales have been through our DTC e-commerce platform. We also have relationships with a growing number of brick-and-mortar retailers. We are in the process expanding our relationships with brick-and-mortar retailers to sell our other products.

 

Direct-to-Consumer

 

E-commerce is our primary distribution channel. While we have benefitted from the rapid growth of the DTC channel, our growth has superseded the pace of the broader DTC market. We expect this market’s momentum to continue as consumer confidence in online shopping increases. We sell directly to consumers through our website, purple.com. We help customers easily engage in relevant content, research our solutions, transact online and find support. We believe our online experience expands our brand and connections with consumers, enabling deeper awareness, engagement and brand loyalty.

 

Retail Relationships

 

We entered into a Memorandum of Understanding with Mattress Firm on May 8, 2017, whereby we are conducting a test of our brand and products at 51 Mattress Firm stores in Washington, D.C., Sacramento, CA and Austin, TX. The initial results of the pilot test have exceeded our and, we believe, Mattress Firm’s expectations and Mattress Firm has requested additional roll-out of Purple products into additional markets. Sections of Mattress Firm’s stores will be dedicated to our products. A similar pilot test with a 1,000-store retailer will begin in February 2018, starting with nine retail locations.

 

We also have established relationships with multiple brick-and-mortar retailers to whom we sell non-mattress products. We plan to expand our retail presence in the future and believe that this will increase awareness and adoption of our brand.

 

Medical Industry Sales

 

We sell a line of seat cushions through a global network of medical device distributors. At this time, one of our cushion models is a registered medical device in the U.S. and the other models are sold as comfort cushions or for wound risk mitigation rather than as medical devices. We do not deal directly with insurance or Medicare and do not expect to in the future. While medical channels do not yet represent a significant percentage of our sales, we believe there is opportunity for growth.

 

Company-Owned Stores

 

We operate one store at our Alpine, Utah manufacturing facility where consumers can experience and purchase our products and expect this store to remain in operation for the foreseeable future.

 

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International

 

We believe there is a substantial opportunity for international expansion and have initial traction in Canada. We believe that our multi-channel distribution strategy, manufacturing capabilities, vertical integration and marketing expertise will enable us to efficiently enter new markets.

 

Operations

 

Factories, Supply Chain and Manufacturing

 

We operate factories in Alpine, Utah and Grantsville, Utah, which manufacture and distribute Purple ® products. These factories have a total of 646,000 square-feet (15 acres under roof), including approximately 574,000 square-feet at our Grantsville, Utah facility and approximately 72,000 square-feet at our Alpine, Utah facility. We believe that these facilities will provide ample room to accommodate our future growth and expansion plans. At these factories we manufacture our proprietary Hyper-Elastic Polymer ® material used in our mattress, pillow and seat cushion products. We assemble, package and ship these products from these facilities.

 

We outsource and resell other products, including mattress protectors, seat cushion covers, pillow covers, packaging and other ingredients and parts.

 

We have relationships with, or have identified, multiple suppliers for all of our outsourced products and components. These suppliers may be freely interchanged in order to maintain quality, cost and delivery expectations.

 

Employees

 

Our most valuable asset is our people and their learned institutional knowledge. As of December 31, 2017, we had approximately 631 employees engaged in manufacturing, innovations, product development, engineering, production, supply chain, business development, branding/marketing, category management, retail sales, international expansion, human resources, information technology, accounting, legal, communications and customer delight. Our current employee population works primarily within our two Utah facilities. We regularly engage labor contracting agencies and independent contractors to accelerate our progress and provide support across various functions within our organization. We have no collective bargaining agreements with our employees.

 

Environmental and Governmental Regulation

 

We are subject to numerous federal, state, local and foreign consumer protection and other laws regulating the bedding industry. These regulations vary among the states and countries in which we do and intend to do business. In the U.S., we are subject to regulations promulgated by the U.S. Environmental Protection Agency, the Occupational Safety and Health Administration and other federal agencies that have authority to regulate our operations. Included in these regulations are laws restricting the generation, emission, treatment, storage and disposal of materials, substances and waste. We are subject to the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive Environmental Response, Compensation and Liability Act. Our mattress products are also subject to fire-retardant standards developed by the State of California, U.S. Consumer Product Safety Commission and other jurisdictions where we sell these products.

 

As a retailer of bedding and cushioning products, we are also subject to laws and regulations applicable to retailers generally, including those regulations governing the marketing and sale of our products and the operation of our e-commerce activities. Many of these regulations are consumer-focused and pertain to safety, truth-in-advertising, promotional offers, privacy, “do not call/mail” requirements, warranty disclosure, delivery timing requirements and similar requirements.

 

It is our policy and practice to comply with all applicable U.S. and foreign laws. We have made and will continue to make capital and other expenditures necessary to comply with these laws. These expenditures have been immaterial to our financial results. We have not suffered a material adverse effect from non-compliance with federal, state, local or foreign legislation, but there can be no assurance that material costs or liabilities will not be incurred in connection with such legislation in the future.

 

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Customer Support

 

We have an in-house customer and sales support team focused on driving high customer and client satisfaction. We believe that our team contributes to positive word-of-mouth recommendations that organically strengthen our brand. Customer referrals and testimonials are a highly effective and efficient method of customer acquisition.

 

Research and Development

 

Our research and development team is focused on developing new comfort technologies, manufacturing machines and improving production processes, as well as developing products. We have an extensive history of innovation that is core to our culture and key to our continued success. Our innovations have culminated over years of persistent research and development. We intend to continue to develop and introduce new comfort technologies and products across sit, sleep and stand categories. Our vertical integration is a key differentiator that enhances the effectiveness of our research and development capabilities. By gaining real-time feedback, we are able to integrate these insights into our manufacturing process, products and equipment.

 

Intellectual Property

 

We rely on patent and trademark protection laws to protect our intellectual property and maintain our competitive position in the marketplace. We hold various U.S. and foreign patents, patent applications, trademarks and trademark applications regarding certain elements of the design, manufacturing and function of our products. We also maintain protections over proprietary trade secrets. Our intellectual property portfolio is integral to our continued success in this industry, in particular with respect to our Hyper-Elastic Polymer ® cushioning material and our Mattress Max™ machine.

 

We own or have the exclusive right to use 102 granted or pending U.S. and foreign patents on inventions and designs pertaining to our machines, processes, mattresses, pillows, seat cushions, packaging techniques and other related existing and future products. Our issued U.S. patents that are significant to our operations are expected to expire at various dates up to 2034.

 

We have a number of trademarks registered with the U.S. Patent and Trademark Office, including EquaPressure ® , WonderGel ® and EquaGel ® (for cushions), and Purple ® , No Pressure ® and Hyper-Elastic Polymer ® (for plasticized elastomeric gel and certain types of products). Applications are pending for registration of some of the trademarks for additional classes of goods. Our Purple, No Pressure and Hyper-Elastic Polymer trademarks are also registered and have applications pending for various classes of goods in numerous foreign jurisdictions, some of which include Canada, China, Europe, Japan and Korea. Certain trademarks reside with EdiZONE, LLC, which is an entity owned by our founders, and are licensed to Purple while the trademark registration applications remain pending. When registered, those trademarks will be assigned to us.

 

We also have a number of common law trademarks, including Mattress Max™, WonderGel Original™, WonderGel Extreme™, DoubleGel™, DoubleGel Plus™, DoubleGel Ultra™, Roll n’ Go™, Fold N’ Go™, Purple Bed™, Purple Top™, Purple Pillow™, Portable Purple™, Everywhere Purple™, Simply Purple™, Lite Purple™, Royal Purple™, Double Purple™, Deep Purple™, Ultimate Purple™, Purple Back™, EquaGel Straight Comfort™, EquaGel General™, EquaGel Protector™ and EquaGel Adjustable™.

 

In addition, we maintain copyrights to past and present versions of purple.com, onpurple.com , equapressure.com , wondergel.com , marketing content, blogs, logos, graphics, videos and other marketing and promotional materials promoting our products.

 

We protect and enforce our intellectual property rights, including through litigation as necessary.

 

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Competition

 

The global bedding industry is mature and highly competitive, consisting of a large number of manufacturers, distributors and retailers. There are a few traditional competitors with significant share of an otherwise fragmented market. However, a growing number of non-traditional competitors are gaining traction in the DTC channel. Products in this industry include mattresses, mattress foundations, pillows, mattress protectors, sheets and other bedding accessories. Mattresses from our competitors are typically manufactured using one or more layers of springs, standard polyurethane foam, memory foam, air chambers or latex foam. Pillows are typically manufactured using polyurethane foam, memory foam, feathers, buckwheat, latex or polyester fiber.

 

The DTC market is highly fragmented, highly competitive and rapidly evolving. DTC competitors include, but are not limited to Casper, Leesa, Tuft & Needle, Saatva and Helix. Some key factors that impact competition in our industry include product features, effectiveness and reliability, marketing efficiency, brand recognition and reputation, expertise of sales and after-market support, pace of innovation and product roadmap, price of products and services, scale, and financial stability and ability to invest in innovation.

 

Seasonality and Cyclicality

 

Sales of our products fluctuate with periods of greater demand corresponding to different periods of the consumer spending cycle, holidays and seasonality. Our sales may also vary with the performance of the broader economy consistent with the market.

 

Our History

 

Tony and Terry Pearce and the founding team members have a twenty-four year history of developing innovative comfort technologies, machines and products. In 1989, the Pearce brothers created a partnership to develop high-tech carbon fiber sporting goods and wheelchairs. In the course of developing and testing wheelchair products, it was clear to the founding team that the core issue of wheelchair comfort could only be solved if the extreme case of compression sores was solved. This led them on a scientific journey to discover the root causes of pressure sores and how to mitigate this condition.

 

In 2010, our founding team launched what has become our current vertically integrated company. The first products sold were seat cushions. In 2013 we attempted to develop a king-size mattress using our improved Hyper-Elastic Polymer ® material. The principal setback in developing king-size mattresses was that the entire surface of the mattress could not be covered using a single piece of Hyper-Elastic Polymer ® material. Over the years and with substantial investment the team overcame this obstacle by creating the proprietary Mattress Max™ machine. We began selling our Purple brand of mattresses with a small test in late 2015 and at scale beginning in January 2016. Purple Innovation, LLC, based in Alpine, Utah, was organized as a Delaware limited liability company on May 26, 2010 under the name WonderGel, LLC. We changed our name to Purple Innovation, LLC on January 27, 2017.

 

Properties

 

We lease two manufacturing facilities in Alpine, Utah and Grantsville, Utah, which manufacture and distribute Purple ® products. These factories have a total of 646,000 square-feet (15 acres under roof), including approximately 574,000 square-feet at our Grantsville, Utah facility and approximately 72,000 square-feet at our Alpine, Utah facility. We believe that these facilities will provide ample room to accommodate our future growth and expansion plans.

 

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Risk Factors

 

The risk factors related to our business and operations are described in the Proxy Statement in the section entitled “Risk Factors” beginning on page 41 of the Proxy Statement, which is incorporated herein by reference. In addition, the following risk factors have been updated since the filing of the Proxy Statement.

 

Purple’s level of indebtedness could adversely affect Purple’s and the Company’s ability to meet its obligations under its indebtedness, react to changes in the economy or its industry and to raise additional capital to fund operations.

 

As of September 30, 2017, Purple had total debt of $37,165 outstanding. On October 9, 2017, Purple entered into a credit agreement with Wells Fargo Bank, National Association, for a $10 million secured revolving loan facility. In connection with the Closing, the Wells Fargo facility was repaid in full and Purple entered into the $25.0 million Credit Agreement with the Lenders. As of February 5, 2018, approximately $25 million is outstanding under the Credit Agreement. Purple’s and the Company’s level of indebtedness could have important consequences to stockholders. For example, it could:

 

  make it more difficult to satisfy our obligations with respect to our indebtedness, resulting in possible defaults on, and acceleration of, such indebtedness;

 

  increase our vulnerability to general adverse economic and industry conditions;

 

  require us to dedicate a substantial portion of our cash flows from operations to payments on indebtedness, thereby reducing the availability of such cash flows to fund working capital, capital expenditures and other general corporate requirements or to carry out other aspects of its business;

 

  limit our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements or to carry out other aspects of its business;

 

  limit our ability to make material acquisitions or take advantage of business opportunities that may arise; and

 

  place us at a potential competitive disadvantage compared to its competitors that have less debt.

 

We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.

 

Future operating flexibility is limited in significant respects by the restrictive covenants in the Credit Agreement, and we may be unable to comply with all covenants in the future.

 

The Credit Agreement imposes restrictions that could impede Purple’s and the Company’s ability to enter into certain corporate transactions, as well as increases our vulnerability to adverse economic and industry conditions, by limiting our flexibility in planning for, and reacting to, changes in our business and industry. These restrictions will limit our ability to, among other things:

 

  make capital expenditures in excess of $20 million;

 

  incur capital lease obligations in excess of $10 million;

 

  enter into future asset-based loans in excess of $20 million;

 

  guarantee additional debt;

 

  pay dividends on capital stock or redeem, repurchase, retire or otherwise acquire any capital stock;

 

  make certain payments, dividends, distributions or investments; and

 

  merge or consolidate with other companies or transfer all or substantially all of Purple’s assets, other than with respect to the Business Combination.

 

In addition, the Credit Agreement contains certain negative covenants that restrict the incurrence of indebtedness unless certain incurrence-based financial covenant requirements are met. The restrictions may prevent Purple and the Company from taking actions that we believe would be in the best interests of the business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. Purple’s ability to comply with these restrictive covenants in future periods will largely depend on its ability to successfully implement its overall business strategy. The breach of any of these covenants or restrictions could result in a default, which could result in the acceleration of Purple’s debt. In the event of an acceleration of Purple’s debt, Purple could be forced to apply all available cash flows to repay such debt, which would reduce or eliminate distributions to us, which could also force us into bankruptcy or liquidation.

 

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Selected Financial Data

 

The following table contains summary historical financial and other data for Purple as of and for the years ended December 31, 2015 and 2016 derived from Purple’s audited financial statements for the years ended December 31, 2015 and 2016. The historical financial and other data as of and for the year ended December 31, 2014 are unaudited. The summary statements of operations for the nine months ended September 30, 2017 and 2016 and the balance sheet data as of September 30, 2017 have been derived from Purple’s unaudited interim condensed financial statements included elsewhere in this Current Report on Form 8-K. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the information contained under the headings “Purple Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About Purple” and in Purple’s audited financial statements and unaudited interim condensed financial statements and the related notes included elsewhere in this Current Report on Form 8-K.

 

$ in thousands   Nine Months Ended
September 30,
    Year Ended
December 31,
 
    2017     2016     2016     2015     2014  
    Unaudited     Unaudited                 Unaudited  
Income Statement Data:                              
Revenues, net   $ 133,820     $ 40,882     $ 65,473     $ 5,838     $ 4,305  
Cost of revenues:                                        
Cost of revenues     73,904       25,573       39,857       3,934       2,297  
Related party royalty fees           3,611       4,139       520       391  
Total cost of revenues     73,904       29,184       43,996       4,454       2,688  
Gross profit     59,916       11,698       21,477       1,384       1,617  
Operating expenses:                                        
Marketing and sales     53,970       9,978       17,901       469       93  
General and administrative     8,463       2,844       4,643       1,193       752  
Research and development     904       522       792       62       3  
Loss on disposal of property and equipment     10             23                
Total operating expenses     63,347       13,344       23,359       1,724       848  
Operating income (loss)     (3,431 )     (1,646 )     (1,882 )     (340 )     769  
Other expense, net     (2 )     (19 )     (19 )     (67 )     (104 )
Net income (loss)   $ (3,433 )   $ (1,665 )   $ (1,901 )   $ (407 )   $ 665  
                                         
Balance Sheet Data (at end of period):                                        
Cash and cash equivalents   $ 3,155             $ 4,013     $ 71     $ 256  
Working capital   $ (18,285 )           $ (6,119 )   $ (1,038 )   $ (522 )
Total assets   $ 30,323             $ 18,842     $ 1,086     $ 1,348  
Current liabilities   $ 36,846             $ 18,717     $ 2,117     $ 1,827  
Long-term obligations   $ 37             $ 24     $     $  
Member’s deficit   $ (8,036 )           $ (813 )   $ (1,031 )   $ (478 )

 

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Management’s discussion and analysis of our financial condition and results of operations is provided in the Proxy Statement in the section entitled “Purple Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 186 of the Proxy Statement, which is incorporated herein by reference. In addition, the disclosure provided in the Proxy Statement has been updated below as of the Closing.

 

Liquidity and Capital Resources

 

Historically, we have financed our operations from cash flows from operations and borrowing availability under related-party notes. We have grown rapidly in 2016 and 2017 and such rapid growth has required additional capital resources to fund operations. Our primary cash needs consist of working capital, capital expenditures, member distributions and debt service. Our working capital needs depend upon the timing of our receipts from sales and payments to others as well as our capital and operating lease payment obligations. We had negative working capital of $(18.3) million and $(6.1) million for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. Our capital expenditures primarily relate to acquiring manufacturing equipment and maintaining it. Our capital expenditures were $5.7 million and $5.5 million for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. We financed these capital expenditures through cash provided by operating activities. We currently expect our capital expenditures for our facilities and equipment to be approximately $7.0 million for fiscal year 2017. We currently expect our capital expenditures for our facilities and equipment to be between $15.0 million and $20.0 million in 2018.  We also expect to spend an additional $10.0 million to $15.0 million in the first quarter of 2018 in order to fund working capital requirements. Actual amounts for capital expenditures or capital needed to fund operations could differ significantly from current expectations because of operating needs, growth needs, regulatory changes, other expenses, or other factors.

 

During 2014, the Company received funds pursuant to related-party notes from InnoHold in the amount of $0.8 million. During the same period the Company was able to make payments on the related-party notes from InnoHold in the amount of $1.4 million.

 

During 2015, the Company received funds pursuant to related-party notes from InnoHold in the amount of $0.9 million with payments made on the related party notes in the amount of $0.8 million.

 

During 2016 in conjunction with the business combination of EquaPressure, all but $0.3 million of the related-party notes and accrued interest were forgiven and recorded as a member contribution.

 

During the nine months ended September 30, 2017, the $0.3 million principal plus accrued interest of the related-party notes payable to InnoHold was paid and the note extinguished.

 

Debt service consists of principal and interest payments on the outstanding balance of certain equipment loans and capital leases totaling $37,165 as of September 30, 2017. Subsequent to September 30, 2017, the Company entered into a $10 million debt facility with Wells Fargo Bank. The Company drew approximately $8.0 million under this facility and ultimately repaid the facility in connection with the Closing of the Business Combination. On February 2, 2018, we entered into the Credit Agreement and received approximately $24.0 million in proceeds after fees and original issue discounts.

 

On a net basis, we also added approximately $26 million in cash through the sale of equity as part of the closing of the Business Combination to our balance sheet to support future growth and operations. The equity sale transactions included as part of the closing of the Business Combination, as previously defined, include a net portion of the Coliseum Private Placement and Baleen Investment, as previously defined, as well as the net portion of the remaining 2015 IPO funds included in trust as of the Closing. Of the total of these funds, a portion was allocated to fees and InnoHold resulting in the approximate $26 million in net cash being added to our balance sheet via the closing of the Business Combination.

 

We believe that our cash flow from operations, together with other available sources of liquidity, will be sufficient to fund anticipated operating expenses and our other anticipated liquidity needs for the next twelve months, based on our current operating conditions. If we are unable to satisfy our liquidity and capital resource requirements, we may have to scale back, postpone or discontinue our growth strategies, which could result in slower growth or no growth, and we may run the risk of losing key suppliers, we may not be able to timely satisfy customer orders, and we may not be able to retain all of our employees. In addition, we may be forced to restructure our obligations to creditors or pursue work-out options.

 

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Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties. Adequate financing may not be available or, if available, may only be available on unfavorable terms. There is no assurance we will obtain the capital we require. As a result, there can be no assurance that we will be able to fund our current operations or growth strategies. In addition, future financings through equity investments are likely to be dilutive to our existing shareholders. Newly issued securities may include preferences or superior voting rights or be combined with the issuance of warrants or other derivative securities, which each may have additional dilutive effects. Furthermore, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. If we cannot raise additional funds on favorable terms or at all, we may not be able to carry out all or parts of our growth strategy, maintain our growth and competitiveness or continue in business.

 

Following the closing of the Business Combination, we will be required to make certain payments to InnoHold under the Tax Receivable Agreement, which payments may have a material adverse effect on our liquidity and capital resources. We are currently unable to anticipate the amount of these payments due to the unpredictable nature of several factors, including the timing of exchanges, the market price of shares of our Class A Stock at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of income.

 

Credit Agreement with Coliseum

 

On February 2, 2018, Purple LLC entered into a Credit Agreement (the “ Credit Agreement ”) with Coliseum Capital Partners, L.P. (“ CCP ”), Blackwell Partners LLC – Series A (“Blackwell”) and Coliseum Debt Fund, L.P. (together with CCP and Blackwell, the “ Lenders ”), pursuant to which the Lenders agreed to make a loan to Purple LLC in an aggregate principal amount of $25 million (the “ Loan ”). The Loan was closed and funded in connection with the Closing of the Business Combination on February 2, 2018. As part of the Credit Agreement, the Sponsor agreed to assign to the Lenders an aggregate of 2,500,000 Sponsor Warrants to purchase 1,250,000 shares of Class A Stock.

 

The Loan bears interest at 12.0% per annum and matures on February 2, 2023. Any pre-payments in the first year are subject to a make-whole payment, while pre-payments in years two through four are subject to certain pre-payment penalties. In addition, Purple LLC may elect for interest in excess of 5.0% per annum to be capitalized and added to the principal amounts of the Loan. The Credit Agreement provides for certain remedies to the Lenders in the event of customary events of default.

 

The Credit Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants of Purple LLC. While any amounts are outstanding under the Credit Agreement, Purple LLC is subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, investments, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. In particular, Purple LLC is restricted from (i) making capital expenditures in excess of $20 million, (ii) incurring capital lease obligations in excess of $10 million and (iii) incurring asset-based loans in excess of $20 million, subject to limited exceptions. Purple LLC is also restricted from paying dividends or making other distributions or payments on its capital stock, subject to limited exceptions.

 

The foregoing summary of the Credit Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Credit Agreement, a copy of which is attached as Exhibit 10.10 to this report and is incorporated by reference herein.

 

Off-Balance Sheet Arrangements

 

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements.

 

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We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

 

Contractual Obligations

 

The following table sets forth our significant contractual obligations as of December 31, 2016:

 

    Total     2017     2018 - 2019     2020 - 2021     Thereafter  
                               
Note payable 1     46,594       46,594       -       -       -  
Capital Lease Obligations 2     36,466       7,638       15,276       13,552       -  
Operating Lease Obligations 3     12,587,345       2,245,594       5,729,164       4,434,614       177,973  
Related party notes payable 4     300,000       300,000       -       -       -  
Total     12,970,405       2,599,826       5,744,440       4,448,166       177,973  

 

(1) Amounts presented relate to a note payable to an unrelated entity that encumbered equipment assumed by the Company from InnoHold in December 2016. These amounts do not include debt drawn, or related interest, under a line of credit with Wells Fargo entered into in October 2017. Prior to the Business Combination, the outstanding principal balance under the line of credit was approximately $8 million, which amount was paid in full at Closing from proceeds retained at Purple LLC for working capital purposes. Further, these amounts do not include net loan proceeds received under the Coliseum Credit Agreement entered into on February 2, 2018. As of February 5, 2018, the outstanding principal balance under the Coliseum Credit Agreement was approximately $24.0 million, which amount is due and payable on February 2, 2023; interest payments related to this debt are expected to be approximately $3 million annually.

 

(2) Capital lease obligations relate primarily to warehouse and office equipment.

 

(3) Represents future monthly rental payment obligations under operating leases for corporate and warehouse facilities in Alpine, Utah and Grantsville, Utah. The Company's headquarters facility in Alpine, Utah is leased from TNT, an entity under common control with the Company. The lease was amended and restated in October 2017 and has an initial lease term of 10 years with the option for a 5 year extension period. The Company also leases a facility located in Grantsville, Utah for use primarily as manufacturing and warehouse space. The lease was entered into in August 2016 with a lease term of 66 months and expires in January 2022.

 

(4) Prior to 2014, the Company entered into various revolving credit demand note payable agreements (“Demand Notes”) with InnoHold. These Demand Notes provided funds to the Company for general working capital needs. The Demand Notes allowed for additional proceeds to be provided to the Company as funds were needed and partial or full repayments by the Company if, and when, funds were available. The Demand Notes accrued interest at a rate of 7 percent per annum. In December 2016, the remaining $300,000 of Demand Notes were amended to be due on April 22, 2017 with interest accruing at 7 percent. The Demand Notes were paid in full in 2017.

 

Quantitative and Qualitative Disclosures about Market Risk

 

We are exposed to various market risks, which include potential losses arising from adverse changes in market rates and prices, such as interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

 

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Directors and Executive Officers

 

Biographical Information

 

As of the date hereof, Purple’s officers and directors are as follows:

 

Name

 

Age

 

Title

Terry V. Pearce   68   Director
Tony M. Pearce   61   Director
Samuel D. Bernards   41   Director and Chief Executive Officer
Jodi Deputy   44   Head of Purple People
Mitchell L. Edwards   59   Chief Business Development Officer
Daniel G. Hill   38   Chief Retail Officer
W. Alexander McArthur   40   Chief Marketing Officer
Casey K. McGarvey   58   Chief Legal Officer and Secretary
Wayne Moorehead   43   Chief Brand Officer
Charles A. Smith   49   Chief Operating Officer
Russ Whatcott   40   Director of Innovation
Mark Watkins   42   Chief Financial Officer and Treasurer
Gary DiCamillo   67   Director
Pano Anthos   59   Director
Claudia Hollingsworth   57   Director
Gary Kiedaisch   71   Director
Adam Gray   52   Director

 

Executive Officers

 

Terry V. Pearce is a co-founder of Purple and has served as a Manager of Purple since its inception in 2010 as WonderGel, LLC. Prior to founding Purple, Mr. Pearce was a manager of various technology companies owned by Mr. Pearce and his brother Tony Pearce, including EdiZONE, LLC, focused on developing advanced cushioning technology. Mr. Pearce holds a Bachelor’s of Science degree in Civil Engineering from the University of Utah. As a co-founder of Purple, Mr. Pearce brings to the Board his extensive knowledge of Purple and its products.

 

Tony M. Pearce is a co-founder of Purple and has served as a Manager of Purple since its inception in 2010 as WonderGel, LLC. Prior to founding Purple, Mr. Pearce was a manager of various technology companies owned by Mr. Pearce and his brother Terry Pearce, including EdiZONE, LLC, focused on developing advanced cushioning technology. Mr. Pearce holds a Bachelor’s of Science degree in Civil Engineering from Brigham Young University and a Master’s of Business Administration from the University of Phoenix. As a co-founder of Purple, Mr. Pearce brings to the Board his extensive knowledge of Purple and its products.

 

Samuel D. Bernards has served as the Chief Executive Officer of Purple since 2016. Prior to joining Purple, Mr. Bernards was a founding member of the venture capital firm Peak Ventures, where he worked as a principal from 2014 to 2016. From 2012 to 2014 he served as the Chief Innovation Officer of mycore, LLC, where he worked on developing core products and initial revenue streams. From 2006 to 2012 Mr. Bernards was employed in various positions with Wal-Mart Stores, Inc. related to supply chain management innovation and retail development, including as Senior Director of Innovation & Development from 2011 to 2012, during which time he led the development and launch of Walmart Express stores. Mr. Bernards holds a Bachelor’s of Science degree in Physics and a Master’s of Business Administration from Brigham Young University. Mr. Bernards brings experience to the Board from his role as Chief Executive Officer of Purple, as well as his experience helping numerous growth companies as a principal of Peak Ventures. Mr. Bernards is a nephew of Tony Pearce.

 

Jodi Deputy has served as Head of Purple People since 2016. Ms. Deputy has over 15 years of experience in human resource and organizational leadership, including as Vice President of Field Services for Jamberry from 2014-2015, Senior Director of Human Resources for inContact, Inc. from 2012 to 2014, and a variety of human resource management positions for GE Healthcare from 2002 to 2012, including serving as Human Resources Manager for GE Healthcare’s Healthcare Information Technologies division from 2009 to 2012. Ms. Deputy obtained a Bachelor’s of Science degree in Public Health from Utah State University and holds a Master’s of Business Administration from Brigham Young University.

 

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Mitchell L. Edwards has served as the Chief Business Development Officer for Purple since July 2017. Mr. Edwards has over 20 years of experience as an executive of hi-tech, internet and consumer electronics companies. Prior to joining Purple, Mr. Edwards served as Senior Vice President and General Counsel of Overstock.com from July 2015 to April 2016 and as Acting Chief Executive Officer for Overstock.com from April 2016 to July 2016; a consultant for Tofana Partners from 2013 to 2015; Chief Financial Officer and General Counsel for Razer, Inc. from 2012 to 2013; Chief Financial Officer and General Counsel for Skullcandy, Inc. from 2010 to 2012; and several other tech and e-commerce companies. Mr. Edwards was also previously a partner at Brobeck, Phleger & Harrison in Los Angeles and San Francisco. Mr. Edwards holds a J.D. from Stanford Law School and received a B.A./M.A. in Jurisprudence and International Business Law from Oxford University, where he was a Marshall Scholar. Mr. Edwards also holds a B.A. in economics from Brigham Young University.

 

Daniel G. Hill has served as Purple’s Chief Retail Officer since 2015. Prior to serving as the Chief Retail Officer, he was the President of Purple from its inception in 2010 as WonderGel, LLC to 2015. He also served as the President of one of the various technology companies owned by Terry and Tony Pearce known as EquaPressure, LLC, until it was combined into Purple. From 2004 to 2015, Mr. Hill worked for various technology companies also owned by Terry and Tony Pearce, including EdiZONE, LLC, focused on developing advanced cushioning technology. Mr. Hill attended Brigham Young University, where he obtained a Bachelor’s of Science degree in Psychology. Mr. Hill is the son-in-law of Tony Pearce.

 

W. Alexander McArthur has served as the Chief Marketing Officer of Purple since 2016 . He has over 10 years of experience in managing internet and traditional marketing. Prior to joining Purple, Mr. McArthur served in marketing management positions for several startups in the e-commerce industry, including as Vice President of Digital Marketing at Modere from 2014 to 2016, an independent marketing consultant from 2012 to 2014, Vice President of Digital Marketing at Purch from 2011 to 2012, Vice President at SEO.com from 2009 to 2010 and Vice President of Internet Marketing at OrangeSoda from 2006 to 2009. Mr. McArthur studied Communications at Brigham Young University.

 

Casey K. McGarvey has served as the Chief Legal Officer and General Counsel of Purple since its inception in 2010 as WonderGel, LLC. He also has served as General Counsel of various technology companies owned by Terry and Tony Pearce, including EdiZONE, LLC, focused on developing advanced cushioning technology. Prior to joining Purple and EdiZONE, Mr. McGarvey was a shareholder, partner or of counsel at several law firms. Mr. McGarvey has a Bachelor’s of Arts in political science, a Juris Doctor and an Executive Master’s of Business Administration, each from the University of Utah.

 

Wayne Moorehead has served as the Chief Brand Officer of Purple since February 2017. Mr. Moorehead has over 15 years of experience in marketing and brand development. Prior to joining Purple, Mr. Moorehead served as a strategic advisor at SUCCESS Magazine from 2015 to 2017, as Chief Strategist at Hint Creative from 2013 to 2017, as Chief Marketing Officer at Nature’s Sunshine Products from 2012-2013, as a brand strategist at Case Agency from 2010 to 2012, and as Chief Marketing Officer at MonaVie from 2005 to 2010, and in other marketing roles at other companies from 2000 to 2005. Mr. Moorehead holds a Bachelor’s of Science degree in Marketing Communications and Advertising and a Master’s of Business Administration, with an emphasis in marketing, both from Brigham Young University.

 

Charles A. Smith has served as the Chief Operating Officer of Purple since July 2017. Mr. Smith has over 25 years of experience in operations and engineering. Prior to joining Purple, Mr. Smith served as the Managing Partner of Milestone Management Partners from 2015 to 2017 and as Vice President of Global Operations at Morinda from 2009 to 2015. Mr. Smith holds a Bachelor of Science degree in Technology Management from Utah Valley University, a Master’s of Business Administration from Brigham Young University, and a Master’s of Business Operational Excellence from The Ohio State University.

 

Russ Whatcott has served as the Director of Innovation for Purple since 2017. Prior to joining Purple, Mr. Whatcott served as the Chief Engineer for EdiZONE, LLC, which is an affiliate of Purple, from 2005. Mr. Whatcott obtained a Bachelor’s of Science degree in Manufacturing Engineering Technology and a Master’s degree in Manufacturing Systems, both from Brigham Young University.

 

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Mark Watkins has served as Chief Financial Officer since November 2017. Prior to joining Purple, Mr. Watkins served as the Chief Financial Officer at Traeger Grills, a post he held from March 2015 through October 2017. From 2002 through March 2015, he held various positions at Nu Skin Enterprises, Inc. (NYSE: NUS), including Vice President of Sales Operations and Vice President of Finance. Prior to joining Nu Skin, Mr. Watkins worked at the accounting firm of PricewaterhouseCoopers LLP, where he performed financial statement audits. Mr. Watkins holds a Master’s and a Bachelor’s in Accounting from Brigham Young University.

 

Non-Executive Directors

 

Gary T. DiCamillo served as one of GPAC’s directors since GPAC’s initial public offering. Since June 2017, he has served as President and Chief Executive Officer of Universal Trailer Corporation, a manufacturer of leading lifestyle and utility trailer brands. Since January 2010, Mr. DiCamillo has been the managing partner of Eaglepoint Advisors, LLC, a privately held advisor to boards and chief executive officers in matters of strategy, organization and the management of business transition issues. Prior to that he was the former president and chief executive officer of Advantage Resourcing (formerly known as RADIA International), a group of privately held technical, professional and commercial staffing companies based in Dedham, Massachusetts, from 2002 until August 2009. Previously, he was chairman and chief executive officer at the Polaroid Corporation from 1996 to 2002. He also has served as president of Worldwide Power Tools and Accessories at Black & Decker Corporation from 1986 to 1996 and before that as vice president/general manager for Culligan U.S.A., a division of Beatrice Corporation. He began his career in brand management at Procter & Gamble Co., followed by several years as a manager at McKinsey & Company. Mr. DiCamillo was elected as a director of Whirlpool Corporation (NYSE:WHR) in 1997 and served as chairman of its audit committee from April 2013 to April 2017. He continues to serve as a director of Whirlpool Corporation. He also served as a board member of The Sheridan Group, Inc., a digital and analog printing company, from May 1989 until February 2017; a board member of Pella Corp., a window and door manufacturer, from 1993 until 2007, then again from May 2010 until the present, where he has chaired the compensation committee since May 2015; a board member of Berkshire Manufactured Products Corp., a manufacturer of aircraft engine parts, from February 2011 to September 2015, where he chaired the audit committee from May 2012 to September 2015; a board member of Universal Trailer Corp., a manufacturer of horse, livestock and cargo trailers for farm, recreational, and commercial markets, since March 2011 and a board member of Select Staffing Corp., a commercial and specialty contract staffing company, from May 2014 to August 2016, where he has chaired the compensation committee. He serves on the boards of trustees at Rensselaer Polytechnic Institute, the Museum of Science in Boston, Spoleto Festival USA and Spoleto Festival, USA and previously served as a board member of the Massachusetts Business Roundtable. Mr. DiCamillo is a graduate of Harvard Business School where he earned an MBA. He also holds a Bachelor of Science degree in Chemical Engineering from Rensselaer Polytechnic Institute. Mr. DiCamillo is a member of GPAC’s Sponsor. He is well-qualified to serve on our board of directors due to his extensive operational, financial and management background.

 

Pano Anthos served as one of GPAC’s directors since GPAC’s initial public offering. Since August 2015, Mr. Anthos has been the Managing Director of XRC Labs and XRC Fund, a retail and consumer goods technology accelerator based in New York City and co-sponsored by Parsons School of Design and Kurt Salmon. Since October 2011, Mr. Anthos has been a partner of Eaglepoint, running their digital transformation practice. He has over 25 years of technology Chief Executive Officer and founder experience, having built new businesses in B2B and B2C markets across Web, social, mobile and gaming platforms. Since November 2012, Mr. Anthos has also been a co-founder of GatherEducation, a virtual reality classroom platform that recreates the physical classroom online to enable great teachers to teach students on low bandwidth, 3G networks. From September 2010 to October 2011, Mr. Anthos founded and ran Guided Launch, an advisory firm that incubated startups in the media and advertising spaces. From 2007 to August 2010, Mr. Anthos founded Hangout Industries, the first virtual reality gaming platform on Facebook, leveraging real world fashion brands and partners such as Conde Nast, Steve Madden and Paige Denim to generate brand experiences for over its players. From 2003 to 2006, Mr. Anthos founded Pantero, a semantic web integration platform that major telecom and insurance companies use to integrate multiple disparate systems. From 1984 to 2001, Mr. Anthos co-founded and built Clearcross, a global logistics platform to manage cross border shipments for global manufacturers and e-commerce companies in over 20 countries. Mr. Anthos also served on the board of directors of FCA International. Mr. Anthos holds an MIA from Columbia University, was an International Fellow and holds a BA from the University of Delaware. Mr. Anthos is a member of the Sponsor. He is well-qualified to serve on our board of directors due to his extensive operational and management background.

 

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Gary A. Kiedaisch was appointed to our board of directors immediately following the closing of the Business Combination. Mr. Kiedaisch has over thirty years of experience in managing international consumer products companies specializing in sports and outdoor recreation. He has served as the Executive Chairman of BigMouth Inc. since 2016. Through 2015 and 2016, Mr. Kiedaisch partnered with CID Capital Partners to identify BigMouth, Inc. as an acquisition target and negotiate the transaction. Upon the closing of CID Capital Partners’ acquisition of BigMouth, Inc., Mr. Kiedaisch assumed the role of Executive Chairman. From 2008 to 2014, Mr. Kiedaisch was the Chairman and CEO of Igloo Products Corporation. From 2004 to 2007, Mr. Kiedaisch served as the President and CEO of The Coleman Company, Inc. Earlier in his career, Mr. Kiedaisch also served as the CEO for multiple other consumer products and outdoor recreation companies, including Nike Bauer Hockey, Bolle Eyewear and Stowe Mountain Resort. We believe that Mr. Kiedaisch is well-qualified to serve on our board of directors due to his extensive operational and management background with consumer product companies, as well as his prior experience serving as a director for other consumer products companies.

 

Claudia Hollingsworth was appointed to our board of directors immediately following the closing of the Business Combination. Ms. Hollingsworth has thirty years of experience in managing manufacturers, wholesalers and retailers of consumer products. Since November 2016, she has served as Chief Executive Officer of i2CEO, a c-level consulting company. From July 2012 to October 2016 she served as Chief Executive Officer of Gump’s San Francisco, a luxury home furnishing apparel and jewelry multi-channel retailer. From May 2011 to June 2012, Ms. Hollingsworth served as Chief Executive Officer of i2CEO. Prior to that, she served as of president of H.D. Buttercup from July 2007 to May 2011 and CEO and president of GBH, Inc. from March 2004 to July 2007. Earlier in her career she held various executive management positions with Michael Anthony Jewelers, M.Z. Berger and OroAmerica.

 

Adam Gray was appointed to our board of directors following the closing of the Business Combination. Mr. Gray is a co-founder of Coliseum Capital Management, LLC, a private firm that makes long-term investments in both public and private companies, and has been a managing partner of the firm since December 2005. Coliseum Capital Management, LLC, is the investment manager of the Coliseum Investors and Coliseum Co-Invest Debt Fund, L.P. Mr. Gray has served as non-executive Chairman of Redflex Holdings Limited since February 2014 and a director since December 2013; has been non-executive Chairman of the Pas Group Limited since August 2017 and a director since February 2016; and on the board of directors of New Flyer Industries, Inc. since March 2012. Mr. Gray served on the board of directors of Blue Bird Corporation from February 2015 until September 2017, DEI Holdings, Inc. from February 2009 until its sale in June 2011, and Benihana Inc. from September 2010 until its sale in August 2012. From January 2005 until November 2005, Mr. Gray was a consultant for a private investment firm. From 2003 to 2004, Mr. Gray served as Executive Vice President, Strategic Projects and Capital Management at Burger King Corp, and from 1993 to 2003, held several executive positions with the Metromedia Restaurant Group, comprised of S&A Restaurant Corp. and Metromedia Steakhouses Company, LP, which included the Bennigan’s, Steak & Ale, Ponderosa and Bonanza restaurant concepts. Prior to that time, Mr. Gray served as an Associate at Kluge & Co. and an analyst in Morgan Stanley’s Merchant Banking Group. Mr. Gray holds both a BSE in Finance from the Wharton School of Business and a BS in Mechanical Engineering from the School of Engineering & Applied Science at the University of Pennsylvania.

 

Board of Directors

 

Our board of directors consists of eight directors who have been elected or appointed to serve until the next annual meeting of stockholders and until their respective successors are duly elected and qualified. At each annual meeting of stockholders, directors will be elected to serve from the time of election and qualification until the next annual meeting following election. Except as otherwise provided by law and subject to the rights of any class or series of preferred stock, vacancies on our board of directors (including a vacancy created by an increase in the size of the board of directors) may be filled only by the affirmative vote of a majority of the remaining directors. A director elected by the board of directors to fill a vacancy serves until the next annual meeting of stockholders and until such director’s successor is elected and qualified.

 

We are a “controlled company” under the rules of the NASDAQ because more than 50% of our outstanding voting power is held by InnoHold. The rules of NASDAQ exempt a “controlled company” from certain corporate governance rules relating to director independence and committees and we intend to rely on certain of these exemptions. While a controlled company is not required to have a majority of independent directors on its board of directors, our bylaws provide that our board of directors shall consist of a majority of independent directors unless otherwise determined by a unanimous vote of our board of directors or unless our bylaws are amended by our stockholders. Our board of directors has determined that Messrs. Anthos, DiCamillo, Gray and Kiedaisch and Ms. Hollingsworth are “independent directors” as defined in the NASDAQ listing standards and applicable SEC rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

 

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Committees of the Board of Directors

 

The standing committees of our board of directors will consist of an Audit Committee. The Audit Committee will report to the board of directors as it deems appropriate and as the board may request. The composition, duties and responsibilities of this committee is expected to be as set forth below. We intend to make a copy of the committee charter available on our website at http://www.purple.com. The information on this website is not part of this Current Report on Form 8-K.

 

Audit Committee

 

Our Audit Committee consists of Mr. DiCamillo, Mr. Kiedaisch and Ms. Hollingsworth. Our board of directors has determined that each of these directors qualifies as an independent director according to the rules and regulations of the SEC and NASDAQ listing requirements with respect to audit committee membership. Our board of directors has also determined that Mr. DiCamillo qualifies as an “audit committee financial expert,” as such term is defined in Item 401(h) of Regulation S-K. In connection with the consummation of the Business Combination, we have amended the charter of our Audit Committee detailing the principal function of the Audit Committee to be as follows:

 

  the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

 

  pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

 

  reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;

 

  setting clear hiring policies for employees or former employees of the independent auditors;

 

  setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

 

  obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

 

  reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

 

  reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

 

The charter will also provide that the Audit Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Audit Committee will consider the independence of each such adviser, including the factors required by NASDAQ and the SEC.

 

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Compensation Committee

 

We intend to rely upon the “controlled company” exception relating to the Compensation Committee requirements under the rules of the NASDAQ. Pursuant to this exception, we will be exempt from the rules that would otherwise require that we have a Compensation Committee.

 

Nominating and Corporate Governance Committee

 

We intend to rely upon the “controlled company” exception relating to the Nominating and Corporate Governance Committee requirements under the rules of the NASDAQ. Pursuant to this exception, we will be exempt from the rules that would otherwise require that we have a Nominating and Corporate Governance Committee.

 

Code of Ethics

 

We have adopted a Code of Ethics that applies to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics is available on our website http://www.purple.com upon the completion of the Business Combination. If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer by posting the required information on our website at the above address. This website and the information on this website are not part of this Current Report on Form 8-K.

 

Risk Oversight

 

Our board of directors will oversee the Company’s business post-Business Combination and consider the risks associated with business strategy and decisions. Our Audit Committee will also provide risk oversight and report any material risks to our board of directors.

 

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Security Ownership of Certain Beneficial Owners and Management

 

The following table sets forth information known to us regarding the beneficial ownership of shares of common stock of the Company as of the Closing Date by:

 

  each person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our Class A Stock or Class B Stock;

  

  each of our current executive officers and directors; and

 

  all executive officers and directors of the Company as a group.

 

Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within sixty days. Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them.

 

    Class A Stock     Class B Stock  
Name and Address of Beneficial Owner (1)   Shares Beneficially Owned     Percentage of Outstanding Class A Stock Beneficially Owned     Shares Beneficially Owned     Percentage of Outstanding Class B Stock Beneficially  Owned  
Global Partner Sponsor I LLC (Sponsor)(2)     2,935,000       25.9 %     -       *  
Coliseum Investors and Coliseum Co-Invest Debt Fund, L.P.(3)     8,184,999       65.1 %     -       *  
Baleen Capital (4)    

1,345,000

     

13.1

%     -       *  
Greenhaven Road Capital Fund 1, L.P. (5)     1,400,000       13.6 %     -       *  
Royce Value Trust, Inc.(6)     875,000       8.7 %     -       *  
David Capital Partners Fund, LP and Pleiades Investment Partners – DC, L.P.(7)     630,000       6.3 %     -       *  
InnoHold, LLC(8)     -       *       44,071,318       100 %
Terry V. Pearce(8)     -       *       44,071,318       100 %
Tony M. Pearce(8)     -       *       44,071,318       100 %
Adam Gray(3)     8,184,999       65.1 %     -       *  
Gary DiCamillo(9)     102,095       1.1 %     -       *  
Pano Anthos(10)     14,785       *       -       *  
Gary Kiedaisch     -       *       -       *  
Claudia Hollingsworth     -       *       -       *  
Samuel D. Bernards(11)     -       *       -       *  
Jodi Deputy(11)     -       *       -       *  
Mitchell L. Edwards(11)     -       *       -       *  
Daniel G. Hill(11)     -       *       -       *  
W. Alexander McArthur(11)     -       *       -       *  
Casey K. McGarvey(11)     -       *       -       *  
Wayne Moorehead(11)     -       *       -       *  
Charles A. Smith(11)     -       *       -       *  
Russ Whatcott(11)     -       *       -       *  
Wayne Moorehead(11)     -       *       -       *  
All directors and executive officers (17 individuals)     8,301,879       65.8 %     44,071,318       100 %

  

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*         Less than 1%

 

(1) Beneficial ownership is determined in accordance with the rules of the SEC. Except as described in the footnotes below and subject to applicable community property laws and similar laws, we believe that each person listed above has sole voting and investment power with respect to such shares. Unless otherwise indicated, the business address of each of the entities, directors and executives in this table is c/o Purple Innovation, Inc. 123 East 200 North, Alpine, Utah 84004. The table above does not include the Company’s 15,525,000 publicly traded warrants as none of the individuals presented hold such warrants.
   
(2) Consists of (i) 1,293,750 shares of Class A Stock held by the Sponsor, of which 646,875 shares of Class A Stock are subject to vesting and forfeiture in accordance with the terms described below, and (ii) 1,641,250 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by the Sponsor. The business address of the Sponsor is 1 Rockefeller Plaza, 10th Floor, New York, New York 10020. The shares of Class A Stock subject to vesting will be forfeited eight years from the Closing, unless any of the following events (each a “Triggering Event”) occurs prior to that time:(i) the closing price of the Class A Stock on the principal exchange on which it is listed is at or above $12.50 for 20 trading days over a thirty trading day period (subject to certain adjustments), (ii) a change of control of the Company, (iii) a “going private” transaction by the Company pursuant to Rule 13e-3 under the Exchange Act or such other time as the Company ceases to be subject to the reporting obligations under Section 13 or 15(d) of the Exchange Act, or (iv) the time that the Company’s Class A Stock ceases to be listed on a national securities exchange. Such shares of Class A Stock will no longer be subject to forfeiture upon the occurrence of a Triggering event.

 

(3) Consists of (i) 3,837,635 shares of Class A Stock held by Coliseum Capital Partners, L.P. (“ CCP ”), of which 468,817 shares of Class A Stock are subject to vesting and forfeiture in accordance with the terms described below, (ii) 1,370,668 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by CCP, (iii) 1,000,000 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by Coliseum Co-Invest Debt Fund, L.P. (“ CCDF ”), (iv) 1,456,115 shares of Class A Stock held by Blackwell Partners LLC – Series A (“ Blackwell ”), of which 178,057 shares of Class A Stock are subject to vesting and forfeiture in accordance with the terms described below, and (v) 520,581 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by Blackwell. The shares of Class A Stock subject to vesting will be forfeited eight years from the Closing, unless any of the following events (each a “Triggering Event”) occurs prior to that time:(i) the closing price of the Class A Stock on the principal exchange on which it is listed is at or above $12.50 for 20 trading days over a thirty trading day period (subject to certain adjustments), (ii) a change of control of the Company, (iii) a “going private” transaction by the Company pursuant to Rule 13e-3 under the Exchange Act or such other time as the Company ceases to be subject to the reporting obligations under Section 13 or 15(d) of the Exchange Act, or (iv) the time that the Company’s Class A Stock ceases to be listed on a national securities exchange. Such shares of Class A Stock will no longer be subject to forfeiture upon the occurrence of a Triggering event. Adam Gray, a director of the Company, is (i) the manager of Coliseum Capital, LLC, which is the general partner of CCP and CCDF and (ii) the managing partner of Coliseum Capital Management, LLC, which is the attorney-in-fact of Blackwell, and Mr. Gray has voting and dispositive control over such securities held by CCP, CCDF and Blackwell. Mr. Gray disclaims beneficial ownership of these securities except to the extent of any pecuniary interest therein. The business address of each of CCP, CCDF, Blackwell and Mr. Gray is 105 Rowayton Avenue, Rowayton, Connecticut 06853.
   
(4) Consists of (i) 557,500 shares of Class A Stock held by Baleen Capital Fund LP (“ BCF ”), (ii) 418,125 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by BCF, (iii) 50,000 shares of Class A Stock issuable upon the exercise of Public Warrants held by BCF, (iv) 182,500 shares of Class A Stock held by Baleen Capital Investors II LLC (“ BCI ”), and (v) 136,875 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by BCI. The business address of each of BCF and BCI is 404 5th Avenue, Floor 3, New York, New York 10018.
   
(5) Consists of (i) 800,000 shares of Class A Stock and (ii) 600,000 shares of Class A Stock issuable upon the exercise of Sponsor Warrants. The business address of Greenhaven Road Capital Fund 1, LP is 8 Sound Shore Drive, Suite 190, Greenwich, Connecticut 06830.

 

(6) Consists of (i) 500,000 shares of Class A Stock and (ii) 375,000 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held in the name of Canoe & Co. The business address of Royce Value Trust, Inc. is 745 Fifth Avenue, New York, New York 10151.

 

(7) Consists of (i) 135,000 shares of Class A Stock held by David Capital Partners Fund, LP (“ DCPF ”), (ii) 101,250 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by DCPF, (iii) 225,000 shares of Class A Stock held by Pleiades Investment Partners – DC, L.P. (“ PIP ”), and (iv) 168,750 shares of Class A Stock issuable upon the exercise of Sponsor Warrants held by PIP. Each of DCPF and PIP is managed by David Capital Partners, LLC. The business address of DCPF is 737 N. Michigan Avenue, Suite 1405, Chicago, Illinois 60611. The business address of PIP is 6022 West Chester Pike, Newtown Square, Pennsylvania 19073

 

(8)  The shares of Class B Stock held by InnoHold, LLC are beneficially owned by Terry Pearce and Tony Pearce, who serve as directors of the Company. Each of Terry and Tony Pearce may be deemed to beneficially own the shares of Class B Stock held by InnoHold, LLC. Voting and disposition decisions with respect to such securities are made jointly by Terry and Tony Pearce. Each of Terry and Tony Pearce disclaims beneficial ownership of these securities except to the extent of any pecuniary interest therein.

 

(9) Mr. DiCamillo, through his holdings in Global Partner Sponsor I LLC (the “ Sponsor ”), has a pecuniary interest in (i) 55.904 Founder Shares and (ii) warrants to purchase 46,191 shares of Class A Stock. The address of the reporting person is 1 Rockefeller Plaza, 10th Floor, New York, New York 10020.

 

(10) Mr. Anthos, through his holdings in the Sponsor, has a pecuniary interest in (i) 13.370 Founder Shares and (ii) warrants to purchase 1,415 shares of Class A Stock. The address of the reporting person is 1 Rockefeller Plaza, 10th Floor, New York, New York 10020.

 

(11) This employee currently owns interests in InnoHold, LLC which, upon vesting and the satisfaction of other requirements, will give the employee the right to receive a certain number of shares of Class B Stock of the Company. The number of shares of Class B Stock such employee will be entitled to is unknown at this time.

 

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Executive Compensation

 

The Company has opted to comply with the executive compensation disclosure rules applicable to emerging growth companies. Emerging growth companies comply with the executive compensation rules applicable to “smaller reporting companies,” as such term is defined under the Securities Act, which require compensation disclosure for Purple’s principal executive officer and the next two most highly-compensated executive officers.

 

The tabular disclosure and discussion that follow describe GPAC’s and Purple’s executive compensation program during the three most recently completed fiscal years, ended December 31, 2017 and December 31, 2016 with respect to Purple’s “named executive officers,” who are:

 

Summary Compensation Table

 

The following table sets forth the compensation paid to the named executive officers for services performed during 2017 and 2016:

 

Summary Compensation Table

 

Name and Principal Position   Year     Salary    

Bonus (5)

    Stock and
Option
Awards
   

Non-Equity
Incentive
Plan
Compensation (1)

   

All
Other
Compensation (4)

    Total  
Terry V. Pearce,   2017     $ 298,333     $ 869     $ 0     $ 0     $ 24,890     $ 324,092  
Co-Director of Research and Development (2)(3)   2016       230,000       0       0       25,292       30,839       286,131  
Tony M. Pearce,   2017       298,333       0       0       0       52,439       350,772  
Co-Director of Research and Development (2)(3)   2016       230,000       0       0       25,292       52,062       307,354  
Samuel D. Bernards   2017       260,000       869       0       1,500       14,122       276,491  
Chief Executive Officer   2016       75,833       0       0       0       0       75,833  
Casey K. McGarvey   2017       301,535       869       0       1,500       12,054       315,958  
Chief Legal Officer & Secretary   2016       314,655       0       0       0       14,312       328,967  
W. Alexander McArthur   2017       252,499       869       0       1,500       13,921       268,790  
Chief Marketing Officer   2016       195,000       0       0       0       0       195,000  
                          

 

Notes

 

(1) The figures shown for non-equity incentive plan compensation represent cash bonuses paid to named executive officers that are tied to financial and operational objectives that were achieved within the applicable fiscal year.

 

(2) Prior to Mr. Bernards joining Purple in 2016, Terry and Tony Pearce jointly served as Chief Executive Officer of Purple.

 

(3) These officers also served as directors of Purple in 2016 and 2017 but did not receive compensation for their service as directors.

 

(4) “All other compensation” for fiscal 2017 is comprised of the following:

 

For Mr. Terry Pearce, $717 related to dental insurance; $2,208 related to the payment of personal utilities expenses; and $21,966 related to personal landscaping services.

 

For Mr. Tony Pearce, $17,571 related to medical, health and dental insurance; $1,190 related to the payment of personal utilities expenses; $21,966 related to personal landscaping services; and $11,712 related to personal freight charges.

 

For Mr. Bernards, $14,122 related to medical, health and dental insurance.

 

For Mr. McGarvey, $12,054 related to medical, health and dental insurance.

 

For Mr. McArthur, $13,921 related to medical, health and dental insurance.

 

“All other compensation” for fiscal 2016 is comprised of the following:

 

For Mr. Terry Pearce, $814 related to dental insurance; $12,637 related to the payment of personal utilities expenses; and $17,388 related to personal landscaping services.

 

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For Mr. Tony Pearce, $22,037 related to medical, health and dental insurance; $12,637 related to the payment of personal utilities expenses; and $17,388 related to personal landscaping services.

 

For Mr. McGarvey, $14,312 related to medical, health and dental insurance.

 

(5) “Bonus” for fiscal 2017 was comprised of an $869 discretionary bonus for each of Messrs. Terry Pearce, Bernards, McGarvey and McArthur.

 

Overview

 

We intend to develop an executive compensation program designed to align compensation with our business objectives and the creation of stockholder value, while enabling us to attract, motivate and retain individuals who contribute to our long-term success.

 

Decisions on the executive compensation program will be made by disinterested members of our Board of Directors. The following discussion is based on the present expectations as to the executive compensation program to be adopted by the Board of Directors. The executive compensation program actually adopted will depend on the judgment of the members of the Board of Directors and may differ from that set forth in the following discussion.

 

We anticipate that decisions regarding executive compensation will reflect our belief that the executive compensation program must be competitive in order to attract and retain our executive officers. We anticipate that the Board of Directors will seek to implement our compensation policies and philosophies by linking a significant portion of our executive officers’ cash compensation to performance objectives and by providing a portion of their compensation as long-term incentive compensation in the form of equity awards.

 

We anticipate that compensation for our executive officers will have three primary components: a base salary, cash bonuses and long-term incentive-based compensation in the form of equity-based awards.

 

Base Salary

 

Purple’s named executive officers’ base salaries will continue as described in the Summary Compensation Table above, subject to the terms of new employment agreements entered into in connection with the consummation of the Business Combination with each of the Purple named executive officers as further described under “Employment Agreements, Non-Competition and Non-Solicitation Agreements” below and will be reviewed annually by the Board of Directors based upon advice and counsel of its advisors.

 

Bonuses

 

We intend to use cash bonuses for Purple’s named executive officers to tie a portion of their compensation to financial and operational objectives achievable within the applicable fiscal year. Near the beginning of each year, the Board of Directors will select the performance targets, target amounts, target award opportunities and other term and conditions of annual cash bonuses for the named executive officers in its sole discretion, subject to the terms of their employment agreements. Following the end of each year, the Board of Directors will determine the extent to which the performance targets were achieved and the amount of the award that is payable to the named executive officers in its sole discretion and subject to ratification by the board of directors.

 

Stock-Based Awards

 

We intend to use stock-based awards to reward long-term performance of the named executive officers and certain key employees. We believe that providing a meaningful portion of the total compensation package in the form of stock-based awards will align the incentives of the named executive officers with the interests of our stockholders and serve to motivate and retain these individuals. Stock-based awards will be awarded under the Purple Innovation, Inc. 2017 Equity Incentive Plan, which has been adopted by our board of directors and approved by our stockholders at the special meeting of stockholders.

 

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The purpose of this plan will be to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer eligible employees, directors and consultants equity-based incentive awards in order to attract, retain and reward these individuals and strengthen the mutuality of interests between them and the Company’s stockholders.

 

The Purple Innovation, Inc. 2017 Equity Incentive Plan provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards.

 

Directors, officers and other employees and subsidiaries and affiliates, as well as others performing consulting or advisory services for the Company and its subsidiaries, will be eligible for grants under the Purple Innovation, Inc. 2017 Equity Incentive Plan.

 

The aggregate number of shares of Common Stock which may be issued or used for reference purposes under the Purple Innovation, Inc. 2017 Equity Incentive Plan or with respect to which awards may be granted may not exceed 4,100,000, which is approximately 7.5% of our Common Stock following the completion of the Business Combination, assuming (i) there are no redemptions and no new equity awards, (ii) the exchange of all Class B Units and shares of Class B Stock issued as Equity Consideration and (iii) the vesting of all shares.

 

Employment Agreements, Non-Competition and Non-Solicitation Agreements

 

Concurrently with the consummation of the Business Combination, Terry Pearce and Tony Pearce each entered into employment agreements with the Company.

 

Pursuant to their respective agreements, Terry Pearce and Tony Pearce were engaged as Co-Directors of Research and Development of the Company. The employment agreements have an initial term through December 31, 2021 (the “Initial Employment Term”) and will be automatically renewable unless terminated by the Company or the employee. Under the employment agreements, the employees are entitled to receive compensation at the rate of $300,000 per year in 2017, increasing annually by $20,000 and by a minimum of $20,000 per year commencing in 2022. In addition, the employee is entitled to receive bonuses and certain benefits. The employment agreements provide, among other things, that the employees are not required to work a particular number of hours for the Company or to be based at any particular location. The employment agreements also provide certain post-employment benefits if a termination arises without cause (as defined) by the Company or with good reason (as defined) by the employee. In such events, the employee would be entitled to be paid all accrued obligations, together with a lump sum payment equal to the amount of salary and benefits from the termination date until the end of the Initial Employment Term or, if the termination occurs following the Initial Employment Term, during the calendar year in which such termination occurred. In addition, the employment agreements provide for the payment of certain benefits upon the death, permanent disability or incapacity of the employee.

 

Terry Pearce and Tony Pearce are also directors of the Company and indirectly control a majority of the voting shares of the Company.

 

The foregoing summary of the employment agreements with Terry Pearce and Tony Pearce does not purport to be complete and is subject to, and qualified in its entirety by, the full text of such employment agreements, copies of which are attached as Exhibits 10.6 and 10.7, respectively, to this report and are incorporated by reference herein.

 

Mr. Bernards served as the Chief Executive Officer of Purple before the Business Combination and will continue to serve as the Chief Executive Officer of the Company. Pursuant to that certain letter agreement, dated September 27, 2016, Mr. Bernards is employed by Purple at will. Mr. Bernards’ current annual base salary is $260,000. Pursuant to the letter agreement, he is eligible to participate in Purple’s key employee incentive plan and also received 4.00% of the profit interests of Purple through Purple Team, LLC and certain ancillary benefits. We expect that the board of directors of the Company will negotiate a new employment agreement with Sam Bernards in accordance with normal corporate governance practices.

 

Other Compensation

 

We expect to continue to maintain various employee benefit plans, including medical, dental, life insurance and 401(k) plans, in which the named executive officers will participate. We also expect to continue to provide certain perquisites to the named executive officers, subject to the Board of Directors’ ongoing review.

 

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Profits Interest Plan

 

Purple previously awarded profits interests to Purple Team LLC and Purple Team LLC awarded an equivalent number of Purple Team LLC profits interests to certain Company employees, including 4,000,000 profits interests to Sam Bernards, 1,000,000 to Casey McGarvey and 1,000,000 to W. Alexander McArthur. These awards were deemed for accounting purposes to be granted subsequent to December 31, 2016. Grants were memorialized with (a) an award agreement between Purple, Purple Team LLC and each applicable employee, (b) equity incentive plans of Purple and Purple Team LLC and (c) ratifying consents of Purple and Purple Team LLC. In connection with the Business Combination, Purple Team LLC merged with and into InnoHold and the profits interests previously issued to Purple Team LLC were cancelled and the members of Purple Team LLC received profits interests in InnoHold, on substantially the same terms as the Purple Team LLC profits interests previously issued. The profits interests vest ratably over the period set forth in the award agreement. However, holders of vested profits interests will receive no economic benefit until the holders of InnoHold’s preferred units receive their preferred return provided in InnoHold’s Amended and Restated Operating Agreement. The profits interests are subject to a $135 million threshold before they are eligible to participate in any economic benefits. These profits interests make up approximately 8.9% of InnoHold’s outstanding units.

 

Deductibility of Executive Compensation

 

Section 162(m) of the Internal Revenue Code denies a federal income tax deduction for certain compensation in excess of $1.0 million per year paid to the chief executive officer and the three other most highly-paid executive officers (other than a company’s chief executive officer and chief financial officer) of a publicly-traded corporation. Certain types of compensation, including compensation based on performance criteria that are approved in advance by stockholders, are excluded from the deduction limit. We expect our policy will be that compensation paid to our executive officers will not be subject to this limit on deductibility for federal income tax purposes to the extent feasible. However, to retain highly skilled executives and remain competitive with other employers, the Board of Directors may authorize compensation that would not be deductible under Section 162(m) or otherwise if it determines that such compensation is in the best interests of the Company and its stockholders.

 

Outstanding Equity Awards at Fiscal 2017 Year End

 

Purple did not have any outstanding equity awards at December 31, 2017.

 

Director Compensation

 

Purple did not pay any director fees in 2015, 2016 or 2017. Compensation earned by directors was earned in their capacity as named executive officers and is described above. As of the date of this Current Report on Form 8-K, the compensation arrangements for the Board have not been determined. Any such arrangement will be reviewed and approved by the Board of Directors of the Company and will be publicly disclosed by the Company when such arrangements are approved.

 

Compensation C ommittee Interlocks and Insider Participation

 

During the years ended December 31, 2016 and December 31, 2017, decisions regarding the compensation of our named executive officers were made by the managers of Purple LLC, Terry Pearce and Tony Pearce, who also served as executive officers of Purple LLC. Going forward, the determination of compensation for our named executive officers will be made by disinterested members of our Board of Directors.

 

Director Independence

 

We have eight directors serving on our board of directors. Our Class A Common Shares are listed on the NASDAQ Capital Market. Using the definition of independence set forth in the rules of NASDAQ, our board of directors has determined that four of our directors are independent: Pano Anthos, Gary DiCamillo, Adam Gray, Gary A. Kiedaisch and Claudia Hollingsworth.

 

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Certain Relationships and Related Transactions, and Director Independence

 

Review and Approval of Related Party Transactions

 

Given the closely held nature of Purple’s business to this point, it has not yet had a policy for reviewing related party transactions. However, going forward, Purple intends to review all relationships and transactions in which Purple and certain related persons, including its founders, directors, named executive officers, and their immediate family members, are participants, to determine whether such persons have a direct or indirect material interest. Purple’s legal and accounting departments will have responsibility for the development and implementation of processes and controls to obtain information from the founders, directors and named executive officers with respect to related party transactions and for then determining, based upon the facts and circumstances, whether Purple or a related party has a direct or indirect material interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly material to Purple or the related party are disclosed in this Current Report on Form 8-K and will continue to be disclosed going forward. In addition, a disinterested majority of the full Board of Directors or Audit Committee will review and approve any related party transaction that is required to be disclosed.

 

Related Party Transactions

 

Purple leases its facilities in Alpine, Utah from TNT Holdings, LLC, which is beneficially owned by Tony Pearce and Terry Pearce. The total amount of rent incurred to TNT Holdings, LLC for the building lease on the Alpine facility in 2016 and the nine months ended September 30, 2017 were $911,787 and $698,970, respectively.

 

On December 15, 2016, Purple and EdiZONE, LLC, which is beneficially owned by Tony Pearce and Terry Pearce, entered into an amended and restated license agreement to terminate certain royalties owed by Purple to EdiZONE, LLC and license back certain intellectual property to EdiZONE on a fully paid and royalty-free basis. This agreement was terminated effective December 27, 2016 pursuant to the Termination of Restated Confidential Technology License Agreement between EdiZONE and Purple, for itself and on behalf of EquaPressure, LLC.

 

On December 15, 2016, EquaPressure, LLC, a wholly owned subsidiary of Purple, and EdiZONE, LLC entered into an amended and restated license agreement to terminate certain royalties owed by EquaPressure, LLC to EdiZONE, LLC and license back certain intellectual property to EdiZONE on a fully paid and royalty-free basis. This agreement was terminated effective December 27, 2016 pursuant to the Termination of Restated Confidential Technology License Agreement between EdiZONE and Purple, for itself and on behalf of EquaPressure, LLC.

 

Effective December 27, 2016, Purple and EdiZONE, LLC executed a confidential assignment and license back agreement, pursuant to which certain intellectual property owned by EdiZONE was assigned to Purple and a subset of such intellectual property (related to non-consumer fields and consumer fields of use currently licensed to third parties) was licensed back on a fully paid and royalty-free basis to EdiZONE from Purple to enable EdiZONE to continue licensing such intellectual property to third party licensees. All royalties on such third-party licenses are paid directly to EdiZONE without any payments going back to Purple. On March 3, 2017, a confirmatory assignment for patents and a confirmatory assignment for trademarks was executed by EdiZONE (as assignor) and Purple (as assignee) as separate short-form documentation of the intellectual property assignments reflected in the confidential assignment and license back agreement for filing with the USPTO. The effect of this agreement is subject to change with the expiration/termination of third-party licenses related to the licensed intellectual property from EdiZONE.

 

Also effective December 27, 2016, Purple and EdiZONE, LLC entered into an Exclusive License Agreement, pursuant to which EdiZONE provided Purple with an exclusive, paid up and irrevocable license to certain trademarks owned by EdiZONE. On April 11, 2017, certain of the trademarks licensed to Purple were assigned by EdiZONE to Purple under an assignment agreement.

 

Purple previously awarded profits interests to Purple Team LLC and Purple Team LLC awarded an equivalent number of Purple Team LLC profits interests to certain Company employees, including 4,000,000 profits interests to Sam Bernards, 1,000,000 to Casey McGarvey and 1,000,000 to W. Alexander McArthur. These awards were deemed for accounting purposes to be granted subsequent to December 31, 2016. Grants were memorialized with (a) an award agreement between Purple, Purple Team LLC and each applicable employee, (b) equity incentive plans of Purple and Purple Team LLC and (c) ratifying consents of Purple and Purple Team LLC. In connection with the Business Combination, Purple Team LLC merged with and into InnoHold and the profits interests previously issued to Purple Team LLC were cancelled and the members of Purple Team LLC received profits interests in InnoHold, on substantially the same terms as the Purple Team LLC profits interests previously issued. The profits interests vest ratably over the period set forth in the award agreement. However, holders of vested profits interests will receive no economic benefit until the holders of InnoHold’s preferred units receive their preferred return provided in InnoHold’s Amended and Restated Operating Agreement. The profits interests are subject to a $135 million threshold before they are eligible to participate in any economic benefits. These profits interests make up approximately 8.9% of InnoHold's outstanding units.

 

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On February 10, 2017, Purple entered into a Shared Services Agreement with EdiZONE, LLC, effective January 1, 2017, pursuant to which each of Purple and EdiZONE agreed to provide certain operational and administrative support services. Pursuant to the Shared Services Agreement, Casey McGarvey, Purple’s Chief Legal Officer, and other employees of Purple provide services to EdiZONE, LLC. Mr. McGarvey also provides similar services to InnoHold, LLC, the controlling member of Purple. In the nine months ended September 30, 2017, Purple did not pay to or receive from EdiZONE, LLC any amounts under this agreement.

 

In December 2016, Purple and InnoHold executed an Equity Transfer Agreement pursuant to which InnoHold transferred to Purple all of the issued and outstanding equity of EquaPressure, LLC. In consideration of the EquaPressure, LLC equity, InnoHold forgave a note from Purple to InnoHold, in part via conversion to equity, and Purple issued a new demand note to InnoHold due April 22, 2017 in the amount of $300,000 with interest at 7%. Purple paid the demand note in full on April 21, 2017 by paying Tony and Terry Pearce at the request of InnoHold. In connection with the Equity Transfer Agreement, and effective December 15, 2016, EquaPressure, LLC assigned to Purple an agreement between EquaPressure and certain customers of EquaPressure.

 

On November 1, 2017, Purple and EdiZONE executed an Amended and Restated Confidential Assignment and License Back Agreement, pursuant to which EdiZONE assigned substantially all of its intellectual property to Purple and Purple licensed back to EdiZONE such intellectual property for use outside the consumer comfort and cushioning field of use reserved by Purple. EdiZONE also agreed to notify Purple of any breach of a third party license agreement relating to consumer comfort intellectual property or consumer comfort products and Purple reserved the right to enforce EdiZONE’s rights with respect to such violations, provided that Purple agreed to pay the costs of such enforcement and to indemnify EdiZONE for any losses arising therefrom. EdiZONE further agreed not to extend such third party licenses or waive any such violations, or to settle any claim with respect thereto, without Purple’s consent. In addition, EdiZONE also agreed to not sell or transfer any of its assets or assign any intellectual property or licenses relating to certain consumer comfort products and related intellectual property without Purple’s consent. EdiZONE has agreed not to use any intellectual property in the consumer comfort or cushioning field of use, subject only to its existing third party licenses.

 

On February 2, 2018, in connection with the Closing, the Company entered into the Exchange Agreement with InnoHold, which provides for the exchange of Class B Units and of Class B Stock issued in connection with the Business Combination into shares of Class A Stock. The initial exchange ratio will be (i) one Class B Unit plus (ii) one share of Class B Stock for one share of Class A Stock, in each case subject to certain adjustments.

 

On February 2, 2018, in connection with the Closing, the Company entered into the Tax Receivable Agreement with InnoHold. Pursuant to the Tax Receivable Agreement, the Company is required to pay InnoHold 80% of the amount of savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in the case of an early termination payment by the Company, or a change of control of the Company) as a result of the increases in tax basis and certain other tax benefits related to the payment of the Cash Consideration pursuant to the Merger Agreement and the exchange of the Class B Units (together with an equal number of shares of Class B Stock) for Class A Stock. The Company would retain the remaining 20% of cash savings, if any, realized. All payments of tax savings to InnoHold will be the Company’s obligation, and not that of Purple LLC.

 

On February 2, 2018, in connection with the Closing, the Company entered into the Registration Rights Agreement with InnoHold and the Parent Representative. Under the Registration Rights Agreement, InnoHold holds registration rights that obligate the Company to register for resale under the Securities Act, all or any portion of the Equity Consideration (including Class A Stock issued in exchange for the Equity Consideration pursuant to the Exchange Agreement) (the “ Registrable Securities ”) so long as such shares are not then restricted under the Lock-Up Agreement. InnoHold is entitled to make a written demand for registration under the Securities Act of all or part of its Registrable Securities (up to a maximum of three demands in total), so long as such shares are not then restricted under the Lock-Up Agreement. Subject to certain exceptions, if any time after the Closing, the Company proposes to file a registration statement under the Securities Act with respect to its securities, under the Registration Rights Agreement, the Company shall give notice to InnoHold as to the proposed filing and offer InnoHold an opportunity to register the sale of such number of Registrable Securities as requested by InnoHold in writing. In addition, subject to certain exceptions, InnoHold is entitled under the Registration Rights Agreement to request in writing that the Company register the resale of any or all of its Registrable Securities on Form S-3 and any similar short-form registration that may be available at such time.

 

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On February 2, 2018, in connection with the Closing, InnoHold and Tony Pearce and Terry Pearce, who together own a majority of InnoHold (collectively with InnoHold, the “ Sellers ”), entered into the Non-Competition Agreement with the Company, Purple LLC and their respective successors, affiliates and subsidiaries (referred to as the “ Covered Parties ”). Pursuant to the Non-Competition Agreement, for a period from the Closing until three years thereafter (or if later, until the one year anniversary of the date on which the Sellers, their affiliates or any of their respective officers, directors or employees are no longer directors, officers, managers or employees of the Company or any of its subsidiaries (the “ Termination Date ”)), each Seller and its affiliates will not, without the Company’s prior written consent, directly or indirectly engage in (or own, manage, finance or control, or become engaged or serve as an officer, director, employee, member, partner, agent, consultant, advisor or representative of), an entity that engages in the business of (i) designing and manufacturing comfort technology products worldwide to improve how people sleep, sit, and stand, including mattresses, pillows, platform bases and cushions, and (ii) marketing, licensing and selling its products worldwide through direct-to-consumer, traditional retail channels and partnerships (collectively, the “ Business ”) anywhere in the world, subject to certain specified exceptions for existing relationships. However, the Covered Parties and their affiliates are permitted under the Non-Competition Agreement to own passive portfolio company investments of no more than 2% in a competitor of the Covered Parties, so long as the Sellers, their affiliates and their respective shareholders, directors, officer, managers and employees who were involved with the business of the Covered Parties are not involved in the management or control of such competitor.

 

On February 2, 2018, in connection with the Closing, InnoHold entered into a lock-up agreement with the Company and the Parent Representative (“ Lock-Up Agreement ”) with respect to the equity securities of both the Company and Purple LLC received in the Business Combination (the “ Restricted Securities ”). Pursuant to the Lock-Up Agreement, InnoHold agreed that it will not, from the Closing until the earliest of (x) the one year anniversary of the Closing, (y) the date on which the last sale price of the Class A Stock (or any successor publicly traded common equity security) equals or exceeds $12.00 per share (as equitably adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing or (z) the date on which the Company consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of the Company’s stockholders having the right to exchange either equity holdings in us for cash, securities or other property: (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of the Restricted Securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of its Restricted Securities, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii). However, InnoHold is allowed to transfer any of its Restricted Securities under certain limited exceptions, including to affiliates, to family members or to its equity holders, provided in each such case that the transferee thereof agrees to be bound by the restrictions set forth in the Lock-Up Agreement. InnoHold is also permitted to transfer the Restricted Securities pursuant to an underwritten public offering to which all of the parties to the Lock-Up Agreement shall have consented.

 

As described above, Purple does not yet have procedures for reviewing related party transactions. Accordingly, none of the listed transactions was approved according to the procedures that we describe will be implemented going forward.

 

Policies and Procedures for Related Person Transactions

 

Our Audit Committee must review and approve any related person transaction we propose to enter into. Our Audit Committee charter details and, post-Business Combination, the amended charter of the Audit Committee of the post-Business Combination will provide, the policies and procedures relating to transactions that may present actual, potential or perceived conflicts of interest and may raise questions as to whether such transactions are consistent with the best interest of the company and our stockholders. A summary of such policies and procedures is as follows:

 

Any potential related party transaction that is brought to the Audit Committee’s attention will be analyzed by the Audit Committee, in consultation with outside counsel or members of management, as appropriate, to determine whether the transaction or relationship does, in fact, constitute a related party transaction. At each of its meetings, the Audit Committee will be provided with the details of each new, existing or proposed related party transaction, including the terms of the transaction, the business purpose of the transaction, and the benefits to us and to the relevant related party.

 

In determining whether to approve a related party transaction, the Audit Committee must consider, among other factors, the following factors to the extent relevant:

 

whether the terms of the transaction are fair to us and on the same basis as would apply if the transaction did not involve a related party;

 

whether there are business reasons for us to enter into the transaction;

 

whether the transaction would impair the independence of an outside director; and

 

whether the transaction would present an improper conflict of interest for any director or executive officer.

 

Any member of the Audit Committee who has an interest in the transaction under discussion must abstain from voting on the approval of the transaction, but may, if so requested by the Chairman of the Audit Committee, participate in some or all of the Audit Committee’s discussions of the transaction. Upon completion of its review of the transaction, the Audit Committee may determine to permit or to prohibit the transaction.

 

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Legal Proceedings

 

On January 9, 2018, Chris Knudsen filed a complaint against the Company in the Fourth Judicial District Court of the State of Utah. Mr. Knudsen is a former consultant to the Company. His contract with the company ended in March 2016. Mr. Knudsen alleges that the Company orally agreed before the end of his consulting contract to appoint him as its chief executive officer beginning April 2016. Mr. Knudsen also contends that the Company orally agreed to immediately issue him 4% of the Company’s equity at the time of his appointment as Chief Executive Officer. Mr. Knudsen alleges that the Company breached these alleged oral agreements when it did not appoint him as Chief Executive Officer on April 1, 2016 and did not provide any equity interests to him. Mr. Knudsen alleges that the Company owes him a sum of $44 million for his purported equity stake in the Company, plus interest, based on an initially announced $1.1 billion valuation. Mr. Knudsen also seeks declaratory relief that he owns the 4% equity position in the Company. The Company has not yet responded to the complaint. The Company denies that it reached an agreement with Mr. Knudsen for him to assume the role of CEO, denies that it reached an agreement to provide equity to Mr. Knudsen, believes that this lawsuit is without merit and intends to vigorously contest it. The Company maintains insurance to defend against claims of this nature, which management believes is adequate to cover the cost of its defense of Mr. Kndusen’s claims.

 

On March 23, 2017, the Company filed its First Amended Complaint against Honest Reviews, LLC (“HMR”), Ryan Monahan (“Mr. Monahan”) and GhostBed, Inc. (“GhostBed”) (collectively, the “Defendants”), alleging that the Defendants are working together on a competitive campaign to intentionally disseminate false and misleading statements regarding the safety of the Company’s mattresses, while at the same time failing to disclose to the public the fact that Mr. Monahan has, since 2015, provided significant digital marketing services to GhostBed, for which his company received substantial compensation. The Defendants have published a number of articles and related materials claiming, without substantiation, that the non-toxic anti-tack powder used in connection with the Company’s products can cause respiratory distress, exacerbate asthma or other respiratory conditions, and cause cancer or even death. Defendants have widely published these materials, including on the HMR website, honestmattressreviews.com, and all of associated HMR social media pages. GhostBed has alleged a number of counterclaims against the Company but, at this state of the litigation, management believes it unlikely that the Company will be liable or owe damages to GhostBed. On September 22, 2017, the United States District Court in Utah issued a preliminary injunction requiring full disclosure of the relationship between GhostBed and Monahan on the HMR website and social media, to remove certain prior articles and other content regarding the Company, the anti-tack powder, and the lawsuit from the HMR website and social media, and requiring that any future posts by the Defendants regarding the Company or the lawsuit be accompanied by a full disclosure of the relationship between Monahan and GhostBed. Despite the Court’s issuance of the preliminary injunction, the Company is unable to determine, at this stage, the possible outcome of the litigation.

 

The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might be required to pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

 

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Market Price and Dividends on our Common Equity and Related Stockholder Matters

 

Market Information

 

Price Range of Securities

 

The Company’s Class A Stock and warrants are listed on The NASDAQ Capital Market under the symbols “PRPL” and “PRPLW,” respectively. The Class A Stock and warrants began separate trading on NASDAQ on August 13, 2015. The following table includes the high and low sales prices for our units, Class A Stock and warrants for the periods presented.

 

    Common Stock     Warrants  
    High     Low     High     Low  
2016                        
First Quarter   $ 10.00     $ 9.56     $ 0.25     $ 0.15  
Second Quarter   $ 9.86     $ 9.51     $ 0.22     $ 0.14  
Third Quarter   $ 10.00     $ 9.65     $ 0.29     $ 0.15  
Fourth Quarter   $ 9.95     $ 9.46     $ 0.35     $ 0.21  
2017                                
First Quarter   $ 10.50     $ 9.84     $ 0.65     $ 0.24  
Second Quarter   $ 10.05     $ 9.93     $ 0.36     $ 0.11  
Third Quarter   $ 10.10     $ 9.49     $ 0.86     $ 0.20  
Fourth Quarter   $ 10.10     $ 9.35     $ 1.25     $ 0.65  
2018                                
First Quarter (1)   $ 12.38     $ 9.55     $ 1.28     $ 0.39  
                             

 

(1)      Through February 7, 2018.

 

Holders

 

As of the date hereof, there were approximately 4 holders of record of the Company’s Class A Stock and one holder of record of the Company’s Class B Stock. This number does not include an undetermined number of stockholders whose stock is held in “street” or “nominee” name.

 

As of the date hereof, there are 12 holders of record of our warrants.

 

The Company’s Class A Stock is listed on the NASDAQ Capital Market under the symbol “PRPL.”

 

Dividends

 

GPAC has never declared or paid any cash dividends to its stockholders, while Purple before the Business Combination made periodic distributions to its members.

 

Our board of directors will make any future decisions regarding dividends. We currently intend to retain and use any future earnings, if any, for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

 

It is the present intention of the Company to retain any earnings for use in its business operations and, accordingly, we do not anticipate the board of directors declaring any dividends in the foreseeable future.

 

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Securities Authorized for Issuance Under Equity Compensation Plans

 

On February 2, 2018, the stockholders of Global Partner Acquisition Corp. approved the Purple Innovation, Inc. 2017 Equity Incentive Plan. Under the terms of the plan, there are 4,100,000 shares of Class A Stock available for issuance under the plan.

 

Recent Sales of Unregistered Securities

 

Information about unregistered sales of GPAC’s equity securities is set forth in Part II, Item 15 of Amendment No. 2 to GPAC’s Registration Statement on Form S-1 (File No. 333-204907) filed with the SEC on July 27, 2015, in Part II, Item 2 of GPAC’s Quarterly Report on Form 10-Q filed with the SEC on September 10, 2015, under Item 3.02 of GPAC’s Current Report on Form 8-K filed with the SEC on August 4, 2015, and in Part II, Item 2 of GPAC’s Quarterly Report on Form 10-Q filed with the SEC on November 3, 2015.

 

The description about the Coliseum Private Placement from Item 1.01 of this Current Report on Form 8-K is incorporated by reference herein. The shares of the Company’s common stock issued in the Coliseum Private Placement were not registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.

 

The description of the Stock Consideration under Item 2.01 of this Current Report on Form 8-K is incorporated by reference herein. The shares of the Company’s common stock issued as Stock Consideration and in the Private Placement were not registered under the Securities Act in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder.

 

Description of Capital Stock

 

Our authorized capital stock consists of 300 million shares of common stock, including 210 million shares of Class A Stock, par value of $0.0001 per share and 90 million shares of Class B Stock, par value of $0.0001 per share, and 5 million shares of undesignated preferred stock, $0.0001 par value per share. The outstanding shares of our common stock are duly authorized, validly issued, fully paid and non-assessable. As of the Closing Date, there were 53,751,686 shares of common stock outstanding, including 9,682,855 shares of Class A Stock and 44,071,318 shares of Class B Stock, held of record by approximately 4 holders of Class A Stock and 1 holder of Class B Stock, no shares of preferred stock outstanding and 28,340,000 warrants outstanding held of record by approximately 12 holders of warrants. Such numbers do not include Depository Trust Company participants or beneficial owners holding shares through nominee names.

 

The following is a summary of the rights of our common and preferred stock and some of the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, our outstanding warrants, our registration rights agreements and the Delaware General Corporation Law. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description you should refer to our amended and restated certificate of incorporation, amended and restated bylaws, the warrant and registration rights agreements, copies of which have been filed as exhibits to this Current Report on Form 8-K, as well as the relevant provisions of the Delaware General Corporation Law.

 

Common Stock

 

Class A Common Stock

 

Holders of Class A Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in our amended and restated certificate of incorporation or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of our common shares that are voted is required to approve any such matter voted on by our stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors. Holders of Class A Stock are entitled to receive ratable dividends when, as and if declared by the board of directors out of funds legally available therefor.

 

In the event of a liquidation, dissolution or winding up of the company after a business combination, our stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. Our stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that we will provide our stockholders with the opportunity to redeem their public shares for cash equal to their pro rata share of the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable) upon the completion of our initial business combination, subject to the limitations described herein.

 

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Class B Common Stock

 

Holders of Class B Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. Unless specified in our amended and restated certificate of incorporation or bylaws, or as required by applicable provisions of the DGCL or applicable stock exchange rules, the affirmative vote of a majority of our common shares that are voted is required to approve any such matter voted on by our stockholders. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the shares voted for the election of directors can elect all of the directors.

 

The Class B Stock is not entitled to receive dividends, if declared by the Board, or to receive any portion of any such assets in respect of their shares upon liquidation, dissolution, distribution of assets or winding-up of the Company in excess of the par value of such stock. In addition, the Class B Stock may only be issued to and held by InnoHold and its permitted transferees (collectively, the “ Permitted Holders ”).

 

At any time Purple issues a Class B Unit to a Permitted Holder, the Company will issue a share of Class B Stock to such Permitted Holder. Upon the exchange of a Class B Unit pursuant to the Exchange Agreement for a share of Class A Stock, the corresponding share of Class B Stock will be automatically cancelled for no consideration. Shares of Class B Stock may only be transferred to a person other than the Company or Purple if the transferee is a Permitted Holder and an equal number of Class B Units are simultaneously transferred to such transferee.

 

Founder Shares

 

The Founder Shares are identical to the shares of Class A Stock sold in GPAC’s initial public offering, and holders of these shares have the same stockholder rights as public stockholders, except that the Founder Shares are subject to certain transfer restrictions described below.

 

Pursuant to a letter agreement, the Sponsor has agreed not to transfer, assign or sell any of its Founder Shares until the earlier of (A) one year after the completion of the Business Combination, or earlier if, subsequent to the Business Combination, the last sale price of our Class A Stock equals or exceeds $12.00 per share (subject to adjustments for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the business combination or (B) the date on which we complete a liquidation, merger, stock exchange or other similar transaction after the business combination that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, the Founder Shares will be released from the lock-up on the date on which we complete a liquidation, merger, stock exchange or other similar transaction after our the Business Combination that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

 

The Sponsor has agreed to subject 646,876 shares of Class A Stock owned by it to vesting and forfeiture based on the Class A Stock price performance of the post-Business Combination company over eight years following consummation of the Business Combination (the “ Vesting Period ”). These shares will vest and no longer be subject to forfeiture on the first day the closing price of the Class A Stock is at or above $12.50 (subject to adjustments for stock splits, stock dividends, reorganizations, recapitalizations and the like) for 20 trading days over a 30 trading day period immediately preceding such day during the Vesting Period. In addition, these shares will immediately vest upon a change of control or liquidation of the Company or certain other events. Any shares that do not vest during the Vesting Period will be forfeited by the Sponsor at the expiration of the Vesting Period. The Sponsor will continue to be entitled to voting rights and dividends on these shares until vesting. In addition, the Sponsor will forfeit 1,293,750 shares of Class A Stock currently owned by it. Further, in connection with the Coliseum Private Placement, the Sponsor assigned 1,293,750 shares of Class A Stock to the Coliseum Investors, including 646,874 shares of Class A Stock subject to vesting.

 

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Voting Power

 

Except as otherwise required by law or as otherwise provided in any certificate of designation for any series of preferred stock, the holders of Class A Stock and Class B Stock have exclusive voting power for the election of directors and all other matters requiring stockholder action. Holders of Class A Stock and Class B Stock are entitled to one vote per share on matters to be voted on by stockholders.

 

Warrants

 

Public Warrants

 

Each whole warrant entitles the registered holder to purchase one-half of one share of our Class A Stock at a price of $5.75 per half share ($11.50 per full share), subject to adjustment as discussed below, at any time after March 4, 2018. Pursuant to the warrant agreement, a warrantholder may exercise its warrants only for a whole number of shares of the Class A Stock. For example, if a warrantholder holds one warrant to purchase one-half of a share of Class A Stock, such warrant will not be exercisable. If a warrantholder holds two warrants, such warrants will be exercisable for one share of the Class A Stock. Warrants must be exercised for a whole share. The warrants will expire February 2, 2023, at 5:00 p.m., New York time, or earlier upon redemption or liquidation.

 

We will not be obligated to deliver any shares of Class A Stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A Stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue shares of Class A Stock upon exercise of a warrant unless Class A Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless. In no event will we be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A Stock underlying such unit.

 

We have agreed that as soon as practicable, but in no event later than fifteen (15) business days, after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A Stock issuable upon exercise of the warrants. We will use our best efforts to cause the same to become effective and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our Class A Stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares under blue sky laws.

 

Once the warrants become exercisable, we may call the warrants for redemption:

 

in whole and not in part;

 

at a price of $0.01 per warrant;

 

upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrantholder; and

 

if, and only if, the reported last sale price of the Class A Stock equals or exceeds $24.00 per share for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrant holders.

 

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If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.

 

We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the Class A Stock may fall below the $24.00 redemption trigger price as well as the $5.75 (for each half share) warrant exercise price after the redemption notice is issued.

 

If we call the warrants for redemption as described above, our management will have the option to require any holder that wishes to exercise his, her or its warrant to do so on a “cashless basis.” In determining whether to require all holders to exercise their warrants on a “cashless basis,” our management will consider, among other factors, our cash position, the number of warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Class A Stock issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below), by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Class A Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. If our management takes advantage of this option, the notice of redemption will contain the information necessary to calculate the number of shares of Class A Stock to be received upon exercise of the warrants, including the “fair market value” in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption. We believe this feature is an attractive option to us if we do not need the cash from the exercise of the warrants after our initial business combination. If we call our warrants for redemption and our management does not take advantage of this option, GPAC’s Sponsor and its permitted transferees would still be entitled to exercise their Sponsor Warrants for cash or on a cashless basis using the same formula described above that other warrant holders would have been required to use had all warrant holders been required to exercise their warrants on a cashless basis, as described in more detail below.

 

A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 9.8% (as specified by the holder) of the shares of Class A Stock outstanding immediately after giving effect to such exercise.

 

If the number of outstanding shares of Class A Stock is increased by a stock dividend payable in shares of Class A Stock, or by a split-up of shares of Class A Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Class A Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares of Class A Stock. A rights offering to holders of Class A Stock entitling holders to purchase shares of Class A Stock at a price less than the fair market value will be deemed a stock dividend of a number of shares of Class A Stock equal to the product of (i) the number of shares of Class A Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Class A Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of Class A Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Class A Stock, in determining the price payable for Class A Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Class A Stock as reported during the ten trading day period ending on the trading day prior to the first date on which the shares of Class A Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.

 

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In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of Class A Stock on account of such shares of Class A Stock (or other shares of our capital stock into which the warrants are convertible), other than (a) as described above or (b) certain ordinary cash dividends, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Class A Stock in respect of such event.

 

If the number of outstanding shares of our Class A Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Class A Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Class A Stock issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares of Class A Stock.

 

Whenever the number of shares of Class A Stock purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares of Class A Stock purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares of Class A Stock so purchasable immediately thereafter.

 

In case of any reclassification or reorganization of the outstanding shares of Class A Stock (other than those described above or that solely affects the par value of such shares of Class A Stock), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares of Class A Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares of our Class A Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of Class A Stock in such a transaction is payable in the form of common stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the warrant agreement based on the Black-Scholes value (as defined in the warrant agreement) of the warrant.

 

The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants.

 

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of Class A Stock or any voting rights until they exercise their warrants and receive shares of Class A Stock. After the issuance of shares of Class A Stock upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.

 

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of our Class A Stock to be issued to the warrant holder.

 

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Sponsor Warrants

 

Pursuant to a letter agreement, the Sponsor Warrants will not be released except to permitted transferees until March 4, 2018. During the lock-up period, the Sponsor Warrants will not be transferable, other than (a) to GPAC’s officers or directors, any affiliates or family members of any of GPAC’s officers or directors, any members of GPAC’s Sponsor, or any affiliates of GPAC’s Sponsor, (b) by gift to a member of one of the members of GPAC’s Sponsor’s immediate family or to a trust, the beneficiary of which is a member of one of the members of GPAC’s Sponsor’s immediate family, to an affiliate of GPAC’s Sponsor or to a charitable organization; (c) by virtue of laws of descent and distribution upon death of one of the members of GPAC’s Sponsor; (d) pursuant to a qualified domestic relations order; (e) by virtue of the laws of the state of Delaware or GPAC’s Sponsor’s limited liability company agreement upon dissolution of GPAC’s Sponsor; or (f) in the event of our completion of a liquidation, merger, stock exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to our completion of our initial business combination; provided, however, that these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions. The Sponsor Warrants are not redeemable by us so long as they are held by the Sponsor or its permitted transferees. Otherwise, the Sponsor Warrants have terms and provisions that are identical to those of the public warrants, except that such warrants may be exercised by the holders on a cashless basis. If the Sponsor Warrants are held by holders other than the Sponsor or its permitted transferees, the Sponsor Warrants will be redeemable by us and exercisable by the holders on the same basis as the Public Warrants.

 

If holders of the Sponsor Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering their warrants for that number of shares of Class A Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below), by (y) the fair market value. The “fair market value” means the average reported last sale price of the Class A Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by GPAC’s Sponsor or its affiliates and permitted transferees is because it is not known at this time whether they will be affiliated with us following a business combination. If they remain affiliated with us, their ability to sell our securities in the open market will be significantly limited. We expect to have policies in place that prohibit insiders from selling our securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell our securities, an insider cannot trade in our securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their warrants and sell the shares of Class A Stock received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities. As a result, we believe that allowing the holders to exercise such warrants on a cashless basis is appropriate. In connection with the Baleen Investment and the Coliseum Private Placement and Coliseum Credit Agreement, GPAC’s Sponsor assigned to the Coliseum Investors, Coliseum Co-Invest Debt Fund, L.P., and the Baleen Investors an aggregate of 9,532,500 Sponsor Warrants to purchase 4,766,250 shares of Class A Stock. After giving effect to such assignment, the Sponsor holds 3,282,500 Sponsor Warrants to purchase 1,641,250 shares of Class A Stock.

 

The Public Warrants and the Sponsor Warrants (including the Sponsor Warrants assigned to the Coliseum Investors, Coliseum Co-Invest Debt Fund, L.P., and the Baleen Investors) are subject to that certain Warrant Agreement, dated July 29, 2015, between Continental Stock Transfer & Trust Company and the Company, a copy which is attached hereto as Exhibit 4.4 and is incorporated herein by reference.

 

Registration Rights

 

The description of the Registration Rights Agreement, the Baleen Registration Rights Agreement and the Coliseum Registration Rights Agreement under Item 1.01 of this Current Report on Form 8-K is incorporated by reference herein.

 

Dividends

 

Subject to the rights, if any, of the holders of any outstanding series of preferred stock, the holders of the Class A Stock will be entitled to receive such dividends and other distributions (payable in cash, property or capital stock of the Company) when, as and if declared thereon by the board of directors from time to time out of any assets or funds of the Company legally available therefor, and will share equally on a per share basis in such dividends and distributions. Holders of Class B Stock are not entitled to share in any such dividends or other distributions.

 

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Liquidation, Dissolution and Winding Up

 

In the event of any voluntary or involuntary liquidation, dissolution or winding-up, the holders of the Class A Stock will be entitled to receive all remaining assets of the Company available for distribution to stockholders, after the rights of the holders of the preferred stock have been satisfied. Holders of the Class B Stock will not be entitled to receive any portion of any such assets of the Company in excess of the par value of such stock in respect of their shares of Class B Stock.

 

Preemptive or Other Rights

 

In connection with the Coliseum Private Placement, we granted to the Coliseum Investors preemptive rights for the future sale of Company securities. So long as the Coliseum Investors hold at least 50% of the shares of Class A Stock acquired in the Coliseum Private Placement, the Coliseum Investors are entitled to purchase up to their pro rata share of all equity securities issued by the Company, subject to certain exceptions.

 

The Coliseum Subscription Agreement provides the Coliseum Investors (and any other funds or accounts managed by Coliseum Capital Management, LLC) with a right of first refusal to provide all, but not less than all, of any of the following financings by the Company or any of its subsidiaries: (i) preferred equity financing with a preference to or over any of the terms of the Company’s common stock and (ii) any debt financing with a principal amount outstanding (together with all other debt provided by lender or group of lenders) greater than or equal to $10 million, other than (x) the replacement or refinancing of existing indebtedness or (y) an asset based loan on customary terms with an all in interest rate of not greater than 5% per year, by the Company or any of its subsidiaries.

 

Other than the Coliseum Investors, stockholders will have no preemptive or other subscription rights and there will be no sinking fund or redemption provisions applicable to the Class A Stock and Class B Stock.

 

Certain Anti-Takeover Provisions of Delaware Law

 

We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. This statute prevents certain Delaware corporations, under certain circumstances, from engaging in a “merger” with:

 

a stockholder who owns 15% or more of our outstanding voting stock (otherwise known as an “interested stockholder”);

 

an affiliate of an interested stockholder; or

 

an associate of an interested stockholder, for three years following the date that the stockholder became an interested stockholder.

 

A “merger” includes a merger or sale of more than 10% of our assets. However, the above provisions of Section 203 do not apply if:

 

our board of directors approves the transaction that made the stockholder an “interested stockholder,” prior to the date of the transaction;

 

after the completion of the transaction that resulted in the stockholder becoming an interested stockholder, that stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, other than statutorily excluded shares of common stock; or

 

on or subsequent to the date of the transaction, the merger is approved by our board of directors and authorized at a meeting of its stockholders, and not by written consent, by an affirmative vote of at least two-thirds of the outstanding voting stock not owned by the interested stockholder.

 

Transfer Agent and Registrar

 

Our transfer agent and registrar is Continental Stock Transfer & Trust Company, 17 Battery Place, New York, New York 10004. Their telephone number is (212) 845-4000.

 

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Indemnification of Directors and Officers

 

Our certificate of incorporation provides that none of our directors will be personally liable to us, or our stockholders, for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the Delaware General Corporation Law.

 

These provisions eliminate our rights and those of our stockholders to recover monetary damages from a director for breach of his fiduciary duty of care as a director except in the situations described above. The limitations summarized above, however, do not affect our ability or that of our stockholders to seek non-monetary remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty.

 

Section 145 of the Delaware General Corporation Law provides a corporation with the power to indemnify any officer or director acting in his capacity as our representative who is, or threatened to be, made a party to any lawsuit or other proceeding for expenses, judgment and amounts paid in settlement in connection with such lawsuit or proceeding. The indemnity provisions apply whether the action was instituted by a third party or was filed by one of our stockholders. The Delaware General Corporation Law provides that Section 145 is not exclusive of other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise. We have provided for this indemnification in our certificate of incorporation because we believe that it is important to attract qualified directors and officers.

 

We have entered into indemnification agreements with each of our executive officers and directors that require us to indemnify such persons against any and all expenses, including judgments, fines or penalties, attorney’s fees, witness fees or other professional fees and related disbursements and other out-of-pocket costs incurred, in connection with any action, suit, arbitration, alternative dispute resolution mechanism, investigation, inquiry or administrative hearing, whether threatened, pending or completed, to which any such person may be made a party by reason of the fact that such person is or was a director, officer, employee or agent of our company, provided that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed to, our best interests. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification thereunder. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers. The foregoing summary of the indemnification agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the form of the indemnification agreement, a copy of which is attached as Exhibit 10.9 to this report and is incorporated by reference herein.

 

Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant to provisions of our certificate of incorporation and bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

Other than the matters disclosed in the section above titled “Legal Proceedings,” there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be require or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.

 

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ITEM 2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT

 

Reference is made to the description of the Credit Agreement set forth under Item 1.01 Entry into A Material Definitive Agreement of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

 

ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES

 

Reference is made to the disclosure set forth under Item 2.01 Completion of Acquisition or Disposition of Assets of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

 

Upon the closing of the Merger, GPAC issued 44,068,831 shares of Class B Stock to InnoHold. The issuance of the securities was deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D promulgated thereunder) as a transaction by an issuer not involving any public offering.

 

Reference is made to the disclosure set forth regarding under the heading “Coliseum Private Placement” under Item 1.01 Entry into A Material Definitive Agreement of this Current Report on Form 8-K, which disclosure is incorporated herein by reference. The issuance of the securities in the Coliseum Private Placement was deemed to be exempt from registration under the Securities Act in reliance upon section 4(a)(2) of the Securities as a transaction by an issuer not involving any public offering.

 

ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS

 

On February 2, 2018, the Company filed a Second Amended and Restated Certificate of Incorporation of the Company (the “Amended Certificate”) with the Secretary of State of the State of Delaware. The material terms of the Amended Certificate and the general effect upon the rights of holders of the Company’s capital stock are included in the Proxy Statement under the sections entitled “Proposal No. 2 —  Approval of Amendment to GPAC’s Amended and Restated Certificate of Incorporation To Increase GPAC’s Authorized Common Stock and Preferred Stock, Including the Establishment of Class B Stock ” beginning on page 125 of the Proxy Statement, “Proposal No. 3 — Approval of Amendment to GPAC’s Amended and Restated Certificate of Incorporation To Rename GPAC’s Outstanding Common Stock” beginning on page 128 of the Proxy Statement, “Proposal No. 4 — Approval of Amendment to GPAC’s Amended and Restated Certificate of Incorporation to Eliminate the Classification of the Board of Directors” beginning on page 130 of the Proxy Statement, “Proposal No. 5 — Approval of Amendment to GPAC’s Amended and Restated Certificate of Incorporation to Adopt Delaware As Exclusive Forum For Certain Legal Actions” beginning on page 132 of the Proxy Statement, “Proposal No. 6 — Approval of Amendment to GPAC’s Amended and Restated Certificate of Incorporation To Change GPAC’s Name” beginning on page 134 of the Proxy Statement, “Proposal No. 7 — Approval of Amendments to GPAC’s Amended and Restated Certificate of Incorporation To Effect Certain Changes Relating to our Transition to an Operating Company” beginning on page 135 of the Proxy Statement and “Proposal No. 8 — Approval of Certain Additional Non-Substantive Changes to GPAC’s Amended and Restated Certificate of Incorporation” beginning on page 137 of the Proxy Statement, which are incorporated by reference herein.

 

A copy of the Amended Certificate is attached as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated by reference herein.

 

In addition, upon the Closing, pursuant to the terms of the Merger Agreement, the Company amended and restated its bylaws. A copy of the Amended and Restated Bylaws of Purple Innovation, Inc. is attached as Exhibit 3.2 to this Current Report on Form 8-K and is incorporated by reference herein.

 

ITEM 4.01 CHANGES IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

(a) Previous independent registered public accounting firm:

 

On February 2, 2018, the Board’s Audit Committee confirmed, recommended and approved the dismissal of WithumSmith+Brown, PC (“ Withum ”) as the Company’s independent registered public accounting firm. During the fiscal years ended December 31, 2017 and December 31, 2016 and for the period from May 19, 2015 (date of inception) to December 31, 2015, Withum’s audit report on GPAC’s financial statements did not contain an adverse opinion or disclaimer of opinion, nor was it qualified as to audit scope or accounting principles except as follows: such audit reports for the fiscal years ended December 31, 2017 and December 31, 2016 contained an explanatory paragraph in which Withum expressed substantial doubt as to GPAC’s ability to continue as a going concern if GPAC did not complete a business combination by the deadline set forth in GPAC’s certificate of incorporation. During the fiscal years ended December 31, 2017 and December 31, 2016 and for the period from May 19, 2015 (date of inception) to December 31, 2015, and the subsequent period through the date of Withum’s dismissal, (i) there were no “disagreements” (as described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) between GPAC and Withum on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to Withum’s satisfaction, would have caused Withum to make reference in connection with Withum’s opinion to the subject matter of the disagreement; and (ii) there were no “reportable events” as the term is described in Item 304(a)(1)(v) of Regulation S-K. We have given permission to Withum to respond fully to the inquiries of the successor auditor. We furnished a copy of this disclosure to Withum and have requested that Withum furnish us with a letter addressed to the SEC stating whether such firm agrees with the above statements or, if not, stating the respects in which it does not agree. We have received the requested letter from Withum, and a copy of the letter is filed with this Current Report on Form 8-K as Exhibit 16.1.

 

  48  

 

 

 

(b) New independent registered public accounting firm:

 

On February 2, 2018, as part of the change in independent registered public accounting firms described in Section (a) above, the Board’s Audit Committee confirmed, recommended and approved the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm to audit the Company’s consolidated financial statements as of and for the fiscal year ending December 31, 2018. BDO USA, LLP was the auditor of Purple LLC prior to the Business Combination and provided audit opinions in connection with Purple LLC’s financial statements for the years ended December 31, 2016 and 2015.

 

During the two most recent fiscal years and through February 2, 2018, GPAC has not consulted with BDO USA, LLP regarding either (1) the application of accounting principles to a specified transaction, either contemplated or proposed, or the type of audit opinion that might be rendered on the financial statements of GPAC, or (2) any matter that was the subject of a disagreement or a reportable event described in Items 304(a)(1)(iv) or (v), respectively, of Regulation S-K or the type of audit opinion that might be rendered on the financial statements of GPAC.

 

ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT

 

Reference is made to the disclosure set forth under Item 2.01 Completion of Acquisition or Disposition of Assets of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

 

ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS

 

In connection with the Closing of the Business Combination, three of GPAC’s directors, William Kerr, Paul Zepf and Jeffrey Weiss, resigned, and, in accordance with our Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, the remaining directors (i) increased the size of the Board of Directors of the Company to eight directors and (ii) appointed as replacements the new directors of the Company, as set forth in Item 2.01 Completion of Acquisition or Disposition of Assets of this Current Report on Form 8-K.

 

On February 2, 2018, in connection with the Closing of the Business Combination, the Company entered into a Board Observer and Indemnification Agreement (the “ Observer Agreement ”) with Paul Zepf, pursuant to which Mr. Zepf agreed to serve as a non-voting observer to the Board of Directors and provide advice and input with respect to actions taken by the Board of Directors and the committees thereof. The Company will compensate Mr. Zepf for his services in the same amount and manner as if he were an independent director and member of each committee of the Board of Directors. The foregoing summary of the Observer Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Observer Agreement, a copy of which is attached as Exhibit 10.19 to this report and is incorporated by reference herein.

 

The Coliseum Subscription Agreement provided that the Company would commit to elect or appoint a designee of CCP to become a member of the board of directors of the Company following the closing of the Business Combination. In connection with the Closing, the Board of Directors of the Company adopted resolutions increasing the number of directors of the Company to eight and appointing Adam Gray, a manager of CCP, as a director.

 

The Chief Executive Officer, Paul Zepf, and the Chief Financial Officer, Andrew Cook, tendered their resignations, effective immediately upon the Closing, and the new executive officers of the Company, as set forth in Item 2.01 Completion of Acquisition or Disposition of Assets of this Current Report on Form 8-K, were appointed, effective as of the Closing. For certain biographical and other information, including a description of employment or other agreements, regarding the newly appointed officers and directors, and current chief executive officer and treasurer, see the disclosure under Item 2.01 Completion of Acquisition or Disposition of Assets of this Current Report on Form 8-K in the section titled “Directors and Executive Officers”, which disclosure is incorporated herein by reference.

 

For information regarding (i) any material plan, contract or arrangement in which any of the Company’s directors is a party or participates that was entered into or materially amended in connection with the Business Combination and any grant or award made to any of the Company’s directors under any such plan, contract or arrangement and (ii) any material compensatory plan, contract or arrangement in which the Company’s principal executive officer, principal financial officer, executive officer named in a Summary Compensation Table in the Proxy Statement or other comparable officer participates or is a party, any material amendment to any such plan, contract or arrangement and any material grant or award to any such person under any such plan, contract or arrangement, see (a) the section in the Proxy Statement entitled “Proposal No. 9 – Approval and Adoption of the Equity Incentive Plan” beginning on page 138, (b) the section in the Proxy Statement entitled “Management After the Business Combination—Executive Compensation” beginning on page 203, (c) the section in the Proxy Statement entitled “Information About Purple—Executive Compensation” beginning on page 184, (d) the section in the Proxy Statement entitled “Information About Purple—2017 Director Compensation” beginning on page 185, (e) the section in the Proxy Statement entitled “Information About GPAC—Executive Compensation” beginning on page 163, (f) “Item 1.01. Entry Into a Material Agreement” in this Current Report on Form 8-K, (g) “Item 2.01. Completion of Acquisition or Disposition of Assets— Executive Compensation” in this Current Report on Form 8-K, (h) “Item 2.01. Completion of Acquisition or Disposition of Assets— Director Compensation” in this Current Report on Form 8-K, (i) the Employment Agreement, dated February 2, 2018, between the Company and Tony Pearce, included in this report as Exhibit 10.6 and (j) the Employment Agreement, dated February 2, 2018, between the Company and Terry Pearce, included in this report as Exhibit 10.7, all of which information is incorporated herein by reference.

 

  49  

 

 

ITEM 5.03 AMENDMENT TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR

 

On February 2, 2018, immediately following the Closing, the Company amended and restated its certificate of incorporation and bylaws in their entirety. The amended and restated certificate of incorporation is filed as Exhibit 3.1 to this Current Report on Form 8-K and is incorporated herein by reference. The amended and restated bylaws are filed as Exhibit 3.2 to this Current Report on Form 8-K and are incorporated herein by reference. The amendments made to our certificate of incorporation are described on pages 125 to 137 of the Proxy Statement, which is incorporated by reference herein.

 

ITEM 5.06 CHANGE IN SHELL COMPANY STATUS

 

Upon the Closing of the Merger on February 2, 2018, the Company ceased to be a “shell company” as defined in Rule 12b-2 of the Exchange Act. See the disclosure under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

 

ITEM 5.07 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

On February 2, 2018, GPAC held a special meeting of its stockholders at which the following actions were approved:

 

(1) To a adopt the Merger Agreement and approve the transactions contemplated thereby, including the Business Combination (the “Business Combination Proposal”);

 

(2) To amend and restate our amended and restated certificate of incorporation to, among other things:

 

increase our authorized Common Stock and preferred stock, including the establishment of Class B Stock;

 

rename our outstanding Common Stock to Class A Stock;

 

eliminate the classification of our board of directors;

 

designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for specified legal actions (the “Delaware Forum Proposal”);

 

change our name from “Global Partner Acquisition Corp.” to “Purple Innovation, Inc.”;

 

change certain provisions related to our transition to an operating company; and

 

provide for certain additional non-substantive changes.

 

(3) To approve and adopt the Purple Innovation, Inc. 2017 Equity Incentive Plan (the “Incentive Plan Proposal”);

 

(4) To approve, for purposes of complying with applicable NASDAQ Capital Market listing rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock (the “Share Issuance Proposal”); and

 

(5) To approve and adopt a proposal to adjourn the special meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the special meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote (the “Adjournment Proposal”).

 

  50  

 

 

The voting results for each of these proposals are set forth below:

  

GPAC’s stockholders approved the Business Combination Proposal, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,783,989   1,348,623   0   0

 

GPAC’s stockholders approved the proposal to increase our authorized Common Stock and preferred stock, including the establishment of Class B Stock, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,691   1,648,626   103,295   0

 

GPAC’s stockholders approved the proposal to rename our outstanding Common Stock to Class A Stock, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,705   1,648,626   103,281   0

 

GPAC’s stockholders approved the proposal to eliminate the classification of our board of directors, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
13,279,314   300,003   103,295   0

 

GPAC’s stockholders approved the Delaware Forum Proposal, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,708   1,648,623   103,281   0

 

GPAC’s stockholders approved the proposal to change our name from “Global Partner Acquisition Corp.” to “Purple Innovation, Inc.”, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,708   1,648,623   103,281   0

 

GPAC’s stockholders approved the proposal to change certain provisions related to our transition to an operating company, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,708   1,648,623   103,281   0

 

  51  

 

 

GPAC’s stockholders approved the proposal to provide for certain additional non-substantive changes, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,708   1,648,623   103,281   0

  

GPAC’s stockholders approved the Incentive Plan Proposal, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,678,604   1,350,727   103,281   0

 

GPAC’s stockholders approved the Share Issuance Proposal, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
12,380,708   1,648,623   103,281   0

  

GPAC’s stockholders approved the Adjournment Proposal, based on the following votes:

 

Votes FOR   Votes AGAINST   Abstain   Broker
Non-Votes
11,934,151   2,095,180   103,281   0

 

ITEM 8.01 OTHER EVENTS

 

On February 6, 2018, the Company announced that it had expanded its Board of Directors to eight directors and appointed Adam Gray to its Board of Directors. The press release is attached as Exhibit 99.4 hereto and is incorporated into this Item 8.01 by reference.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(a) Financial Statements of Businesses Acquired.

 

The audited financial statements of Purple at December 31, 2016 and 2015 and for the years ended December 31, 2016 and 2015 and the unaudited financial statements of Purple at December 31, 2014 and for the year ended December 31, 2014 are attached to this Current Report on Form 8-K as Exhibit 99.1, which are incorporated herein by reference. The unaudited financial statements as of September 30, 2017 and for the nine months ended September 30, 2017 and September 30, 2016 are attached to this Current Report on Form 8-K as Exhibit 99.2, which are incorporated herein by reference.

 

  (b) Pro Forma Financial Information.

  

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2016 and for the nine months ended September 30, 2017 give pro forma effect to the Business Combination as if it had occurred on January 1, 2016. The unaudited pro forma condensed combined balance sheet as of September 30, 2017 assumes that the Business Combination was completed on September 30, 2017.

 

The unaudited pro forma condensed combined financial information is attached to this Current Report on Form 8-K as Exhibit 99.3.

  

  (c) Shell Company Transactions.

 

Reference is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein, which are incorporated herein by reference.

 

  (d) Exhibits.

 

See the Exhibit Index following the signature page of this Current Report, which is incorporated by reference here.

 

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SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: February 8, 2018 PURPLE INNOVATION, INC.
     
  By:

/s/ Samuel D. Bernards

    Samuel D. Bernards
    President and Chief Executive Officer

 

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EXHIBIT INDEX

 

Exhibit
Number

 

Description

   
2.1   Agreement and Plan of Merger, dated November 2, 2017, by and among Global Partner Acquisition Corp., PRPL Acquisition, LLC, Purple Innovation, LLC, InnoHold, LLC and Global Partner Sponsor I LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on November 3, 2017)
   
2.2   Amendment No. 1 to Agreement and Plan of Merger, dated January 8, 2018, by and among Global Partner Acquisition Corp., Purple Innovation, LLC, PRPL Acquisition, LLC and other parties named therein (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on January 8, 2018)
     
3.1   Amended and Restated Certificate of Incorporation
   
3.2   Amended and Restated Bylaws
   
4.1   Form of Class A Common Stock certificate
     
4.2   Form of Class B Common Stock certificate
     
4.3   Specimen Warrant Certificate (incorporated by reference to Exhibit 4.3 to the Company’s Form S-1/A filed with the SEC on July 13, 2015)
   
4.4   Warrant Agreement, dated July 29, 2015, between Continental Stock Transfer & Trust Company and the Company (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (File No. 001-37523) filed with the SEC on August 4, 2015)
     
10.1   Exchange Agreement, dated February 2, 2018, by and between Purple Innovation, Inc., Purple Innovation, LLC and InnoHold, LLC
   
10.2   Tax Receivable Agreement, dated February 2, 2018, by and between Purple Innovation, Inc. and InnoHold, LLC
   
10.3   Registration Rights Agreement, dated February 2, 2018, by and among Purple Innovation, Inc., InnoHold, LLC and Global Partner Sponsor I LLC
   
10.4   Non-Competition and Non-Solicitation Agreement, dated February 2, 2018, by and among Purple Innovation, Inc., InnoHold, LLC, Purple Innovation, LLC, Terry Pearce and Tony Pearce
   
10.5   Lock-Up Agreement, dated February 2, 2018, by and among Purple Innovation, Inc., InnoHold, LLC and Global Partner Sponsor I LLC
     
10.6#   Employment Agreement, dated February 2, 2018, between Purple Innovation, Inc. and Tony Pearce
     
10.7#   Employment Agreement, dated February 2, 2018, between Purple Innovation, Inc. and Terry Pearce
   
10.8#   Purple Innovation, Inc. 2017 Equity Incentive Plan
     
10.9   Form of Indemnification Agreement
   
10.10   Credit Agreement, dated February 2, 2018, between Purple Innovation, LLC, Coliseum Capital Partners, L.P., Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P.

 

  54  

 

 

10.11   Parent Guaranty, dated February 2, 2018, between Purple Innovation, Inc., Coliseum Capital Partners, L.P. and Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P.
     
10.12   Subscription and Backstop Agreement, dated January 29, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Baleen Capital Investors II LLC, Baleen Capital Fund LP, Greenhaven Road Capital Fund 1, L.P., Royce Value Trust, Inc., David Capital Partners Fund, LP, Pleiades Investment Partners – DC, L.P. and Dane Capital Fund LP
     
10.13   Agreement to Assign Sponsor Warrants, dated February 2, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Continental Stock Transfer and Trust Company, Baleen Capital Investors II LLC, Baleen Capital Fund LP, Greenhaven Road Capital Fund 1, L.P., Royce Value Trust, Inc., David Capital Partners Fund, LP, Pleiades Investment Partners – DC, L.P. and Dane Capital Fund LP
     
10.14   Registration Rights Agreement, dated February 2, 2018, between Global Partner Acquisition Corp., Baleen Capital Investors II LLC, Baleen Capital Fund LP, Greenhaven Road Capital Fund 1, L.P., Royce Value Trust, Inc., David Capital Partners Fund, LP, Pleiades Investment Partners – DC, L.P. and Dane Capital Fund LP
     
10.15   Subscription Agreement, dated February 1, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Coliseum Capital Partners, L.P. and Blackwell Partners LLC – Series A
     
10.16   Agreement to Assign Sponsor Warrants, dated February 2, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Continental Stock Transfer and Trust Company, Coliseum Capital Partners, L.P., Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P.
     
10.17   Agreement to Assign Founder Shares, dated February 2, 2018, between Global Partner Acquisition Corp., Global Partner Sponsor I LLC, Continental Stock Transfer and Trust Company and Coliseum Capital Partners, L.P., Blackwell Partners, LLC
     
10.18   Registration Rights Agreement, dated February 2, 2018, between Global Partner Acquisition Corp., Coliseum Capital Partners, L.P., Blackwell Partners, LLC and Coliseum Co-Invest Debt Fund, L.P.
     
10.19   Board Observer and Indemnification Agreement, dated February 2, 2018, between Purple Innovation, Inc. and Paul Zepf
     
16.1   Letter from WithumSmith+Brown, PC
     
21.1   Subsidiaries
   
99.1   Audited Financial Statements of Purple Innovation, LLC for the years ended December 31, 2016 and December 31, 2015 and Unaudited Financial Statements of Purple Innovation, LLC for the year ended December 31, 2014
   
99.2   Unaudited financial statements of Purple Innovation, LLC for the nine months ended September 30, 2017
   
99.3   Pro forma financial statements
     
99.4   Press Release, dated February 6, 2018

 

# Indicates a management contract or compensatory plan or arrangement.

 

  55  

Exhibit 3.1

 

Form of Amended and Restated Certificate of Incorporation of the Parent

 

SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

GLOBAL PARTNER ACQUISITION CORP.

 

February 2, 2018

 

Global Partner Acquisition Corp., a corporation organized and existing under the laws of the State of Delaware (the “ Corporation ”), DOES HEREBY CERTIFY AS FOLLOWS:

 

1. The name of the Corporation is “Global Partner Acquisition Corp.”. The original certificate of incorporation was filed with the Secretary of State of the State of Delaware on May 19, 2015 (the “ Original Certificate ”).

 

2. The Original Certificate was restated, integrated and amended by the provisions of the Amended and Restated Certificate of Incorporation (the “ First Amended and Restated Certificate ”) which was duly adopted by the Board of Directors of the Corporation (the “ Board ”) and the stockholders of the Corporation in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware (as amended, the “ DGCL ”) on July 29, 2015.

 

3. This Second Amended and Restated Certificate of Incorporation (the “ Amended and Restated Certificate ”) was duly adopted by the Board and the stockholders of the Corporation in accordance with Sections 242 and 245 of the DGCL.

 

4. This Amended and Restated Certificate restates, integra tes and amends and restates provisions of the First Amended and Restated Certificate. Certain capitalized terms used in this Amended and Restated Certificate are defined where appropriate herein.

 

5. The text of the First Amended and Restated Certificate, as amended, is hereby restated and amended in its entirety to read as follows:

 

ARTICLE I

NAME

 

The name of the corporation is Purple Innovation, Inc.

 

ARTICLE II

PURPOSE

 

The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “ DGCL ”). In addition to the powers and privileges conferred upon the Corporation by law and those incidental thereto, the Corporation shall possess and may exercise all the powers and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of the Corporation.

 

 

 

 

ARTICLE III

REGISTERED AGENT

 

The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, DE 19808, New Castle County, and the name of the Corporation’s registered agent at such address is Corporation Service Company.

 

ARTICLE IV

CAPITALIZATION

 

Section 4.1  Authorized Capital Stock .  The total number of shares of all classes of capital stock which the Corporation is authorized to issue is Three Hundred and Five Million (305,000,000) shares, consisting of (a) Two Hundred and Ten Million (210,000,000) shares of class A common stock, par value $0.0001 per share (the “ Class A Common Stock ”), (b) Ninety Million (90,000,000) shares of class B common stock, par value $0.0001 per share (the “ Class B Common Stock ” and, together with the Class A Common Stock, the “ Common Stock ”) and (c) Five Million (5,000,000) shares of preferred stock, par value $0.0001 per share (the “ Preferred Stock ”).  Subject to the rights of the holders of any one or more series of Preferred Stock then outstanding, the number of authorized shares of any of the Class A Common Stock, Class B Common Stock or Preferred Stock may be increased or decreased, in each case by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, and no vote of the holders of any of the Class A Common Stock, Class B Common Stock or Preferred Stock voting separately as a class will be required therefor. Notwithstanding the foregoing, the number of authorized shares of any particular class may not be decreased below the number of shares of such class then outstanding plus, in the case of Class A Common Stock, the number of shares of Class A Common Stock issuable in connection with (i) the exchange of Class B Common Stock and Class B Units (as defined in Article XI) pursuant to the Exchange Agreement (as defined in Article XI) and (ii) the exercise of outstanding options, warrants, exchange rights, conversion rights or similar rights for Class A Common Stock.

 

Section 4.2  Renaming of Existing Common Stock . Upon this Amended and Restated Certificate becoming effective pursuant to the DGCL, each share of the Corporation’s common stock, par value $0.0001 per share, issued and outstanding or held in treasury, shall automatically and without any action on the part of the holder thereof be renamed as and become one share of Class A Common Stock.

 

Section 4.3  Preferred Stock .  The Preferred Stock may be issued from time to time in one or more series. The Board is hereby expressly authorized to provide for the issuance of shares of the Preferred Stock in one or more series and to establish from time to time the number of shares to be included in each such series and to fix the voting rights, if any, designations, powers, preferences and relative, participating, optional and other special rights, if any, of each such series and any qualifications, limitations and restrictions thereof, as shall be stated in the resolution or resolutions adopted by the Board providing for the issuance of such series and included in a certificate of designations (a “ Preferred Stock Designation ”) filed pursuant to the DGCL, and the Board is hereby expressly vested with the authority to the full extent provided by law, now or hereafter, to adopt any such resolution or resolutions.

 

2

 

 

Section 4.4  Common Stock .

 

(a) Voting Rights .

 

(1)  Each holder of Class A Common Stock, as such, will be entitled to one vote for each share of Class A Common Stock held of record by the holder on all matters on which stockholders generally are entitled to vote.

 

(2)  Each holder of Class B Common Stock, as such, will be entitled to one vote for each share of Class B Common Stock held of record by the holder on all matters on which stockholders are generally entitled to vote.

 

(3)  Except as otherwise required by the DGCL or this Amended and Restated Certificate, the holders of Common Stock will vote together as a single class on all matters (or, if any holders of Preferred Stock are entitled to vote together with the holders of Common Stock, as a single class with the holders of such Preferred Stock).

 

(4)  Except as otherwise required by law or this Amended and Restated Certificate (including any Preferred Stock Designation), at any annual or special meeting of the stockholders of the Corporation, the holders of the Common Stock shall have the exclusive right to vote for the election of directors and on all other matters properly submitted to a vote of the stockholders. Notwithstanding the foregoing, except as otherwise required by law or this Amended and Restated Certificate (including a Preferred Stock Designation), the holders of the Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate (including any amendment to any Preferred Stock Designation) that relates solely to the terms of one or more outstanding series of the Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate (including any Preferred Stock Designation).

 

(b) Dividends and Distributions .

 

(1)  Subject to the rights, if any, of the holders of any outstanding series of Preferred Stock, the holders of the Class A Common Stock shall be entitled to receive dividends and other distributions (payable in cash, property or capital stock of the Corporation) when, as and if declared thereon by the Board from time to time out of any assets or funds of the Corporation legally available therefor, and shall share equally on a per share basis in such dividends and distributions.

 

3

 

 

(2)  Except as set forth in Section 4.4(b)(3) with respect to stock dividends, dividends and other distributions shall not be declared or paid on the Class B Common Stock.

 

(3)  In no event will any stock dividends, stock splits, reverse stock splits, combinations of stock, reclassifications or recapitalizations be declared or made on any Class A Common Stock or Class B Common Stock, as the case may be, unless contemporaneously therewith (a) all shares of Class A Common Stock and Class B Common Stock at the time outstanding are treated in the same proportion and the same manner and (b) the stock dividend, stock split, reverse stock split, combination of stock, reclassification or recapitalization has been reflected in the same economically equivalent manner with respect to all Class A Units (as defined in Article XI) and Class B Units. Stock dividends with respect to Class A Common Stock may be paid only with Class A Common Stock. Stock dividends with respect to Class B Common Stock may be paid only with Class B Common Stock; provided , that the deemed transfer and retirement of shares of Class B Common Stock to the Corporation in accordance with terms and conditions of the Exchange Agreement shall not be a transaction subject to this Section 4.4(b)(3) .

 

(c)  Liquidation, Dissolution or Winding Up .  Subject to the rights, if any, of the holders of any outstanding series of the Preferred Stock, and to the rights of the holders of Class B Common Stock to exchange their shares of Class B Common Stock and Class B Units for shares of Class A Common Stock in accordance with the Exchange Agreement (or for the consideration payable in respect of shares of Class A Common Stock in such voluntary or involuntary liquidation, dissolution or winding up), in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of (i) the Class A Common Stock shall be entitled to receive all the remaining assets of the Corporation available for distribution to its stockholders, ratably in proportion to the number of shares of the Class A Common Stock held by them, and (ii) the Class B Common Stock shall not be entitled to receive any amount of the remaining assets.  Except as otherwise provided above with respect to the exchange rights of holders of the Class B Common Stock under the terms of the Exchange Agreement, the holders of shares of Class B Common Stock, as such, will not be entitled to receive, with respect to such shares, any assets of the Corporation, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation.

 

(d)  Transfer of Class B Common Stock .

 

(1)  A holder of Class B Common Stock may only transfer such Class B Common Stock (or a fraction thereof) to a transferee if the holder also transfers a corresponding number of Class B Units to the transferee (as such number may be adjusted to reflect equitably any stock split, subdivision, combination or similar change with respect to the Class B Units or Class B Common Stock).

 

(2)  Any purported transfer of shares of Class B Common Stock in violation of the restriction described in Section 4.4(d)(1) (the “ Restriction ”) shall be null and void. If, notwithstanding the foregoing prohibition, a person shall, voluntarily or involuntarily, purportedly become or attempt to become, the purported owner (“ Purported Owner ”) of shares of Class B Common Stock in violation of the Restriction, then the Purported Owner shall not obtain any rights in and to such shares of Class B Common Stock (the “ Restricted Shares ”), and the purported transfer of the Restricted Shares to the Purported Owner shall not be recognized by the Corporation’s transfer agent (the “ Transfer Agent ”).

 

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(3)  Upon a determination by the Board that a person has attempted or may attempt to transfer or to acquire Restricted Shares in violation of the Restriction, the Board may take such action as it deems advisable to refuse to give effect to such transfer or acquisition on the books and records of the Corporation, including without limitation to cause the Transfer Agent to maintain the Purported Owner’s transferor as the record owner of the Restricted Shares, and to institute proceedings to enjoin or rescind any such transfer or acquisition.

 

(e)  Legends .  All certificates or book entries representing shares of Class B Common Stock (or fractions thereof), as the case may be, shall bear a legend substantially in the following form:

 

THE SECURITIES REPRESENTED BY THIS [CERTIFICATE][BOOK ENTRY] ARE SUBJECT TO THE RESTRICTIONS (INCLUDING RESTRICTIONS ON TRANSFER) SET FORTH IN THE CERTIFICATE OF INCORPORATION (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION AND SHALL BE PROVIDED FREE OF CHARGE TO ANY STOCKHOLDER MAKING A REQUEST THEREFOR).

 

(f)  Fractional Shares .  The Class B Common Stock may be issued and transferred in fractions of a share which shall entitle the holder to exercise voting rights and to have the benefit of all other rights of holders of Class B Common Stock. Subject to the Restriction, holders of shares of Class B Common Stock (or fractions thereof) shall be entitled to transfer fractions thereof and the Corporation shall, and shall cause any transfer agent with respect to the Class B Common Stock to, facilitate any such transfers, including by issuing certificates or making book entries representing any such fractional shares.

 

(g)  Transfer Taxes .  The issuance of shares of Class A Common Stock upon the exchange of Class B Common Stock and Class B Units under the terms of the Exchange Agreement will be made without charge to the holders of the shares of Class B Common Stock and of the Class B Units for any stamp or other similar tax in respect of the issuance, unless any such shares of Class A Common Stock are to be issued in a name other than that of the then record holder of the shares of Class B Common Stock and Class B Units being exchanged, in which case the Person or Persons requesting the issuance thereof will pay to the Corporation the amount of any tax that may be payable in respect of any transfer involved in the issuance or will establish to the reasonable satisfaction of the Corporation that the tax has been paid or is not payable.

 

Section 4.5  Rights and Options .  The Corporation has the authority to create and issue rights, warrants and options entitling the holders thereof to purchase shares of any class or series of the Corporation’s capital stock or other securities of the Corporation, and such rights, warrants and options shall be evidenced by instrument(s) approved by the Board. The Board is empowered to set the exercise price, duration, times for exercise and other terms and conditions of such rights, warrants or options; provided , however, that the consideration to be received for any shares of capital stock subject thereto may not be less than the par value thereof.

 

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ARTICLE V

BOARD OF DIRECTORS

 

Section 5.1   Board Powers .  The business and affairs of the Corporation shall be managed by, or under the direction of, the Board. In addition to the powers and authority expressly conferred upon the Board by statute, this Amended and Restated Certificate or the Amended and Restated Bylaws (“ Bylaws ”) of the Corporation, the Board is hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the DGCL, this Amended and Restated Certificate and any Bylaws adopted by the stockholders; provided , however , that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the Board that would have been valid if such Bylaws had not been adopted.

 

Section 5.2  Number, Election and Term .

 

(a) The number of directors of the Corporation at the time this Amended and Restated Certificate of Incorporation becomes effective, until such time as such number may be changed pursuant to the succeeding sentence, shall be fixed at seven (7). The number of directors of the Corporation, other than those who may be elected by the holders of one or more series of the Preferred Stock voting separately by class or series, shall be fixed from time to time exclusively by the Board pursuant to a resolution adopted by a majority of the Whole Board. For purposes of this Amended and Restated Certificate, “Whole Board” shall mean the total number of directors the Corporation would have if there were no vacancies.

 

(b)  A director shall hold office until the next annual meeting and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

(c)  Unless and except to the extent that the Bylaws shall so require, the election of directors need not be by written ballot.

 

Section 5.3  Newly Created Directorships and Vacancies .  Newly created directorships resulting from an increase in the number of directors and any vacancies on the Board resulting from death, resignation, retirement, disqualification, removal or other cause may be filled solely by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director (and not by stockholders), and any director so chosen shall hold office for the remainder of the full term to which the new directorship was added or in which the vacancy occurred and until his or her successor has been elected and qualified, subject, however, to such director’s earlier death, resignation, retirement, disqualification or removal.

 

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Section 5.4   Removal .  Subject to Section 5.5 hereof, any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

 

Section 5.5   Preferred Stock — Directors .  Notwithstanding any other provision of this Article V , and except as otherwise required by law, whenever the holders of one or more series of the Preferred Stock shall have the right, voting separately by class or series, to elect one or more directors, the term of office, the filling of vacancies, the removal from office and other features of such directorships shall be governed by the terms of such series of the Preferred Stock as set forth in this Amended and Restated Certificate (including any Preferred Stock Designation) and such directors shall not be included in any of the classes created pursuant to this Article V unless expressly provided by such terms.

 

ARTICLE VI

BYLAWS

 

In furtherance and not in limitation of the powers conferred upon it by law, the Board shall have the power to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Whole Board shall be required to adopt, amend, alter or repeal the Bylaws pursuant to the preceding sentence. The Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided , however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by law or by this Amended and Restated Certificate (including any Preferred Stock Designation), the affirmative vote of the holders of at least a majority of the voting power of all then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws, and provided further, however, that (i) no Bylaws hereafter adopted by the stockholders shall invalidate any prior act or the Board that would have been valid had such Bylaws not been adopted and (ii) any provision of the Bylaws which states that it may be changed by the unanimous vote of the entire or whole Board of Directors may only be changed by such vote.

 

ARTICLE VII

MEETINGS OF STOCKHOLDERS

 

Section 7.1  Meetings .  Subject to the rights of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, Chief Executive Officer of the Corporation, or the Board pursuant to a resolution adopted by a majority of the Whole Board.

 

Section 7.2  Advance Notice .  Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws.

 

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Section 7.3 No Action by Written Consent . Any action required or permitted to be taken by the stockholders of the Corporation must be effected by a duly called annual or special meeting of such holders, and may not be effected by written consent of the stockholders.

   

ARTICLE VIII

LIMITED LIABILITY; INDEMNIFICATION

 

Section 8.1  Limitation of Director Liability .  A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL as the same exists or may hereafter be amended. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.

 

Section 8.2  Indemnification and Advancement of Expenses .

 

(a)  To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “ proceeding ”) by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (an “ indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such indemnitee in connection with such proceeding. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by an indemnitee in defending or otherwise participating in any proceeding in advance of its final disposition; provided , however, that, to the extent required by applicable law, such payment of expenses in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking, by or on behalf of the indemnitee, to repay all amounts so advanced if it shall ultimately be determined that the indemnitee is not entitled to be indemnified under this Section  8.2 or otherwise. The rights to indemnification and advancement of expenses conferred by this Section 8.2 shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. Notwithstanding the foregoing provisions of this Section 8.2(a) , except for proceedings to enforce rights to indemnification and advancement of expenses, the Corporation shall indemnify and advance expenses to an indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board.

 

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(b) The rights to indemnification and advancement of expenses conferred on any indemnitee by this Section  8.2 shall not be exclusive of any other rights that any indemnitee may have or hereafter acquire under law, this Amended and Restated Certificate, the Bylaws, an agreement, vote of stockholders or disinterested directors, or otherwise.

 

(c)  Any repeal or amendment of this Section 8.2 by the stockholders of the Corporation or by changes in law, or the adoption of any other provision of this Amended and Restated Certificate inconsistent with this Section 8.2 , shall, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the Corporation to provide broader indemnification rights on a retroactive basis than permitted prior thereto), and shall not in any way diminish or adversely affect any right or protection existing at the time of such repeal or amendment or adoption of such inconsistent provision in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision.

 

(d)  This Section 8.2 shall not limit the right of the Corporation, to the extent and in the manner authorized or permitted by law, to indemnify and to advance expenses to persons other than indemnitees.

 

ARTICLE IX

AMENDMENT OF AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

 

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate (including any Preferred Stock Designation), in the manner now or hereafter prescribed by this Amended and Restated Certificate and the DGCL.

 

ARTICLE X

EXCLUSIVE FORUM

 

Section 10.1 . Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any stockholder (including a beneficial owner) of the Corporation to bring (i) any derivative action, suit or proceeding brought or purporting to be brought on behalf of the Corporation, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, creditors or other constituents, (iii) any action, suit or proceeding asserting a claim against the Corporation or any of its current or former directors, officers or employees arising pursuant to any provision of the DGCL, this Amended and Restated Certificate or the Bylaws or (iv) any action, suit or proceeding asserting a claim against the Corporation or any of its current or former directors, officers or employees governed by the internal affairs doctrine, except for, as to each of clauses (i) through (iv), any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction.

 

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Section 10.2 . Personal Jurisdiction . If any action the subject matter of which is within the scope of Section 10.1 immediately above is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (i) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 10.1 immediately above (an “Enforcement Action”) and (ii) having service of process made upon such stockholder in any such Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

 

Section 10.3 . If any provision of this Article X shall be held to be invalid, illegal or unenforceable as applied to any person or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provision in any other circumstance to such person and of the remaining provisions of this Article X (including, without limitation, each portion of any sentence of this Article X containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) to such person, and the application of such provision to other persons and circumstances, shall not in any way be affected or impaired thereby. Any person purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have received notice of and consented to the provisions of this Article X.

 

ARTICLE XI

DEFINITIONS

 

As used in this Amended and Restated Certificate, the term:

 

(a) Business Combination ” means a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving the Corporation and one or more businesses.

 

(b) Class A Units ” has the meaning set forth in the Purple LLC Agreement.

 

(c) Class B Units ” has the meaning set forth in the Purple LLC Agreement.

 

(d) Exchange Agreement ” means that certain Exchange Agreement to be entered into in connection with the closing of the transactions contemplated by the Merger Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time.

 

(e) Merger Agreement ” means that certain Merger Agreement dated as of November 2, 2017 by and among the Corporation, Purple Innovation, LLC, InnoHold, LLC, PRPL Acquisition, LLC and the Parent Representative (as defined therein), as the same may be amended, restated, supplemented and/or otherwise modified from time to time.

 

(f) Purple LLC Agreement ” means that certain Second Amended and Restated Limited Liability Company Agreement of Purple Innovation, LLC, to be entered into in connection with the closing of the transactions contemplated by the Merger Agreement, as the same may be amended, restated, supplemented and/or otherwise modified from time to time.

 

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ARTICLE XII

BUSINESS COMBINATION REQUIREMENTS; EXISTENCE

 

Section 12.1 General .

 

(a) The provisions of this Article XII shall apply during the period commencing upon the effectiveness of this Amended and Restated Certificate and terminating upon the consummation of the Corporation’s initial Business Combination and no amendment to this Article XII shall be effective prior to the consummation of the initial Business Combination unless approved by the affirmative vote of the holders of at least sixty-five percent (65%) of all then outstanding shares of the Common Stock.

 

(b) Immediately after the consummation of the Corporation’s initial public offering of securities (the “Offering”), a certain amount of the net offering proceeds received by the Corporation in the Offering (including the proceeds of any exercise of the underwriters’ over-allotment option) and certain other amounts specified in the Corporation’s registration statement on Form S-1, as initially filed with the Securities and Exchange Commission on June 12, 2015, as amended (the “Registration Statement”), shall be deposited in a trust account (the “Trust Account”), established for the benefit of the Public Stockholders (as defined below) pursuant to a trust agreement described in the Registration Statement. Except for the withdrawal of interest to pay taxes, none of the funds held in the Trust Account (including the interest earned on the funds held in the Trust Account) will be released from the Trust Account until the earlier of (i) the completion of the initial Business Combination and (ii) the redemption of 100% of the Offering Shares (as defined below) if the Corporation is unable to complete its initial Business Combination by November 6, 2017 (or February 5, 2018 if the Corporation has executed a definitive agreement for a Business Combination by November 6, 2017). Holders of shares of the Corporation’s Common Stock included as part of the units sold in the Offering (the “Offering Shares”) (whether such Offering Shares were purchased in the Offering or in the secondary market following the Offering and whether or not such holders are affiliates of Global Partner Sponsor I LLC, (the “Sponsor”) or officers or directors of the Corporation) are referred to herein as “Public Stockholders.”

 

Section 12.2 Redemption and Repurchase Rights .

 

(a) Prior to the consummation of the initial Business Combination, the Corporation shall provide all holders of Offering Shares with the opportunity to have their Offering Shares redeemed or repurchased upon the consummation of the initial Business Combination pursuant to, and subject to the limitations of, Sections 12.2(b) and 12.2(c) (such rights of such holders to have their Offering Shares redeemed or repurchased pursuant to such Sections, the “Redemption Rights”) hereof for cash equal to the applicable redemption or repurchase price per share determined in accordance with Section 12.2(b) hereof (the “Redemption Price”); provided, however, that the Corporation shall not redeem or repurchase Offering Shares to the extent that such redemption or repurchase would result in the Corporation having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of less than $5,000,001 (such limitation hereinafter called the “Redemption Limitation”). Notwithstanding anything to the contrary contained in this Amended and Restated Certificate, there shall be no Redemption Rights or liquidating distributions with respect to any warrant issued pursuant to the Offering.

 

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(b) (i) Repurchase Rights . Unless the Corporation offers to redeem the Offering Shares as described in Section 12.2(b)(ii), it shall offer to repurchase the Offering Shares pursuant to a tender offer in accordance with Rule 13e-4 and Regulation 14E of the Exchange Act (such rules and regulations hereinafter called the “Tender Offer Rules”) which it shall commence prior to the consummation of the initial Business Combination and shall file tender offer documents with the Securities and Exchange Commission that contain substantially the same financial and other information about the initial Business Combination and the Redemption Rights as is required under Regulation 14A of the Exchange Act (such rules and regulations hereinafter called the “Proxy Solicitation Rules”), even if such information is not required under the Tender Offer Rules. If the Corporation offers to repurchase the Offering Shares (and has not otherwise withdrawn the tender offer), the Redemption Price per share of the Common Stock payable to holders of the Offering Shares tendering their Offering Shares pursuant to such tender offer shall be equal to, subject to the Redemption Limitation, the quotient obtained by dividing: (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the date of the commencement of the tender offer, including interest (which interest shall be net of taxes payable), by (ii) the total number of then outstanding Offering Shares.

 

(ii) Redemption Rights . If a stockholder vote is required by law to approve the proposed initial Business Combination or the Corporation decides to hold a stockholder vote on the proposed initial Business Combination for business or other legal reasons, the Corporation shall offer to redeem the Offering Shares at a Redemption Price per share of the Common Stock payable to holders of the Offering Shares exercising their Redemption Rights (irrespective of whether they voted in favor or against the Business Combination) equal to, subject to the Redemption Limitation, the quotient obtained by dividing (a) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the initial Business Combination, including interest (which interest shall be net of taxes payable), by (b) the total number of then outstanding Offering Shares.

 

(c) If the Corporation offers to redeem the Offering Shares in conjunction with a stockholder vote on an initial Business Combination pursuant to a proxy solicitation, a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Exchange Act), shall be restricted from seeking Redemption Rights with respect to 10% or more of the Offering Shares.

 

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(d) In the event that the Corporation has not consummated a Business Combination by November 6, 2017 (or February 5, 2018 if the Corporation has executed a definitive agreement for a Business Combination by November 6, 2017), the Corporation shall (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the Offering Shares in consideration of a per-share price, payable in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable and less up to $50,000 of such net interest to pay dissolution expenses), by (B) the total number of then outstanding Offering Shares, which redemption will completely extinguish rights of the Public Stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the Board in accordance with applicable law, dissolve and liquidate, subject in each case to the Corporation’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law.

 

(e) If the Corporation offers to redeem the Offering Shares in conjunction with a stockholder vote on an initial Business Combination, the Corporation shall consummate the proposed Business Combination only if (i) such initial Business Combination is approved by the affirmative vote of the holders of a majority of the shares of the Common Stock that are voted at a stockholder meeting held to consider such initial Business Combination and (ii) the Redemption Limitation is not exceeded.

 

Section 12.3 Distributions from the Trust Account .

 

(a) A Public Stockholder shall be entitled to receive funds from the Trust Account only as provided in Sections 12.2(a), 12.2(b), 12.2(d) or 12.7 hereof. In no other circumstances shall a Public Stockholder have any right or interest of any kind in or to distributions from the Trust Account, and no stockholder other than a Public Stockholder shall have any interest in or to the Trust Account.

 

(b) Each Public Stockholder that does not exercise its Redemption Rights shall retain its interest in the Corporation and shall be deemed to have given its consent to the release of the remaining funds in the Trust Account to the Corporation, and following payment to any Public Stockholders exercising their Redemption Rights, the remaining funds in the Trust Account shall be released to the Corporation.

 

(c) The exercise by a Public Stockholder of the Redemption Rights shall be conditioned on such Public Stockholder following the specific procedures for redemptions set forth by the Corporation in any applicable tender offer or proxy materials sent to the Corporation’s Public Stockholders relating to the proposed initial Business Combination. Payment of the amounts necessary to satisfy the Redemption Rights properly exercised shall be made as promptly as practical after the consummation of the initial Business Combination.

 

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Section 12.4 Share Issuances . Prior to the consummation of the Corporation’s initial Business Combination, the Corporation shall not issue any additional shares of capital stock of the Corporation that would entitle the holders thereof to receive funds from the Trust Account or vote on any Business Combination.

 

Section 12.5 Transactions with Affiliates . In the event the Corporation enters into an initial Business Combination with a target business that is affiliated with the Sponsor, or the directors or officers of the Corporation, the Corporation, or a committee of the independent directors of the Corporation, shall obtain an opinion from an independent investment banking firm that is a member of the Financial Industry Regulatory Authority or a qualified independent accounting firm that such Business Combination is fair to the Corporation from a financial point of view.

 

Section 12.6 No Transactions with Other Blank Check Companies . The Corporation shall not enter into a Business Combination with another blank check company or a similar company with nominal operations.

 

Section 12.7 Additional Redemption Rights . If, in accordance with Section 9.1(a), any amendment is made to Section 9.2(d) that would affect the substance or timing of the Corporation’s obligation to redeem 100% of the Offering Shares if the Corporation has not consummated a Business Combination by November 6, 2017 (or February 5, 2018 if the Corporation has executed a definitive agreement for a Business Combination by November 6, 2017), the Public Stockholders shall be provided with the opportunity to redeem their Offering Shares upon the approval of any such amendment, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding Offering Shares; provided, however, that any such redemption shall be subject to the Redemption Limitation.

 

Section 12.8 Minimum Value of Target . So long as the Corporation’s securities are listed on the Nasdaq Stock Market, the Corporation’s Business Combination must occur with one or more target businesses that together have a fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the Business Combination.    

 

[Signature page to follow]

 

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IN WITNESS WHEREOF, Global Partner Acquisition Corp. has caused this Amended and Restated Certificate to be duly executed in its name and on its behalf by an authorized officer as of the date first set forth above.

 

  GLOBAL PARTNER ACQUISITION CORP.
     
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Chief Executive Officer

 

 

 

Exhibit 3.2

 

AMENDED AND RESTATED

BYLAWS

 

OF

 

PURPLE INNOVATION, INC.

A DELAWARE CORPORATION

(THE “CORPORATION”)

(FORMERLY KNOWN AS

GLOBAL PARTNER Acquisition CORP.)

 

ARTICLE I

 

OFFICES

 

Section 1.1. Registered Office . The registered office of the Corporation within the State of Delaware shall be located at either (a) the principal place of business of the Corporation in the State of Delaware or (b) the office of the corporation or individual acting as the Corporation’s registered agent in Delaware.

 

Section 1.2. Additional Offices . The Corporation may, in addition to its registered office in the State of Delaware, have such other offices and places of business, both within and outside the State of Delaware, as the Board of Directors of the Corporation (the “ Board ”) may from time to time determine or as the business and affairs of the Corporation may require.

 

ARTICLE II

 

STOCKHOLDERS MEETINGS

 

Section 2.1. Annual Meetings . The annual meeting of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to  Section 9.5(a) . At each annual meeting, the stockholders shall elect those directors of the Corporation to fill any term of a directorship that expires on the date of such annual meeting and may transact any other business as may properly be brought before the meeting.

 

Section 2.2. Special Meetings . Subject to the rights of the holders of any outstanding series of the Preferred Stock, and to the requirements of applicable law, special meetings of stockholders, for any purpose or purposes, may be called only by the Chairman of the Board, Chief Executive Officer, or the Board pursuant to a resolution adopted by a majority of the Board. Special meetings of stockholders shall be held at such place and time and on such date as shall be determined by the Board and stated in the Corporation’s notice of the meeting, provided that the Board may in its sole discretion determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication pursuant to  Section 9.5(a) .

 

Section 2.3. Notices. Notice of each stockholders meeting stating the place, if any, date, and time of the meeting, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, shall be given in the manner permitted by Section 9.3 to each stockholder entitled to vote thereat by the Corporation not less than 10 nor more than 60 days before the date of the meeting. If said notice is for a stockholders meeting other than an annual meeting, it shall in addition state the purpose or purposes for which the meeting is called, and the business transacted at such meeting shall be limited to the matters so stated in the Corporation’s notice of meeting (or any supplement thereto). Any meeting of stockholders as to which notice has been given may be postponed, and any special meeting of stockholders as to which notice has been given may be cancelled, by the Board upon public announcement (as defined in Section 2.7(c)) given before the date previously scheduled for such meeting.

 

 

 

 

Section 2.4. Quorum . Except as otherwise provided by applicable law, the Corporation’s Second Amended and Restated Certificate of Incorporation, as the same may be amended or restated from time to time (the “ Certificate of Incorporation ”) or these Bylaws, the presence, in person or by proxy, at a stockholders meeting of the holders of shares of outstanding capital stock of the Corporation representing a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote at such meeting shall constitute a quorum for the transaction of business at such meeting, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of shares representing a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. If a quorum shall not be present or represented by proxy at any meeting of the stockholders of the Corporation, the chairman of the meeting may adjourn the meeting from time to time in the manner provided in  Section 2.6  until a quorum shall attend. The stockholders present at a duly convened meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the voting power of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any such other corporation to vote shares held by it in a fiduciary capacity.

 

Section 2.5. Voting of Shares .

 

(a)  Voting Lists . The Secretary shall prepare, or shall cause the officer or agent who has charge of the stock ledger of the Corporation to prepare, at least 10 days before every meeting of stockholders, a complete list of the stockholders of record entitled to vote at such meeting and showing the address and the number of shares registered in the name of each stockholder. Nothing contained in this  Section 2.5(a)  shall require the Corporation to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least 10 days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If a meeting of stockholders is to be held solely by means of remote communication as permitted by Section 9.5(a) , the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of meeting. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list required by this  Section 2.5(a)  or to vote in person or by proxy at any meeting of stockholders.

 

(b)  Manner of Voting . At any stockholders meeting, every stockholder entitled to vote may vote in person or by proxy. If authorized by the Board, the voting by stockholders or proxy holders at any meeting conducted by remote communication may be effected by a ballot submitted by electronic transmission (as defined in  Section 9.3 ), provided that any such electronic transmission must either set forth or be submitted with information from which the Corporation can determine that the electronic transmission was authorized by the stockholder or proxy holder. The Board, in its discretion, or the chairman of the meeting of stockholders, in such person’s discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

(c)  Proxies . Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Proxies need not be filed with the Secretary of the Corporation until the meeting is called to order, but shall be filed with the Secretary before being voted. Without limiting the manner in which a stockholder may authorize another person or persons to act for such stockholder as proxy, either of the following shall constitute a valid means by which a stockholder may grant such authority:

 

(i) A stockholder may execute a writing authorizing another person or persons to act for such stockholder as proxy. Execution may be accomplished by the stockholder or such stockholder’s authorized officer, director, employee or agent signing such writing or causing such person’s signature to be affixed to such writing by any reasonable means, including, but not limited to, by facsimile signature.

 

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(ii) A stockholder may authorize another person or persons to act for such stockholder as proxy by transmitting or authorizing the transmission of an electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission authorizing another person or persons to act as proxy for a stockholder may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used; provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

 

(d)  Required Vote . Subject to the rights of the holders of one or more series of preferred stock of the Corporation (“ Preferred Stock ”), voting separately by class or series, to elect directors pursuant to the terms of one or more series of Preferred Stock, the election of directors shall be determined by a plurality of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon. All other matters shall be determined by the vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the meeting and entitled to vote thereon, unless the matter is one upon which, by applicable law, the Certificate of Incorporation, these Bylaws or applicable stock exchange rules, a different vote is required, in which case such provision shall govern and control the decision of such matter.

 

(e)  Inspectors of Election . The Board may, and shall if required by law, in advance of any meeting of stockholders, appoint one or more persons as inspectors of election, who may be employees of the Corporation or otherwise serve the Corporation in other capacities, to act at such meeting of stockholders or any adjournment thereof and to make a written report thereof. The Board may appoint one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspectors of election or alternates are appointed by the Board, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain and report the number of outstanding shares and the voting power of each; determine the number of shares present in person or represented by proxy at the meeting and the validity of proxies and ballots; count all votes and ballots and report the results; determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. No person who is a candidate for an office at an election may serve as an inspector at such election. Each report of an inspector shall be in writing and signed by the inspector or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors.

 

Section 2.6. Adjournments . Any meeting of stockholders, annual or special, may be adjourned by the chairman of the meeting, from time to time, whether or not there is a quorum, to reconvene at the same or some other place. Notice need not be given of any such adjourned meeting if the date, time, and place, if any, thereof, and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting the stockholders, or the holders of any class or series of stock entitled to vote separately as a class, as the case may be, may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

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Section 2.7. Advance Notice for Business .

 

(a)  Annual Meetings of Stockholders . No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board, (ii) otherwise properly brought before the annual meeting by or at the direction of the Board or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this  Section 2.7(a)  and on the record date for the determination of stockholders entitled to vote at such annual meeting and (y) who complies with the notice procedures set forth in this  Section 2.7(a) . Notwithstanding anything in this  Section 2.7(a)  to the contrary, only persons nominated for election as a director to fill any term of a directorship that expires on the date of the annual meeting pursuant to  Section 3.3  will be considered for election at such meeting.

 

(i) In addition to any other applicable requirements, for business (other than nominations) to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such business must otherwise be a proper matter for stockholder action. Subject to  Section 2.7(a)(iii) , a stockholder’s notice to the Secretary with respect to such business, to be timely, must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Corporation. The public announcement of an adjournment of an annual meeting shall not commence a new time period for the giving of a stockholder’s notice as described in this Section 2.7(a).

 

(ii) To be in proper written form, a stockholder’s notice to the Secretary with respect to any business (other than nominations) must set forth as to each such matter such stockholder proposes to bring before the annual meeting (A) a brief description of the business desired to be brought before the annual meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event such business includes a proposal to amend these Bylaws, the language of the proposed amendment) and the reasons for conducting such business at the annual meeting, (B) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, (D) a description of all arrangements or understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal of such business by such stockholder, (E) any material interest of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made in such business and (F) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

 

(iii) The foregoing notice requirements of this  Section 2.7(a)  shall be deemed satisfied by a stockholder as to any proposal (other than nominations) if the stockholder has notified the Corporation of such stockholder’s intention to present such proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and such stockholder has complied with the requirements of such Rule for inclusion of such proposal in a proxy statement prepared by the Corporation to solicit proxies for such annual meeting. No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this  Section 2.7(a) , provided, however, that once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this  Section 2.7(a)  shall be deemed to preclude discussion by any stockholder of any such business. If the Board or the chairman of the annual meeting determines that any stockholder proposal was not made in accordance with the provisions of this  Section 2.7(a)  or that the information provided in a stockholder’s notice does not satisfy the information requirements of this Section 2.7(a), such proposal shall not be presented for action at the annual meeting. Notwithstanding the foregoing provisions of this Section 2.7(a), if the stockholder (or a qualified representative of the stockholder) does not appear at the annual meeting of stockholders of the Corporation to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.

 

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(iv) In addition to the provisions of this  Section 2.7(a) , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this  Section 2.7(a)  shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

 

(b)  Special Meetings of Stockholders . Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting only pursuant to  Section 3.3 .

 

(c)  Public Announcement . For purposes of these Bylaws, “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

 

Section 2.8. Conduct of Meetings . The chairman of each annual and special meeting of stockholders shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act of the Chief Executive Officer or if the Chief Executive Officer is not a director, the President (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the President or if the President is not a director, such other person as shall be appointed by the Board. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the chairman of the meeting. The Board may adopt such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with these Bylaws or such rules and regulations as adopted by the Board, the chairman of any meeting of stockholders shall have the right and authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the chairman of the meeting, may include, without limitation, the following: (a) the establishment of an agenda or order of business for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present; (c) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (e) limitations on the time allotted to questions or comments by participants. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure. The secretary of each annual and special meeting of stockholders shall be the Secretary or, in the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary so appointed to act by the chairman of the meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

Section 2.9. Consents in Lieu of Meeting . Unless otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

 

No written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated consent delivered in the manner required by this section and Delaware Law to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested.

 

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ARTICLE III

 

DIRECTORS

 

Section 3.1. Powers . The business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws required to be exercised or done by the stockholders.

 

Section 3.2. Composition of the Board of Directors. The number of directors of the Corporation shall be as designated or as otherwise determined in the manner set forth in the Certificate of Incorporation. Directors need not be stockholders or residents of the State of Delaware. Unless changed by the unanimous vote of the entire Board, a majority of the members of the Board shall be comprised of “independent directors” as such term is defined in the corporate governance rules of the principal securities exchange upon which the securities of the Corporation may be listed from time to time or, if the securities of the Corporation shall cease to be listed on any national securities exchange, the corporate governance rules of the Nasdaq Capital Market.

 

Section 3.3. Advance Notice for Nomination of Directors .

 

(a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors as set forth in the Corporation’s notice of such special meeting, may be made (i) by or at the direction of the Board or a committee thereof or (ii) by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this  Section 3.3  and on the record date for the determination of stockholders entitled to vote at such meeting and (y) who complies with the notice procedures set forth in this  Section 3.3 .

 

(b) In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary at the principal executive offices of the Corporation (i) in the case of an annual meeting, not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting was first made by the Corporation; and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which public announcement of the date of the special meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an annual meeting or special meeting commence a new time period for the giving of a stockholder’s notice as described in this  Section 3.3 .

 

(c) To be in proper written form, a stockholder’s notice to the Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, (B) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made, (C) a description of all arrangements or understandings relating to the nomination to be made by such stockholder among such stockholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed nominee and any other person or persons (including their names), (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder and the beneficial owner, if any, on whose behalf the nomination is made that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

 

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(d) If the Board or the chairman of the meeting of stockholders determines that any nomination was not made in accordance with the provisions of this  Section 3.3 , then such nomination shall not be considered at the meeting in question. Notwithstanding the foregoing provisions of this  Section 3.3 , if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Corporation.

 

(e) In addition to the provisions of this  Section 3.3 , a stockholder shall also comply with all of the applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this  Section 3.3  shall be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation.

 

Section 3.4. Compensation . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board shall have the authority to fix the compensation of directors. The directors may be reimbursed their expenses, if any, of attendance at each meeting of the Board and may be paid either a fixed sum for attendance at each meeting of the Board or other compensation as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of committees of the Board may be allowed like compensation and reimbursement of expenses for service on the committee.

 

ARTICLE IV

 

BOARD MEETINGS

 

Section 4.1. Annual Meetings . The Board shall meet as soon as practicable after the adjournment of each annual stockholders meeting at the place of the annual stockholders meeting unless the Board shall fix another time and place and give notice thereof in the manner required herein for special meetings of the Board. No notice to the directors shall be necessary to legally convene this meeting, except as provided in this Section 4.1 .

 

Section 4.2. Regular Meetings . Regularly scheduled, periodic meetings of the Board may be held without notice at such times, dates and places as shall from time to time be determined by the Board.

 

Section 4.3. Special Meetings . Special meetings of the Board (a) may be called by the Chairman of the Board or President and (b) shall be called by the Chairman of the Board, President or Secretary on the written request of at least a majority of directors then in office, or the sole director, as the case may be, and shall be held at such time, date and place as may be determined by the person calling the meeting or, if called upon the request of directors or the sole director, as specified in such written request. Notice of each special meeting of the Board shall be given, as provided in  Section 9.3 , to each director (i) at least 24 hours before the meeting if such notice is oral notice given personally or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery; (ii) at least two days before the meeting if such notice is sent by a nationally recognized overnight delivery service; and (iii) at least five days before the meeting if such notice is sent through the United States mail. If the Secretary shall fail or refuse to give such notice, then the notice may be given by the officer who called the meeting or the directors who requested the meeting. Any and all business that may be transacted at a regular meeting of the Board may be transacted at a special meeting. Except as may be otherwise expressly provided by applicable law, the Certificate of Incorporation, or these Bylaws, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in the notice or waiver of notice of such meeting. A special meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.4 .

 

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Section 4.4. Quorum; Required Vote . A majority of the Board shall constitute a quorum for the transaction of business at any meeting of the Board, and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board, except as may be otherwise specifically provided by applicable law, the Certificate of Incorporation or these Bylaws. If a quorum shall not be present at any meeting, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

 

Section 4.5. Consent In Lieu of Meeting . Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions (or paper reproductions thereof) are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

 

Section 4.6. Organization . The chairman of each meeting of the Board shall be the Chairman of the Board or, in the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) or, in the absence (or inability or refusal to act) of the Chief Executive Officer or if the Chief Executive Officer is not a director, the President (if he or she shall be a director) or in the absence (or inability or refusal to act) of the President or if the President is not a director, a chairman elected from the directors present. The Secretary shall act as secretary of all meetings of the Board. In the absence (or inability or refusal to act) of the Secretary, an Assistant Secretary shall perform the duties of the Secretary at such meeting. In the absence (or inability or refusal to act) of the Secretary and all Assistant Secretaries, the chairman of the meeting may appoint any person to act as secretary of the meeting.

 

ARTICLE V

 

COMMITTEES OF DIRECTORS

 

Section 5.1. Establishment . The Board may by resolution passed by a majority of the Board designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee.

 

Section 5.2. Available Powers . Any committee established pursuant to  Section 5.1  hereof, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it.

 

Section 5.3. Alternate Members . The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of such committee.

 

Section 5.4. Procedures . Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. At meetings of a committee, a majority of the number of members of the committee (but not including any alternate member, unless such alternate member has replaced any absent or disqualified member at the time of, or in connection with, such meeting) shall constitute a quorum for the transaction of business. The act of a majority of the members present at any meeting at which a quorum is present shall be the act of the committee, except as otherwise specifically provided by applicable law, the Certificate of Incorporation, these Bylaws or the Board. If a quorum is not present at a meeting of a committee, the members present may adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present. Unless the Board otherwise provides and except as provided in these Bylaws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to Article III and Article IV of these Bylaws.

 

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ARTICLE VI

 

OFFICERS

 

Section 6.1. Officers . The officers of the Corporation elected by the Board shall be a Chairman of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Secretary and such other officers (including without limitation, Vice Presidents, Assistant Secretaries and a Treasurer) as the Board from time to time may determine. Officers elected by the Board shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this  Article VI . Such officers shall also have such powers and duties as from time to time may be conferred by the Board. The Chief Executive Officer or President may also appoint such other officers (including without limitation one or more Vice Presidents and Controllers) as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers shall have such powers and duties and shall hold their offices for such terms as may be provided in these Bylaws or as may be prescribed by the Board or, if such officer has been appointed by the Chief Executive Officer or President, as may be prescribed by the appointing officer.

 

(a)  Chairman of the Board . The Chairman of the Board shall preside when present at all meetings of the stockholders and the Board. The Chairman of the Board shall have general supervision and control of the acquisition activities of the Corporation subject to the ultimate authority of the Board, and shall be responsible for the execution of the policies of the Board with respect to such matters. In the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The powers and duties of the Chairman of the Board shall not include supervision or control of the preparation of the financial statements of the Corporation (other than through participation as a member of the Board). The position of Chairman of the Board and Chief Executive Officer may be held by the same person.

 

(b)  Chief Executive Officer . The Chief Executive Officer shall be the chief executive officer of the Corporation, shall have general supervision of the affairs of the Corporation and general control of all of its business subject to the ultimate authority of the Board, and shall be responsible for the execution of the policies of the Board with respect to such matters, except to the extent any such powers and duties have been prescribed to the Chairman of the Board pursuant to  Section 6.1(a)  above. In the absence (or inability or refusal to act) of the Chairman of the Board, the Chief Executive Officer (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The position of Chief Executive Officer and President may be held by the same person.

 

(c)  President . The President shall make recommendations to the Chief Executive Officer on all operational matters that would normally be reserved for the final executive responsibility of the Chief Executive Officer. In the absence (or inability or refusal to act) of the Chairman of the Board and Chief Executive Officer, the President (if he or she shall be a director) shall preside when present at all meetings of the stockholders and the Board. The President shall also perform such duties and have such powers as shall be designated by the Board. The position of President and Chief Executive Officer may be held by the same person.

 

(d)  Vice Presidents . In the absence (or inability or refusal to act) of the President, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board) shall perform the duties and have the powers of the President. Any one or more of the Vice Presidents may be given an additional designation of rank or function.

 

(e)  Secretary .

 

(i) The Secretary shall attend all meetings of the stockholders, the Board and (as required) committees of the Board and shall record the proceedings of such meetings in books to be kept for that purpose. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board and shall perform such other duties as may be prescribed by the Board, the Chairman of the Board, Chief Executive Officer or President. The Secretary shall have custody of the corporate seal of the Corporation and the Secretary, or any Assistant Secretary, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by his or her signature or by the signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing thereof by his or her signature.

 

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(ii) The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, if one has been appointed, a stock ledger, or duplicate stock ledger, showing the names of the stockholders and their addresses, the number and classes of shares held by each and, with respect to certificated shares, the number and date of certificates issued for the same and the number and date of certificates cancelled.

 

(f)  Assistant Secretaries . The Assistant Secretary or, if there be more than one, the Assistant Secretaries in the order determined by the Board shall, in the absence (or inability or refusal to act) of the Secretary, perform the duties and have the powers of the Secretary.

 

(g)  Chief Financial Officer . The Chief Financial Officer shall perform all duties commonly incident to that office (including, without limitation, the care and custody of the funds and securities of the Corporation, which from time to time may come into the Chief Financial Officer’s hands and the deposit of the funds of the Corporation in such banks or trust companies as the Board, the Chief Executive Officer or the President may authorize).

 

(h)  Treasurer . The Treasurer shall, in the absence (or inability or refusal to act) of the Chief Financial Officer, perform the duties and exercise the powers of the Chief Financial Officer.

 

Section 6.2. Term of Office; Removal; Vacancies . The elected officers of the Corporation shall be appointed by the Board and shall hold office until their successors are duly elected and qualified by the Board or until their earlier death, resignation, retirement, disqualification, or removal from office. Any officer may be removed, with or without cause, at any time by the Board. Any officer appointed by the Chief Executive Officer or President may also be removed, with or without cause, by the Chief Executive Officer or President, as the case may be, unless the Board otherwise provides. Any vacancy occurring in any elected office of the Corporation may be filled by the Board. Any vacancy occurring in any office appointed by the Chief Executive Officer or President may be filled by the Chief Executive Officer, or President, as the case may be, unless the Board then determines that such office shall thereupon be elected by the Board, in which case the Board shall elect such officer.

 

Section 6.3. Other Officers . The Board may delegate the power to appoint such other officers and agents, and may also remove such officers and agents or delegate the power to remove same, as it shall from time to time deem necessary or desirable.

 

Section 6.4. Multiple Officeholders; Stockholder and Director Officers . Any number of offices may be held by the same person unless the Certificate of Incorporation or these Bylaws otherwise provide. Officers need not be stockholders or residents of the State of Delaware.

 

ARTICLE VII

 

SHARES

 

Section 7.1. Certificated and Uncertificated Shares . The shares of the Corporation may be certificated or uncertificated, subject to the sole discretion of the Board.

 

Section 7.2. Multiple Classes of Stock . If the Corporation shall be authorized to issue more than one class of stock or more than one series of any class, the Corporation shall (a) cause the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights to be set forth in full or summarized on the face or back of any certificate that the Corporation issues to represent shares of such class or series of stock or (b) in the case of uncertificated shares, within a reasonable time after the issuance or transfer of such shares, send to the registered owner thereof a written notice containing the information required to be set forth on certificates as specified in clause (a) above; provided, however, that, except as otherwise provided by applicable law, in lieu of the foregoing requirements, there may be set forth on the face or back of such certificate or, in the case of uncertificated shares, on such written notice a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences or rights.

 

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Section 7.3. Signatures . Each certificate representing capital stock of the Corporation shall be signed by or in the name of the Corporation by (a) the Chairman of the Board, Chief Executive Officer or the President and (b) the Treasurer, the Secretary or an Assistant Secretary of the Corporation. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar on the date of issue.

 

Section 7.4. Consideration and Payment for Shares .

 

(a) Subject to applicable law and the Certificate of Incorporation, shares of stock may be issued for such consideration, having in the case of shares with par value a value not less than the par value thereof, and to such persons, as determined from time to time by the Board. The consideration may consist of any tangible or intangible property or benefit to the Corporation including cash, promissory notes, services performed, contracts for services to be performed, or other securities.

 

(b) Subject to applicable law and the Certificate of Incorporation, shares may not be issued until the full amount of the consideration has been paid, unless upon the face or back of each certificate issued to represent any partly paid shares of capital stock or upon the books and records of the Corporation in the case of partly paid uncertificated shares, there shall have been set forth the total amount of the consideration to be paid therefor and the amount paid thereon up to and including the time said certificate representing certificated shares or said uncertificated shares are issued.

 

Section 7.5. Lost, Destroyed or Wrongfully Taken Certificates .

 

(a) If an owner of a certificate representing shares claims that such certificate has been lost, destroyed or wrongfully taken, the Corporation shall issue a new certificate representing such shares or such shares in uncertificated form if the owner: (i) requests such a new certificate before the Corporation has notice that the certificate representing such shares has been acquired by a protected purchaser; (ii) if requested by the Corporation, delivers to the Corporation a bond sufficient to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, wrongful taking or destruction of such certificate or the issuance of such new certificate or uncertificated shares; and (iii) satisfies other reasonable requirements imposed by the Corporation.

 

(b) If a certificate representing shares has been lost, apparently destroyed or wrongfully taken, and the owner fails to notify the Corporation of that fact within a reasonable time after the owner has notice of such loss, apparent destruction or wrongful taking and the Corporation registers a transfer of such shares before receiving notification, the owner shall be precluded from asserting against the Corporation any claim for registering such transfer or a claim to a new certificate representing such shares or such shares in uncertificated form.

 

Section 7.6. Transfer of Stock .

 

(a) If a certificate representing shares of the Corporation is presented to the Corporation with an endorsement requesting the registration of transfer of such shares or an instruction is presented to the Corporation requesting the registration of transfer of uncertificated shares, the Corporation shall register the transfer as requested if:

 

(i) in the case of certificated shares, the certificate representing such shares has been surrendered; 

 

(ii)(A) with respect to certificated shares, the endorsement is made by the person specified by the certificate as entitled to such shares; (B) with respect to uncertificated shares, an instruction is made by the registered owner of such uncertificated shares; or (C) with respect to certificated shares or uncertificated shares, the endorsement or instruction is made by any other appropriate person or by an agent who has actual authority to act on behalf of the appropriate person;

 

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(iii) the Corporation has received a guarantee of signature of the person signing such endorsement or instruction or such other reasonable assurance that the endorsement or instruction is genuine and authorized as the Corporation may request;

 

(iv) the transfer does not violate any restriction on transfer imposed by the Corporation that is enforceable in accordance with  Section 7.8(a) ; and

 

(v) such other conditions for such transfer as shall be provided for under applicable law have been satisfied.

 

(b) Whenever any transfer of shares shall be made for collateral security and not absolutely, the Corporation shall so record such fact in the entry of transfer if, when the certificate for such shares is presented to the Corporation for transfer or, if such shares are uncertificated, when the instruction for registration of transfer thereof is presented to the Corporation, both the transferor and transferee request the Corporation to do so.

 

Section 7.7. Registered Stockholders . Before due presentment for registration of transfer of a certificate representing shares of the Corporation or of an instruction requesting registration of transfer of uncertificated shares, the Corporation may treat the registered owner as the person exclusively entitled to inspect for any proper purpose the stock ledger and the other books and records of the Corporation, vote such shares, receive dividends (to the extent that dividends are payable thereon) or notifications with respect to such shares and otherwise exercise all the rights and powers of the owner of such shares, except that a person who is the beneficial owner of such shares (if held in a voting trust or by a nominee on behalf of such person) may, upon providing documentary evidence of beneficial ownership of such shares and satisfying such other conditions as are provided under applicable law, may also so inspect the books and records of the Corporation.

 

Section 7.8. Effect of the Corporation’s Restriction on Transfer .

 

(a) A written restriction on the transfer or registration of transfer of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, if permitted by the DGCL and noted conspicuously on the certificate representing such shares or, in the case of uncertificated shares, contained in a notice, offering circular or prospectus sent by the Corporation to the registered owner of such shares within a reasonable time prior to or after the issuance or transfer of such shares, may be enforced against the holder of such shares or any successor or transferee of the holder including an executor, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder.

 

(b) A restriction imposed by the Corporation on the transfer or the registration of shares of the Corporation or on the amount of shares of the Corporation that may be owned by any person or group of persons, even if otherwise lawful, is ineffective against a person without actual knowledge of such restriction unless: (i) the shares are certificated and such restriction is noted conspicuously on the certificate; or (ii) the shares are uncertificated and such restriction was contained in a notice, offering circular or prospectus sent by the Corporation to the registered owner of such shares prior to or within a reasonable time after the issuance or transfer of such shares.

 

Section 7.9. Regulations . The Board shall have power and authority to make such additional rules and regulations, subject to any applicable requirement of law, as the Board may deem necessary and appropriate with respect to the issue, transfer or registration of transfer of shares of stock or certificates representing shares. The Board may appoint one or more transfer agents or registrars and may require for the validity thereof that certificates representing shares bear the signature of any transfer agent or registrar so appointed.

 

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ARTICLE VIII

 

INDEMNIFICATION

 

Section 8.1. Right to Indemnification . To the fullest extent permitted by applicable law, as the same exists or may hereafter be amended, the Corporation shall indemnify and hold harmless each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “ proceeding ”), by reason of the fact that he or she is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan (hereinafter an “ Indemnitee ”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent, or in any other capacity while serving as a director, officer, employee or agent, against all liability and loss suffered and expenses (including, without limitation, attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid in settlement) reasonably incurred by such Indemnitee in connection with such proceeding; provided, however, that, except as provided in  Section 8.3  with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify an Indemnitee in connection with a proceeding (or part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized by the Board.

 

Section 8.2. Right to Advancement of Expenses . In addition to the right to indemnification conferred in  Section 8.1 , an Indemnitee shall also have the right to be paid by the Corporation to the fullest extent not prohibited by applicable law the expenses (including, without limitation, attorneys’ fees) incurred in defending or otherwise participating in any such proceeding in advance of its final disposition (hereinafter an “ advancement of expenses ”); provided, however, that, if the Delaware General Corporation Law (“ DGCL ”) requires, an advancement of expenses incurred by an Indemnitee in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such Indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon the Corporation’s receipt of an undertaking (hereinafter an “ undertaking ”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this  Article VIII  or otherwise. 

 

Section 8.3. Right of Indemnitee to Bring Suit . If a claim under  Section 8.1  or  Section 8.2  is not paid in full by the Corporation within 60 days after a written claim therefor has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be 20 days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall also be entitled to be paid the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by an Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final judicial decision from which there is no further right to appeal (hereinafter a “ final adjudication ”) that, the Indemnitee has not met any applicable standard for indemnification set forth in the DGCL. Neither the failure of the Corporation (including its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the DGCL, nor an actual determination by the Corporation (including a determination by its directors who are not parties to such action, a committee of such directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, shall be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this  Article VIII  or otherwise shall be on the Corporation.

 

Section 8.4. Non-Exclusivity of Rights . The rights provided to any Indemnitee pursuant to this  Article VIII  shall not be exclusive of any other right, which such Indemnitee may have or hereafter acquire under applicable law, the Certificate of Incorporation, these Bylaws, an agreement, a vote of stockholders or disinterested directors, or otherwise.

 

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Section 8.5. Insurance . The Corporation may maintain insurance, at its expense, to protect itself and/or any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

 

Section 8.6. Indemnification of Other Persons . This  Article VIII  shall not limit the right of the Corporation to the extent and in the manner authorized or permitted by law to indemnify and to advance expenses to persons other than Indemnitees. Without limiting the foregoing, the Corporation may, to the extent authorized from time to time by the Board, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation and to any other person who is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, to the fullest extent of the provisions of this  Article VIII  with respect to the indemnification and advancement of expenses of Indemnitees under this  Article VIII .

 

Section 8.7. Amendments . Any repeal or amendment of this  Article VIII  by the Board or the stockholders of the Corporation or by changes in applicable law, or the adoption of any other provision of these Bylaws inconsistent with this  Article VIII , will, to the extent permitted by applicable law, be prospective only (except to the extent such amendment or change in applicable law permits the Corporation to provide broader indemnification rights to Indemnitees on a retroactive basis than permitted prior thereto), and will not in any way diminish or adversely affect any right or protection existing hereunder in respect of any act or omission occurring prior to such repeal or amendment or adoption of such inconsistent provision; provided however, that amendments or repeals of this Article VIII shall require the affirmative vote of the stockholders holding at least 66.7% of the voting power of all outstanding shares of capital stock of the Corporation.

 

Section 8.8. Certain Definitions . For purposes of this  Article VIII , (a) references to “other enterprise” shall include any employee benefit plan; (b) references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; (c) references to “serving at the request of the Corporation” shall include any service that imposes duties on, or involves services by, a person with respect to any employee benefit plan, its participants, or beneficiaries; and (d) a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” for purposes of Section 145 of the DGCL.

 

Section 8.9. Contract Rights . The rights provided to Indemnitees pursuant to this  Article VIII  shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer, agent or employee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators.

 

Section 8.10. Severability . If any provision or provisions of this  Article VIII  shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this  Article VIII  shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this  Article VIII  (including, without limitation, each such portion of this Article VIII  containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1. Place of Meetings . If the place of any meeting of stockholders, the Board or committee of the Board for which notice is required under these Bylaws is not designated in the notice of such meeting, such meeting shall be held at the principal business office of the Corporation; provided, however, if the Board has, in its sole discretion, determined that a meeting shall not be held at any place, but instead shall be held by means of remote communication pursuant to  Section 9.5  hereof, then such meeting shall not be held at any place.

 

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Section 9.2. Fixing Record Dates .

 

(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall not be more than 60 nor less than 10 days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.

 

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

 

Section 9.3. Means of Giving Notice .

 

(a)  Notice to Directors . Whenever under applicable law, the Certificate of Incorporation or these Bylaws notice is required to be given to any director, such notice shall be given either (i) in writing and sent by mail, or by a nationally recognized delivery service, (ii) by means of facsimile telecommunication or other form of electronic transmission, or (iii) by oral notice given personally or by telephone. A notice to a director will be deemed given as follows: (i) if given by hand delivery, orally, or by telephone, when actually received by the director, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the director at the director’s address appearing on the records of the Corporation, (iv) if sent by facsimile telecommunication, when sent to the facsimile transmission number for such director appearing on the records of the Corporation, (v) if sent by electronic mail, when sent to the electronic mail address for such director appearing on the records of the Corporation, or (vi) if sent by any other form of electronic transmission, when sent to the address, location or number (as applicable) for such director appearing on the records of the Corporation.

 

(b)  Notice to Stockholders . Whenever under applicable law, the Certificate of Incorporation or these Bylaws notice is required to be given to any stockholder, such notice may be given (i) in writing and sent either by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, or (ii) by means of a form of electronic transmission consented to by the stockholder, to the extent permitted by, and subject to the conditions set forth in Section 232 of the DGCL. A notice to a stockholder shall be deemed given as follows: (i) if given by hand delivery, when actually received by the stockholder, (ii) if sent through the United States mail, when deposited in the United States mail, with postage and fees thereon prepaid, addressed to the stockholder at the stockholder’s address appearing on the stock ledger of the Corporation, (iii) if sent for next day delivery by a nationally recognized overnight delivery service, when deposited with such service, with fees thereon prepaid, addressed to the stockholder at the stockholder’s address appearing on the stock ledger of the Corporation, and (iv) if given by a form of electronic transmission consented to by the stockholder to whom the notice is given and otherwise meeting the requirements set forth above, (A) if by facsimile transmission, when directed to a number at which the stockholder has consented to receive notice, (B) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice, (C) if by a posting on an electronic network together with separate notice to the stockholder of such specified posting, upon the later of (1) such posting and (2) the giving of such separate notice, and (D) if by any other form of electronic transmission, when directed to the stockholder. A stockholder may revoke such stockholder’s consent to receiving notice by means of electronic communication by giving written notice of such revocation to the Corporation. Any such consent shall be deemed revoked if (1) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (2) such inability becomes known to the Secretary or an Assistant Secretary or to the Corporation’s transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.

 

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(c)  Electronic Transmission . “ Electronic transmission ” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by telex, facsimile telecommunication, electronic mail, telegram and cablegram.

 

(d)  Notice to Stockholders Sharing Same Address . Without limiting the manner by which notice otherwise may be given effectively by the Corporation to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. A stockholder may revoke such stockholder’s consent by delivering written notice of such revocation to the Corporation. Any stockholder who fails to object in writing to the Corporation within 60 days of having been given written notice by the Corporation of its intention to send such a single written notice shall be deemed to have consented to receiving such single written notice.

  

(e)  Exceptions to Notice Requirements . Whenever notice is required to be given, under the DGCL, the Certificate of Incorporation or these Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

 

Whenever notice is required to be given by the Corporation, under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, to any stockholder to whom (1) notice of two consecutive annual meetings of stockholders and all notices of stockholder meetings or of the taking of action by written consent of stockholders without a meeting to such stockholder during the period between such two consecutive annual meetings, or (2) all, and at least two payments (if sent by first-class mail) of dividends or interest on securities during a 12-month period, have been mailed addressed to such stockholder at such stockholder’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such stockholder shall not be required. Any action or meeting that shall be taken or held without notice to such stockholder shall have the same force and effect as if such notice had been duly given. If any such stockholder shall deliver to the Corporation a written notice setting forth such stockholder’s then current address, the requirement that notice be given to such stockholder shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate with the Secretary of State of Delaware, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to Section 230(b) of the DGCL. The exception in subsection (1) of the first sentence of this paragraph to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.

 

Section 9.4. Waiver of Notice . Whenever any notice is required to be given under applicable law, the Certificate of Incorporation, or these Bylaws, a written waiver of such notice, signed before or after the date of such meeting by the person or persons entitled to said notice, or a waiver by electronic transmission by the person entitled to said notice, shall be deemed equivalent to such required notice. All such waivers shall be kept with the books of the Corporation. Attendance at a meeting shall constitute a waiver of notice of such meeting, except where a person attends for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

 

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Section 9.5. Meeting Attendance via Remote Communication Equipment.

 

(a)  Stockholder Meetings . If authorized by the Board in its sole discretion, and subject to such guidelines and procedures as the Board may adopt, stockholders and proxy holders not physically present at a meeting of stockholders may, by means of remote communication:

 

(i) participate in a meeting of stockholders; and

 

(ii) be deemed present in person and vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation shall implement reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote communication, a record of such votes or other action shall be maintained by the Corporation.

 

(b)  Board Meetings . Unless otherwise restricted by applicable law, the Certificate of Incorporation or these Bylaws, members of the Board or any committee thereof may participate in a meeting of the Board or any committee thereof by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Such participation in a meeting shall constitute presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting was not lawfully called or convened.

 

Section 9.6. Dividends . The Board may from time to time declare, and the Corporation may pay, dividends (payable in cash, property or shares of the Corporation’s capital stock) on the Corporation’s outstanding shares of capital stock entitled to the receive dividends, subject to applicable law and the Certificate of Incorporation.

 

Section 9.7. Reserves . The Board may set apart out of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

 

Section 9.8. Contracts and Negotiable Instruments . Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, any contract, bond, deed, lease, mortgage or other instrument may be executed and delivered in the name and on behalf of the Corporation by such officer or officers or other employee or employees of the Corporation as the Board may from time to time authorize. Such authority may be general or confined to specific instances as the Board may determine. The Chairman of the Board, the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer may execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation. Subject to any restrictions imposed by the Board, the Chairman of the Board Chief Executive Officer, President, the Chief Financial Officer or the Treasurer may delegate powers to execute and deliver any contract, bond, deed, lease, mortgage or other instrument in the name and on behalf of the Corporation to other officers or employees of the Corporation under such person’s supervision and authority, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

 

Section 9.9. Fiscal Year . The fiscal year of the Corporation shall be fixed by the Board.

 

Section 9.10. Seal . The Board may adopt a corporate seal, which shall be in such form as the Board determines. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or otherwise reproduced.

 

Section 9.11. Books and Records . The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board.

 

Section 9.12. Resignation . Any director, committee member or officer may resign by giving notice thereof in writing or by electronic transmission to the Chairman of the Board, the Chief Executive Officer, the President or the Secretary. The resignation shall take effect at the time specified therein, or at the time of receipt of such notice if no time is specified or the specified time is earlier than the time of such receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

 

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Section 9.13. Surety Bonds . Such officers, employees and agents of the Corporation (if any) as the Chairman of the Board, Chief Executive Officer, President or the Board may direct, from time to time, shall be bonded for the faithful performance of their duties and for the restoration to the Corporation, in case of their death, resignation, retirement, disqualification or removal from office, of all books, papers, vouchers, money and other property of whatever kind in their possession or under their control belonging to the Corporation, in such amounts and by such surety companies as the Chairman of the Board, Chief Executive Officer, President or the Board may determine. The premiums on such bonds shall be paid by the Corporation and the bonds so furnished shall be in the custody of the Secretary.

 

Section 9.14. Securities of Other Corporations . Powers of attorney, proxies, waivers of notice of meeting, consents in writing and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, Chief Executive Officer, President or any Vice President. Any such officer, may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities, or to consent in writing, in the name of the Corporation as such holder, to any action by such corporation, and at any such meeting or with respect to any such consent shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed. The Board may from time to time confer like powers upon any other person or persons.

 

Section 9.15. Amendments . The Board shall have the power to adopt, amend, alter or repeal the Bylaws. The affirmative vote of a majority of the Board shall be required to adopt, amend, alter or repeal the Bylaws; provided, however that any provision hereof which states that it may be changed by the unanimous vote of the entire Board may only be changed or amended by such vote. Except for any provision hereof which states that the Bylaws may be changed by the unanimous vote of the entire Board, the Bylaws also may be adopted, amended, altered or repealed by the stockholders; provided, however, that in addition to any vote of the holders of any class or series of capital stock of the Corporation required by applicable law or the Certificate of Incorporation, the affirmative vote of the holders of at least a majority of the voting power of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders to adopt, amend, alter or repeal the Bylaws. Notwithstanding the foregoing, however, any provision hereof which states that it may be changed by the unanimous vote of the entire Board may only be changed or amended by such vote.

 

 

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Exhibit 4.1

 

 

   

Exhibit 4.2

 

   

 

Exhibit 10.1

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (this “ Agreement ”), dated as of February 2, 2018, is entered into by and among Purple Innovation, Inc., a Delaware corporation (the “ Corporation ”), Purple Innovation, LLC, a Delaware limited liability company (the “ Company ”), InnoHold, LLC, a Delaware limited liability company and a Class B Holder (as defined below) (“ InnoHold ”) and any other Class B Holders that may from time to time become parties hereto.

 

WHEREAS, the parties hereto desire to provide for the exchange of Class B Units and Class B Stock for shares of Class A Stock (as such terms are defined below) on the terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

Article I
DEFINITIONS

 

Section 1.1. Definitions . The following capitalized terms shall have the meanings specified in this Section 1.1 . Other terms are defined in the text of this Agreement, and those terms shall have the meanings respectively ascribed to them therein.

 

Applicable Law ” means, with respect to any Person, any federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a governmental authority or regulatory agency that is binding upon or applicable to such Person or its assets, as amended unless expressly specified otherwise.

 

Board ” means the board of directors of the Corporation.

 

Business Day ” has the meaning set forth in the LLC Agreement.

 

Cash Exchange Payment ” means an amount in immediately available funds in U.S. dollars equal to the product of (a) the number of Class B Paired Securities Exchanged, multiplied by (b) the then-applicable Exchange Rate multiplied by (c) the average of the daily VWAP of a share of Class A Common Stock for the 10 Trading Days immediately prior to the date of delivery of the relevant Exchange Notice.

 

Class A Stock ” has the meaning set forth in the LLC Agreement.

 

Class A Unit ” has the meaning set forth in the LLC Agreement.

 

Class B Paired Security ” shall mean one Class B Unit and one share of Class B Stock; for the avoidance of doubt, the combination of one Class B Unit and one share of Class B Stock shall be considered one Class B Paired Security for purposes of this Agreement, and no issuance of a share of Class A Stock pursuant to an Exchange shall be permitted hereunder unless each Class B Unit and share of Class B Stock comprising a Class B Paired Security is transferred, in tandem, to the Corporation.

 

Class B Holder ” has the meaning set forth in the LLC Agreement.

 

Class B Stock ” has the meaning set forth in the LLC Agreement.

 

     

 

 

Class B Unit ” has the meaning set forth in the LLC Agreement.

 

Closing Price ” means the last sale price of the Class A Stock for any applicable trading day.

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Common Stock ” means the Class A Stock and the Class B Stock.

 

Exchange ” means the exchange of Class B Paired Securities for Class A Stock, on the terms and conditions set forth herein, on any Exchange Date.

 

Exchange Date ” means, subject to Section 2.1(a)(ii), the date that is specified by a Class B Holder in its Exchange Notice.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

Exchange Rate ” means the number of shares of Class A Stock for which one Class B Paired Security may be exchanged. On the date of this Agreement, the Exchange Rate shall be one (1), subject to adjustment pursuant to Section 2.2 .

 

Fair Market Value ” means the Closing Price of one (1) share of Class A Stock on the Business Day prior to the measurement date; provided , that if the Class A Stock is listed on any domestic securities exchange, the term “ Business Day ” as used in this sentence means any Business Day on which such exchange is open for trading.

 

Fundamental Transaction ” has the meaning set forth in Section 2.1(b) .

 

LLC Agreement ” means the Second Amended and Restated Limited Liability Company Agreement of the Company, dated as of the date hereof, as the same may be further amended or restated from time to time.

 

Lock-Up Agreement ” means that certain Lock-Up Agreement by and among the Corporation, InnoHold and certain other parties thereto of even date herewith.

 

Lock-Up Period ” has the meaning set forth in the Lock-Up Agreement.

 

Member ” has the meaning set forth in the LLC Agreement.

 

Month ” means, unless the context requires otherwise, a calendar month.

 

Person ” means and includes any individual and any legal entity, including a corporation, partnership, association, limited liability company, trust, joint stock company or estate.

 

Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of the date hereof, by and among the Corporation and each other party thereto, as amended from time to time.

 

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

Subsidiary ” has the meaning given to such term in the LLC Agreement.

 

Tax Receivable Agreement ” means that certain Tax Receivable Agreement, dated on or about the date hereof, among the Corporation, the Company and each other party thereto, as amended from time to time.

 

Trading Day ” means a day on which the NASDAQ Capital Market or such other principal United States securities exchange on which the shares of Class A Stock are listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day), or if the shares of Class A Stock are not listed or admitted to trading on such an exchange, on the automated quotation system on which the shares of Class A Stock are then authorized for quotation.

 

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Units ” has the meaning set forth in the LLC Agreement.

 

VWAP ” means the daily per share volume-weighted average price of the Class A Stock on the principal U.S. securities exchange or automated or electronic quotation system on which Class A Stock trades, as displayed under the heading Bloomberg PRPL on the Bloomberg page designated for the Class A Stock (or its equivalent successor if such page is not available) in respect of the period from the open of trading on such day until the close of trading on such day (or if such volume-weighted average price is unavailable, (a) the per share volume-weighted average price of such Class A Stock on such day (determined without regard to afterhours trading or any other trading outside the regular trading session or trading hours), or (b) if such determination is not feasible, the market price per share of Class A Stock, in either case as determined by a nationally recognized independent investment banking firm retained in good faith for this purpose by the Company).

 

Article II
EXCHANGES

 

Section 2.1. Exchange of Class B Paired Securities for Class A Stock .

 

(a) Monthly Elective Exchanges .

 

(i) Subject to Section 2.1(c) , at any time following the expiration of the Lock-Up Period, and subject to Section 2.1(g) and the adjustment as provided in this Agreement, each Class B Holder shall be entitled on any Exchange Date to surrender all or a portion of the Class B Paired Securities held by such Class B Holder to the Company (or, at the option of the Corporation, directly to the Corporation) in exchange for, at the option of the Corporation (acting by a majority of the disinterested members of the Board), either (A) the delivery by the Corporation to the exchanging Class B Holder of a number of shares of Class A Stock that is equal to the product of the number of Class B Paired Securities surrendered multiplied by the Exchange Rate (the “ Exchange Shares ”), or (B) a Cash Exchange Payment in accordance with the instructions provided in the Exchange Notice; provided, however , that Class B Holder may exchange no less than the lesser of (A) the number of Class B Paired Securities held by Class B Holder and (B) One Thousand (1,000) Class B Paired Securities in any one Exchange.

 

(ii) A Class B Holder shall exercise its right to exchange Class B Paired Securities pursuant to this Section 2.1(a) by delivering to the Company, with a contemporaneous copy delivered to the Corporation, in each case during normal business hours at the principal executive offices of the Company and the Corporation, respectively, (A) a written election of exchange in respect of the Class B Paired Securities to be exchanged substantially in the form of Exhibit A hereto (an “ Exchange Notice ”), at least three Business Days prior to the Exchange Date specified by such Class B Holder in such Exchange Notice or within such shorter period of time as may be agreed upon by the Corporation and the exchanging Class B Holder, duly executed by such Class B Holder; (B) any certificates representing such Class B Paired Securities on the Exchange Date, together with a written assignment and acceptance agreement with respect to such Class B Paired Securities, in a form reasonably acceptable to the Corporation; and (C) if the Corporation or the Company requires the delivery of the certification contemplated by Section 2.4(b) , either (i) such certification or (ii) written notice from such Class B Holder that it is unable to provide such certification on the Exchange Date.

 

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(iii) Upon a Class B Holder exercising its right to an Exchange, the Corporation and the Company shall take such actions as may be required to ensure that such Class B Holder receives the shares of Class A Stock that such exchanging Class B Holder is entitled to receive in connection with such Exchange pursuant to this Section 2.1(a) . Without limiting the foregoing, in the event of an Exchange, (A) the Corporation shall be deemed to have transferred the Class A Stock to be delivered to the exchanging Class B Holder to the Company and the Company shall issue to the Corporation a number of Class A Units in the Company equal to the number of Class B Paired Securities exchanged by the Class B Holder and (B) the Company shall be deemed to have transferred such Class A Stock to the exchanging Class B Holder in exchange for the Class B Paired Securities surrendered by such Class B Holder in the Exchange. If an exchanging Class B Holder receives the shares of Class A Stock that it is entitled to receive in connection with an Exchange pursuant to this Section 2.1(a) directly from the Corporation, the Class B Holder shall have no further right to receive shares of Class A Stock from the Company in connection with that Exchange, and the Corporation and the Company shall be deemed to have satisfied their obligations under the first sentence of this Section 2.1(a)(iii) . On the Exchange Date, all rights of the exchanging Class B Holder as a holder of the Class B Paired Securities that are subject to the Exchange shall cease, and such Class B Holder shall be treated for all purposes as having become the record holder of any shares of Class A Stock to be received by the exchanging Class B Holder in respect of such Exchange.

 

(b) Effect of Fundamental Transactions on Exchanges . Subject to Section 2.1(c) , below, in the event of any merger, acquisition, reorganization, consolidation, or liquidation of the Corporation involving a payment or distribution of cash, securities or other assets to the holders of Class A Stock or any reclassification or other similar transaction as a result of which the shares of Class A Stock are converted into, among other things, another security or securities (a “ Fundamental Transaction ”), the Class B Units and the Class B Stock shall remain outstanding and the exchange provisions of this Agreement shall thereafter permit the exchange of Class B Paired Securities for the amount of such cash, securities or other assets which a Class B Holder would have received had he, she or it made an exchange for Class A Stock immediately prior to such Fundamental Transaction, regardless of whether such exchange would actually have been permitted at such time and taking into account any adjustment as a result of any division or subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination or consolidation (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such merger, acquisition, consolidation, reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Stock is converted or changed into another security, securities or other property, this Agreement shall continue to be applicable, mutatis mutandis, with respect to such security, securities or other property.

 

(c) Participation in Fundamental Transactions . Notwithstanding Section 2.1(b) , the Corporation and the Company shall use their commercially reasonable efforts to expeditiously and in good faith provide the Class B Holders with sufficient notice of any proposed Fundamental Transaction so that any Class B Holder who elects in writing no later than 10 days prior to the proposed date of closing of such Fundamental Transaction may participate in any Fundamental Transaction involving the Class A Stock, shall not be required to comply with the requirements of Section 2.1(a) and, to facilitate participation in any such Fundamental Transaction and to adopt reasonable modifications (following good faith consultation with such electing Class B Holder) to the exchange procedures set forth in this Agreement so that any exercise required in respect thereof shall be effective only upon, and shall be conditional upon, the closing of such Fundamental Transaction. Any exchange by a Class B Holder in connection with a Fundamental Transaction shall not be subject to the timing requirements of Section 2.1(a) , including without limitation that the Class B Holder may elect to make the exchange on a date other than the Exchange Date and shall not be subject to notice requirements of Section 2.1(a)(ii) . Failure of any Class B Holder to provide notice under this Section 2.1(c) shall not disqualify such Class B Holder from participating in any Fundamental Transaction or from rights under Section 2.1(b) .

 

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(d) Issuance of Class A Stock or Cash Exchange Payment . As promptly as practicable following satisfaction of a Class B Holder’s obligations under Section 2.1(a)(ii) , and in any event no later than two (2) Business Days after such obligations are satisfied, the Corporation or the Company, as applicable, shall (A) deliver or cause to be delivered to such Class B Holder, at the address set forth on such Class B Holder’s signature page to the LLC Agreement (or at such other address as such party may designate to the Corporation), the number of shares of Class A Stock deliverable to such Class B Holder upon such Exchange, registered in the name of the relevant exchanging Class B Holder, subject to the Class B Holder’s execution of any letter of transmittal or other document required to be executed by the holders of Class A Stock, or (B) wire the Cash Exchange Payment to the bank account specified by the Class B Holder on the Exchange Notice. To the extent the Class A Stock is settled through the facilities of The Depository Trust Company, the Corporation or the Company, as applicable, will upon the written instruction of an exchanging Class B Holder, deliver the shares of Class A Stock deliverable to such exchanging Class B Holder, through the facilities of The Depository Trust Company, to the account of the participant of The Depository Trust Company designated by such exchanging Class B Holder in the Exchange Notice. Notwithstanding anything to the contrary in this Agreement, no fractional shares of Class A Stock shall be issued as a result of any Exchange. In lieu of any fractional share of Class A Stock to which a Class B Holder would otherwise be entitled in any Exchange, the Company or the Corporation, as applicable, shall pay to such Class B Holder cash equal to such fraction multiplied by the Fair Market Value as of the Exchange Date.

 

(e) Expenses . The Corporation, the Company, and each exchanging Class B Holder shall bear its own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated, except that the Company shall bear any transfer taxes, stamp taxes or duties, or other similar taxes as well as any other expenses incurred by the Corporation in connection with, or arising by reason of, any Exchange; provided , however , that if any shares of Class A Stock are to be delivered in a name other than that of the Class B Holder that requested the Exchange, then such Class B Holder or the Person in whose name such shares are to be delivered shall pay to the Company the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Company that such tax has been paid or is not payable.

 

(f) Publicly Traded Partnership . Each of the Corporation and the Company covenants and agrees that neither shall take or cause or permit to be taken any action that would cause the Units in the Company to not meet the requirements of Treasury Regulation Section 1.7704-1(h) applicable to partnership interests that are not readily tradable on a secondary market. Notwithstanding anything to the contrary herein, if the Board, after consultation with its outside legal counsel and tax advisor, shall determine in good faith that, despite adherence by the Corporation and the Company to the foregoing, additional restrictions must be imposed on Exchanges in order for the Company not to be treated as a “publicly traded partnership” under Section 7704 of the Code, the Corporation or the Company, as applicable, may impose such restrictions on Exchanges, as the Corporation or the Company, as applicable, may reasonably determine to be necessary or advisable.

 

(g) Other Prohibitions on Exchange . For the avoidance of doubt, and notwithstanding anything to the contrary herein, a Class B Holder shall not be entitled to exchange Class B Paired Securities to the extent that the Corporation or the Company reasonably determines in good faith that the Exchange (i) would be prohibited by any Applicable Law (including the unavailability of any requisite registration statement filed under the Securities Act or any exemption from the registration requirements thereunder) or (ii) would not be permitted under any other agreement with the Corporation, its subsidiaries, the Company or the Subsidiaries to which such Class B Holder is a party (including the LLC Agreement). For the avoidance of doubt, no Exchange shall be deemed to be prohibited by any Applicable Law pertaining to the registration of securities if such securities have been so registered or if any exemption from such registration requirements is reasonably available, and the parties hereto believe that there is currently no law, regulation, injunction, order or decree of any nature and acknowledge that there is no agreement of the type referred to in clause (ii) of the preceding sentence, that would, in either case, restrict the ability of a Class B Holder to exchange Class B Paired Securities.

 

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Section 2.2. Adjustments .

 

(a) The Exchange Rate shall be adjusted accordingly if there is: (i) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the Class B Paired Securities that is not accompanied by an identical subdivision or combination of the Class A Stock; or (ii) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class A Stock that is not accompanied by an identical subdivision or combination of the Class B Paired Securities. For example, if there is a 2 for 1 stock split of Class A Stock and no corresponding split with respect to the Class B Paired Securities, the Exchange Rate would be adjusted to be 2. To the extent not fully reflected in an adjustment to the Exchange Rate, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Stock are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an exchanging Class B Holder shall be entitled to receive the amount of such security, securities or other property that such exchanging Class B Holder would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction. For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Stock are converted or changed into another security, securities or other property, this Section 2.2 shall continue to be applicable, mutatis mutandis , with respect to such security or other property.

 

(b) Each time that the Corporation acquires Class B Paired Securities other than in connection with a corresponding issuance by the Corporation of the same number of shares of Class A Stock (whether as a result of an Exchange or otherwise) or a concurrent recapitalization of the Company that causes the number of Class A Units held by the Corporation to equal the number of shares of Class A Stock outstanding immediately following such purchase of Class B Paired Securities (subject, in any such case, to prior applications of this Section 2.2(b) ), the Exchange Rate shall be adjusted immediately following such transaction, without any further action by the Corporation or any Class B Holder, as follows: the Exchange Rate shall first be set at a ratio, the numerator of which shall be the number of shares of Class A Stock of the Corporation then-outstanding and the denominator of which shall be the sum of the number of Class A Units plus Class B Units then-owned by the Corporation, in each case after giving effect to the transaction that gave rise to such Exchange Rate adjustment and prior to giving effect to any event that has occurred which would give rise to an adjustment to the Exchange Rate pursuant to Section 2.2(a) , and then that ratio shall be adjusted as set forth in Section 2.2(a) for each event (if any) giving rise to such Section 2.2(a) adjustment assuming that such event had occurred after the transaction that gave rise to the Exchange Ratio adjustment being made hereby.

 

Section 2.3. Class A Stock to be Issued .

 

(a) Subject to the terms of the Registration Rights Agreement, the Corporation and the Company covenant and agree to deliver shares of Class A Stock that have been registered under the Securities Act with respect to any Exchange to the extent that a registration statement is effective and available for such shares. In the event that any Exchange in accordance with this Agreement is to be effected at a time when any such registration has not become effective or otherwise is unavailable, the Corporation shall use its commercially reasonable efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements. The Corporation shall list the Class A Stock required to be delivered upon Exchange prior to such delivery on each national securities exchange or inter-dealer quotation system on which the outstanding Class A Stock may be listed or traded at the time of such delivery. Nothing contained herein shall be construed to preclude the Corporation or the Company from satisfying their obligations in respect of the exchange of the Class B Paired Securities by delivery of Class A Stock which are unregistered under the Securities Act or held in the treasury of the Corporation or the Company or any of their subsidiaries. The Corporation shall not be required to comply with this Section 2.3(a) in an Exchange in connection with a Fundamental Transaction.

 

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(b) The Corporation reserves the right to cause certificates evidencing such Class A Stock to be imprinted with legends as to restrictions on transfer that it may deem necessary or appropriate, including legends as to applicable U.S. federal or state securities laws or other legal or contractual restrictions, and may require any Class B Holder to which Class A Stock are to be issued to agree in writing (i) that such shares of Class A Stock will not be transferred except in compliance with such restrictions and (ii) to such other matters as the Corporation may deem reasonably necessary or appropriate in light of applicable law and existing agreements.

 

(c) The Corporation shall at all times reserve and keep available out of its authorized but unissued Class A Stock, solely for the purpose of issuance upon an Exchange, such number of shares of Class A Stock as shall be deliverable upon any such Exchange; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Exchange by delivery of purchased shares of Class A Stock (which may or may not be held in the treasury of the Corporation or any subsidiary thereof).

 

(d) Prior to the date of this Agreement, the Corporation has taken all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the Corporation (including derivative securities with respect thereto) and any securities which may be deemed to be equity securities or derivative securities of the Corporation for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the Corporation who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Corporation upon the registration of any class of equity security of the Corporation pursuant to Section 12 of the Exchange Act (with the authorizing resolutions specifying the name of each such officer or director whose acquisition or disposition of securities is to be exempted and the number of securities that may be acquired and disposed of by each such Person pursuant to this Agreement).

 

(e) The Corporation covenants that all Class A Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the Corporation or to any right of first refusal or other right in favor of any Person.

 

Section 2.4. Withholding; Certification of Non-Foreign Status .

 

(a) If the Corporation or the Company shall be required to withhold any amounts by reason of any federal, state, local or foreign tax rules or regulations in respect of any Exchange, the Corporation or the Company, as the case may be, shall be entitled to take such action as it deems appropriate in order to ensure compliance with such withholding requirements, including at its option withholding shares of Class A Stock with a Fair Market Value equal to the minimum amount of any taxes which the Corporation or the Company, as the case may be, may be required to withhold with respect to such Exchange, or requiring as a condition of any Exchange that the exchanging Unit holder tender to the Company an amount equal to the minimum amount of any taxes which the Corporation or the Company, as the case may be, may be required to withhold with respect to such Exchange. To the extent that amounts are (or property is) so withheld by the Company or Corporation and paid over to the appropriate taxing authority, such withheld amounts (or property) shall be treated for all purposes of this Agreement as having been paid (or delivered) to the applicable Class B Holder. The parties anticipate that, on the basis of current law, no federal income tax withholding would be required with respect to an Exchange by any Class B Holder who is a “United States person” within the meaning of Section 7701(a)(30) of the Code and who has properly certified that such holder is not subject to federal backup withholding.

 

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(b) Notwithstanding anything to the contrary herein, each of the Corporation and the Company may, in the reasonable exercise of its discretion, require as a condition to the effectiveness of an Exchange that an exchanging Class B Holder deliver to the Corporation or the Company, as the case may be, a certification of non-foreign status in accordance with Treasury Regulation Section 1.1445-2(b) or to provide any other applicable withholding certificate. In the event the Corporation or the Company has required delivery of such certification but an exchanging Class B Holder is unable to comply, the Corporation or the Company, as the case may be, shall nevertheless deliver or cause to be delivered to the exchanging Class B Holder the Class A Stock in accordance with Section 2.1 , but subject to withholding as provided in Section 2.4(a) .

 

Section 2.5. Distributions . No Exchange shall impair the right of the Class B Holder effecting an Exchange pursuant to this Agreement to receive any distributions payable on the Class B Units so exchanged in respect of a record date that occurs prior to the Exchange Date for such Exchange. No adjustments in respect of distributions on any Class B Unit will be made on the Exchange of any Class B Paired Securities, and if the Exchange Date with respect to a Class B Unit occurs after the record date for the payment of a distribution on Class B Units but before the date of the payment, then the registered Class B Holder of the Class B Unit at the close of business on the record date will be entitled to receive the distribution payable on the Class B Unit on the payment date notwithstanding the Exchange of the Class B Units, and, for the avoidance of doubt, no Class B Holder effecting an Exchange pursuant to this Agreement shall have the right to receive any distributions (including tax distributions) on any exchanged Class B Unit with a record date that occurs from and after any Exchange Date. No Class B Holder effecting an Exchange pursuant to this Agreement shall be entitled to receive, in respect of a single record date, both (i) distributions on the Class B Units exchanged by such Class B Holder and (ii) any dividends payable on shares of Class A Stock received by such Class B Holder in such Exchange.

 

Article III
REPRESENTATIONS AND WARRANTIES

 

Section 3.1. Representations and Warranties of the Class B Holders . Each Class B Holder, severally and not jointly, represents and warrants that, as of the date hereof and as of each Exchange Date upon which a Member is issued Class A Stock, (i) if it is not a natural person, that it is duly incorporated or formed and, the extent such concept exists in its jurisdiction of organization, is in good standing under the laws of such jurisdiction, (ii) it has all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) if it is not a natural person, the execution and delivery of this Agreement by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such Class B Holder, (iv) this Agreement constitutes a legal, valid and binding obligation of such Class B Holder enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, (v) the execution, delivery and performance of this Agreement by such Class B Holder and the consummation by such Class B Holder of the transactions contemplated hereby will not (A) if it is not a natural person, result in a violation of the certificate of incorporation, bylaws, trust agreement or other organizational documents of such Class B Holder or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Class B Holder is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable such Class B Holder, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not in any material respect result in the unenforceability against such Class B Holder of this Agreement, (vi) it is acquiring the Class A Stock issued in accordance with this Agreement for its own account with the present intention of holding such Class A Stock for purposes of investment, and that it has no intention of selling Class A Stock in a public distribution in violation of any federal or state securities laws, (vii) it is a sophisticated party for purposes of applicable federal and state securities laws and regulations or has employed the services of an adequate purchaser representative for purposes of applicable federal and state securities laws and regulations, (viii) such Class B Holder has knowledge and experience in financial and business matters such that such Class B Holder is capable of evaluating the merits and risks of an investment in the Corporation, (ix) it is able to bear the economic risks of an investment in the Class A Stock and could afford a complete loss of such investment and (x) if the Class B Holder is a partnership, “S corporation”, “grantor trust” or other flow-through entity, the interest of such Class B Holder in the Company does not represent “substantially all” of the value of its assets, and it was not a “principal purpose” of such Class B Holder to avoid the “100 partner” limitation applicable under section 7704 of the Code.

 

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Section 3.2. Representations and Warranties of the Corporation and the Company . Each of the Corporation and the Company, severally and not jointly, represents and warrants that, as of the date hereof (i) it is, and as of the date of an applicable Exchange it will be, duly incorporated or formed and, to the extent such concept exists in its jurisdiction of organization, in good standing under the laws of such jurisdiction, (ii) it has, and as of the date of an applicable Exchange it will have, all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) the execution and delivery of this Agreement by it and consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such party, (iv) this Agreement constitutes, and as of the date of an applicable Exchange it will constitute, a legal, valid and binding obligation of such party enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by such party and the consummation by such party of the transactions contemplated hereby will not (A) result in a violation of the certificate of incorporation, bylaws, trust agreement or other organizational documents of such party or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such party is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable to such party, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not in any material respect result in the unenforceability against such party of this Agreement.

 

Article IV
MISCELLANEOUS PROVISIONS

 

Section 4.1. Additional Class B Holders . To the extent a Class B Holder validly transfers any or all of such holder’s Class B Paired Securities to another Person in a transaction in accordance with, and not in contravention of, the LLC Agreement or the Registration Rights Agreement, then such transferee (each, a “ Permitted Transferee ”) shall have the right to execute and deliver a joinder to this Agreement in a form provided by the Corporation, whereupon such Permitted Transferee shall become a Class B Holder hereunder. If the Company issues any Class B Units following the date hereof, in accordance with, and not in contravention of, the LLC Agreement, then any recipient of such Class B Units shall have the right to execute and deliver a joinder to this Agreement in a form provided by the Corporation, and thereby become a Class B Holder hereunder. If the Company issues any other Units (as defined in the LLC Agreement) in the future, then the Corporation shall have the right to permit the holder of such Units to execute and deliver a joinder to this Agreement in a form provided by the Corporation, whereupon such holder shall become a Class B Holder hereunder, but solely with respect to such holder’s Units which constitute Class B Units hereunder, if any. Except as set forth in this Section 4.1 , a Class B Holder may not assign or transfer any of its rights or obligations under this Agreement.

 

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Section 4.2. Notifications . Any notice, demand, consent, election, offer, approval, request, or other communication (collectively, a “ notice ”) required or permitted under this Agreement must be in writing and either delivered personally, sent by certified or registered mail, postage prepaid, return receipt requested or sent by recognized overnight delivery service, electronic mail (e-mail) or by facsimile transmittal. Any notice sent by confirmed e-mail or facsimile must be sent simultaneously by another method described in the prior sentence. A notice must be addressed:

 

(a) If to the Corporation or the Company at:

 

Purple Innovation, Inc.

123 E. 200 N.

Alpine, UT 84004

Attn: Casey McGarvey

Email: casey@onpurple.com

 

with a copy (which copy shall not constitute notice) to:

Dorsey & Whitney LLP

111 S. Main St., Suite 2100

Salt Lake City, UT 84111

Attn: Nolan S. Taylor

E-mail: taylor.nolan@dorsey.com

Fax: (801) 933-7373

Tel: (801) 933-7366

 

(b) If to any Class B Holder, to the address and other contact information set forth in the records of the Company from time to time.

 

All such notices and communications shall be deemed to have been delivered and received (i) on the date personally delivered, (ii) one (1) Business Day after being sent by a reputable overnight delivery service, (iii) five (5) Business Days after being sent, if sent by registered or certified mail, and (iv) on the date delivered by facsimile or email with receipt of transmission confirmed during business hours on a Business Day (or one (1) Business Day after the date of delivery if delivered after business hours).

 

Section 4.3. Complete Agreement . This Agreement and the agreements referred to herein constitute the entire agreement and understanding among the parties with respect to the subject matter hereof and thereof, and supersedes all prior agreements or arrangements (written and oral), including any prior representation, statement, condition or warranty between the parties relating to the subject matter hereof and thereof.

 

Section 4.4. Applicable Law; Venue; Waiver of Jury Trial .

 

(a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each of the parties hereto irrevocably consents to the exclusive jurisdiction and venue of any court within the State of Delaware in connection with any matter based upon or arising out of this Agreement or the matters contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which they might otherwise have to such jurisdiction, venue and such process.

 

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(b) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE AGREEMENTS DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 4.4 .

 

Section 4.5. References to this Agreement; Headings . Unless otherwise indicated, “Articles,” “Sections,” “Subsections”, “Clauses”, “Exhibits” and “Schedules” mean and refer to designated Articles, Sections, Subsections, Clauses, Exhibits and Schedules of this Agreement. Words such as “herein,” “hereby,” “hereinafter,” “hereof,” “hereto,” and “hereunder” refer to this Agreement as a whole, unless the context indicates otherwise. All headings in this Agreement are for convenience of reference only and are not intended to define or limit the scope or intent of this Agreement. All exhibits and schedules referred to herein, and as the same may be amended from time to time, are by this reference made a part hereof as though fully set forth herein.

 

Section 4.6. Binding Provisions . This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective personal and legal representatives, heirs, executors, successors and permitted assigns.

 

Section 4.7. Construction . Common nouns and pronouns and any variations thereof shall be deemed to refer to masculine, feminine, or neuter, singular or plural, as the identity of the Person, Persons or other reference in the context requires. Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party hereto. Any reference to any statute, law, or regulation, form or schedule shall include any amendments, modifications, or replacements thereof. Any reference to any agreement, contract or schedule, unless otherwise stated, shall include any amendments, modifications, or replacements thereof. Whenever used herein, “or” shall include both the conjunctive and disjunctive unless the context requires otherwise, “any” shall mean “one or more,” and “including” shall mean “including without limitation.” Except to the extent otherwise expressly provided herein, all references to any Class B Holder shall be deemed to refer solely to such Person in its capacity as such Class B Holder and not in any other capacity.

 

Section 4.8. Severability . It is expressly understood and agreed that if any provision of this Agreement or the application of any such provision to any party or circumstance shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to any party or circumstance other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law so long as the economic or legal substance of the matters contemplated by this Agreement is not affected in any manner materially adverse to any party. If the final judgment of a court of competent jurisdiction declares or finds that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, or to delete specific words or phrases, and to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. If such court of competent jurisdiction does not so replace an invalid or unenforceable term or provision, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the matters contemplated hereby are fulfilled to the fullest extent possible.

 

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Section 4.9. Counterparts . This Agreement and any amendments may be executed simultaneously in two or more counterparts and delivered via facsimile or .pdf, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

 

Section 4.10. No Third Party Beneficiaries . This Agreement is not intended to, and does not, provide or create any rights or benefits of any Person other than the parties hereto and their successors and permitted assigns.

 

Section 4.11. Mutual Drafting . The parties hereto are sophisticated and have been represented by attorneys throughout the transactions contemplated hereby who have carefully negotiated the provisions hereof. As a consequence, the parties do not intend that the presumptions of laws or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied to this Agreement or any agreement or instrument executed in connection herewith, and therefore waive their effects.

 

Section 4.12. Rights and Remedies Cumulative . The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive the right to use any or all other remedies. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

 

Section 4.13. Amendment . The provisions of this Agreement may be amended only by the affirmative vote or written consent of each of (a) the Corporation, (b) the Company and (c) InnoHold; provided that, without the consent of any Person, a Person who becomes a Class B Holder after the date hereof pursuant to Section 4.1 shall execute and deliver a joinder to this Agreement to become a party to this Agreement.

 

Section 4.14. Tax Treatment . This Agreement shall be treated as part of the partnership agreement of the Company as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations promulgated thereunder. Notwithstanding anything to the contrary in this Agreement, for federal, state and local tax purposes, the Corporation, the Company and the Class B Holders shall report each Exchange consummated pursuant to this Agreement, whether directly to the Corporation or to the Company, as a taxable transfer of an interest in the Company to the Corporation pursuant to Section 1001 of the Code that is eligible to give rise to a Basis Adjustment (as such term is defined in the Tax Receivable Agreement) and none of the Corporation, the Company or any Class B Holder shall take a contrary position on any tax return or otherwise unless otherwise required pursuant to a determination within the meaning of Section 1313 of the Code.

 

Section 4.15. Further Action . Each party hereto shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by the other party hereto to give effect to and carry out the transactions contemplated herein.

 

Section 4.16. Specific Performance . The parties hereto recognize that irreparable injury will result from a breach of any provision of this Agreement and that money damages will be inadequate to fully remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of the provisions of this Agreement, any party which may be injured (in addition to any other remedies which may be available to that party) shall be entitled (without the need to post any bond, surety, or other security) to one or more preliminary or permanent orders (a) restraining and enjoining any act which would constitute a breach or (b) compelling the performance of any obligation which, if not performed, would constitute a breach. Each party hereto further agrees that, in the event of any action for an injunction or other equitable remedy in respect of such breach or enforcement of specific performance, it will not assert the defense that a remedy at law would be adequate.

 

Section 4.17. Independent Nature of Class B Holders’ Rights and Obligations . The obligations of each Class B Holder hereunder are several and not joint with the obligations of any other Class B Holder, and no Class B Holder shall be responsible in any way for the performance of the obligations of any other Class B Holder hereunder. The decision of each Class B Holder to enter into to this Agreement has been made by such Class B Holder independently of any other Class B Holder. Nothing contained herein, and no action taken by any Class B Holder pursuant hereto, shall be deemed to constitute the Class B Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Class B Holders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby and the Corporation acknowledges that the Class B Holders are not acting in concert or as a group, and the Corporation will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.

 

[Signature pages follow]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered, all as of the date first set forth above.

 

  PURPLE INNOVATION, INC.
     
  By: /s/ Samuel D. Bernards
  Name: Samuel D. Bernards
  Title: Chief Executive Officer
   
  PURPLE INNOVATION, LLC.
     
  By: /s/ Samuel D. Bernards
  Name: Samuel D. Bernards
  Title: Chief Executive Officer
     
  INNOHOLD, LLC
   
  By: /s/ Terry V. Pearce 
  Name: Terry V. Pearce
  Title: Manager

 

[ Signature Page to Exchange Agreement ]

 

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The undersigned does herby agree to the terms and conditions of the Exchange Agreement, dated as of February 2, 2018, and is bound by all terms and conditions thereof as of the date set forth below.

 

  CLASS B HOLDERS:
   
   
  Name:
  Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page of Holders Receiving Class B Units Subsequent to February 2, 2018]

 

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Exhibit A

 

FORM OF ELECTION OF EXCHANGE

 

Purple Innovation, Inc.

123 E. 200 N.

Alpine, UT 84004

 

Reference is hereby made to the Exchange Agreement, dated as of February 2, 2018 (the “ Exchange Agreement ”), among Purple Innovation, Inc., a Delaware corporation, Purple Innovation, LLC, a Delaware limited liability company, InnoHold, LLC, a Delaware limited liability company, and such other holders of Class B Units that may from time to time become parties thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

As of the date set forth below, the undersigned Class B Holder hereby transfers to the Corporation or the Company, as applicable, the number of Class B Paired Securities set forth below in Exchange for shares of Class A Stock to be issued in its name as set forth below and/or a Cash Exchange Payment to the bank account set forth below, in accordance with the Exchange Agreement.

 

Legal Name of Class B Holder:

   
     
Address:    
     
Number of Class B Paired Securities to be Exchanged:    
     
Bank Account for Cash Exchange Payment and Instructions    

 

 

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Election of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Election of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the Class B Paired Securities subject to this Election of Exchange are being transferred to the Company free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the Class B Paired Securities subject to this Election of Exchange is required to be obtained by the undersigned for the transfer of such Class B Paired Securities to the Company.

 

The undersigned hereby irrevocably constitutes and appoints any officer of the Corporation as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Corporation or the Company, as applicable, the Class B Paired Securities subject to this Election of Exchange and to deliver to the undersigned the shares of Class A Stock to be delivered in Exchange therefor.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Election of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney.

 

 

      
  Name:       
  Date:  

 

 

 

 

 

Exhibit 10.2

 

TAX RECEIVABLE AGREEMENT

 

THIS Tax Receivable Agreement (“ TRA ”) is made and entered into as of February 2, 2018 (the “ Effective Date ”) by and among Purple Innovation, Inc., a Delaware corporation (“ Parent ”), InnoHold, LLC, a Delaware limited liability company (“ InnoHold ”), Purple Innovation, LLC, a Delaware limited liability company (the “ Company ”), and those direct or indirect equity owners of the Company listed on Schedule 1 (together with InnoHold, the “ Class B Unitholders ”).

 

RECITALS

 

1. Prior to the Effective Date of this TRA and the Closing Arrangements, defined below, and immediately prior to the merger of Purple Team, LLC, a Delaware limited liability company (“ Purple Team ”), into Innohold, the equity in the Company was owned solely by InnoHold and Purple Team.

 

2. Also prior to the Effective Date of this TRA, (i) PRPL Acquisition, LLC, a Delaware limited liability company and a wholly owned subsidiary of Parent, will have merged with and into the Company (the “ Merger ”) in accordance with the Agreement and Plan of Merger dated November 2, 2017 (as may be amended from time to time, the “ Merger Agreement ”), and the parties thereto will have received the consideration as set forth in the Merger Agreement and (ii) pursuant to the Merger Agreement, Innohold will have received (among other things) (a) a cash distribution, (b) rights under an agreement relating to the exchange of Class B Units of the Company and Class B Stock of Parent into Class A Stock of Parent dated as of the date hereof (the “ Exchange Agreement ”) and (c) the rights under this TRA. Steps (i) – (ii) are defined as the “ Closing Arrangements .”

 

3. At the Effective Date, after the completion of the Merger and the Closing Arrangements, Parent and the Class B Unitholders will hold all the Units of the Company outstanding at such time, and will be parties to the Second Amended and Restated Operating Agreement of the Company (the “ LLC Agreement ”).

 

4. The parties intend to treat the Merger and the Closing Arrangements as integrated transactions, such that the Surviving Entity, as defined in the Merger Agreement, is a continuation of the Company for United States federal income tax purposes, and Parent is treated as having acquired by purchasing Units of the Company as contemplated by the Merger Agreement, for the consideration set forth in the Merger Agreement and in the Closing Arrangements.

 

5. Pursuant to the Exchange Agreement, the Class B Unitholders or their permitted assignees may exchange its Class B Units for Class A Stock of Parent and, as a result of which, the Applicable Class B Unitholder(s) will receive the right to certain payments under this TRA.

 

6. The Company and each of its direct and (to the extent owned through a chain of pass-through entities as determined for U.S. federal income tax purposes) indirect subsidiaries (if any) which are treated as partnerships for United States federal income tax purposes (the Company, such subsidiaries, and any direct or (to the extent owned through a chain of pass-through entities) indirect subsidiary that is disregarded as an entity separate from its owner, together, the “ Company Group ”), have, or will have, in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the “ Code ”), for each Taxable Year (as such term is defined below) in which an Exchange (as such term is defined below) occurs, which election is intended to result in an adjustment to the tax basis of the assets owned by the Company Group (solely with respect to Parent) at the time of an Exchange (such time, the “ Exchange Date ”).

 

 

 

 

7. The income, gain, loss, deduction and other Tax (as such term is defined below) items of Parent or any Parent Consolidated Group may be affected by (i) the Basis Adjustments (as such term is defined below) and (ii) the Imputed Interest (as such term is defined below).

 

8. The parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments and Imputed Interest on the liability for Taxes of Parent and certain other matters.

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, the parties agree as follows:

 

Article 1
DEFINITIONS

 

Section 1.1. Definitions .

 

As used in this TRA, the terms set forth in this Article 1 shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

Amended Schedule ” is defined in Section 2.4(b).

 

Applicable Class B Unitholder(s) ” means, from time to time, any Class B Unitholder(s) who exercise their Exchange Rights and who, as a result, are entitled to the payments contemplated by this TRA.

 

Basis Adjustment ” means the adjustment to the tax basis of a Reference Asset, whether as reported on a Tax Return or as a result of a Determination, under sections 732, 743(b) or 1012 of the Code, as applicable, and the Treasury Regulations promulgated thereunder, and any other applicable, similar or successor provisions of the Code (both in situations where, as a result of one or more Exchanges, Company becomes an entity that is disregarded as separate from its owner for tax purposes and in situations where, following an Exchange, Company remains in existence as an entity for United States federal income tax purposes) and, in each case, comparable sections of foreign, state and local income and franchise tax laws, arising by reason of the Closing Arrangements, the Exchange Agreement (or any Exchange thereunder) and all payments under this TRA, and that arise solely with respect to Class B Units held by the Class B Unitholders. For purposes of calculating the Basis Adjustment with respect to any Applicable Class B Unitholder(s), the transferee’s share of partnership property will be determined in accordance with section 743(b) and regulations promulgated thereunder. The amount of any Basis Adjustment resulting from an Exchange of one or more Class B Units shall be determined without regard to any Pre-Exchange Transfer of such Class B Units and as if any such Pre-Exchange Transfer had not occurred.

 

Beneficial Owner ” of a security means a Person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

 

Board ” means the Board of Directors of Parent.

 

Business Day ” has the meaning set forth in the LLC Agreement.

 

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Change of Control ” means the occurrence of any of the following events after the date hereof:

 

(i) there is consummated, in accordance with Parent’s certificate of incorporation and applicable law, the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of Parent’s assets (determined on a consolidated basis), including a sale of all Class A Units held by Parent, to any Person or “group” (as such term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or any successor provisions thereto);

 

(ii) any Person or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d)(3) of the Exchange Act, or any successor provisions thereto, is or becomes the beneficial owner, directly or indirectly, of securities of Parent representing more than fifty percent (50%) of the combined voting power of the Parent’s then outstanding voting securities;

 

(iii) there is consummated a merger, reorganization, consolidation or similar form of business transaction involving Parent and any other corporation or other entity, and, immediately after the consummation of such transaction, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the Person surviving the merger or, if the surviving Person is a Subsidiary, the ultimate parent thereof, or (y) the voting securities immediately prior to such merger or consolidation do not continue to represent or are not converted into more than fifty percent (50%) of the combined voting power of then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving Person is a Subsidiary, the ultimate parent thereof; or

 

(iv) the stockholders of Parent and the Board approve a plan of complete liquidation or dissolution of Parent.

 

Notwithstanding the foregoing, except with respect to clause (iii)(x) above, a “Change of Control” shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which (A) the record holders of the shares of stock of Parent immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares or other equity of, an entity which owns all or substantially all of the assets of Parent immediately following such transaction or series of transactions or (B) Parent is the surviving entity and its Class A Stock continues to be registered under Section 12(b) or 12(g) of the Exchange Act and continues to be publicly traded.

 

Change of Control Termination Date ” means the date of a Change of Control Termination Notice for purposes of determining the Change of Control Termination Payment.

 

Change of Control Termination Effective Date ” is defined in Section 4.2.

 

Change of Control Termination Notice ” is defined in Section 4.2.

 

Change of Control Termination Payment ” is defined in Section 4.3(b).

 

Change of Control Termination Schedule ” is defined in Section 4.1(b).

 

Class A Stock ” has the meaning set forth in the LLC Agreement.

 

Class A Units ” has the meaning set forth in the LLC Agreement.

 

Class B Stock ” has the meaning set forth in the LLC Agreement.

 

Class B Unitholder ” is defined in the Recitals.

 

Class B Units ” has the meaning set forth in the LLC Agreement.

 

Closing Date ” means the date on which the Merger, as defined in the Merger Agreement, is effective.

 

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Code ” is defined in the Recitals.

 

Company ” is defined in the Recitals.

 

Company Group ” is defined in the Recitals.

 

Control ” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

Cumulative Net Realized Tax Benefit ” for a Taxable Year means, with respect to each Applicable Class B Unitholder, the cumulative amount of Realized Tax Benefits for all Taxable Years of Parent, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment with respect to each Applicable Class B Unitholder for each Taxable Year shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination, or, if applicable, the Early Termination Schedule, Change of Control Termination Schedule, or amendments thereto.

 

Default Rate ” means LIBOR plus 500 basis points.

 

Determination ” shall have the meaning ascribed to such term in section 13l3(a) of the Code or similar provision of foreign, state and local tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax. A Determination shall include the expiration of all periods of limitations relating to the assessment of Tax for a Taxable Year.

 

Early Termination Date ” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

 

Early Termination Effective Date ” is defined in Section 4.2.

 

Early Termination Notice ” is defined in Section 4.2.

 

Early Termination Payment ” is defined in Section 4.3(b).

 

Early Termination Rate ” means LIBOR plus 100 basis points.

 

Early Termination Schedule ” is defined in Section 4.2.

 

Effective Date” is defined in the opening paragraph.

 

Exchange ” means (i) the steps in the Closing Arrangements that result in the acquisition of Class A Units in the Company by Parent and (ii) any exchange of Class B Units and Class B Stock into Class A Stock pursuant to the Exchange Agreement.

 

Exchange Agreement ” is defined in the Recitals.

 

Exchange Basis Schedule ” is defined in Section 2.2.

 

Exchange Date ” is defined in the Recitals.

 

Expert ” is defined in Section 7.9.

 

Hypothetical Tax Liability means, for purposes of determining a payment hereunder by Parent to the Applicable Class B Unitholder(s) in respect of a Taxable Year, the amount that would constitute the liability for Taxes of Parent using the same methods, elections, conventions and similar practices as are used on the relevant Parent Return, if there were excluded, in making such determination, (1) any aggregate increase or decrease in Tax liability for the Taxable Year attributable to Basis Adjustments arising as a result of the Exchanges by the Applicable Class B Unitholder(s), including by reason of any payments under this TRA to any Applicable Class B Unitholder(s) (other than payments of Imputed Interest) and (2) any deductions attributable to Imputed Interest with respect to payment obligations under this TRA to such Applicable Class B Unitholder(s) for the Taxable Year. For the avoidance of doubt, Hypothetical Tax Liability shall be determined without taking into account the carryover or carryback of any Tax item (or portions thereof) that is attributable to such Basis Adjustment or Imputed Interest.

 

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Imputed Interest ” shall mean any interest imputed under sections 483, 1272 or 1274 of the Code and any similar provision of state and local tax law, as applicable, with respect to Parent’s payment obligations under this TRA.

 

InnoHold ” is defined in the Recitals.

 

IRS ” means the United States Internal Revenue Service.

 

LIBOR ” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two (2) days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBOR01” or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period.

 

LLC Agreement ” is defined in the Recitals.

 

Market Value ” means the Closing Price (as defined in the Exchange Agreement) of one (1) share of Class A Stock on the Business Day prior to the measurement date; provided , that if the Class A Stock is listed on any domestic securities exchange, the term “ Business Day ” as used in this sentence means Business Days on which such exchange is open for trading.

 

Material Objection Notice ” has the meaning set forth in Section 4.2.

 

Merger ” is defined in the Recitals.

 

Merger Agreement ” is defined in the Recitals.

 

Net Tax Benefit ” is defined in Section 3.l(b).

 

Non-Stepped Up Tax Basis ” means, with respect to any Reference Asset at any time, the tax basis that such asset would have had at such time if no Basis Adjustments had been made.

 

Objection Notice ” has the meaning set forth in Section 2.4(a).

 

OTC Bulletin Board ” means the Financial Industry Regulatory Authority OTC Bulletin Board electronic inter-dealer quotation system.

 

Parent ” is defined in the opening paragraph.

 

Parent Consolidated Group ” means any group of entities that are part of the United States federal income tax consolidated group of which Parent is the common parent.

 

Parent Return ” means the United States federal, and/or foreign, and/or state and/or local Tax Return, as applicable, of Parent filed with respect to Taxes for any Taxable Year, and includes consolidated returns in which Parent is the common parent.

 

Participation Percentage ” means, with respect to a Class B Unitholder, the percentage set forth on Exhibit B next to such Class B Unitholder’s name.

 

Person ” means and includes any individual, bank, savings association, corporation, partnership (limited, general, exempted or otherwise), limited liability company, limited company, company, exempted company, unit trust, joint-stock company, trust, estate or unincorporated organization.

 

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Pre-Exchange Transfer ” means any transfer (including upon the death of an Applicable Class B Unitholder) in respect of one or more Class B Units (i) that occurs after the Closing Arrangements and prior to an Exchange of such Class B Units and (ii) to which sections 743(b) or 734(b) of the Code applies.

 

Qualified Tax Advisor ” means any law or accounting firm that is internationally recognized as being expert in Tax matters and that is reasonably acceptable to Parent and the Applicable Class B Unitholder(s).

 

Realized Tax Benefit ” means, for purposes of determining a payment hereunder by Parent to an Applicable Class B Unitholder in respect of a Taxable Year, the excess, if any, of (a) the Hypothetical Tax Liability determined with reference to such Applicable Class B Unitholder in respect of the Taxable Year over (b) the “actual” liability for Taxes of Parent using the same methods, elections, conventions and similar practices used on the relevant Parent Return, such “actual” liability to be computed with the adjustments described in this TRA (including, for the avoidance of doubt, the application of the Valuation Assumptions when provided for in this Agreement). If all or a portion of the actual tax liability of Parent for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

Realized Tax Detriment ” means, for purposes of determining a payment hereunder by Parent to an Applicable Class B Unitholder, the excess, if any, of (a) the “actual” liability for Taxes of Parent using the same methods, elections, conventions and similar practices used on the relevant Parent Return, such “actual” liability to be computed with the adjustments described in this TRA (including, for the avoidance of doubt, the application of the Valuation Assumptions when provided for in this TRA) over (b) the Hypothetical Tax Liability determined with reference to such Applicable Class B Unitholder in respect of the Taxable Year. If all or a portion of the actual tax liability of Parent for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.

 

Reconciliation Dispute ” has the meaning set forth in Section 7.9.

 

Reconciliation Procedures ” has the meaning set forth in Section 2.4(a).

 

Reference Asset ” means an asset that is held by any member of a Company Group at the time of the Closing Arrangements or an Exchange, as relevant. A Reference Asset also includes any asset that is “substituted basis property” under section 7701(a)(42) of the Code with respect to a Reference Asset.

 

Schedule ” means any of the following: (a) an Exchange Basis Schedule, (b) a Tax Benefit Schedule, (c) the Early Termination Schedule or (d) the Change of Control Termination Schedule.

 

Senior Obligations ” is defined in Section 5.1.

 

Subsidiaries ” means, with respect to any Person, another Person in which such first Person owns, directly or indirectly, an amount of voting securities, other voting ownership or voting partnership interests which is sufficient to elect at least a majority of the board of directors or other governing body (or if there are no such voting interests, 50% or more of the equity interests of such Person).

 

Tax Benefit Payment ” is defined in Section 3.1(b).

 

Tax Benefit Schedule ” is defined in Section 2.3(a).

 

Tax Return ” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

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Taxable Year ” means a taxable year of Parent as defined in Section 441(b) of the Code or comparable section of foreign, state or local tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than twelve (12) months for which a Tax Return is made), ending on or after the Effective Date

 

Taxes ” means any and all taxes, assessments or similar charges that are based on or measured with respect to any income or profits, or that are imposed in lieu of or are in the nature of an income tax, including any franchise taxes based on income, imposed by any federal, foreign, state or local Taxing Authority, and any interest related to such Tax.

 

Taxing Authority ” shall mean any domestic, federal, national, foreign, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

TRA ” is defined in the Recitals.

 

Treasury Regulations ” means the final and temporary regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

Units ” means the Class A Units and the Class B Units, collectively.

 

Valuation Assumptions ” shall mean, subject to Section 4.1(b), as of an Early Termination Date or Change of Control Termination Date, the assumptions that:

 

(a) in each Taxable Year ending on or after such Early Termination Date, Parent will have taxable income sufficient to fully utilize the deductions arising from the Basis Adjustments and the Imputed Interest during such Taxable Year (including, for the avoidance of doubt, Basis Adjustments and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available;

 

(b) All Taxes are paid on the due date for payment of such Taxes, excluding any available extensions;

 

(c) the U.S. federal income tax rates and state and local income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other Law as in effect on the Early Termination Date (but taking into account for the applicable Taxable Years adjustments to the tax rates that have been enacted as of the Early Termination Date with a delayed effective date);

 

(d) any loss carryovers generated by any Basis Adjustment or Imputed Interest and available as of the date of the Early Termination Schedule will be utilized by Parent on a pro rata basis from the date of such schedule through the scheduled expiration date of such loss carryovers;

 

(e) any non-amortizable assets will be disposed of on the fifteenth anniversary of the applicable Basis Adjustment; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale of the relevant asset (if earlier than such fifteenth anniversary); and

 

(f) if, as of the Early Termination Date, there are Class B Units that have not been Exchanged, then each such Class B Unit shall be deemed to be Exchanged for the Market Value of the Class A Stock payable in respect thereof under the Exchange Agreement and the amount of cash that would be transferred under this TRA to the Class B Unitholder(s) that is attributable to such Class B Units that have not been exchanged under this TRA, determined as if the deemed Exchange occurred on the Early Termination Date. For the avoidance of doubt, the term “Exchange” as used in herein shall include any Exchange deemed to have occurred under this subsection.

 

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Section 1.2. Other Definitional and Interpretative Provisions . The words ‘‘hereof, “herein” and “hereunder” and words of like import used in this TRA shall refer to this TRA as a whole and not to any particular provision of this TRA. References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this TRA unless otherwise specified. All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this TRA as if set forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this TRA. Any singular term in this TRA shall be deemed to include the plural, and any plural term the singular. Whenever the words “include”, “includes” or “including” are used in this TRA, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import. “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms thereof. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

 

Article 2
DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

 

Section 2.1. Basis Adjustment . The parties hereto acknowledge that an Exchange constitutes a transfer of an interest in Company giving rise to a Basis Adjustment. For the avoidance of doubt, payments made under this TRA shall not be treated as resulting in a Basis Adjustment to the extent such payments are treated as Imputed Interest.

 

Section 2.2. Basis Schedule . Within 45 calendar days after the filing of the United States federal income tax return of Parent for each Taxable Year in which any Exchange has been effected, Parent shall deliver to the Applicable Class B Unitholder(s) a schedule (the “ Exchange Basis Schedule ”) that shows, in reasonable detail necessary to perform the calculations required by this TRA, including with respect to each Applicable Class B Unitholder, for purposes of Taxes, (i) the Non-Stepped Up Tax Basis of the Reference Assets as of the Exchange Date, (ii) the Basis Adjustments with respect to the Reference Assets as a result of any Exchanges effected in the Closing Arrangements, any other Exchanges effected in such Taxable Year and Exchanges effected in prior Taxable Years, calculated in the aggregate and identified separately based on whether the Basis Adjustment arises by virtue of an Exchange effected in the Closing Arrangements, the current Taxable Year or prior Taxable Years, (iii) the period (or periods) over which the Reference Assets are amortizable and/or depreciable and (iv) the period (or periods) over which each Basis Adjustment is amortizable and or depreciable, identified separately based on whether the Basis Adjustment arises by virtue of an Exchange effected in the Closing Arrangements, the current Taxable Year or prior Taxable Years. The Exchange Basis Schedule will become final as provided in Section 2.4(a) and may be amended as provided in Section 2.4(b) (subject to the procedures set forth in Section 2.4(b)).

 

Section 2.3. Tax Benefit Schedule.

 

(a)  Tax Benefit Schedule . Within 60 calendar days after the filing of the United States federal income tax return of Parent for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment, Parent shall provide to the Applicable Class B Unitholder(s) a schedule showing, in reasonable detail and, at the request of the Applicable Class B Unitholder(s), with respect to each separate Exchange by such Applicable Class B Unitholder(s), the calculation of the Realized Tax Benefit or Realized Tax Detriment with respect to an Exchange effected in the Closing Arrangements, for any Exchange effected in a prior Taxable Year and for any Exchange effected for such Taxable Year with respect to such Applicable Class B Unitholder(s) (each a “ Tax Benefit Schedule ”). The Tax Benefit Schedule will become final as provided in Section 2.4(a) and may be amended as provided in Section 2.4(b) (subject to the procedures set forth in Section 2.4(b)).

 

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(b)  Applicable Principles . Subject to Sections 3.3 and 3.4, the Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual cash liability for Taxes of Parent (on a consolidated basis, as relevant) for such Taxable Year attributable to the Basis Adjustments and Imputed Interest, determined using a “with and without” methodology. In preparing the Tax Returns upon which the Realized Tax Benefit or Detriment are prepared, and in calculating the Hypothetical Tax Liability, Parent will not take any positions that are not more likely than not to be sustained if challenged by a Tax authority. For the avoidance of doubt, the actual liability for Taxes will take into account the deduction of the portion of each Tax Benefit Payment that must be accounted for as interest under the Code based upon the characterization of Tax Benefit Payments as additional consideration payable by Parent for the Class B Units acquired in an Exchange, and any tax items of Parent or any member of the consolidated tax return of Parent that are deductible in a year after the Closing Date. Carryovers or carrybacks of any Tax item attributable to the Basis Adjustment and Imputed Interest shall be considered to be subject to the rules of Code and the Treasury Regulation or the appropriate provisions of foreign, state and local income and franchise tax law, as applicable, governing the use, limitation, and expiration of carryovers or carrybacks of the relevant-type. If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment or Imputed Interest and another portion that is not, such portions shall be considered to be used in accordance with the “with and without” methodology, recognizing that the Hypothetical Tax Liability for the year would not include any such carryover or carryback, but such amount would be taken into account in calculating the Realized Tax Benefit for the year, if it is actually utilized in such year. For the avoidance of doubt, if there is a carryover or carryback of any Tax item that is not attributable to the Basis Adjustment or Imputed Interest, it will be utilized in the calculation of the Hypothetical Tax Liability and the Realized Tax Benefit and Realized Tax Detriments for the year to which it is carried, to the extent possible. The parties agree that (1) all Tax Benefit Payments (other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase price adjustments that give rise to further Basis Adjustments to Reference Assets for Parent and (B) have the effect of creating additional Basis Adjustments to Reference Assets for Parent in the year of payment, and (2) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate. The parties further agree that all Tax Benefit Payments shall be shared among the Class B Unitholders in proportion to their Participation Percentages.

 

Section 2.4. Procedures, Amendments.

 

(a)  Procedure . Every time Parent delivers to the Applicable Class B Unitholder(s) an applicable Schedule under this TRA, including any Amended Schedule delivered pursuant to Section 2.4(b), but excluding any Early Termination Schedule, Change of Control Termination Schedule, amended Early Termination Schedule or amended Change of Control Termination Schedule, Parent shall also (i) deliver to the Applicable Class B Unitholder(s) schedules and work papers, as reasonably determined by Parent or reasonably requested by the Applicable Class B Unitholder(s), providing reasonable detail regarding the preparation of the Schedule and (ii) allow the Applicable Class B Unitholder(s) reasonable access at no cost to the appropriate representatives at Parent, as determined by Parent or requested by the Applicable Class B Unitholder(s) in connection with a review of such Schedule. An applicable Schedule or amendment thereto shall become final and binding on Parent and an Applicable Class B Unitholder 30 calendar days from the first date on which the Applicable Class B Unitholder(s) received the applicable Schedule or amendment thereto unless the Applicable Class B Unitholder(s) (i) within 30 calendar days after receiving an applicable Schedule or amendment thereto, provides Parent with notice of a material objection to such Schedule (“ Objection Notice ”) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by Parent. If the parties, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within 30 calendar days after receipt by Parent of an Objection Notice, Parent and the Applicable Class B Unitholder(s) shall employ the reconciliation procedures as described in Section 7.9 (the “ Reconciliation Procedures ”).

 

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(b)  Amended Schedule . The applicable Schedule for any Taxable Year shall be amended from time to time by Parent (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to any Taxable Year after the date the Schedule was provided to the Applicable Class B Unitholder(s), (iii) to comply with the Expert’s determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other Tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year or (vi) to adjust an Exchange Basis Schedule to take into account payments made pursuant to this TRA (any such Schedule an “ Amended Schedule ”). For the avoidance of doubt, no Applicable Class B Unitholder shall have any obligation to make any payment to Parent, or to reimburse Parent, for amounts previously paid pursuant to this TRA.

 

Article 3
TAX BENEFIT PAYMENTS

 

Section 3.1. Payments.

 

(a)  Payments . Within five Business Days after a Tax Benefit Schedule or Amended Schedule delivered to Class B Unitholders becomes final in accordance with Section 2.4, Parent shall pay to each Applicable Class B Unitholder for the applicable Taxable Year the Tax Benefit Payment with respect to such Applicable Class B Unitholder for such Taxable Year, as determined pursuant to Section 3.l(b). Each such Tax Benefit Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by the Applicable Class B Unitholder to Parent or as otherwise agreed by Parent and the Applicable Class B Unitholder. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, United States federal estimated income tax payments.

 

(b) A “ Tax Benefit Payment ” for a Taxable Year means, with respect to each Applicable Class B Unitholder, an amount, not less than zero, equal to the sum of the Applicable Class B Unitholder’s Net Tax Benefit. Subject to Sections 3.3 and 3.4, the “ Net Tax Benefit ” with respect to each Class B Unitholder for a Taxable Year shall be an amount equal to the excess, if any, of 80% of the Cumulative Net Realized Tax Benefit with respect to such Class B Unitholder for such Taxable Year over the total amount of payments previously made to such Class B Unitholder under this Section 3.1 (excluding payments attributable to Imputed Interest).

 

Section 3.2. No Duplicative Payments and Principles . It is intended that the provisions of this TRA will not result in duplicative payment of any amount required under this TRA. It is also intended that the provisions of this TRA provide that 80% of the Cumulative Net Realized Tax Benefit with respect each Class B Unitholder will be paid to such Class B Unitholder. The provisions of this TRA shall be construed in the appropriate manner to ensure such intentions are realized.

 

Section 3.3. Insufficient Taxable Income or Insufficient Funds . Notwithstanding anything in Section 3.1(a) or (b) to the contrary, and subject to Section 3.4 hereof, to the extent that the aggregate tax benefit of Parent’s deduction with respect to the Basis Adjustments or Imputed Interest under this TRA is limited in a particular Taxable Year because Parent does not have sufficient taxable income, or to the extent that Parent lacks sufficient funds to satisfy its obligations to make all Tax Benefit Payments due with respect to a particular Taxable Year, the limitation on the tax benefit for Parent, or the payments under this TRA that may be made, as the case may be, shall be taken into account or made for each Person entitled to receive a payment pursuant to Section 3.1(a) on a first-in first-out basis by calculating and paying out Net Tax Benefits in the following order of priority: (i) first Net Tax Benefits during such Taxable Year (whether by virtue of current year deductions or carryovers of net operating losses arising in prior years from Basis Adjustments) arising from Exchanges effected in the Closing Arrangements (pro rata among the members who Exchanged units in the Closing Arrangements), and then (ii) Net Tax Benefits during such Taxable Year (whether by virtue of current year deductions or carryovers of net operating losses arising in prior years from Basis Adjustments) arising from Exchanges following the Exchanges effected in the Closing Arrangements on a first-in first-out basis, with the Net Tax Benefits arising from Exchanges effected in an earlier Taxable Year calculated and paid out prior to Net Tax Benefits arising from Exchanges effected in later Taxable Years (pro rata among members who Exchange in a Taxable Year (but after the Closing Arrangements), without regard to when the Exchange occurred in the Taxable Year).

 

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Article 4
TERMINATION

 

Section 4.1. Termination and Breach of TRA.

 

(a) Parent may terminate this TRA with respect to all amounts payable to the Class B Unitholders under this TRA at any time by paying to them the Early Termination Payments in cash; provided , however , that this TRA shall only terminate under this Section 4.l(a) effective upon the receipt of the Early Termination Payments by the all Class B Unitholders; and provided , further , that Parent may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which all or any portion of any Early Termination Payment has been paid. Upon payment in full of the Early Termination Payments by Parent, Parent shall not have any further payment obligations under this TRA, other than for any (i) Tax Benefit Payments due and payable but unpaid as of the Early Termination Notice; and (ii) Tax Benefit Payments due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (ii) is included in Early Termination Payments). If an Exchange occurs after Parent has made all Tax Benefit Payments to the Class B Unitholders in full as specified above, Parent shall have no obligations under this TRA with respect to such Exchange. For purposes of this Section 4.1, a Class B Unitholder includes a person who was a Class B Unitholder prior to the receipt of notice from Parent pursuant to this Section 4.1(a) and who exchanged Class B Units and Class B Stock for Parent Class A Stock prior to such notice pursuant to the Exchange Agreement.

 

(b) Upon the occurrence of a Change of Control, Parent shall be obligated to terminate this TRA effective as of the Change of Control Termination Date by paying to the Class B Unitholders the Change of Control Termination Payments, substituting “Change of Control Termination Date” for “Early Termination Date” each time Early Termination Date appears in the definition of Valuation Assumptions and substituting “Change of Control Termination Schedule” for “Early Termination Schedule” each time Early Termination Schedule appears in the definition of Valuation Assumptions, and following the procedures set forth in Sections 4.2 and 4.3, as applicable to a Change of Control; provided , however , that this TRA shall only terminate under this Section 4.1(b) effective upon the receipt of all of the Change of Control Termination Payments by the Class B Unitholders. Upon payment in full of the Change of Control Termination Payments by Parent, Parent shall have no further payment obligations under this TRA, other than for any (i) Tax Benefit Payments due and payable but unpaid as of the Change of Control Termination Notice; and (ii) Tax Benefit Payments due for the Taxable Year ending with or including the date of the Change of Control Termination Notice (except to the extent that the amount described in clause (ii) is included in Change of Control Termination Payments). If an Exchange occurs after Parent has made all Tax Benefit Payments to the Class B Unitholders in full as specified above, Parent shall have no obligations under this TRA with respect to such Exchange. For purposes of a Change of Control Termination Payment, a Class B Unitholder includes a person who was a Class B Unitholder immediately prior to the Change of Control who exchanged Class B Units and Class B Stock for Parent Class A Stock immediately prior to the Change of Control pursuant to the Exchange Agreement.

 

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(c) In the event that Parent breaches any of its material obligations under this TRA, whether as a result of failure to make any payment within 90 days of when due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include, but shall not be limited to: (i) Early Termination Payments calculated as if an Early Termination Notice had been delivered on the date of the breach; (ii) any Tax Benefit Payments due and payable but unpaid as of the date of the breach; and (iii) any Tax Benefit Payments due for the Taxable Year ending with or including the date of the breach. Notwithstanding the foregoing, in the event that Parent breaches this TRA, the Class B Unitholders shall be entitled to elect to receive the amounts set forth in clauses (i), (ii), (iii) and (iv) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this TRA within 90 days after the date such payment is due shall be deemed to be a breach of a material obligation under this TRA for all purposes hereof.

 

Section 4.2. Termination Notice . If Parent chooses to exercise its right of early termination under Section 4.1 above, or within thirty days of a Change of Control (as the case may be), Parent shall deliver to each of the Class B Unitholders notice of such intention to exercise such right or of such occurrence (“ Early Termination Notice ” or “ Change of Control Termination Notice ,” as applicable) and a schedule (the “ Early Termination Schedule ” or “ Change of Control Termination Schedule ,” as applicable) specifying Parent’s intention to exercise such right, or the presence of such occurrence, and showing in reasonable detail the calculation of the Early Termination Payments or the Change of Control Termination Payments, as applicable, for the Class B Unitholders. Parent shall, along with such notice and schedule, (i) deliver to the Class B Unitholders schedules and work papers, as reasonably determined by Parent or reasonably requested by the Class B Unitholders providing reasonable detail regarding the preparation of the Schedule and (ii) allow the Class B Unitholders reasonable access, at no cost, to the appropriate representatives at Parent, as reasonably determined by Parent or reasonably requested by the Class B Unitholders, in connection with a review of such schedule. The Early Termination Schedule or Change of Control Termination Schedule, as applicable, shall become final and binding on Parent and the Class B Unitholders 30 calendar days from the first date on which the Class B Unitholders received such schedule or amendment thereto unless the Class B Unitholders (i), within 30 calendar days after receiving such schedule, provide Parent with notice of a material objection to such schedule made in good faith (“ Material Objection Notice ”) or (ii) provide a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such schedule becomes binding on the date the waiver is received by Parent (the “ Early Termination Effective Date ” or “ Change of Control Termination Effective Date ”). If for any reason the parties are unable to successfully resolve the issues raised in such notice within 30 calendar days after receipt by Parent of the Material Objection Notice, Parent and the Class B Unitholders shall engage in the Reconciliation Procedures.

 

Section 4.3. Payment upon Termination.

 

(a) Within three Business Days after the Early Termination Effective Date, Parent shall pay to each Class B Unitholder an amount equal to the Early Termination Payment with respect to such Class B Unitholder. On the Change of Control Termination Effective Date, Parent shall pay to each Class B Unitholder an amount equal to the Change of Control Termination Payment with respect to such Class B Unitholder. Such payments shall be made by wire transfer of immediately available funds to a bank account or accounts designated by each Class B Unitholder or as otherwise agreed by Parent and each such Class B Unitholder.

 

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(b) “ Early Termination Payment ” for a Class B Unitholder shall equal the present value, discounted at the Early Termination Rate as of the Early Termination Effective Date, of all Tax Benefit Payments that would be required to be paid by Parent to such Class B Unitholder hereunder beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied. “ Change of Control Termination Payment ” for a Class B Unitholder shall equal the present value, discounted at the Early Termination Rate as of the Change of Control Termination Effective Date, of all Tax Benefit Payments that would be required to be paid by Parent to such Class B Unitholder hereunder beginning as of the Change of Control Termination Date and assuming that the Valuation Assumptions are applied, as amended by Section 4.l(b). The present value determinations pursuant to this Section 4.3(b) shall be made assuming the Parent filed its U. S. federal income tax returns on the original due date (without extension).

 

Section 4.4. Scheduled Termination . No Tax Benefit Payment shall accrue, or shall become due or payable with respect to any Exchange after the 40 th anniversary (the “ Scheduled Termination Date ”) of the effective date of such Exchange. For avoidance of doubt, this TRA shall continue to be in effect in periods after the Scheduled Termination Date with respect to Tax Benefit Payments that arise on or before such date, or any adjustment thereto, and shall terminate upon such time as when all Tax Benefit Payments due and payable hereunder have been paid and the Determinations have been made with respect to all such payments.

 

Article 5
SUBORDINATION AND LATE PAYMENTS

 

Section 5.1. Subordination . Notwithstanding any other provision to the contrary, any payment required to be made by Parent under this TRA shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of Parent and its Subsidiaries from unrelated lenders (“ Senior Obligations ”) and shall rank pari passu with all current or future unsecured obligations of Parent that are not Senior Obligations. For the avoidance of doubt, the fact that a payment is subordinated pursuant to this Section 5.1 and thus cannot be made, does not mean that a failure to make a payment in a timely manner under Section 4.1(c) is not a material breach of this Agreement.

 

Section 5.2. Late Payments by Parent . The amount of all or any portion of any payment not made by Parent when due under the terms of this TRA shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such payment was due. For avoidance of doubt, this Section 5.2 shall not limit or restrict in any way the rights of the Class B Unitholders hereunder, including, without limitation, their rights under Section 4.1(c) hereof.

 

Article 6
NO DISPUTES; CONSISTENCY; COOPERATION

 

Section 6.1. Election to be Filed . As the sole managing member of Company, Parent shall cause Company and each Company Group member that is treated as a partnership for United States federal income tax purposes to file an election under Section 754 of the Code (a “ 754 Election ”) commencing no later than with its first Taxable Year which includes an Exchange, unless such entity already has a 754 Election in effect, and shall not cause any such entity to revoke such election until this TRA is no longer in effect for any Class B Unitholder. If Company acquires an interest in an entity that is treated as a partnership for United States federal income tax purposes, either directly or indirectly through one or more entities treated as a partnership or disregarded entity for United States federal income tax purposes, Parent shall use its best efforts to cause such entity to file a 754 Election effective for each such entity’s Taxable Year in which such acquisition occurs, unless such entity already has a 754 Election in effect, and shall not cause such entity to revoke such election until this TRA is no longer in effect.

 

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Section 6.2. Participation in Parent’s and Company’s Tax Matters.

 

(a) Except as otherwise provided herein, Parent shall have full responsibility for, and sole discretion over, all Tax matters concerning Parent. Notwithstanding the foregoing. Parent shall notify the Class B Unitholders of, and keep the Class B Unitholders reasonably informed with respect to, the portion of any audit of Parent by a Taxing Authority the outcome of which is reasonably expected to materially affect the rights and obligations of such Class B Unitholders under this TRA, and shall provide to the Class B Unitholders reasonable opportunity to provide information and other input to Parent and its advisors concerning the conduct of any such portion of such audit; provided , however , that Parent shall not be required to take any action that is inconsistent with any provision of the LLC Agreement.

 

(b) The rights and responsibilities of Parent and InnoHold with respect to Tax matters concerning the Company and its Subsidiaries shall be as set forth in the LLC Agreement or, as applicable, the Merger Agreement.

 

Section 6.3. Consistency . Parent, InnoHold and the Class B Unitholders agree to report and cause to be reported for all purposes, including federal, foreign, state and local Tax purposes and financial reporting purposes, all Tax-related items (including, without limitation, the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by Parent in any Schedule required to be provided by or on behalf of Parent under this TRA, provided Parent prepares and finalizes each such Schedule in accordance with the terms hereof, unless otherwise required by a Determination.

 

Section 6.4. Cooperation . Each applicable Applicable Class B Unitholder shall (a) furnish to Parent in a timely manner such information, documents and other materials as Parent may reasonably request for purposes of making any determination or computation necessary or appropriate under this TRA, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to Parent and its representatives to provide explanations of documents and materials and such other information as Parent or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and Parent shall reimburse any such Applicable Class B Unitholder for any reasonable third-party costs and expenses incurred pursuant to this Section 6.4.

 

Article 7
MISCELLANEOUS

 

Section 7.1. Notices . Any notice, demand, consent, election, offer, approval, request or other communication (collectively, a “ notice ”) required or permitted under this TRA must be in writing and either delivered personally, sent by certified or registered mail, postage prepaid, return receipt requested or sent by recognized overnight delivery service, electronic mail (e-mail) or by facsimile transmittal. Any notice sent by confirmed e-mail or facsimile must be sent simultaneously by another method described in the prior sentence. A notice must be addressed:

 

To the Company or Parent :

 

Purple Innovation, Inc. 

123 E. 200 N. 

Alpine, UT 84004 

Attn: Casey McGarvey 

Email: casey@onpurple.com

 

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with a copy (which copy shall not constitute notice) to:

 

Dorsey & Whitney LLP 

111 S. Main St., Suite 2100 

Salt Lake City, UT 84111 

Attn: Nolan S. Taylor 

E-mail:  taylor.nolan@dorsey.com 

Fax:      (801) 933-7373
Tel:      (801) 933-7366

 

To InnoHold :

 

InnoHold, LLC 

123 E. 200 N. 

Alpine, UT 84004 

Attn:   Casey McGarvey 

Email:  casey@onpurple.com

 

with a copy (which copy shall not constitute notice) to:

 

Dorsey & Whitney LLP 

111 South Main Street, Suite 2100 

Salt Lake City, UT 84111 

Attention: Nolan Taylor, Esq. 

Tel: 801-933-7366 

Fax: 801-933-7373 

Email: taylor.nolan@dorsey.com

 

A notice delivered personally will be deemed given only when accepted or refused by the Person to whom it is delivered. A notice that is sent by mail will be deemed given: (i) three Business Days after such notice is mailed to an address within the United States of America or (ii) seven Business Days after such notice is mailed to an address outside of the United States of America. A notice sent by recognized overnight delivery service will be deemed given when received or refused. A notice sent by e-mail or facsimile shall be deemed given upon receipt of a confirmation of such transmission, unless such receipt occurs after normal business hours, in which case such notice shall be deemed given as of the next Business Day. Any party may designate, by written notice to all of the others, substitute addresses or addressees for notices; thereafter, notices are to be directed to those substitute addresses or addressees.

 

Section 7.2. Counterparts. This TRA and any amendments may be executed simultaneously in two or more counterparts and delivered via facsimile or .pdf, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

 

Section 7.3. Entire TRA; No Third Party Beneficiaries . This TRA, together with the LLC Agreement and the Exchange Agreement, constitute the entire agreement and understanding among the parties with respect to the subject matter hereof and thereof, and supersedes all prior agreements or arrangements (written and oral), including any prior representation, statement, condition or warranty between the parties relating to the subject matter hereof and thereof. This TRA is not intended to, and does not, provide or create any rights or benefits of any Person other than the parties hereto and their successors and permitted assigns.

 

Section 7.4. Governing Law. The parties hereto hereby agree that all questions concerning the construction, validity and interpretation of this TRA and the performance of the obligations imposed by this TRA shall be governed by the internal laws of the State of Delaware without giving effect to any choice of law or conflict of law provision or rule, notwithstanding that public policy in Delaware or any other forum jurisdiction might indicate that the laws of that or any other jurisdiction should otherwise apply based on contacts with such state or otherwise.

 

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Section 7.5. Severability. It is expressly understood and agreed that if any provision of this TRA or the application of any such provision to any party or circumstance shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this TRA, or the application of such provision to any party or circumstance other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law so long as the economic or legal substance of the matters contemplated by this TRA is not affected in any manner materially adverse to any party. If the final judgment of a court of competent jurisdiction declares or finds that any term or provision hereof is invalid or unenforceable, the parties hereto agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration or area of the term or provision, or to delete specific words or phrases, and to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this TRA shall be enforceable as so modified. If such court of competent jurisdiction does not so replace an invalid or unenforceable term or provision, the parties hereto will negotiate in good faith to modify this TRA so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the matters contemplated hereby are fulfilled to the fullest extent possible.

 

Section 7.6. Successors, Assignment, Amendments and Waivers.

 

(a) Neither InnoHold nor any Class B Unitholder may assign any of its rights under this TRA to any person without the prior written consent of Parent, which consent shall not be unreasonably withheld; provided, however, that (i) to the extent Class B Units allocable to any Class B Unitholder are transferred by InnoHold or such Class B Unitholder in accordance with the terms of the LLC Agreement, the relevant Class B Unitholder shall have the option to assign to the transferee of such Class B Units the transferring Class B Unitholder’s rights under this TRA with respect to such transferred Class B Units, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this TRA, in form and substance substantially similar to Exhibit A to this TRA, agreeing to become a Class B Unitholder for all purposes of this TRA, and (ii) once an Exchange has occurred, any and all payments that may become payable to an Applicable Class B Unitholder pursuant to this TRA with respect to the Exchanged Class B Units may be assigned to any Person or Persons as long as any such Person has executed and delivered, or, in connection with such assignment, executes and delivers, a joinder to this TRA, in form and substance substantially similar to Exhibit A to this TRA, and acknowledging specifically the terms of Section 7.6(b). For the avoidance of doubt, if aa Class B Unitholder transfers Class B Units but does not assign to the transferee of such Class B Units such Class B Unitholder’s rights under this TRA with respect to such transferred Class B Units, such Class B Unitholder shall continue to be entitled to receive the Tax Benefit Payments arising in respect of a subsequent Exchange of such Class B Units.

 

(b) No provision of this TRA may be amended unless such amendment is approved in writing by Parent and the Class B Unitholders. No provision of this TRA may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

(c) All of the terms and provisions of this TRA shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. Parent shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Parent, by written agreement, expressly to assume and agree to perform this TRA in the same manner and to the same extent that Parent would be required to perform if no such succession had taken place.

 

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Section 7.7. Titles and Subtitles. The titles of the sections and subsections are for convenience of reference only and are not to be considered in construing this TRA.

 

Section 7.8. Resolution of Disputes.

 

(a) Each of the parties hereto submits to the exclusive jurisdiction of the Court of Chancery in the State of Delaware in any action or proceeding arising out of or relating to this TRA and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each party hereto also agrees not to bring any action or proceeding arising out of or relating to this TRA in any other court. Each of the parties hereto waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party hereto with respect thereto. The parties hereto each agree that final judgment in any such suit, action or proceeding brought in such a court shall be conclusive and binding on it and may be enforced in any court to the jurisdiction of which it is subject by a suit upon such judgment.

 

(b) EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE AGREEMENTS DELIVERED IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.8.

 

Section 7.9. Reconciliation. In the event that Parent and the Class B Unitholders are unable to resolve a disagreement with respect to the matters governed by Section 2.4, or Section 4.2, within the relevant period designated in this TRA (“ Reconciliation Dispute ”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “ Expert ”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless Parent and the Class B Unitholders agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with Parent or the Class B Unitholders (or the affected Class B Unitholders) or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within 15 days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the Qualified Tax Advisor. The Expert shall resolve any matter relating to an Exchange Basis Schedule, or an amendment thereto, the Early Termination Schedule, or an amendment thereto, the Change of Control Termination Schedule, or an amendment thereto or Section 3.l(c), within 30 calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within 15 calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this TRA and such Tax Return may be filed as prepared by Parent, subject to adjustment or amendment upon resolution. Parent and the Class B Unitholders shall bear their own costs and expenses relating to the engagement of such Expert, amending any Tax Return and the proceeding unless the Class B Unitholders have a prevailing position that is more than 10% of the payment at issue, in which case Parent shall reimburse the Class B Unitholders for any reasonable out-of-pocket costs and expenses in such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on Parent and the Class B Unitholders who are parties to such Dispute and may be entered and enforced in any court having jurisdiction.

 

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Section 7.10. Withholding. Parent shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as Parent is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by Parent, such withheld amounts shall be treated for all purposes as having been paid to InnoHold and/or the Class B Unitholders (as the case may be). The parties anticipate that, on the basis of current law, no federal income tax withholding would be required with respect to payments contemplated by this TRA to InnoHold or any Class B Unitholder who is a “United States person” within the meaning of Section 770l(a)(30) of the Code and who properly certifies that such holder is not subject to federal backup withholding.

 

Section 7.11. Admission of Parent into a Consolidated Group and Transfers of Corporate Assets.

 

(a) If Parent is or becomes the common parent of a Parent Consolidated Group that files a consolidated income tax return pursuant to Section 1501 et seq. of Code, the provisions of this TRA will be applied with respect to the Parent Consolidated Group as a whole and the Tax Benefit Payments, Early Termination Payments, Change of Control Termination Payments and other applicable items shall be computed with reference to the consolidated taxable income of the Parent Consolidated Group as a whole. Similar provisions apply to any state or local consolidated group of which Parent is a member.

 

(b) If Parent transfers one or more assets to a corporation (or a Person classified as a corporation for United States federal income tax purposes) with which it does not file a consolidated tax return pursuant to Section 1501 of the Code, then, for purposes of calculating the amount of any Tax Benefit Payment, Early Termination Payment or Change of Control Termination Payment due hereunder, Parent shall be treated as having disposed of such asset in a fully taxable transaction on the date of such transfer. The consideration deemed to be received by Parent shall be equal to the fair market value of the transferred asset. For purposes of this Section 7.11, a transfer of a partnership or limited liability company interest shall be treated as a transfer of the transferring partner’s or member’s share of each of the assets and liabilities of that partnership or limited liability company.

 

Section 7.12. Confidentiality.

 

(a) Innohold and the Class B Unitholders or their respective assignee(s) acknowledges and agrees that the information of Parent and of its Affiliates is confidential and, except (i) in the course of performing any duties as necessary for Parent and its Affiliates, (ii) as required by law or legal process, (iii) to enforce the terms of this TRA, or (iv) such disclosure is related to the performance of obligations under this Agreement, the Merger Agreement, the Related Agreements and the consummation of the transactions contemplated thereunder, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this TRA, of Parent and its Affiliates and successors, concerning the Company and its Affiliates and successors, learned by Innohold and the Class B Unitholders or their respective assignee(s) heretofore or hereafter. This Section 7.12(a) shall not apply to (i) any information that has been made publicly available by Parent or any of its Affiliates, becomes public knowledge (except as a result of an act of Innohold, the Class B Unitholders or their respective assignee(s) in violation of this TRA) or is generally known to the business community, (ii) the disclosure of information to the extent necessary for Innohold to prepare and file its Tax returns, to respond to any inquiries regarding the same from any Taxing authority or to prosecute or defend any action, proceeding or audit by any Taxing authority with respect to such returns, and (iii) any information that was independently developed by Innohold, the Class B Unitholders or their respective assignee(s), provided that such independent development can reasonably be proven by Innohold, the Class B Unitholders or their respective assignee(s).

 

(b) If Innohold, the Class B Unitholders or their respective assignee(s) commit a breach, or threaten to commit a breach, of any of the provisions of Section 7.12(a), Parent shall have the right and remedy to have the provisions of Section 7.12(a) specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Parent or any of its Subsidiaries and the accounts and funds managed by Parent and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, Parent, InnoHold, the Company and the Class B Unitholders have duly executed this TRA as of the date first written above.

 

  PURPLE INNOVATION, INC.
     
  By: /s/ Samuel D. Bernards
  Name: Samuel D. Bernards
  Title: Chief Executive Officer
     
  INNOHOLD, LLC
     
  By: /s/ Terry V. Pearce 
  Name: Terry V. Pearce
  Title: Manager
     
  PURPLE INNOVATION, LLC
     
  By: /s/ Samuel D. Bernards
  Name: Samuel D. Bernards
  Title: Chief Executive Officer
     
  CLASS B UNITHOLDERS:
   
  /s/ Tony M. Pearce
  Tony M. Pearce
   
  /s/ Carrie Pearce
  Carrie Pearce
   
  /s/ Terry V. Pearce
  Terry V. Pearce
   
  /s/ Gae Pearce
  Gae Pearce

 

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  CLASS B UNITHOLDERS:
   
  PT1
   
  By: /s/ Tomi Hill
  Name: Tomi Hill
  Title: Trustee
     
  By: /s/ Amy Stone
  Name: Amy Stone
  Title: Trustee
     
  By: /s/ Nicholas Pearce
  Name: Nicholas Pearce
  Title: Trustee
     
  PT2  
     
  By: /s/ Tomi Hill
  Name: Tomi Hill
  Title: Trustee
     
  By: /s/ Amy Stone
  Name: Amy Stone
  Title: Trustee
     
  By: /s/ Nicholas Pearce
  Name: Nicholas Pearce
  Title: Trustee
     
  PT3  
     
  By: /s/ Tomi Hill
  Name: Tomi Hill
  Title: Trustee
     
  By: /s/ Amy Stone
  Name: Amy Stone
  Title: Trustee
     
  By: /s/ Nicholas Pearce
  Name: Nicholas Pearce
  Title: Trustee

 

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  CLASS B UNITHOLDERS:
     
  PT4  
     
  By: /s/ Tomi Hill
  Name: Tomi Hill
  Title: Trustee
     
  By: /s/ Amy Stone
  Name: Amy Stone
  Title: Trustee
     
  By: /s/ Nicholas Pearce
  Name: Nicholas Pearce
  Title: Trustee
     
  TLA Trust 1
     
  By: /s/ Rebecca Taylor
  Name: Rebecca Taylor
  Title: Trustee
     
  By: /s/ Tiffany Peay
  Name: Tiffany Peay
  Title: Trustee
     
  TLA Trust 1
     
  By: /s/ Rebecca Taylor
  Name: Rebecca Taylor
  Title: Trustee
     
  By: /s/ Tiffany Peay
  Name: Tiffany Peay
  Title: Trustee

 

Signature Page to Tax Receivable Agreement

 

21

 

 

Exhibit A

 

Form of Joinder Agreement

 

[ ________________ ] does hereby agree to the terms and conditions of the Tax Receivable Agreement, dated as of February 2, 2018 (the “ TRA ”), a copy of which is attached hereto, and upon execution of this joinder, for all purposes thereunder, shall be and hereby is a Class B Unitholder, as defined in the TRA, and is bound by all terms and conditions thereof as of the date set forth below.

 

  [Name of Assignee, if Entity]
     
  By:            
  Name:  
  Title:  

 

Date: ________________________

 

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Exhibit B

 

Participation Percentages

 

Class B Unitholder   Participation Percentage
     
Tony M. Pearce   *
     
Carrie Pearce   *
     
PT1   *
     
PT2   *
     
PT3   *
     
PT4   *
     
Terry V. Pearce   *
     
Gae Pearce   *
     
TLA Trust 1   *
     
TLA Trust 2   *

 

* Each Class B Unitholder’s Participation Percentage shall be equal to such Class B Unitholder’s share of payments received under this TRA as determined under the Fourth Amended and Restated Limited Liability Company Agreement of InnoHold, LLC.

 

 

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Exhibit 10.3

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is entered into as of February 2, 2018, by and among (i) Global Partner Acquisition Corp. , a Delaware corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Purple Innovation, Inc.” (including any successor entity thereto, the “ Parent ”), (ii) Global Partner Sponsor I LLC , a Delaware limited liability company, solely in its capacity under the Merger Agreement as the Parent Representative (the “ Parent Representative ”), and (iii) InnoHold, LLC , a Delaware limited liability company (the “ Investor ”).

 

WHEREAS , on November 2, 2017, the Parent, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“ Merger Sub ”), Purple Innovation, LLC, a Delaware limited liability company (the “ Company ”), the Investor and the Parent Representative entered into that certain Agreement and Plan of Merger (as amended from time to time in accordance with the terms thereof, including by the First Amendment to Merger Agreement, dated as of January 8, 2018, the “ Merger Agreement ”), pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity (the “ Merger ”), and a result of which, among other matters, all of the issued and outstanding membership interests of the Company immediately prior to the consummation of the Merger (the “ Closing ”) shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, in exchange for the Merger Consideration, including the Equity Consideration consisting of Parent Class B Common Stock and Surviving Entity Class B Units;

 

WHEREAS , in connection with the consummation of the transactions contemplated by the Merger Agreement, Parent, the Company, the Parent Representative and the Investor are also entering into a Lock-Up Agreement (as amended from time to time in accordance with the terms thereof, the “ Lock-Up Agreement ”), pursuant to which the Investor has agreed not to transfer its Equity Consideration for the lock-up period set forth therein; and

 

WHEREAS , the parties desire to enter into this Agreement to provide the Investor with certain rights relating to the registration of the Class A Common Stock held by it or which it may acquire;

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. DEFINITIONS . Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Merger Agreement. The following capitalized terms used herein have the following meanings:

 

Agreement ” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

 

Class A Common Stock means the class A common stock, par value $0.0001 per share, of Parent (including any successor common equity securities into which such securities are exchanged or converted), as renamed in connection with the Closing from common stock, par value $0.0001 per share.

 

Class B Common Stock means the class B common stock, par value $0.0001 per share, of Parent.

 

Closing ” is defined in the recitals to this Agreement.

 

 

 

 

Common Stock ” means, collectively, the shares of Class A Common Stock and Class B Common Stock of Parent, including any shares of common stock of Parent issuable upon the exercise of any warrant or upon the exercise, conversion or exchange of any other right to acquire shares of common stock of Parent.

 

Company ” is defined in the recitals to this Agreement.

 

Demand Registration ” is defined in Section 2.1.1.

 

Form S-3 ” is defined in Section 2.3.

 

Founder Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of July 29, 2015, between Parent and Global Partner Sponsor I, LLC, a Delaware limited liability company, as amended.

 

Founder Securities ” means those securities included in the definition of “Registrable Security” specified in the Founder Registration Rights Agreement.

 

Indemnified Party ” is defined in Section 4.3.

 

Indemnifying Party ” is defined in Section 4.3.

 

Investor ” is defined in the preamble to this Agreement, and include any transferee of the Registrable Securities (so long as they remain Registrable Securities) of Investor permitted under this Agreement and the Lock-Up Agreement.

 

Investor Indemnified Party ” is defined in Section 4.1.

 

Lock-Up Agreement ” is defined in the recitals to this Agreement.

 

Maximum Number of Shares ” is defined in Section 2.1.4.

 

Merger ” is defined in the recitals to this Agreement.

 

Merger Agreement ” is defined in the recitals to this Agreement.

 

Merger Sub ” is defined in the recitals to this Agreement.

 

Other Registrable Securities ” means the Founder Securities and any PIPE Registrable Securities.

 

Other Registration Rights Agreements ” means the Founders Registration Rights Agreement, and the PIPE Registration Rights Agreements.

 

Parent ” is defined in the preamble to this Agreement, and shall include Parent’s successors by merger, acquisition, reorganization or otherwise.

 

Parent Representative ” is defined in the preamble to this Agreement.

 

Piggy-Back Registration ” is defined in Section 2.2.1.

 

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PIPE Registrable Securities ” means any securities which Parent may have obligations to register under the PIPE Registration Rights Agreements.

 

PIPE Registration Rights Agreements ” means any registration rights agreements that have been or will be entered into by the Parent prior to or in connection with the Closing in connection with any subscription and/or backstop arrangements with potential investors in Parent in connection with the Closing.

 

Pro Rata ” is defined in Section 2.2.2(a).

 

Proceeding ” is defined in Section 6.10.

 

Register ,” “ Registered ” and “ Registration ” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

Registrable Securities ” means all of the Class A Common Stock to be issued by Parent, in accordance with the Merger Agreement, in exchange for the Equity Consideration issued under the Merger Agreement, including any warrants, share capital or other securities of Parent issued as a dividend or other distribution with respect to or in exchange for or in replacement of such Class A Common Stock. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by Parent and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding or (d) the Registrable Securities are freely saleable under Rule 144 without volume limitations.

 

Registration Expenses ” is defined in Section 3.3.

 

Registration Statement ” means a registration statement filed by Parent with the SEC in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

 

Specified Courts ” is defined in Section 6.10.

 

Underwriter ” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

2. REGISTRATION RIGHTS .

 

2.1 Demand Registration .

 

2.1.1 Request for Registration . Subject to Section 2.4, at any time and from time to time after the Closing, the Investor may make a written demand for registration under the Securities Act of all or part of its Registrable Securities (a “ Demand Registration ”). Any demand for a Demand Registration shall specify the number of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. Parent shall not be obligated to effect more than an aggregate of three (3) Demand Registrations under this Section 2.1.1 in respect of all Registrable Securities.

 

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2.1.2 Effective Registration . A registration will not count as a Demand Registration until the Registration Statement filed with the SEC with respect to such Demand Registration has been declared effective and Parent has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the SEC or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) the Investor thereafter elects to continue the offering; provided, further, that Parent shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.

 

2.1.3 Underwritten Offering . If the Investor so elects and advises Parent as part of its written demand for a Demand Registration that the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of the Investor to include its Registrable Securities in such registration shall be conditioned upon its participation in such underwriting and the inclusion of its Registrable Securities in the underwriting to the extent provided herein. The Investor shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by the Investor.

 

2.1.4 Reduction of Offering . If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises Parent and the Investor in writing that the dollar amount or number of Registrable Securities which the Investor desires to sell, taken together with all other Class A Common Stock or other securities which Parent desires to sell and the Class A Common Stock or other securities, if any, as to which registration by Parent has been requested pursuant to written contractual piggy-back registration rights held by other security holders of Parent who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then Parent shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Investor that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares. In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.1.4 shall include such Parent securities on an as-converted to Class A Common Stock basis.

 

2.1.5 Withdrawal . If the Investor disapproves of the terms of any underwriting or is not entitled to include all of its Registrable Securities in any offering, the Investor may elect to withdraw from such offering by giving written notice to Parent and the Underwriter or Underwriters of its request to withdraw prior to the effectiveness of the Registration Statement filed with the SEC with respect to such Demand Registration. If the Investor withdraws from a proposed offering relating to a Demand Registration in such event, then such registration shall not count as a Demand Registration provided for in Section 2.1. Notwithstanding anything to the contrary in this Agreement, but subject to Section 4, the Parent shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration prior to its withdrawal under this Section 2.1.5.

 

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2.2 Piggy-Back Registration .

 

2.2.1 Piggy-Back Rights . Subject to Section 2.4, if at any time after the Closing Parent proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by Parent for its own account or for security holders of Parent for their account (or by Parent and by security holders of Parent including pursuant to Section 2.1), other than a Registration Statement (i) filed in connection with any employee share option or other benefit plan, (ii) for an exchange offer or offering of securities solely to Parent’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of Parent or (iv) for a dividend reinvestment plan, then Parent shall (x) give written notice of such proposed filing to the Investor as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the Investor in such notice the opportunity to register the sale of such number of Registrable Securities as the Investor may request in writing within five (5) days following receipt of such notice (a “ Piggy-Back Registration ”). To the extent permitted by applicable securities laws with respect to such registration by Parent or another demanding shareholder, Parent shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of Parent and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. If the Investor proposes to distribute its Registrable Securities through a Piggy-Back Registration that involves an Underwriter or Underwriters, the Investor shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

 

2.2.2 Reduction of Offering . If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises Parent and the Investor in writing that the dollar amount or number of Class A Common Stock or other Parent securities which Parent desires to sell, taken together with (i) the Class A Common Stock or other Parent securities, if any, as to which registration has been demanded pursuant to written contractual arrangements with Persons other than the Investor hereunder, (ii) the Registrable Securities as to which registration has been requested under this Section 2.2, and (iii) the Class A Common Stock or other Parent securities, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other security holders of Parent, exceeds the Maximum Number of Shares, then Parent shall include in any such registration:

 

(a) If the registration is undertaken for Parent’s account: (i) first, the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investor as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with the Other Registrable Securities and Registrable Securities being included pro rata in accordance with the number of securities that each such Person has requested be included in such piggy-back registration, regardless of the number of securities held by each such Person (such proportion is referred to herein as “ Pro Rata ”); and (iii) third, to the extent that the Maximum Number of shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares;

 

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(b) If the registration is a “demand” registration undertaken at the demand of holders of Other Registrable Securities under an Other Registration Rights Agreement: (i) first, the Other Registrable Securities for the account of the demanding holders under the Other Registration Rights Agreement that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements (excluding the holders who exercised such demand rights) and the Registrable Securities of the Investor as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares; and

 

(c) If the registration is a “demand” registration undertaken at the demand of Persons other than the Investor or the holders of Other Registrable Securities, (i) first, the Class A Common Stock or other securities for the account of such demanding Persons that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investor as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares.

 

In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.2.2 shall include such Parent securities on an as-converted to Class A Common Stock basis. Notwithstanding anything to the contrary contained above, to the extent that the registration of Investor’s Registrable Securities would prevent Parent or the demanding stockholders from effecting such registration and offering, Investor shall not be permitted to exercise Piggy-Back Registration rights with respect to such registration and offering.

 

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2.2.3 Withdrawal . The Investor may elect to withdraw its request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to Parent of such request to withdraw prior to the effectiveness of the Registration Statement. Parent (whether on its own determination or as the result of a withdrawal by Persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement without any liability to the Investor, subject to the next sentence and the provisions of Section 4. Notwithstanding any such withdrawal, Parent shall pay all expenses incurred in connection with such Piggy-Back Registration as provided in Section 3.3 by the Investor to the extent that it has requested to have its Registrable Securities included in such Piggy-Back Registration.

 

2.3 Registrations on Form S-3 . After the Closing, subject to Section 2.4, the Investor may at any time and from time to time, request in writing that Parent register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“ Form S-3 ”); provided , however, that Parent shall not be obligated to effect such request through an underwritten offering. As soon as practicable after receipt of such written request, Parent will effect the registration of all or such portion of the Investor’s Registrable Securities as are specified in such request; provided, however, that Parent shall not be obligated to effect any such registration pursuant to this Section 2.3: (i) if Form S-3 is not available to Parent for such resale offering, including if it is because a resale registration is not permitted under applicable securities laws because Parent is a subsidiary of the Investor; or (ii) if the Investor, together with the holders of any other securities of Parent entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $1,000,000. Registrations effected pursuant to this Section 2.3 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

 

2.4 Restriction of Offerings . Notwithstanding anything to the contrary contained in this Agreement, the Investor shall not be entitled to request, and Parent shall not be obligated to effect, or to take any action to effect, any registration (including any Demand Registration or Piggy-Back Registration) pursuant to this Section 2 with respect to any Registrable Securities during the Lock-Up Period (as such term is defined in the Lock-Up Agreement) while they are subject to restrictions on transfer under the Lock-Up Agreement.

 

3. REGISTRATION PROCEDURES .

 

3.1 Filings; Information . Whenever Parent is required to effect the registration of any Registrable Securities by the Investor pursuant to Section 2, Parent shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

 

3.1.1 Filing Registration Statement . Parent shall use its best efforts to, as expeditiously as possible after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the SEC a Registration Statement on any form for which Parent then qualifies or which counsel for Parent shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become effective and use its best efforts to keep it effective for the period required by Section 3.1.3; provided , however , that Parent shall have the right to defer any Demand Registration for up to ninety (90) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if Parent shall furnish to the Investor a certificate signed by the President, Chief Executive Officer or Chairman of Parent stating that, in the good faith judgment of the Board of Directors of Parent, it would be materially detrimental to Parent and its shareholders for such Registration Statement to be effected at such time; provided further, however, that Parent shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder.

 

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3.1.2 Copies . Parent shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Investor and its legal counsel if the Investor is including Registrable Securities in such registration copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the Investor or its legal counsel may request in order to facilitate the disposition of the Registrable Securities owned by the Investor.

 

3.1.3 Amendments and Supplements . Parent shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn or until such time as the Registrable Securities cease to be Registrable Securities as defined by this Agreement.

 

3.1.4 Notification . After the filing of a Registration Statement, Parent shall promptly, and in no event more than three (3) Business Days after such filing, notify the Investor of such filing, and shall further notify the Investor promptly and confirm such advice in writing in all events within three (3) Business Days after the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the SEC of any stop order (and Parent shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the SEC for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the Investor any such supplement or amendment; except that before filing with the SEC a Registration Statement or prospectus or any amendment or supplement thereto, Parent shall furnish to the Investor and its legal counsel copies of all such documents proposed to be filed sufficiently in advance of filing to provide the Investor and its legal counsel with a reasonable opportunity to review such documents and comment thereon, and Parent shall not file any Registration Statement or prospectus or amendment or supplement thereto to which the Investor or its legal counsel shall object.

 

3.1.5 State Securities Laws Compliance . Prior to any public offering of Registrable Securities, Parent shall use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Investor (in light of its intended plan of distribution) may reasonably request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of Parent and do any and all other acts and things that may be necessary or advisable to enable the Investor to consummate the disposition of such Registrable Securities in such jurisdictions; provided , however , that Parent shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject.

 

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3.1.6 Agreements for Disposition . Parent shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of Parent in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the Investor. The Investor shall not be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to the Investor’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with the Investor’s material agreements and organizational documents, and with respect to written information relating to the Investor that the Investor has furnished in writing expressly for inclusion in such Registration Statement.

 

3.1.7 Cooperation . The principal executive officer of Parent, the principal financial officer of Parent, the principal accounting officer of Parent and all other officers and members of the management of Parent shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

 

3.1.8 Records . Parent shall make available for inspection by the Investor, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by the Investor or any Underwriter, all financial and other records, pertinent corporate documents and properties of Parent, as shall be necessary to enable them to exercise their due diligence responsibility, and cause Parent’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

 

3.1.9 Opinions and Comfort Letters . Parent shall furnish to the Investor a signed counterpart, addressed to the Investor, of (i) any opinion of counsel to Parent delivered to any Underwriter and (ii) any comfort letter from Parent’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, Parent shall furnish to the Investor, at any time that the Investor elects to use a prospectus, an opinion of counsel to Parent to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

 

3.1.10  Earnings Statement . Parent shall comply with all applicable rules and regulations of the SEC and the Securities Act, and make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11  Listing . Parent shall use its best efforts to cause all Registrable Securities that are Class A Common Stock included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by Parent are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the Investor.

 

3.1.12  Road Show . If the registration involves the registration of Registrable Securities involving gross proceeds in excess of $25,000,000, Parent shall use its reasonable efforts to make available senior executives of Parent to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any underwritten offering.

 

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3.2 Obligation to Suspend Distribution . Upon receipt of any notice from Parent of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by Parent, pursuant to a written insider trading compliance program adopted by Parent’s Board of Directors, of the ability of all “insiders” covered by such program to transact in Parent’s securities because of the existence of material non-public information, the Investor shall immediately discontinue disposition of its Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Investor receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in Parent’s securities is removed, as applicable, and, if so directed by Parent, the Investor will deliver to Parent all copies, other than permanent file copies then in the Investor’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.

 

3.3 Registration Expenses . Subject to Section 4, Parent shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective (“ Registration Expenses ”), including: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) Parent’s internal expenses (including all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for Parent and fees and expenses for independent certified public accountants retained by Parent (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by Parent in connection with such registration and (ix) the fees and expenses of one legal counsel selected by the Investor. Parent shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the Investor, which underwriting discounts or selling commissions shall be borne by the Investor. Additionally, in an underwritten offering, all selling security holders and Parent shall bear the expenses of the Underwriter pro rata in proportion to the respective amount of securities each is selling in such offering.

 

3.4 Information . The Investor shall provide such information as may reasonably be requested by Parent, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement including any Registrable Securities of the Investor, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the obligation to comply with federal and applicable state securities laws.

 

4. INDEMNIFICATION AND CONTRIBUTION .

 

4.1 Indemnification by Parent . Parent agrees to indemnify and hold harmless the Investor, and the Investor’s officers, employees, affiliates, directors, partners, members, attorneys and agents, and each Person, if any, who controls the Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “ Investor Indemnified Party ”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Parent of the Securities Act or any rule or regulation promulgated thereunder applicable to Parent and relating to action or inaction required of Parent in connection with any such registration; and Parent shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided , however , that Parent will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to Parent, in writing, by such selling holder expressly for use therein. Parent also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each Person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

 

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4.2 Indemnification by the Investor . The Investor will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by the Investor, indemnify and hold harmless Parent, each of its directors and officers and each Underwriter (if any), and each other selling holder and each other Person, if any, who controls another selling holder or such Underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to Parent by the Investor expressly for use therein, and shall reimburse Parent, its directors and officers, each Underwriter and each other selling holder or controlling Person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. The Investor’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by the Investor.

 

4.3 Conduct of Indemnification Proceedings . Promptly after receipt by any Person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such Person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other Person for indemnification hereunder, notify such other Person (the “ Indemnifying Party ”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

 

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4.4 Contribution .

 

4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1.

 

4.4.3 The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

5. UNDERWRITING AND DISTRIBUTION .

 

5.1 Rule 144 . Parent covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the Investor may reasonably request, all to the extent required from time to time to enable the Investor to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

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6. MISCELLANEOUS .

 

6.1 Other Registration Rights . Parent represents and warrants that as of the date of this Agreement, no Person, other than the holders of (i) the Registrable Securities, (ii) the Founder Securities and (iii) the PIPE Registrable Securities, has any right to require Parent to register any of Parent’s capital stock for sale or to include Parent’s capital stock in any registration filed by Parent for the sale of capital stock for its own account or for the account of any other Person.

 

6.2 Assignment; No Third Party Beneficiaries . This Agreement and the rights, duties and obligations of Parent hereunder may not be assigned or delegated by Parent in whole or in part. This Agreement and the rights, duties and obligations of the Investor hereunder may be freely assigned or delegated by the Investor in conjunction with and to the extent of any permitted transfer of Registrable Securities by the Investor. In the event of any such assignment by the Investor of some but not all of its rights hereunder, the assignee will be included in the term “Investor” under this Agreement and shall have pro rata rights under this Agreement with respect to the Registrable Securities so transferred to it, but any determination, consent or action by the Investor hereunder will require the holders of a majority-in-interest of the Registrable Securities. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties, to the permitted assigns of the Investor or of any assignee of the Investor. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2. If the Parent Representative is replaced in accordance with the terms of the Merger Agreement, the replacement Parent Representative shall automatically become a party to this Agreement as if it were the original Parent Representative hereunder.

 

6.3 Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable Party at the following addresses (or at such other address for a Party as shall be specified by like notice):

 

If to the Parent Representative, to:

With a copy to (which shall not constitute notice):
       
Global Partner Sponsor I LLC Ellenoff Grossman & Schole, LLP
c/o Ellenoff Grossman & Schole, LLP 1345 Avenue of the Americas, 11th Floor
1345 Avenue of the Americas, 11th Floor New York, NY 10105
New York, NY 10105 Attn: Douglas Ellenoff, Esq.
Attn:   Douglas Ellenoff, Esq.     Stuart Neuhauser, Esq.
  Stuart Neuhauser, Esq.    Fax: (212) 370-7889
Fax: (212) 370-7889        Tel: (212) 370-1300
Tel: (212) 370-1300   Email: ellenoff@egsllp.com
Email: ellenoff@egsllp.com   sneuhauser@egsllp.com
  sneuhauser@egsllp.com    

 

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If to Parent after the Closing, to: With copies to (which shall not constitute notice):
       

Purple Innovation, Inc.

Dorsey & Whitney LLP
123 E. 200 N. 111 S. Main St., Suite 2100
Alpine, UT 84004 Salt Lake City, UT 84111
Attn: Casey McGarvey Attn: Nolan S. Taylor
Email: casey@purple.com E-mail: taylor.nolan@dorsey.com
Fax: (801) 933-7373
    Tel: (801) 933-7366
       
    and  
       
    the Parent Representative (and its copy for notices hereunder)

 

If to the Investor, to: With a copy to (which shall not constitute notice):
       
InnoHold, LLC Dorsey & Whitney LLP
123 E.  200 N. 111 S. Main St., Suite 2100
Alpine, UT 84004 Salt Lake City, UT 84111
Attn: Casey McGarvey Attn: Nolan S. Taylor
Email: casey@purple.com E-mail: taylor.nolan@dorsey.com
    Fax: (801) 933-7373
    Tel: (801) 933-7366

  

6.4 Severability . This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

6.5 Counterparts . This Agreement may be executed in multiple counterparts (including by facsimile or pdf or other electronic document transmission), each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.

 

6.6 Entire Agreement . This Agreement (together with the Merger Agreement and the Lock-Up Agreement to the extent incorporated herein, and including all agreements entered into pursuant hereto or thereto or referenced herein or therein and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, relating to the subject matter hereof; provided , that, for the avoidance of doubt, the foregoing shall not affect the rights and obligations of the parties under the Merger Agreement or any other Related Document or the rights or obligations of the parties under the Other Registrations Rights Agreements.

 

6.7 Interpretation . Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

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6.8 Amendments; Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written agreement or consent of Parent, the Parent Representative and the Investor. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision

 

6.9 Remedies Cumulative . In the event a party fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the other parties may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

6.10 Governing Law; Jurisdiction . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, claims or other legal proceedings arising out of or relating to this Agreement (a “ Proceeding ”) shall be heard and determined exclusively in any state or federal court located in the State of Delaware (or in any court in which appeal from such courts may be taken) (the “ Specified Courts ”). Each party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding brought by any party hereto and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Law. Each party irrevocably consents to the service of the summons and complaint and any other process in any Proceeding, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 6.3. Nothing in this Section 6.10 shall affect the right of any party to serve legal process in any other manner permitted by applicable Law.

 

6.11 WAIVER OF TRIAL BY JURY . EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE INVESTORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

6.12 Termination of Merger Agreement . This Agreement shall be binding upon each party upon such party’s execution and delivery of this Agreement, but this Agreement shall only become effective upon the Closing under the Merger Agreement. In the event that the Merger Agreement is validly terminated in accordance with its terms prior to the Closing, this Agreement shall automatically terminate and become null and void and be of no further force or effect, and the parties shall have no obligations hereunder.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW]

  

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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered as of the date first written above.

 

   

Parent:
   
  GLOBAL PARTNER ACQUISITION CORP.
     
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Chief Executive Officer
     
  The Parent Representative:
   
  GLOBAL PARTNER SPONSOR I LLC ,
solely in its capacity under the Merger Agreement as the Parent Representative
   
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Manager
     
  The Investor:
   
  INNOHOLD, LLC
   
  By: /s/ Terry V. Pearce
  Name: Terry V. Pearce
  Title: Manager

 

 

 

{Signature Page to Registration Rights Agreement}

 

16

 

Exhibit 10.4

 

NON-COMPETITION AND NON-SOLICITATION AGREEMENT

 

THIS NON-COMPETITION AND NON-SOLICITATION AGREEMENT (this “ Agreement ”) is being executed and delivered as of February 8, 2018 by each of InnoHold, LLC , a Delaware limited liability company (“ InnoHold ”), Terry Pearce (“ Terry ”) and Tony Pearce (“ Tony ” and together with Terry, the “ Founders ” and collectively with InnoHold, the “ Sellers ”), in favor of and for the benefit of Global Partner Acquisition Corp. , a Delaware corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Purple Innovation, Inc.” (including any successor entity thereto, “ Parent ”), Purple Innovation, LLC , a Delaware limited liability company (including any successor entity thereto, the “ Company ”), and each of Parent’s and/or the Company’s respective present and future Affiliates, successors and direct and indirect Subsidiaries (collectively with Parent and the Company, the “ Covered Parties ”). Any capitalized term used, but not defined in this Agreement will have the meaning ascribed to such term in the Merger Agreement (defined below).

 

WHEREAS , on November 2, 2017, Parent, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“ Merger Sub ”), the Company, InnoHold and Global Partner Sponsor I LLC, a Delaware limited liability company, in its capacity under the Merger Agreement as the Parent Representative (the “ Parent Representative ”), entered into that certain Agreement and Plan of Merger (as amended from time to time in accordance with the terms thereof, the “ Merger Agreement ”), pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity (the “ Merger ”), and a result of which, among other matters, all of the issued and outstanding membership interests of the Company immediately prior to the consummation of the Merger (the “ Closing ”) shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, in exchange for the Merger Consideration;

 

WHEREAS , on January 8, 2018, the parties to the Merger Agreement amended certain provisions therein;

 

WHEREAS , the Company is in the business of (i) designing and manufacturing comfort technology products worldwide to improve how people sleep, sit, and stand, including mattresses, pillows, platform bases and cushions, and (ii) marketing, licensing and selling its products worldwide through direct-to-consumer, traditional retail channels and partnerships (clauses (i) and (ii), collectively, the “ Business ”);

 

WHEREAS , in connection with, and as a condition to the consummation of the transactions contemplated by the Merger Agreement (the “ Transactions ”), and to enable Parent to secure more fully the benefits of the Transactions, including the protection and maintenance of the goodwill and confidential information of the Company, Parent has required that the Sellers enter into this Agreement;

 

WHEREAS , the Sellers are entering into this Agreement in order to induce Parent to consummate the Transactions, pursuant to which the Sellers will directly or indirectly receive a material benefit; and

 

WHEREAS , InnoHold is the sole member of the Company, and each Founder is a significant equity holder of InnoHold and a director, executive officer and founder of the Company, and each Seller has contributed to the value of the Company and has obtained extensive and valuable knowledge and confidential information concerning the business of the Company.

 

 

 

 

NOW, THEREFORE , in order to induce Parent to consummate the Transactions, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Seller hereby agrees as follows:

 

1. Restriction on Competition.

 

(a) Restriction . Each Seller hereby agrees that during the Restricted Period, such Seller will not, and will not permit its Affiliates to, without the prior written consent of Parent (which may be withheld in its sole discretion), anywhere in the world, directly or indirectly engage in the Business (other than through a Covered Party) or own, manage, finance or control, or participate in the ownership, management, financing or control of, or become engaged or serve as an officer, director, member, partner, employee, agent, consultant, advisor or representative of, a business or entity (other than a Covered Party) that engages in the Business (a “ Competitor ”). For purposes of this Agreement: (i) the “ Restricted Period ” means the period from the Closing until the later of (x) the three (3) year anniversary of the Closing Date and (y) the one (1) year anniversary of the Termination Date; and (ii) the “ Termination Date ” means with respect to any Seller the date on which such Seller is no longer a director, officer, manager or employee of Parent or any of its Subsidiaries.

 

(b) Exceptions . Notwithstanding the foregoing: (i) any Seller and its Affiliates may own passive investments of no more than two percent (2%) of any class of outstanding equity interests in a Competitor that is publicly traded, so long as such Seller and its Affiliates and their respective directors, officers, managers and employees who were involved with the business of the Covered Parties, and the immediate family members of the Seller or its Affiliates, are not involved in the management or control of such Competitor (“ Permitted Ownership ”); and (ii) the Sellers’ continued ownership, control and operation of EdiZONE, LLC, a Delaware limited liability company (“ EdiZONE ”), will not be deemed to violate the provisions of this Section 1 so long (A) as the Sellers and EdiZONE comply with the terms and conditions of the Amended and Restated Confidential Assignment and License Back Agreement between EdiZONE and the Company executed November 1, 2017 and effective December 27, 2016 (the “ Amended EdiZONE Agreement ”) and (B) the Sellers and EdiZONE and their respective Affiliates do not directly or indirectly compete with the Business anywhere in the world other than EdiZONE performing its obligations under its existing third party license agreements as in effect as of the date hereof.

 

(c) Acknowledgment . Each Seller acknowledges and agrees, based upon such Seller’s own education, experience and training, that (i) such Seller possesses knowledge of confidential information of the Company and its Subsidiaries and the Business, (ii) such Seller’s execution of this Agreement is a material inducement to Parent to consummate the Transactions and to realize the goodwill of the Company and its Subsidiaries, for which such Seller will receive a substantial direct or indirect financial benefit, and that Parent would not have entered into the Merger Agreement or consummated the Transactions but for such Seller’s agreements set forth in this Agreement; (iii) it would impair the goodwill of the Company and its Subsidiaries and reduce the value of the assets of the Company and its Subsidiaries and cause serious and irreparable injury if such Seller were to use its ability and knowledge by engaging in the Business in competition with a Covered Party, and/or to otherwise breach the obligations contained herein and that the Covered Parties would not have an adequate remedy at law because of the unique nature of the Business, (iv) neither such Seller nor its Affiliates have any intention of engaging in the Business (other than through the Covered Parties) during the Restricted Period other than through Permitted Ownership, (v) the relevant public policy aspects of restrictive covenants, covenants not to compete and non-solicitation provisions have been discussed, and every effort has been made to limit the restrictions placed upon such Seller to those that are reasonable and necessary to protect the Covered Parties’ legitimate interests, (vi) the Covered Parties conduct and intend to conduct the Business everywhere in the world and compete with other businesses that are or could be located in any part of the world, (vii) the foregoing restrictions on competition are fair and reasonable in type of prohibited activity, geographic area covered, scope and duration, (viii) the consideration provided to such Seller under this Agreement and the Merger Agreement is not illusory, and (ix) such provisions do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the Covered Parties.

 

  2  

 

 

2. No Solicitation; No Disparagement.

 

(a) No Solicitation of Employees and Consultants . Each Seller agrees that, during the Restricted Period, such Seller will not, and will not permit its Affiliates to, without the prior written consent of Parent (which may be withheld in its sole discretion), either on its own behalf or on behalf of any other Person (other than, if applicable, a Covered Party in the performance of such Seller’s or its Affiliate’s duties on behalf of the Covered Parties), directly or indirectly: (i) hire or engage as an employee, independent contractor, consultant or otherwise any Covered Personnel (as defined below); (ii) solicit, induce, encourage or otherwise cause (or attempt to do any of the foregoing) any Covered Personnel to leave the service (whether as an employee, consultant or independent contractor) of any Covered Party; or (iii) in any way interfere with or attempt to interfere with the relationship between any Covered Personnel and any Covered Party; provided , however , a Seller and its Affiliates will not be deemed to have violated this Section 2(a) if any Covered Personnel voluntarily and independently solicits an offer of employment from such Seller or its Affiliate (or other Person whom such Seller or its Affiliate is acting on behalf of) by responding to a general advertisement or solicitation program conducted by or on behalf of such Seller or its Affiliate (or such other Person whom such Seller or its Affiliate is acting on behalf of) that is not targeted at such Covered Personnel or Covered Personnel generally, so long as such Covered Personnel is not hired. For purposes of this Agreement, “ Covered Personnel ” shall mean any Person who is or was an employee, consultant or independent contractor of the Covered Parties, (A) if the relevant time of determination is before the Termination Date, as of such date of determination or during the one (1) year period preceding such date and, (B) if the relevant time of determination is after the Termination Date, as of the Termination Date or during the one (1) year period preceding the Termination Date; provided , that Covered Personnel will not include (i) any Founder’s spouse, child or grandchild or a spouse of a Founder’s child or grandchild, (ii) Casey McGarvey if such individual’s employment with the employing Covered Parties has already been terminated at least three months prior to being hired by a Seller or its Affiliate and such individual is not released from any non-competition, non-solicitation, confidentiality, assignment of intellectual property or similar protective covenants on behalf of any Covered Party and (iii) any individual who is terminated by its employing or engaging Covered Parties at least three months prior to being hired by a Seller or its Affiliate, so long as the Sellers comply with their respective obligations hereunder with respect to such individual during such three month post-termination period.

 

(b) Non-Solicitation of Customers and Suppliers . Each Seller agrees that, during the Restricted Period, such Seller will not, and will not permit its Affiliates to, without the prior written consent of Parent (which may be withheld in its sole discretion), individually or on behalf of any other Person (other than, if applicable, a Covered Party in the performance of such Seller’s or its Affiliate’s duties on behalf of the Covered Parties), directly or indirectly: (i) solicit, induce, encourage or otherwise cause (or attempt to do any of the foregoing) any Covered Customer (as defined below) to (A) cease being, or not become, a client or customer of any Covered Party with respect to the Business or (B) reduce the amount of business of such Covered Customer with any Covered Party, or otherwise alter such business relationship in a manner adverse to any Covered Party, in either case, with respect to or relating to the Business; (ii) interfere with or disrupt (or attempt to interfere with or disrupt) the contractual relationship between any Covered Party and any Covered Customer; (iii) divert any business with any Covered Customer relating to the Business from a Covered Party; (iv) solicit for business, provide services to, engage in or do business with, any Covered Customer for products or services that are part of the Business; or (v) interfere with or disrupt (or attempt to interfere with or disrupt), any Person that was a vendor, supplier, distributor, agent or other service provider of a Covered Party at the time of such interference or disruption, for a purpose competitive with a Covered Party as it relates to the Business. For purposes of this Agreement, a “ Covered Customer ” shall mean any Person who is or was an actual customer or client (or prospective customer or client with whom a Covered Party actively marketed or made or taken specific action to make a proposal) of a Covered Party, (A) if the relevant time of determination is before the Termination Date, as of such date of determination or during the one (1) year period preceding such date and, (B) if the relevant time of determination is after the Termination Date, as of the Termination Date or during the one (1) year period preceding the Termination Date. Notwithstanding the foregoing, EdiZONE may continue to perform its obligations under its existing third party license agreements as in effect as of the date hereof, even with respect to Covered Customers, in accordance with the terms and conditions of the Amended EdiZONE Agreement.

 

  3  

 

 

(c) Non-Disparagement .

 

(i) Each Seller agrees that from and after the Closing Date, such Seller will not, and will not permit its Affiliates to, directly or indirectly engage in any conduct that involves the making or publishing (including through electronic mail distribution or online social media) of any written or oral public statements or remarks (including the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or good will of one or more Covered Parties or their respective management, officers, employees, independent contractors or consultants. Notwithstanding the foregoing, subject to Section 3 below, the provisions of this Section 2(c)(i) shall not restrict such Seller or its Affiliates from providing truthful testimony or information in response to a subpoena or investigation by a Governmental Authority or in connection with any legal action by such Seller or its Affiliate against any Covered Party under this Agreement, the Merger Agreement or any other Related Document that is asserted in good faith.

 

(ii) Parent agrees that from and after the Closing Date, Parent’s officers and directors will not directly or indirectly engage in any conduct that involves the making or publishing (including through electronic mail distribution or online social media) of any written or oral public statements or remarks (including the repetition or distribution of derogatory rumors, allegations, negative reports or comments) that are disparaging, deleterious or damaging to the integrity, reputation or good will of any Seller. Notwithstanding the foregoing, subject to Section 3 below, the provisions of this Section 2(c)(ii) shall not restrict Parent’s officers or directors from providing truthful testimony or information in response to a subpoena or investigation by a Governmental Authority or in connection with any legal action by a Covered Party against any Seller under this Agreement, the Merger Agreement or any other Related Document that is asserted in good faith.

 

3. Confidentiality. From and after the Closing Date, each Seller will, and will cause its Representatives to (but with respect to its controlling Affiliates, only to the extent it is able), keep confidential and not (except, if applicable, in the performance of such Seller’s duties on behalf of the Covered Parties) directly or indirectly use, disclose, reveal, publish, transfer or provide access to, any and all Covered Party Information without the prior written consent of Parent (which may be withheld in its sole discretion). As used in this Agreement, “ Covered Party Information ” means all material and information relating to the business, affairs and assets of any Covered Party, including material and information that concerns or relates to such Covered Party’s bidding and proposal, technical, computer hardware or software, administrative, management, operational, data processing, financial, marketing, sales, human resources, business development, planning and/or other business activities, regardless of whether such material and information is maintained in physical, electronic, or other form, that is: (A) gathered, compiled, generated, produced or maintained by such Covered Party through its Representatives, or provided to such Covered Party by its suppliers, service providers or customers; and (B) intended and maintained by such Covered Party or its Representatives, suppliers, service providers or customers to be kept in confidence. The obligations set forth in this Section 3 will not apply to any Covered Party Information where such Seller can prove that such material or information: (i) is known or available through other lawful sources not bound by a confidentiality agreement with, or other confidentiality obligation to, any Covered Party; (ii) is or becomes publicly known through no violation of this Agreement or other non-disclosure obligation of such Seller or any of its Representatives; (iii) is already in the possession of such Seller at the time of disclosure through lawful sources not bound by a confidentiality agreement or other confidentiality obligation as evidenced by such Seller’s documents and records; or (iv) is required to be disclosed pursuant to an order of any administrative body or court of competent jurisdiction (provided that (A) the applicable Covered Party is given reasonable prior written notice, (B) such Seller cooperates (and causes its Representatives to cooperate) with any reasonable request of any Covered Party to seek to prevent or narrow such disclosure and (C) if after compliance with clauses (A) and (B) such disclosure is still required, such Seller and its Representatives only disclose such portion of the Covered Party Information that is expressly required by such order, as it may be subsequently narrowed). Notwithstanding the foregoing, Sellers may disclose information to EdiZONE and EdiZONE’s third party licensees consistent with the Amended EdiZONE Agreement and as required by the underlying EdiZONE third-party licenses, so long as the Sellers have obtained (subject to customary terms and conditions to the extent EdiZONE and the third party licensees are not already subject to confidentiality obligations directly to the Sellers or indirectly through EdiZONE) and enforce (directly or indirectly through EdiZONE) strict confidentiality obligations against EdiZONE and such third party licensees with respect to such information consistent with the requirements of the terms and conditions of the Amended EdiZONE Agreement. For the avoidance of doubt, nothing herein imposes (i) liability to the Sellers to the extent that any such confidential information has previously been provided to EdiZONE or its third party licensees prior to the date of this Agreement (so long as the Sellers enforce confidentiality obligations with respect to such information from and after the date of this Agreement) or (ii) an obligation onto Sellers to obtain or seek stricter obligations of confidentiality from existing third party licensees of EdiZONE than what already exists in their respective license agreements.

 

  4  

 

 

4. Representations and Warranties. Each Seller hereby represents and warrants, to and for the benefit of the Covered Parties as of the date of this Agreement and as of the Closing Date, that: (a) such Seller has full power and capacity to execute and deliver, and to perform all of such Seller’s obligations under, this Agreement; and (b) neither the execution and delivery of this Agreement nor the performance of such Seller’s obligations hereunder will result directly or indirectly in a violation or breach of any agreement or obligation by which such Seller is a party or otherwise bound. By entering into this Agreement, each Seller certifies and acknowledges that such Seller has carefully read all of the provisions of this Agreement, and that such Seller voluntarily and knowingly enters into this Agreement.

 

5. Remedies. The covenants and undertakings of the Sellers contained in this Agreement relate to matters which are of a special, unique and extraordinary character and a violation of any of the terms of this Agreement may cause irreparable injury to the Covered Parties, the amount of which may be impossible to estimate or determine and which cannot be adequately compensated. Each Seller agrees that, in the event of any breach or threatened breach by such Seller of any covenant or obligation contained in this Agreement, each applicable Covered Party will be entitled to seek the following remedies (in addition to, and not in lieu of, any other remedy at law or in equity or pursuant to the Merger Agreement or the other Related Documents that may be available to the Covered Parties, including monetary damages), and a court of competent jurisdiction may award: (i) an injunction, restraining order or other equitable relief restraining or preventing such breach or threatened breach, without the necessity of proving actual damages or posting bond or security, which each Seller expressly waives; and (ii) recovery of the Covered Party’s attorneys’ fees and costs incurred in enforcing the Covered Party’s rights under this Agreement. Each Seller hereby consents to the award of any of the above remedies to the applicable Covered Party in connection with any such breach or threatened breach. Each Seller hereby acknowledges and agrees that in the event of any breach of this Agreement, any value attributed or allocated to this Agreement (or any other non-competition agreement with such Seller) under or in connection with the Merger Agreement shall not be considered a measure of, or a limit on, the damages of the Covered Parties.

 

6. Survival of Obligations. The expiration of the Restricted Period will not relieve a Seller of any obligation or liability arising from any breach by such Seller of this Agreement during the Restricted Period. Each Seller further agrees that the time period during which the covenants contained in Section 1 and Section 2 of this Agreement will be effective will be computed by excluding from such computation any time during which such Seller is in violation of any provision of such Sections.

 

  5  

 

 

7. Miscellaneous.

 

(a) Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable party at the following addresses (or at such other address for a party as shall be specified by like notice):

 

If to Parent (or any other Covered Party), to:

with a copy (that will not constitute notice) to:
Purple Innovation, Inc. Ellenoff Grossman & Schole LLP
123 E. 200 N. 1345 Avenue of the Americas, 11 th Floor
Alpine, UT 84004 New York, New York 10105
Attn: Casey McGarvey Attn: Douglas Ellenoff, Esq.
Email: casey@onpurple.com   Stuart Neuhauser, Esq.
    Facsimile No.: (212) 370-7889
and Telephone No.: (212) 370-1300
    Email: ellenoff@egsllp.com
Global Partner Sponsor I LLC sneuhauser@egsllp.com
c/o Ellenoff Grossman & Schole LLP  
1345 Avenue of the Americas, 11 th Floor    
New York, NY 10105    
Attn: Douglas Ellenoff, Esq.    
  Stuart Neuhauser, Esq.    
Fax: (212) 370-7889    
Tel: (212) 370-1300    
Email: ellenoff@egsllp.com    
  sneuhauser@egsllp.com    
       

If to any Seller, to:

With a copy to (which shall not constitute notice):

   
InnoHold, LLC Dorsey & Whitney LLP
123 E. 200 N. 111 S. Main St., Suite 2100
Alpine, UT 84004 Salt Lake City, UT 84111
Attn: Casey McGarvey Attn: Nolan S. Taylor
Email: casey@onpurple.com E-mail: taylor.nolan@dorsey.com
    Fax: (801) 933-7373
    Tel: (801) 933-7366

 

(b) Integration and Non-Exclusivity . This Agreement, the Merger Agreement and the other Related Documents contain the entire agreement between the Sellers and the Covered Parties concerning the subject matter hereof. Notwithstanding the foregoing, the rights and remedies of the Covered Parties under this Agreement are not exclusive of or limited by any other rights or remedies which they may have, whether at law, in equity, by contract or otherwise, all of which will be cumulative (and not alternative). Without limiting the generality of the foregoing, the rights and remedies of the Covered Parties, and the obligations and liabilities of the Sellers and their Affiliates, under this Agreement, are in addition to their respective rights, remedies, obligations and liabilities (i) under the laws of unfair competition, misappropriation of trade secrets, or other requirements of statutory or common law, or any applicable rules and regulations and (ii) otherwise conferred by contract, including the Merger Agreement and any other written agreement between a Seller or its Affiliate and any of the Covered Parties. Nothing in the Merger Agreement will limit any of the obligations, liabilities, rights or remedies of a Seller or the Covered Parties under this Agreement, nor will any breach of the Merger Agreement or any other agreement between a Seller or its Affiliate and any of the Covered Parties limit or otherwise affect any right or remedy of the Covered Parties under this Agreement. If any term or condition of any other agreement between a Seller or its Affiliate and any of the Covered Parties conflicts or is inconsistent with the terms and conditions of this Agreement, the more restrictive terms will control as to such Seller or its Affiliate, as applicable.

 

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(c) Severability; Reformation . Each provision of this Agreement is separable from every other provision of this Agreement. If any provision of this Agreement is found or held to be invalid, illegal or unenforceable, in whole or in part, by a court of competent jurisdiction, then (i) such provision will be deemed amended to conform to applicable laws so as to be valid, legal and enforceable to the fullest possible extent, (ii) the invalidity, illegality or unenforceability of such provision will not affect the validity, legality or enforceability of such provision under any other circumstances or in any other jurisdiction, and (iii) the invalidity, illegality or unenforceability of such provision will not affect the validity, legality or enforceability of the remainder of such provision or the validity, legality or enforceability of any other provision of this Agreement. The Sellers and the Covered Parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision. Without limiting the foregoing, if any court of competent jurisdiction determines that any part hereof is unenforceable because of the duration, geographic area covered, scope of such provision, or otherwise, such court will have the power to reduce the duration, geographic area covered or scope of such provision, as the case may be, and, in its reduced form, such provision will then be enforceable. The Sellers will, at a Covered Party’s request, join such Covered Party in requesting that such court take such action.

 

(d) Amendment; Waiver . This Agreement may not be amended or modified in any respect, except by a written agreement executed by the Sellers, Parent and the Parent Representative (or their respective permitted successors or assigns). No waiver will be effective unless it is expressly set forth in a written instrument executed by the waiving party (and if such waiving party is a Covered Party, the Parent Representative) and any such waiver will have no effect except in the specific instance in which it is given. Any delay or omission by a party in exercising its rights under this Agreement, or failure to insist upon strict compliance with any term, covenant, or condition of this Agreement will not be deemed a waiver of such term, covenant, condition or right, nor will any waiver or relinquishment of any right or power under this Agreement at any time or times be deemed a waiver or relinquishment of such right or power at any other time or times.

 

( e ) Governing Law; Jurisdiction . This Agreement shall be governed by, construed and enforced in accordance with the Laws of the State of Delaware without regard to the conflict of laws principles thereof. All Actions arising out of or relating to this Agreement shall be heard and determined exclusively in any state or federal court located in the State of Delaware (or in any appellate courts thereof) (the “ Specified Courts ”). Each party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Action arising out of or relating to this Agreement brought by any party hereto, (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Action is brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court and (c) waives any bond, surety or other security that might be required of any other party with respect thereto. Each party agrees that a final judgment in any Action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law or in equity. Each party irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 7(a) . Nothing in this Section 7(e) shall affect the right of any party to serve legal process in any other manner permitted by Law.

 

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( f ) WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7( f ) . ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 7( f ) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

(g) Successors and Assigns; Third Party Beneficiaries . This Agreement will be binding upon the Sellers and their respective estates, heirs, successors and assigns, and will inure to the benefit of the Covered Parties, and their respective successors and assigns. Each Covered Party may freely assign any or all of its rights under this Agreement, at any time, in whole or in part, to any Person which acquires, in one or more transactions, at least a majority of the equity securities (whether by equity sale, merger or otherwise) of such Covered Party or all or substantially all of the assets of such Covered Party and its Subsidiaries, taken as a whole, without obtaining the consent or approval of any Seller. Each Seller agrees that the obligations of such Seller under this Agreement are personal and will not be assigned by such Seller. Each of the Covered Parties are express third party beneficiaries of this Agreement and will be considered parties under and for purposes of this Agreement.

 

(h) Parent Representative Authorized to Act on Behalf of Covered Parties . The parties acknowledge and agree that the Parent Representative is authorized and shall have the sole right to act on behalf of Parent and the other Covered Parties under this Agreement, including the right to enforce Parent’s rights and remedies under this Agreement. Without limiting the foregoing, in the event that a Seller serves as a director, officer, employee or other authorized agent of a Covered Party, such Seller shall have no authority, express or implied, to act or make any determination on behalf of a Covered Party in connection with this Agreement or any dispute or Action with respect hereto.

 

(i) Construction . Each Seller acknowledges that such Seller has been represented by counsel, or had the opportunity to be represented by counsel of its choice. Any rule of construction to the effect that ambiguities are to be resolved against the drafting party will not be applied in the construction or interpretation of this Agreement. Neither the drafting history nor the negotiating history of this Agreement will be used or referred to in connection with the construction or interpretation of this Agreement. The headings and subheadings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. In this Agreement: (i) the words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation”; (ii) the definitions contained herein are applicable to the singular as well as the plural forms of such terms; (iii) whenever required by the context, any pronoun shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (iv) the words “herein,” “hereto,” and “hereby” and other words of similar import shall be deemed in each case to refer to this Agreement as a whole and not to any particular Section or other subdivision of this Agreement; (v) the word “if” and other words of similar import when used herein shall be deemed in each case to be followed by the phrase “and only if”; (vi) the term “or” means “and/or”; and (vii) any agreement or instrument defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement or instrument as from time to time amended, modified or supplemented, including by waiver or consent and references to all attachments thereto and instruments incorporated therein. Notwithstanding anything to the contrary contained herein, for purposes of this Agreement, Parent and its Subsidiaries will not be deemed to be Affiliates of any Seller (or any Affiliate of any Seller other than Parent and its Subsidiaries), and visa versa.

 

(j) Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. A photocopy, faxed, scanned and/or emailed copy of this Agreement or any signature page to this Agreement, shall have the same validity and enforceability as an originally signed copy.

 

(k) Effectiveness . This Agreement shall be binding upon each Seller upon such Seller’s execution and delivery of this Agreement, but this Agreement shall only become effective upon the consummation of the Transactions. In the event that the Merger Agreement is validly terminated in accordance with its terms prior to the consummation of the Transactions, this Agreement shall automatically terminate and become null and void, and the parties shall have no obligations hereunder.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows ]

 

  8  

 

 

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Non-Competition and Non-Solicitation Agreement as of the date first written above.

 

 

The Sellers:
     
  INNOHOLD, LLC
     
  By: /s/ Terry V. Pearce
  Name: Terry V. Pearce
  Title: Manager
     
  /s/ Terry Pearce
  Terry Pearce
     
  /s/ Tony Pearce
  Tony Pearce

 

Acknowledged and accepted as of the date first written above:
   
Parent:  
     
Global Partner Acquisition Corp .  
   
By: /s/ Paul Zepf  
Name: Paul Zepf  
Title: Chief Executive Officer  
     
The Company:  
   
PURPLE INNOVATION, LLC  
   
By: /s/ Samuel D. Bernards  
Name: Samuel D. Bernards  
Title: Chief Executive Officer  
     
The Parent Representative:  
     

GLOBAL PARTNER SPONSOR I LLC ,

solely in its capacity under the Merger

Agreement as the Parent Representative

 
   
By: /s/ Paul Zepf  
Name: Paul Zepf  
Title: Manager  

 

[ Signature Page to Non-Competition and Non-Solicitation Agreement ]

 

9

 

 

Exhibit 10.5

 

LOCK-UP AGREEMENT

 

THIS LOCK-UP AGREEMENT (this “ Agreement ”) is made and entered into as of February 2, 2018, by and among (i) Global Partner Acquisition Corp. , a Delaware corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Purple Innovation, Inc.” (including any successor entity thereto, “ Parent ”), (ii) Purple Innovation, LLC , a Delaware limited liability company (including the Surviving Entity (as defined in the Merger Agreement) or any other successor entity thereto, the “ Company ”), (iii) Global Partner Sponsor I LLC , a Delaware limited liability company, solely in the capacity under the Merger Agreement as the Parent Representative (including any successor Parent Representative appointed in accordance therewith, the “ Parent Representative ”), and (iv) InnoHold, LLC , a Delaware limited liability company and the sole member of the Company (as defined below) (“ Holder ”). Capitalized terms used but not otherwise defined in this Agreement will have the meaning ascribed to such term in the Merger Agreement.

 

WHEREAS , on November 2, 2017, Parent, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“ Merger Sub ”), the Company, Holder and the Parent Representative entered into that certain Agreement and Plan of Merger (as amended from time to time in accordance with the terms thereof, the “ Merger Agreement ”), pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity (the “ Merger ”), and a result of which, among other matters, all of the issued and outstanding membership interests of the Company immediately prior to the consummation of the Merger (the “ Closing ”) shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, in exchange for the Merger Consideration, including the Equity Consideration consisting of Parent Class B Common Stock and Surviving Entity Class B Units;

 

WHEREAS , on January 8, 2018, the parties to the Merger Agreement amended certain provisions therein;

 

WHEREAS , Holder, prior to giving effect to the Closing, owns all of the issued and outstanding membership interests of the Company; and

 

WHEREAS , pursuant to the Merger Agreement, and in view of the valuable consideration to be received by Holder thereunder, including the rights under the Registration Rights Agreement being entered into by and among Parent, Holder and the other parties thereto, on or about the date hereof in connection with Merger Agreement (the “ Registration Rights Agreement ”), the parties desire to enter into this Agreement, pursuant to which the Equity Consideration, consisting of equity securities of both Parent and the Company, to be issued to Holder (such Equity Consideration, together with any securities paid as dividends or distributions with respect to such securities or into which such securities are exchanged or converted, the Restricted Securities ) shall become subject to limitations on disposition as set forth herein.

 

 

 

 

NOW, THEREFORE , in consideration of the premises set forth above, which are incorporated in this Agreement as if fully set forth below, and intending to be legally bound hereby, the parties hereby agree as follows:

 

1.  Lock-Up Provisions .

 

(a) Holder hereby agrees not to, during the period commencing from the Closing and ending on the earliest of (x) the one (1) year anniversary of the date of the Closing, (y) the date on which the last sale price of the Parent Class A Common Stock (or any successor publicly traded common equity security) equals or exceeds $12.00 per share (as equitably adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, and (z) the date after the Closing on which Parent consummates a liquidation, merger, share exchange or other similar transaction with an unaffiliated third party that results in all of Parent’s shareholders having the right to exchange their equity holdings in Parent for cash, securities or other property (the “ Lock-Up Period ”): (i) lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Restricted Securities, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Restricted Securities, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in clauses (i), (ii) or (iii) above is to be settled by delivery of Restricted Securities or other securities, in cash or otherwise (any of the foregoing described in clauses (i), (ii) or (iii), a “ Prohibited Transfer ”). The foregoing sentence shall not apply to the transfer of any or all of the Restricted Securities owned by Holder (A) by gift, will or intestate succession upon the death of Holder, (B) to any Permitted Transferee, (C) pursuant to a court order or settlement agreement related to the distribution of assets in connection with the dissolution of marriage or civil union or (D) pursuant to an underwritten public offering to which all of the parties to this Agreement shall have consented; provided, however, that in any of cases (A), (B) or (C) it shall be a condition to such transfer that the transferee executes and delivers to Parent, the Company and the Parent Representative an agreement stating that the transferee is receiving and holding the Restricted Securities subject to the provisions of this Agreement applicable to Holder, and there shall be no further transfer of such Restricted Securities except in accordance with this Agreement. As used in this Agreement, the term “ Permitted Transferee ” shall mean: (I) the members of Holder’s immediate family (for purposes of this Agreement, “immediate family” shall mean with respect to any natural person, any of the following: such person’s spouse, the siblings of such person and his or her spouse, and the direct descendants and ascendants (including adopted and step children and parents) of such person and his or her spouses and siblings), (II) any trust for the direct or indirect benefit of Holder or the immediate family of Holder, (III) if Holder is a trust, to the trustor or beneficiary of such trust or to the estate of a beneficiary of such trust, (IV) as a distribution to limited partners, shareholders, members of, or owners of similar equity interests in Holder or (V) to any affiliate of Holder. Holder further agrees to execute such agreements as may be reasonably requested by Parent, the Company or the Parent Representative that are consistent with the foregoing or that are necessary to give further effect thereto.

 

(b) If any Prohibited Transfer is made or attempted contrary to the provisions of this Agreement, such purported Prohibited Transfer shall be null and void ab initio, and Parent and the Company shall refuse to recognize any such purported transferee of the Restricted Securities as one of its equity holders for any purpose. In order to enforce this  Section 1 , Parent and the Company may impose stop-transfer instructions with respect to the Restricted Securities of Holder (and permitted transferees and assigns thereof) until the end of the Lock-Up Period.

 

(c) During the Lock-Up Period, each certificate evidencing any Restricted Securities shall be stamped or otherwise imprinted with a legend in substantially the following form, in addition to any other applicable legends:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A LOCK-UP AGREEMENT, DATED AS OF FEBRUARY 2, 2018, BY AND AMONG THE ISSUER OF SUCH SECURITIES (THE “ISSUER”) AND THE ISSUER’S SECURITY HOLDER NAMED THEREIN, AS AMENDED. A COPY OF SUCH LOCK-UP AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST.”

 

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(d) For the avoidance of any doubt, Holder shall retain all of its rights as an equity holder of Parent and the Company with respect to the Restricted Securities during the Lock-Up Period, including the right to vote any Restricted Securities that are entitled to vote.

 

2.  Miscellaneous .

 

(a)  Termination of Merger Agreement . Notwithstanding anything to the contrary contained herein, in the event that the Merger Agreement is terminated in accordance with its terms prior to the Closing, this Agreement and all rights and obligations of the parties hereunder shall automatically terminate and be of no further force or effect.

 

(b)  Binding Effect; Assignment . This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns. This Agreement and all obligations of Holder are personal to Holder and may not be transferred or delegated by Holder at any time other than pursuant to a transfer permitted by and in accordance with Section 1(a) above. Parent and the Company may freely assign any or all of its rights under this Agreement, in whole or in part, to any successor entity (whether by merger, consolidation, equity sale, asset sale or otherwise) without obtaining the consent or approval of Holder, but subject to obtaining the consent of the Parent Representative. If the Parent Representative is replaced in accordance with the terms of the Merger Agreement, the replacement Parent Representative shall automatically become a party to this Agreement as if it were the original Parent Representative hereunder.

 

(c)  Third Parties . Nothing contained in this Agreement or in any instrument or document executed by any party in connection with the transactions contemplated hereby shall create any rights in, or be deemed to have been executed for the benefit of, any person or entity that is not a party hereto or thereto or a successor or permitted assign of such a party.

 

(d)  Governing Law; Jurisdiction . This Agreement and any dispute or controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflict of law principles thereof. All Proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any state or federal court located in the State of Delaware (or in any appellate courts thereof) (the “ Specified Courts ”). Each party hereto hereby (i) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding arising out of or relating to this Agreement brought by any party hereto and (ii) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each party irrevocably consents to the service of the summons and complaint and any other process in any other action or proceeding relating to the transactions contemplated by this Agreement, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in  Section 2(g) . Nothing in this  Section 2(d)  shall affect the right of any party to serve legal process in any other manner permitted by applicable law.

 

(e)  WAIVER OF JURY TRIAL . EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND (ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS  SECTION 2(e) .

 

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(f)  Interpretation . The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

(g)  Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable party at the following addresses (or at such other address for a party as shall be specified by like notice):

 

If to the Parent Representative, to: With a copy to (which shall not constitute notice):
   
Global Partner Sponsor I LLP Ellenoff Grossman & Schole, LLP
c/o Ellenoff Grossman & Schole, LLP 1345 Avenue of the Americas, 11th Floor
1345 Avenue of the Americas, 11th Floor New York, NY 10105
New York, NY 10105 Attn: Douglas Ellenoff, Esq.
Attn: Douglas Ellenoff, Esq.   Stuart Neuhauser, Esq.
  Stuart Neuhauser, Esq. Fax: (212) 370-7889
Fax: (212) 370-7889 Tel: (212) 370-1300
Tel: (212) 370-1300 Email: ellenoff@egsllp.com
Email: ellenoff@egsllp.com   sneuhauser@egsllp.com
  sneuhauser@egsllp.com    
   
If to Parent or the Company after the Closing, to: With copies to (which shall not constitute notice):
   
Purple Innovation, Inc. Dorsey & Whitney LLP
123 E. 200 N. 111 S. Main St., Suite 2100
Alpine, UT 84004 Salt Lake City, UT 84111
Attn: Casey McGarvey Attn: Nolan S. Taylor
Email: casey@onpurple.com E-mail: taylor.nolan@dorsey.com
    Fax: (801) 933-7373
    Tel: (801) 933-7366
    and
    the Parent Representative (and its copy for notices hereunder)

  

If to Holder, to: InnoHold, LLC With a copy to (which shall not constitute notice):
   
123 E. 200 N. Dorsey & Whitney LLP
Alpine, UT 84004 111 S. Main St., Suite 2100
Attn: Casey McGarvey Salt Lake City, UT 84111
Email: casey@onpurple.com Attn: Nolan S. Taylor
    E-mail: taylor.nolan@dorsey.com
    Fax: (801) 933-7373
    Tel: (801) 933-7366

 

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(h)  Amendments and Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of Parent, the Company, the Parent Representative and Holder. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

(i)  Severability . In case any provision in this Agreement shall be held invalid, illegal or unenforceable in a jurisdiction, such provision shall be modified or deleted, as to the jurisdiction involved, only to the extent necessary to render the same valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby nor shall the validity, legality or enforceability of such provision be affected thereby in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties will substitute for any invalid, illegal or unenforceable provision a suitable and equitable provision that carries out, so far as may be valid, legal and enforceable, the intent and purpose of such invalid, illegal or unenforceable provision.

 

(j)  Specific Performance . Holder acknowledges that its obligations under this Agreement are unique, recognizes and affirms that in the event of a breach of this Agreement by Holder, money damages will be inadequate and Parent, the Company and Parent Representative will have no adequate remedy at law, and agrees that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed by Holder in accordance with their specific terms or were otherwise breached. Accordingly, each of Parent, the Company and the Parent Representative shall be entitled to an injunction or restraining order to prevent breaches of this Agreement by Holder and to enforce specifically the terms and provisions hereof, without the requirement to post any bond or other security or to prove that money damages would be inadequate, this being in addition to any other right or remedy to which such party may be entitled under this Agreement, at law or in equity.

 

(k)  Entire Agreement . This Agreement constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled;  provided , that, for the avoidance of doubt, the foregoing shall not affect the rights and obligations of the parties under the Merger Agreement or any Related Agreement, including the Registration Rights Agreement. Notwithstanding the foregoing, nothing in this Agreement shall limit any of the rights or remedies of Parent, the Company and the Parent Representative or any of the obligations of Holder under any other agreement between Holder and Parent, the Company or the Parent Representative or any certificate or instrument executed by Holder in favor of Parent, the Company or the Parent Representative, and nothing in any other agreement, certificate or instrument shall limit any of the rights or remedies of Parent, the Company or the Parent Representative or any of the obligations of Holder under this Agreement.

 

(l)  Further Assurances . From time to time, at another party’s request and without further consideration (but at the requesting party’s reasonable cost and expense), each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.

 

(m)  Counterparts; Facsimile. This Agreement may also be executed and delivered by facsimile signature or by email in portable document format in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[ Remainder of Page Intentionally Left Blank; Signature Pages Follow ]

 

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IN WITNESS WHEREOF , the parties have executed this Lock-Up Agreement as of the date first written above.

 

  Parent:
   
  Global Partner Acquisition Corp.
   
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Chief Executive Officer
   
  The Parent Representative:
   
  GLOBAL PARTNER SPONSOR I LLC,
solely in its capacity under the Merger Agreement as the Parent Representative
   
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Chief Executive Officer
   
  The Company:
   
  PURPLE INNOVATION, LLC
   
  By: /s/ Samuel D. Bernards
  Name: Samuel D. Bernards
  Title: Chief Executive Officer
   
  Holder:
   
  INNOHOLD, LLC
   
  By: /s/ Terry V. Pearce
  Name: Terry V. Pearce
  Title: Manager

 

 

 

[ Signature Page to Lock-up Agreement ]

 

 

 

Exhibit 10.6

 

Amended and Restated Employment Agreement

 

This Amended and Restated Employment Agreement (this “Agreement”) is effective as of February 2, 2018 (the “Effective Date”), by and between Tony Pearce, an individual resident of the State of Utah (“Executive”) and Purple Innovation, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, the Company wishes to employ Executive in accordance with the terms of this Agreement.

 

WHEREAS, Executive wishes to accept employment with the Company according to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

 

1. Employment . The Company hereby employs Executive, and Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending on the date described in Section 4(a) (the “Employment Period”).

 

2. Position and Duties .

 

(a) During the Employment Period and subject to any applicable terms of the Certificate of Incorporation or Bylaws of the Company, Executive shall serve as Co-Director of Research and Development of the Company and shall, subject to the direction of the Board of Directors (“Board”) and the Chief Executive Officer of the Company (“CEO”), participate in the Company’s technology, research and innovation efforts. In connection therewith, Executive shall work with the Company’s other Co-Director of Research and Development (if such person has been engaged by the Company) to supervise or assist with the research and development activities of the Company, subject to the power and authority of the Board and the CEO to expand (with mutual agreement of Executive) or limit Executive’s duties, responsibilities, functions and authority.

 

(b) Executive shall report to the CEO and shall diligently perform his duties in good faith in accordance with Section 2(a) above.

 

(c) Executive shall comply with all lawful rules, policies, procedures, regulations and administrative directions now or hereafter reasonably established by the Board for employees of the Company.

 

(d) Notwithstanding the foregoing in this Section 2 , Executive’s employment will be subject to the following provisions:

 

(i) Executive will be free to devote such time as he sees fit in his sole discretion towards educational, welfare, social, religious and civic organizations and perform services for, and hold director, advisor, management or employment positions with, other companies and businesses. Without limitation of the foregoing, Company accepts and approves that Executive may serve one or more LDS missions or, if called, serve in any capacity for the LDS church and related organizations during the Employment period. Executive will not be required to work a particular number of hours for the Company.

 

 

 

 

(ii) The parties agree that Executive’s inventions, ideas and other intellectual property conceived developed, reduced to practice, documented or filed with any governmental entity during his employment relating to the business conducted, or known to be proposed to be conducted, by the Company or its subsidiaries are the consideration provided in exchange for the Salary payments and other benefits hereunder. Notwithstanding anything herein to the contrary, Executive shall, as a condition to his employment hereunder and to his right to the receipt of the Salary and other benefits hereunder, enter into a Proprietary Information, Invention Assignment, and Non-Competition Agreement in substantially the form annexed as Exhibit A hereto setting forth the Executive’s previous inventions which pre-date the date of such Proprietary Information, Invention Assignment and Non-Competition Agreement.

 

3. Salary and Benefits .

 

(a) Salary . During the Employment Period, the Company shall pay Executive base monthly salary at the following annual rates during the calendar years set forth below:

 

2017: $300,000

 

2018: $320,000

 

2019: $340,000

 

2020: $360,000

 

2021: $380,000

 

2022 and thereafter: Minimum $20,000 per year increases.

 

(b) Bonus . With respect to each calendar year during the Employment Period, Executive may be eligible to receive an annual or more frequent bonus as determined by the Board in its sole discretion. Any bonus payable hereunder shall be paid no later than March 15th of the calendar year following the calendar year for which the bonus is earned. In addition, Executive will be entitled to participate in any equity incentive plan offered to other executives of the Company and adopted by the Board of Directors or the Compensation Committee of the Board of Directors.

 

(c) Benefits . During the Employment Period, Executive, for himself and his spouse and dependent children under the age of 26, will be entitled to all employee benefit plans of the Company or benefits offered by the Company to its employees, including without limitation all health insurance plans, dental insurance plans, vision insurance plans, disability insurance plans, worker’s comp plans, unemployment insurance plans, social security or Medicare matching plans, retirement plans (including 401(k)), life insurance plans and other perquisite plans and programs (collectively, the “Benefit Plans”) for which employees of Executive’s rank in the Company are generally eligible, in each case consistent with the Company’s then-current practice as approved by the Board from time to time. Notwithstanding the foregoing, if Executive wishes, an alternative benefit plan (as a non-limiting example, full coverage (including all subpart and subplans and available optional plans) from and related to Medicare) may be selected by Executive and the Company will pay the same percentage of those premiums (but a minimum of 75%) as it pays other executive-level officers in the Company. To the extent that the Company is unable to provide any of the foregoing benefits to Executive pursuant to the terms of the applicable plans or without incurring unreasonable cost or expense, the Company shall have the option, in its discretion, in lieu of providing such benefit or benefits to Executive, to provide Executive with a cash payment or payments reasonably determined by the Board to compensate Executive for the Company’s inability to provide such benefits to Executive.

 

(d) Business Expenses . During the Employment Period, the Company shall reimburse Executive for all reasonable business expenses incurred by Executive in the course of performing Executive’s duties under this Agreement, against presentation by Executive to the Company of reasonably detailed receipts or records relating thereto.

 

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(e) Office and Supplies . At all times during the Employment Period, the Company shall maintain and reserve for the exclusive use of Executive executive-level (no lesser in any way than the office of any other executive officer in the Company) office space in the same general portion of the company’s general headquarters as the CEO has his/her main office, and there shall be no limitation of use of such office (without limitation, for example this office can be used for Executive’s work for any other company or organization). In addition, Company shall at all times supply Executive at Company’s cost with executive-level office furniture, computers, printers, phones and the like chosen at the sole reasonable discretion of Executive for use in his office including technology or fashion or decorating or functionality updates, including additional such items for use in his other offices or home office anywhere in the world, or while traveling whether or not traveling for the company, and there shall be no limitation of use of such items (without limitation, for example these items can be used for Executive’s work for any other company or organization).

 

4. Employment Period .

 

(a) The Employment Period will begin on the Effective Date and shall continue until December 31, 2021 (the “Initial Employment Period”), and thereafter will automatically renew for one year terms unless either party gives the other party 30 days’ notice of its election not to renew, or until Executive’s employment hereunder is terminated in accordance with Section 4(b) . Any leave of absence in which Executive does not work for the Company for one month or more to serve religious missions or other not-for-profit activities will not toll the Employment Period and during such leave of absence, Executive will be paid full Salary payments and benefits hereunder.

 

(b) The Employment Period and Executive’s employment hereunder (i) will terminate upon Executive’s death or permanent disability or incapacity, (ii) may be terminated by the Company at any time with or without Cause (as defined in Section 4(f) ), and (iii) may be terminated by Executive at any time with or without Good Reason (as defined in Section 4(g) ). (The date of termination associated with each and all of these reasons for termination is referred to hereafter as the “Termination Date.”)

 

(c) If Executive’s employment hereunder is terminated by the Company for Cause or by Executive without Good Reason, then Executive will be entitled to receive only Executive’s accrued, unpaid Salary, any reimbursements owed for business expenses incurred on or prior to the Termination Date and any accrued but unpaid benefits due and owing to Executive under any Benefit Plans through the Termination Date (collectively, the “Accrued Obligations”).

 

(d) If Executive’s employment hereunder is terminated without Cause by the Company or by Executive with Good Reason during the Employment Period, then Executive shall receive the Accrued Obligations and, with the understanding that Executive shall not apply for unemployment compensation chargeable to the Company during the twelve months following the Termination Date, the Company shall pay Executive a one-time immediate lump sum of 100% of the remaining Salary and benefits that would have been paid from the Termination Date until the end of the Initial Employment Term or, if the termination occurs following the Initial Employment Term, during the calendar year in which the Termination Date occurred. Such lump sum shall be paid to Executive no later than March 15 th of the calendar year following the calendar year in which the Termination Date occurred. For purposes of the foregoing (as well as Section 4(e) below), the amount payable with respect to the remaining benefits that would have been paid over the Employment Period shall be determined in good faith as the present value of the Company contributions that would have been made during the remaining Initial Employment Period on Executive’s behalf.

 

(e) If Executive’s employment hereunder is terminated as a result of Executive’s death, permanent disability or incapacity during the Employment Period, Executive or Executive’s representatives or beneficiaries shall receive the Accrued Obligations or if not applicable the equivalent value in cash and the Company shall pay Executive or Executive’s representatives or beneficiaries a one-time immediate lump sum of 90% of the remaining Salary and benefits that would have been paid over the Initial Employment Period if Executive had not been terminated or, if the termination occurs following the Initial Employment Term, during the calendar year in which the Termination Date occurred. The Company’s payment of the amounts due pursuant to this Section 2(e) to any person who the Company reasonably believes is authorized to act on behalf of the Executive’s representatives or beneficiaries shall be deemed to satisfy the Company’s obligations pursuant to this Section 2(e) in full. The Company may, should it determine to do so, purchase key man insurance in an amount sufficient to cover the obligation to Executive’s representatives and beneficiaries who are agreed to be intended third-party beneficiaries to this provision of this Agreement. The Company’s obligations under this Agreement are not limited to any payment by any insurance company.

 

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(f) For purposes of the Agreement, “Cause” means Executive’s conviction of or entering a guilty plea to any felony or any crime involving moral turpitude, fraud, misrepresentation, embezzlement, theft or sexual harassment.

 

(g) For purposes of this Agreement, “Good Reason” shall mean Executive’s resignation following a Change of Control as defined in paragraph 7 herein or following the initial occurrence (without Executive’s consent) of any of the following, provided Executive has provided the Company with written notice setting forth in reasonable detail the grounds for such resignation within 15 days following such initial occurrence, and provided further the Company has failed to remedy the stated grounds for such resignation within 30 days following its receipt of such notice: (i) the Company substantially reduces the aggregate value of Executive’s Salary or the benefits provided to Executive under the Benefit Plans or other benefit obligations; (ii) the Company requires that Executive be based at a particular location; or (iii) any other action or inaction that constitutes a breach of this Agreement by the Company. A resignation with Good Reason may occur only within 30 days following the expiration of the Company’s 30-day cure period described above.

 

5. Representations and Warranties .

 

(a) Executive hereby represents and warrants to the Company that upon execution and delivery of this Agreement, this Agreement will be the valid and binding obligation of Executive, enforceable against Executive in accordance with its terms.

 

(b) The Company hereby represents and warrants to Executive that upon execution and delivery of this Agreement, this Agreement will be the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

 

6. Indemnification . With respect to all actions taken relating to the Company by Executive during the Employment Period and during any previous activity relating to the Company or any future activity relating to the Company (as a non-limiting example during any future cooperation in a patent infringement suit filed by the Company against a third party), the Company agrees to fully indemnify, hold harmless and defend Executive and Executive’s estate, heirs, and Affiliates on the same basis as the officers of the Company, in connection with any claims, liabilities, actions, suits or proceedings to which Executive or his estate, heirs or Affiliates is, or is threatened to be made, a party, and Executive shall be covered by the Company’s executive indemnification insurance during all such periods in indemnification to the same extent as the officers of the Company.

 

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7. Successors and Assigns . This Agreement will bind and inure to the benefit of and be enforceable by Executive and the Company and their respective heirs, successors and permitted assigns. Neither party may assign any of its rights or assign or delegate any of its obligations hereunder without the prior written consent of the other party hereto; provided, however, that the Company may assign this Agreement in connection with any Change of Control provided Executive is first terminated without Cause by the Company and all termination-associated payments to Executive have been made and all other termination-associated obligations have been fulfilled by the Company. “Change of Control” means a change in ownership or control of Company following the Effective Date effected through any of the following transactions: (i) any consolidation or merger of Company with or into any other entity, or any other corporate reorganization, other than any consolidation, merger or reorganization in which the members of the Company immediately prior to such transaction, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such transaction; (ii) any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company’s voting power is transferred; or (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of Company; provided, however, that a Change of Control does not include (x) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof or (y) a change in ownership or control of the Company effected through any consolidation or merger for the principal purpose of changing the domicile of the Company. A public offering of the Company’s securities will be deemed to constitute a Change of Control if in excess of 50% of the Company’s voting power is issued pursuant to such offering.

 

8. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and will be deemed to have been given (a) on the date established by the sender as having been delivered personally, (b) on the date delivered by a private courier with signature by the recipient as established by the sender by evidence obtained from such courier, or (c) on the date sent by facsimile or email transmission (with acknowledgement by recipient of complete transmission). Notices, demands or communications to any party hereto will, unless another address is specified in writing pursuant to this Section 8 , be sent to the addresses indicated below.

 

If to Executive: 

Tony M. Pearce 

801 S. 1230 E. 

Alpine, Utah 84004 

Email: tony@onpurple.com 

and tonymarionp@gmail.com

If to the Company: 

Purple Innovation, Inc. 

123 E 200 N 

Alpine, Utah 84004 

Attn: Chief Legal Officer 

Email: casey@onpurple.com

 

9. Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be valid under applicable law; but, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but except as otherwise set forth in this Agreement, this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

10. Complete Agreement . This Agreement and any documents or agreements referred to herein and all exhibits and schedules referred to herein or therein embody the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Without limiting the generality of the foregoing, this Agreement amends and restates and supersedes and replaces the Employment Agreement by and between the Executive and WonderGel, LLC dba Purple, which was effective as of December 31, 2016.

 

11. Signatures; Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. For purposes hereof, a facsimile signature, portable document format (PDF) signature or signature sent by electronic transmission will be considered an original signature.

 

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12. Governing Law . All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement will be governed by, and construed in accordance with, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Utah or any other jurisdiction).

 

13. Survival . The provisions of Sections 6 through 10 , 12 , 13 , and 15 shall survive the termination of Executive’s employment and the termination of this Agreement for any reason. Upon termination of Executive, all amounts owing to Executive hereunder shall be paid to Executive within one week of termination of this Agreement or Executive’s employment hereunder, whichever is earlier.

 

14. Headings; No Strict Construction . The headings of the paragraphs and sections of this Agreement are inserted for convenience only and will not be deemed a part of or affect the construction or interpretation of any provision hereof. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party.

 

15. Code Section 409A . The parties hereto intend that the payments and benefits provided in this Agreement either will be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or be provided in a manner that complies with Section 409A of the Code and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph. Further, if Executive is a “specified employee” (as such term is defined under Section 409A of the Code) at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to Executive) until the date that is at least six (6) months following Executive’s termination of employment with the Company (or the earlier date of Executive’s death), whereupon the Company will promptly pay Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to Executive under this Agreement during the period in which such payments or benefits were deferred. In addition, if following the date hereof, the Company or Executive reasonably determines that any amounts or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (i) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or (ii) preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (iii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. Notwithstanding anything contained herein to the contrary, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Executive under Section 409A of the Code, or damages for failing to comply with Section 409A of the Code.

 

16. Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

17. Read and Understood . Executive has read this Agreement carefully and understands each of its terms and conditions. Executive has sought independent legal counsel of Executive’s choice to the extent Executive deemed such advice necessary in connection with the review and execution of this Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  Company:
  Purple Innovation, Inc.
     
  By: /s/ Sam Bernards
    Sam Bernards, CEO
     
  Executive:
   
  /s/ Tony M. Pearce
  Tony M. Pearce

 

[Signature Page to Tony Pearce Employment Agreement]

 

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Exhibit A

 

See Attached

 

8

 

 

Confidential Purple Innovation, Inc.

 

Proprietary Information and Invention Assignment Agreement

 

In consideration, and as a condition, of my employment with Purple Innovation, Inc. or any of its subsidiaries (collectively, the “ Company ”), I agree, effective as of February 2, 2018 (the “ Effective Date ”), as follows:

 

1. Nondisclosure

 

1.1. Recognition of the Company’s Rights; Nondisclosure . At all times following the Effective Date during my performance of services (the “ Services ”) for the Company, whether as an officer, director, manager, employee or contractor or otherwise (the “ Service Period ”), and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon, or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use, or publication may be required in connection with my work for the Company, or unless a director or officer of the Company expressly authorizes such in writing. I will obtain the Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that incorporates any Proprietary Information and/or disparages the Company. The foregoing restrictions do not apply to any information that (i) is in or enters the public domain, through no wrongdoing of my own or any third party; or (ii) has been disclosed to me by a third party who is not subject to such restriction and who has not directly or indirectly received such information through the wrongdoing of any third party; provided, however, that the limitations of this sentence will not in any way limit any other duties or obligations that I have, or may have in the future, with respect to the Company in accordance with any other written agreement with the Company or as a result of any express or implied duty or obligation that I may have as a member, officer, manager, employee, contractor or director of the Company. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information will be the sole property of the Company and its assigns.

 

1.2. Proprietary Information . The term “ Proprietary Information ” means any and all confidential and/or proprietary knowledge, data, or information of the Company. By way of illustration but not limitation, “Proprietary Information” includes (a) trade secrets, inventions, mask works, ideas, materials, concepts, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “ Inventions ”); and (b) information regarding research, development, products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers and the existence of any business discussions, negotiations, or agreements between the Company and any third party; and (c) information regarding the skills and compensation of the Company’s employees, contractors or other service providers.

 

1.3. No Improper Use of Information of Prior Employers and Others . During the Service Period, I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information that is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

 

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1.4. Third Party Information . I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my Service Period and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than the Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by a manager or officer of the Company in writing.

 

2. Assignment of Inventions

 

2.1. Proprietary Rights . The term “ Proprietary Rights ” means all trade secret, patent, copyright, trademark, mask work, moral rights, know-how and any and all other intellectual property rights throughout the world.

 

2.2. Excluded Inventions and Excluded Future Inventions . As set forth on Exhibit A attached hereto, inventions, patented or unpatented, that (i) I made prior to the Effective Date, or (ii) that have been owned prior to the Effective Date in whole or part by me through EdiZONE, LLC or licensed by EdiZONE, LLC to third parties (clauses (i) and (ii) are collectively, the “ Excluded Inventions “). To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of all Excluded Inventions (and related patents, trademarks and copyrights) relevant to the subject matter of my Services that I have, alone or jointly with others, conceived, developed, or reduced to practice or caused to be conceived, developed or reduced to practice prior to the Effective Date, that constitute my property or the property of third parties and that the Company agrees will be excluded from the scope of this Agreement. That certain Amended and Restated Confidential Assignment and License Back Agreement executed November 2, 2017 and effective December 27, 2016 governs the rights of the Company and EdiZONE with respect to the Excluded Inventions.

 

2.3. Assignment of Inventions . Subject to Section 2.4 , I hereby assign and agree to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title, and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my Service Period with the Company. Inventions (and all Proprietary Rights with respect thereto) assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2 , are hereinafter referred to as “ Company Inventions .” I hereby forever waive and agree not to assert any and all Proprietary Rights I may have in or with respect to any Company Invention. Notwithstanding the date of this Agreement, my assignment of rights to the Company as provided in this Agreement is intended to pertain to Inventions and Proprietary Rights created from my earliest performance of services for, or on behalf of, the Company and continue for so long as I continue providing services for, or on behalf of, the Company.

 

2.4. Nonassignable Inventions . I recognize that, in the event of a specifically applicable state law, regulation, rule, or public policy (“ Specific Inventions Law ”), this Agreement may not be deemed to require assignment of any invention that qualifies fully for protection under a Specific Inventions Law by virtue of the fact that any such invention was, for example, developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted or was derived from work performed by me directly or indirectly for the Company. In the absence of a Specific Inventions Law, the preceding sentence will not apply.

 

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2.5. Obligation to Keep the Company Informed . During my Service Period and for one year after termination of my Service Period with the Company, I will promptly disclose to the Company fully and in writing all Inventions (and all Proprietary Rights with respect thereto) authored, conceived, or reduced to practice by me, either alone or jointly with others. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf or in which I am named as an inventor or co-inventor within one year after termination of Service Period. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Section 2.5 of this Agreement relating to my Inventions. I will preserve the confidentiality of any Company Invention (and all Proprietary Rights with respect thereto) that results from my Services during the Service Period.

 

2.6. Works for Hire . I acknowledge that all original works of authorship that are made by me (solely or jointly with others) within the scope of my Services during the Service Period and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

 

2.7. Enforcement of Proprietary Rights . I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to the Company Inventions in any and all countries. To that end I will execute, verify, and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries will continue beyond the termination of my Service Period, but the Company will compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

 

2.8. Further Assurances . If the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 2 with the same legal force and effect as if executed by me. I hereby waive, assign and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

 

2.9. Presumption of Ownership . Due to the difficulty of establishing when an Invention (and all Proprietary Rights with respect thereto) is first conceived or developed, whether it results from access to the Company’s actual or anticipated business or research or development, or whether it is a direct or indirect result or derivation of any work I perform for the Company, I hereby acknowledge and agree that ownership of all Inventions (and all Proprietary Rights with respect thereto) conceived, developed, suggested or reduced to practice by me, alone or jointly with others during my Service Period shall be presumed to belong to the Company and I shall have the burden of proof to prove otherwise.

 

3. Records . Unless otherwise directed or requested by the Company, I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during my Service Period with the Company, which records will be available to and remain the sole property of the Company at all times.

 

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4. No Conflicts or Solicitation . I acknowledge that during my Service Period I will have access to and knowledge of Proprietary Information. To protect the Company’s Proprietary Information, I agree that during the period of my Service Period with the Company I will not, without the Company’s express written consent, engage in any other business activity that is competitive with the Company, or would otherwise conflict with my obligations to the Company. I have entered into a Non-Competition and Non-Solicitation Agreement of even date herewith.

 

5. No Conflicting Obligation . I represent that my performance of all the terms of this Agreement and my performance of the Services do not and will not breach any non-compete agreement or any agreement to keep in confidence information acquired by me in confidence or in trust prior to my Service Period with the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement.

 

6. Return of Company Documents . Upon termination of the Service Period or upon request by the Company during the course of my Service Period, I will deliver to the Company any and all property, equipment, drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I agree that I will not copy, delete or alter any information contained on my Company computer, cell phone or other electronic storage and communication device before I return it to the Company. I further agree that any property situated on the Company’s premises or otherwise owned by the Company, including cloud based and onsite based storage services or devices for and access of electronic data or media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. I further agree that I will not store any of the Company’s information in locations or on electronic devices which are not accessible by the Company, that I will use only Company provided or approved electronic devices, such as but not limited to cell phones, tablets, digital photographs and the like, and that the Company has the right to inspect any of such personal devices which contain such information and to require the deletion or other permanent destruction of the same. Prior to leaving, I will cooperate with the Company in completing and signing the Company’s termination statement.

 

7. Legal and Equitable Remedies . Because my services are personal and unique and because I may have access to and become acquainted with the Company’s Proprietary Information, the Company has the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement or an infringement of its intellectual property rights or other rights.

 

8. Notices . All notices, payments, demands or communications required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to be delivered, given and received for all purposes (a) as of the date and time of actual receipt, in the case of notices delivered personally; (b) one calendar day after deposit with a nationally recognized overnight delivery service; (c) if sent by email, or other electronic communication processes, upon confirmed receipt by recipient; or (d) five calendar days after deposit in registered or certified United States mail return receipt requested, as applicable. If not emailed, such notices, payments, demands or communications shall be delivered personally to the recipient or to an officer of the recipient to whom the same is directed, or sent by registered or certified United States mail return receipt requested, or by nationally recognized overnight delivery service, addressed at the addresses specified on the signature page hereto or to such other address as may be specified from time to time by notice to parties hereto.

 

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9. Notification of New Employer . If the Service Period ceases for any reason (such as from termination of my employment by myself or the Company), I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.

 

10. G eneral Provisions

 

10.1. Survival and Assignment by the Company . I understand that my obligation under this Agreement will continue in accordance with its express terms regardless of any changes in title, position, duties, salary, compensation or benefits, or other terms and conditions of my Services. I further understand that my obligations under this Agreement will continue following the termination of my Services regardless of the manner of such termination and will be binding upon my heirs, executors, and administrators. The Company will have the right to assign this Agreement to its affiliates and successors. I expressly consent to be bound by the provisions of this Agreement for the benefit of the Company or any parent, subsidiary, or affiliate to whom I may be transferred without the necessity that this Agreement be re-executed at the time of such transfer.

 

10.2. Severability . In case any provision (or portions thereof) contained in this Agreement will, for any reason, be held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect the other provisions of this Agreement, and this Agreement will be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

 

10.3. Governing Law . This Agreement and actions taken hereunder will be governed and construed in accordance with the laws of the State of Utah, applied without regard to conflict of law principles. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Salt Lake City, Utah for any lawsuit filed there against me by the Company arising from or relating to this Agreement.

 

10.4. Successors and Assigns . This Agreement will be binding upon my heirs, executors, administrators, and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

 

10.5. Service Period . I acknowledge and agree that my relationship with the Company is governed by the Amended and Restated Employment Agreement of even date hereof.

 

10.6. Waiver . No waiver by the Company of any breach of this Agreement will be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement will be construed as a waiver of any other right. The Company will not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

10.7. Entire Agreement . The obligations pursuant to Sections 1 and 2 of this Agreement will apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement and the offer letter of even date herewith is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and thereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

 

10.8. Advice of Counsel . I ACKNOWLEDGE THAT, IN EXECUING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGRREEMENT. THIS AGREEMENT MAY NOT BE CONSTRUED AGAINST ANY PARTY BY ANY REASON OF THE DRAFTING FOR PREPARATION HEREOF.

 

10.9. Counterparts . This Agreement may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means (e.g., electronic mail or PDF) shall be effective as delivery of a manually executed counterpart to this Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below.

 

Sign:   Date:

Print: Tony Pearce      

 

Acknowledged and agreed:

  

Purple Innovation, inc.

By:                                      
Name: Samuel D. Bernards
Its: Chief Executive Officer

 

[ Signature page to Proprietary Information and Invention Assignment Agreement]

 

[Signature Page to PIIA]

 

14

Exhibit 10.7

 

Amended and Restated Employment Agreement

 

This Amended and Restated Employment Agreement (this “Agreement”) is effective as of February 2, 2018 (the “Effective Date”), by and between Terry Pearce, an individual resident of the State of Utah (“Executive”) and Purple Innovation, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, the Company wishes to employ Executive in accordance with the terms of this Agreement.

 

WHEREAS, Executive wishes to accept employment with the Company according to the terms of this Agreement.

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

 

1. Employment . The Company hereby employs Executive, and Executive hereby accepts employment by the Company, upon the terms and conditions set forth in this Agreement for the period beginning on the Effective Date and ending on the date described in Section 4(a) (the “Employment Period”).

 

2. Position and Duties .

 

(a) During the Employment Period and subject to any applicable terms of the Certificate of Incorporation or Bylaws of the Company, Executive shall serve as Co-Director of Research and Development of the Company and shall, subject to the direction of the Board of Directors (“Board”) and the Chief Executive Officer of the Company (“CEO”), participate in the Company’s technology, research and innovation efforts. In connection therewith, Executive shall work with the Company’s other Co-Director of Research and Development (if such person has been engaged by the Company) to supervise or assist with the research and development activities of the Company, subject to the power and authority of the Board and the CEO to expand (with mutual agreement of Executive) or limit Executive’s duties, responsibilities, functions and authority.

 

(b) Executive shall report to the CEO and shall diligently perform his duties in good faith in accordance with Section 2(a) above.

 

(c) Executive shall comply with all lawful rules, policies, procedures, regulations and administrative directions now or hereafter reasonably established by the Board for employees of the Company.

 

(d) Notwithstanding the foregoing in this Section 2 , Executive’s employment will be subject to the following provisions:

 

(i) Executive will be free to devote such time as he sees fit in his sole discretion towards educational, welfare, social, religious and civic organizations and perform services for, and hold director, advisor, management or employment positions with, other companies and businesses. Without limitation of the foregoing, Company accepts and approves that Executive may serve one or more LDS missions or, if called, serve in any capacity for the LDS church and related organizations during the Employment period. Executive will not be required to work a particular number of hours for the Company.

 

 

 

 

(ii) The parties agree that Executive’s inventions, ideas and other intellectual property conceived developed, reduced to practice, documented or filed with any governmental entity during his employment relating to the business conducted, or known to be proposed to be conducted, by the Company or its subsidiaries are the consideration provided in exchange for the Salary payments and other benefits hereunder. Notwithstanding anything herein to the contrary, Executive shall, as a condition to his employment hereunder and to his right to the receipt of the Salary and other benefits hereunder, enter into a Proprietary Information, Invention Assignment, and Non-Competition Agreement in substantially the form annexed as Exhibit A hereto setting forth the Executive’s previous inventions which pre-date the date of such Proprietary Information, Invention Assignment and Non-Competition Agreement.

 

3. Salary and Benefits .

 

(a) Salary . During the Employment Period, the Company shall pay Executive base monthly salary at the following annual rates during the calendar years set forth below:

 

2017: $300,000

 

2018: $320,000

 

2019: $340,000

 

2020: $360,000

 

2021: $380,000

 

2022 and thereafter: Minimum $20,000 per year increases.

 

(b) Bonus . With respect to each calendar year during the Employment Period, Executive may be eligible to receive an annual or more frequent bonus as determined by the Board in its sole discretion. Any bonus payable hereunder shall be paid no later than March 15th of the calendar year following the calendar year for which the bonus is earned. In addition, Executive will be entitled to participate in any equity incentive plan offered to other executives of the Company and adopted by the Board of Directors or the Compensation Committee of the Board of Directors.

 

(c) Benefits . During the Employment Period, Executive, for himself and his spouse and dependent children under the age of 26, will be entitled to all employee benefit plans of the Company or benefits offered by the Company to its employees, including without limitation all health insurance plans, dental insurance plans, vision insurance plans, disability insurance plans, worker’s comp plans, unemployment insurance plans, social security or Medicare matching plans, retirement plans (including 401(k)), life insurance plans and other perquisite plans and programs (collectively, the “Benefit Plans”) for which employees of Executive’s rank in the Company are generally eligible, in each case consistent with the Company’s then-current practice as approved by the Board from time to time. Notwithstanding the foregoing, if Executive wishes, an alternative benefit plan (as a non-limiting example, full coverage (including all subpart and subplans and available optional plans) from and related to Medicare) may be selected by Executive and the Company will pay the same percentage of those premiums (but a minimum of 75%) as it pays other executive-level officers in the Company. To the extent that the Company is unable to provide any of the foregoing benefits to Executive pursuant to the terms of the applicable plans or without incurring unreasonable cost or expense, the Company shall have the option, in its discretion, in lieu of providing such benefit or benefits to Executive, to provide Executive with a cash payment or payments reasonably determined by the Board to compensate Executive for the Company’s inability to provide such benefits to Executive.

 

(d) Business Expenses . During the Employment Period, the Company shall reimburse Executive for all reasonable business expenses incurred by Executive in the course of performing Executive’s duties under this Agreement, against presentation by Executive to the Company of reasonably detailed receipts or records relating thereto.

 

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(e) Office and Supplies . At all times during the Employment Period, the Company shall maintain and reserve for the exclusive use of Executive executive-level (no lesser in any way than the office of any other executive officer in the Company) office space in the same general portion of the company’s general headquarters as the CEO has his/her main office, and there shall be no limitation of use of such office (without limitation, for example this office can be used for Executive’s work for any other company or organization). In addition, Company shall at all times supply Executive at Company’s cost with executive-level office furniture, computers, printers, phones and the like chosen at the sole reasonable discretion of Executive for use in his office including technology or fashion or decorating or functionality updates, including additional such items for use in his other offices or home office anywhere in the world, or while traveling whether or not traveling for the company, and there shall be no limitation of use of such items (without limitation, for example these items can be used for Executive’s work for any other company or organization).

 

4. Employment Period .

 

(a) The Employment Period will begin on the Effective Date and shall continue until December 31, 2021 (the “Initial Employment Period”), and thereafter will automatically renew for one year terms unless either party gives the other party 30 days’ notice of its election not to renew, or until Executive’s employment hereunder is terminated in accordance with Section 4(b) . Any leave of absence in which Executive does not work for the Company for one month or more to serve religious missions or other not-for-profit activities will not toll the Employment Period and during such leave of absence, Executive will be paid full Salary payments and benefits hereunder.

 

(b) The Employment Period and Executive’s employment hereunder (i) will terminate upon Executive’s death or permanent disability or incapacity, (ii) may be terminated by the Company at any time with or without Cause (as defined in Section 4(f) ), and (iii) may be terminated by Executive at any time with or without Good Reason (as defined in Section 4(g) ). (The date of termination associated with each and all of these reasons for termination is referred to hereafter as the “Termination Date.”)

 

(c) If Executive’s employment hereunder is terminated by the Company for Cause or by Executive without Good Reason, then Executive will be entitled to receive only Executive’s accrued, unpaid Salary, any reimbursements owed for business expenses incurred on or prior to the Termination Date and any accrued but unpaid benefits due and owing to Executive under any Benefit Plans through the Termination Date (collectively, the “Accrued Obligations”).

 

(d) If Executive’s employment hereunder is terminated without Cause by the Company or by Executive with Good Reason during the Employment Period, then Executive shall receive the Accrued Obligations and, with the understanding that Executive shall not apply for unemployment compensation chargeable to the Company during the twelve months following the Termination Date, the Company shall pay Executive a one-time immediate lump sum of 100% of the remaining Salary and benefits that would have been paid from the Termination Date until the end of the Initial Employment Term or, if the termination occurs following the Initial Employment Term, during the calendar year in which the Termination Date occurred. Such lump sum shall be paid to Executive no later than March 15 th of the calendar year following the calendar year in which the Termination Date occurred. For purposes of the foregoing (as well as Section 4(e) below), the amount payable with respect to the remaining benefits that would have been paid over the Employment Period shall be determined in good faith as the present value of the Company contributions that would have been made during the remaining Initial Employment Period on Executive’s behalf.

 

(e) If Executive’s employment hereunder is terminated as a result of Executive’s death, permanent disability or incapacity during the Employment Period, Executive or Executive’s representatives or beneficiaries shall receive the Accrued Obligations or if not applicable the equivalent value in cash and the Company shall pay Executive or Executive’s representatives or beneficiaries a one-time immediate lump sum of 90% of the remaining Salary and benefits that would have been paid over the Initial Employment Period if Executive had not been terminated or, if the termination occurs following the Initial Employment Term, during the calendar year in which the Termination Date occurred. The Company’s payment of the amounts due pursuant to this Section 2(e) to any person who the Company reasonably believes is authorized to act on behalf of the Executive’s representatives or beneficiaries shall be deemed to satisfy the Company’s obligations pursuant to this Section 2(e) in full. The Company may, should it determine to do so, purchase key man insurance in an amount sufficient to cover the obligation to Executive’s representatives and beneficiaries who are agreed to be intended third-party beneficiaries to this provision of this Agreement. The Company’s obligations under this Agreement are not limited to any payment by any insurance company.

 

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(f) For purposes of the Agreement, “Cause” means Executive’s conviction of or entering a guilty plea to any felony or any crime involving moral turpitude, fraud, misrepresentation, embezzlement, theft or sexual harassment.

 

(g) For purposes of this Agreement, “Good Reason” shall mean Executive’s resignation following a Change of Control as defined in paragraph 7 herein or following the initial occurrence (without Executive’s consent) of any of the following, provided Executive has provided the Company with written notice setting forth in reasonable detail the grounds for such resignation within 15 days following such initial occurrence, and provided further the Company has failed to remedy the stated grounds for such resignation within 30 days following its receipt of such notice: (i) the Company substantially reduces the aggregate value of Executive’s Salary or the benefits provided to Executive under the Benefit Plans or other benefit obligations; (ii) the Company requires that Executive be based at a particular location; or (iii) any other action or inaction that constitutes a breach of this Agreement by the Company. A resignation with Good Reason may occur only within 30 days following the expiration of the Company’s 30-day cure period described above.

 

5. Representations and Warranties .

 

(a) Executive hereby represents and warrants to the Company that upon execution and delivery of this Agreement, this Agreement will be the valid and binding obligation of Executive, enforceable against Executive in accordance with its terms.

 

(b) The Company hereby represents and warrants to Executive that upon execution and delivery of this Agreement, this Agreement will be the valid and binding obligation of the Company, enforceable against the Company in accordance with its terms.

 

6. Indemnification . With respect to all actions taken relating to the Company by Executive during the Employment Period and during any previous activity relating to the Company or any future activity relating to the Company (as a non-limiting example during any future cooperation in a patent infringement suit filed by the Company against a third party), the Company agrees to fully indemnify, hold harmless and defend Executive and Executive’s estate, heirs, and Affiliates on the same basis as the officers of the Company, in connection with any claims, liabilities, actions, suits or proceedings to which Executive or his estate, heirs or Affiliates is, or is threatened to be made, a party, and Executive shall be covered by the Company’s executive indemnification insurance during all such periods in indemnification to the same extent as the officers of the Company.

 

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7. Successors and Assigns . This Agreement will bind and inure to the benefit of and be enforceable by Executive and the Company and their respective heirs, successors and permitted assigns. Neither party may assign any of its rights or assign or delegate any of its obligations hereunder without the prior written consent of the other party hereto; provided, however, that the Company may assign this Agreement in connection with any Change of Control provided Executive is first terminated without Cause by the Company and all termination-associated payments to Executive have been made and all other termination-associated obligations have been fulfilled by the Company. “Change of Control” means a change in ownership or control of Company following the Effective Date effected through any of the following transactions: (i) any consolidation or merger of Company with or into any other entity, or any other corporate reorganization, other than any consolidation, merger or reorganization in which the members of the Company immediately prior to such transaction, continue to hold at least a majority of the voting power of the surviving entity in substantially the same proportions (or, if the surviving entity is a wholly owned subsidiary, its parent) immediately after such transaction; (ii) any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company’s voting power is transferred; or (iii) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of Company; provided, however, that a Change of Control does not include (x) any transaction or series of transactions principally for bona fide equity financing purposes in which cash is received by the Company or any successor or indebtedness of the Company is cancelled or converted or a combination thereof or (y) a change in ownership or control of the Company effected through any consolidation or merger for the principal purpose of changing the domicile of the Company. A public offering of the Company’s securities will be deemed to constitute a Change of Control if in excess of 50% of the Company’s voting power is issued pursuant to such offering.

 

8. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and will be deemed to have been given (a) on the date established by the sender as having been delivered personally, (b) on the date delivered by a private courier with signature by the recipient as established by the sender by evidence obtained from such courier, or (c) on the date sent by facsimile or email transmission (with acknowledgement by recipient of complete transmission). Notices, demands or communications to any party hereto will, unless another address is specified in writing pursuant to this Section 8 , be sent to the addresses indicated below.

 

If to Executive:

Terry V. Pearce

125 E Watkins Lane

Alpine, Utah 84004

Email: terry@onpurple.com

If to the Company:

Purple Innovation, Inc.

123 E 200 N

Alpine, Utah 84004

Attn: Chief Legal Officer

Email: casey@onpurple.com

 

9. Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be valid under applicable law; but, if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but except as otherwise set forth in this Agreement, this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

10. Complete Agreement . This Agreement and any documents or agreements referred to herein and all exhibits and schedules referred to herein or therein embody the complete agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Without limiting the generality of the foregoing, this Agreement amends and restates and supersedes and replaces the Employment Agreement by and between the Executive and WonderGel, LLC dba Purple, which was effective as of December 31, 2016.

 

11. Signatures; Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. For purposes hereof, a facsimile signature, portable document format (PDF) signature or signature sent by electronic transmission will be considered an original signature.

 

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12. Governing Law . All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement will be governed by, and construed in accordance with, the internal laws of the State of Utah, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Utah or any other jurisdiction).

 

13. Survival . The provisions of Sections 6 through 10 , 12 , 13 , and 15 shall survive the termination of Executive’s employment and the termination of this Agreement for any reason. Upon termination of Executive, all amounts owing to Executive hereunder shall be paid to Executive within one week of termination of this Agreement or Executive’s employment hereunder, whichever is earlier.

 

14. Headings; No Strict Construction . The headings of the paragraphs and sections of this Agreement are inserted for convenience only and will not be deemed a part of or affect the construction or interpretation of any provision hereof. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party.

 

15. Code Section 409A . The parties hereto intend that the payments and benefits provided in this Agreement either will be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or be provided in a manner that complies with Section 409A of the Code and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph. Further, if Executive is a “specified employee” (as such term is defined under Section 409A of the Code) at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to Executive) until the date that is at least six (6) months following Executive’s termination of employment with the Company (or the earlier date of Executive’s death), whereupon the Company will promptly pay Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to Executive under this Agreement during the period in which such payments or benefits were deferred. In addition, if following the date hereof, the Company or Executive reasonably determines that any amounts or benefits payable under this Agreement may be subject to Section 409A of the Code, the Company and Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (i) exempt the compensation and benefits payable under this Agreement from Section 409A of the Code and/or (ii) preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (iii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance. Notwithstanding anything contained herein to the contrary, in no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on Executive under Section 409A of the Code, or damages for failing to comply with Section 409A of the Code.

 

16. Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

17. Read and Understood . Executive has read this Agreement carefully and understands each of its terms and conditions. Executive has sought independent legal counsel of Executive’s choice to the extent Executive deemed such advice necessary in connection with the review and execution of this Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.

 

  Company:
   
  Purple Innovation, Inc.
     
  By: /s/ Sam Bernards
    Sam Bernards, CEO
     
  Executive:
   
 

/s/ Terry V. Pearce

 

Terry V. Pearce

 

[Signature Page to Terry Pearce Employment Agreement]

 

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Exhibit A

 

See Attached

 

8

 

 

Confidential Purple Innovation, Inc.

 

Proprietary Information and Invention Assignment Agreement

 

In consideration, and as a condition, of my employment with Purple Innovation, Inc. or any of its subsidiaries (collectively, the “ Company ”), I agree, effective as of February 2, 2018 (the “ Effective Date ”), as follows:

 

1. Nondisclosure

 

1.1. Recognition of the Company’s Rights; Nondisclosure . At all times following the Effective Date during my performance of services (the “ Services ”) for the Company, whether as an officer, director, manager, employee or contractor or otherwise (the “ Service Period ”), and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon, or publish any of the Company’s Proprietary Information (defined below), except as such disclosure, use, or publication may be required in connection with my work for the Company, or unless a director or officer of the Company expressly authorizes such in writing. I will obtain the Company’s written approval before publishing or submitting for publication any material (written, verbal, or otherwise) that incorporates any Proprietary Information and/or disparages the Company. The foregoing restrictions do not apply to any information that (i) is in or enters the public domain, through no wrongdoing of my own or any third party; or (ii) has been disclosed to me by a third party who is not subject to such restriction and who has not directly or indirectly received such information through the wrongdoing of any third party; provided, however, that the limitations of this sentence will not in any way limit any other duties or obligations that I have, or may have in the future, with respect to the Company in accordance with any other written agreement with the Company or as a result of any express or implied duty or obligation that I may have as a member, officer, manager, employee, contractor or director of the Company. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information will be the sole property of the Company and its assigns.

 

1.2. Proprietary Information . The term “ Proprietary Information ” means any and all confidential and/or proprietary knowledge, data, or information of the Company. By way of illustration but not limitation, “Proprietary Information” includes (a) trade secrets, inventions, mask works, ideas, materials, concepts, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as “ Inventions ”); and (b) information regarding research, development, products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers and the existence of any business discussions, negotiations, or agreements between the Company and any third party; and (c) information regarding the skills and compensation of the Company’s employees, contractors or other service providers.

 

1.3. No Improper Use of Information of Prior Employers and Others . During the Service Period, I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information that is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.

 

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1.4. Third Party Information . I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my Service Period and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than the Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by a manager or officer of the Company in writing.

 

2. Assignment of Inventions

 

2.1. Proprietary Rights . The term “ Proprietary Rights ” means all trade secret, patent, copyright, trademark, mask work, moral rights, know-how and any and all other intellectual property rights throughout the world.

 

2.2. Excluded Inventions and Excluded Future Inventions . As set forth on Exhibit A attached hereto, inventions, patented or unpatented, that (i) I made prior to the Effective Date, or (ii) that have been owned prior to the Effective Date in whole or part by me through EdiZONE, LLC or licensed by EdiZONE, LLC to third parties (clauses (i) and (ii) are collectively, the “ Excluded Inventions “). To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of all Excluded Inventions (and related patents, trademarks and copyrights) relevant to the subject matter of my Services that I have, alone or jointly with others, conceived, developed, or reduced to practice or caused to be conceived, developed or reduced to practice prior to the Effective Date, that constitute my property or the property of third parties and that the Company agrees will be excluded from the scope of this Agreement. That certain Amended and Restated Confidential Assignment and License Back Agreement executed November 2, 2017 and effective December 27, 2016 governs the rights of the Company and EdiZONE with respect to the Excluded Inventions.

 

2.3. Assignment of Inventions . Subject to Section 2.4 , I hereby assign and agree to assign in the future (when any such Inventions or Proprietary Rights are first reduced to practice or first fixed in a tangible medium, as applicable) to the Company all my right, title, and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my Service Period with the Company. Inventions (and all Proprietary Rights with respect thereto) assigned to the Company, or to a third party as directed by the Company pursuant to this Section 2 , are hereinafter referred to as “ Company Inventions .” I hereby forever waive and agree not to assert any and all Proprietary Rights I may have in or with respect to any Company Invention. Notwithstanding the date of this Agreement, my assignment of rights to the Company as provided in this Agreement is intended to pertain to Inventions and Proprietary Rights created from my earliest performance of services for, or on behalf of, the Company and continue for so long as I continue providing services for, or on behalf of, the Company.

 

2.4. Nonassignable Inventions . I recognize that, in the event of a specifically applicable state law, regulation, rule, or public policy (“ Specific Inventions Law ”), this Agreement may not be deemed to require assignment of any invention that qualifies fully for protection under a Specific Inventions Law by virtue of the fact that any such invention was, for example, developed entirely on my own time without using the Company’s equipment, supplies, facilities, or trade secrets and neither related to the Company’s actual or anticipated business, research or development, nor resulted or was derived from work performed by me directly or indirectly for the Company. In the absence of a Specific Inventions Law, the preceding sentence will not apply.

 

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2.5. Obligation to Keep the Company Informed . During my Service Period and for one year after termination of my Service Period with the Company, I will promptly disclose to the Company fully and in writing all Inventions (and all Proprietary Rights with respect thereto) authored, conceived, or reduced to practice by me, either alone or jointly with others. In addition, I will promptly disclose to the Company all patent applications filed by me or on my behalf or in which I am named as an inventor or co-inventor within one year after termination of Service Period. The Company will keep in confidence and will not use for any purpose or disclose to third parties without my consent any confidential information disclosed in writing to the Company pursuant to this Section 2.5 of this Agreement relating to my Inventions. I will preserve the confidentiality of any Company Invention (and all Proprietary Rights with respect thereto) that results from my Services during the Service Period.

 

2.6. Works for Hire . I acknowledge that all original works of authorship that are made by me (solely or jointly with others) within the scope of my Services during the Service Period and which are protectable by copyright are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101).

 

2.7. Enforcement of Proprietary Rights . I will assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights relating to the Company Inventions in any and all countries. To that end I will execute, verify, and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries will continue beyond the termination of my Service Period, but the Company will compensate me at a reasonable rate after my termination for the time actually spent by me at the Company’s request on such assistance.

 

2.8. Further Assurances . If the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts to further the purposes of this Section 2 with the same legal force and effect as if executed by me. I hereby waive, assign and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.

 

2.9. Presumption of Ownership . Due to the difficulty of establishing when an Invention (and all Proprietary Rights with respect thereto) is first conceived or developed, whether it results from access to the Company’s actual or anticipated business or research or development, or whether it is a direct or indirect result or derivation of any work I perform for the Company, I hereby acknowledge and agree that ownership of all Inventions (and all Proprietary Rights with respect thereto) conceived, developed, suggested or reduced to practice by me, alone or jointly with others during my Service Period shall be presumed to belong to the Company and I shall have the burden of proof to prove otherwise.

 

3. Records . Unless otherwise directed or requested by the Company, I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during my Service Period with the Company, which records will be available to and remain the sole property of the Company at all times.

 

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4. No Conflicts or Solicitation . I acknowledge that during my Service Period I will have access to and knowledge of Proprietary Information. To protect the Company’s Proprietary Information, I agree that during the period of my Service Period with the Company I will not, without the Company’s express written consent, engage in any other business activity that is competitive with the Company, or would otherwise conflict with my obligations to the Company. I have entered into a Non-Competition and Non-Solicitation Agreement of even date herewith.

 

5. No Conflicting Obligation . I represent that my performance of all the terms of this Agreement and my performance of the Services do not and will not breach any non-compete agreement or any agreement to keep in confidence information acquired by me in confidence or in trust prior to my Service Period with the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict with this Agreement.

 

6. Return of Company Documents . Upon termination of the Service Period or upon request by the Company during the course of my Service Period, I will deliver to the Company any and all property, equipment, drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I agree that I will not copy, delete or alter any information contained on my Company computer, cell phone or other electronic storage and communication device before I return it to the Company. I further agree that any property situated on the Company’s premises or otherwise owned by the Company, including cloud based and onsite based storage services or devices for and access of electronic data or media, filing cabinets or other work areas, is subject to inspection by the Company personnel at any time with or without notice. I further agree that I will not store any of the Company’s information in locations or on electronic devices which are not accessible by the Company, that I will use only Company provided or approved electronic devices, such as but not limited to cell phones, tablets, digital photographs and the like, and that the Company has the right to inspect any of such personal devices which contain such information and to require the deletion or other permanent destruction of the same. Prior to leaving, I will cooperate with the Company in completing and signing the Company’s termination statement.

 

7. Legal and Equitable Remedies . Because my services are personal and unique and because I may have access to and become acquainted with the Company’s Proprietary Information, the Company has the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement or an infringement of its intellectual property rights or other rights.

 

8. Notices . All notices, payments, demands or communications required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to be delivered, given and received for all purposes (a) as of the date and time of actual receipt, in the case of notices delivered personally; (b) one calendar day after deposit with a nationally recognized overnight delivery service; (c) if sent by email, or other electronic communication processes, upon confirmed receipt by recipient; or (d) five calendar days after deposit in registered or certified United States mail return receipt requested, as applicable. If not emailed, such notices, payments, demands or communications shall be delivered personally to the recipient or to an officer of the recipient to whom the same is directed, or sent by registered or certified United States mail return receipt requested, or by nationally recognized overnight delivery service, addressed at the addresses specified on the signature page hereto or to such other address as may be specified from time to time by notice to parties hereto.

 

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9. Notification of New Employer . If the Service Period ceases for any reason (such as from termination of my employment by myself or the Company), I hereby consent to the notification of my new employer of my rights and obligations under this Agreement.

 

10. G eneral Provisions

 

10.1. Survival and Assignment by the Company . I understand that my obligation under this Agreement will continue in accordance with its express terms regardless of any changes in title, position, duties, salary, compensation or benefits, or other terms and conditions of my Services. I further understand that my obligations under this Agreement will continue following the termination of my Services regardless of the manner of such termination and will be binding upon my heirs, executors, and administrators. The Company will have the right to assign this Agreement to its affiliates and successors. I expressly consent to be bound by the provisions of this Agreement for the benefit of the Company or any parent, subsidiary, or affiliate to whom I may be transferred without the necessity that this Agreement be re-executed at the time of such transfer.

 

10.2. Severability . In case any provision (or portions thereof) contained in this Agreement will, for any reason, be held invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect the other provisions of this Agreement, and this Agreement will be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

 

10.3. Governing Law . This Agreement and actions taken hereunder will be governed and construed in accordance with the laws of the State of Utah, applied without regard to conflict of law principles. I hereby expressly consent to the personal jurisdiction of the state and federal courts located in Salt Lake City, Utah for any lawsuit filed there against me by the Company arising from or relating to this Agreement.

 

10.4. Successors and Assigns . This Agreement will be binding upon my heirs, executors, administrators, and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.

 

10.5. Service Period . I acknowledge and agree that my relationship with the Company is governed by the Amended and Restated Employment Agreement of even date hereof.

 

10.6. Waiver . No waiver by the Company of any breach of this Agreement will be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement will be construed as a waiver of any other right. The Company will not be required to give notice to enforce strict adherence to all terms of this Agreement.

 

10.7. Entire Agreement . The obligations pursuant to Sections 1 and 2 of this Agreement will apply to any time during which I was previously employed, or am in the future employed, by the Company as a consultant if no other agreement governs nondisclosure and assignment of inventions during such period. This Agreement and the offer letter of even date herewith is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and thereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement.

 

10.8. Advice of Counsel . I ACKNOWLEDGE THAT, IN EXECUING THIS AGREEMENT, I HAVE HAD THE OPPORTUNITY TO SEEK THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND I HAVE READ AND UNDERSTOOD ALL OF THE TERMS AND PROVISIONS OF THIS AGRREEMENT. THIS AGREEMENT MAY NOT BE CONSTRUED AGAINST ANY PARTY BY ANY REASON OF THE DRAFTING FOR PREPARATION HEREOF.

 

10.9. Counterparts . This Agreement may be executed in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile or other electronic means (e.g., electronic mail or PDF) shall be effective as delivery of a manually executed counterpart to this Agreement.

 

[signature page follows]

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date set forth below.

 

Sign:

    Date:

Print: Terry Pearce

 

Acknowledged and agreed:

 

 

Purple Innovation, inc.

By:                                          
Name: Samuel D. Bernards
Its: Chief Executive Officer

 

[ Signature page to Proprietary Information and Invention Assignment Agreement]

 

[Signature Page to PIIA]

 

14

Exhibit 10.8

 

PURPLE INNOVATION, INC.

 

2017 EQUITY INCENTIVE PLAN

 

1. Purpose . The purpose of the Purple Innovation, Inc. 2017 Equity Incentive Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby directors, officers, managers, employees, consultants and advisors of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may (but need not) be measured by reference to the value of Common Shares, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders.

 

2. Definitions . The following definitions shall be applicable throughout this Plan:

 

(a) “ Affiliate ” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest as determined by the Committee in its discretion. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.

 

(b) “ Award ” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Stock Bonus Award or Performance Compensation Award granted under this Plan.

 

(c) “ Award Agreement ” means an agreement made and delivered in accordance with Section 15(a) of this Plan evidencing the grant of an Award hereunder.

 

(d) “ Board ” means the Board of Directors of the Company.

 

(e) Business Day means any day other than a Saturday, a Sunday or a day on which banking institutions in New York City are authorized or obligated by federal law or executive order to be closed.

 

(f)   “ Cause ” means, in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) the Company or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting agreement or similar document or policy between the Participant and the Company or an Affiliate in effect at the time of such termination or (ii) in the absence of any such employment or consulting agreement, document or policy (or the absence of any definition of “Cause” contained therein), (A) a continuing material breach or material default (including, without limitation, any material dereliction of duty) by Participant of any agreement between the Participant and the Company, except for any such breach or default which is caused by the physical disability of the Participant (as determined by a neutral physician), or a continuing failure by the Participant to follow the direction of a duly authorized representative of the Company; (B) gross negligence, willful misfeasance or breach of fiduciary duty to the Company or Affiliate of the Company by the Participant; (C) the commission by the Participant of an act of fraud, embezzlement or any felony or other crime of dishonesty in connection with the Participant’s duties to the Company or Affiliate of the Company; or (D) conviction of the Participant of a felony or any other crime that would materially and adversely affect: (i) the business reputation of the Company or Affiliate of the Company or (ii) the performance of the Participant’s duties to the Company or an Affiliate of the Company. Any determination of whether Cause exists shall be made by the Committee in its sole discretion.

 

 

 

 

(g) “ Change in Control ” shall, in the case of a particular Award, unless the applicable Award Agreement states otherwise or contains a different definition of “Change in Control,” be deemed to occur upon:

 

(i) A tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of the Company, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to the commencement of such offer), or (B) any employee benefit plan of the Company or its Subsidiaries, and their Affiliates;

 

(ii)   The Company shall be merged or consolidated with another corporation, unless as a result of such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to such transaction); provided, that a merger or consolidation of the Company with another company which is controlled by persons owning more than 50% of the outstanding voting securities of the Company shall constitute a Change in Control unless the Committee, in its discretion, determine otherwise, or (B) any employee benefit plan of the Company or its Subsidiaries, and their Affiliates;

 

(iii) The Company shall sell substantially all of its assets to another entity that is not wholly owned by the Company, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to such transaction), or (B) any employee benefit plan of the Company or its Subsidiaries, and their Affiliates;

 

(iv) A Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Company (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving or resulting corporation or entity shall be owned in the aggregate by (A) the shareholders of the Company (as of the time immediately prior to the first acquisition of such securities by such Person), or (B) any employee benefit plan of the Company or its Subsidiaries, and their Affiliates; or

 

(v) The individuals who, as of the date hereof, constitute the members of the Board (the “Current Board Members”) cease, by reason of a financing, merger, combination, acquisition, takeover or other non-ordinary course transaction affecting the Company, to constitute at least a majority of the members of the Board unless such change is approved by the Current Board Members.

 

For purposes of this Section 2(g), ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a Person shall not include (A) the Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportion as their ownership of stock of the Company.

 

(h) “ Code ” means the Internal Revenue Code of 1986, as amended, and any successor thereto. References in this Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance issued by any governmental authority under such section, and any amendments or successor provisions to such section, regulations or guidance.

 

(i) “ Committee ” means a committee of at least two people as the Board may appoint to administer this Plan or, if no such committee has been appointed by the Board, the Board. Unless altered by an action of the Board, the Committee shall be the Compensation Committee of the Board.

 

(j) “ Common Shares ” means the Class A common stock, par value $0.0001 per share, of the Company (and any stock or other securities into which such common shares may be converted or into which they may be exchanged).

 

(k) “ Company ” means Purple Innovation, Inc., a Delaware corporation, together with its successors and assigns.

 

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(l) “ Current Board Members ” has the meaning given such term in the definition of “Change in Control.”

 

(m) “ Date of Grant ” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization.

 

(n) “ Disability ” means a “permanent and total” disability incurred by a Participant while in the employ or service of the Company or an Affiliate. For this purpose, a permanent and total disability shall mean that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months. The determination of whether a Participant has incurred a permanent and total disability shall be made by a physician designated by the Committee, whose determination shall be final and binding.

 

(o) “ Effective Date ” means the date as of which this Plan is adopted by the Board, subject to Section 3 of this Plan.

 

(p) “ Eligible Director ” means a person who is (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act, and (ii) an “outside director” within the meaning of Section 162(m) of the Code.

 

(q) “ Eligible Person ” means any (i) individual employed by the Company or an Affiliate; provided , however , that no such employee covered by a collective bargaining agreement shall be an Eligible Person unless and to the extent that such eligibility is set forth in such collective bargaining agreement or in an agreement or instrument relating thereto; (ii) director of the Company or an Affiliate; or (iii) consultant or advisor to the Company or an Affiliate, provided that if the Securities Act applies such persons must be eligible to be offered securities registrable on Form S-8 under the Securities Act.

 

(r)   “ Exchange Act ” has the meaning given such term in the definition of “Change in Control,” and any reference in this Plan to any section of (or rule promulgated under) the Exchange Act shall be deemed to include any rules, regulations or other interpretative guidance issued by any governmental authority under such section or rule, and any amendments or successor provisions to such section, rules, regulations or guidance.

 

(s) “ Exercise Price ” has the meaning given such term in Section 7(b) of this Plan.

 

(t)   “ Fair Market Value ”, unless otherwise provided by the Committee in accordance with all applicable laws, rules regulations and standards, means, on a given date, (i) if the Common Shares are listed on a national securities exchange, the closing sales price on the principal exchange of the Common Shares on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported, or (ii) if the Common Shares are not listed on a national securities exchange, the mean between the bid and offered prices as quoted by any nationally recognized interdealer quotation system for such date, provided that if the Common Shares are not quoted on an interdealer quotation system or it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code Section 409A, if applicable.

 

(u) “ Immediate Family Members ” shall have the meaning set forth in Section 15(b) of this Plan.

 

(v) “ Incentive Stock Option ” means an Option that is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in this Plan.

 

(w) “ Indemnifiable Person ” shall have the meaning set forth in Section 4(e) of this Plan.

 

(x) “ Negative Discretion ” shall mean the discretion authorized by this Plan to be applied by the Committee to eliminate or reduce the size of a Performance Compensation Award consistent with Section 162(m) of the Code.

 

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(y) “ Nonqualified Stock Option ” means an Option that is not designated by the Committee as an Incentive Stock Option.

 

(z)   “ Option ” means an Award granted under Section 7 of this Plan.

 

(aa) “ Option Period ” has the meaning given such term in Section 7(c) of this Plan.

 

(bb) “ Participant ” means an Eligible Person who has been selected by the Committee to participate in this Plan and to receive an Award pursuant to Section 6 of this Plan.

 

(cc) “ Performance Compensation Award ” shall mean any Award designated by the Committee as a Performance Compensation Award pursuant to Section 11 of this Plan.

 

(dd) “ Performance Criteria ” shall mean the criterion or criteria that the Committee shall select for purposes of establishing the Performance Goal(s) for a Performance Period with respect to any Performance Compensation Award under this Plan.

 

(ee) “ Performance Formula ” shall mean, for a Performance Period, the one or more objective formulae applied against the relevant Performance Goal to determine, with regard to the Performance Compensation Award of a particular Participant, whether all, some portion but less than all, or none of the Performance Compensation Award has been earned for the Performance Period.

 

(ff) “ Performance Goals ” shall mean, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon the Performance Criteria.

 

(gg) “ Performance Period ” shall mean the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Compensation Award.

 

(hh) “ Permitted Transferee ” shall have the meaning set forth in Section 15(b) of this Plan.

 

(ii)   “ Person ” has the meaning given such term in the definition of “Change in Control.”

 

(jj)   “ Plan ” means this Purple Innovation, Inc. 2017 Equity Incentive Plan, as amended from time to time.

 

(kk) “ Retirement ” means the fulfillment of each of the following conditions: (i) the Participant is in good standing with the Company and/or an Affiliate of the Company as determined by the Committee; (ii) the voluntary termination by a Participant of such Participant’s employment or service to the Company and/or an Affiliate and (iii) that at the time of such voluntary termination, the sum of: (A) the Participant’s age (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) and (B) the Participant’s years of employment or service with the Company (calculated to the nearest month, with any resulting fraction of a year being calculated as the number of months in the year divided by 12) equals at least 62 (provided that, in any case, the foregoing shall only be applicable if, at the time of such Retirement, the Participant shall be at least 55 years of age and shall have been employed by or served with the Company for no less than five years).

 

(ll)   “ Restricted Period ” means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.

 

(mm) “ Restricted Stock Unit ” means an unfunded and unsecured promise to deliver Common Shares, cash, other securities or other property, subject to certain restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of this Plan.

 

(nn) “ Restricted Stock ” means Common Shares, subject to certain specified restrictions (including, without limitation, a requirement that the Participant remain continuously employed or provide continuous services for a specified period of time), granted under Section 9 of this Plan.

 

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(oo) “ SAR Period ” has the meaning given such term in Section 8(c) of this Plan.

 

(pp) “ Securities Act ” means the Securities Act of 1933, as amended, and any successor thereto. Reference in this Plan to any section of the Securities Act shall be deemed to include any rules, regulations or other official interpretative guidance issued by any governmental authority under such section, and any amendments or successor provisions to such section, rules, regulations or guidance.

 

(qq) “ Stock Appreciation Right ” or SAR means an Award granted under Section 8 of this Plan which meets all of the requirements of Section 1.409A-1(b)(5)(i)(B) of the Treasury Regulations.

 

(rr) “ Stock Bonus Award ” means an Award granted under Section 10 of this Plan.

 

(ss) “ Strike Price ” means, except as otherwise provided by the Committee in the case of Substitute Awards, (i) in the case of a SAR granted in tandem with an Option, the Exercise Price of the related Option, or (ii) in the case of a SAR granted independent of an Option, the Fair Market Value of Common Shares on the Date of Grant.

 

(tt) “ Subsidiary ” means, with respect to any specified Person:

 

(i)    any corporation, association or other business entity of which more than 50% of the total voting power of shares of voting securities (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and

 

(ii)   any partnership or limited liability company (or any comparable foreign entity) (a) the sole general partner or managing member (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (b) the only general partners or managing members (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).

 

(uu) “ Substitute Award ” has the meaning given such term in Section 5(e).

 

(vv) “ Treasury Regulations ” means any regulations, whether proposed, temporary or final, promulgated by the U.S. Department of Treasury under the Code, and any successor provisions.

 

3. Effective Date; Duration . The Plan shall be effective upon its approval by the stockholders of the Company, which date shall be within twelve (12) months before or after the date of the closing of the Agreement and Plan of Merger by and among Global Partner Acquisition Corp., PRPL Acquistion, LLC, Purple Innovation, LLC, Innohold, LLC and Global Partner Sponsor I LLC (as parent representative). The expiration date of this Plan, on and after which date no Awards may be granted hereunder, shall be the tenth anniversary of the date on which the Plan was approved by the stockholders of the Company; provided , however , that such expiration shall not affect Awards then outstanding, and the terms and conditions of this Plan shall continue to apply to such Awards.

 

4. Administration .

 

(a) The Committee shall administer this Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under this Plan) or necessary to obtain the exception for performance-based compensation under Section 162(m) of the Code, as applicable, it is intended that each member of the Committee shall, at the time he takes any action with respect to an Award under this Plan, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under this Plan. The acts of a majority of the members present at any meeting at which a quorum is present or acts approved in writing by a majority of the Committee shall be deemed the acts of the Committee. Whether a quorum is present shall be determined based on the Committee’s charter as approved by the Board.

 

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(b) Subject to the provisions of this Plan and applicable law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by this Plan and its charter, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Common Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award; (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Common Shares, other securities, other Awards or other property, or canceled, forfeited, or suspended, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Shares, other securities, other Awards or other property and other amounts payable with respect to an Award shall be made; (vii) interpret, administer, reconcile any inconsistency in, settle any controversy regarding, correct any defect in and/or complete any omission in this Plan and any instrument or agreement relating to, or Award granted under, this Plan; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of this Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) to reprice existing Awards or to grant Awards in connection with or in consideration of the cancellation of an outstanding Award with a higher price; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Plan.

 

(c) The Committee may, by resolution, expressly delegate to a special committee, consisting of one or more directors who may but need not be officers of the Company, the authority, within specified parameters as to the number and types of Awards, to (i) designate officers and/or employees of the Company or any of its Affiliates to be recipients of Awards under this Plan, and (ii) to determine the number of such Awards to be received by any such Participants; provided, however, that such delegation of duties and responsibilities may not be made with respect to grants of Awards to persons (i) subject to Section 16 of the Exchange Act or (ii) who are, or who are reasonably expected to be, “covered employees” for purposes of Section 162(m) of the Code. The acts of such delegates shall be treated as acts of the Committee, and such delegates shall report regularly to the Board and the Committee regarding the delegated duties and responsibilities and any Awards granted.

 

(d) Unless otherwise expressly provided in this Plan, all designations, determinations, interpretations, and other decisions under or with respect to this Plan or any Award or any documents evidencing Awards granted pursuant to this Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.

 

(e) No member of the Board, the Committee, delegate of the Committee or any employee, advisor or agent of the Company or the Board or the Committee (each such person, an “ Indemnifiable Person ”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to this Plan or any Award hereunder. Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from (and the Company shall pay or reimburse on demand for) any loss, cost, liability, or expense (including court costs and attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken under this Plan or any Award Agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, provided , that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Certificate of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which any such Indemnifiable Person may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.

 

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(f)   Notwithstanding anything to the contrary contained in this Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer this Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under this Plan.

 

5. Grant of Awards; Shares Subject to this Plan; Limitations .

 

(a) The Committee may, from time to time, grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Bonus Awards and/or Performance Compensation Awards to one or more Eligible Persons. Subject to Section 12 of this Plan, the Committee is authorized to deliver under this Plan an aggregate of 4,100,000 Common Shares. Notwithstanding the foregoing, directors of the Company or an Affiliate who are not employees of the Company or an Affiliate may not be granted Awards denominated in Common Shares that exceed in the aggregate 820,000 Common Shares; provided, that the foregoing limitation shall not apply to any Award made pursuant to an election by a director to receive an Award in lieu of all or a portion of the annual and/or committee retainers and annual meeting fee payable to such director.

 

(b) Common Shares underlying Awards under this Plan that are forfeited, cancelled, expire unexercised, or are settled in cash shall be available again for Awards under this Plan at the same ratio at which they were previously granted. Notwithstanding the foregoing, the following Common Shares shall not be available again for Awards under the Plan: (i) shares tendered or held back upon the exercise of an Option or settlement of an Award to cover the Exercise Price of an Award; (ii) shares that are used or withheld to satisfy tax withholding obligations of the Participant; and (iii) shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the SAR upon exercise thereof.

 

(c) Awards that do not entitle the holder thereof to receive or purchase Common Shares shall not be counted against the aggregate number of Common Shares available for Awards under the Plan.

 

(d) Common Shares delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or any combination of the foregoing.

 

(e) Subject to compliance with Section 1.409A-3(f) of the Treasury Regulations, Awards may, in the sole discretion of the Committee, be granted under this Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“ Substitute Awards ”). The number of Common Shares underlying any Substitute Awards shall be counted against the aggregate number of Common Shares available for Awards under this Plan; provided, however that Common Shares issued under Substitute Awards granted in substitution for awards previously granted by an entity that is acquired by or merged with the Company or an Affiliate shall not be counted against the aggregate number of Common Shares available for Awards under the Plan.

 

(f)   Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Section 12), the Committee shall not grant to any one Eligible Person in any one calendar year Awards (i) for more than 10% of the Available Shares in the aggregate or (ii) payable in cash in an amount exceeding $5,000,000 in the aggregate.

 

6. Eligibility . Participation shall be limited to Eligible Persons who have entered into an Award Agreement or who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in this Plan.

 

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7. Options .

 

(a) Generally . Each Option granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Option so granted shall be subject to the conditions set forth in this Section 7, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. All Options granted under this Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Notwithstanding any designation of an Option, to the extent that the aggregate Fair Market Value of Common Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company or any Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonqualified Stock Options. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless this Plan has been approved by the stockholders of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code, provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under this Plan.

 

(b) Exercise Price . The exercise price (“ Exercise Price ”) per Common Share for each Option shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant; provided, however , that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Affiliate, the Exercise Price per share shall not be less than 110% of the Fair Market Value per share on the Date of Grant; and, provided further, that notwithstanding any provision herein to the contrary, the Exercise Price shall not be less than the par value per Common Share.

 

(c) Vesting and Expiration . Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee and as set forth in the applicable Award Agreement, and shall expire after such period, not to exceed ten (10) years from the Date of Grant, as may be determined by the Committee (the “ Option Period ”); provided , however , that the Option Period shall not exceed five (5) years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Affiliate; and, provided , further , that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of such Option other than with respect to exercisability. Unless otherwise provided by the Committee in an Award Agreement:

 

(i) an Option shall vest and become exercisable with respect to one-third of the Common Shares subject to such Option on each of the first three anniversaries of the Date of Grant; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously granted by an entity that is acquired by or merged with the Company or an Affiliate;

 

(ii)   the unvested portion of an Option shall expire upon termination of employment or service of the Participant granted the Option, and the vested portion of such Option shall remain exercisable for:

 

(A) one year following termination of employment or service by reason of such Participant’s death or Disability (with the determination of Disability to be made by the Committee on a case by case basis), but not later than the expiration of the Option Period;

 

(B) for directors, officers and employees of the Company only, for ninety (90) days following termination of employment or service by reason of such Participant’s Retirement;

 

(C) 90 calendar days following termination of employment or service for any reason other than such Participant’s death, Disability or Retirement, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the Option Period; and

 

(iii) both the unvested and the vested portion of an Option shall immediately expire upon the termination of the Participant’s employment or service by the Company for Cause.

 

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Notwithstanding the foregoing provisions of Section 7(c) and consistent with the requirements of applicable law, the Committee, in its sole discretion, may extend the post-termination of employment period during which a Participant may exercise vested Options.

 

(d) Method of Exercise and Form of Payment . No Common Shares shall be delivered pursuant to the exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any applicable federal, state, local and/or foreign income and employment taxes withheld. Options that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award Agreement accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check (subject to collection), cash equivalent and/or vested Common Shares valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of Common Shares in lieu of actual delivery of such shares to the Company); provided , however, that such Common Shares are not subject to any pledge or other security interest and; (ii) by such other method as the Committee may permit in accordance with applicable law, in its sole discretion, including without limitation: (A) in other property having a fair market value (as determined by the Committee in its discretion) on the date of exercise equal to the Exercise Price or (B) if there is a public market for the Common Shares at such time, by means of a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the Common Shares otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price or (C) by a “net exercise” method whereby the Company withholds from the delivery of the Common Shares for which the Option was exercised that number of Common Shares having a Fair Market Value equal to the aggregate Exercise Price for the Common Shares for which the Option was exercised. Any fractional Common Shares shall be settled in cash.

 

(e) Notification upon Disqualifying Disposition of an Incentive Stock Option . Each Participant awarded an Incentive Stock Option under this Plan shall notify the Company in writing immediately after the date he makes a disqualifying disposition of any Common Shares acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Shares before the later of (A) two years after the Date of Grant of the Incentive Stock Option or (B) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession of any Common Shares acquired pursuant to the exercise of an Incentive Stock Option as agent for the applicable Participant until the end of the period described in the preceding sentence.

 

(f)   Compliance with Laws, etc . Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner that the Committee determines would violate the Sarbanes-Oxley Act of 2002, if applicable, or any other applicable law or the applicable rules and regulations of the Securities and Exchange Commission or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.

 

8. Stock Appreciation Rights .

 

(a) Generally . Each SAR granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each SAR so granted shall be subject to the conditions set forth in this Section 8, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. Any Option granted under this Plan may include tandem SARs (i.e., SARs granted in conjunction with an Award of Options under this Plan). The Committee also may award SARs to Eligible Persons independent of any Option.

 

(b) Exercise Price. The Exercise Price per Common Share for each Option granted in connection with a SAR shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant; provided, however, that the Committee may designate a purchase price below Fair Market Value on the date of grant if the SAR is granted in substitution for an appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate.

 

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(c) Vesting and Expiration . A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “ SAR Period ”); provided, however , that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any SAR, which acceleration shall not affect the terms and conditions of such SAR other than with respect to exercisability. Unless otherwise provided by the Committee in an Award Agreement:

 

(i) a SAR shall vest and become exercisable with respect to one-third of the Common Shares subject to such SAR on each of the first three anniversaries of the Date of Grant;

 

(ii) the unvested portion of a SAR shall expire upon termination of employment or service of the Participant granted the SAR, and the vested portion of such SAR shall remain exercisable for:

 

(A) one year following termination of employment or service by reason of such Participant’s death or Disability (with the determination of Disability to be made by the Committee on a case by case basis), but not later than the expiration of the SAR Period;

 

(B) for directors, officers and employees of the Company only, for the remainder of the SAR Period following termination of employment or service by reason of such Participant’s Retirement;

 

(C) 90 calendar days following termination of employment or service for any reason other than such Participant’s death, Disability or Retirement, and other than such Participant’s termination of employment or service for Cause, but not later than the expiration of the SAR Period; and

 

(iii) both the unvested and the vested portion of a SAR shall expire immediately upon the termination of the Participant’s employment or service by the Company for Cause.

 

(d) Method of Exercise . SARs that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded. Notwithstanding the foregoing, if on the last day of the Option Period (or in the case of a SAR independent of an Option, the SAR Period), the Fair Market Value exceeds the Strike Price, the Participant has not exercised the SAR or the corresponding Option (if applicable), and neither the SAR nor the corresponding Option (if applicable) has expired, such SAR shall be deemed to have been exercised by the Participant on such last day and the Company shall make the appropriate payment therefor.

 

(e) Payment . Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of Common Shares subject to the SAR that are being exercised multiplied by the excess, if any, of the Fair Market Value of one Common Share on the exercise date over the Strike Price, less an amount equal to any applicable federal, state, local and non-U.S. income and employment taxes withheld. The Company shall pay such amount in cash, in Common Shares valued at Fair Market Value, or any combination thereof, as determined by the Committee. Any fractional Common Share shall be settled in cash.

 

9. Restricted Stock and Restricted Stock Units .

 

(a) Generally . Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each such grant shall be subject to the conditions set forth in this Section 9, and to such other conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement. Restricted Stock and Restricted Stock Units shall be subject to such restrictions on transferability and other restrictions as the Committee may impose (including, for example, limitations on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at such times, under such circumstances, in such installments, upon the satisfaction of Performance Goals or otherwise, as the Committee determines at the time of the grant of an Award or thereafter. Except as otherwise provided in an Award Agreement, a Participant shall have none of the rights of a stockholder with respect to Restricted Stock Units until such time as Common Shares are paid in settlement of such Awards.

 

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(b) Restricted Accounts; Escrow or Similar Arrangement . Unless otherwise determined by the Committee, upon the grant of Restricted Stock, a book entry in a restricted account shall be established in the Participant’s name at the Company’s transfer agent and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than held in such restricted account pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate share power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank share power within the amount of time specified by the Committee, the Award shall be null and void ab initio . Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including without limitation the right to vote such Restricted Stock and the right to receive dividends, if applicable. To the extent shares of Restricted Stock are forfeited, any share certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.

 

(c) Vesting; Acceleration of Lapse of Restrictions . Unless otherwise provided by the Committee in an Award Agreement: (i) the Restricted Period shall lapse with respect to one-third of the Restricted Stock and Restricted Stock Units on each of the first three anniversaries of the Date of Grant; and (ii) the unvested portion of Restricted Stock and Restricted Stock Units shall terminate and be forfeited upon the termination of employment or service of the Participant granted the applicable Award.

 

(d) Delivery of Restricted Stock and Settlement of Restricted Stock Units . (i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his beneficiary, without charge, the share certificate evidencing the shares of Restricted Stock that have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share). Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such shares of Restricted Stock and, if such shares of Restricted Stock are forfeited, the Participant shall have no right to such dividends (except as otherwise set forth by the Committee in the applicable Award Agreement).

 

(ii)   Unless otherwise provided by the Committee in an Award Agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units and no later than the 75 th day of the calendar year following the calendar year in which such expiration occurs, the Company shall deliver to the Participant, or his beneficiary, without charge, one Common Share for each such outstanding Restricted Stock Unit; provided , however , that the Committee may, in its sole discretion and subject to the requirements of Section 409A of the Code, elect to (i) pay cash or part cash and part Common Share in lieu of delivering only Common Shares in respect of such Restricted Stock Units or (ii) defer the delivery of Common Shares (or cash or part Common Shares and part cash, as the case may be) beyond the 75 th day of the calendar year following the calendar year in which the expiration of the Restricted Period occurs if such delivery would result in a violation of applicable law until such time as is no longer the case. If a cash payment is made in lieu of delivering Common Shares, the amount of such payment shall be equal to the Fair Market Value of the Common Shares as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units, less an amount equal to any applicable federal, state, local and non-U.S. income and employment taxes withheld. Notwithstanding anything contained herein to the contrary, the Committee in an Award Agreement may, in a manner consistent with the applicable requirements of Section 409A of the Code, enable a Participant to elect to defer the date on which settlement of the Restricted Stock Units shall occur.

 

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10. Stock Bonus Awards . The Committee may issue unrestricted Common Shares, or other Awards denominated in Common Shares, under this Plan to Eligible Persons, either alone or in tandem with other awards, in such amounts as the Committee shall from time to time in its sole discretion determine. Each Stock Bonus Award granted under this Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Stock Bonus Award so granted shall be subject to such conditions not inconsistent with this Plan as may be reflected in the applicable Award Agreement.

 

11. Performance Compensation Awards .

 

(a) Generally . The provisions of the Plan are intended to enable Options and Stock Appreciation Rights granted hereunder to certain Eligible Persons to qualify for an exemption under Section 162(m) of the Code. The Committee shall have the authority, at the time of grant of any Award described in Sections 7 through 10 of this Plan, to designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code. The Committee shall have the authority to make an award of a cash bonus to any Participant and designate such Award as a Performance Compensation Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

 

(b) Discretion of Committee with Respect to Performance Compensation Awards . With regard to a particular Performance Period, the Committee shall have sole discretion to select the length of such Performance Period, the type(s) of Performance Compensation Awards to be issued, the Performance Criteria that will be used to establish the Performance Goal(s), the kind(s) and/or level(s) of the Performance Goals(s) that is (are) to apply and the Performance Formula. Within the first 90 calendar days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code, if applicable), the Committee shall, with regard to the Performance Compensation Awards to be issued for such Performance Period, exercise its discretion with respect to each of the matters enumerated in the immediately preceding sentence and record the same in writing.

 

(c) Performance Criteria . The Performance Criteria that will be used to establish the Performance Goal(s) shall be based on the attainment of specific levels of performance of the Company and/or one or more Affiliates, divisions or operational units, or any combination of the foregoing, as determined by the Committee, which criteria may be based on one or more of the following business criteria: (i) revenue; (ii) sales; (iii) profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures); (v) net income (before or after taxes, operating income or other income measures); (vi) cash (cash flow, cash generation or other cash measures); (vii) stock price or performance; (viii) total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price); (ix) economic value added; (x) return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales); (xi) market share; (xii) improvements in capital structure; (xiii) expenses (expense management, expense ratio, expense efficiency ratios or other expense measures); (xiv) business expansion or consolidation (acquisitions and divestitures); (xv) internal rate of return or increase in net present value; (xvi) working capital targets relating to inventory and/or accounts receivable; (xvii) inventory management; (xviii) service or product delivery or quality; (xix) customer satisfaction; (xx) employee retention; (xxi) safety standards; (xxii) productivity measures; (xxiii) cost reduction measures; and/or (xxiv) strategic plan development and implementation. Any one or more of the Performance Criteria adopted by the Committee may be used on an absolute or relative basis to measure the performance of the Company and/or one or more Affiliates as a whole or any business unit(s) of the Company and/or one or more Affiliates or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Criteria may be compared to the performance of a selected group of comparison companies, or a published or special index that the Committee, in its sole discretion, deems appropriate, or as compared to various stock market indices. The Committee also has the authority to provide for accelerated vesting of any Award based on the achievement of Performance Goals pursuant to the Performance Criteria specified in this paragraph. To the extent required under Section 162(m) of the Code, the Committee shall, within the first 90 calendar days of a Performance Period (or, if longer or shorter, within the maximum period allowed under Section 162(m) of the Code), define in an objective fashion the manner of calculating the Performance Criteria it selects to use for such Performance Period and thereafter promptly communicate such Performance Criteria to the Participant.

 

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(d) Modification of Performance Goal(s) . In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Criteria without obtaining stockholder approval of such alterations, the Committee shall have sole discretion to make such alterations without obtaining stockholder approval. For purposes of clarity and without limiting the Committee’s authority set forth above, at the time it establishes Performance Criteria to be used with any Performance Compensation Award, the Committee may specify one or more events requiring an adjustment to the calculation of the Performance Goal, including but not limited to: (i) asset write-downs; (ii) litigation or claim judgments or settlements; (iii) the effect of changes in tax laws, accounting principles, or other laws or regulatory rules affecting reported results; (iv) any reorganization and restructuring programs; (v) acquisitions or divestitures; (vi) any other specific items that are unusual in nature or infrequently occurring, or objectively determinable category thereof; (viii) foreign exchange gains and losses; and (ix) a change in the Company’s fiscal year. The Committee may reserve discretion to make or not make one or more adjustments as specified in a Performance Compensation Award, but only to the extent that such discretion is Negative Discretion.

 

(e) Payment of Performance Compensation Awards .

 

(i) Condition to Receipt of Payment . Unless otherwise provided in the applicable Award Agreement, a Participant must be employed by, or in service to, the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period.

 

(ii)   Limitation . A Participant shall be eligible to receive payment in respect of a Performance Compensation Award only to the extent that: (A) the Performance Goals for such period are achieved; and (B) all or some of the portion of such Participant’s Performance Compensation Award has been earned for the Performance Period based on the application of the Performance Formula to such achieved Performance Goals.

 

(iii) Certification . Following the completion of a Performance Period, the Committee shall review and certify in writing whether, and to what extent, the Performance Goals for the Performance Period have been achieved and, if so, calculate and certify in writing that amount of the Performance Compensation Awards earned for the period based upon the Performance Formula. The Committee shall then determine the amount of each Participant’s Performance Compensation Award actually payable for the Performance Period and, in so doing, may apply Negative Discretion.

 

(iv) Use of Negative Discretion . In determining the actual amount of an individual Participant’s Performance Compensation Award for a Performance Period, the Committee may reduce or eliminate the amount of the Performance Compensation Award earned under the Performance Formula in the Performance Period through the use of Negative Discretion if, in its sole judgment, such reduction or elimination is appropriate. The Committee shall not have the discretion, except as is otherwise provided in this Plan, to (A) grant or provide payment in respect of Performance Compensation Awards for a Performance Period if the Performance Goals for such Performance Period have not been attained; or (B) increase a Performance Compensation Award above the applicable limitations set forth in Section 5 of this Plan.

 

(f)   Timing of Award Payments . Performance Compensation Awards granted for a Performance Period shall be paid to Participants as soon as administratively practicable following completion of the certifications required by this Section 11, but in no event later than two-and-one-half months following the end of the fiscal year during which the Performance Period is completed in order to comply with the short-term deferral rules under Section 1.409A-1(b)(4) of the Treasury Regulations. Notwithstanding the foregoing, payment of a Performance Compensation Award may be delayed, as permitted by Section 1.409A-2(b)(7)(i) of the Treasury Regulations, to the extent that the Company reasonably anticipates that if such payment were made as scheduled, the Company’s tax deduction with respect to such payment would not be permitted due to the application of Section 162(m) of the Code.

 

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12. Changes in Capital Structure and Similar Events . In the event of (a) any dividend or other distribution (whether in the form of cash, Common Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, split-up, split-off, combination, repurchase or exchange of Common Shares or other securities of the Company, issuance of warrants or other rights to acquire Common Shares or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the Common Shares, or (b) unusual or nonrecurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate in order to prevent dilution or enlargement of rights, then the Committee shall make any such adjustments that are equitable, including without limitation any or all of the following:

 

(i) adjusting any or all of (A) the number of Common Shares or other securities of the Company (or number and kind of other securities or other property) that may be delivered in respect of Awards or with respect to which Awards may be granted under this Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of this Plan) and (B) the terms of any outstanding Award, including, without limitation, (1) the number of Common Shares or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (2) the Exercise Price or Strike Price with respect to any Award or (3) any applicable performance measures (including, without limitation, Performance Criteria and Performance Goals);

 

(ii)   subject to the requirements of Section 409A of the Code, providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event; and

 

(iii) subject to the requirements of Section 409A of the Code, canceling any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, Common Shares, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per Common Share received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Common Shares subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a Common Share subject thereto may be canceled and terminated without any payment or consideration therefor); provided , however , that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 123 (revised 2004) or ASC Topic 718, or any successor thereto), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. Any adjustment in Incentive Stock Options under this Section 12 (other than any cancellation of Incentive Stock Options) shall be made only to the extent not constituting a “modification” within the meaning of Section 424(h)(3) of the Code, and any adjustments under this Section 12 shall be made in a manner that does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

13. Effect of Change in Control. Except to the extent otherwise provided in an Award Agreement, in the event of a Change in Control, notwithstanding any provision of this Plan to the contrary, with respect to all or any portion of a particular outstanding Award or Awards:

 

(a) all of the then outstanding Options and SARs shall immediately vest and become immediately exercisable as of a time prior to the Change in Control;

 

(b) the Restricted Period shall expire as of a time prior to the Change in Control (including without limitation a waiver of any applicable Performance Goals);

 

(c) Performance Periods in effect on the date the Change in Control occurs shall end on such date, and the Committee shall (i) determine the extent to which Performance Goals with respect to each such Performance Period have been met based upon such audited or unaudited financial information or other information then available as it deems relevant and (ii) cause the Participant to receive partial or full payment of Awards for each such Performance Period based upon the Committee’s determination of the degree of attainment of the Performance Goals, or assuming that the applicable “target” levels of performance have been attained or on such other basis determined by the Committee.

 

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To the extent practicable, any actions taken by the Committee under the immediately preceding clauses (a) through (c) shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control transactions with respect to the Common Shares subject to their Awards.

 

14. Amendments and Termination .

 

(a) Amendment and Termination of this Plan . The Board may amend, alter, suspend, discontinue, or terminate this Plan or any portion thereof at any time; provided , that (i) no amendment to the definition of Eligible Person in Section 2(q), Section 5(b), Section 11(c) or Section 14(b) (to the extent required by the proviso in such Section 14(b)) shall be made without stockholder approval and (ii) no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to this Plan (including, without limitation, as necessary to comply with any rules or requirements of any national securities exchange or inter-dealer quotation system on which the Common Shares may be listed or quoted or to prevent the Company from being denied a tax deduction under Section 162(m) of the Code); and, provided , further , that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the prior written consent of the affected Participant, holder or beneficiary.

 

(b) Amendment of Award Agreements . The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively; provided, however, that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant.

 

15. General .

 

(a) Award Agreements . Each Award under this Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)) and shall specify the terms and conditions of the Award and any rules applicable thereto, including without limitation, the effect on such Award of the death, Disability or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. The Company’s failure to specify any term of any Award in any particular Award Agreement shall not invalidate such term, provided such terms was duly adopted by the Board or the Committee.

 

(b) Nontransferability; Trading Restrictions .

 

(i) Each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

 

(ii)   Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, with or without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of this Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act (collectively, the “ Immediate Family Members ”); (B) a trust solely for the benefit of the Participant and his or her Immediate Family Members; or (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his or her Immediate Family Members; or (D) any other transferee as may be approved either (I) by the Board or the Committee in its sole discretion, or (II) as provided in the applicable Award Agreement (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as a “ Permitted Transferee ”); provided, that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of this Plan.

 

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(iii) The terms of any Award transferred in accordance with subparagraph (ii) above shall apply to the Permitted Transferee and any reference in this Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the Common Shares to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under this Plan or otherwise; and (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of this Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in this Plan and the applicable Award Agreement.

 

(iv) The Committee shall have the right, either on an Award-by-Award basis or as a matter of policy for all Awards or one or more classes of Awards, to condition the delivery of vested Common Shares received in connection with such Award on the Participant’s agreement to such restrictions as the Committee may determine.

 

(c) Tax Withholding .

 

(i) A Participant shall be required to pay to the Company or any Affiliate, or the Company or any Affiliate shall have the right and is hereby authorized to withhold, from any cash, Common Shares, other securities or other property deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Shares, other securities or other property) of any required withholding taxes in respect of an Award, its exercise, or any payment or transfer under an Award or under this Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such withholding and taxes. In addition, the Committee, in its discretion, may make arrangements mutually agreeable with a Participant who is not an employee of the Company or an Affiliate to facilitate the payment of applicable income and self-employment taxes.

 

(ii)   Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing withholding liability by (A) the delivery of Common Shares (which are not subject to any pledge or other security interest) owned by the Participant having a fair market value equal to such withholding liability or (B) having the Company withhold from the number of Common Shares otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a fair market value equal to such withholding liability (but no more than the maximum individual statutory rate for the applicable tax jurisdiction).

 

(d) No Claim to Awards; No Rights to Continued Employment; Waiver . No employee of the Company or an Affiliate, or other person, shall have any claim or right to be granted an Award under this Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither this Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any claim under this Plan, unless otherwise expressly provided in this Plan or any Award Agreement. By accepting an Award under this Plan, a Participant shall thereby be deemed to have waived any claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under this Plan or any Award Agreement, notwithstanding any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant.

 

(e) International Participants . With respect to Participants who reside or work outside of the United States of America and who are not (and who are not expected to be) “covered employees” within the meaning of Section 162(m) of the Code, the Committee may in its sole discretion amend the terms of this Plan or outstanding Awards (or establish a sub-plan) with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for such Participants, the Company or its Affiliates.

 

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(f)   Designation and Change of Beneficiary . Unless otherwise provided by the Committee in an Award Agreement, each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under this Plan upon his or her death. A Participant may, from time to time, revoke or change his or her beneficiary designation without the consent of any prior beneficiary by filing a new designation with the Committee. The last such designation filed with the Committee shall be controlling; provided , however , that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his or her spouse or, if the Participant is unmarried at the time of death, his or her estate. Upon the occurrence of a Participant’s divorce (as evidenced by a final order or decree of divorce), any spousal designation previously given by such Participant shall automatically terminate.

 

(g) Termination of Employment/Service . Unless determined otherwise by the Committee at any point following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice-versa) shall be considered a termination of employment or service with the Company or an Affiliate; and (ii) if a Participant’s employment with the Company and its Affiliates terminates, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity (or vice-versa), such change in status shall not be considered a termination of employment with the Company or an Affiliate for purposes of this Plan unless the Committee, in its discretion, determines otherwise.

 

(h) No Rights as a Stockholder . Except as otherwise specifically provided in this Plan or any Award Agreement, no person shall be entitled to the privileges of ownership in respect of Common Shares that are subject to Awards hereunder until such shares have been issued or delivered to that person.

 

(i) Government and Other Regulations .

 

(i) The obligation of the Company to settle Awards in Common Shares or other consideration shall be subject to all applicable laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any Common Shares pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the Common Shares to be offered or sold under this Plan. The Committee shall have the authority to provide that all certificates for Common Shares or other securities of the Company or any Affiliate delivered under this Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under this Plan, the applicable Award Agreement, the federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or inter-dealer quotation system upon which such shares or other securities are then listed or quoted and any other applicable federal, state, local or non-U.S. laws, and, without limiting the generality of Section 9 of this Plan, the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. Notwithstanding any provision in this Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under this Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.

 

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(ii)   The Committee may cancel an Award or any portion thereof if it determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of Common Shares from the public markets, the Company’s issuance of Common Shares to the Participant, the Participant’s acquisition of Common Shares from the Company and/or the Participant’s sale of Common Shares to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award in accordance with the foregoing, unless doing so would violate Section 409A of the Code, the Company shall pay to the Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the Common Shares subject to such Award or portion thereof canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of Common Shares (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof. The Committee shall have the discretion to consider and take action to mitigate the tax consequence to the Participant in cancelling an Award in accordance with this clause.

 

(j) Payments to Persons Other Than Participants . If the Committee shall find that any person to whom any amount is payable under this Plan is unable to care for his affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.

 

(k) Nonexclusivity of this Plan . Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or other equity-based awards otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.

 

(l) No Trust or Fund Created . Neither this Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of this Plan or any Award shall require the Company, for the purpose of satisfying any obligations under this Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under this Plan other than as general unsecured creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees under general law.

 

(m) Reliance on Reports . Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and/or its Affiliates and/or any other information furnished in connection with this Plan by any agent of the Company or the Committee or the Board, other than himself.

 

(n) Relationship to Other Benefits . No payment under this Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.

 

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(o) Governing Law . The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to the conflict of laws provisions.

 

(p) Severability . If any provision of this Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify this Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws in the manner that most closely reflects the original intent of the Award or the Plan, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of this Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of this Plan and any such Award shall remain in full force and effect.

 

(q) Obligations Binding on Successors . The obligations of the Company under this Plan shall be binding upon any successor corporation or organization resulting from the merger, amalgamation, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.

 

(r)   Code Section 162(m) Approval . If so determined by the Committee, the provisions of this Plan regarding Performance Compensation Awards shall be disclosed and reapproved by stockholders no later than the first stockholder meeting that occurs in the fifth year following the year in which stockholders previously approved such provisions, in each case in order for certain Awards granted after such time to be exempt from the deduction limitations of Section 162(m) of the Code. Nothing in this clause, however, shall affect the validity of Awards granted after such time if such stockholder approval has not been obtained.

 

(s) Expenses; Gender; Titles and Headings . The expenses of administering this Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in this Plan are for convenience of reference only, and in the event of any conflict, the text of this Plan, rather than such titles or headings shall control.

 

(t)   Other Agreements . Notwithstanding the above, the Committee may require, as a condition to the grant of and/or the receipt of Common Shares under an Award, that the Participant execute lock-up, stockholder or other agreements, as it may determine in its sole and absolute discretion.

 

(u) Section 409A . The Plan and all Awards granted hereunder are intended to comply with, or otherwise be exempt from, the requirements of Section 409A of the Code. The Plan and all Awards granted under this Plan shall be administered, interpreted, and construed in a manner consistent with Section 409A of the Code to the extent necessary to avoid the imposition of additional taxes under Section 409A(a)(1)(B) of the Code. Notwithstanding anything in this Plan to the contrary, in no event shall the Committee exercise its discretion to accelerate the payment or settlement of an Award where such payment or settlement constitutes deferred compensation within the meaning of Section 409A of the Code unless, and solely to the extent that, such accelerated payment or settlement is permissible under Section 1.409A-3(j)(4) of the Treasury Regulations. If a Participant is a “specified employee” (within the meaning of Section 1.409A-1(i) of the Treasury Regulations) at any time during the twelve (12)-month period ending on the date of his termination of employment, and any Award hereunder subject to the requirements of Section 409A of the Code is to be satisfied on account of the Participant’s termination of employment, satisfaction of such Award shall be suspended until the date that is six (6) months after the date of such termination of employment.

 

(v) Payments . Participants shall be required to pay, to the extent required by applicable law, any amounts required to receive Common Shares under any Award made under this Plan.

 

 

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Exhibit 10.9

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (“ Agreement ”), dated as of February 2, 2018, is by and between Purple Innovation, Inc., a Delaware corporation (the “ Company ”) and [NAME OF DIRECTOR/OFFICER] (the “ Indemnitee ”).

 

WHEREAS, Indemnitee is a director and/or officer of the Company;

 

WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies;

 

WHEREAS, the board of directors of the Company (the “ Board ”) has determined that enhancing the ability of the Company to retain and attract as directors and officers the most capable persons is in the best interests of the Company and that the Company therefore should seek to assure such persons that indemnification and insurance coverage is available; and

 

WHEREAS, in recognition of the need to provide Indemnitee with substantial protection against personal liability, in order to procure Indemnitee’s continued service as a director and/or officer of the Company and to enhance Indemnitee’s ability to serve the Company in an effective manner, and in order to provide such protection pursuant to express contract rights (intended to be enforceable irrespective of, among other things, any amendment to the Company’s certificate of incorporation or bylaws (collectively, the “ Constituent Documents ”), any change in the composition of the Board or any change in control or business combination transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of, and the advancement of Expenses (as defined in Section 1(f) below) to, Indemnitee as set forth in this Agreement and for the coverage of Indemnitee under the Company’s directors’ and officers’ liability insurance policies.

 

NOW, THEREFORE, in consideration of the foregoing and the Indemnitee’s agreement to continue to provide services to the Company, the parties agree as follows:

 

1.   Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

 

(a)  “ Beneficial Owner ” has the meaning given to the term “beneficial owner” in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

 

(b)  “ Change in Control ” means the occurrence after the date of this Agreement of any of the following events:

 

(i)  any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty percent (30%) or more of the Company’s then outstanding Voting Securities;

 

(ii)  the consummation of a reorganization, merger or consolidation, unless immediately following such reorganization, merger or consolidation, all of the Beneficial Owners of the Voting Securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the outstanding Voting Securities of the entity resulting from such transaction;

 

 

 

(iii)  during any period of two consecutive years, not including any period prior to the execution of this Agreement, individuals who at the beginning of such period constituted the Board (including for this purpose any new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved) cease for any reason to constitute at least a majority of the Board; or

 

(iv)  the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

 

(c)  “ Claim ” means:

 

(i)  any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, arbitrative, investigative or other, and whether made pursuant to federal, state or other law; or

 

(ii)  any inquiry, hearing or investigation that the Indemnitee determines might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism.

 

(d)  “ Delaware Court ” shall have the meaning ascribed to it in Section 9(e) below.

 

(e)  “ Disinterested Director ” means a director of the Company who is not and was not a party to the Claim in respect of which indemnification is sought by Indemnitee.

 

(f)  “ Expenses ” means any and all expenses, including attorneys’ and experts’ fees, court costs, transcript costs, travel expenses, duplicating, printing and binding costs, telephone charges, and all other costs and expenses incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim. Expenses also shall include (i) Expenses incurred in connection with any appeal resulting from any Claim, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 5 only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

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(g)  “ Expense Advance ” means any payment of Expenses advanced to Indemnitee by the Company pursuant to Section 4 or Section 5 hereof.

 

(h)  “ Indemnifiable Event ” means any event or occurrence, whether occurring before, on or after the date of this Agreement, related to the fact that Indemnitee is or was a director, officer, employee or agent of the Company or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, member, manager, trustee or agent of any other corporation, limited liability company, partnership, joint venture, trust or other entity or enterprise (collectively with the Company, “ Enterprise ”) or by reason of an action or inaction by Indemnitee in any such capacity (whether or not serving in such capacity at the time any Loss is incurred for which indemnification can be provided under this Agreement).

 

(i)  “ Independent Counsel ” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently performs, nor in the past five years has performed, services for either: (i) the Company or Indemnitee (other than in connection with matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements) or (ii) any other party to the Claim giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(j)  “ Losses ” means any and all Expenses, damages, losses, liabilities, judgments, fines, penalties (whether civil, criminal or other), ERISA excise taxes, amounts paid or payable in settlement, including any interest, assessments, any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payments under this Agreement and all other charges paid or payable in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness or participate in, any Claim.

 

(k)  “ Person ” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity and includes the meaning set forth in Sections 13(d) and 14(d) of the Exchange Act.

 

(l)  “ Standard of Conduct Determination ” shall have the meaning ascribed to it in Section 9(b) below.

 

(m)  “ Voting Securities ” means any securities of the Company that vote generally in the election of directors.

 

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2.   Services to the Company . Indemnitee agrees to continue to serve as a director or officer of the Company for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders Indemnitee’s resignation or is no longer serving in such capacity. This Agreement shall not be deemed an employment agreement between the Company (or any of its subsidiaries or Enterprise) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee’s service to the Company or any of its subsidiaries or Enterprise is at will and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment agreement between Indemnitee and the Company (or any of its subsidiaries or Enterprise), other applicable formal severance policies duly adopted by the Board or, with respect to service as a director or officer of the Company, by the Company’s Constituent Documents or Delaware law.

 

3.   Indemnification . Subject to Section 9 and Section 10 of this Agreement, the Company shall indemnify Indemnitee, to the fullest extent permitted by the laws of the State of Delaware in effect on the date hereof, or as such laws may from time to time hereafter be amended to increase the scope of such permitted indemnification, against any and all Losses if Indemnitee was or is or becomes a party to or participant in, or is threatened to be made a party to or participant in, any Claim by reason of or arising in part out of an Indemnifiable Event, including, without limitation, Claims brought by or in the right of the Company, Claims brought by third parties, and Claims in which the Indemnitee is solely a witness.

 

4.   Advancement of Expenses . Indemnitee shall have the right to advancement by the Company, prior to the final disposition of any Claim by final adjudication to which there are no further rights of appeal, of any and all Expenses actually and reasonably paid or incurred by Indemnitee in connection with any Claim arising out of an Indemnifiable Event. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Without limiting the generality or effect of the foregoing, within ten (10) days after any request by Indemnitee, the Company shall, in accordance with such request, (a) pay such Expenses on behalf of Indemnitee, (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses, or (c) reimburse Indemnitee for such Expenses. In connection with any request for Expense Advances, Indemnitee shall not be required to provide any documentation or information to the extent that the provision thereof would undermine or otherwise jeopardize attorney-client privilege. In connection with any request for Expense Advances, Indemnitee shall execute and deliver to the Company an undertaking (which shall be accepted without reference to Indemnitee’s ability to repay the Expense Advances) to repay any amounts paid, advanced, or reimbursed by the Company for such Expenses to the extent that it is ultimately determined, following the final disposition of such Claim, that Indemnitee is not entitled to indemnification hereunder. Indemnitee’s obligation to reimburse the Company for Expense Advances shall be unsecured and no interest shall be charged thereon.

 

5.   Indemnification for Expenses in Enforcing Rights . To the fullest extent allowable under applicable law, the Company shall also indemnify against, and, if requested by Indemnitee, shall advance to Indemnitee subject to and in accordance with Section 4, any Expenses actually and reasonably paid or incurred by Indemnitee in connection with any action or proceeding by Indemnitee for (a) indemnification or reimbursement or advance payment of Expenses by the Company under any provision of this Agreement, or under any other agreement or provision of the Constituent Documents now or hereafter in effect relating to Claims relating to Indemnifiable Events, and/or (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company. However, in the event that Indemnitee is ultimately determined not to be entitled to such indemnification or insurance recovery, as the case may be, then all amounts advanced under this Section 5 shall be repaid. Indemnitee shall be required to reimburse the Company in the event that a final judicial determination is made that such action brought by Indemnitee was frivolous or not made in good faith.

 

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6.   Partial Indemnity . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of any Losses in respect of a Claim related to an Indemnifiable Event but not for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

 

7.   Notification and Defense of Claims .

 

(a)   Notification of Claims . Indemnitee shall notify the Company in writing as soon as practicable of any Claim which could relate to an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder except that the Company shall not be liable to indemnify Indemnitee under this Agreement with respect to any judicial award in a Claim related to an Indemnifiable Event if the Company was not given a reasonable and timely opportunity to participate at its expense in the defense of such action.

 

(b)   Defense of Claims . The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event at its own expense and, except as otherwise provided below, to the extent the Company so wishes, it may assume the defense thereof with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election to assume the defense of any such Claim, the Company shall not be liable to Indemnitee under this Agreement or otherwise for any Expenses subsequently directly incurred by Indemnitee in connection with Indemnitee’s defense of such Claim other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own legal counsel in such Claim, but all Expenses related to such counsel incurred after notice from the Company of its assumption of the defense shall be at Indemnitee’s own expense; provided, however, that if (i) Indemnitee’s employment of its own legal counsel has been authorized by the Company, (ii) Indemnitee has reasonably determined that there may be a conflict of interest between Indemnitee and the Company in the defense of such Claim, (iii) after a Change in Control, Indemnitee’s employment of its own counsel has been approved by the Independent Counsel or (iv) the Company shall not in fact have employed counsel to assume the defense of such Claim, then Indemnitee shall be entitled to retain its own separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any such Claim) and all Expenses related to such separate counsel shall be borne by the Company.

 

8.   Procedure upon Application for Indemnification . In order to obtain indemnification pursuant to this Agreement, Indemnitee shall submit to the Company a written request therefor, including in such request such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Claim. Indemnification shall be made insofar as the Company determines Indemnitee is entitled to indemnification in accordance with Section 9 below.

 

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9.   Determination of Right to Indemnification .

 

(a)   Mandatory Indemnification; Indemnification as a Witness.

 

(i)  To the extent that Indemnitee shall have been successful on the merits or otherwise in defense of any Claim relating to an Indemnifiable Event or any portion thereof or in defense of any issue or matter therein, including without limitation dismissal without prejudice, Indemnitee shall be indemnified against all Losses relating to such Claim in accordance with Section 3 to the fullest extent allowable by law.

 

(ii)  To the extent that Indemnitee’s involvement in a Claim relating to an Indemnifiable Event is to prepare to serve and serve as a witness, and not as a party, the Indemnitee shall be indemnified against all Losses incurred in connection therewith to the fullest extent allowable by law.

 

(b)   Standard of Conduct . To the extent that the provisions of Section 9(a) are inapplicable to a Claim related to an Indemnifiable Event that shall have been finally disposed of, any determination of whether Indemnitee has satisfied any applicable standard of conduct under Delaware law that is a legally required condition to indemnification of Indemnitee hereunder against Losses relating to such Claim and any determination that Expense Advances must be repaid to the Company (a “ Standard of Conduct Determination ”) shall be made as follows:

 

(i)  if no Change in Control has occurred, (A) by a majority vote of the Disinterested Directors, even if less than a quorum of the Board, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum or (C) if there are no such Disinterested Directors, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee; and

 

(ii)  if a Change in Control shall have occurred, (A) if the Indemnitee so requests in writing, by a majority vote of the Disinterested Directors, even if less than a quorum of the Board or (B) otherwise, by Independent Counsel in a written opinion addressed to the Board, a copy of which shall be delivered to Indemnitee.

 

The Company shall indemnify and hold harmless Indemnitee against and, if requested by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within ten (10) days of such request, any and all Expenses incurred by Indemnitee in cooperating with the person or persons making such Standard of Conduct Determination.

 

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(c)   Making the Standard of Conduct Determination . The Company shall use its reasonable best efforts to cause any Standard of Conduct Determination required under Section 9(b) to be made as promptly as practicable. If the person or persons designated to make the Standard of Conduct Determination under Section 9(b) shall not have made a determination within 30 days after the later of (A) receipt by the Company of a written request from Indemnitee for indemnification pursuant to Section 8 (the date of such receipt being the “ Notification Date ”) and (B) the selection of an Independent Counsel, if such determination is to be made by Independent Counsel, then Indemnitee shall be deemed to have satisfied the applicable standard of conduct; provided that such 30-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or persons making such determination in good faith requires such additional time to obtain or evaluate information relating thereto. Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement of Indemnitee to indemnification under this Agreement shall be required to be made prior to the final disposition of any Claim.

 

(d)   Payment of Indemnification . If, in regard to any Losses:

 

(i)  Indemnitee shall be entitled to indemnification pursuant to Section 9(a);

 

(ii)  no Standard Conduct Determination is legally required as a condition to indemnification of Indemnitee hereunder; or

 

(iii)  Indemnitee has been determined or deemed pursuant to Section 9(b) or Section 9(c) to have satisfied the Standard of Conduct Determination, then the Company shall pay to Indemnitee, within five (5) days after the later of (A) the Notification Date or (B) the earliest date on which the applicable criterion specified in clause (i), (ii) or (iii) is satisfied, an amount equal to such Losses.

 

  7  

 

 

(e)   Selection of Independent Counsel for Standard of Conduct Determination . If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(i), the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising Indemnitee of the identity of the Independent Counsel so selected. If a Standard of Conduct Determination is to be made by Independent Counsel pursuant to Section 9.1(b)(ii), the Independent Counsel shall be selected by Indemnitee, and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either case, Indemnitee or the Company, as applicable, may, within three (3) days after receiving written notice of selection from the other, deliver to the other a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not satisfy the criteria set forth in the definition of “Independent Counsel” in Section 1(i), and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person or firm so selected shall act as Independent Counsel. If such written objection is properly and timely made and substantiated, (i) the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit; and (ii) the non-objecting party may, at its option, select an alternative Independent Counsel and give written notice to the other party advising such other party of the identity of the alternative Independent Counsel so selected, in which case the provisions of the two immediately preceding sentences, the introductory clause of this sentence and numbered clause (i) of this sentence shall apply to such subsequent selection and notice. If applicable, the provisions of clause (ii) of the immediately preceding sentence shall apply to successive alternative selections. If no Independent Counsel that is permitted under the foregoing provisions of this Section 9(e) to make the Standard of Conduct Determination shall have been selected within twenty (20) days after the Company gives its initial notice pursuant to the first sentence of this Section 9(e) or Indemnitee gives its initial notice pursuant to the second sentence of this Section 9(e), as the case may be, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware (“ Delaware Court ”) to resolve any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and/or to appoint as Independent Counsel a person to be selected by the Court or such other person as the Court shall designate, and the person or firm with respect to whom all objections are so resolved or the person or firm so appointed will act as Independent Counsel. In all events, the Company shall pay all of the reasonable fees and expenses of the Independent Counsel incurred in connection with the Independent Counsel’s determination pursuant to Section 9(b).

 

(f)   Presumptions and Defenses.

 

(i)   Indemnitee’s Entitlement to Indemnification . In making any Standard of Conduct Determination, the person or persons making such determination shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the Company shall have the burden of proof to overcome that presumption and establish that Indemnitee is not so entitled. Any Standard of Conduct Determination that is adverse to Indemnitee may be challenged by the Indemnitee in the Delaware Court. No determination by the Company (including by its directors or any Independent Counsel) that Indemnitee has not satisfied any applicable standard of conduct may be used as a defense to any legal proceedings brought by Indemnitee to secure indemnification or reimbursement or advance payment of Expenses by the Company hereunder or create a presumption that Indemnitee has not met any applicable standard of conduct.

 

(ii)   Reliance as a Safe Harbor . For purposes of this Agreement, and without creating any presumption as to a lack of good faith if the following circumstances do not exist, Indemnitee shall be deemed to have acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board or by any other Person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any director, officer, agent or employee of the Company shall not be imputed to Indemnitee for purposes of determining the right to indemnity hereunder.

 

  8  

 

 

(iii)   No Other Presumptions . For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, will not create a presumption that Indemnitee did not meet any applicable standard of conduct or have any particular belief, or that indemnification hereunder is otherwise not permitted.

 

(iv)   Defense to Indemnification and Burden of Proof . It shall be a defense to any action brought by Indemnitee against the Company to enforce this Agreement (other than an action brought to enforce a claim for Losses incurred in defending against a Claim related to an Indemnifiable Event in advance of its final disposition) that it is not permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed. In connection with any such action or any related Standard of Conduct Determination, the burden of proving such a defense or that the Indemnitee did not satisfy the applicable standard of conduct shall be on the Company.

 

(v)   Resolution of Claims . The Company acknowledges that a settlement or other disposition short of final judgment may be successful on the merits or otherwise for purposes of Section 9.1(a)(i) if it permits a party to avoid expense, delay, distraction, disruption and uncertainty. In the event that any Claim relating to an Indemnifiable Event to which Indemnitee is a party is resolved in any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with our without payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise for purposes of Section 9.1(a)(i). The Company shall have the burden of proof to overcome this presumption.

 

  9  

 

 

10.   Exclusions from Indemnification . Notwithstanding anything in this Agreement to the contrary, the Company shall not be obligated to:

 

(a)  indemnify or advance funds to Indemnitee for Expenses or Losses with respect to proceedings initiated by Indemnitee, including any proceedings against the Company or its directors, officers, employees or other indemnitees and not by way of defense, except:

 

(i)  proceedings referenced in Section 5 above (unless a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous); or

 

(ii)  where the Company has joined in or the Board has consented to the initiation of such proceedings.

 

(b)  indemnify Indemnitee if a final decision by a court of competent jurisdiction determines that such indemnification is prohibited by applicable law.

 

(c)  indemnify Indemnitee for the disgorgement of profits arising from the purchase or sale by Indemnitee of securities of the Company in violation of Section 16(b) of the Exchange Act, or any similar successor statute.

 

(d)  indemnify or advance funds to Indemnitee for Indemnitee’s reimbursement to the Company of any bonus or other incentive-based or equity-based compensation previously received by Indemnitee or payment of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements under Section 304 of the Sarbanes-Oxley Act of 2002 in connection with an accounting restatement of the Company or the payment to the Company of profits arising from the purchase or sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act).

 

11.   Settlement of Claims . The Company shall not be liable to Indemnitee under this Agreement for any amounts paid in settlement of any threatened or pending Claim related to an Indemnifiable Event effected without the Company’s prior written consent, which shall not be unreasonably withheld. The Company shall not settle any Claim related to an Indemnifiable Event in any manner that would impose any Losses on the Indemnitee without the Indemnitee’s prior written consent.

 

12.   Duration . All agreements and obligations of the Company contained herein shall continue during the period that Indemnitee is a director or officer of the Company (or is serving at the request of the Company as a director, officer, employee, member, trustee or agent of another Enterprise) and shall continue thereafter (i) so long as Indemnitee may be subject to any possible Claim relating to an Indemnifiable Event (including any rights of appeal thereto) and (ii) throughout the pendency of any proceeding (including any rights of appeal thereto) commenced by Indemnitee to enforce or interpret his or her rights under this Agreement, even if, in either case, he or she may have ceased to serve in such capacity at the time of any such Claim or proceeding.

 

13.   Non-Exclusivity . The rights of Indemnitee hereunder will be in addition to any other rights Indemnitee may have under the Constituent Documents, the General Corporation Law of the State of Delaware, any other contract or otherwise (collectively, “ Other Indemnity Provisions ”); provided, however, that (a) to the extent that Indemnitee otherwise would have any greater right to indemnification under any Other Indemnity Provision, Indemnitee will be deemed to have such greater right hereunder and (b) to the extent that any change is made to any Other Indemnity Provision which permits any greater right to indemnification than that provided under this Agreement as of the date hereof, Indemnitee will be deemed to have such greater right hereunder.

 

  10  

 

 

14.   Liability Insurance . For the duration of Indemnitee’s service as a director and/or officer of the Company, and thereafter for so long as Indemnitee shall be subject to any pending Claim relating to an Indemnifiable Event, the Company shall use commercially reasonable efforts (taking into account the scope and amount of coverage available relative to the cost thereof) to continue to maintain in effect policies of directors’ and officers’ liability insurance providing coverage that is at least substantially comparable in scope and amount to that provided by the Company’s current policies of directors’ and officers’ liability insurance. In all policies of directors’ and officers’ liability insurance maintained by the Company, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company’s directors, if Indemnitee is a director, or of the Company’s officers, if Indemnitee is an officer (and not a director) by such policy. Upon request, the Company will provide to Indemnitee copies of all directors’ and officers’ liability insurance applications, binders, policies, declarations, endorsements and other related materials.

 

15.   No Duplication of Payments . The Company shall not be liable under this Agreement to make any payment to Indemnitee in respect of any Losses to the extent Indemnitee has otherwise received payment under any insurance policy, the Constituent Documents, Other Indemnity Provisions or otherwise of the amounts otherwise indemnifiable by the Company hereunder.

 

16.   Subrogation . In the event of payment to Indemnitee under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee. Indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

 

17.   Amendments . No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be binding unless in the form of a writing signed by the party against whom enforcement of the waiver is sought, and no such waiver shall operate as a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein, no failure to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

 

18.   Binding Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part of the business and/or assets of the Company, by written agreement in form and substances satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

  11  

 

 

19.   Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any portion thereof) are held by a court of competent jurisdiction to be invalid, illegal, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

20.   Notices . All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered by hand, against receipt, or mailed, by postage prepaid, certified or registered mail:

 

(a)  if to Indemnitee, to the address set forth on the signature page hereto.

 

(b)  if to the Company, to: Purple Innovation, Inc.

 

Attn: Chief Legal Officer

 

123 East 200 North

 

Alpine, Utah 84004

 

Notice of change of address shall be effective only when given in accordance with this Section. All notices complying with this Section shall be deemed to have been received on the date of hand delivery or on the third business day after mailing.

 

21.   Governing Law and Forum . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in such state without giving effect to its principles of conflicts of laws. The Company and Indemnitee hereby irrevocably and unconditionally: (a) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court and not in any other state or federal court in the United States, (b) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (c) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, DE 19808, New Castle County as its agent in the State of Delaware for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware and (d) waive, and agree not to plead or make, any claim that the Delaware Court lacks venue or that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

 

22.   Headings . The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

 

23.   Counterparts . This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute one and the same Agreement.

 

[signature page follows]

 

  12  

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  PURPLE INNOVATION, INC.
     
  By:                           
 

Name: Samuel D. Bernards

Title:   Chief Executive Officer

     
 

INDEMNITEE

   
                   
 

Name:__________________

  Address:______________________

 

 

13

 

Exhibit 10.10

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of February 2, 2018, by and among PURPLE INNOVATION, LLC, a Delaware limited liability company (“Borrower”), COLISEUM CAPITAL PARTNERS, L.P. (“CCP”), BLACKWELL PARTNERS LLC-SERIES A (“Blackwell”) and COLISEUM CO-INVEST DEBT FUND, L.P. (and together with CCP and Blackwell, “Lenders”).

 

RECITALS

 

Borrower has requested that Lenders extend credit to Borrower as described below, and Lenders have agreed to provide such credit to Borrower on the terms and conditions contained herein.

 

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lenders and Borrower hereby agree as follows:

 

Article I
CREDIT TERMS

 

Section 1.1.          LOAN.

 

(a)            Loan . Subject to the terms and conditions of this Agreement, Lenders hereby agree to make, ratably according to their respective loan percentages set forth on Schedule 1.1 hereto (on a several and not joint basis), a loan to Borrower on the Closing Date (as defined below), in an aggregate principal amount of Twenty-Five Million Dollars ($25,000,000.00) (the “Loan”), the proceeds of which shall be used to finance Borrower’s working capital requirements and general corporate purposes.

 

(b)          Repayment; Mandatory Prepayments .

 

(i) Following the first anniversary of the date hereof, Borrower may partially or wholly repay its outstanding borrowings hereunder subject to concurrent payment of any applicable Prepayment Premium, calculated on the amount prepaid. For purposes of the foregoing, “Prepayment Premium” shall mean (a) 6.00% on any date during the second year following the date hereof, (b) 4.00% on any date during the third year following the date hereof, (c) 2.00% on any date during the fourth year following the date hereof and (d) thereafter, 0%. The remaining outstanding principal amount of the Loan shall be repaid in full on the fifth anniversary of the date hereof (the “Maturity Date”). Notwithstanding anything to the contrary, in the event that Borrower desires to prepay the Loan on or prior to the first anniversary of the date hereof, such prepayment shall be permitted subject to the concurrent payment of the applicable Make-Whole Amount (as defined below).

 

“Make-Whole Amount” means, with respect to any prepayment of the Loan pursuant to the terms of this Agreement at any time during the first year following the date hereof, an amount equal to the sum of (a) the present value (discounted at a rate per annum equal to the rate on five-year U.S. treasury bills at the time of prepayment as reasonably selected by Lenders plus 50 basis points) of the interest that would have accrued through the first anniversary of the date hereof as though the full amount of the Loans had been funded on the Closing Date and had remained outstanding during such one-year period plus (b) a prepayment premium equal to 6% of the amount prepaid.

 

 

 

 

(ii) In addition, subject to customary obligations to repay other debt permitted hereunder, within five (5) business days following receipt of Net Proceeds (as defined below), Borrower shall make an offer to Lenders to prepay the outstanding principal amount of the Loan by such amount. Lenders shall thereafter accept or reject such offer within three (3) business days, and such payment shall, if accepted, be made within one (1) business day following such acceptance.

 

For purposes of the foregoing, “Net Proceeds” means, without duplication: (v) (A) in the case of any sale, lease, transfer or otherwise disposition or conveyance of any asset of Borrower not permitted by Section 5.4, 100% of the net cash proceeds received by or on behalf of Borrower from such sale, lease, transfer or other disposition or conveyance and (B) 100% of any cash payments received by or on behalf of, or paid to or for the account of, Borrower (other than in the ordinary course of business), in connection with insurance payments, in the case of each of the foregoing clauses (A) and (B), that have not been reinvested by Borrower within twelve (12) months to purchase assets used or useful in the business of Borrower; provided that the amounts set forth in this clause (v) shall not constitute “Net Proceeds” until the aggregate amount of such net cash proceeds, for all sales, leases, transfers or other dispositions or conveyances and all insurance payments (taken as a whole) have exceed $500,000.00, (w) 100% of the net cash proceeds received by or on behalf of Borrower in connection with any incurrence of indebtedness that is not permitted to be incurred pursuant to the terms of this Agreement, (x) 100% of any cash payments received by or on behalf of, or paid to or for the account of, Borrower (other than in the ordinary course of business), in connection with condemnation events, judgments, litigation settlements and indemnity payments, (y) 100% of the net cash proceeds received by or on behalf of Borrower as a result of Borrower’s issuance or sale of its stock and (z) 100% of any indemnification payments made to Borrower pursuant to the terms of the Merger Agreement.

 

(c)          Change of Control Premium . In the event that all, or any portion, of the Loans is repaid (whether voluntarily, mandatorily, as a result of acceleration, or otherwise) (i) upon the occurrence of a Change of Control during the first year after the date hereof, Borrower shall pay a fee to Lenders, ratably in accordance with their respective commitment percentages set forth on Schedule 1.1 hereto, equal to the amount of interest that would have accrued through the first anniversary of the date hereof as though the full amount of the Loans had been funded on the Closing Date and had remained outstanding during such one-year period or (ii) upon the occurrence of a Change of Control at any time after the first anniversary of the Closing Date, such repayment (whether voluntary, mandatory, as a result of acceleration, or otherwise) shall be subject to the applicable Prepayment Premium set forth in 1.1(b)(i) above.

 

  - 2 -  

 

 

Section 1.2.          INTEREST.

 

(a)          Interest . The outstanding principal balance of the Loans shall bear interest at the rate of interest of 12.0% per annum (computed on the basis of a 360-day year, actual days elapsed). At the election of Borrower prior to the Maturity Date (it being understood that, if Borrower does not pay such interest in cash on the applicable Interest Payment Date (as defined below), Borrower shall be deemed to have made such election for such Interest Payment Date), interest in excess of 5.0% per annum may, in lieu of being paid in cash, be capitalized and added to the principal amount of the Loan (ratably owing to Lenders based on their respective loan percentages as set forth on Schedule 1.1 hereto). Interest shall accrue and be payable on the last business day of each March, June, September and December, commencing on June 29, 2018, (each, an “Interest Payment Date”) and on the Maturity Date.

 

(b)          Default Interest . From and after the Maturity Date, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or upon the occurrence and during the continuance of an Event of Default, then, the outstanding principal amount of the Loan shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4.0%) above the rate of interest from time to time otherwise applicable to the Loan, which increase shall take effect automatically and without further action (of the Lenders or otherwise).

 

Article II
REPRESENTATIONS AND WARRANTIES

 

Borrower makes the following representations and warranties to Lenders, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until all indebtedness and other obligations (other than unasserted, contingent indemnification obligations) arising under this Agreement and the other Loan Documents are paid in full.

 

Section 2.1.          LEGAL STATUS. Borrower is: (a) a limited liability company, duly organized and existing and in good standing under the laws of Delaware, (b) is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which the failure to so qualify or to be so licensed could have a Material Adverse Effect on Borrower; and (c) not the target of any trade or economic sanctions promulgated by the United Nations or the governments of the United States, the United Kingdom, the European Union, or any other jurisdiction in which Borrower is located or operates (collectively, “Sanctions”). As used herein, “Material Adverse Effect” means (a) a material adverse effect on the operations, business, assets, properties, financial prospects, liabilities (actual or contingent) or financial condition of Borrower, (b) a material impairment of the ability of Borrower to perform its obligations under the Loan Documents to which it is a party, (c) a material impairment of the rights and remedies of Lenders under any Loan Document or (d) an impairment of the legality, validity, binding effect or enforceability against Borrower of any Loan Document to which it is a party.

 

Section 2.2.          AUTHORIZATION AND VALIDITY. This Agreement and each guaranty, contract, instrument and other document required hereby or at any time hereafter delivered to Lenders in connection herewith (collectively, the “Loan Documents”) have been duly authorized, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of Borrower or the party which executes the same, enforceable in accordance with their respective terms, except as enforcement thereof may be limited by applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium or similar laws affecting the enforcement of creditor’s rights, generally and by general principles of equity.

 

  - 3 -  

 

 

Section 2.3.          NO VIOLATION. The execution, delivery and performance by Borrower of each of the Loan Documents do not violate any provision of any law or regulation, or contravene any provision of the organizational and governing documents of Borrower, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Borrower is a party or by which Borrower may be bound, except as could not have a Material Adverse Effect on the financial condition or operation of Borrower.

 

Section 2.4.          LITIGATION. There are no pending, or to the best of Borrower’s knowledge threatened in writing, actions, claims, investigations, suits or proceedings by or before any governmental authority, arbitrator, court or administrative agency which could have a Material Adverse Effect on the financial condition or operation of Borrower, except as described on Schedule 2.4 hereto.

 

Section 2.5.          CORRECTNESS OF FINANCIAL STATEMENT. The annual financial statement of Borrower dated December 31, 2016, and all interim financial statements of Borrower delivered to Lenders (or set forth in public filings) since said date, true copies of which have been delivered by Borrower to Lenders (or set forth in public filings) prior to the date hereof, (a) are complete and correct in all material respects and present fairly the financial condition of Borrower, (b) disclose all liabilities of Borrower that, as of the date thereof, are required to be reflected or reserved against under generally accepted accounting principles, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with generally accepted accounting principles consistently applied. Since the dates of such financial statements there has been no material adverse change in the financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except (i) such liens granted to Wells (as defined below) to secure certain obligations of Borrower existing prior to the Closing Date pursuant to the Prior Bank Loan (as defined below), which obligations shall have been irrevocably paid in full prior to the Closing Date in accordance with Section 3.1(d) and (ii) Permitted Liens (as defined below).

 

Section 2.6.          INCOME AND SALES TAX RETURNS. Borrower has no knowledge of any pending assessments or adjustments (in an amount in excess of $10,000) of its income or sales tax payable with respect to any year, except for (i) income or sales tax being contested or disputed in accordance with Section 4.7 or (ii) such pending assessments or adjustments described on Schedule 2.6 hereto with respect to which the potential exposure does not exceed $8,500,000 in the aggregate.

 

Section 2.7.          NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Borrower is a party or by which Borrower may be bound that requires the subordination in right of payment of any of Borrower’s obligations subject to this Agreement to any other obligation of Borrower.

 

Section 2.8.          PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable it to conduct the business in which it is now engaged in compliance with applicable law, except as could not have a Material Adverse Effect on the financial condition or operation of Borrower.

 

  - 4 -  

 

 

Section 2.9.          ERISA. Borrower is in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ERISA”); Borrower has not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Borrower; Borrower has met its minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under generally accepted accounting principles.

 

Section 2.10.          OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowed money in an amount in excess of $100,000, any purchase money obligation in an amount in excess of $100,000 or any other material lease, commitment, contract, instrument or obligation. As of the Closing Date, the aggregate amount of accounts payable greater than 60 days past due and owed by Borrower does not exceed $7,000,000.

 

Section 2.11.          ENVIRONMENTAL MATTERS. Except as specifically disclosed on Schedule 2.11 hereto, Borrower is in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of Borrower’s operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time (collectively, “Environmental Laws”). None of the operations of Borrower is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. Borrower has no material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

 

Article III
CONDITIONS

 

Section 3.1.          CONDITIONS. The obligation of Lenders to extend the credit contemplated by this Agreement shall not become effective until the date on which each of the following conditions precedent shall have been satisfied or waived in a manner satisfactory to Lenders (the “Closing Date”):

 

(a)          Documentation . Lenders shall have received, in form and substance satisfactory to Lenders, each of the following, duly executed:

 

(i) This Agreement.

 

(ii) Parent Guaranty in the form of Exhibit A hereto (the “Parent Guaranty”).

 

(iii) Limited Liability Company Certificate: Borrowing.

 

  - 5 -  

 

 

(iv) Such other documents as Lenders may require under any other Section of this Agreement.

 

(b)          Financial Condition . There shall have been no material adverse change in the financial condition or business of Borrower hereunder, if any, nor any material decline in the market value of a substantial or material portion of the assets of Borrower, if any.

 

(c)          Payment of Fees . Lenders shall have received payment in full of any fee required by any of the Loan Documents to be paid concurrently with the making of such credit extension.

 

(d)          Repayment of Existing Debt . All of the indebtedness and obligations under that certain Credit Agreement dated as of October 9, 2017 (the “Prior Bank Loan”), between Borrower and Wells Fargo, National Association (“Wells”) shall have been repaid and all commitments in respect thereof shall have been terminated and the Lenders shall have received reasonably satisfactory evidence of the discharge (or the irrevocable and unconditional (except for receipt of the stated payoff amount) making of arrangements for discharge) of all guarantees and related liens prior to the initial funding under this Agreement.

 

(e)          Sponsor Shares and Warrants . Lenders shall have received (whether by assignment or transfer) not less than 2,500,000 warrants that entitle the holder to purchase 1,250,000 shares of common stock of Purple Innovation, Inc., a Delaware corporation (“Parent Guarantor”), which, in each case shall be allocated ratably to Lenders in accordance with their loan percentages on the Closing Date as set forth on Schedule 1.1 hereto.

 

(f)          Closing Date Merger . The merger of Borrower and a wholly-owned subsidiary of Parent Guarantor shall have been completed, or shall concurrently be completed, in accordance with the terms of that certain Merger Agreement dated as of November 2, 2017 and as amended on January 8, 2018, without any further amendment, waiver or modification that could reasonably be expected to be adverse to the interests of Lenders.

 

(g)          No Default . No Default or Event of Default shall have occurred and be continuing.

 

(h)          Representations and Warranties . The representations and warranties of Borrower and the Parent Guarantor set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects.

 

Article IV
AFFIRMATIVE COVENANTS

 

Borrower covenants that so long as the Loan (or the commitments in respect thereof) remain outstanding, and until all indebtedness and other obligations (other than unasserted, contingent indemnification obligations) arising under this Agreement and the other Loan Documents are paid in full, Borrower shall, unless Lenders otherwise consent in writing:

 

Section 4.1.          PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Lenders, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.

 

  - 6 -  

 

 

Section 4.2.          ACCOUNTING RECORDS. Maintain adequate books and records in accordance with generally accepted accounting principles consistently applied, and permit any representative of any Lenders, at any reasonable time during regular business hours, to inspect, audit and examine such books and records, to make copies of the same, and to inspect the properties of Borrower. Notwithstanding anything to the contrary, such Lender shall bear the cost and expense of such inspections, audits and examinations; provided that any such examinations, audits and examinations conducted during an Event of Default shall be at the cost and expense of Borrower.

 

Section 4.3.          FINANCIAL STATEMENTS. Provide to Lenders all of the following, in form and detail reasonably satisfactory to Lenders:

 

(a)         not later than 90 days (or, if Borrower is required to include such financial statements in an Annual Report on Form 10-K, such later date as may be permitted by the Securities Exchange Act or the rules thereunder) after and as of the end of each fiscal year of Borrower, an audited financial statement of Borrower, prepared by a certified public accountant acceptable to Lenders, to include balance sheet, income statement and statement of cash flows and sources, and within 30 days after filing, but in no event later than each August 30, copies of Borrower’s filed federal income tax returns for such year. The audited annual financial statements shall be accompanied by the unqualified opinion (as to scope of opinion and going concern) of such accountant addressed to Lenders;

 

(b)         not later than 45 days (or, if Borrower is required to include such financial statements in a Quarterly Report on Form 10-Q, such later date as may be permitted by the Securities Exchange Act or the rules thereunder) after and as of the end of each fiscal quarter, a financial statement of Borrower, prepared by Borrower, to include balance sheet, income statement and statement of cash flows and sources;

 

(c)         contemporaneously with each annual and quarterly financial statement of Borrower required hereby, a certificate of the president or chief financial officer, a general partner or a member of Borrower, as applicable, substantially to the form of Exhibit B attached hereto and incorporated herein by this reference that (i) said financial statements are complete and correct in all material respects and fairly present the financial condition of Borrower as of the date thereof, and (ii) there exists no Default or Event of Default, except as set forth in such certificate; and

 

(d)         from time to time such other information regarding Borrower and its properties and operations as Lenders may reasonably request.

 

To the extent any financial statements required by Section 4.3(a) or Section 4.3(b) are included in an Annual Report on Form 10-K or Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission, such financial statements shall be deemed to have been provided to Lenders hereunder in form satisfactory to Lenders and shall be deemed delivered to Lenders when such financial statements are filed for public availability on the Securities and Exchange Commission’s Electronic Data Gathering and Retrieval System.

 

Section 4.4.          COMPLIANCE. (a) Preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business, except as could not have a Material Adverse Effect on the financial condition or operation of Borrower; (b) comply with the provisions of all documents pursuant to which Borrower is organized and/or which govern Borrower’s continued existence; (c) comply with the requirements of all laws, rules, regulations and orders of any jurisdiction in which Borrower is located or doing business, or otherwise is applicable to Borrower, except as could not have a Material Adverse Effect on the financial condition or operation of Borrower; (d) comply in all material respects with all Environmental Laws and (e) comply with (i) all Sanctions, (ii) all laws and regulations that relate to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto, (iii) the U.S. Foreign Corrupt Practices Act of 1977, as amended, (iv) the U.K. Bribery Act of 2010, as amended, and (v) any other applicable anti-bribery or anti-corruption laws and regulations.

 

  - 7 -  

 

 

Section 4.5.          INSURANCE. Maintain and keep in force, for each business in which Borrower is engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, commercial general liability, directors’ and officers’ liability, flood, and, if required, hurricane, windstorm, seismic property damage and workers’ compensation.

 

Section 4.6.          FACILITIES. Keep all properties useful or necessary to Borrower’s business in good repair and condition (ordinary wear and tear excepted), and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained (ordinary wear and tear excepted).

 

Section 4.7.          TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, in an amount exceeding $10,000 except (a) such as Borrower may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Borrower maintains adequate reserves with respect thereto, in accordance with generally accepted accounting principles, for eventual payment thereof in the event Borrower is obligated to make such payment.

 

Section 4.8.          LITIGATION. Promptly give notice in writing to Lenders of any litigation pending or threatened against Borrower with a claim reasonably expected to be in excess of $500,000.00.

 

Section 4.9.          NOTICE TO LENDERS. Promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Lenders in reasonable detail of: (a) the occurrence of any Default or Event of Default; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction relating to Borrower, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Borrower is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower’s property in an amount in excess of $100,000.

 

  - 8 -  

 

 

Article V
NEGATIVE COVENANTS

 

Borrower further covenants that so long as the Loan (or the commitments in respect thereof) remain outstanding, and until all indebtedness and other obligations (other than unasserted, contingent indemnification obligations) arising under this Agreement and the other Loan Documents are paid in full, Borrower will not without Lenders’ prior written consent:

 

Section 5.1.          USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article I hereof, or directly or indirectly use any such proceeds for the purpose of (a) providing financing to, or otherwise funding, any targets of Sanctions; or (b) providing financing for, or otherwise funding, any transaction which would be prohibited by Sanctions or would otherwise cause Lenders or any affiliate of a Lender to be in breach of any Sanctions.

 

Section 5.2.          CAPITAL EXPENDITURES. Make any additional investment in fixed assets in any fiscal year in excess of an aggregate of $20,000,000.00.

 

Section 5.3.          OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtedness or liabilities (each to the extent resulting from borrowings, loans or advances of money), whether secured or unsecured, matured or unmatured, liquidated or unliquidated, joint or several, except (a) the liabilities of Borrower to Lenders, (b) any other liabilities of Borrower existing as of, and specifically disclosed on Schedule 5.3 hereto (and together with refinancings or replacements thereof that do not increase the principal amount thereof), (c) Capital Lease Obligations and purchase money indebtedness in an aggregate amount not to exceed $10,000,000.00 at any time outstanding, (d) (i) unsecured obligations under commercial credit cards in the ordinary course of business in an amount not exceeding $5,000,000 outstanding at any time and (ii) other unsecured indebtedness in an amount not exceeding $250,000 outstanding at any time, (e) any indebtedness and obligations (each, an “Asset Based Credit Facility”) to a third party unaffiliated institutional asset based lender (each, an “Asset Based Lender”) in an amount not to exceed $20,000,000 at any time outstanding; provided, that Lenders agree to negotiate in good faith and enter into customary intercreditor arrangements with respect to any such Asset Based Credit Facility entered into pursuant to this Section 5.3(e); provided, further that up to $10,000,000 of the indebtedness permitted to be incurred under this Section 5.3(e) may be in the form of other secured or unsecured indebtedness (the principal amount of any such indebtedness incurred pursuant to this proviso shall, for the avoidance of doubt, reduce dollar-for-dollar the aggregate amount of indebtedness permitted to be incurred under this Section 5.3(e)); and (f) additional indebtedness (each, an “Additional Debt Facility”) so long as after giving effect to the incurrence thereof Borrower is in compliance with the Debt Incurrence Conditions. As used herein, (i) “Capital Lease Obligations” of any person or entity means the obligations of such person or entity to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person or entity under generally accepted accounting principles, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with generally accepted accounting principles, consistently applied (“GAAP”); provided, that in the event that Borrower notifies Lenders that Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision, regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then Borrower and Majority Lenders shall negotiate in good faith to enter into an amendment of the relevant affected provisions (without the payment of any amendment or similar fee to any Lenders) to preserve the original intent thereof in light of such change in GAAP or the application thereof, (ii) “Debt Incurrence Conditions” means that (x) no Default or Event of Default is continuing or would result from the incurrence of such indebtedness and (y) after giving effect to the incurrence of such indebtedness, Borrower would be in compliance (determined on a pro forma basis after giving effect to such incurrence) with a Total Debt Ratio not to exceed 2.00:1.00 (iii) “Total Debt Ratio” means the ratio of (A) (x) all indebtedness incurred by Borrower (for the avoidance of doubt, including (without limitation) Capital Lease Obligations), plus (x) solely for the purpose of determining compliance with Section 5.7(c) hereof, all cash dividends and distributions to be made pursuant to Section 5.7(c) of this agreement, together with all such cash dividends and distributions made prior to the date of the proposed use of such amount in reliance on Section 5.7(c), to (B) net profit of Borrower before tax plus, to the extent deducted in determining net profit before tax, interest expense (net of capitalized interest expense), depreciation expense, amortization expense, non-cash compensation expense and, to the extent approved by Lenders (such approval not to be unreasonably withheld, conditioned or delayed), transaction expenses incurred in connection with the GPAC Merger (as defined herein), each as determined for the most recently ended period of four consecutive fiscal quarters of the Borrower (this clause (B) “Adjusted Cash Flow”), and (iv) “GPAC Merger” means the merger of PRPL Acquisition, LLC with and into borrower, pursuant to which Global Partner Acquisition Corp. acquires a minority interest in Borrower and the shareholders in Borrower existing on the date of this Agreement maintain a minority interest in Borrower through rolled equity.

 

  - 9 -  

 

 

Section 5.4.          MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity (except for the GPAC Merger); make any substantial change in the nature of Borrower’s business as conducted as of the date hereof; other than as permitted by Section 5.6 hereof, acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Borrower’s assets except in the ordinary course of its business and, so long as no Default or Event of Default is continuing or would result therefrom, other sales and dispositions in an amount not exceeding $250,000 in any fiscal year of Borrower.

 

Section 5.5.          GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for, nor pledge or hypothecate any assets of Borrower as security for, any liabilities or obligations of any other person or entity, except, if applicable, any of the foregoing in favor of an Asset Based Lender pursuant an Asset Based Credit Facility or any holder of any Additional Debt Facility otherwise permitted hereunder.

 

Section 5.6.          LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except (a) any of the foregoing existing as of, and specifically disclosed on Schedule 5.6 hereto (including investments existing on the date hereof in Equapressure LLC, which is an inactive subsidiary of Borrower), (b) travel and other advances to management personnel and employees in the ordinary course of business; (c) other readily marketable Investments in debt securities which are reasonably acceptable to Lenders, (d) [reserved]; (e) Permitted Acquisitions and (f) so long as no Default or Event of Default is continuing or would result therefrom, investments not otherwise permitted hereunder which are made after the date hereof so long as the aggregate amount of all such Investments does not exceed $250,000 at any one time outstanding. As used herein, “Permitted Acquisition” means any transaction or series of related transactions by Borrower for (i) the direct or indirect acquisition of all or substantially all of the property or assets of any U.S. person, or of any assets constituting a line of business, business unit or division of any person located in the U.S., or, with respect to intellectual property assets related to the business, located in the U.S. or any other jurisdiction, (ii) the acquisition (including by merger or consolidation) of the equity interests (other than director qualifying shares) of any person that becomes a subsidiary of Borrower after giving effect to such transaction, or (iii) a merger or consolidation or any other combination with any person (so long as a Loan Party, to the extent such Loan Party is a party to such merger or consolidation, is the surviving entity); provided that each of the following conditions shall be met: (A) no Default or Event of Default shall exist either at the time of the consummation of such acquisition or execution of applicable acquisition documentation, or in each case would result therefrom, (B) such acquisition is consensual, (C) such acquisition shall not result in a decrease to the Adjusted Cash Flow of Borrower prior to giving effect thereto, (D) Borrower shall have delivered to Lenders at least five (5) business days prior to the consummation thereof (1) a due diligence package comprising such material and information that Borrower has obtained during the course of its own diligence process, and (2) notice of such acquisition setting forth in reasonable detail the terms and conditions of such acquisition, (e) Borrower shall be in pro forma compliance with the Debt Incurrence Conditions after giving effect thereto and (F) the target shall be in a similar line of business as Borrower; provided, further, that any acquired subsidiary shall execute a guaranty in substantially the form of the Parent Guaranty (a “Subsidiary Guarantor”; any Subsidiary Guarantors together with the Parent Guarantor and Borrower are collectively referred to herein as “Loan Parties”).

 

  - 10 -  

 

 

Section 5.7.          DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either in cash, stock or any other property on Borrower’s stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire any shares of any class of Borrower’s stock now or hereafter outstanding; provided however, that Borrower may (a) pay any Tax Distributions (as defined in the Limited Liability Company Agreement of Borrower), (b) pay other cash dividends or distributions to its shareholders, members or partners, as applicable, in any year to cover such shareholders’, members’ or partners’ federal and state income tax liability for the immediately preceding year, to the extent not paid pursuant to Section 5.7(a) hereof, arising as a direct result of Borrower’s reported income for said year, but not to exceed the minimum amount so required, and Borrower shall provide to Lenders, upon request, any documentation required by Lenders to substantiate the appropriateness of amounts paid or to be paid and (c) pay other cash dividends and distributions, so long as (x) no Default or Event of Default is continuing or would result from the payment of such dividends or distributions and (y) after giving effect to the payment of such dividends or distributions, Borrower would be in compliance (determined on a pro forma basis after giving effect to such payment) with a Total Debt Ratio not to exceed 2.00:1.00.

 

Section 5.8.          PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets now owned or hereafter acquired, except the following (collectively, “Permitted Liens”): (a) any of the foregoing, in or upon assets, in favor of the holder of any Additional Debt Facility or Asset Based Credit Facility permitted under Section 5.3, (b) security interests in assets not constituting intellectual property securing indebtedness permitted under Section 5.3(c) herein (provided that (i) such security shall be created substantially simultaneously with the acquisition of the related property, (ii) such security interests do not at any time encumber any property other than the property financed and the proceeds thereof, (iii) the amount of indebtedness secured thereby is not increased, except in connection with a refinancing or replacement thereof that does not exceed the amount specified in Section 5.3(c) and (iv) the principal amount of indebtedness secured by any such security interest shall at no time exceed one hundred percent (100%) of the original price for the purchase of such property(including customary fees, costs and expenses) at the time of purchase), (c) deposits or pledges to secure payment of workers’ compensation, unemployment insurance, old age pensions or other social security obligations, in the ordinary course of business of Borrower, (d) liens for taxes, fees, assessments and governmental charges not delinquent or to the extent that payment therefor shall not at the time be required to be made in accordance with , the provisions of Section 4.7, (e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens arising in the ordinary course of business, for sums not due or to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 4.7, (f) liens upon assets not constituting intellectual property incurred, or deposits or pledges made or given in connection with, or to secure payment of, indemnity, performance or other similar bonds, (g) liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restriction against access by Borrower in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by Borrower to provide collateral to the depository institution, (h) encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of real property and landlord’s liens under leases on the premises rented, which do not materially detract from the value of such property or impair the use thereof in the business of Borrower, (i) leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another person or entity, in the ordinary course of such person or entity’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than intellectual property) granted in the ordinary course of Borrower’s business (or, if referring to another person or entity, in the ordinary course of such person or entity’s business), (j) non-exclusive licenses of intellectual property rights granted to third parties in the ordinary course of business not interfering, individually or in the aggregate, in any material respect with the conduct of the business of Borrower, (k) liens with respect to security deposits given by Borrower to secure real estate leases not exceeding $1,000,000.00 in the aggregate outstanding at any time, (l) deposits with Rocky Mountain Power in an amount up to $150,000 in connection with the change of the name of Borrower’s account with Rocky Mountain Power from Edizone to Borrower and (m) exclusive licenses of intellectual property by or to EdiZONE, LLC existing on the date of this Agreement and described on Schedule 5.8(m) hereto.

 

  - 11 -  

 

 

Section 5.9.          RESTRICTIONS ON ENCUMBRANCE OF INTELLECTUAL PROPERTY. Without in any way limiting the generality of Section 5.8 hereof, mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s intellectual property, including, without limitation, patents, trademarks, copyrights, service marks and trade secrets, whether now owned or hereafter acquired, except (a) non-exclusive licenses of intellectual property rights granted to third parties in the ordinary course of business not interfering, individually or in the aggregate, in any material respect with the conduct of the business of Borrower and (b) exclusive licenses permitted by Section 5.8(m) hereof.

 

Section 5.10.          TRANSACTIONS WITH AFFILIATES. Directly or indirectly: (i) pay any funds to or for the account of any Affiliate, (ii) make any Investment in any Affiliate (whether by acquisition of equity interests or Debt, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt or otherwise), (iii) dispose of any property, tangible or intangible, to or from any Affiliate or (iv) participate in, or effect, any transaction with any Affiliate (transactions of the nature described in clauses (i) through (iv), “ Affiliate Transactions ”), except for (a) Affiliate Transactions entered into on an arm’s-length (or better) basis and provided that all of the material terms thereof could have been obtained from a third party that was not an Affiliate, (b) the GPAC Merger, (c) transactions described in Section 5.8(m) or (d) the commercial real estate lease existing on the date hereof (without any modification thereto) between the Borrower and TNT Holdings LLC. As used herein, “Affiliate” means, with respect to a specified person at any time, another person that directly or indirectly through one or more intermediaries, Controls or is Controlled by, or is under common Control with, the person specified, and “ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ability to exercise voting power, by contract or otherwise.

 

  - 12 -  

 

 

Article VI
EVENTS OF DEFAULT

 

Section 6.1.          The occurrence of any of the following shall constitute an “Event of Default” under this Agreement and any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default shall constitute a “Default” under this Agreement:

 

(a)         Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents, and, except as to principal, such failure shall continue unremedied for three (3) business days.

 

(b)         Any financial statement or certificate furnished to Lenders in connection with, or any representation or warranty made by Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

 

(c)         Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an “Event of Default” in this section 6.1), and with respect to any such default that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence.

 

(d)         Any default in the payment or performance of any obligation, or any defined event of default, under the terms of any contract, instrument or document (other than any of the Loan Documents) pursuant to which Borrower has incurred any debt or other liability to any person or entity, including Lenders, and such default shall continue beyond any grace period applicable thereto.

 

(e)         Borrower shall become insolvent, or shall suffer or consent to or apply for the appointment of a receiver, trustee, custodian or liquidator of itself or any of its property, or shall generally fail to pay its debts as they become due, or shall make a general assignment for the benefit of creditors; Borrower shall file a voluntary petition in bankruptcy, or seeking reorganization, in order to effect a plan or other arrangement with creditors or any other relief under the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time (“Bankruptcy Code”), or under any state or federal law granting relief to debtors, whether now or hereafter in effect; or Borrower shall file an answer admitting the jurisdiction of the court and the material allegations of any involuntary petition; or Borrower shall be adjudicated a bankrupt, or an order for relief shall be entered against Borrower by any court of competent jurisdiction under the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors.

 

(f)         The filing of a notice of judgment lien in excess of $100,000 against Borrower and same shall not be vacated or stayed within 30 days after the attachment thereof; or the recording of any abstract or transcript of judgment in excess of $100,000 against Borrower in any county or recording district in which Borrower has an interest in real property and such judgment and same shall not be vacated or stayed within 30 days after the attachment thereof; or the service of a notice of levy and/or of a writ of attachment or execution, or other like process, against the assets of Borrower having a value exceeding $100,000 and same shall not be vacated or stayed within 30 days after the attachment thereof; or the entry of a judgment against Borrower in excess of $100,000 and same shall remain unsatisfied or undismissed for 30 days; or any involuntary petition or proceeding pursuant to the Bankruptcy Code or any other applicable state or federal law relating to bankruptcy, reorganization or other relief for debtors is filed or commenced against Borrower and same shall not be stayed or dismissed within 60 days.

 

  - 13 -  

 

 

(g)         The dissolution or liquidation of Borrower; or Borrower, or any of its directors, stockholders or members shall take action seeking to effect the dissolution or liquidation of Borrower (it being understood that the GPAC Merger does not effect a dissolution or liquidation of Borrower).

 

(h)         The occurrence of a Change of Control. “Change of Control” shall mean the withdrawal, resignation or expulsion of any one or more of the general partners in Borrower or any change in control of Borrower or any entity or combination of entities that directly or indirectly control Borrower, with “control” defined as ownership of an aggregate of twenty-five percent (25%) or more of the common stock, members’ equity or other ownership interest (other than a limited partnership interest); provided, however, that in no event shall a “Change of Control” of Borrower occur in connection with either (i) the exchange by InnoHold, LLC (or any successor thereto) of Class B Common Stock of Parent Guarantor and Class B Units of Borrower for Class A Common Stock of Parent Guarantor or (ii) a transfer by InnoHold, LLC of its interests in Borrower to an estate planning entity controlled by a member of InnoHold, LLC.

 

Section 6.2.          REMEDIES. Upon the occurrence and during the continuation of any Event of Default: (a) all principal, unpaid interest outstanding and other indebtedness of Borrower under each of the Loan Documents, any term thereof to the contrary notwithstanding, shall at the Majority Lenders’ option and without notice become immediately due and payable without presentment, demand, protest or any notices of any kind, including without limitation, notice of nonperformance, notice of protest, notice of dishonor, notice of intention to accelerate or notice of acceleration, all of which are hereby expressly waived by Borrower; (b) the obligation, if any, of Lenders to extend any further credit under any of the Loan Documents shall immediately cease and terminate; and (c) Lenders shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to exercise any or all of the rights of a beneficiary (provided, such exercise shall be by Majority Lenders on behalf of all other applicable Lenders) pursuant to applicable law. All rights, powers and remedies of Lenders may be exercised at any time by the Majority Lenders and from time to time during the continuance of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

 

Article VII
MISCELLANEOUS

 

Section 7.1.          NO WAIVER. No delay, failure or discontinuance of any Lender in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by such Lender of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

 

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Section 7.2.          NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

 

BORROWER: PURPLE INNOVATION, LLC

 

123 East 200 North 

Alpine, Utah 84004 

Attn: Manager

 

LENDERS: COLISEUM CAPITAL PARTNERS, L.P.

 

105 Royaton Avenue 

Royaton, CT 06853 

Attn: Adam Gray 

Email: agray@coliseumpartners.com

 

BLACKWELL PARTNERS LLC – SERIES A

 

c/o Coliseum Capital Management, LLC 

105 Royaton Avenue 

Royaton, CT 06853 

Attn: Adam Gray 

Email: agray@coliseumpartners.com

 

COLISEUM CO-INVEST DEBT FUND, L.P.

 

c/o Coliseum Capital Management, LLC 

105 Royaton Avenue 

Royaton, CT 06853 

Attn: Adam Gray 

Email: agray@coliseumpartners.com

 

 

or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy or e-mail, upon receipt.

 

Section 7.3.          COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Lenders immediately upon demand (a) the full amount of all reasonable out-of-pocket payments, advances, charges, costs and expenses, including, to the extent permitted by applicable law, reasonable attorneys’ fees, expended or incurred by Lenders in connection with the negotiation and preparation of (i) this Agreement and the other Loan Documents (in an aggregate principal amount under this clause (a)(i) not to exceed $350,000), (ii) Lenders’ continued administration hereof and thereof, and (iii) the preparation of any amendments and waivers hereto and thereto, (b) the full amount of all out-of-pocket payments, advances, charges, costs and expenses, including, to the extent permitted by applicable law, attorneys’ fees, expended or incurred by Lenders in connection with the enforcement of Lenders’ rights and/or the collection of any amounts which become due to Lenders (or any of them) under any of the Loan Documents, whether or not suit is brought, and (c) the full amount of all out-of-pocket payments, advances, charges, costs and expenses, including, to the extent permitted by applicable law, attorneys’ fees), expended or incurred by Lenders (or any of them) in connection with the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by any Lender or any other person) relating to Borrower or any other person or entity and related to any of the Loan Documents. Notwithstanding anything in this Agreement to the contrary, reasonable attorneys’ fees shall not exceed the amount permitted by law.

 

  - 15 -  

 

 

Section 7.4.          SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Borrower may not assign or transfer its interests or rights hereunder without Lenders’ prior written consent. Each Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, such Lender’s rights and benefits under each of the Loan Documents with the prior written consent of the Borrower (which consent shall not be unreasonably withheld, conditioned or delayed and shall not be required if (a) an Event of Default is continuing or (b) such assignment or participation is to an affiliate of a Lender). In connection therewith, the applicable Lender may disclose all documents and information which such Lender now has or may hereafter acquire relating to any credit subject hereto, Borrower or its business, any guarantor hereunder or the business of such guarantor, provided that prior to disclosing such documents and information, the Lender shall first obtain the agreement of such prospective assignee, participant or other transferee to comply with the provisions of Section 7.12. Upon any such assignment, the applicable Lender shall deliver an updated Schedule 1.1 to Borrower reflecting such assignment.

 

Section 7.5.          ENTIRE AGREEMENT; AMENDMENT. To the full extent permitted by law, this Agreement and the other Loan Documents constitute the entire agreement between Borrower and Lenders with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof. This Agreement may be amended or modified only in writing signed by each party hereto, except that Borrower and Lenders holding not less than a majority in interest of the Loan (the “Majority Lenders”) may agree to amendments or waivers that do not (a) extend the date of any payment or prepayment required hereunder or (b) decrease the principal amount of the Loan, the interest rate hereunder or the amount of any prepayment or repayment premium.

 

Section 7.6.          NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

 

Section 7.7.          TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

 

  - 16 -  

 

 

Section 7.8.          SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

 

Section 7.9.          COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

 

Section 7.10.          GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. BORROWER AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS AGREEMENT.

 

Section 7.11.          BUSINESS PURPOSE. Borrower represents and warrants that each credit subject hereto is made for (a) a business, commercial, investment, agricultural or other similar purpose, (b) the purpose of acquiring or carrying on a business, professional or commercial activity, or (c) the purpose of acquiring any real or personal property as an investment and not primarily for a personal, family or household use.

 

Section 7.12.          CONFIDENTIALITY OF INFORMATION. Each Lender shall use reasonable efforts to assure that information about Borrower or the Parent Guarantor and their respective operations, affairs and financial condition, not generally disclosed to the public or to trade and other creditors, that is furnished to such Lender pursuant to the provisions hereof is used only for the purposes of this Agreement and the other Loan Documents and any other relationship between such Lender and Borrower or the Parent Guarantor and shall not be divulged to any person or entity other than such Lender, its affiliates and their respective officers, directors, employees and agents, except: (a) to their attorneys and accountants; (b) in connection with the enforcement of the rights of such Lender hereunder and under the Loan Documents or otherwise in connection with applicable litigation; (c) in connection with assignments and participations and the solicitation of prospective assignees and participants referred to in Section 7.4 hereof; (d) if such information is generally available to the public other than as a result of disclosure by such Lender; (e) to any direct or indirect contractual counterparty in any hedging arrangement or such contractual counterparty’s professional advisor; and (f) as may otherwise be required or requested by any regulatory authority having jurisdiction over such Lender or by any applicable law, rule, regulation or judicial process, the opinion of such Lender’s counsel concerning the making of such disclosure to be binding on the parties hereto. No Lender shall incur any liability to Borrower by reason of any disclosure permitted by this Section.

 

[Continues With Signatures On Following Page]

  - 17 -  

 

 

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed as of the day and year first written above.

 

  PURPLE INNOVATION, LLC
     
  By: /s/ Samuel D. Bernards
    Samuel D. Bernards
    Chief Executive Officer
     
  COLISEUM CAPITAL PARTNERS, L.P.
  By: Coliseum Capital, LLC, its General Partner

   

  By:  /s/ Adam Gray
    Name: Adam Gray
    Title:  Manager
     
  BLACKWELL PARTNERS LLC – Series A
  By: Coliseum Capital Management, LLC, its Attorney-in-Fact

  

  By: /s/ Adam Gray
    Name: Adam Gray
    Title:   Manager
     
  COLISEUM CO-INVEST DEBT FUND, L.P.
  By: Coliseum Capital, LLC, its General Partner

  

  By: /s/ Adam Gray
    Name:  Adam Gray
    Title:  Manager

 

  - 18 -  

 

 

Exhibit A

 

[Form of]

 

PARENT GUARANTY

 

For value received, PURPLE INNOVATION, INC. (“Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment in cash when due, whether by acceleration or otherwise, of all obligations and liabilities (the “Guaranteed Obligations”), whether now in existence or hereafter arising, of PURPLE INNOVATION, LLC, a limited liability company organized under the laws of the State of Delaware (“Borrower”) to Lenders (as defined below) under and arising out of or under that certain Credit Agreement, among Borrower, COLISEUM CAPITAL PARTNERS, L.P. (“CCP”), BLACKWELL PARTNERS LLC – SERIES A (“Blackwell”) and COLISEUM CO-INVEST DEBT FUND, L.P. (and together with CCP and Blackwell, and their respective successors and assigns, “Lenders”) dated as of the date hereof according to the terms thereof (as in effect on the date hereof, and as otherwise amended, restated, supplemented or otherwise modified, the “Credit Agreement”). Capitalized terms used in this Guaranty but not defined in this Guaranty shall have the meanings ascribed to such terms in the Credit Agreement. This Guaranty is one of payment and not of collection.

 

Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by any Lender against, and any other notice to, Borrower, Guarantor or others.

 

Lenders may at any time and from time to time without notice to or consent of Guarantor and without impairing or releasing the obligations of Guarantor hereunder: (1) agree with Borrower to make any change in the terms of any obligation or liability of Borrower to Lenders, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of Borrower to Lenders, (3) exercise or refrain from exercising any rights against Borrower or others, or (4) compromise or subordinate any obligation or liability of Borrower to Lenders including any security therefor. Any other suretyship defenses (other than irrevocable payment in full) are hereby waived by Guarantor.

 

This Guaranty shall continue in full force and effect until the Guaranteed Obligations are satisfied, defeased, discharged or otherwise terminated, and automatically, upon such satisfaction, defeasement, discharge or termination, without any action by any person, the obligations and liabilities of Guarantor under this Guaranty shall automatically terminate. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above which shall have been incurred prior to such termination.

 

  - 1 -  

 

 

Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of Lenders, and any purported assignment or delegation absent such consent is void, except for an assignment and delegation of all of Guarantor’s rights and obligations hereunder in whatever form Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise. Upon any such delegation and assumption of obligations, Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption.

 

Guarantor hereby represents as follows:

 

(a) Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Delaware and has full power and authority to execute and deliver this Guaranty.

 

(b) The execution and delivery of this Guaranty have been and remain duly authorized by all necessary action and do not contravene any provision of Guarantor’s certificate of incorporation or by-laws, as amended to date, or any law, regulation, decree, order, judgment, resolution or any contractual restriction binding on Guarantor or its assets that could affect, in a materially adverse manner, the ability of Guarantor to perform any of its obligations hereunder.

 

(c) All consents, licenses, clearances, authorizations, and approvals of, and registration and declarations with, any governmental or regulatory authority necessary for the due execution and delivery of this Guaranty have been obtained and remain in full force and effect and all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with, any governmental or regulatory authority is required in connection with the execution or delivery of this Guaranty.

 

(d) This Guaranty constitutes the legal, valid, and binding obligation of Guarantor, enforceable against Guarantor in accordance with all of its terms and conditions (subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally). The enforceability of Guarantor’s obligations is also subject to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.

 

  - 2 -  

 

 

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed as of the day and year first written above.

 

PURPLE INNOVATION INC.  
     
By:        
  Name:  
  Title:  

 

  - 3 -  

 

 

EXHIBIT B

FORM OF COMPLIANCE CERTIFICATE
 

I am an officer of PURPLE INNOVATION, LLC (“Borrower”). Under the terms of that certain Credit Agreement dated as of February 2, 2018, by and among Borrower and COLISEUM CAPITAL PARTNERS, L.P., BLACKWELL PARTNERS LLC-SERIES A and COLISEUM CO-INVEST DEBT FUND, L.P. (the “Agreement”), I hereby certify that:

 

1.         The attached financial statements of Borrower dated as of ______________ (the “Statement Date”) are true and correct in all material respects and have been accurately prepared in accordance with generally accepted accounting principles and used consistently with prior practices.

 

2.         Unless expressly stated otherwise in a written statement attached to this Certificate, all representations and warranties contained in the Agreement remain true and correct in all material respects, and as of the date hereof there exists no default or defined event of default under the Agreement or any promissory note or other contract, instrument or document executed in connection therewith, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute such a default or defined event of default.

 

PURPLE INNOVATION, LLC      
         
By:                        Date:                    
Title:        

 

 - 1 -

 

Exhibit 10.11

 

PARENT GUARANTY

 

February 2, 2018

 

For value received, PURPLE INNOVATION, INC. (“Guarantor”), a corporation duly organized under the laws of the State of Delaware, hereby unconditionally guarantees the prompt and complete payment in cash when due, whether by acceleration or otherwise, of all obligations and liabilities (the “Guaranteed Obligations”), whether now in existence or hereafter arising, of PURPLE INNOVATION, LLC, a limited liability company organized under the laws of the State of Delaware (“Borrower”) to Lenders (as defined below) under and arising out of or under that certain Credit Agreement, among Borrower, COLISEUM CAPITAL PARTNERS, L.P. (“CCP”), BLACKWELL PARTNERS LLC – SERIES A (“Blackwell”) and COLISEUM CO-INVEST DEBT FUND, L.P. (and together with CCP and Blackwell, and their respective successors and assigns, “Lenders”) dated as of the date hereof according to the terms thereof (as in effect on the date hereof, and as otherwise amended, restated, supplemented or otherwise modified, the “Credit Agreement”). Capitalized terms used in this Guaranty but not defined in this Guaranty shall have the meanings ascribed to such terms in the Credit Agreement. This Guaranty is one of payment and not of collection.

 

Guarantor hereby waives notice of acceptance of this Guaranty and notice of any obligation or liability to which it may apply, and waives presentment, demand for payment, protest, notice of dishonor or non-payment of any such obligation or liability, suit or the taking of other action by any Lender against, and any other notice to, Borrower, Guarantor or others.

 

Lenders may at any time and from time to time without notice to or consent of Guarantor and without impairing or releasing the obligations of Guarantor hereunder: (1) agree with Borrower to make any change in the terms of any obligation or liability of Borrower to Lenders, (2) take or fail to take any action of any kind in respect of any security for any obligation or liability of Borrower to Lenders, (3) exercise or refrain from exercising any rights against Borrower or others, or (4) compromise or subordinate any obligation or liability of Borrower to Lenders including any security therefor. Any other suretyship defenses (other than irrevocable payment in full) are hereby waived by Guarantor.

 

This Guaranty shall continue in full force and effect until the Guaranteed Obligations are satisfied, defeased, discharged or otherwise terminated, and automatically, upon such satisfaction, defeasement, discharge or termination, without any action by any person, the obligations and liabilities of Guarantor under this Guaranty shall automatically terminate. It is understood and agreed, however, that notwithstanding any such termination this Guaranty shall continue in full force and effect with respect to the obligations and liabilities set forth above which shall have been incurred prior to such termination.

 

Guarantor may not assign its rights nor delegate its obligations under this Guaranty, in whole or in part, without prior written consent of Lenders, and any purported assignment or delegation absent such consent is void, except for an assignment and delegation of all of Guarantor’s rights and obligations hereunder in whatever form Guarantor determines may be appropriate to a partnership, corporation, trust or other organization in whatever form that succeeds to all or substantially all of Guarantor’s assets and business and that assumes such obligations by contract, operation of law or otherwise. Upon any such delegation and assumption of obligations, Guarantor shall be relieved of and fully discharged from all obligations hereunder, whether such obligations arose before or after such delegation and assumption.

Guarantor hereby represents as follows:

 

(a) Guarantor is duly organized, validly existing, and in good standing under the laws of the State of Delaware and has full power and authority to execute and deliver this Guaranty.

 

 

 

 

(b) The execution and delivery of this Guaranty have been and remain duly authorized by all necessary action and do not contravene any provision of Guarantor’s certificate of incorporation or by-laws, as amended to date, or any law, regulation, decree, order, judgment, resolution or any contractual restriction binding on Guarantor or its assets that could affect, in a materially adverse manner, the ability of Guarantor to perform any of its obligations hereunder.

 

(c) All consents, licenses, clearances, authorizations, and approvals of, and registration and declarations with, any governmental or regulatory authority necessary for the due execution and delivery of this Guaranty have been obtained and remain in full force and effect and all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with, any governmental or regulatory authority is required in connection with the execution or delivery of this Guaranty.

 

(d) This Guaranty constitutes the legal, valid, and binding obligation of Guarantor, enforceable against Guarantor in accordance with all of its terms and conditions (subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally). The enforceability of Guarantor’s obligations is also subject to the effect of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW. GUARANTOR AGREES TO THE EXCLUSIVE JURISDICTION OF COURTS LOCATED IN THE STATE OF NEW YORK, UNITED STATES OF AMERICA, OVER ANY DISPUTES ARISING UNDER OR RELATING TO THIS GUARANTY.

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have caused this Agreement to be executed as of the day and year first written above.

 

PURPLE INNOVATION INC.  
 

 

 
By: /s/ Samuel D. Bernards  
  Name: Samuel D. Bernards
Title: Chief Executive Officer
 

 

 

 

[Signature Page to Parent Guaranty]

 

 

Exhibit 10.12

 

SUBSCRIPTION

 

AND

 

BACKSTOP AGREEMENT

 

This Subscription and Backstop Agreement (this “ Agreement ”), made as of January 29, 2018 by and among Global Partner Acquisition Corp., a Delaware corporation (the “ Company ”), Global Partner Sponsor I LLC, a Delaware limited liability company (the “ Sponsor ”), and the Subscribers identified on the signature pages hereto (individually, a “ Subscriber ” and collectively, the “ Subscribers ”), is intended to set forth certain representations, covenants and agreements among the Company, the Sponsor and the Subscribers:

 

(i) with respect to the acquisition by the Subscribers of shares of common stock of the Company, par value $0.0001 per share (the “ Common Stock ”), through the open market and private transactions described in Section 2 hereof; and

 

(ii) with respect to the private offering of shares of Common Stock (the “ Common Offering ”) for sale by the Company and the purchase of such shares by the Subscribers, pursuant to Section 3 hereof.

 

The respective representations, covenants and agreements set forth herein are made in connection with the Company’s proposed business combination with Purple Innovation, LLC, a Delaware limited liability company (“ Purple ”), pursuant to that certain Agreement and Plan of Merger dated as of November 2, 2017, by and among the Company, Purple, PRPL Acquisition, LLC, InnoHold LLC and the Sponsor (solely in its capacity as the Parent Representative) (as amended, the “ Merger Agreement ”; such business combination, the “ Merge r”, and the consummation of the Merger in accordance with the terms of the Merger Agreement, the “ Merger Closing ”).

 

In consideration of the respective representations, covenants and agreements contained herein, and subject to the terms and conditions hereof, the Subscribers, the Sponsor, and the Company hereby agree as follows:

 

1.   Transfer and Voting of Common Stock .

 

(a)  Each of the Subscribers covenants and agrees that until the earlier of (i) the Merger Closing and (ii) the Termination Date (as defined below), it shall not, and shall ensure that its Affiliates do not, Transfer any Common Stock. For purposes hereof, “ Affiliate ” shall mean affiliate as such term is defined in Rule 12b-2 under the Exchange Act (as defined below) and “ Transfer ” shall mean any direct or indirect transfer, redemption, disposition or monetization in any manner whatsoever, including, without limitation, through redemption election or any derivative transactions.

 

 

 

(b)  Each of the Subscribers covenants and agrees that it shall, and shall cause each of its Affiliates to, (A) vote all the Common Stock, if any, that it or they owned on the record date for the special meeting of stockholders to be held by the Company to approve, among other things, the Merger (the “ Special Meeting ”) in favor of (x) the Merger, pursuant to a proxy statement filed by the Company with the Securities and Exchange Commission (the “ SEC ”) in connection with the Special Meeting, as supplemented by definitive additional materials filed with the Exchange through the date hereof (the “ Proxy Statement ”) and (y) each of the other proposals of the Company set forth in the Proxy Statement, and (B) not exercise its or their redemption rights in any Common Stock in connection with the Special Meeting or the Merger.

 

2.   Backstop

 

Commencing on the date hereof and the close of business on the third Trading Day prior to the Special Meeting (“ Backstop Deadline ”), each of the Subscribers shall (provided it is lawful to do so) use reasonable best efforts to purchase the number of shares of Common Stock of the Company set forth opposite its name on the signature page hereto (the “ Backstop Purchase ”) in the open market (the “ Open Market Shares ”) or in privately negotiated transactions with third parties, including forward contracts (the “ Private Purchase Shares ”, and collectively with the Open Market Shares, the “ Backstop Shares ”), provided that: such transactions settle no later than, or are conditioned upon, the Merger Closing. On the date immediately following the Backstop Deadline and promptly at other times requested by the Company from time to time, (x) notify the Company in writing of the number of Open Market Shares and Private Purchase Shares so purchased and (y) provide the Company, for all Backstop Shares acquired, all documentary evidence reasonably requested by the Company and its advisors (including without limitation, its legal counsel) and its transfer agent and proxy solicitor to confirm that each Subscriber has purchased, or has contracted to purchase, such shares. For purposes hereof, “ Trading Day ” shall mean a day during which trading in the Common Stock generally occurs on the NASDAQ Capital Market or, if the Common Stock is not listed on the NASDAQ Capital Market, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the principal other market on which the Common Stock is then listed or admitted for trading.

 

3.   Subscription

 

(a)  Subject to the terms and conditions set forth in this Agreement, each Subscriber hereby irrevocably subscribes for and agrees to purchase from the Company the number of shares of Common Stock of the Company set forth opposite its name on the signature page hereto, less the number of Backstop Shares purchased by it pursuant to Section 2 hereof, at a purchase price of $10.00 per share, and the Company agrees to sell such shares to each such Subscriber at such price (the shares of Common Stock to be so sold, the “ Subject Shares ”), subject to the Company’s right to determine not to consummate such sale if the Merger Closing does not occur. For the avoidance of doubt, if the Merger Closing does not occur, then the Subscribers’ obligations to purchase, and the Company’s obligation to issue, shares pursuant to the foregoing sentence are extinguished. Any such purchase shall be consummated simultaneously with the Merger Closing.

 

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(b)  Each Subscriber acknowledges that, in connection with the Merger, the Common Stock of the Company will be renamed “Class A Common Stock,” as described in the Proxy Statement.

 

4.   Delivery of Subscription Amount; Acceptance of Subscriptions; Delivery . Each Subscriber understands and agrees that this subscription is made subject to the following terms and conditions:

 

(a)  Contemporaneously with the execution and delivery of this Agreement, each Subscriber shall execute and deliver the Investor Questionnaire (as defined below) and, in respect of subscription set forth in Section 3 hereof, each Subscriber shall, on or before January 31, 2018 (the “ Funding Date ”) cause a wire transfer to be made for payment for the Subject Shares in immediately available funds in the amount equal to $10.00 multiplied by the number of Subject Shares to be purchased by such Subscriber pursuant to the above Subscription (the “ Subscription Amount ”), in each case in accordance with the Subscription Instructions set forth on Exhibit A hereto. The payments provided for in this Section 4(a) shall be maintained in escrow with Continental Stock Transfer & Trust Company (or other nationally recognized escrow agent with whom in all cases, whether with Continental Stock Transfer & Trust Company or otherwise, the Company shall have an escrow agreement in place for purposes hereof, which such agreement shall be on reasonable and customary terms) pending the Merger Closing.

 

(b)  The subscription of each Subscriber for the Subject Shares shall be deemed to be accepted only (and shall not otherwise be accepted by the Company except) when (i) the Company has confirmed in writing to such Subscriber that the Company’s representations and warranties contained herein are, or shall be, true and correct as of the date of the acceptance of such subscription and (ii) there occurs the substantially simultaneous Merger Closing. If such acceptances do not occur on or prior to the earliest of (x) the Merger Closing or (y) the date on which the Merger Agreement is terminated in accordance with its terms (the “ Termination Date ”), the Subscribers’ subscriptions shall automatically be deemed rejected (the “ Subscription Rejection ”).

 

(c)  The payment of the Subscription Amount (or a portion thereof, as applicable) will be returned promptly, without interest, to the Subscribers if the applicable subscriptions are rejected in whole or in part or if the Common Offering is withdrawn or canceled.

 

(d)  The representations and warranties of the Company and the Subscribers set forth herein shall be true and correct as of the date that the Company accepts the subscriptions set forth herein.

 

5.   Consideration . In order to induce the Subscribers to enter into this Agreement, and subject to the Subscribers’ full compliance with each of their obligations hereunder, the Sponsor agrees that it will, as soon after the Merger Closing as may be practicable, assign and transfer to the Subscribers such number of sponsor warrants as are allocated as set forth on the signature pages hereto, entitling the holder to purchase shares of Common Stock (such sponsor warrants, the “ Sponsor Warrants ”); all such Sponsor Warrants (and the shares of Common Stock underlying the Sponsor Warrants) shall be subject to the same lock-up and transfer restrictions currently applicable to the Sponsor Warrants and shall be entitled to the same registration rights currently applicable to the Sponsor Warrants. In connection with the assignment of Sponsor Warrants, the parties and the warrant agent shall enter into an Agreement to Assign Sponsor Warrants in the form of Exhibit C hereto.

 

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6.   Expenses . Each party hereto shall pay all of its own expenses in connection with this Agreement and the transactions contemplated hereby.

 

7.   Registration Rights .

 

(a)  As soon as practicable following the Merger Closing, the Company and the Subscribers shall execute and deliver a registration rights agreement with respect to the Subject Shares and Sponsor Warrants, in substantially the form of the Registration Rights Agreement annexed as Annex G to the Company’s proxy statement dated January 16, 2018 and filed with the SEC (collectively, the “ Registration Rights Agreement ”), pursuant to which the Company shall agree under certain circumstances to register the resale of the Subject Shares and the Sponsor Warrants, each under the Securities Act of 1933, as amended (the “ Securities Act ”), and the rules and regulations promulgated thereunder, and applicable state securities laws.

 

(b)  None of the Subject Securities or the Sponsor Warrants may be directly or indirectly transferred, disposed of or otherwise monetized in any manner whatsoever, except in a transaction that is in compliance with the Securities Act and applicable state securities laws. Except as provided in the Registration Rights Agreement, it shall be a condition to any such transfer that the Company shall be furnished with a written opinion of counsel to the holder of such Subject Securities or Sponsor Warrants, reasonably satisfactory to the Company (as determined by the Company within 3 Business Days of its receipt of such written opinion), to the effect that the proposed transfer would be in compliance with the Securities Act and applicable state securities laws; provided that the Company shall not require such written opinion of counsel if, acting in its reasonable discretion, if determines that applicable Law does not prohibit any transfers of the Subject Shares or Sponsor Warrants at such time. “ Business Day ” shall mean any day that is not a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

 

8.   Representations, Warranties, Understandings, Risk Acknowledgments, and Covenants of the Subscribers . Each Subscriber hereby represents, warrants and covenants to the Company as follows:

 

(a)  Such Subscriber is purchasing the Subject Shares and the Sponsor Warrants for its own account, not as a nominee or agent, for investment purposes and not with a view towards distribution or resale within the meaning of the Securities Act (absent the registration of the Subject Shares or the Sponsor Warrants for resale under the Securities Act or a valid exemption from registration). Such Subscriber will not sell, assign or transfer such shares or securities at any time in violation of the Securities Act or applicable state securities laws. Such Subscriber acknowledges that the Subject Shares and Sponsor Warrants cannot be sold unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available.

 

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(b)  Such Subscriber understands that (A) the Subject Shares and the Sponsor Warrants (1) have not been registered under the Securities Act or any state securities laws, (2) have been offered and will be sold in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act, (3) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings and (4) must be held indefinitely because of the fact that the Subject Shares and the Sponsor Warrants have not been registered under the Securities Act or applicable state securities laws, and (B) such Subscriber must therefore bear the economic risk of its investment hereunder indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt therefrom. Such Subscriber further understands that such exemptions depend upon, among other things, the bona fide nature of the investment intent of such Subscriber expressed herein. Pursuant to the foregoing, such Subscriber acknowledges that until such time as the resale of the Subject Shares and the Sponsor Warrants have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to an exemption from registration, the certificates representing any Subject Shares or Sponsor Warrants acquired by each Subscriber shall bear a restrictive legend substantially as follows (and a stop-transfer order may be placed against transfer of the certificates evidencing such Subject Shares and Sponsor Warrants):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING:

 

BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

 

1. REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS AN ACCREDITED INVESTOR (AS SUCH TERM IS DEFINED IN RULE 501 UNDER THE SECURITIES ACT) WITHIN THE SCOPE OF SECTIONS (1), (2), (3) OR (7) of RULE 501, AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND

 

2. AGREES FOR THE BENEFIT OF GLOBAL PARTNER ACQUISITION CORP. (THE “COMPANY”) THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR OR SUCH OTHER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AFTER THE LAST DATE OF INITIAL ISSUANCE HEREOF, AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:

 

(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR

 

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(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR

 

(C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR

 

(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(B) ABOVE, THE COMPANY AND THE TRANSFER AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

(c)  Such Subscriber has knowledge, skill and experience in financial, business and investment matters relating to an investment of this type and is capable of evaluating the merits and risks of such investment and protecting the Subscribers’ interest in connection with the acquisition of the Subject Shares, Backstop Shares and Sponsor Warrants (including the Common Stock for which the Sponsor Warrants are exercisable), (collectively, the “ Securities ”). Such Subscriber understands that the acquisition of the Securities is a speculative investment and involves substantial risks and that each Subscriber could lose its entire investment. Further, the undersigned has (i) carefully read and considered the risks identified in the Disclosure Documents (as defined below) and (ii) carefully considered the risks related to the Merger, the Company, and Purple and has taken full cognizance of and understands all of the risks related to the Company, Purple, the Merger, the Securities and the transactions contemplated hereby, including, without limitation, the purchase of the Securities. Acknowledging the very significant tax impact analysis and other analyses that is warranted in determining the consequences to it of purchasing and owning the Securities, to the extent deemed necessary by the such Subscriber, such Subscriber has had the opportunity to retain, at its own expense, and relied upon, appropriate professional advice regarding the investment, tax and legal merits and consequences of the foregoing, including, without limitation, purchasing and owning the Securities. Such Subscriber has the ability to bear the economic risks of such Subscriber’s investment in the Company, including a complete loss of the investment, and such Subscriber has no need for liquidity in such investment.

 

(d)  Such Subscriber has been furnished by the Company all information (or provided access to all information it reasonably requested) regarding the business and financial condition of the Company and Purple, the Company’s expected plans for future business activities, and the merits and risks of an investment in the Securities which such Subscriber has reasonably requested or otherwise needs to evaluate the investment in the Securities.

 

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(e)  Such Subscriber is in receipt of and has carefully read and understands the following items (collectively, the “ Disclosure Documents ”):

 

(i)  the final prospectus of the Company in connection with the IPO, dated July 29, 2015, as filed with the SEC (the “ Final Prospectus ”);

 

(ii)  each filing made by the Company with the SEC following the filing of the Final Prospectus;

 

(iii)  the Merger Agreement (including any amendment thereto), a copy of which has been filed by the Company with the SEC; and

 

(iv)  the Proxy Statement (including any supplement thereto) and the amendments to the Certificate of Incorporation of the Company proposed to be voted on pursuant thereto, a copy of which has been filed by the Company with the SEC.

 

Such Subscriber understands the significant extent to which certain of the disclosures contained in items (i) and (ii) above shall no longer apply following the Closing in accordance with the Merger Agreement.

 

Such Subscriber acknowledges that neither the Company nor any of its Affiliates has made or makes any representation or warranty to such Subscriber in respect of the Company or Purple, the Merger, the Company upon, or relating to, the Merger, other than in the case of the Company, the representations and warranties contained in this Agreement.

 

(f)  In making its investment decision to purchase the Securities, such Subscriber is relying solely on investigations made by such Subscriber and such Subscriber’s representatives. The offer to sell or assign the Securities was communicated to the Subscribers in such a manner that each Subscriber was able to ask questions of and receive answers from the management of the Company concerning the terms and conditions of the proposed transaction and that at no time was any Subscriber presented with or solicited by or through any advertisement, article, leaflet, public promotional meeting, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or meeting or any other form of general or public advertising or solicitation.

 

(g)  Such Subscriber acknowledges that it has been advised that:

 

(i)  The Securities have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of any representations by the Company. Any representation to the contrary is a criminal offense.

 

(ii)  In making an investment decision, such Subscriber must rely on its own examination of the Company, the Sponsor, the Merger, Purple, the Securities and the Common Offering, including the merits and risks involved. The Securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of any representation. Any representation to the contrary is a criminal offense.

 

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(iii)  The Securities will be “restricted securities” within the meaning of Rule 144 under the Securities Act, are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. Such Subscriber is aware of the provisions of Rule 144 are not currently available and, in the future, may not become available for resale of any of the Subject Shares and that the Company is an issuer subject to Rule 144(i) under the Securities Act. Each Subscriber is aware that it may be required to bear the financial risks of this investment for an indefinite period of time.

 

(h)  Such Subscriber agrees to furnish the Company with such other information as the Company may reasonably request in order to verify the accuracy of the information contained herein and agrees to notify the Company immediately of any material change in the information provided herein that occurs prior to the acceptance of this Agreement by the Company.

 

(i)  Such Subscriber further represents and warrants that it is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act, and such Subscriber has executed the Investor Questionnaire attached hereto as Exhibit B (the “ Investor Questionnaire ”) and shall provide to the Company an updated Investor Questionnaire for any change in circumstances at any time on or prior to the Merger Closing.

 

(j)  As of the date of this Agreement, such Subscriber and its Affiliates do not have, and during the 30 day period prior to the date of this Agreement, such Subscriber and its Affiliates have not, in a seller, transferor or other similar capacity, entered into, any “put equivalent position” as such term is defined in Rule 16a-1 of under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) or short sale positions with respect to the securities of the Company. In addition, such Subscriber shall comply with all applicable provisions of Regulation M promulgated under the Securities Act.

 

(k)  If such Subscriber is a natural person, he or she has reached the age of majority in the state in which such Subscriber resides, has adequate means of providing for such Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Securities for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

 

(l)  If such Subscriber is a partnership, corporation, trust, estate or other entity (an “ Entity ”): (i) such Entity has the full legal right and power and all authority and approval required (a) to execute and deliver, or authorize execution and delivery of, this Agreement and all other instruments executed and delivered by or on behalf of such Entity in connection with the purchase of the Securities, (b) to delegate authority pursuant to power of attorney and (c) to purchase and hold such Securities; (ii) the signature of the party signing on behalf of such Entity is binding upon such Entity; and (iii) such Entity has not been formed for the specific purpose of acquiring such Securities unless each beneficial owner of such entity is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, is qualified as an accredited investor within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act and has submitted information substantiating such individual qualification.

 

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(m)  If such Subscriber is a retirement plan or is investing on behalf of a retirement plan, such Subscriber acknowledges that investment in the Securities poses additional risks including the inability to use losses generated by an investment in the Securities to offset taxable income.

 

(n)  This Agreement has been duly authorized, executed and delivered by each Subscriber and constitutes a legal, valid and binding obligation of such Subscriber enforceable against such Subscriber in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in Law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.

 

(o)  Such Subscriber understands and confirms that the Company will rely on the representations and covenants contained herein in effecting the transactions contemplated by this Agreement and the other Transaction Documents (as defined herein). All representations and warranties provided to the Company furnished by or on behalf of such Subscriber, taken as a whole, are true and correct and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

(p)  Neither such Subscriber nor, to the extent it has them, any of its shareholders, members, managers, general or limited partners, directors, Affiliates or executive officers (collectively with such Subscriber, the “ Subscriber Covered Persons ”), are subject to any of the “Bad Actor” disqualifications described in Rule 506(d) under the Securities Act (a “ Disqualification Event ”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3).

 

(q)  Such Subscriber has exercised reasonable care to determine whether any Subscriber Covered Person is subject to a Disqualification Event.

 

(r)  The purchase of Securities by such Subscriber will not subject the Company to any Disqualification Event.

 

(s)  As of the date hereof, except as heretofore disclosed to the Company in writing, such Subscriber does not own, directly or indirectly, any shares of Common Stock or securities exercisable or exchangeable for, or convertible into, shares of Common Stock, nor has such Subscriber entered into any contract, commitment or agreement with respect to the purchase or other acquisition of any such securities.

 

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(t)   Waiver Against Trust . Reference is made to the Final Prospectus. Such Subscriber represents and warrants that it has read the Final Prospectus and understands that Company has established the Trust Account containing the proceeds of the IPO (including interest accrued from time to time thereon) for the benefit of the Public Stockholders and that, except as otherwise described in the Final Prospectus, the Company may disburse monies from the Trust Account only: (a) to the Public Stockholders in the event they elect to redeem their Ordinary Shares in connection with the consummation of its Business Combination, (b) to the Public Stockholders if the Company fails to consummate a Business Combination by February 5, 2018, (c) to pay any taxes and for working capital purposes from the interest accrued in the Trust Account, and (d) to the Company after or concurrently with the consummation of its Business Combination. For and in consideration of the Company entering into this Agreement and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Subscriber hereby agrees on behalf of itself and its Affiliates that, notwithstanding anything to the contrary in this Agreement, neither the Subscriber nor its Affiliates does now or shall at any time hereafter have any right, title, interest or claim of any kind in or to any monies in the Trust Account or distributions therefrom, or make any claim against the Trust Account (including any distributions therefrom), regardless of whether such claim arises as a result of, in connection with or relating in any way to, any proposed or actual business relationship between the Company or its representatives, on the one hand, and the Subscriber or its representatives, on the other hand, this Agreement or any other matter, and regardless of whether such claim arises based on contract, tort, equity or any other theory of legal liability (any and all such claims are collectively referred to hereafter as the “ Released Claims ”). The Subscriber on behalf of itself and its Affiliates hereby irrevocably waives any Released Claims that the Subscriber or its Affiliates may have against the Trust Account (including any distributions therefrom) now or in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company or its representatives and will not seek recourse against the Trust Account (including any distributions therefrom) for any reason whatsoever (including for an alleged breach of this Agreement or any other agreement with the Company or its Affiliates). Such Subscriber agrees and acknowledges that such irrevocable waiver is material to this Agreement and specifically relied upon by the Company and its Affiliates to induce the Company to enter in this Agreement, and the Subscriber further intends and understands such waiver to be valid, binding and enforceable under applicable Law. To the extent the Subscriber or any of its Affiliates commences any action or proceeding based upon, in connection with, relating to or arising out of any matter relating to the Company or its representatives, which proceeding seeks, in whole or in part, monetary relief against the Company or its representatives, the Subscriber hereby acknowledges and agrees its sole remedy shall be against funds held outside of the Trust Account and that such claim shall not permit any the Subscriber or its Affiliates (or any Person claiming on any of their behalves or in lieu of them) to have any claim against the Trust Account (including any distributions therefrom) or any amounts contained therein. In the event that the Subscriber or any of its Affiliates commences Action based upon, in connection with, relating to or arising out of any matter relating to the Company or its representatives which proceeding seeks, in whole or in part, relief against the Trust Account (including any distributions therefrom) or the Public Stockholders, whether in the form of money damages or injunctive relief, the Company and its representatives shall be entitled to recover from the Subscriber, its Affiliates, and the Subscriber Shareholders, the associated legal fees and costs in connection with any such Action, in the event the Company or its representatives, as applicable, prevails in such Action. Notwithstanding anything to the contrary in this Section 8(t), the Released Claims shall not include, and this Section 8(t) shall not otherwise affect, any rights of the Subscriber or its Affiliates as a Public Stockholder of the Company to receive distributions from the Trust Account in its capacity as a Public Stockholder. This Section 8(t) shall survive termination of this Agreement for any reason.

 

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9.   Representations and Warranties of the Company . The Company represents and warrants to each of the Subscribers as follows:

 

(a)  Subject to obtaining all required approvals necessary in connection with the performance of the Merger Agreement (including the approval of the Company’s stockholders for the Merger Agreement and the related transactions) and any required approvals pursuant to the applicable rules of Nasdaq (together, the “ Required Approvals ”), the Company has all requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement and the Merger Agreement (collectively, the “ Transaction Documents ”), and to perform its obligations under this Agreement and the other Transaction Document. Subject to obtaining the Required Approvals, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all requisite corporate action, and no other proceedings on the Company’s part are necessary to authorize the execution, delivery or performance of this Agreement and the other Transaction Documents. This Agreement and each of the other Transaction Documents have been duly executed and delivered by the Company, and, assuming that this Agreement and the Registration Rights Agreement constitute a valid and binding obligation of the Subscriber, this Agreement and each of the other Transaction Documents will constitute upon execution and delivery by the Company, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in Law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.

 

(b)  Subject to obtaining the Required Approvals, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) conflict with or result in a violation of any provision of the Company’s certificate of incorporation and bylaws, as currently in effect (“ Organizational Documents ”), (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, to which the Company is a party, or (iii) result in a violation of any Law applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations in clauses (ii) or (iii) of this Section 9(b) as have not had or would not reasonably be expect to have, individually or in the aggregate, a material adverse effect on the business, properties, condition or prospects (financial or otherwise) or results of operations of the Company (“ Material Adverse Effect ”)).

 

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(c)  Except as required by the Exchange Act, the rules of Nasdaq, and the terms of the Merger Agreement, the Company is not required to submit any notice, report or other filing with any Governmental Authority in connection with the execution, delivery or performance by it of the Transaction Documents or the consummation of the transactions contemplated by the Transaction Documents and no consent, approval or authorization of any Governmental Authority or any other Person is required to be obtained by the Company in connection with its execution, delivery and performance of this Agreement and each of the other Transaction Documents or the consummation of the transactions contemplated hereby and thereby, (other than such consents, approvals or authorizations, the failure of which to obtain, have not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect).

 

(d)  The Company has timely filed all forms, reports and other documents required to be filed by it with the SEC (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “SEC Documents”) since the date of its IPO (the “ IPO Date ”), or has timely filed for a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects in accordance with the requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations thereunder, and none of the SEC Documents, at the time they were filed with the SEC (except to the extent that information contained in any SEC Document has been superseded by a later timely filed SEC Document), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

(e)  Each of the financial statements (including, in each case, any notes thereto) contained in the SEC Documents was prepared in accordance with U.S. generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) and each fairly presents, in all material respects, the financial position, results of operations and cash flows of the Company as at the respective dates thereof and for the respective periods indicated therein.

 

(f)  The Company understands and confirms that the Subscribers will rely on the representations and covenants contained herein in effecting the transactions contemplated by this Agreement.

 

10.   Understandings . Each Subscriber understands, acknowledges and agrees with the Company as follows:

 

(a)  Such Subscriber hereby acknowledges and agrees that the subscription hereunder is irrevocable by such Subscriber, that, except as required by Law, such Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of such Subscriber hereunder, and that this Agreement and such other agreements shall survive the death, disability, liquidation or dissolution of such Subscriber and shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns. If such Subscriber is more than one person, the obligations of such Subscriber hereunder shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and his/her/its heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

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(b)  No federal or state agency has made any finding or determination as to the accuracy or adequacy of the Disclosure Documents or as to the suitability of this offering for investment nor any recommendation or endorsement of the Securities.

 

(c)  The offering is intended to be exempt from registration under the Securities Act, which is dependent upon the truth, completeness and accuracy of the statements made by such Subscriber herein.

 

(d)  There is only a limited public market for the Common Stock and there is no public market for the Sponsor Warrants. There can be no assurance that such Subscriber will be able to sell or dispose of the Securities.

 

(e)  In the event that the Merger is not completed by February 5, 2018, the Company will be required to liquidate and to cease its activities.

 

(f)  The representations and warranties of such Subscriber contained in this Agreement and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on and as of the date hereof and the date of the consummation of each offering of the Subject Shares as if made on and as of such date and such representation and warranties and all agreements of such Subscriber contained herein and in any other writing delivered in connection with the transactions contemplated hereby.

 

11.   Survival . All representations, warranties and covenants contained in this Agreement shall survive until the earlier of the (A) Merger Closing or (B) Termination Date. Each of the Subscribers acknowledges the meaning and legal consequences of the representations, warranties and covenants contained herein and that the Company has relied upon such representations, warranties and covenants in determining such Subscriber’s qualification and suitability to purchase or acquire the Securities.

 

12.   Notices . All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if and when delivered personally or two Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid or one Business Day after it is delivered by a commercial overnight carrier or upon confirmation if delivered by facsimile or email:

 

(a) if to the Company (prior to the Merger Closing) or to the Sponsor, to the following address:

 

Global Partner Acquisition Corp.

1 Rockefeller Plaza, 11th Floor

New York, New York 10020

Attention: Paul Zepf

Email: pzepf@globalpartnerac.com

 

with a copy to:

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Attention: Stuart Neuhauser, Esq.

Email: sneuhauser@egsllp.com

 

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(b) if to the Company (following the Merger Closing), to the following address:

 

Purple Innovation, Inc.
123 E. 200 N.

Alpine, UT 84004

Attention: Casey McGarvey

E-mail: casey@onpurple.com

 

with a copy to:

  

Dorsey & Whitney LLP

111 S. Main St., Suite 2100

Salt Lake City, UT 84111

Attention: Nolan S. Taylor

E-mail: taylor.nolan@dorsey.com

 

(c) if to the Subscribers, to the address of each Subscriber set forth on the signature pages hereof;

 

(d) or at such other address as any party shall have specified by notice in writing to the other parties.

 

13.   Notification of Changes . Each Subscriber agrees and covenants to notify the Company immediately upon the occurrence of any event prior to the Merger Closing that would cause any representation, warranty, covenant or other statement contained in this Agreement to be false or incorrect or of any change in any statement made herein occurring prior to the Merger Closing.

 

14.   Obligations Irrevocable . Subject to the terms and conditions contained herein, the obligations of the Subscriber to make its subscription provided for hereunder shall be irrevocable, except with the consent of the Company, until the Subscription Rejection.

 

15.   Assignability; Amendments; Waiver . This Agreement is not assignable by any Subscriber, and may not be amended, modified or terminated except by an instrument in writing signed by the Company. This Agreement may not be waived except by an instrument in writing signed by the party against whom enforcement of waiver is sought.

 

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16.   Binding Effect . Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, successors and assigns, and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by and be binding upon such heirs, executors, administrators, successors, legal representatives and assigns. This Agreement does not confer any rights or remedies upon any person or entity other than the parties hereto and their heirs, successors and permitted assigns,; and provided further , however , that notwithstanding anything to the contrary herein, the Company and each of the Subscribers acknowledges that money damages would not be an adequate remedy at Law if any Subscriber fails to perform in any material respect any of its obligations hereunder and accordingly agree that each party, in addition to any other remedy to which it may be entitled at Law or in equity, shall be entitled to seek an injunction or similar equitable relief restraining such party from committing or continuing any such breach or threatened breach or to seek to compel specific performance of the obligations of any other party under this Agreement, without the posting of any bond, in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at Law.

 

17.   Obligations Irrevocable . Except as otherwise provided herein, the obligations of each of the Subscribers to make its subscription provided for hereunder shall be irrevocable, except with the consent of the Company, until the Subscription Rejection.

 

18.   Agreement . This Agreement and the Registration Rights Agreement constitute the entire agreement of the Subscribers and the Company relating to the matters contained herein and therein, superseding all prior contracts or agreements, whether oral or written. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

19.   Governing Law; Jurisdiction; WAIVER OF JURY TRIAL . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof that would require the application of the laws of any jurisdiction other than New York. Each of the parties consents to the non-exclusive jurisdiction of the federal courts whose districts encompass any part of the District of Delaware or the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction, then in the applicable Delaware state court), with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens , to the bringing of any such proceeding in such jurisdictions. EACH PARTY HERETO (AND BORQS TO THE EXTENT OF ITS THIRD PARTY BENEFICIARY RIGHTS) HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

20.   Severability . If any provision of this Agreement or the application thereof to any Subscriber or any circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other subscriptions or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by Law.

 

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21.   Construction . The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof. The rule of construction that an agreement shall be construed strictly against the drafter shall not apply to this Agreement.

 

22.   Further Assurances . From time to time, at another party’s request and without further consideration (but at the requesting party’s reasonable cost and expense), each party shall execute and deliver such additional documents and take all such further action as may be reasonably necessary to consummate the transactions contemplated by this Agreement.

 

23.   Counterparts; Facsimile . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. A facsimile or other electronic transmission of this signed Agreement shall be legal and binding on all parties hereto.

 

24.   Interpretation . The headings, titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “Dollars” or “$” means United States dollars. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

25.   Counsel . Each of the Subscribers hereby acknowledges that the Company and its counsel represent the interests of the Company and not those of any Subscriber in any agreement (including this Agreement) to which the Company is a party.

 

26.   Information; Confidentiality . Without limiting any of the Subscribers’ pre-existing confidentiality obligations, each of the Subscribers agrees that it shall not, until the date of the Merger Closing, without the Company’s prior written consent, disclose to any other person or entity the nature, extent or fact that such Subscriber is entering this Agreement or the terms and conditions hereof, or any information such Subscriber may receive in connection with this Agreement (in each case to the extent the Company has communicated the confidentiality thereof) other than (a) pursuant to the order of any court or administrative agency or in any pending legal or administrative proceeding, or otherwise as required by applicable law or compulsory legal process (in which case such Subscriber agrees, to the extent practicable and not prohibited by applicable Law, to inform the Company promptly thereof prior to such disclosure), (b) upon the request or demand of any regulatory authority having jurisdiction over such Subscriber, (c) to the extent that such information is or becomes publicly available other than by reason of disclosure by such Subscriber in violation of this Agreement, or (d) to such Subscriber’s Affiliates and to such Subscriber’s and its Affiliates’ employees, legal counsel, independent auditors and other agents (collectively “ representatives ”) who need to know such information and who are informed of the confidential nature of such information and are or have been advised of their obligation to keep information of this type confidential. Each Subscriber will cause all of its and its Affiliate’s representatives to comply with the confidentiality provisions of this Agreement as fully as if they were a party hereto and will be responsible for a breach of the confidentiality provisions of this Agreement by any such representatives. In addition, the Subscriber shall not, for a period of six (6) months from the date hereof, make any public disclosure of the nature, extent or fact that such Subscriber is entering this Agreement or the terms and conditions hereof, without the prior written consent of the Company.

 

[Signature Page to follow]

 

  16  

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date first written above.

 

  GLOBAL PARTNER ACQUISITION CORP.
     
  By:

/s/ Paul J. Zepf

    Name: Paul J. Zepf
    Title:   Chief Executive Officer
     
  GLOBAL PARTNER SPONSOR I LLC
     
  By: /s/ Paul J. Zepf
    Name: Paul J. Zepf
    Title:   Chief Executive Officer

 

  17  

 

 

[Subscriber Signature Page]

 

Accepted and agreed:

 

Baleen Capital Fund LP

 

By: Baleen Capital Management LLC  
Its Investment Manager    
     
By: /s/ Fang Li  
Name: Fang Li    
Title:   Managing Member    
     
Date: January 29, 2018    

 

Address of Subscriber:

 

404 5 th Avenue, Floor 3

New York, NY 10018

  

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

557,500

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

557,500

  

Number of Sponsor Warrants Subscriber is to receive:

 

836,250

 

  18  

 

 

Accepted and agreed:

 

Baleen Capital Investors II LLC

 

By: Baleen Capital Management LLC  
Its Managing Member   
     
By: /s/ Fang Li  
Name: Fang Li    
Title:   Managing Member    
     
Date: January 29, 2018    

  

Address of Subscriber:

  

404 5 th Avenue, Floor 3

New York, NY 10018

  

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

182,500

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

182,500

 

Number of Sponsor Warrants Subscriber is to receive:

 

273,750

 

  19  

 

 

Accepted and agreed:

 

Greenhaven Road Capital Fund 1, L.P.

 

By: Greenhaven Road Investment Management  
Its Managing Member    
     
By: /s/ Scott Miller  
Name: Scott Miller    
Title:   Date: January 29, 2018  

  

Address of Subscriber:

 

70 Greenhaven Road

Rye, NY 10580

 

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

800,000

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

800,000

 

Number of Sponsor Warrants Subscriber is to receive:

 

1,200,000

 

  20  

 

 

Accepted and agreed:

 

Royce Value Trust, Inc.

 

By: /s/ Christopher D. Clark  
Name: Christopher D. Clark    
Title:   President    
     
Date: January 29, 2018    

 

Address of Subscriber:

 

745 Fifth Avenue

New York, New York 10151

  

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

500,000

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

500,000

 

Number of Sponsor Warrants Subscriber is to receive:

 

750,000

 

  21  

 

 

Accepted and agreed:

 

David Capital Partners Fund, LP

 

By: David Capital Partners, LLC  
  Its General Partner  

 

By: /s/ Adam J. Patinkin  
  Name: Adam J. Patinkin, CFA  
  Title:   Managing Partner  
     
  Date: January 29, 2018  

 

Address of Subscriber:

  

737 N. Michigan Avenue, Suite 1405

Chicago, IL 60611

 

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

135,000

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

135,000

 

Number of Sponsor Warrants Subscriber is to receive:

 

202,500

 

  22  

 

 

Accepted and agreed:

 

Pleiades Investment Partners – DC, L.P.

 

By: David Capital Partners, LLC  
  Its Investment Manager    
       
By: /s/ Adam J. Patinkin  
  Name: Adam J. Patinkin, CFA    
  Title:   Managing Partner    
       
  Date: January 29, 2018    

 

Address of Subscriber:

  

6022 West Chester Pike

Newtown Square, PA 19073

  

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

225,000

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

225,000

 

Number of Sponsor Warrants Subscriber is to receive:

 

337,500

 

  23  

 

 

Accepted and agreed:

 

Dane Capital Fund LP

 

By: Dane Capital LLC  
  Its Investment Manager    
       
By: /s/ Eric Gomberg  
  Name: Eric Gomberg    
  Title:   Managing Member    
       
  Date: January 29, 2018    

   

Address of Subscriber:

 

747 Third Avenue, 4 th Floor

New York, NY 10017

  

Total number of shares of Common Stock to be purchased by the Subscriber in open market or private purchases pursuant to Section 2 hereof.

 

100,000

 

Total number of shares of Common Stock subscribed for by the Subscriber pursuant to Section 3 hereof (assuming no open market or private purchases):

 

100,000

 

Number of Sponsor Warrants Subscriber is to receive:

 

150,000

 

  24  

 

 

Exhibit A

 

Subscription Instructions

 

The funds to be paid to the Company pursuant to Section 3 hereof shall be transmitted in federal funds by wire transfer to Continental Stock Transfer and Trust Company in accordance with the wire transfer instructions to be provided to the Subscribers.

 

 

 

Exhibit B

 

Investor Questionnaire

 

INVESTOR QUESTIONNAIRE

 

GLOBAL PARTNER ACQUISITION CORP.

 

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF SHARES FROM GLOBAL PARTNER ACQUISITION CORP. (THE “ COMPANY ”).

 

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT CONFIDENCE. NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR IN LITIGATION INVOLVING THE COMPANY AND ITS CONTROLLING PERSONS.

 

Capitalized terms used herein without definition shall have the respective meanings given such terms as set forth in the Backstop and Subscription Agreement among the Company, Global Partner Sponsor I LLC and the subscriber or subscribers signatory thereto (the “ Agreement ”).

 

(1) The undersigned represents and warrants that he, she or it comes within at least one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the undersigned comes within that category. The undersigned agrees to furnish any additional information which the Company reasonably deems necessary in order to verify the answers set forth below.

 

Category A ___

The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

   
 

Explanation . In calculating net worth, you include all of your assets (other than your primary residence), whether liquid or illiquid, such as cash, stock, securities, personal property and real estate based on the fair

market value of such property MINUS all debts and liabilities (except that a mortgage or other debt secured

by your primary residence, up to the estimated fair market value of the primary residence at the time of the

purchase of the Shares, shall not be included as a liability, provided that if the amount of such indebtedness outstanding at the time of the purchase of the Shares exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability. Further, the amount of any mortgage or other indebtedness secured by your primary residence that exceeds the fair market value of the residence at the time of the purchase of the Shares shall be included as a liability.

   
Category B ___

The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching and the same income level in the current year.

 

  2  

 

 

Category C ___ The undersigned is a director or executive officer of the Company which is issuing and selling the Shares.
   
Category D ___

The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “ Act ”); a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors (describe entity).

___________________________________________________________________ ___________________________________________________________________  

   
Category E ___

The undersigned is a private business development company as defined in Section 202(a) (22) of the Investment Advisors Act of 1940 (describe entity) 

___________________________________________________________________ ___________________________________________________________________  

   

  Category F ___

The undersigned is either a corporation, partnership, Massachusetts or similar business trust, or any organization described in Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Shares and with total assets in excess of $5,000,000. (describe entity)

___________________________________________________________________ ___________________________________________________________________

 

   
Category G ___

The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.

__________________________________________________________________

__________________________________________________________________ 

   
Category H ___

The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories. If relying upon this Category alone, each equity owner must complete a separate copy of this Investor Questionnaire. (describe entity)  ___________________________________________________________________ ___________________________________________________________________

   
 

The undersigned agrees that the undersigned will notify the Company at any time on or prior to the applicable closing in the event that the representations and warranties in this Investor Questionnaire shall cease to be true, accurate and complete.

  

  3  

 

 

(2) Suitability (please answer each question)

 

  (a)

Are you familiar with the risk aspects and the non-liquidity of investments such as the Shares for which you seek to purchase?

 

YES _____     NO _____

 

  (b)

Do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

 

YES _____     NO _____

 

(3) Manner in which title is to be held: (circle one)

 

  (a) Individual Ownership
  (b) Community Property
  (c) Joint Tenant with Right of Survivorship (both parties must sign)
  (d) Partnership
  (e) Tenants in Common
  (f) Company
  (g) Trust
  (h) Other

 

(4) FINRA Affiliation.

 

Are you affiliated or associated with a member of FINRA (please check one):

 

YES _____     NO _____

 

If Yes, please describe:

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

  

*If subscriber is a Registered Representative with a member of FINRA, have the following acknowledgment signed by the appropriate party:

  

The undersigned FINRA firm acknowledges receipt of the notice required by the Conduct Rules of FINRA.

  

     
  Name of NASD Member Firm  
     
  By:    
    Authorized Officer  
       
  Date:    

 

[Remainder of page intentionally left blank]

 

  4  

 

 

The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in this Investor Questionnaire and such answers have been provided under the assumption that the Company will rely on them.

 

Date: ________________  
  Print or Type Entity Name
     
  By:

__________________________________________

 

Print or Type Name: _________________________

     
     
  Title:  __________________________________________

 

  5  

 

 

Exhibit C

 

Form of Agreement to Assign Sponsor Warrants

 

AGREEMENT TO ASSIGN SPONSOR WARRANTS

 

February 2, 2018

 

 

Global Partner Acquisition Corp.

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Attention: Paul J. Zepf

E-mail: pzepf@globalpartnerac.com

   

Continental Stock Transfer & Trust Company

As Warrant Agent

17 Battery Place

New York, NY 10004

Attention: Compliance Department

  

Ladies and Gentlemen:

  

Reference is made to that certain (i) agreement and plan of merger by and among Global Partner Acquisition Corp. (the “ Company ”), PRPL Acquisition, LLC, a wholly owned subsidiary of the Company, Purple Innovation, LLC, InnoHold, LLC (“ InnoHold ”), and Global Partner Sponsor I LLC, in its capacity as Parent Representative, dated as of November 2, 2017 (as amended, the “ Merger Agreement ”) and (ii) that certain warrant agreement (the “ Warrant Agreement ”) dated as of July 29, 2015, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “ Warrant Agent ”, also referred to therein as the “ Transfer Agent ”). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Warrant Agreement.

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Global Partner Sponsor I LLC (“ Sponsor ”), the Company and the Warrant Agent hereby agree with the entities identified on Schedule A hereto (the “ Assignees ”) as follows:

 

1. Subject to and effective on the Closing, the Sponsor agrees to transfer and assign to the Assignees all of its right, title and interest in and to the number of Private Placement Warrants (as defined in the Warrant Agreement) set forth opposite the names of the Assignees on Schedule A.

 

  6  

 

 

2. Notwithstanding anything to the contrary in the Warrant Agreement, in consideration of the assignment of the Private Placement Warrants pursuant hereto, each of the Assignees hereby agrees as follows:

 

a. Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.2 below, at the price of $0.01 per Warrant (the “ Redemption Price ”), provided that the last sales price of the Class A Common Stock reported has been at least $24.00 per share (subject to adjustment in compliance with Section 4 of the Warrant Agreement), on each of twenty (20) trading days within the thirty (30) trading-day period ending on the third Business Day prior to the date on which notice of the redemption is given and provided that there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in (b) below) or the Company has elected to require the exercise of the Warrants on a “cashless basis” pursuant to subsection 3.3.1 of the Warrant Agreement.

 

b. In the event that the Company elects to redeem all of the Warrants, the Company shall fix a date for the redemption (the “ Redemption Date ”). Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (such 30-day period, the “ Redemption Period ”) to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received such notice.

  

c. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

  

d. The Warrants may be exercised, for cash or on a “cashless basis” in accordance with Section 2.5 of the Warrant Agreement. pursuant to subsection 3.3.1(c) of the Warrant Agreement,

  

3. The parties hereto hereby agree that all references to “Sponsor” in the Warrant Agreement shall be deemed to refer to the Assignees and their Permitted Transferees.

  

4. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived to any particular provision, except by a written instrument executed by all parties hereto.

  

5. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on the undersigned and their respective successors and assigns.

 

6. This Agreement shall be construed and interpreted in a manner consistent with the provisions of the Merger Agreement. The provisions set forth in Sections 10.2, 10.3, 10.5, 10.7, 10.8, 10.10 and 10.13 of the Merger Agreement, as of the date hereof, are hereby incorporated by reference into, and shall be deemed to apply to, this Agreement as if all references to the “Agreement” in such sections were instead references to this Agreement.

  

7. Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent in the same manner as provided in the Merger Agreement. Notices to Sponsor shall be sent to the address of the Purchaser Representative set forth in Section 10.1 of the Merger Agreement as of the date hereof, and as it may be changed in accordance with Section 10.1 of the Merger Agreement so long as Sponsor remains the Purchaser Representative.

  

8. This Agreement shall terminate at such time, if any, as the Merger Agreement is terminated in accordance with its terms, and upon such termination this Agreement shall be null and void and of no effect whatsoever, and the parties hereto shall have not obligations under this Agreement.

 

[ Signature page follows ]

  7  

 

 

Please indicate your agreement to the foregoing by signing in the space provided below.

 

 

GLOBAL PARTNER SPONSOR I LLC  

   
  By:   
  Name:  
  Title:  

 

GLOBAL PARTNER ACQUISITION CORP.  
     
By:  
Name:    
Title:    
     
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY  

As Warrant Agent

 

 
By:           
Name:    
Title:    

 

  8  

 

 

Schedule A

 

Name of Assignee:   Number of Warrants Assigned:  
Baleen Capital Fund LP     836,250  
Baleen Capital Investors II LLC     273,750  
Greenhaven Road Capital Fund 1, L.P.     1,200,000  
Royce Value Trust, Inc.     750,000  
David Capital Partners Fund, LP     202,500  
Pleiades Investment Partners – DC, L.P.     337,500  
Dane Capital Fund LP     150,000  

 

 

9

 

Exhibit 10.13

 

AGREEMENT TO ASSIGN SPONSOR WARRANTS

 

February 2, 2018

 

Global Partner Acquisition Corp.

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Attention: Paul J. Zepf

E-mail: pzepf@globalpartnerac.com

 

Continental Stock Transfer & Trust Company

As Warrant Agent

17 Battery Place

New York, NY 10004

Attention: Compliance Department

 

Ladies and Gentlemen:

 

Reference is made to that certain (i) agreement and plan of merger by and among Global Partner Acquisition Corp. (the “ Company ”), PRPL Acquisition, LLC, a wholly owned subsidiary of the Company, Purple Innovation, LLC, InnoHold, LLC (“ InnoHold ”), and Global Partner Sponsor I LLC, in its capacity as Parent Representative, dated as of November 2, 2017 (as amended, the “ Merger Agreement ”) and (ii) that certain warrant agreement (the “ Warrant Agreement ”) dated as of July 29, 2015, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent (the “ Warrant Agent ”, also referred to therein as the “ Transfer Agent ”). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Warrant Agreement.

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Global Partner Sponsor I LLC (“ Sponsor ”), the Company and the Warrant Agent hereby agree with the entities identified on Schedule A hereto (the “ Assignees ”) as follows:

 

1. Subject to and effective on the Closing, the Sponsor agrees to transfer and assign to the Assignees all of its right, title and interest in and to the number of Private Placement Warrants (as defined in the Warrant Agreement) set forth opposite the names of the Assignees on Schedule A.

 

2. Notwithstanding anything to the contrary in the Warrant Agreement, in consideration of the assignment of the Private Placement Warrants pursuant hereto, each of the Assignees hereby agrees as follows:

 

a. Not less than all of the outstanding Warrants may be redeemed, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the Registered Holders of the Warrants, as described in Section 6.2 below, at the price of $0.01 per Warrant (the “ Redemption Price ”), provided that the last sales price of the Class A Common Stock reported has been at least $24.00 per share (subject to adjustment in compliance with Section 4 of the Warrant Agreement), on each of twenty (20) trading days within the thirty (30) trading-day period ending on the third Business Day prior to the date on which notice of the redemption is given and provided that there is an effective registration statement covering the shares of Common Stock issuable upon exercise of the Warrants, and a current prospectus relating thereto, available throughout the 30-day Redemption Period (as defined in (b) below) or the Company has elected to require the exercise of the Warrants on a “cashless basis” pursuant to subsection 3.3.1 of the Warrant Agreement.

 

 

 

 

b. In the event that the Company elects to redeem all of the Warrants, the Company shall fix a date for the redemption (the “ Redemption Date ”). Notice of redemption shall be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the Redemption Date (such 30-day period, the “ Redemption Period ”) to the Registered Holders of the Warrants to be redeemed at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the Registered Holder received such notice.

 

c. On and after the Redemption Date, the record holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Redemption Price.

 

d. The Warrants may be exercised, for cash or on a “cashless basis” in accordance with Section 2.5 of the Warrant Agreement. pursuant to subsection 3.3.1(c) of the Warrant Agreement,

 

3. The parties hereto hereby agree that all references to “Sponsor” in the Warrant Agreement shall be deemed to refer to the Assignees and their Permitted Transferees.

 

4. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived to any particular provision, except by a written instrument executed by all parties hereto.

 

5. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on the undersigned and their respective successors and assigns.

 

6. This Agreement shall be construed and interpreted in a manner consistent with the provisions of the Merger Agreement. The provisions set forth in Sections 10.2, 10.3, 10.5, 10.7, 10.8, 10.10 and 10.13 of the Merger Agreement, as of the date hereof, are hereby incorporated by reference into, and shall be deemed to apply to, this Agreement as if all references to the “Agreement” in such sections were instead references to this Agreement.

 

7. Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent in the same manner as provided in the Merger Agreement. Notices to Sponsor shall be sent to the address of the Purchaser Representative set forth in Section 10.1 of the Merger Agreement as of the date hereof, and as it may be changed in accordance with Section 10.1 of the Merger Agreement so long as Sponsor remains the Purchaser Representative.

 

8. This Agreement shall terminate at such time, if any, as the Merger Agreement is terminated in accordance with its terms, and upon such termination this Agreement shall be null and void and of no effect whatsoever, and the parties hereto shall have not obligations under this Agreement.

 

[ Signature page follows ]

 

 

 

 

Please indicate your agreement to the foregoing by signing in the space provided below.

 

  GLOBAL PARTNER SPONSOR I LLC
     
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Managing Member

 

GLOBAL PARTNER ACQUISITION CORP.  
     
By: /s/ Paul Zepf  
Name: Paul Zepf  
Title: Chief Executive Officer  
     
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
As Warrant Agent  
     
By:  /s/ Henry Farrell  
Name: Henry Farrell  
Title: Vice President  

 

 

 

 

Schedule A

 

Name of Assignee:   Number of Warrants Assigned:  
Baleen Capital Fund LP     836,250  
Baleen Capital Investors II LLC     273,750  
Greenhaven Road Capital Fund 1, L.P.     1,200,000  
Royce Value Trust, Inc.     750,000  
David Capital Partners Fund, LP     202,500  
Pleiades Investment Partners – DC, L.P.     337,500  
Dane Capital Fund LP     150,000  

 

 

 

 

Exhibit 10.14

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is entered into as of February 2, 2018, by and among Global Partner Acquisition Corp. , a Delaware corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Purple Innovation, Inc.” (including any successor entity thereto, the “ Parent ”), and the undersigned parties listed under Investors on the signature page hereto (each an “ Investor ” and collectively, the “ Investors ”).

 

WHEREAS , Parent is a party to that certain Agreement and Plan of Merger, dated as of November 2, 2017 (as amended, the “ Merger Agreement ”), with Purple Innovation, LLC, a Delaware limited liability company (the “ Company ”), PRPL Acquisition, LLC (“ Merger Sub ”), InnoHold, LLC, a Delaware limited liability company (“ InnoHold ”), and Global Partner Sponsor I LLC, in its capacity thereunder as the Parent Representative, pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company with the Company continuing as the surviving entity;

 

WHEREAS , on January 29, 2018, Parent, Global Partner Sponsor I LLC, a Delaware limited liability company (the “ Sponsor ”), and the Investors entered into that certain Subscription and Backstop Agreement (the “ Subscription Agreement ”), pursuant to which the Investors agreed to purchase shares of Parent’s Class A Common Stock (as defined below) in open market purchases, privately negotiated purchases with third parties and a private placement with Parent to occur immediately prior to or simultaneously with the consummation of the transactions under the Merger Agreement (the “ Closing ”), and Sponsor agreed to transfer to the Investors certain of its Sponsor Warrants (as defined below) (the “ Transferred Sponsor Warrants ”), subject to the certain restrictions as set forth in the Insider Letter (as defined below); and

 

WHEREAS , the parties desire to enter into this Agreement to provide the Investors with certain rights relating to the registration of the shares of Class A Common Stock to be acquired by the Investors, if any, in the private placement with Parent to occur immediately prior to or simultaneously with the Closing (the “ PIPE Shares ”), the Transferred Sponsor Warrants and the shares of Class A Common Stock issuable upon exercise of the Transferred Sponsor Warrants (the “ Warrant Shares ”).

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.  DEFINITIONS . Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Subscription Agreement. The following capitalized terms used herein have the following meanings:

 

Agreement ” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

 

Class A Common Stock means the class A common stock, par value $0.0001 per share, of Parent (including any successor common equity securities into which such securities are exchanged or converted), as renamed in connection with the Closing from common stock, par value $0.0001 per share, of Parent.

 

Closing ” is defined in the recitals to this Agreement.

 

 

 

 

Company ” is defined in the recitals to this Agreement.

 

Demand Registration ” is defined in Section 2.1.1.

 

Demanding Holder ” is defined in Section 2.1.1.

 

Form S-3 ” is defined in Section 2.3.

 

Founder Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of July 29, 2015, between Parent and Sponsor, as amended.

 

Founder Securities ” means those securities included in the definition of “Registrable Security” specified in the Founder Registration Rights Agreement.

 

Indemnified Party ” is defined in Section 4.3.

 

Indemnifying Party ” is defined in Section 4.3.

 

InnoHold ” is defined in the recitals to this Agreement.

 

InnoHold Registration Rights Agreement ” means that certain Registration Rights Agreement to be entered into by Parent and InnoHold in connection with the Closing, as amended.

 

InnoHold Securities ” means those securities included in the definition of “Registrable Securities” specified in the InnoHold Registration Rights Agreement.

 

Insider Letter ” means that letter agreement, dated as of July 29, 2015, by and between Parent, the Sponsor and the directors and officers of Parent signatory thereto (which is attached as Exhibit 10.3 to Parent’s current report on Form 8-K filed with the SEC on August 4, 2015).

 

Investor(s) ” is defined in the preamble to this Agreement, and include any transferee of the Registrable Securities (so long as they remain Registrable Securities) of an Investor permitted under this Agreement.

 

Investor Indemnified Party ” is defined in Section 4.1.

 

Maximum Number of Shares ” is defined in Section 2.1.4.

 

Merger Agreement ” is defined in the recitals to this Agreement.

 

Merger Sub ” is defined in the recitals to this Agreement.

 

Other PIPE Registrable Securities ” means any securities which Parent may have obligations to register under Other PIPE Registration Rights Agreements.

 

Other PIPE Registration Rights Agreements ” means any registration rights agreements that have been or will be entered into by the Parent prior to or in connection with the Closing in connection with any subscription and/or backstop arrangements with potential investors in Parent in connection with the Closing.

 

Other Registrable Securities ” means the Founder Securities, the InnoHold Securities and any Other PIPE Registrable Securities.

 

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Other Registration Rights Agreements ” means the Founders Registration Rights Agreement, the InnoHold Registration Rights Agreement and any Other PIPE Registration Rights Agreements.

 

Parent ” is defined in the preamble to this Agreement, and shall include Parent’s successors by merger, acquisition, reorganization or otherwise.

 

Piggy-Back Registration ” is defined in Section 2.2.1.

 

PIPE Shares ” is defined in the recitals to this Agreement.

 

Pro Rata ” is defined in Section 2.2.2(a).

 

Proceeding ” is defined in Section 6.10.

 

Public Warrants ” means warrants included as part of the units issued by the Parent in its initial public offering.

 

Register ,” “ Registered ” and “ Registration ” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

Registrable Securities ” means all of the PIPE Shares purchased by the Investors under the Subscription Agreement, the Transferred Sponsor Warrants and the Warrant Shares issuable upon exercise of the Transferred Sponsor Warrants. Registrable Securities include any warrants, share capital or other securities of Parent issued as a dividend or other distribution with respect to or in exchange for or in replacement of such PIPE Shares, Transferred Sponsor Warrants and Warrant Shares. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by Parent and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding or (d) the Registrable Securities are freely saleable under Rule 144 without volume limitations.

 

Registration Expenses ” is defined in Section 3.3.

 

Registration Statement ” means a registration statement filed by Parent with the SEC in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

 

Specified Courts ” is defined in Section 6.10.

 

Sponsor ” is defined in the recitals to this Agreement.

 

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Sponsor Warrants ” means the warrants to purchase Class A Common Stock that the Sponsor acquired in a private placement that occurred after the consummation of the Parent’s initial public offering.

 

Subscription Agreement ” is defined in the recitals to this Agreement.

 

Transferred Sponsor Warrants ” is defined in the recitals to this Agreement.

 

Underwriter ” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

Warrant Registration Filing Date ” is defined in Section 2.5.

 

Warrant Registration Statement ” is defined in Section 2.5.

 

Warrant Shares ” is defined in the recitals to this Agreement.

 

2.  REGISTRATION RIGHTS .

 

2.1  Demand Registration .

 

2.1.1  Request for Registration . Subject to Section 2.4, at any time and from time to time after the Closing, Investors holding a majority-in-interest of Registrable Securities then issued and outstanding may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “ Demand Registration ”). Any demand for a Demand Registration shall specify the number of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. Within thirty (30) days following receipt of any request for a Demand Registration, Parent will notify all other Investors holding Registrable Securities of the demand, and each Investor holding Registrable Securities who wishes to include all or a portion of such Investor’s Registrable Securities in the Demand Registration (each such Investor including shares of Registrable Securities in such registration, a “ Demanding Holder ”) shall so notify Parent within fifteen (15) days after the receipt by such Investor of the notice from Parent. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. Parent shall not be obligated to effect more than an aggregate of three (3) Demand Registrations under this Section 2.1.1 in respect of all Registrable Securities.

 

2.1.2  Effective Registration . A registration will not count as a Demand Registration until the Registration Statement filed with the SEC with respect to such Demand Registration has been declared effective and Parent has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the SEC or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders thereafter elect to continue the offering; provided, further, that Parent shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.

 

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2.1.3  Underwritten Offering . If a majority-in-interest of the Demanding Holders so elect and advise Parent as part of their written demand for a Demand Registration that the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of any Demanding Holder to include their Registrable Securities in such registration shall be conditioned upon such Demanding Holder’s participation in such underwriting and the inclusion of its Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by a majority-in-interest of the Investors initiating the Demand Registration.

 

2.1.4  Reduction of Offering . If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises Parent and the Demanding Holders in writing that the dollar amount or number of Registrable Securities which the Demanding Holders desire to sell, taken together with all other Class A Common Stock or other securities which Parent desires to sell and the Class A Common Stock or other securities, if any, as to which registration by Parent has been requested pursuant to written contractual piggy-back registration rights held by other security holders of Parent who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then Parent shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of securities that each applicable Person has requested be included in such registration, regardless of the number of securities held by each such Person), that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares. In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.1.4 shall include such Parent securities on an as-converted to Class A Common Stock basis.

 

2.1.5  Withdrawal . If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to Parent and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the SEC with respect to such Demand Registration. If the majority-in-interest of the Demanding Holders withdraw from a proposed offering relating to a Demand Registration in such event, then such registration shall not count as a Demand Registration provided for in Section 2.1. Notwithstanding anything to the contrary in this Agreement, but subject to Section 4, the Parent shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration prior to its withdrawal under this Section 2.1.5.

 

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2.2  Piggy-Back Registration .

 

2.2.1  Piggy-Back Rights . Subject to Section 2.4, if at any time after the Closing Parent proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by Parent for its own account or for security holders of Parent for their account (or by Parent and by security holders of Parent including pursuant to Section 2.1), other than the Warrant Registration Statement or a Registration Statement (i) filed in connection with any employee share option or other benefit plan, (ii) for an exchange offer or offering of securities solely to Parent’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of Parent, (iv) for a dividend reinvestment plan, then Parent shall (x) give written notice of such proposed filing to Investors holding Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to Investors holding Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such Investors may request in writing within five (5) days following receipt of such notice (a “ Piggy-Back Registration ”). To the extent permitted by applicable securities laws with respect to such registration by Parent or another demanding shareholder, Parent shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of Parent and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All Investors holding Registrable Securities proposing to distribute their Registrable Securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

 

2.2.2  Reduction of Offering . If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises Parent and the Investors holding Registrable Securities proposing to distribute their Registrable Securities through such Piggy-Back Registration in writing that the dollar amount or number of Class A Common Stock or other Parent securities which Parent desires to sell, taken together with (i) the Class A Common Stock or other Parent securities, if any, as to which registration has been demanded pursuant to written contractual arrangements with Persons other than the Investors hereunder, (ii) the Registrable Securities as to which registration has been requested under this Section 2.2, and (iii) the Class A Common Stock or other Parent securities, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other security holders of Parent, exceeds the Maximum Number of Shares, then Parent shall include in any such registration:

 

(a) If the registration is undertaken for Parent’s account: (i) first, the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with the Other Registrable Securities and Registrable Securities being included pro rata in accordance with the number of securities that each such Person has requested be included in such piggy-back registration, regardless of the number of securities held by each such Person (such proportion is referred to herein as “ Pro Rata ”); and (iii) third, to the extent that the Maximum Number of shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares;

 

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(b) If the registration is a “demand” registration undertaken at the demand of holders of Other Registrable Securities under an Other Registration Rights Agreement: (i) first, the Other Registrable Securities for the account of the demanding holders under the Other Registration Rights Agreement that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements (excluding the holders who exercised such demand rights) and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares; and

 

(c) If the registration is a “demand” registration undertaken at the demand of Persons other than the Investors holding Registrable Securities or the holders of Other Registrable Securities, (i) first, the Class A Common Stock or other securities for the account of such demanding Persons that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares.

 

In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.2.2 shall include such Parent securities on an as-converted to Class A Common Stock basis. Notwithstanding anything to the contrary contained above, to the extent that the registration of the Registrable Securities of the Investors would prevent Parent or the demanding stockholders from effecting such registration and offering, such Investors shall not be permitted to exercise Piggy-Back Registration rights with respect to such registration and offering.

 

2.2.3  Withdrawal . Any Investor holding Registrable Securities may elect to withdraw its request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to Parent of such request to withdraw prior to the effectiveness of the Registration Statement. Parent (whether on its own determination or as the result of a withdrawal by Persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement without any liability to the Investor, subject to the next sentence and the provisions of Section 4. Notwithstanding any such withdrawal, Parent shall pay all expenses incurred in connection with such Piggy-Back Registration as provided in Section 3.3 by Investors holding Registrable Securities that have requested to have their Registrable Securities included in such Piggy-Back Registration.

 

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2.3  Registrations on Form S-3 . After the Closing, subject to Section 2.4, Investors holding Registrable Securities may at any time and from time to time, request in writing that Parent register the resale of any or all of such Registrable Securities on Form S-3 or any similar short-form registration which may be available at such time (“ Form S-3 ”); provided, however, that Parent shall not be obligated to effect such request through an underwritten offering. As soon as practicable after receipt of such written request, Parent will give written notice of the proposed registration to all other Investors holding Registrable Securities, and, as soon as practicable thereafter Parent will effect the registration of all or such portion of Investors’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities, if any, of any other Investors joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from Parent; provided, however, that Parent shall not be obligated to effect any such registration pursuant to this Section 2.3: (i) if Form S-3 is not available to Parent for such offering; or (ii) if Investors holding Registrable Securities, together with the holders of any other securities of Parent entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $1,000,000. Registrations effected pursuant to this Section 2.3 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

 

2.4  Restriction of Offerings . Notwithstanding anything to the contrary contained in this Agreement, except pursuant to Section 2.5 below, the Investors shall not be entitled to request, and Parent shall not be obligated to effect, or to take any action to effect, any registration (including any Demand Registration or Piggy-Back Registration) pursuant to this Section 2 with respect to any Transferred Sponsor Warrants or Warrant Shares that are Registrable Securities during the applicable Lock-Up Periods (as such term is defined in the Insider Letter) while they are subject to restrictions on transfer under the Insider Letter.

 

2.5  Warrant Registration Statement . On or prior to February 14, 2018 (the “ Warrant Registration Filing Date ”), Parent will prepare and file with the SEC a Registration Statement (the “ Warrant Registration Statement ”) to register the resale of the Sponsor Warrants and all of the shares of Class A Common Stock issuable upon exercise of the Parent’s issued and outstanding Public Warrants and Sponsor Warrants, including the Warrant Shares, which Warrant Registration Statement will be treated as a Registration Statement for purposes of this Agreement, including Sections 3 and 4 hereof; provided, that the Transferred Sponsor Warrants and Warrant Shares of each Investor will be included for registration in the Warrant Registration Statement only to the extent that such Investor promptly provides to Parent upon request (and in any event at least two (2) Business Days prior to the Warrant Registration Filing Date) all of the information required by Section 3.4 below with respect to the Warrant Registration Statement.

 

3.  REGISTRATION PROCEDURES .

 

3.1  Filings; Information . Whenever Parent is required to effect the registration of any Registrable Securities by Investors pursuant to Section 2, Parent shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

 

3.1.1  Filing Registration Statement . Parent shall use its best efforts to, as expeditiously as possible after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the SEC a Registration Statement on any form for which Parent then qualifies or which counsel for Parent shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become effective and use its best efforts to keep it effective for the period required by Section 3.1.3; provided, however, that Parent shall have the right to defer any Demand Registration for up to ninety (90) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if Parent shall furnish to Investors requesting to include their Registrable Securities in such registration a certificate signed by the President, Chief Executive Officer or Chairman of Parent stating that, in the good faith judgment of the Board of Directors of Parent, it would be materially detrimental to Parent and its shareholders for such Registration Statement to be effected at such time; provided further, however, that Parent shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder.

 

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3.1.2  Copies . Parent shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to Investors holding Registrable Securities included in such registration, and such Investors’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as Investors holding Registrable Securities included in such registration or legal counsel for such Investors may request in order to facilitate the disposition of the Registrable Securities owned by such Investors.

 

3.1.3  Amendments and Supplements . Parent shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn or until such time as the Registrable Securities cease to be Registrable Securities as defined by this Agreement.

 

3.1.4  Notification . After the filing of a Registration Statement, Parent shall promptly, and in no event more than three (3) Business Days after such filing, notify Investors holding Registrable Securities included in such Registration Statement of such filing, and shall further notify such Investors promptly and confirm such advice in writing in all events within three (3) Business Days after the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the SEC of any stop order (and Parent shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the SEC for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to Investors holding Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the SEC a Registration Statement or prospectus or any amendment or supplement thereto, Parent shall furnish to Investors holding Registrable Securities included in such Registration Statement and the legal counsel of such Investors copies of all such documents proposed to be filed sufficiently in advance of filing to provide such Investors and legal counsel with a reasonable opportunity to review such documents and comment thereon, and Parent shall not file any Registration Statement or prospectus or amendment or supplement thereto to which such Investors or their legal counsel shall object.

 

3.1.5  State Securities Laws Compliance . Prior to any public offering of Registrable Securities, Parent shall use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as Investors holding Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of Parent and do any and all other acts and things that may be necessary or advisable to enable Investors holding Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that Parent shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject.

 

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3.1.6  Agreements for Disposition . Parent shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of Parent in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of Investors holding Registrable Securities included in such Registration Statement. No Investor holding Registrable Securities included in such Registration Statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such Investor’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such Investor’s material agreements and organizational documents, and with respect to written information relating to such Investor that such Investor has furnished in writing expressly for inclusion in such Registration Statement.

 

3.1.7  Cooperation . The principal executive officer of Parent, the principal financial officer of Parent, the principal accounting officer of Parent and all other officers and members of the management of Parent shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

 

3.1.8  Records . Parent shall make available for inspection by Investors holding Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any Investor holding Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of Parent, as shall be necessary to enable them to exercise their due diligence responsibility, and cause Parent’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

 

3.1.9  Opinions and Comfort Letters . Parent shall furnish to each Investor holding Registrable Securities included in such Registration Statement a signed counterpart, addressed to such Investor, of (i) any opinion of counsel to Parent delivered to any Underwriter and (ii) any comfort letter from Parent’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, Parent shall furnish to each Investor holding Registrable Securities included in such Registration Statement, at any time that such Investor elects to use a prospectus, an opinion of counsel to Parent to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

 

3.1.10  Earnings Statement . Parent shall comply with all applicable rules and regulations of the SEC and the Securities Act, and make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11  Listing . Parent shall use its best efforts to cause all Registrable Securities that are Class A Common Stock included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by Parent are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to Investors holding a majority-in-interest of the Registrable Securities included in such registration.

 

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3.1.12  Road Show . If the registration involves the registration of Registrable Securities involving gross proceeds in excess of $25,000,000, Parent shall use its reasonable efforts to make available senior executives of Parent to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any underwritten offering.

 

3.2  Obligation to Suspend Distribution . Upon receipt of any notice from Parent of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by Parent, pursuant to a written insider trading compliance program adopted by Parent’s Board of Directors, of the ability of all “insiders” covered by such program to transact in Parent’s securities because of the existence of material non-public information, each Investor holding Registrable Securities included in such Registration Statement shall immediately discontinue disposition of its Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in Parent’s securities is removed, as applicable, and, if so directed by Parent, each such Investor will deliver to Parent all copies, other than permanent file copies then in such Investor’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.

 

3.3  Registration Expenses . Subject to Section 4, Parent shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective (“ Registration Expenses ”), including: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) Parent’s internal expenses (including all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for Parent and fees and expenses for independent certified public accountants retained by Parent (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by Parent in connection with such registration and (ix) the fees and expenses of one legal counsel selected by Investors holding a majority-in-interest of the Registrable Securities included in such registration. Parent shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the Investors, which underwriting discounts or selling commissions shall be borne by the Investors. Additionally, in an underwritten offering, all selling security holders and Parent shall bear the expenses of the Underwriter pro rata in proportion to the respective amount of securities each is selling in such offering.

 

3.4  Information . Investors holding Registrable Securities included in such Registration Statement shall provide such information as may reasonably be requested by Parent, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement including any Registrable Securities of the Investors, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the obligation to comply with federal and applicable state securities laws.

 

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4.  INDEMNIFICATION AND CONTRIBUTION .

 

4.1  Indemnification by Parent . Parent agrees to indemnify and hold harmless each Investor, and each Investor’s officers, employees, affiliates, directors, partners, members, attorneys and agents, and each Person, if any, who controls an Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “ Investor Indemnified Party ”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Parent of the Securities Act or any rule or regulation promulgated thereunder applicable to Parent and relating to action or inaction required of Parent in connection with any such registration; and Parent shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided, however, that Parent will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to Parent, in writing, by such selling holder expressly for use therein. Parent also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each Person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

 

4.2  Indemnification by the Investors . Each Investor selling Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling Investor, indemnify and hold harmless Parent, each of its directors and officers and each Underwriter (if any), and each other selling holder and each other Person, if any, who controls another selling holder or such Underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to Parent by such Investor expressly for use therein, and shall reimburse Parent, its directors and officers, each Underwriter and each other selling holder or controlling Person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each selling Investor’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling Investor.

 

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4.3  Conduct of Indemnification Proceedings . Promptly after receipt by any Person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such Person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other Person for indemnification hereunder, notify such other Person (the “ Indemnifying Party ”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

 

4.4  Contribution .

 

4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1.

 

4.4.3 The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

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5.  UNDERWRITING AND DISTRIBUTION .

 

5.1  Rule 144 . Parent covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as Investors holding Registrable Securities may reasonably request, all to the extent required from time to time to enable such Investors to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

6.  MISCELLANEOUS.

 

6.1  Other Registration Rights . Parent represents and warrants that as of the date of this Agreement, no Person, other than the holders of (i) the Registrable Securities, (ii) the Founder Securities, (iii) the InnoHold Securities and (iv) the Other PIPE Registrable Securities, has any right to require Parent to register any of Parent’s capital stock for sale or to include Parent’s capital stock in any registration filed by Parent for the sale of capital stock for its own account or for the account of any other Person.

 

6.2  Assignment; No Third Party Beneficiaries . This Agreement and the rights, duties and obligations of Parent hereunder may not be assigned or delegated by Parent in whole or in part. This Agreement and the rights, duties and obligations of Investors holding Registrable Securities hereunder may be freely assigned or delegated by such Investor in conjunction with and to the extent of any permitted transfer of Registrable Securities by such Investor. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties, to the permitted assigns of the Investors or of any assignee of the Investors. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2.

 

6.3  Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable Party at the following addresses (or at such other address for a Party as shall be specified by like notice):

 

If to Parent, to:

 

Purple Innovation, Inc.
123 E. 200 N.
Alpine, UT 84004
Attn: Casey McGarvey
Email: casey@purple.com

With a copy to (which shall not constitute notice):

 

Dorsey & Whitney LLP
111 S. Main St., Suite 2100
Salt Lake City, UT 84111
Attn: Nolan S. Taylor
Email: taylor.nolan@dorsey.com
Fax: (801) 933-7373
Tel: (801) 933-7366

If to an Investor, to the address set forth next to such Investor’s name on Exhibit A hereto.

 

6.4  Severability . This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

6.5  Counterparts . This Agreement may be executed in multiple counterparts (including by facsimile or pdf or other electronic document transmission), each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.

 

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6.6  Entire Agreement . This Agreement (together with the Subscription Agreement to the extent incorporated herein, and including all agreements entered into pursuant hereto or thereto or referenced herein or therein and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, relating to the subject matter hereof; provided, that, for the avoidance of doubt, the foregoing shall not affect the rights and obligations of the parties under the Subscription Agreement or the rights or obligations of the parties under the Other Registrations Rights Agreements. For the avoidance of doubt, the Investors acknowledge and agree that notwithstanding anything to the contrary contained herein or in the Subscription Agreement, they shall have no rights under the Founder Registration Rights Agreement, including with respect to the Transferred Sponsor Warrants and Warrant Shares.

 

6.7  Interpretation . Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

6.8  Amendments; Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written agreement or consent of Parent and Investors holding a majority-in-interest of the Registrable Securities. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

6.9  Remedies Cumulative . In the event a party fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the other parties may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

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6.10  Governing Law; Jurisdiction . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, claims or other legal proceedings arising out of or relating to this Agreement (a “ Proceeding ”) shall be heard and determined exclusively in any state or federal court located in the State of Delaware (or in any court in which appeal from such courts may be taken) (the “ Specified Courts ”). Each party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding brought by any party hereto and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each party irrevocably consents to the service of the summons and complaint and any other process in any Proceeding, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 6.3. Nothing in this Section 6.10 shall affect the right of any party to serve legal process in any other manner permitted by applicable law.

 

6.11  WAIVER OF TRIAL BY JURY . EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE INVESTORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW}

 

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IN WITNESS WHEREOF , the parties have caused this Registration Rights Agreement to be executed and delivered as of the date first written above.

 

  Parent:
   
  Global Partner Acquisition Corp.
   
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title:   Chief Executive Officer

 

  Investors:
   
  Baleen Capital Fund LP
     
  By: Baleen Capital Management LLC,
    its Investment Manager

 

  By: /s/ Fang Li
  Name: Fang Li
  Title:   Managing Member

 

  Baleen Capital Investors II LLC
   
  By: Baleen Capital Management LLC,
    its Managing Manager

 

  By: /s/ Fang Li
  Name:   Fang Li
  Title: Managing Member

 

  Greenhaven Road Capital Fund 1, L.P.
   
  By: Greenhaven Road Investment Management
    its Managing Manager

 

  By: /s/ Scott Miller
  Name: Scott Miller
  Title: Authorized Person

 

{Signature Page to PIPE Registration Rights Agreement}

 

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  Royce Value Trust, Inc.
   
  By: /s/ Christopher D. Clark
  Name: Christopher D. Clark
  Title:   President

 

  David Capital Partners Fund, LP
   
  By: David Capital Partners, LLC
    its Managing Manager

 

  By: /s/ Adam J. Patinkin
  Name: Adam J. Patinkin, CFA
  Title:   Managing Partner

 

  Pleiades Investment Partners – DC, L.P.
   
  By: David Capital Partners, LLC
    its Investment Advisor

 

  By: /s/ Adam J. Patinkin
  Name: Adam J. Patinkin, CFA
  Title: Managing Partner

 

  Dane Capital Fund LP
   
  By: Dane Capital LLC
    its Investment Manager

 

  By: /s/ Eric Gomberg
  Name: Eric Gomberg
  Title: Managing Member

 

{Signature Page to PIPE Registration Rights Agreement}

 

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EXHIBIT A
Investors

 

Name of Investor Address of Investor
Baleen Capital Fund LP 404 5th Avenue, Floor 3
New York, NY 10018
Baleen Capital Investors II LLC 404 5th Avenue, Floor 3
New York, NY 10018
Greenhaven Road Capital Fund 1, L.P. 70 Greenhaven Road
Rye, NY 10580
Royce Value Trust, Inc. 745 Fifth Avenue
New York, New York 10151
David Capital Partners Fund, LP 737 N. Michigan Avenue, Suite 1405
Chicago, IL 60611
Pleiades Investment Partners – DC, L.P. 6022 West Chester Pike
Newtown Square, PA 19073
Dane Capital Fund LP 747 3 rd Avenue, 4th Floor
New York, NY 10017

 

 A- 1

 

Exhibit 10.15

 

SUBSCRIPTION AGREEMENT

 

This Subscription Agreement (this “ Agreement ”), made as of February 1, 2018, by and among Global Partner Acquisition Corp., a Delaware corporation (the “ Company ”), Global Partner Sponsor I LLC, a Delaware limited liability company (the “ Sponsor ”), Coliseum Capital Partners, L.P., a Delaware limited partnership (“ CCP ”), and Blackwell Partners LLC – Series A, a Delaware limited liability company (“ Blackwell ”, and together with CCP, each a “ Subscriber ”, and together, the “ Subscribers ”), is intended to set forth certain representations, covenants and agreements among the Company, the Sponsor and the Subscribers with respect to the private offering of shares (the “ Common Offering ”) of common stock of the Company, par value $0.0001 per share (the “ Common Stock ”) for sale by the Company and the purchase by the Subscribers, pursuant to Section 2 hereof.

 

The respective representations, covenants and agreements set forth herein are made in connection with the Company’s proposed business combination with Purple Innovation, LLC, a Delaware limited liability company (“ Purple ”), pursuant to that certain Agreement and Plan of Merger (the “ Merger Agreement ”), dated as of November 2, 2017, as amended on January 8, 2018, by and among the Company, Purple, PRPL Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company, InnoHold LLC, a Delaware limited liability company (“ InnoHold ”), and the Sponsor, solely in its capacity as the representative of the Company as provided in the Merger Agreement (such business combination, the “ Merger ”, and the consummation of the Merger in accordance with the terms of the Merger Agreement, the “ Merger Closing ”).

 

In consideration of the respective representations, covenants and agreements contained herein, and subject to the terms and conditions hereof, the Subscribers, the Sponsor and the Company hereby agree as follows:

 

1. Transfer and Voting of Shares .

 

(a) Each of the Subscribers covenants and agrees that until the earlier of (i) the Merger Closing and (ii) the Termination Date (as defined below), it shall not, and shall ensure that its Affiliates do not, Transfer any Common Stock. As used in this Agreement, “ Affiliate ” shall mean affiliate as such term is defined in Rule 12b-2 under the Exchange Act (as defined below) and “ Transfer ” shall mean any direct or indirect transfer, redemption, disposition or monetization in any manner whatsoever, including, without limitation, through redemption election or any derivative transactions.

 

(b) Each Subscriber covenants and agrees that it shall, and shall cause each of its Affiliates to, (i) vote all the Common Stock, if any, that it or they owned on the record date for the special meeting of stockholders to be held by the Company to approve, among other things, the Merger (the “ Special Meeting ”) in favor of (A) the Merger, pursuant to a proxy statement filed by the Company with the Securities and Exchange Commission (the “ SEC ”) in connection with the Special Meeting, as supplemented by definitive additional materials filed with the SEC through the date hereof (collectively the “ Proxy Statement ”), and (B) each of the proposals of the Company set forth in the Proxy Statement, and (ii) not exercise its or their redemption rights in any Common Stock in connection with the Special Meeting or the Merger.

 

 

 

 

2. Subscription

 

(a) Subject to the terms and conditions set forth in this Agreement, (i) CCP hereby irrevocably subscribes for and agrees to purchase from the Company 2,900,000 shares of Common Stock, at a purchase price of $10.00 per share, and the Company agrees to sell such shares to CCP at such price (the shares of Common Stock to be so sold, the “ CCP Subject Shares ”), and (ii) Blackwell hereby irrevocably subscribes for and agrees to purchase from the Company 1,100,000 shares of Common Stock, at a purchase price of $10.00 per share, and the Company agrees to sell such shares to Blackwell at such price (the shares of Common Stock to be so sold, the “ Blackwell Subject Shares ”, and together with the CCP Subject Shares, the “ Subject Shares ”), in each case subject to the Merger Closing. For the avoidance of doubt, if the Merger Closing does not occur, then each Subscriber’s obligation to purchase, and the Company’s obligation to issue, shares pursuant to this Agreement are extinguished. Any such purchase shall be consummated simultaneously with the Merger Closing.

 

(b) Each Subscriber acknowledges that, in connection with the Merger, the Common Stock of the Company will be renamed “Class A Common Stock,” as described in the Proxy Statement.

 

3. Delivery of Subscription Amount; Acceptance of Subscriptions; Delivery; Refund of Oversubscribed Subject Shares . The subscription to purchase Subject Shares from each Subscriber is subject to the following terms and conditions:

 

(a) Contemporaneously with the execution and delivery of this Agreement, the Subscriber shall execute and deliver the Investor Questionnaire (as defined below) and, in respect of above Subscription, each Subscriber shall, on or before February 1, 2018 (the “ Funding Date ”), cause a wire transfer to be made for payment for the Subject Shares to be purchased by such Subscriber in immediately available funds in the amount equal to $10.00 multiplied by the number of Subject Shares to be purchased by such Subscriber pursuant to the subscription in Section 2 above (the “ Subscription Amount ”), in each case in accordance with the Subscription Instructions set forth on Exhibit A hereto. The payments provided for in this Section 3(a) shall be maintained in escrow with Continental Stock Transfer & Trust Company (or other nationally recognized escrow agent with whom in all cases, whether with Continental Stock Transfer & Trust Company or otherwise, the Company shall have an escrow agreement in place for purposes hereof, which such agreement shall be on reasonable and customary terms) pending the Company’s acceptance of the subscription.

 

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(b) The subscription by each Subscriber for its Subject Shares shall be deemed to be accepted only (and shall not otherwise be accepted by the Company except) when (i) the Company has confirmed in writing to such Subscriber that the Company’s representations and warranties contained herein are, or shall be, true and correct as of the date of the acceptance of such subscription and (ii) there occurs the simultaneous Merger Closing. If such acceptances do not occur on or prior to the earliest of (x) the Merger Closing, (y) the date on which the Merger Agreement is terminated in accordance with its terms, and (z) February 5, 2018 (the “ Termination Date ”), such Subscriber’s subscription shall automatically be deemed rejected (the “ Subscription Rejection ”).

 

(c) The payment of the Subscription Amount (or a portion thereof, as applicable) will be returned promptly, without interest, to the Subscribers if the Merger Closing does not occur.

 

(d) The representations and warranties of the Company and each Subscriber set forth herein shall be true and correct as of the date that the Company accepts the subscriptions set forth herein.

 

(e) Notwithstanding anything to the contrary herein, the Subscribers’ obligations to purchase from the Company the Subject Shares shall be subject to the following conditions, and, upon written notice of the failure of any of the following conditions to be met, delivered to the Company by the Subscribers prior to the Merger Closing, this Agreement shall be of no further force or effect:

 

(i) the Company shall not have, without the written consent of the Subscribers, agreed to amend any term of the Merger Agreement, or agreed to waive any condition to the Merger Closing, except that, notwithstanding the terms of the Merger Agreement: (A) Minimum Parent Cash (as defined in the Merger Agreement) shall be $60,000,000, (B) Post-Closing Parent Cash (as defined in the Merger Agreement) shall be $50,000,000, including the net amount of the proceeds of the Debt Transaction, (C) the requirement to assign all Sponsor Warrants to InnoHold shall have been revised to permit the assignment of Sponsor Warrants under this Agreement, (D) the transactions contemplated by this Agreement and the sale of Common Stock and transfer of Sponsor Warrants to Baleen Capital Fund LP (“ Baleen ”) shall have been permitted, and (E) amendments to the InnoHold and Sponsor registration rights agreements made to accommodate the Subscribers’ and Baleen’s registration rights;

 

(ii) the Company’s stockholders shall have approved at the Special Meeting the Merger and any of the other matters that are conditions to the Merger Closing;

 

(iii) after payment of all expenses of the Company and Purple and their respective subsidiaries and any cash payments to InnoHold in accordance with the Merger Agreement, the Company and its subsidiaries, on a consolidated basis shall have, after giving effect to the Merger Closing (including, without limitation, the receipt of $25 million in the form of unsecured debt pursuant to the Debt Transaction (as defined below)), at least $50 million in cash on its balance sheet less up to $8,100,000 used to pay down in full and terminate the existing asset-backed loan facility of Purple;

 

(iv) the Subscribers shall be satisfied that third party expenses incurred and payable by the Company and its subsidiaries in connection with the Merger Closing shall not exceed $6.5 million in the aggregate;

 

(v) the Company shall have entered into the Credit Agreement by and between Purple, CCP, Blackwell, and Coliseum Co-Invest Debt Fund, L.P., dated as of February 2, 2018 (the “ Debt Transaction ”);

  

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(vi) the Subscribers shall have received an acceptable commitment that, following the Merger Closing, the board of directors of the Company (the “ Board of Directors ”) will be increased to eight members and that one designee of the Subscribers will be elected or appointed to the Board of Directors, subject to such designee (i) qualifying as an “independent director” as such term is defined in the corporate governance rules of the Nasdaq Capital Market (an “ Independent Director ”), (ii) providing to the Company such information as may be required by the Company or under applicable securities laws with respect to the background and experience of such designee, and (iii) being reasonably acceptable to the Board of Directors, in its good faith and reasonable judgment;

 

(vii) the transfers of the founder shares (as such term is used in the Final Prospectus (as hereinafter defined), the “ Founder Shares ”) and Sponsor Warrants (as defined below) shall have occurred; provided that the transferred Founder Shares and the Sponsor Warrants shall be subject to the terms of Section 7 of the Insider Letter (in the form of Exhibit 10.2 to the Registration Statement on Form S-1/A filed with the SEC on July 13, 2015) (the “ Insider Letter ”) and the Sponsor Warrants shall also be subject to the terms of the Private Placement Warrants Purchase Agreement, dated as of June 11, 2015, by and between the Company and the Sponsor (the “ Warrant Purchase Agreement ”), and the Warrant Agreement, dated as of July 29, 2015, by and between the Company and Continental Transfer & Trust Company, as warrant agent (the “ Warrant Agreement ”), without any amendments to such agreements except as approved in writing in advance by the Subscribers; and

 

(viii) The Subscribers shall have entered into a Registration Rights Agreement with the Company with respect to the registration under the Securities Act of 1933, as amended, and the rules and regulations thereunder (the “ Securities Act ”) of the resale of the Subject Shares, Founder Shares and Sponsor Warrants, and the Common Stock underlying the Sponsor Warrants (the “ Registration Rights Agreement ”).

 

4. Consideration . In order to induce the Subscribers to enter into this Agreement, and subject to the compliance by the Subscribers with their obligations hereunder, the Sponsor agrees that it will, concurrently with the Merger Closing, assign and transfer to:

 

(a) CCP, 2,378,966 sponsor warrants sold to the Sponsor pursuant to the Warrant Purchase Agreement (the “ Sponsor Warrants ”), entitling CCP to purchase 1,189,483 shares of Common Stock; all such Sponsor Warrants (and the shares of Common Stock underlying such warrants) shall be subject to the same lock-up and transfer restrictions currently applicable to the Sponsor Warrants under the Warrant Agreement and the Insider Letter;

 

(b) CCP, 937,635 Founder Shares, of which 468,818 Founder Shares shall be fully vested at the Merger Closing and 468,817 Founder Shares shall be subject to vesting and forfeiture based on the common stock price performance of the Company over eight years following the consummation of the Business Combination and certain other events as set forth in the Sponsor Share Agreement annexed to the Merger Agreement. All such Founder Shares shall be subject to the same lock-up and transfer restrictions currently applicable to the other Founder Shares under the Insider Letter.

 

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(c) Blackwell, 903,534 Sponsor Warrants, entitling Blackwell to purchase 451,767 shares of Common Stock; all such Sponsor Warrants (and the shares of Common Stock underlying such warrants) shall be subject to the same lock-up and transfer restrictions currently applicable to the Sponsor Warrants under the Warrant Agreement and the Insider Letter; and

 

(d) Blackwell, 356,115 Founder Shares, of which 178,058 Founder Shares shall be fully vested at the Merger Closing and 178,057 Founder Shares shall be subject to vesting and forfeiture based on the common stock price performance of the Company over eight years following the consummation of the Business Combination and certain other events as set forth in the Sponsor Share Agreement annexed to the Merger Agreement. All such Founder Shares shall be subject to the same lock-up and transfer restrictions currently applicable to the other Founder Shares under the Insider Letter.

 

5. Expenses . The Company shall reimburse the Subscribers for their expenses in connection with this Agreement and the transactions contemplated by hereby in an amount, together with expenses of the Subscribers incurred in connection with the Debt Transaction, up to $350,000, if the Merger Closing occurs (and otherwise each party hereto shall pay all of its own expenses in connection with this Agreement and the transactions contemplated hereby).

 

6. Board Nominee . For so long as the Subscribers, together with any other funds or accounts managed by Coliseum Capital Management, LLC (“ Coliseum ”), hold in the aggregate at least fifty percent (50%) of the number of shares of Common Stock held by the Subscribers as of and after giving effect to the Merger Closing, the Company shall nominate and include one designee of Coliseum, in each slate of members of the Board of Directors proposed to stockholders of the Company, whether at the annual meeting or otherwise, subject to (a) such designee shall, if elected to the Board of Directors, be an Independent Director, (b) such designee providing to the Company such information as may be required by the Company or under applicable securities laws with respect to the background and experience of such designee, and (c) the right, not to be unreasonably withheld, conditioned or delayed, of the nomination committee of the Board of Directors to approve such designee (it being understood and agreed that if pursuant to this clause (c) the nomination committee rejects such designee, such rejection must be in good faith and Coliseum shall have the right to propose additional designees for consideration by such committee until a designee is approved). The Company shall issue a press release reasonably satisfactory to Coliseum promptly after the appointment to the Board of Directors of Coliseum’s initial designee contemplated under Section 3(e)(vi) above.

 

7. Preemptive Rights .

 

(a) Subject to applicable securities laws and regulations, each Subscriber then holding at least fifty percent (50%) of the number of shares of Common Stock held by it as of and after giving effect to the Merger Closing, shall have a preemptive right to purchase up to its Pro Rata Share (as defined below) of all Equity Securities (as defined below) that the Company may, from time to time, propose to sell and issue following the Merger Closing, other than the following:

 

(i) shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to such options, warrants or other rights issued or to be issued after the date hereof to employees, officers or directors of, or consultants or advisors to the Company or any subsidiary, pursuant to stock purchase or stock option plans or other arrangements that are approved by the Board of Directors of the Company;

 

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(ii) any Equity Securities issued or issuable pursuant to any rights or agreements, options, warrants or convertible securities outstanding as of immediately after the Closing or which were previously issued subject to this Section 7;

 

(iii) any Equity Securities issued in connection with any stock split or stock dividend by the Company;

 

(iv) any Equity Securities issued in connection with a Proposed Financing (as defined below) provided that such debt was issued or incurred in compliance with Section 8 and such issuance does not exceed (on a fully diluted basis), in the aggregate when taken together with all prior issuances made in connection with this clause (iv), 2% of the issued and outstanding shares of Common Stock then outstanding; and

 

(v) any Equity Securities issued in connection with acquisitions, joint ventures, partnerships or strategic transactions to the applicable selling persons or counterparties with who the Company or its subsidiary is consummating such joint venture, partnership or strategic transaction, in each case, that is approved by a majority of the disinterested directors of the Company, provided that any such issuance shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.

 

(b) If the Company proposes to issue any Equity Securities, it shall give each Subscriber written notice of its intention, describing the Equity Securities, the price and the terms and conditions upon which the Company proposes to issue the same. Each Subscriber shall have ten (10) Business Days (as defined below) from the giving of such notice to agree to purchase up to its Pro Rata Share of the Equity Securities for the price and upon the terms and conditions specified in the notice by giving written notice to the Company and stating therein the quantity of Equity Securities to be purchased.

 

(c) If a Subscriber entitled to the preemptive rights under Section 7(a) hereof does not elect to purchase any or all of its Pro Rata Share of the Equity Securities, then the other Subscriber shall have the first right to purchase such first Subscriber’s unpurchased Pro Rata Share of Equity Securities.

 

(d) As used in this Agreement: (i) “ Equity Securities ” shall mean (A) any Common Stock, preferred stock, warrant or other security of the Company, (B) any security convertible into or exercisable or exchangeable for, with or without consideration, any Common Stock, preferred stock or other security (including any option to purchase such a convertible security), (C) any security carrying any warrant or right to subscribe to or purchase any Common Stock, preferred stock or other security, or (D) any such warrant or right; (ii) “ Pro Rata Share ” shall mean, with respect to a Subscriber, the ratio of (x) the number of shares of the Company’s Common Stock (including all shares of Common Stock issuable or issued upon conversion of shares of preferred stock or convertible debt, upon the exercise of outstanding warrants or options and upon the exchange of securities exchangeable for Common Stock) of which such Subscriber is deemed to be the beneficial owner immediately prior to the issuance of such Equity Securities to (y) the total number of shares of the Company’s outstanding Common Stock (including all shares of Common Stock issuable or issued upon conversion of shares of preferred stock or convertible debt, upon the exercise of outstanding warrants or options and upon the exchange of securities exchangeable for Common Stock of the Company) immediately prior to the issuance of the Equity Securities; and (iii) “ Business Day ” shall mean any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

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8. Right of First Refusal – Indebtedness .

 

(a) Following the Merger Closing, so long as the Subscribers hold at least fifty percent (50%) of the number of shares of Common Stock held by them in the aggregate as of and after giving effect to the Merger Closing, prior to the Company or any of its subsidiaries entering into (i) preferred equity financing with a preference to or over any of the terms of the Company’s Common Stock or (ii) any debt financing with a principal amount outstanding (together with all other debt provided by lender or group of lenders) greater than or equal to $10 million, other than (x) the replacement or refinancing of existing indebtedness or (y) an asset based loan on customary terms with an all in interest rate of not greater than 5% per year, the Company must deliver a written notice (a “ ROFR Notice ”) to the Subscribers no later than twenty (20) Business Days prior to the consummation of the transactions pursuant to which such financing would otherwise be incurred (a “ Proposed Financing ”), which ROFR Notice shall include the material terms and conditions (including applicable interest rate, coupons, preferences, premiums, prepayment or termination fees, redemption rights, and expense reimbursement requirements) of such Proposed Financing, the identity of the person(s) that the Company or its subsidiary is seeking such Proposed Financing from, and the intended date of the consummation of such Proposed Financing.

 

(b) The Subscribers shall have the right, but not the obligation, to provide (or to have its managed accounts provide) all, but not less than all, of the financing sought by the Company or any of its subsidiaries pursuant to any Proposed Financing on the same terms and conditions as described in the applicable ROFR Notice (a “ Right of First Refusal ”). If intending to exercise a Right of First Refusal, the Subscribers shall provide written notice to the Company of such intention within fifteen (15) Business Days of receipt of the applicable ROFR Notice. Following failure of the Subscribers to deliver notice in accordance with the preceding sentence, or otherwise declining to exercise a Right of First Refusal (the date of such failure or declination, the “ Refusal Date ”), the Company may proceed with consummating the applicable Proposed Financing; provided that if such Proposed Financing (i) fails to be consummated within ninety (90) days of the Refusal Date or (ii) can only be consummated upon general terms and conditions materially more favorable to the providers thereof than specified in applicable ROFR Notice , then such Proposed Financing shall again become subject to a Right of First Refusal in favor of the Subscribers on the terms set forth in this Section 8. Either Subscriber may provide the entirety of the financing or assign its rights under this Section 8 to any other funds or accounts managed by Coliseum Capital Management, LLC.

 

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9. Transfer Restrictions .

 

(a) None of the Subject Shares may be directly or indirectly transferred, disposed of or otherwise monetized in any manner whatsoever, except in a transaction that is in compliance with the Securities Act, and applicable state securities laws. Except as provided in the Registration Rights Agreement, it shall be a condition to any such transfer that the Company shall be furnished with a written opinion of counsel to the holder of such Subject Shares, reasonably satisfactory to the Company (as determined by the Company within 3 Business Days of its receipt of such written opinion), to the effect that the proposed transfer would be in compliance with the Securities Act and applicable state securities laws; provided that the Company shall not require such written opinion of counsel if, acting in its reasonable discretion, if determines that applicable Law does not prohibit any transfers of the Subject Shares at such time. “ Business Day ” shall mean any day that is not a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed.

 

(b) Without limitation to the generality of the foregoing, no Subscriber shall execute any short sales or engage in other hedging transactions of any kind with respect to the Common Stock during the period from the date of the Merger Closing through the date that is 45 consecutive days thereafter. For the avoidance of doubt, the prohibition set forth herein shall not be applicable on or after the Termination Date.

 

10. Representations, Warranties, Understandings, Risk Acknowledgments, and Covenants of the Subscribers . Each Subscriber hereby represents, warrants and covenants to the Company as follows:

 

(a) Such Subscriber is purchasing the Subject Shares and the other securities of the Company to be transferred to it by the Sponsor hereunder (the “ Sponsor Securities ”) for its own account, not as a nominee or agent, for investment purposes and not with a view towards distribution or resale within the meaning of the Securities Act (absent the registration of the Subject Shares or the Sponsor Securities for resale under the Securities Act or a valid exemption from registration). Such Subscriber will not sell, assign or transfer such shares or securities at any time in violation of the Securities Act or applicable state securities laws. Such Subscriber acknowledges that the Subject Shares and Sponsor Securities cannot be sold unless subsequently registered under the Securities Act and applicable state securities laws or an exemption from such registration is available.

 

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(b) Such Subscriber understands that (A) the Subject Shares and the Sponsor Securities (1) have not been registered under the Securities Act or any state securities laws, (2) have been offered and will be sold in reliance upon an exemption from the registration and prospectus delivery requirements of the Securities Act, (3) will be issued in reliance upon exemptions from the registration and prospectus delivery requirements of state securities laws which relate to private offerings and (4) must be held indefinitely because of the fact that the Subject Shares and the Sponsor Securities have not been registered under the Securities Act or applicable state securities laws, and (B) such Subscriber must therefore bear the economic risk of its investment hereunder indefinitely unless a subsequent disposition thereof is registered under the Securities Act and applicable state securities laws or is exempt therefrom. Such Subscriber further understands that such exemptions depend upon, among other things, the bona fide nature of the investment intent of such Subscriber expressed herein. Pursuant to the foregoing, such Subscriber acknowledges that until such time as the resale of the Subject Shares and the Sponsor Securities have been registered under the Securities Act as contemplated by the Registration Rights Agreement or otherwise may be sold pursuant to an exemption from registration, the certificates representing any Subject Shares or Sponsor Securities acquired by such Subscriber shall bear a restrictive legend substantially as follows (and a stop-transfer order may be placed against transfer of the certificates evidencing such Subject Shares and Sponsor Securities):

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THESE SECURITIES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING:

 

BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER:

 

1. REPRESENTS THAT IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A “QUALIFIED INSTITUTIONAL BUYER” (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, AND
     
2. AGREES FOR THE BENEFIT OF PURPLE INNOVATION, INC. (THE “COMPANY”) THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS SECURITY OR ANY BENEFICIAL INTEREST HEREIN PRIOR TO THE DATE THAT IS THE LATER OF (X) ONE YEAR OR SUCH OTHER PERIOD OF TIME AS PERMITTED BY RULE 144 UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THERETO AFTER THE LAST DATE OF INITIAL ISSUANCE HEREOF, AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW, EXCEPT:
     
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, OR
     
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR
     
(C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, OR
     
(D) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

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PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH CLAUSE (2)(B) ABOVE, THE COMPANY AND THE TRANSFER AGENT RESERVE THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS TO THE AVAILABILITY OF ANY EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

 

(c) Such Subscriber has knowledge, skill and experience in financial, business and investment matters relating to an investment of this type and is capable of evaluating the merits and risks of such investment and protecting such Subscriber’s interest in connection with the acquisition of the Subject Shares and Sponsor Securities (collectively, the “ Shares ”). Such Subscriber understands that the acquisition of the Shares is a speculative investment and involves substantial risks and that such Subscriber could lose such Subscriber’s entire investment. Further, such Subscriber has (i) carefully read and considered the risks identified in the Disclosure Documents (as defined below) and (ii) carefully considered the risks related to the Merger, the Company, and Purple and has taken full cognizance of and understands all of the risks related to the Company, Purple, the Merger, the Shares and the transactions contemplated hereby, including, without limitation, the purchase of the Shares. Acknowledging the very significant tax impact analysis and other analyses that is warranted in determining the consequences to it of purchasing and owning the Shares, to the extent deemed necessary by such Subscriber, such Subscriber has had the opportunity to retain, at its own expense, and relied upon, appropriate professional advice regarding the investment, tax and legal merits and consequences of the foregoing, including, without limitation, purchasing and owning the Shares. Such Subscriber has the ability to bear the economic risks of such Subscriber’s investment in the Company, including a complete loss of the investment, and such Subscriber has no need for liquidity in such investment.

 

(d) Such Subscriber has been furnished by the Company all information (or provided access to all reasonable information it requested) regarding the business and financial condition of the Company and Purple, the Company’s expected plans for future business activities, and the merits and risks of an investment in the Shares which such Subscriber has requested or otherwise needs to evaluate the investment in the Shares.

 

(e) Such Subscriber is in receipt of and has carefully read and understands the following items (collectively, the “ Disclosure Documents ”):

 

(i) the final prospectus of the Company, filed with the Securities and Exchange Commission (the “ SEC ”) on July 29, 2015 (the “ Final Prospectus ”);

 

(ii) each filing made by the Company with the SEC following the filing of the Final Prospectus;

 

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(iii) the Merger Agreement (including any amendment thereto), a copy of which is annexed to the Proxy Statement; and

 

(iv) the Proxy Statement (including any supplement thereto) and the amendments to the Certificate of Incorporation of the Company proposed to be voted on pursuant thereto, a copy of which has been made available to such Subscriber.

 

Such Subscriber understands the significant extent to which certain of the disclosures contained in items (i) and (ii) above shall no longer apply following the Closing in accordance with the Merger Agreement.

 

Such Subscriber acknowledges that neither the Company nor any of its Affiliates has made or makes any representation or warranty to such Subscriber in respect of the Company, Purple, or the Merger, other than in the case of the Company, the representations and warranties contained in this Agreement.

 

(f) In making its investment decision to purchase the Shares, such Subscriber is relying solely on investigations made by such Subscriber and such Subscriber’s representatives. The offer to sell the Subject Shares was communicated to such Subscriber in such a manner that such Subscriber was able to ask questions of and receive answers from the management of the Company concerning the terms and conditions of the proposed transaction and that at no time was such Subscriber presented with or solicited by or through any advertisement, article, leaflet, public promotional meeting, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or meeting or any other form of general or public advertising or solicitation.

 

(g) Such Subscriber acknowledges that it has been advised that:

 

(i) The Subject Shares offered hereby have not been approved or disapproved by the SEC or any state securities commission nor has the SEC or any state securities commission passed upon the accuracy or adequacy of any representations by the Company. Any representation to the contrary is a criminal offense.

 

(ii) In making an investment decision, such Subscriber must rely on its own examination of the Company, the Merger, Purple, the Shares and the Common Offering, including the merits and risks involved. The Shares have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of any representation. Any representation to the contrary is a criminal offense.

 

(iii) The Subject Shares will be “restricted securities” within the meaning of Rule 144 under the Securities Act, are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom. Such Subscriber is aware of the provisions of Rule 144 are not currently available and, in the future, may not become available for resale of any of the Subject Shares and that the Company is an issuer subject to Rule 144(i) under the Securities Act. Such Subscriber is aware that it may be required to bear the financial risks of this investment for an indefinite period of time.

 

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(h) Such Subscriber agrees to furnish the Company with such other information as the Company may reasonably request in order to verify the accuracy of the information contained herein and agrees to notify the Company immediately of any material change in the information provided herein that occurs prior to the acceptance of this Agreement by the Company.

 

(i) Such Subscriber further represents and warrants that it is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, an “accredited investor” within the meaning of Rule 501 of Regulation D under the Securities Act, and Subscriber has executed the Investor Questionnaire attached hereto as Exhibit B (the “ Investor Questionnaire ”) and shall provide to the Company an updated Investor Questionnaire for any change in circumstances at any time on or prior to the Merger Closing.

 

(j) As of the date of this Agreement, such Subscriber and its Affiliates do not have, and during the 30 day period prior to the date of this Agreement such Subscriber and its Affiliates have not, in a seller, transferor or other similar capacity, entered into, any “put equivalent position” as such term is defined in Rule 16a-1 of under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) or short sale positions with respect to the securities of the Company. In addition, such Subscriber shall comply with all applicable provisions of Regulation M promulgated under the Securities Act.

 

(k) If such Subscriber is a natural person, he or she has reached the age of majority in the state in which such Subscriber resides, has adequate means of providing for such Subscriber’s current financial needs and contingencies, is able to bear the substantial economic risks of an investment in the Subject Shares for an indefinite period of time, has no need for liquidity in such investment and, at the present time, could afford a complete loss of such investment.

 

(l) If such Subscriber is a partnership, corporation, trust, estate or other entity (an “ Entity ”): (i) such Entity has the full legal right and power and all authority and approval required (a) to execute and deliver, or authorize execution and delivery of, this Agreement and all other instruments executed and delivered by or on behalf of such Entity in connection with the purchase of the Shares, (b) to delegate authority pursuant to power of attorney and (c) to purchase and hold such Shares; (ii) the signature of the party signing on behalf of such Entity is binding upon such Entity; and (iii) such Entity has not been formed for the specific purpose of acquiring such Shares, unless each beneficial owner of such entity is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act, is qualified as an accredited investor within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act and has submitted information substantiating such individual qualification.

 

(m) If such Subscriber is a retirement plan or is investing on behalf of a retirement plan, such Subscriber acknowledges that investment in the Shares poses additional risks including the inability to use losses generated by an investment in the Shares to offset taxable income.

 

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(n) This Agreement has been duly authorized, executed and delivered by such Subscriber and constitutes a legal, valid and binding obligation of such Subscriber enforceable against such Subscriber in accordance with its terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in Law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.

 

(o) Such Subscriber understands and confirms that the Company will rely on the representations and covenants contained herein in effecting the transactions contemplated by this Agreement and the other Transaction Documents (as defined herein). All representations and warranties provided to the Company furnished by or on behalf of such Subscriber, taken as a whole, are true and correct and do not contain any untrue statement of material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.

 

(p) Such Subscriber has read the Final Prospectus, and understands that the Company has established a trust fund (“ Trust Fund ”) for the benefit of the Company’s public shareholders and that the Company may disburse monies from the Trust Fund only (i) to the Company’s public shareholders in the event they elect to redeem their shares, (ii) to the public shareholders upon the liquidation of the Company if the Company fails to consummate an initial business combination within the required time period described in the Final Prospectus, (iii) to the Company in limited amounts for its tax obligations and (iv) to the Company after, or concurrently with, the consummation of a business combination. To induce the Company to enter into this Agreement and sell the securities to be sold to it hereunder, such Subscriber agrees that it does not have any right, title, interest or claim of any kind in or to any monies in the Trust Fund (“ Claim ”) and waives any Claim it may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and will not seek recourse against the Trust Fund for any reason whatsoever. Notwithstanding the foregoing, such Subscriber shall maintain rights of redemption of any public shares it may own if the Merger Closing does not occur, subject to the terms and conditions applicable to any such redemption. This section shall survive the termination of this Agreement for any reason.

 

(q) Neither such Subscriber nor, to the extent it has them, any of its shareholders, members, managers, general or limited partners, directors, Affiliates or executive officers (collectively with such Subscriber, the “ Subscriber Covered Persons ”), are subject to any of the “Bad Actor” disqualifications described in Rule 506(d) under the Securities Act (a “ Disqualification Event ”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3).

 

(r) Such Subscriber has exercised reasonable care to determine whether any Subscriber Covered Person is subject to a Disqualification Event.

 

(s) The purchase of Shares by such Subscriber will not subject the Company to any Disqualification Event.

 

  13  

 

 

(t) As of the date hereof, such Subscriber does not own, directly or indirectly, any shares of Common Stock.

 

11. Representations and Warranties of the Company . The Company represents and warrants to each of the Subscribers as follows:

 

(a) Subject to obtaining all required approvals necessary in connection with the performance of the Merger Agreement (including, without limitation, the approval of the Company’s stockholders) and any required approvals pursuant to the applicable rules of NASDAQ, each of which will have been obtained prior to or as of the Merger Closing (together, the “ Required Approvals ”), the Company has all requisite corporate power and authority to enter into and perform this Agreement, the Registration Rights Agreement, the Warrant Purchase Agreement, the Warrant Agreement and the Merger Agreement (collectively, the “ Transaction Documents ”), and to consummate the transactions contemplated hereby and thereby, in accordance with the terms hereof and thereof. Subject to obtaining the Required Approvals, the execution and delivery of this Agreement and each of the other Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by the Company’s Board of Directors and, subject to obtaining the Required Approvals, no further consent or authorization of the Company, its Board of Directors, or its shareholders is required. This Agreement and each of the other Transaction Documents have been duly executed and delivered by the Company. This Agreement and each of the other Transaction Documents will constitute upon execution and delivery by the Company, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by: (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws in effect that limit creditors’ rights generally; (ii) equitable limitations on the availability of specific remedies; (iii) principles of equity (regardless of whether such enforcement is considered in a proceeding in Law or in equity); and (iv) to the extent rights to indemnification and contribution may be limited by federal securities laws or the public policy underlying such laws.

 

(b) Subject to obtaining the Required Approvals, the execution, delivery and performance of this Agreement and each of the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (i) conflict with or result in a violation of any material provision of the Second Amended and Restated Certificate of Incorporation (which is the currently applicable certificate of incorporation of the Company), of the Company, (ii) violate or conflict with, or result in a material breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, to which the Company is a party, or (iii) result in a material violation of any Law applicable to the Company or by which any property or asset of the Company is bound or affected. The Company is not in violation of its Second Amended and Restated Certificate of Incorporation or other organizational documents. The Company is not in material default (and no event has occurred which with notice or lapse of time would result in a default) under, and the Company has not taken any action or failed to take any action that would give to others any rights of termination, amendment, acceleration or cancellation of, any agreement or instrument to which the Company is a party or by which any property or assets of the Company is bound or affected. Except for filings required under the Securities Act and any applicable state securities laws (and subject to obtaining the Required Approvals), the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency, regulatory agency, self-regulatory organization or stock market (other than pursuant to the applicable rules of NASDAQ and the filing of a Notification and Report Form with the United States Federal Trade Commission and the United States Department of Justice under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended and the expiration or termination of any applicable waiting period thereunder, if required) in order for it to execute, deliver or perform any of its obligations under the Transaction Documents. All consents, authorizations, orders, filings and registrations that the Company is required to effect or obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof or will, prior to any acceptance of this subscription, be so obtained or effected in a timely manner as required by Law.

 

  14  

 

 

(c) The Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Act and the Exchange Act (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits to such documents) incorporated by reference therein, being hereinafter referred to herein as the “ SEC Documents ”) since January 16, 2014, or has timely filed for a valid extension of such time of filing and has filed any such SEC Document prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(d) As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with United States generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes, year-end adjustments or may be condensed or summary statements) and fairly present in all material respects the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

 

(e) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act). Such disclosure controls and procedures: (i) are designed to ensure that material information relating to the Company and its subsidiaries is made known to the Company’s chief executive officer and its chief financial officer by others within those entities, particularly during the periods in which the Company’s reports and filings under the Exchange Act are being prepared, (ii) have been evaluated for effectiveness as of the end of the most recent quarterly period reported to the SEC, and (iii) are effective to perform the functions for which they were established.

 

  15  

 

 

(f) Except with respect to the transactions contemplated hereby and by each of the other Transaction Documents and except as disclosed in the Disclosure Documents or has been disclosed in any public disclosure as defined in Section 101(e) of Regulation FD promulgated under the Exchange Act, since July 29, 2015: (i) the Company has conducted its business only in the ordinary course, consistent with past practice, and since that date, no changes have occurred which would reasonably be expected to have a material adverse effect on the business, properties, condition (financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole (“ Material Adverse Effect ”); and (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses and other liabilities incurred in the ordinary course of business consistent with past practice and in order to consummate the Merger and (B) liabilities not required to be reflected on the Company’s financial statements pursuant to GAAP or required to be disclosed in the SEC Documents.

 

(g) Other than deficiency letters from NASDAQ as described in the Proxy Statement and/or reports on Form 8-K filed by the Company with the SEC, there is no Action pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries that (i) adversely affects or challenges the legality, validity or enforceability of this Agreement, the Merger or the Merger Agreement, or (ii) if there were an unfavorable decision, could have or reasonably be expected to have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending any investigation by the SEC involving the Company or to the knowledge of the Company, any director or officer of the Company (in his or her capacity as such). The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act. As used in this Agreement, “ Action ” means any action, lawsuit, claim, suit, arbitration, hearing, examination or judicial or legal proceeding or investigation, whether civil, criminal or administrative, at Law or in equity, or by or before any federal, national, supranational, foreign, state, provincial, local, county, municipal or other government, any governmental, regulatory or administrative authority, agency, department, bureau, board, commission or official or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority, or any court, tribunal, judicial or arbitral body, or any securities exchange, futures exchange, contract market, any other exchange or corporation or similar self-regulatory body or organization applicable to a party to this Agreement (each, a “ Governmental Authority ”) (in each case to the extent that the rules, regulations or orders of such body or authority have the force of Law). As used in this Agreement, “ Law ” means any material law (statutory, common or otherwise), including any material statute, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order of a Governmental Authority.

 

  16  

 

 

(h) The Company has made or filed all federal, state and foreign income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject in respect of which the failure to so make or file could reasonably be expected to have a Material Adverse Effect and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and, to the extent required by generally accepted accounting principles, has set aside on its books provisions reasonably adequate for the payment of all taxes that are material in amount for periods subsequent to the periods to which such returns, reports or declarations apply. The Company has not executed a waiver with respect to the statute of limitations relating to the assessment or collection of any foreign, federal, state or local tax.

 

(i) Since the date of the Proxy Statement, except as set forth in any document filed with the SEC, no event has occurred or, to the knowledge of the Company, circumstance exists that (with or without notice or lapse of time) would or could reasonably be expected to: (i) constitute or result in a violation by the Company, or a failure on the part of the Company to comply with, any Law; or (ii) give rise to any obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature in connection with a failure to comply with any Law, except in either case that would not reasonably be expected to have a Material Adverse Effect.

 

(j) The Company is in compliance in all material respects with the provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder that are applicable to it.

 

(k) No labor or employment dispute exists or, to the knowledge of the Company, is imminent or threatened, with respect to any of the employees of the Company that has had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(l) To the extent this Agreement is not already publicly disclosed at such time, the Company will file a report on Form 8-K (or other applicable form) with the SEC disclosing the material terms of this Agreement to the extent required by the rules and regulations of the SEC, and will timely file a copy of this Agreement if required to do so under applicable securities laws.

 

(m) As of the Merger Closing, the Common Stock will be registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. As of the Merger Closing, other than the deficiency letters from NASDAQ as described in the Proxy Statement and/or reports on Form 8-K filed by the Company with the SEC, the Company has not, in the 12 months preceding the date hereof, received notice from any trading market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such trading market. As of the Merger Closing, the Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements. As of the Merger Closing, the Common Stock will be eligible for electronic transfer through the Depository Trust Company or another established clearing corporation and the Company is current in payment of the fees to the Depository Trust Company (or such other established clearing corporation) in connection with such electronic transfer.

 

  17  

 

 

(n) The Company acknowledges and agrees that each of the Subscribers is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Subscriber is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Subscriber or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Subscribers’ purchase of the Subject Shares. The Company further represents to each Subscriber that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

 

(o) The Company understands and confirms that the Subscribers will rely on the representations and covenants contained herein in effecting the transactions contemplated by this Agreement.

 

12. Understandings . Each Subscriber understands, acknowledges and agrees with the Company as follows:

 

(a) Such Subscriber hereby acknowledges and agrees that the subscription hereunder is irrevocable by such Subscriber, that, except as required by Law, such Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of such Subscriber hereunder, and that this Agreement and such other agreements shall survive the death, disability, liquidation or dissolution of such Subscriber and shall be binding upon and inure to the benefit of the parties and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns.

 

(b) No federal or state agency has made any finding or determination as to the accuracy or adequacy of the Disclosure Documents or as to the suitability of this offering for investment nor any recommendation or endorsement of the Shares.

 

(c) The offering is intended to be exempt from registration under the Securities Act, which is dependent upon the truth, completeness and accuracy of the statements made by such Subscriber herein.

 

(d) There is only a limited public market for the Common Stock. There can be no assurance that such Subscriber will be able to sell or dispose of the Shares.

 

(e) In the event that the Merger is not completed by February 5, 2018, the Company will be required to liquidate and to cease its activities.

 

(f) The representations and warranties of such Subscriber contained in this Agreement and in any other writing delivered in connection with the transactions contemplated hereby shall be true and correct in all respects on and as of the date hereof and the date of the consummation of each offering of the Subject Shares as if made on and as of such date and such representation and warranties and all agreements of such Subscriber contained herein and in any other writing delivered in connection with the transactions contemplated hereby.

 

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13. Survival . All representations, warranties and covenants contained in this Agreement shall survive until the earlier of (a) the Merger Closing and (b) the Termination Date. Each Subscriber acknowledge the meaning and legal consequences of the representations, warranties and covenants contained herein and that the Company has relied upon such representations, warranties and covenants in determining such Subscriber’s qualification and suitability to purchase the Shares.

 

14. Notices . All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if and when delivered personally or two (2) Business Days after being sent by registered or certified mail, return receipt requested, postage prepaid or one Business Day after it is delivered by a commercial overnight carrier or upon confirmation if delivered by facsimile or email:

 

(a) if to the Company (prior to the Merger Closing) or to the Sponsor, to the following address:

 

Global Partner Acquisition Corp.

1 Rockefeller Plaza, 11th Floor

New York, New York 10020

Attention: Paul Zepf

Email: pzepf@globalpartnerac.com

 

with a copy to:

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Attention: Stuart Neuhauser, Esq.

Email: sneuhauser@egsllp.com

 

(b) if to the Company (following the Merger Closing), to the following address:

 

Purple Innovation, Inc.
123 E. 200 N.

Alpine, UT 84004

Attention: Casey McGarvey

E-mail: casey@onpurple.com

 

with a copy to:

 

Dorsey & Whitney LLP

111 S. Main St., Suite 2100

Salt Lake City, UT 84111

Attention: Nolan S. Taylor

E-mail: taylor.nolan@dorsey.com

 

  19  

 

 

(c) if to either Subscriber, to:

 

Coliseum Capital Management, LLC

105 Rowayton Avenue

Rowayton, CT 06853

Attention: Adam Gray; Christopher Shackelton; and Chivonne Cassar

Email: agray@coliseumpartners.com ; chris@coliseumpartners.com ; ccassar@coliseumpartners.com

 

with a copy to:

 

Paul Hastings LLC

200 Park Avenue

New York, NY 10166

Attention: Barry Brooks

Email: barrybrooks@paulhastings.com

 

(d) or at such other address as any party shall have specified by notice in writing to the others.

 

15. Notification of Changes . Each Subscriber agrees and covenants to notify the Company promptly after the occurrence of any event prior to the Merger Closing that would cause any representation, warranty, covenant or other statement contained in this Agreement to be false or incorrect or of any change in any statement made herein occurring prior to the Merger Closing.

 

16. Assignability; Amendments; Waiver . This Agreement is not assignable by the Subscribers, and may not be amended, modified or terminated except by an instrument in writing signed by the Company. This Agreement may not be waived except by an instrument in writing signed by the party against whom enforcement of waiver is sought.

 

17. Binding Effect . Except as otherwise provided herein, this Agreement shall be binding upon and inure to the benefit of the parties and their heirs, successors and assigns, and the agreements, representations, warranties and acknowledgments contained herein shall be deemed to be made by and be binding upon such heirs, executors, administrators, successors, legal representatives and assigns. This Agreement does not confer any rights or remedies upon any person or entity other than the parties hereto and their heirs, successors and permitted assigns; provided that notwithstanding anything to the contrary herein, the Company and the Subscribers acknowledges that money damages would not be an adequate remedy at Law if any Subscriber fails to perform in any material respect any of its obligations hereunder and accordingly agree that each party, in addition to any other remedy to which it may be entitled at Law or in equity, shall be entitled to seek an injunction or similar equitable relief restraining such party from committing or continuing any such breach or threatened breach or to seek to compel specific performance of the obligations of any other party under this Agreement, without the posting of any bond, in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction, and if any action should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at Law.

 

18. Obligations Irrevocable . Except as otherwise provided herein, the obligations of a Subscriber to make its subscription provided for hereunder shall be irrevocable, except with the consent of the Company, until the Subscription Rejection.

 

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19. Agreement . This Agreement, the Registration Rights Agreement, the Warrant Agreement, and the Warrant Purchase Agreement constitute the entire agreement of the Subscribers and the Company relating to the matters contained herein and therein, superseding all prior contracts or agreements, whether oral or written. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

 

20. Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof that would require the application of the laws of any jurisdiction other than the State of Delaware. Each of the parties hereto consents to the non-exclusive jurisdiction of the federal courts whose districts encompass any part of the District of Delaware or the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction, then in the applicable Delaware state court), with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens , to the bringing of any such proceeding in such jurisdictions.

 

21. Severability . If any provision of this Agreement or the application thereof to any Subscriber or any circumstance shall be held invalid or unenforceable to any extent, the remainder of this Agreement and the application of such provision to other subscriptions or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by Law.

 

22. Construction . The headings in this Agreement are inserted for convenience and identification only and are not intended to describe, interpret, define, or limit the scope, extent or intent of this Agreement or any provision hereof. The rule of construction that an agreement shall be construed strictly against the drafter shall not apply to this Agreement.

 

23. Counterparts; Facsimile . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which together shall be deemed to be one and the same agreement. A facsimile or other electronic transmission of this signed Agreement shall be legal and binding on all parties hereto.

 

24. Counsel . Each Subscriber hereby acknowledges that the Company and its counsel represent the interests of the Company and not those of any Subscriber in any agreement (including this Agreement) to which the Company is a party.

 

[Signature Page to follow]

 

  21  

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date first written above.

 

  GLOBAL PARTNER ACQUISITION CORP.
     
  By: /s/ Paul Zepf
    Name: Paul Zepf
    Title: Chief Executive Officer
     
  GLOBAL PARTNER SPONSOR I LLC
     
  By: /s/ Paul Zepf
    Name: Paul Zepf
    Title: Managing Member

 

ACCEPTED AND AGREED:

 

ColISEUM CAPITAL partners, l.p.

 

by: coliseum capital, llc, its general partner

 

By:

/s/ Adam Gray

 

Name:

Adam Gray

 
Title: Manager  

 

BLACKWELL PARTNERS LLC – SERIES A

 

by: coliseum capital management, llc, attorney-in-fact

 

By:

/s/ Adam Gray

 

Name:

Adam Gray

 
Title:

Managing Partner

 

 

 

 

 

Exhibit A

 

Subscription Instructions

 

Global Partner Acquisition Corp. Private Placement Subscription Escrow Account

 

Continental Stock Transfer & Trust Company - Escrow

 

Wire Instructions

 

 

 

ACCOUNT NAME

Continental Stock Transfer & Trust Company as Agent for Global Partner Acquisition Corp. Private Placement Subscription Escrow Account. (Short Name: CST &T AAF Global Partner Acquisition Corp. Private Placement Subscription Escrow)

 

BANK

JPMorgan Chase Bank

4 Metrotech Center, 14 th Floor

Brooklyn, NY 11245

 

ACCOUNT#

938-267015

 

ABA#

021000021

 

SWIFT CODE

CHASUS33

 

Reference

Attn: Celeste Gonzalez

 

PRIMARY CONTACT:

Sharmin Carter

Controller & Treasurer

Continental Stock Transfer & Trust Company

Accounting Department

1 State Street, 30th Floor

New York, NY 10004

0: (212) 845-3220

F: (212) 616-7620

E: scarter@continentalstock.com

SECONDARY CONTACT:

Francis E. Wolf, Jr.

Vice President

Continental Stock Transfer & Trust Company Corporate Actions Services

1 State Street, 30th Floor

New York, NY 10004

0: (212) 845-3233

F: (212) 558-6718

E: fwolf@continentalstock.com

 

  A- 1  

 

 

Exhibit B

 

Investor Questionnaire

 

 

INVESTOR QUESTIONNAIRE

 

GLOBAL PARTNER ACQUISITION CORP.

 

THIS QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF SHARES FROM GLOBAL PARTNER ACQUISITION CORP. (THE “ COMPANY ”).

 

THE INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT CONFIDENCE. NO INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR IN LITIGATION INVOLVING THE COMPANY AND ITS CONTROLLING PERSONS.

 

Capitalized terms used herein without definition shall have the respective meanings given such terms as set forth in the Subscription Agreement among the Company, Global Partner Sponsor I LLC and the subscriber signatory thereto (the “ Agreement ”).

 

(1) The undersigned represents and warrants that he, she or it comes within at least one category marked below, and that for any category marked, he, she or it has truthfully set forth, where applicable, the factual basis or reason the undersigned comes within that category. The undersigned agrees to furnish any additional information which the Company reasonably deems necessary in order to verify the answers set forth below.

 

Category A ___

The undersigned is an individual (not a partnership, corporation, etc.) whose individual net worth, or joint net worth with his or her spouse, presently exceeds $1,000,000.

   
 

Explanation . In calculating net worth, you include all of your assets (other than your primary residence), whether liquid or illiquid, such as cash, stock, securities, personal property and real estate based on the fair market value of such property MINUS all debts and liabilities (except that a mortgage or other debt secured by your primary residence, up to the estimated fair market value of the primary residence at the time of the purchase of the Shares, shall not be included as a liability, provided that if the amount of such indebtedness outstanding at the time of the purchase of the Shares exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of your primary residence, the amount of such excess shall be included as a liability. Further, the amount of any mortgage or other indebtedness secured by your primary residence that exceeds the fair market value of the residence at the time of the purchase of the Shares shall be included as a liability.

   
Category B ___

The undersigned is an individual (not a partnership, corporation, etc.) who had an income in excess of $200,000 in each of the two most recent years, or joint income with his or her spouse in excess of $300,000 in each of those years (in each case including foreign income, tax exempt income and full amount of capital gains and losses but excluding any income of other family members and any unrealized capital appreciation) and has a reasonable expectation of reaching and the same income level in the current year.

   

Category C ___ The undersigned is a director or executive officer of the Company which is issuing and selling the Shares.
  B- 1  

 

 

 

 
Category D ___

The undersigned is a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “ Act ”); a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Act, whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors (describe entity).

___________________________________________________________________ ___________________________________________________________________  

   
Category E ___

The undersigned is a private business development company as defined in Section 202(a) (22) of the Investment Advisors Act of 1940 (describe entity) 

___________________________________________________________________ ___________________________________________________________________  

  

Category F ___

The undersigned is either a corporation, partnership, Massachusetts or similar business trust, or any organization described in Section 501(c)(3) of the Internal Revenue Code, in each case not formed for the specific purpose of acquiring the Shares and with total assets in excess of $5,000,000. (describe entity)

___________________________________________________________________ ___________________________________________________________________

   
Category G ___

The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, where the purchase is directed by a “sophisticated investor” as defined in Regulation 506(b)(2)(ii) under the Act.

__________________________________________________________________

__________________________________________________________________ 

   
Category H ___

The undersigned is an entity (other than a trust) in which all of the equity owners are “accredited investors” within one or more of the above categories. If relying upon this Category alone, each equity owner must complete a separate copy of this Investor Questionnaire. (describe entity)

___________________________________________________________________ ___________________________________________________________________

   
 

The undersigned agrees that the undersigned will notify the Company at any time on or prior to the applicable closing in the event that the representations and warranties in this Investor Questionnaire shall cease to be true, accurate and complete.

 

(2) Suitability (please answer each question)

 

  (a)

Are you familiar with the risk aspects and the non-liquidity of investments such as the Shares for which you seek to purchase?

 

YES _____     NO _____

 

  (b)

Do you understand that there is no guarantee of financial return on this investment and that you run the risk of losing your entire investment?

 

YES _____     NO _____

 

  B- 2  

 

 

(3) Manner in which title is to be held: (circle one)

 

  (a) Individual Ownership

 

  (b) Community Property

 

  (c) Joint Tenant with Right of Survivorship (both parties must sign)

 

  (d) Partnership

 

  (e) Tenants in Common

 

  (f) Company

 

  (g) Trust

 

  (h) Other

 

(4) FINRA Affiliation.

 

Are you affiliated or associated with a member of FINRA (please check one):

 

YES _____     NO _____

 

If Yes, please describe:

 

_______________________________________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

 

*If subscriber is a Registered Representative with a member of FINRA, have the following acknowledgment signed by the appropriate party:

 

The undersigned FINRA firm acknowledges receipt of the notice required by the Conduct Rules of FINRA.

  

     
  Name of NASD Member Firm  
     
  By:    
    Authorized Officer  
       
  Date:    

 

[Remainder of page intentionally left blank]

 

  B- 3  

 

 

The undersigned is informed of the significance to the Company of the foregoing representations and answers contained in this Investor Questionnaire and such answers have been provided under the assumption that the Company will rely on them.

 

Date: ____________  
  Print or Type Entity Name
       
  By:

__________________________________________

 

Print or Type Name: _________________________

 

 

       
  Title:  __________________________________________

 

 

B-4

 

 

Exhibit 10.16

 

AGREEMENT TO ASSIGN SPONSOR WARRANTS

 

February 2, 2018

 

Global Partner Acquisition Corp.

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Attention: Paul J. Zepf

E-mail: pzepf@globalpartnerac.com

 

Continental Stock Transfer & Trust Company

As Warrant Agent

17 Battery Place

New York, NY 10004

Attention: Compliance Department

 

Ladies and Gentlemen:

 

Reference is made to that certain warrant agreement (the “ Warrant Agreement ”) dated as of July 29, 2015, by and between Global Partner Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company, as warrant agent (the “ Warrant Agent ”, also referred to therein as the “ Transfer Agent ”). Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Warrant Agreement.

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Global Partner Sponsor I LLC (“ Sponsor ”), the Company and the Warrant Agent hereby agree with the entities identified on Schedule A hereto (the “ Assignees ”) as follows:

 

1. Subject to and effective with no further action by any party on the closing (the “ Closing ”) of the business combination pursuant to the Agreement and Plan of Merger dated as of November 2, 2017 by and among the Company, Purple Innovation, LLC and the other parties named therein (as amended, the “ Merger Agreement ”), the Sponsor hereby transfers and assigns to the Assignees all of its right, title and interest in and to the number of Private Placement Warrants (as defined in the Warrant Agreement) set forth opposite the names of the Assignees on Schedule A.

 

2. Sponsor represents and warrants to each of the Assignees that the Private Placement Warrants that are being assigned pursuant to this letter agreement (this “ Agreement ”) are free and clear of any liens, claims or encumbrances of any nature whatsoever, other than as set forth in Section 7 of the Insider Letter (in the form of Exhibit 10.2 to the Registration Statement on Form S-1/A filed with the SEC on July 13, 2015), the terms of the Private Placement Warrants Purchase Agreement, dated as of June 11, 2015, by and between the Company and the Sponsor (the “ Warrant Purchase Agreement ”), and the Warrant Agreement.

 

3. The parties hereto hereby agree that all references to “Sponsor” in the Warrant Agreement shall be deemed to refer to the Assignees and their Permitted Transferees.

 

4. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived to any particular provision, except by a written instrument executed by all parties hereto.

 

5. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on the undersigned and their respective successors and assigns.

 

6. Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing. Notices to the Company or the Sponsor shall be sent to the address of the Company above, and notices to the Warrant Agent shall be sent to the address of the Warrant Agent above. Notices to the Assignees shall be sent to Coliseum Capital Management, LLC, 105 Rowayton Avenue, Rowayton, CT 06853.

 

7. This Agreement shall terminate at such time, if any, as the Merger Agreement is terminated in accordance with its terms, and upon such termination this Agreement shall be null and void and of no effect whatsoever, and the parties hereto shall have not obligations under this Agreement.

 

[ Signature page follows ]

 

 

 

Please indicate your agreement to the foregoing by signing in the space provided below.

 

  GLOBAL PARTNER SPONSOR I LLC
     
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Managing Member

 

GLOBAL PARTNER ACQUISITION CORP.  
     
By: /s/ Paul Zepf  
Name: Paul Zepf  
Title: Chief Executive Officer  
     
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY  
As Warrant Agent  
     
By: /s/ Henry Farrell  
Name: Henry Farrell  
Title: Vice President  

 

ACCEPTED AND AGREED:  
   
ColISEUM CAPITAL partners, l.p.  
   
by: coliseum capital, llc, its general partner  
     
By: /s/ Adam Gray  
Name: Adam Gray  
Title: Manager  
     
BLACKWELL PARTNERS LLC – SERIES A  
   
by: coliseum capital management, llc, attorney-in-fact  
     
By: /s/ Adam Gray  
Name: Adam Gray  
Title: Managing Member  
     
COLISEUM CO-INVEST DEBT FUND, L.P.  
   
by: coliseum capital, llc, ITS GENERAL PARTNER  
     
By: /s/ Adam Gray  
Name: Adam Gray  
Title: Manager  

 

 

 

Schedule A

 

Name of Assignee:   Number of Warrants Assigned:  
       
Sub Debt        
Coliseum Capital Partners, L.P.     362,371  
Coliseum Co-Invest Debt Fund, L.P.     2,000,000  
Blackwell Partners LLC – Series A     137,629  
Total     2,500,000  
Subscription Agreement        
Coliseum Capital Partners, L.P.     2,378,966  
Blackwell Partners LLC – Series A     903,534  
Total     3,282,500  

 

 

Exhibit 10.17

 

AGREEMENT TO ASSIGN FOUNDER SHARES

 

February 2, 2018

 

Global Partner Acquisition Corp.

One Rockefeller Plaza, 11th Floor

New York, NY 10020

Attention: Paul J. Zepf

E-mail: pzepf@globalpartnerac.com

 

Ladies and Gentlemen:

 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Global Partner Sponsor I LLC (“ Sponsor ”) and Global Partner Acquisition Corp. (the “ Company ”) hereby agree with the entities identified on Schedule A hereto (the “ Assignees ”) as follows:

 

1. Subject to and effective with no further action by any party on the closing (the “ Closing ”) of the business combination pursuant to the Agreement and Plan of Merger dated as of November 2, 2017 by and among the Company, Purple Innovation, LLC and the other parties named therein (as amended, the “ Merger Agreement ”), and pursuant to that certain Subscription Agreement, dated as of February 1, 2018, by and among the Company, Sponsor and the Assignees, the Sponsor hereby transfers and assigns to the Assignees all of its right, title and interest in and to the number of Founder Shares (as such term is used in the final prospectus of the Company, filed with the Securities and Exchange Commission on July 29, 2015) set forth opposite the names of the Assignees on Schedule A.

 

2. Sponsor represents and warrants to each of the Assignees that the Founder Shares that are being assigned pursuant to this letter agreement (this “ Agreement ”) have been duly issued, and are fully paid and non-assessable, and are free and clear of any liens, claims or encumbrances of any nature whatsoever, provided that the Founder Shares shall be subject to certain restrictions on transfer as provided in the Subscription Agreement and the agreements referred to therein.

 

3. This Agreement constitutes the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersedes all prior understandings, agreements, or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof. This Agreement may not be changed, amended, modified or waived to any particular provision, except by a written instrument executed by all parties hereto.

 

4. No party hereto may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written consent of the other party. Any purported assignment in violation of this paragraph shall be void and ineffectual and shall not operate to transfer or assign any interest or title to the purported assignee. This Agreement shall be binding on the undersigned and their respective successors and assigns.

 

5. Any notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing. Notices to the Company or the Sponsor shall be sent to the address of the Company above. Notices to the Assignees shall be sent to Coliseum Capital Management, LLC, 105 Rowayton Avenue, Rowayton, CT 06853.

 

6. This Agreement shall terminate at such time, if any, as the Merger Agreement is terminated in accordance with its terms, and upon such termination this Agreement shall be null and void and of no effect whatsoever, and the parties hereto shall have not obligations under this Agreement.

 

[ Signature page follows ]

 

 

 

 

Please indicate your agreement to the foregoing by signing in the space provided below.

 

  GLOBAL PARTNER SPONSOR I LLC
     
  By: /s/ Paul Zepf
  Name: Paul Zepf
  Title: Managing Member

 

GLOBAL PARTNER ACQUISITION CORP.  
           
By: /s/ Paul Zepf  
Name: Paul Zepf  
Title: Chief Executive Officer  
     
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
As Transfer Agent  
     
By: /s/ Henry Farrell  
Name: Henry Farrell  
Title: Vice President  
     
ACCEPTED AND AGREED:  
   
ColISEUM CAPITAL partners, l.p.  
     
by: coliseum capital, llc, its general partner
     
By: /s/ Adam Gray  
Name: Adam Gray  
Title: Manager  
     
BLACKWELL PARTNERS LLC – SERIES A  
     
by: coliseum capital management, llc, attorney-in-fact
     
By: /s/ Adam Gray  
Name: Adam Gray  
Title: Managing Partner  

 

 

 

 

Schedule A

 

Name of Assignee:   Number of Founder Shares Assigned:  
       
Subscription Agreement        
Coliseum Capital Partners, L.P.     937,635  
Blackwell Partners LLC – Series A     356,115  
Total     1,293,750  

 

 

 

 

Exhibit 10.18

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is entered into as of February 2, 2018, by and among Global Partner Acquisition Corp. , a Delaware corporation, which will be known after the consummation of the transactions contemplated by the Merger Agreement (as defined below) as “Purple Innovation, Inc.” (including any successor entity thereto, the “ Parent ”), and the undersigned parties listed under Investors on the signature page hereto (each an “ Investor ” and collectively, the “ Investors ”).

 

WHEREAS , Parent is a party to that certain Agreement and Plan of Merger, dated as of November 2, 2017 (as amended, the “ Merger Agreement ”), with Purple Innovation, LLC, a Delaware limited liability company (the “ Company ”), PRPL Acquisition, LLC (“ Merger Sub ”), InnoHold, LLC, a Delaware limited liability company (“ InnoHold ”), and Global Partner Sponsor I LLC, in its capacity thereunder as the Parent Representative, pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company with the Company continuing as the surviving entity ;

 

WHEREAS , on February 1, 2018, Parent, Global Partner Sponsor I LLC, a Delaware limited liability company (the “ Sponsor ”), and the Investors entered into that certain Subscription Agreement (the “ Subscription Agreement ”) and certain other agreements, pursuant to which the Investors agreed to purchase shares of Parent’s Class A Common Stock (as defined below) in a private placement with Parent to occur immediately prior to or simultaneously with the consummation of the transactions under the Merger Agreement (the “ Closing ”), and Sponsor agreed to transfer to the Investors in the aggregate 1,293,750 of its Founder Shares (as defined below) (the “ Transferred Sponsor Shares ”) and 5,782,500 Sponsor Warrants (as defined below) (the “ Transferred Sponsor Warrants ”), subject to the certain restrictions as set forth in the Insider Letter (as defined below); and

 

WHEREAS , the parties desire to enter into this Agreement to provide the Investors with certain rights relating to the registration of the shares of Class A Common Stock to be acquired by the Investors in the private placement with Parent to occur immediately prior to or simultaneously with the Closing (the “ PIPE Shares ”), the Transferred Sponsor Shares, the Transferred Sponsor Warrants and the shares of Class A Common Stock issuable upon exercise of the Transferred Sponsor Warrants (the “ Warrant Shares ”).

 

NOW, THEREFORE , in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1. DEFINITIONS . Any capitalized term used but not defined in this Agreement will have the meaning ascribed to such term in the Subscription Agreement. The following capitalized terms used herein have the following meanings:

 

Agreement ” means this Agreement, as amended, restated, supplemented, or otherwise modified from time to time.

 

Class A Common Stock means the class A common stock, par value $0.0001 per share, of Parent (including any successor common equity securities into which such securities are exchanged or converted), as renamed in connection with the Closing from common stock, par value $0.0001 per share, of Parent.

 

 

 

 

Closing ” is defined in the recitals to this Agreement.

 

Company ” is defined in the recitals to this Agreement.

 

Demand Registration ” is defined in Section 2.1.1.

 

Demanding Holder ” is defined in Section 2.1.1.

 

Form S-3 ” is defined in Section 2.3.

 

Founder Registration Rights Agreement ” means that certain Registration Rights Agreement, dated as of July 29, 2015, between Parent and Sponsor, as amended.

 

Founder Securities ” means those securities included in the definition of “Registrable Security” specified in the Founder Registration Rights Agreement.

 

Founder Shares ” means the shares of Class A Common Stock initially purchased by the Sponsor in a private placement prior to Parent’s initial public offering.

 

Indemnified Party ” is defined in Section 4.3.

 

Indemnifying Party ” is defined in Section 4.3.

 

InnoHold ” is defined in the recitals to this Agreement.

 

InnoHold Registration Rights Agreement ” means that certain Registration Rights Agreement to be entered into by Parent and InnoHold in connection with the Closing, as amended.

 

InnoHold Securities ” means those securities included in the definition of “Registrable Securities” specified in the InnoHold Registration Rights Agreement.

 

Insider Letter ” means that letter agreement, dated as of July 29, 2015, by and between Parent, the Sponsor and the directors and officers of Parent signatory thereto (which is attached as Exhibit 10.3 to Parent’s current report on Form 8-K filed with the SEC on August 4, 2015).

 

Investor(s) ” is defined in the preamble to this Agreement, and include any transferee of the Registrable Securities (so long as they remain Registrable Securities) of an Investor permitted under this Agreement.

 

Investor Indemnified Party ” is defined in Section 4.1.

 

Maximum Number of Shares ” is defined in Section 2.1.4.

 

Merger Agreement ” is defined in the recitals to this Agreement.

 

Merger Sub ” is defined in the recitals to this Agreement.

 

Other PIPE Registrable Securities ” means any securities which Parent may have obligations to register under Other PIPE Registration Rights Agreements.

 

Other PIPE Registration Rights Agreements ” means any registration rights agreements that have been or will be entered into by the Parent prior to or in connection with the Closing in connection with any subscription and/or backstop arrangements with potential investors in Parent in connection with the Closing.

 

  2  

 

 

Other Registrable Securities ” means the Founder Securities, the InnoHold Securities and any Other PIPE Registrable Securities.

 

Other Registration Rights Agreements ” means the Founders Registration Rights Agreement, the InnoHold Registration Rights Agreement and any Other PIPE Registration Rights Agreements.

 

Parent ” is defined in the preamble to this Agreement, and shall include Parent’s successors by merger, acquisition, reorganization or otherwise.

 

Piggy-Back Registration ” is defined in Section 2.2.1.

 

PIPE Shares ” is defined in the recitals to this Agreement.

 

Pro Rata ” is defined in Section 2.2.2(a).

 

Proceeding ” is defined in Section 6.10.

 

Public Warrants ” means warrants included as part of the units issued by the Parent in its initial public offering.

 

Register ,” “ Registered ” and “ Registration ” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such registration statement becoming effective.

 

Registrable Securities ” means all of the PIPE Shares purchased by the Investors under the Subscription Agreement, the Transferred Sponsor Shares, the Transferred Sponsor Warrants and the Warrant Shares issuable upon exercise of the Transferred Sponsor Warrants. Registrable Securities include any warrants, share capital or other securities of Parent issued as a dividend or other distribution with respect to or in exchange for or in replacement of such PIPE Shares, Transferred Sponsor Shares, Transferred Sponsor Warrants and Warrant Shares. As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred, new certificates for them not bearing a legend restricting further transfer shall have been delivered by Parent and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding or (d) the Registrable Securities are freely saleable under Rule 144 without volume limitations or manner-of-sale restrictions and without the need for current public information pursuant to Rule 144 (including Rule 144(i)(2)) as set forth in a written opinion letter to such effect, addressed, delivered and acceptable to the Parent’s transfer agent and the affected Investors, as reasonably determined by Parent, upon the advice of counsel to Parent.

 

Registration Expenses ” is defined in Section 3.3.

 

Registration Statement ” means a registration statement filed by Parent with the SEC in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities (other than a registration statement on Form S-4 or Form S-8, or their successors, or any registration statement covering only securities proposed to be issued in exchange for securities or assets of another entity).

 

  3  

 

 

Rule 415 ” means Rule 415 promulgated under the Securities Act (or any successor rule promulgated thereafter by the SEC).

 

SEC ” means the U.S. Securities and Exchange Commission.

 

Securities Act ” means the Securities Act of 1933, as amended.

 

Specified Courts ” is defined in Section 6.10.

 

Sponsor ” is defined in the recitals to this Agreement.

 

Sponsor Warrants ” means the warrants to purchase Class A Common Stock that the Sponsor acquired in a private placement that occurred after the consummation of the Parent’s initial public offering.

 

Subscription Agreement ” is defined in the recitals to this Agreement.

 

Transferred Sponsor Shares ” is defined in the recitals to this Agreement.

 

Transferred Sponsor Warrants ” is defined in the recitals to this Agreement.

 

Underwriter ” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

Warrant and PIPE Shares Registration Filing Date ” is defined in Section 2.5.

 

Warrant and PIPE Shares Registration Statement ” is defined in Section 2.5.

 

Warrant Shares ” is defined in the recitals to this Agreement.

 

2. REGISTRATION RIGHTS .

 

2.1 Demand Registration .

 

2.1.1 Request for Registration . Subject to Section 2.4, at any time and from time to time after the Closing, Investors holding a majority-in-interest of Registrable Securities then issued and outstanding may make a written demand for registration under the Securities Act of all or part of their Registrable Securities (a “ Demand Registration ”). Any demand for a Demand Registration shall specify the number of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. Within five (5) days following receipt of any request for a Demand Registration, Parent will notify all other Investors holding Registrable Securities of the demand, and each Investor holding Registrable Securities who wishes to include all or a portion of such Investor’s Registrable Securities in the Demand Registration (each such Investor including shares of Registrable Securities in such registration, a “ Demanding Holder ”) shall so notify Parent within fifteen (10) days after the receipt by such Investor of the notice from Parent. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.1.4 and the provisos set forth in Section 3.1.1. Parent shall not be obligated to effect more than an aggregate of three (3) Demand Registrations under this Section 2.1.1 in respect of all Registrable Securities.

 

  4  

 

 

2.1.2 Effective Registration . A registration will not count as a Demand Registration until the Registration Statement filed with the SEC with respect to such Demand Registration has been declared effective and Parent has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the SEC or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders within thirty (30) days of such removal, rescission or termination elect to continue the offering; provided, further, that Parent shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration, is terminated or a majority-in-interest fail to elect to continue the offering in accordance with the immediately preceding clause (ii).

 

2.1.3 Underwritten Offering . If a majority-in-interest of the Demanding Holders so elect and advise Parent as part of their written demand for a Demand Registration that the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering, then the right of any Demanding Holder to include their Registrable Securities in such registration shall be conditioned upon such Demanding Holder’s participation in such underwriting and the inclusion of its Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by a majority-in-interest of the Investors initiating the Demand Registration.

 

2.1.4 Reduction of Offering . If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering advises Parent and the Demanding Holders in writing that the dollar amount or number of Registrable Securities which the Demanding Holders desire to sell, taken together with all other Class A Common Stock or other securities which Parent desires to sell and the Class A Common Stock or other securities, if any, as to which registration by Parent has been requested pursuant to written contractual piggy-back registration rights held by other security holders of Parent who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “ Maximum Number of Shares ”), then Parent shall include in such registration: (i) first, the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of securities that each applicable Person has requested be included in such registration, regardless of the number of securities held by each such Person), that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; and (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares. In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.1.4 shall include such Parent securities on an as-converted to Class A Common Stock basis.

 

  5  

 

 

2.1.5 Withdrawal . If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to Parent and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the SEC with respect to such Demand Registration. If the majority-in-interest of the Demanding Holders withdraw from a proposed offering relating to a Demand Registration in such event, then such registration shall not count as a Demand Registration provided for in Section 2.1. Notwithstanding anything to the contrary in this Agreement, but subject to Section 4, the Parent shall be responsible for the Registration Expenses incurred in connection with a Registration pursuant to a Demand Registration prior to its withdrawal under this Section 2.1.5.

 

2.2 Piggy-Back Registration .

 

2.2.1 Piggy-Back Rights . Subject to Section 2.4, if at any time after the Closing Parent proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by Parent for its own account or for security holders of Parent for their account (or by Parent and by security holders of Parent including pursuant to Section 2.1), other than the Warrant and PIPE Shares Registration Statement or a Registration Statement (i) filed in connection with any employee share option or other benefit plan, (ii) for an exchange offer or offering of securities solely to Parent’s existing shareholders, (iii) for an offering of debt that is convertible into equity securities of Parent, (iv) for a dividend reinvestment plan, then Parent shall (x) give written notice of such proposed filing to Investors holding Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to Investors holding Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such Investors may request in writing within five (5) days following receipt of such notice (a “ Piggy-Back Registration ”). To the extent permitted by applicable securities laws with respect to such registration by Parent or another demanding shareholder, Parent shall cause such Registrable Securities to be included in such registration and shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of Parent and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All Investors holding Registrable Securities proposing to distribute their Registrable Securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration. Notwithstanding anything to the contrary contained herein, Parent shall include the PIPE Shares, the Transferred Sponsor Warrants and the Warrant Shares of each Investor in the Warrant and PIPE Shares Registration Statement if such Investor promptly provides to Parent upon request (and in any event at least two (2) Business Days prior to the Warrant and PIPE Shares Registration Filing Date) all of the information required by Section 3.4 below with respect to the Warrant and PIPE Shares Registration Statement.

 

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2.2.2 Reduction of Offering . If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises Parent and the Investors holding Registrable Securities proposing to distribute their Registrable Securities through such Piggy-Back Registration in writing that the dollar amount or number of Class A Common Stock or other Parent securities which Parent desires to sell, taken together with (i) the Class A Common Stock or other Parent securities, if any, as to which registration has been demanded pursuant to written contractual arrangements with Persons other than the Investors hereunder, (ii) the Registrable Securities as to which registration has been requested under this Section 2.2, and (iii) the Class A Common Stock or other Parent securities, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other security holders of Parent, exceeds the Maximum Number of Shares, then Parent shall include in any such registration:

 

(a) If the registration is undertaken for Parent’s account: (i) first, the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with the Other Registrable Securities and Registrable Securities being included pro rata in accordance with the number of securities that each such Person has requested be included in such piggy-back registration, regardless of the number of securities held by each such Person (such proportion is referred to herein as “ Pro Rata ”); and (iii) third, to the extent that the Maximum Number of shares has not been reached under the foregoing clauses (i) and (ii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares;

 

(b) If the registration is a “demand” registration undertaken at the demand of holders of Other Registrable Securities under an Other Registration Rights Agreement: (i) first, the Other Registrable Securities for the account of the demanding holders under the Other Registration Rights Agreement that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements (excluding the holders who exercised such demand rights) and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares; and

 

(c) If the registration is a “demand” registration undertaken at the demand of Persons other than the Investors holding Registrable Securities or the holders of Other Registrable Securities, (i) first, the Class A Common Stock or other securities for the account of such demanding Persons that can be sold without exceeding the Maximum Number of Shares; (ii) second, to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Class A Common Stock or other securities that Parent desires to sell that can be sold without exceeding the Maximum Number of Shares; (iii) third, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the Other Registrable Securities as to which piggy-back registration has been requested pursuant to the Other Registration Rights Agreements and the Registrable Securities of the Investors as to which registration has been requested pursuant to this Section 2.2, together that can be sold without exceeding the Maximum Number of Shares, with such Other Registrable Securities and Registrable Securities being included Pro Rata; and (iv) fourth, to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the Class A Common Stock or other securities for the account of other Persons that Parent is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Number of Shares.

 

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In the event that Parent securities that are convertible into Class A Common Stock are included in the offering, the calculations under this Section 2.2.2 shall include such Parent securities on an as-converted to Class A Common Stock basis. Notwithstanding anything to the contrary contained above, to the extent that the registration of the Registrable Securities of the Investors would prevent Parent or the demanding stockholders from effecting such registration and offering, such Investors shall not be permitted to exercise Piggy-Back Registration rights with respect to such registration and offering.

 

2.2.3 Withdrawal . Any Investor holding Registrable Securities may elect to withdraw its request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to Parent of such request to withdraw prior to the effectiveness of the Registration Statement. Parent (whether on its own determination or as the result of a withdrawal by Persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of such Registration Statement without any liability to the Investor, subject to the next sentence and the provisions of Section 4. Notwithstanding any such withdrawal, Parent shall pay all expenses incurred in connection with such Piggy-Back Registration as provided in Section 3.3 by Investors holding Registrable Securities that have requested to have their Registrable Securities included in such Piggy-Back Registration.

 

2.3 Shelf Registration . After the Closing, subject to Section 2.4, Investors holding Registrable Securities may at any time and from time to time, request in writing that Parent, pursuant to Rule 415, register the resale of any or all of their Registrable Securities on Form S-3, or if Form S-3 is not available to Parent, Form S-1; provided, however, that Parent shall not be obligated to effect such request through an underwritten offering. As soon as practicable after receipt of such written request, Parent will give written notice of the proposed registration to all other Investors holding Registrable Securities, and, as soon as practicable thereafter Parent will effect the registration of all or such portion of Investors’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities, if any, of any other Investors joining in such request as are specified in a written request given within fifteen (15) days after receipt of such written notice from Parent; provided, however, that Parent shall not be obligated to effect any such registration pursuant to this Section 2.3 if Investors holding Registrable Securities, together with the holders of any other securities of Parent entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at any aggregate price to the public of less than $1,000,000. Registrations effected pursuant to this Section 2.3 shall not be counted as Demand Registrations effected pursuant to Section 2.1.

 

2.4 Restriction of Offerings . Notwithstanding anything to the contrary contained in this Agreement, except pursuant to Section 2.5 below, the Investors shall not be entitled to request, and Parent shall not be obligated to effect, or to take any action to effect, any registration (including any Demand Registration or Piggy-Back Registration) pursuant to this Section 2 with respect to any Transferred Sponsor Shares that are Registrable Securities during the applicable Lock-Up Periods (as such term is defined in the Insider Letter) while they are subject to restrictions on transfer under the Insider Letter.

 

2.5 Warrant and PIPE Shares Registration Statement . On or prior to February 14, 2018 (the “ Warrant and PIPE Shares Registration Filing Date ”), Parent will prepare and file with the SEC pursuant to Rule 415 a Registration Statement (the “ Warrant and PIPE Shares Registration Statement ”) to register, among other things, the resale of the Transferred Sponsor Warrants, the PIPE Shares and the Warrant Shares, which Warrant and PIPE Shares Registration Statement will not be treated as a Demand Registration for purposes of Section 2.1.1 but will be treated as Registration all other purposes of this Agreement, including Sections 3 and 4 hereof; provided, that the Transferred Sponsor Warrants, the PIPE Shares, and Warrant Shares of each Investor will be included for registration in the Warrant and PIPE Shares Registration Statement only to the extent that such Investor promptly provides to Parent upon request (and in any event at least two (2) Business Days prior to the Warrant and PIPE Shares Registration Filing Date) all of the information required by Section 3.4 below with respect to the Warrant and PIPE Shares Registration Statement.

 

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3. REGISTRATION PROCEDURES .

 

3.1 Filings; Information . Whenever Parent is required to effect the registration of any Registrable Securities by Investors pursuant to Section 2, Parent shall use its best efforts to effect the registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

 

3.1.1 Filing Registration Statement . Parent shall use its best efforts to, as expeditiously as possible, but in no event more than forty-five (45) days, after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the SEC a Registration Statement on any form for which Parent then qualifies or which counsel for Parent shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become effective as soon as practicable, but in no event later than seventy-five (75) days after the filing of such Registration Statement, and use its best efforts to keep it effective for the period required by Section 3.1.3; provided, however, that Parent shall have the right to defer any Demand Registration for up to an additional fifteen (15) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any demand registration to which such Piggy-Back Registration relates, in each case if Parent shall furnish to Investors requesting to include their Registrable Securities in such registration a certificate signed by the President, Chief Executive Officer or Chairman of Parent stating that, in the good faith judgment of the Board of Directors of Parent, it would be materially detrimental to Parent and its shareholders for such Registration Statement to be effected at such time; provided further, however, that Parent shall not have the right to exercise the right set forth in the immediately preceding proviso more than once in any 365-day period in respect of a Demand Registration hereunder.

 

3.1.2 Copies . Parent shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to Investors holding Registrable Securities included in such registration, and such Investors’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as Investors holding Registrable Securities included in such registration or legal counsel for such Investors may request in order to facilitate the disposition of the Registrable Securities owned by such Investors.

 

3.1.3 Amendments and Supplements . Parent shall prepare and file with the SEC such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn or until such time as the Registrable Securities cease to be Registrable Securities as defined by this Agreement.

 

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3.1.4 Notification . After the filing of a Registration Statement, Parent shall promptly, and in no event more than three (3) Business Days after such filing, notify Investors holding Registrable Securities included in such Registration Statement of such filing, and shall further notify such Investors promptly and confirm such advice in writing in all events within three (3) Business Days after the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the SEC of any stop order (and Parent shall take all actions required to prevent the entry of such stop order or to remove it if entered); (iv) subject to the last sentence of this Section 3.1.4, the occurrence or existence of any pending corporate development with respect to the Parent that Parent believes may be material and that, in the determination of Parent’s Board of Directors, makes it not in the best interest of Parent to allow continued availability of such Registration Statement or any prospectus relating thereto; and (v) any request by the SEC for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to Investors holding Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the SEC a Registration Statement or prospectus or any amendment or supplement thereto, Parent shall furnish to Investors holding Registrable Securities included in such Registration Statement and the legal counsel of such Investors copies of all such documents proposed to be filed sufficiently in advance of filing to provide such Investors and legal counsel with a reasonable opportunity to review such documents and comment thereon, and Parent shall not file any Registration Statement or prospectus or amendment or supplement thereto to which such Investors or their legal counsel shall object. In no event shall any notification pursuant to this Agreement contain any information which would constitute material, non-public information regarding the Parent or any of its subsidiaries.

 

3.1.5 State Securities Laws Compliance . Prior to any public offering of Registrable Securities, Parent shall use its best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as Investors holding Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or approved by such other governmental authorities as may be necessary by virtue of the business and operations of Parent and do any and all other acts and things that may be necessary or advisable to enable Investors holding Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that Parent shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or take any action to which it would be subject to general service of process or taxation in any such jurisdiction where it is not then otherwise so subject.

 

3.1.6 Agreements for Disposition . Parent shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of Parent in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of Investors holding Registrable Securities included in such Registration Statement. No Investor holding Registrable Securities included in such Registration Statement shall be required to make any representations or warranties in the underwriting agreement except, if applicable, with respect to such Investor’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such Investor’s material agreements and organizational documents, and with respect to written information relating to such Investor that such Investor has furnished in writing expressly for inclusion in such Registration Statement.

 

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3.1.7 Cooperation . The principal executive officer of Parent, the principal financial officer of Parent, the principal accounting officer of Parent and all other officers and members of the management of Parent shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

 

3.1.8 Records . Parent shall make available for inspection by Investors holding Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other professional retained by any Investor holding Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of Parent, as shall be necessary to enable them to exercise their due diligence responsibility, and cause Parent’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

 

3.1.9 Opinions and Comfort Letters . Parent shall furnish to each Investor holding Registrable Securities included in such Registration Statement a signed counterpart, addressed to such Investor, of (i) any opinion of counsel to Parent delivered to any Underwriter and (ii) any comfort letter from Parent’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, Parent shall furnish to each Investor holding Registrable Securities included in such Registration Statement, at any time that such Investor elects to use a prospectus, an opinion of counsel to Parent to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

 

3.1.10 Earnings Statement . Parent shall comply with all applicable rules and regulations of the SEC and the Securities Act, and make available to its shareholders, as soon as practicable, an earnings statement covering a period of twelve (12) months, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11 Listing . Parent shall use its best efforts to cause all Registrable Securities that are Class A Common Stock included in any registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by Parent are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to Investors holding a majority-in-interest of the Registrable Securities included in such registration.

 

3.1.12 Road Show . If the registration involves the registration of Registrable Securities involving gross proceeds in excess of $25,000,000, Parent shall make available senior executives of Parent to participate in customary “road show” presentations that may be reasonably requested by the Underwriter in any underwritten offering.

 

3.2 Obligation to Suspend Distribution . Upon receipt of any notice from Parent of the happening of any event of the kind described in Section 3.1.4(iii), (iv) or (v), each Investor holding Registrable Securities included in such Registration Statement shall immediately discontinue disposition of its Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor receives the supplemented or amended prospectus contemplated by Section 3.1.4(iii), (iv) or (v) to the extent required, and, if so directed by Parent, each such Investor will deliver to Parent all copies, other than permanent file copies then in such Investor’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice. Parent shall be entitled to exercise its right under this Section 3.2 to suspend the availability of a Registration Statement and related prospectus for a period not to exceed thirty (30) calendar days once in any 365-day period.

 

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3.3 Registration Expenses . Subject to Section 4, Parent shall bear all costs and expenses incurred in connection with any Demand Registration pursuant to Section 2.1, any Piggy-Back Registration pursuant to Section 2.2, and any registration on Form S-3 effected pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective (“ Registration Expenses ”), including: (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) Parent’s internal expenses (including all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for Parent and fees and expenses for independent certified public accountants retained by Parent (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by Parent in connection with such registration; (ix) any underwriting discounts or selling commissions, placement agent or broker fees or similar discounts, commissions or fees and any related expenses with respect to the sale of Registrable Securities by any Investor; and (x) the fees and expenses of one legal counsel selected by Investors holding a majority-in-interest of the Registrable Securities included in such registration.

 

3.4 Information . Investors holding Registrable Securities included in such Registration Statement shall provide such information as may reasonably be requested by Parent, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement including any Registrable Securities of the Investors, including amendments and supplements thereto, in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the obligation to comply with federal and applicable state securities laws.

 

4. INDEMNIFICATION AND CONTRIBUTION .

 

4.1 Indemnification by Parent . Parent agrees to indemnify and hold harmless each Investor, and each Investor’s officers, employees, affiliates, directors, partners, members, attorneys and agents, and each Person, if any, who controls an Investor (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (each, an “ Investor Indemnified Party ”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by Parent of the Securities Act or any rule or regulation promulgated thereunder applicable to Parent and relating to action or inaction required of Parent in connection with any such registration; and Parent shall promptly reimburse the Investor Indemnified Party for any legal and any other expenses reasonably incurred by such Investor Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided, however, that Parent will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to Parent, in writing, by such selling holder expressly for use therein. Parent also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each Person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

 

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4.2 Indemnification by the Investors . Each Investor selling Registrable Securities will, in the event that any registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such selling Investor, indemnify and hold harmless Parent, each of its directors and officers and each Underwriter (if any), and each other selling holder and each other Person, if any, who controls another selling holder or such Underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to Parent by such Investor expressly for use therein, and shall reimburse Parent, its directors and officers, each Underwriter and each other selling holder or controlling Person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each selling Investor’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such selling Investor.

 

4.3 Conduct of Indemnification Proceedings . Promptly after receipt by any Person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such Person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other Person for indemnification hereunder, notify such other Person (the “ Indemnifying Party ”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

 

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4.4 Contribution .

 

4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue statement of a material fact or the omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1.

 

4.4.3 The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such holder from the sale of Registrable Securities which gave rise to such contribution obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

5. UNDERWRITING AND DISTRIBUTION .

 

5.1 Rule 144 . Parent covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as Investors holding Registrable Securities may reasonably request, all to the extent required from time to time to enable such Investors to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

 

6. MISCELLANEOUS.

 

6.1 Other Registration Rights . Parent represents and warrants that as of the date of this Agreement, no Person, other than the holders of (i) the Registrable Securities, (ii) the Founder Securities, (iii) the InnoHold Securities and (iv) the Other PIPE Registrable Securities, has any right to require Parent to register any of Parent’s capital stock for sale or to include Parent’s capital stock in any registration filed by Parent for the sale of capital stock for its own account or for the account of any other Person.

 

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6.2 Assignment; No Third Party Beneficiaries . This Agreement and the rights, duties and obligations of Parent hereunder may not be assigned or delegated by Parent in whole or in part. This Agreement and the rights, duties and obligations of Investors holding Registrable Securities hereunder may be freely assigned or delegated by such Investor in conjunction with and to the extent of any permitted transfer of Registrable Securities by such Investor. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties, to the permitted assigns of the Investors or of any assignee of the Investors. This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 4 and this Section 6.2.

 

6.3 Notices . All notices, consents, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered (i) in person, (ii) by facsimile or other electronic means, with affirmative confirmation of receipt, (iii) one Business Day after being sent, if sent by reputable, nationally recognized overnight courier service or (iv) three (3) Business Days after being mailed, if sent by registered or certified mail, pre-paid and return receipt requested, in each case to the applicable Party at the following addresses (or at such other address for a Party as shall be specified by like notice):

 

If to Parent, to:

 

Purple Innovation, Inc.
123 E. 200 N.
Alpine, UT 84004
Attn: Casey McGarvey
Email: casey@purple.com

With a copy to (which shall not constitute notice):

 

Dorsey & Whitney LLP
111 S. Main St., Suite 2100
Salt Lake City, UT 84111
Attn:  Nolan S. Taylor
Email:  taylor.nolan@dorsey.com
Fax:    (801) 933-7373
Tel:     (801) 933-7366

If to an Investor, to the address set forth next to such Investor’s name on Exhibit A hereto.

 

6.4 Severability . This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

6.5 Counterparts . This Agreement may be executed in multiple counterparts (including by facsimile or pdf or other electronic document transmission), each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.

 

6.6 Entire Agreement . This Agreement (together with the Subscription Agreement to the extent incorporated herein, and including all agreements entered into pursuant hereto or thereto or referenced herein or therein and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written, relating to the subject matter hereof. For the avoidance of doubt, the Investors acknowledge and agree that notwithstanding anything to the contrary contained herein or in the Subscription Agreement, they shall have no rights under the Founder Registration Rights Agreement, including with respect to the Transferred Sponsor Shares, the Transferred Sponsor Warrants and the Warrant Shares.

 

  15  

 

 

6.7 Interpretation . Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement. In this Agreement, unless the context otherwise requires: (i) any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa; (ii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding or succeeding such term and shall be deemed in each case to be followed by the words “without limitation”; (iii) the words “herein,” “hereto,” and “hereby” and other words of similar import in this Agreement shall be deemed in each case to refer to this Agreement as a whole and not to any particular section or other subdivision of this Agreement; and (iv) the term “or” means “and/or”. The parties have participated jointly in the negotiation and drafting of this Agreement. Consequently, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

6.8 Amendments; Waivers . Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written agreement or consent of Parent and Investors holding a majority-in-interest of the Registrable Securities. No failure or delay by a party in exercising any right hereunder shall operate as a waiver thereof. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision

 

6.9 Remedies Cumulative . In the event a party fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the other parties may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

6.10 Governing Law; Jurisdiction . This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without regard to the conflict of laws principles thereof. All actions, claims or other legal proceedings arising out of or relating to this Agreement (a “ Proceeding ”) shall be heard and determined exclusively in any state or federal court located in the State of Delaware (or in any court in which appeal from such courts may be taken) (the “ Specified Courts ”). Each party hereto hereby (a) submits to the exclusive jurisdiction of any Specified Court for the purpose of any Proceeding brought by any party hereto and (b) irrevocably waives, and agrees not to assert by way of motion, defense or otherwise, in any such Proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the Proceeding is brought in an inconvenient forum, that the venue of the Proceeding is improper, or that this Agreement or the transactions contemplated hereby may not be enforced in or by any Specified Court. Each party agrees that a final judgment in any Proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable law. Each party irrevocably consents to the service of the summons and complaint and any other process in any Proceeding, on behalf of itself, or its property, by personal delivery of copies of such process to such party at the applicable address set forth in Section 6.3. Nothing in this Section 6.10 shall affect the right of any party to serve legal process in any other manner permitted by applicable law.

 

6.11 WAIVER OF TRIAL BY JURY . EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF THE INVESTORS IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGES FOLLOW}

 

  16  

 

 

IN WITNESS WHEREOF , the parties have caused this Registration Rights Agreement to be executed and delivered as of the date first written above.

 

 

Parent:
   
  Global Partner Acquisition Corp.
     
  By: /s/ Paul Zepf
  Name:   Paul Zepf
  Title:   Chief Executive Officer

 

  Investors:
     
  Coliseum Capital Partners, L.P.
       
  By: Coliseum Capital, LLC,
its General Partner
       
    By: /s/ Adam Gray
    Name:   Adam Gray
    Title:   Manager
       
  Blackwell partners llc – series A
       
  By: Coliseum Capital Management, LLC,
Attorney-in-Fact
       
    By: /s/ Adam Gray
    Name:   Adam Gray
    Title:   Managing Partner
       
  Coliseum Co-Invest Debt Fund, L.P.
       
  By: Coliseum Capital, LLC,
    its General Partner
       
    By: /s/ Adam Gray
    Name:   Adam Gray
    Title:   Manager

 

[Signature Page to Registration Rights Agreement]

 

  17  

 

 

EXHIBIT A
Investors

 

Name of Investor Address of Investor
Coliseum Capital Partners, L.P.

c/o Coliseum Capital Management, LLC
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Adam Gray; Christopher Shackelton; and Chivonne Cassar
Email:    agray@coliseumpartners.com; chris@coliseumpartners.com;
               ccassar@coliseumpartners.com

 

with a copy to (which shall not constitute notice):

 

Paul Hastings LLC
200 Park Avenue
New York, NY 10166
Attn: Barry Brooks
Email: barrybrooks@paulhastings.com

Blackwell Partners LLC – Series A

c/o Coliseum Capital Management, LLC
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Adam Gray; Christopher Shackelton; and Chivonne Cassar
Email:    agray@coliseumpartners.com; chris@coliseumpartners.com;
               ccassar@coliseumpartners.com

 

with a copy to (which shall not constitute notice):

 

Paul Hastings LLC
200 Park Avenue
New York, NY 10166
Attn: Barry Brooks
Email: barrybrooks@paulhastings.com

Coliseum Co-Invest Debt Fund, L.P.

c/o Coliseum Capital Management, LLC
105 Rowayton Avenue
Rowayton, CT 06853
Attn: Adam Gray; Christopher Shackelton; and Chivonne Cassar
Email:   agray@coliseumpartners.com; chris@coliseumpartners.com;
              ccassar@coliseumpartners.com

 

with a copy to (which shall not constitute notice):

 

Paul Hastings LLC
200 Park Avenue
New York, NY 10166
Attn: Barry Brooks
Email: barrybrooks@paulhastings.com

 

 

A-1

 

 

Exhibit 10.19

 

THIS BOARD OBSERVER AND INDEMNIFICATION AGREEMENT , dated as of the 2nd day of February, 2018 (this   Agreement ”), is made by and between  PURPLE INNOVATION, INC. , a Delaware corporation (the “ Company ”), and  PAUL J. ZEPF (“ Observer ”).

 

WHEREAS , on February 2, 2018, the Company consummated a business combination with Purple Innovation LLC;

 

WHEREAS , the Company has agreed that the Observer will be entitled to attend and participate in all meetings of the Company’s Board of Directors (the “ Board ”) and any and all committees thereof (each a “ Committee ” and, collectively, the “ Committees ”).

 

NOW, THEREFORE , in consideration of the foregoing, the Company and Observer hereby agree as follows:

 

1. Board Observer Rights .

 

(a) The Company agrees that it will invite Observer to attend, in a non-voting observer capacity, all meetings of the Board and any and all Committees for the purposes of permitting Observer to have current information with respect to the affairs of the Company and the actions taken by the Board and Observer to provide input and advice with respect thereto (the “ Approved Purposes ”). Observer shall have the right to be heard at any such meeting, but in no event shall Observer: (i) be deemed to be a member of the Board or such Committees; (ii) have the right to vote on any matter under consideration by the Board or such Committees or otherwise have any power to cause the Company to take, or not to take, any action; or (iii) except as expressly set forth in this Agreement, have or be deemed to have, or otherwise be subject to, any duties (fiduciary or otherwise) to the Company or its stockholders or any duties (fiduciary or otherwise) otherwise applicable to the directors of the Company.  As a non-voting observer, Observer will also be provided (concurrently with delivery to the directors of the Company and in the same manner delivery is made to them) copies of all notices, minutes, consents, and all other materials or information (financial or otherwise) that are provided to the directors with respect to a meeting or any written consent in lieu of meeting (except to the extent Observer has been excluded therefrom pursuant to clause (c) below).

 

(b) If a meeting of the Board or any of the Committees is conducted via telephone or other electronic medium (e.g., videoconference), Observer may attend such meeting via the same medium.

 

(c) Notwithstanding the foregoing, the Company may exclude Observer from access to any material or meeting or portion thereof if: (i) the Board concludes in good faith, upon advice of the Company’s counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege between the Company and such counsel; provided, however, that any such exclusion shall apply only to such portion of the material or such portion of the meeting which would be required to preserve such privilege and not to any other portion thereof; or (ii) such portion of a meeting is an executive session limited solely to independent director members of the Board, independent auditors and/or legal counsel, as the Board may designate, and Observer (assuming Observer were a member of the Board) would not meet the then-applicable standards for independence adopted by Nasdaq, or such other exchange on which the Company’s securities are then traded.

  

 

 

 

(d) The Company shall compensate Observer in the same amount of all cash and non-cash retainers, meeting fees and any other cash and non-cash fees (including, without limitation, equity and equity incentive awards) as if Observer were an independent director member of the Board and a member of each of the committees thereof, as such compensation may be modified from time to time. Further, the Company shall reimburse Observer for all reasonable out-of-pocket expenses incurred by Observer in connection with attendance at Board and Committee meetings or any other matter which the Company requests Observer to undertake on behalf of the Company (it being understood that Observer shall be under no obligation to undertake any matter other than as set forth in Section 1(a) hereof unless Observer expressly agrees thereto in his sole discretion). All compensation and reimbursements payable by the Company pursuant to this Section 1(d) shall be paid to Observer in accordance with the Company’s policies and practices with respect to director compensation and expense reimbursement then in effect; provided, however, that any such compensation or reimbursement shall be paid to Observer no later than comparable compensation or reimbursement is paid to the members of the Board.

 

(e) The rights described in this Section 1 shall terminate upon: (i) the termination of the Observer Period, as provided below; (ii) any material violation of the terms of this Agreement by Observer which (A) remains uncured within ten business days after receipt of notice thereof, or (B) if such violation is not subject to cure, directly causes harm to the Company in the Board’s sole and absolute discretion; or (iii) the death or disability of Observer. The Observer Period shall be for a period of one year from the date hereof, and shall automatically renew for successive periods of one year unless the Company shall provide written notice to the Observer, not less than 30 days prior to any such renewal period, of its determination not to renew the Observer Period. The Observer may terminate the Observer Period at any time by written notice to the Company.

 

2. Confidential Treatment of Company Confidential Information .

 

(a) In consideration of the Company’s disclosure to Observer of information which is not publicly available concerning the Company for the Approved Purposes, Observer agrees that this Agreement will apply to all information, in any form whatsoever, disclosed or made available to Observer concerning the Company, its affiliates and/or the Approved Purposes (“ Confidential Information ”).

 

(b) Except as otherwise provided herein, Observer agrees: (i) to hold Confidential Information in strict confidence; (ii) not to disclose Confidential Information to any third parties; and (iii) not to use any Confidential Information for any purpose except for the Approved Purposes. Observer may disclose the Confidential Information to its responsible agents, advisors, affiliates and representatives with a bona fide need to know (“ Representatives ”), but only to the extent necessary for the Approved Purposes. Observer agrees to instruct all such Representatives not to disclose such Confidential Information to third parties without the prior written permission of the Company. Observer will, at all times, remain liable under the terms of this Agreement for any unauthorized disclosure or use by any of its Representatives of Confidential Information provided to such Representatives by Observer.

 

3. Exempted Disclosure . The foregoing restriction on the use and nondisclosure of Confidential Information will not include information which: (i) is, or hereafter becomes, through no act or failure to act on the part of Observer, generally known or available to the public; (ii) was acquired by Observer before receiving such information from the Company, without restriction as to use or disclosure; (iii) is hereafter furnished to Observer by a third party, without, to Observer’s knowledge, restriction as to use or disclosure; (iv) such information was independently developed by Observer; or (v) is required or requested to be disclosed pursuant to judicial, regulatory or administrative process or court order, provided, that to the extent permitted by law, rule or regulation and reasonably practicable under the circumstances, Observer gives the Company prompt notice of such required disclosure so that the Company may challenge the same.

   

  2  

 

 

4. Return of Confidential Information . Following the termination of the rights of Observer described in Section 1 and upon request of the Company, Observer will promptly: (i) return to the Company all physical materials containing or consisting of Confidential Information and all hard copies thereof; and (ii) destroy all electronically stored Confidential Information in Observer’s possession or control. Observer may retain in his confidential files one copy of any item of Confidential Information in order to comply with any legal, compliance or regulatory requirements. Any Confidential Information that is not returned or destroyed, including, without limitation, any oral Confidential Information, and all notes, analyses, compilations, studies or other documents prepared by or for the benefit of Observer from such information, will remain subject to the confidentiality obligations set forth in this Agreement indefinitely.

 

5. Disclaimer . All Confidential Information is provided to Observer “as is” and the Company does not make any representation or warranty as to the accuracy or completeness of the Confidential Information or any component thereof. The Company will have no liability to Observer resulting from the reliance on the Confidential Information by Observer or any third party to whom such Confidential Information is disclosed.

 

6. Company Ownership of Confidential Information . Observer acknowledges that all of the Confidential Information is owned solely by the Company (or its licensors) and that the unauthorized disclosure or use of such Confidential Information would cause irreparable harm and significant injury, the degree of which may be difficult to ascertain. Therefore, in the event of any breach of this Agreement, the Company is entitled to seek all forms of equitable relief (including an injunction and order for specific performance), in addition to all other remedies available at law or in equity.

 

7. Observer and Representative Compliance with Securities Laws . Observer agrees that the Confidential Information is given in confidence in accordance with the terms of this Agreement, and Observer will not take any action relating to the securities of the Company which would constitute insider trading, market manipulation, or any other violation of applicable securities law. Observer agrees to instruct all of its Representatives to whom it discloses Confidential Information that they may not take any action relating to the securities of the Company which would constitute insider trading, market manipulation, or any other violation of applicable securities law.

 

8. Indemnity .

 

(a) The Company will indemnify and hold harmless Observer from and against any losses, claims, damages, liabilities and expenses to which Observer may become subject, insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof) arise out of, relate to, or are based upon Observer’s designation or attendance as a non-voting observer at meetings of the Board and Committees, Observer’s receipt of materials or information under this Agreement, or Observer’s exercise of his rights under this Agreement. The Company will pay or reimburse Observer for such losses, claims, damages, liabilities and expenses as they are incurred, including, without limitation, for amounts incurred in connection with investigating or defending any such loss, claim, damage, liability, expense or action.

 

(b) Promptly after receipt by Observer under Section 8(a) of notice of the commencement of any action (but in no event in excess of 30 days after receipt of actual notice), Observer will, if a claim in respect thereof is to be made against Observer under this Section 8, notify the Company in writing of the commencement thereof, but the omission to so notify the Company will not relieve the Company from any liability under this Section 8, except to the extent that the Company is materially prejudiced by such failure to notify and, in such case, only as to the particular item for which indemnification is then being sought and with respect to which the Company has been materially prejudiced and not from any other liability which the Company may have to Observer. In case any such action is brought against Observer, and Observer notifies the Company of the commencement thereof, the Company will be entitled, to the extent it may wish, to participate in the defense thereof, with separate counsel. Such participation shall not relieve the Company of the obligation to pay or reimburse Observer for reasonable legal and other expenses (subject to Subsection (c)) incurred by Observer in defending itself, except for such expenses incurred after the Company has deposited funds sufficient to effect the settlement (unless an expungement proceeding has been initiated), with prejudice, of the claim in respect of which indemnity is sought. The Company shall not be liable to Observer on account of any settlement of any claim or action effected without the consent of the Company, such consent not to be unreasonably withheld or delayed.

   

  3  

 

 

(c) The Company shall pay all reasonable legal fees and expenses of Observer in the defense of such claims or actions.

 

9. Insurance . For the duration of Observer’s appointment as Observer of the Company, and thereafter for the duration of the applicable statute of limitations, the Company shall cause to be maintained in effect a policy of liability insurance coverage for Observer against liability that may be asserted against or incurred by him in his capacity as Observer which is equivalent in scope and amount to that provided to the members of the Board. Upon request, the Company shall provide Observer or his counsel with a copy of all directors’ liability insurance applications, binders, policies, declarations, endorsements, and other related materials. Notwithstanding the foregoing, the Company may, but shall not be required to, create a trust fund, grant a security interest, or use other means, including, without limitation, a letter of credit, to ensure the payment of such amounts as may be necessary to satisfy its obligations to indemnify and advance expenses pursuant to this Agreement.

 

10. Governing Law: Venue for Disputes . This Agreement shall be governed in all respects by the laws of the State of Delaware (without giving effect to principles of conflicts of laws which would lead to the application of the laws of another jurisdiction). Each of the parties hereto consents to the non-exclusive jurisdiction of the federal courts whose districts encompass any part of the District of Delaware or the Court of Chancery of the State of Delaware (or, if the Court of Chancery of the State of Delaware lacks jurisdiction, then in the applicable Delaware state court), with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions

 

11. Notices . All notices and communications hereunder shall be in writing and shall be deemed to have been given and delivered when deposited in the United States mail, postage prepaid, registered or certified mail, to the applicable address set forth below.

 

  To the Company: Purple Innovation, Inc.
    123 E. 200 N.
    Alpine, UT 84004
    Attention: Casey McGarvey
    E-mail: casey@purple.com
     
  With a copy to: Dorsey & Whitney LLP
    111 S. Main St., Suite 2100
    Salt Lake City, UT 84111
    Attention: Nolan S. Taylor
   

E-mail: taylor.nolan@dorsey.com

     
  To Observer: Paul J. Zepf
    10 Allison Lane
   

Thornwood, NY 10594 

  

  4  

 

 

12. Entire Agreement . This Agreement constitutes the complete and exclusive statement regarding the subject matter of this Agreement and supersedes all prior agreements, understandings and communications, oral or written, between the parties regarding the subject matter of this Agreement.

 

13. Expenses . The Company agrees to reimburse Observer for the actual and reasonable costs and expenses of the Observer that the Observer incurs in connection with the enforcement of this Agreement or any claim, damages or litigation relating to any breach of this Agreement, if the Company is found to have breached this Agreement.

 

14. Term . The provisions of Section 1 hereof shall terminate and be of no further force or effect pursuant to Section 1(e) hereof. Notwithstanding the provisions of this Section 14, the provisions of Sections 2, 3, 4, 6, 7, 8, 9, 10, 13 and this Section 14 shall survive any termination or expiration of this Agreement.

  

IN WITNESS WHEREOF , the undersigned have hereto executed this Agreement as of the date first above written.

 

  PURPLE INNOVATION, INC.
   
  By: /s/ Sam Bernards
  Sam Bernards, Chief Executive Officer
   
  OBSERVER
   
   /s/ Paul G. Zepf
  Paul G. Zepf

 

5

 

 

Exhibit 16.1

 

 

 

February 8, 2018

 

Office of the Chief Accountant

Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

 

Ladies and Gentlemen:

 

We have read the statements of Purple Innovation, Inc. included under Item 4.01 of its Form 8-K dated February 8, 2018, and we agree with such statements, except that we are not in a position to agree or disagree with the Company’s statements that the audit committee decided to engage BDO USA, LLP to serve as the Company’s new independent registered public accounting firm, and the statements made in paragraph (b) under Item 4.01.

 

 

 

WithumSmith+Brown, PC

 

cc: Mr. Gary T. DiCamillo

Audit Committee Chairman

Purple Innovation, Inc.

 

 

WithumSmith+Brown, PC 200 Jefferson Park, Suite 400, Whippany, New Jersey 07981-1070 T (973) 898 9494 F (973)898 0686 withum.com

 

MEMBER OF HLB INTERNATIONAL. AWORLD-WIDE NETWORK OF INDEPENDENT PROFESSIONAL ACCOUNTING FIRMS AND BUSINESS ADVISORS

 

Exhibit 21.1

 

Subsidiaries of Purple Innovation, Inc.

 

Purple Innovation, LLC

Exhibit 99.1

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Unitholders

Purple Innovation, LLC, formerly known as WonderGel, LLC

Alpine, Utah

 

We have audited the accompanying balance sheets of Purple Innovation, LLC, formerly known as WonderGel, LLC (the Company) as of December 31, 2016 and 2015 and the related statements of operations, changes in member’s deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Purple Innovation, LLC, formerly known as WonderGel, LLC at December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

/s/ BDO USA, LLP

 

Salt Lake City, Utah

 

January 30, 2018

 

 

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)
Balance Sheets

 

    December 31,  
    2016     2015     2014  
                (Unaudited)  
Assets                  
Current assets:                  
Cash and cash equivalents   $ 4,013,217     $ 70,865     $ 256,002  
Accounts receivable, net     2,327,928       593,222       440,097  
Inventories, net     5,334,862       382,327       608,259  
Prepaid inventory     674,592              
Other current assets     247,382              
Total current assets     12,597,981       1,046,414       1,304,358  
Property and equipment, net     6,104,433       29,352       43,197  
Intangible assets, net     129,501              
Other long term assets     10,000       10,000        
Total assets   $ 18,841,915     $ 1,085,766     $ 1,347,555  
                         
Liabilities and Member's Deficit                        
Current liabilities:                        
Accounts payable   $ 6,892,995     $ 188,369     $ 228,484  
Accrued sales returns     2,054,352       17,000       5,000  
Accrued interest - related party     21,687       242,284       324,677  
Compensation and benefits     1,809,706       318,228       59,122  
Customer prepayments     4,153,790              
Accrued sales tax     2,292,018              
Other accrued liabilities     1,141,465       192,287       99,070  
Current portion of long-term obligations     51,426              
Related party notes payable     300,000       1,158,656       1,109,300  
Total current liabilities     18,717,439       2,116,824       1,825,653  
Long-term obligations, net of current portion     23,641              
Other long term liabilities     913,510              
Total liabilities     19,654,590       2,116,824       1,825,653  
Member's deficit:                        
Membership interest           64,013        
Common units, no par value, 100,000,000 units authorized; 88,000,000 units issued and outstanding     2,259,704              
Distributions     (286,363 )     (209,814 )      
Accumulated deficit     (2,786,016 )     (885,257 )     (478,098 )
Total member's deficit     (812,675 )     (1,031,058 )     (478,098 )
Total liabilities and member's deficit   $ 18,841,915     $ 1,085,766     $ 1,347,555  

 

The accompanying notes are an integral part of these financial statements.

 

  2  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)
Statements of Operations

 

    Year Ended December 31,  
    2016     2015     2014  
                (Unaudited)  
Revenues, net   $ 65,472,901     $ 5,838,610     $ 4,305,611  
Cost of revenues:                        
Cost of revenues     39,857,090       3,934,905       2,297,037  
Related-party royalty fees (see Note 2)     4,139,046       519,877       391,539  
Total cost of revenues     43,996,136       4,454,782       2,688,576  
Gross profit     21,476,765       1,383,828       1,617,035  
Operating expenses:                        
Marketing and sales     17,900,959       469,255       92,250  
General and administrative     4,643,234       1,193,119       752,109  
Research and development     791,530       61,509       3,362  
Loss on disposal of property and equipment     22,704              
Total operating expenses     23,358,427       1,723,883       847,721  
Operating income (loss)     (1,881,662 )     (340,055 )     769,314  
Other income (expense):                        
Other income     7,961       5,139        
Interest expense     (27,058 )     (72,243 )     (104,157 )
Total other expense     (19,097 )     (67,104 )     (104,157 )
Net income (loss)   $ (1,900,759 )   $ (407,159 )   $ 665,157  

 

The accompanying notes are an integral part of these financial statements.

 

  3  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)
Statement of Changes in Member’s Deficit

 

    Contributed Common Equity     Member's Distributions     Accumulated Deficit     Total Member's Deficit  
Balance - December 31, 2013 (unaudited)   $           $ (1,143,255 )   $ (1,143,255 )
Net income                 665,157       665,157  
Balance - December 31, 2014 (unaudited)   $           $ (478,098 )   $ (478,098 )
Net loss                 (407,159 )     (407,159 )
Forgiveness of debt by related-party     64,013                   64,013  
Member distributions           (209,814 )           (209,814 )
Balance - December 31, 2015   $ 64,013     $ (209,814 )   $ (885,257 )   $ (1,031,058 )
Net loss                 (1,900,759 )     (1,900,759 )
Forgiveness of debt by related-party     787,568                   787,568  
Forgiveness of unpaid royalties     1,040,537                   1,040,537  
Contribution of property and equipment from related-party     367,586                   367,586  
Member distributions           (76,549 )           (76,549 )
Balance - December 31, 2016   $ 2,259,704     $ (286,363 )   $ (2,786,016 )   $ (812,675 )

 

The accompanying notes are an integral part of these financial statements.

 

  4  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)
Statement of Cash Flows

 

    Year Ended December 31,  
    2016     2015     2014  
                (Unaudited)  
Cash flows from operating activities:                  
Net income (loss)   $ (1,900,759 )   $ (407,159 )   $ 665,157  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
Depreciation and amortization     79,658       13,845       13,845  
Loss on disposal of property and equipment     22,704              
Bad debt     10,000       3,552       26,427  
Changes in operating assets and liabilities:                        
(Increase) decrease in accounts receivable     (1,674,019 )     (156,677 )     127,169  
(Increase) decrease in inventories     (4,952,535 )     225,932       (261,679 )
Increase in prepaid inventory and other     (921,974 )     (10,000 )      
Increase (decrease) in accounts payable     5,548,041       (40,115 )     (74,989 )
Increase in accrued sales returns     2,054,352       12,000       5,000  
Increase in accrued compensation and benefits     1,491,478       259,106       31,102  
Increase in customer prepayments     4,153,790              
Increase in other accrued liabilities     5,223,759       28,737       203,119  
Net cash provided by (used in) operating activities     9,134,495       (70,779 )     735,151  
                         
Cash flows from investing activities:                        
Purchase of property and equipment     (4,689,743 )           (21 )
Investment in intangible assets     (129,627 )            
Net cash used in investing activities     (4,819,370 )           (21 )
                         
Cash flows from financing activities:                        
Proceeds from related-party notes payable     245,000       885,000       791,000  
Payments on related-party notes payable     (540,200 )     (789,544 )     (1,395,000 )
Payments on long-term obligations     (1,024 )            
Member distributions     (76,549 )     (209,814 )      
Net cash used in financing activities     (372,773 )     (114,358 )     (604,000 )
                         
Net increase (decrease) in cash     3,942,352       (185,137 )     131,130  
Cash, beginning of the period     70,865       256,002       124,872  
Cash, end of the period   $ 4,013,217     $ 70,865     $ 256,002  
                         
Supplemental disclosures of cash flow information:                        
Cash paid during the period for interest   $ 23,937     $ 136,723     $  
                         
Supplemental schedule of non-cash investing and financing activities:                        
Property and equipment included in accounts payable   $ 1,043,897     $     $  
Equipment acquired through capital lease   $ 29,497     $     $  
Property and equipment acquired through related-party contribution   $ 414,180     $     $  
Long-term obligations acquired through related-party contribution   $ 46,594     $     $  
Member contribution through forgiveness of unpaid royalties   $ 1,040,537     $     $  
Member contribution through partial note forgiveness   $ 787,568     $ 64,013     $  

 

The accompanying notes are an integral part of these financial statements.

 

  5  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements

 

Note 1 Description of Business

 

Purple Innovation, LLC (the “Company”), formerly known as WonderGel, LLC, was established as a limited liability company under the laws of the State of Delaware on May 26, 2010. The name was changed to Purple Innovation, LLC on January 27, 2017. The Company is a comfort technology company which designs and manufactures products to improve how people sleep, sit, and stand. It designs and manufactures a range of comfort technology products, including mattresses, pillows, and cushions, using its proprietary Hyper-Elastic Polymer® technology designed to improve comfort. The Company markets and sells its products through direct-to-consumer and traditional retail channels.

 

Note 2 Summary of Significant Accounting Policies

 

This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and have been consistently applied in the preparation of the financial statements.

 

Basis of Presentation

 

These financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with GAAP and reflect the financial position, results of operations and cash flows of the Company. The financial statements and related footnotes as of and for the year ended December 31, 2014 are unaudited.

 

Business Combination

 

In December of 2016, the Company acquired EquaPressure, LLC (“EquaPressure”) from InnoHold, LLC (“InnoHold”), 100% owners of the Company. EquaPressure designs and manufactures medical cushioning products primarily for sales in the long-term and home medical care markets. At the time of the acquisition, InnoHold was the owner of both entities and the acquisition of EquaPressure was a transfer between entities under common control. As such, the Company recorded the assets, liabilities and equity of EquaPressure on its balance sheet at EquaPressure’s historical basis instead of fair value. Transfers of businesses between entities under common control require the reporting period to be presented as if the transaction occurred at the beginning of the period in which common control first existed. Accordingly, the accompanying financial statements and related notes of the Company have been retrospectively adjusted to include the historical balances of EquaPressure prior to the effective date of the acquisition.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Predicting future events is inherently an imprecise activity and, as such, requires the use ofjudgment. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected in the financial statements in future periods.

 

  6  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded net of an allowance for expected losses and consist primarily of receivables from wholesale customers and receivables from third-party processors for customer credit card purchases. The allowance is recognized in an amount equal to anticipated future write-offs. Management estimates allowance for doubtful accounts based on delinquencies, aging trends, industry risk trends, historical experience and current trends. Account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered. Management established an allowance for doubtful accounts of $10,000, as of December 31, 2016. There was no allowance for doubtful accounts at December 31, 2015 and 2014. The Company recognized bad debt in the amount of $3,552 and $26,427 for the years ended December 31, 2015 and 2014, respectively.

 

Inventories

 

Inventories consist of raw materials, work-in-process and finished goods and are stated at the lower of cost or market. Manufactured inventory consists of raw material, direct labor and manufacturing overhead cost components. Cost is calculated using the average cost method. The Company reviews the components of its inventory on a regular basis for excess and obsolete inventory and makes appropriate adjustments when necessary. Once established, the original cost of the inventory less the related inventory allowance represents the new cost basis of such products. As of December 31, 2016, 2015 and 2014, the reserve for inventory obsolescence was $184,625, $8,514 and $17,405, respectively.

 

Prepaid Inventory and Other Assets

 

The Company has made payments and deposits for inventories, subscriptions and other products and services that will be received, consumed or used in a future period in the amounts of $931,974 and $10,000 as of December 31, 2016 and 2015, respectively. There were no prepaid inventory and other assets as of December 31, 2014.

 

Property and Equipment

 

Property and equipment are stated at cost, net of depreciation. Property and equipment is depreciated using the straight-line method over the estimated useful lives of the respective assets, ranging from 3 to 10 years, as follows:

 

 

    Years  
Equipment     10  
Furniture and fixtures     7  
Computer equipment and software     3  

 

Major renewals and betterments that extend useful life are capitalized. The Company records depreciation and amortization in cost of sales for long-lived assets used in the manufacturing process, and within each line item of operating expenses for all other long-lived assets. Leasehold improvements are amortized over the shorter of the useful life of the leasehold improvements or the contractual term of the lease, with consideration of lease renewal options if renewal appears probable. Assets under capital lease are included within equipment and represent non-cash investing activities. The cost and related accumulated depreciation of assets sold or retired is removed from the accounts with any resulting gain or loss included in net income in the statement of operations.

 

  7  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Intangible Assets

 

Intangible assets consist of legal costs for obtaining patents for developed technologies and legal cost of trademarks. Patents are being amortized using the straight-line method over their estimated useful lives of 20 years. Trademarks have indefinite lives and are not amortized, but instead are tested for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. No impairments on intangible assets were recorded during the year ended December 31, 2016. The Company had no intangible assets as of December 31, 2015 or 2014.

 

Impairment of Long-Lived Assets

 

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is assessed by a comparison of the carrying amount of the asset to the estimated future undiscounted net cash flows expected to be generated by the asset or group of assets. If estimated future undiscounted net cash flows are less than the carrying amount of the asset or group of assets, the asset is considered impaired and an expense is recorded in an amount required to reduce the carrying amount of the asset to its then fair value. Fair value generally is determined from estimated discounted future net cash flows (for assets held for use) or net realizable value (for assets held for sale). The Company did not identify any indicators of impairment for the years ended December 31, 2016, 2015 or 2014.

 

Income Taxes

 

The Company is a limited liability company taxed as a partnership for federal and state income tax purposes. Generally, partnerships are not subject to income tax because their earnings and losses are passed directly to their members and taxes at that level. Therefore, a provision for federal and state income taxes is not necessary because the Company’s taxable income or loss is includable in the income tax returns of the Company’s members.

 

The Company has not disclosed the net difference between its tax bases and the reported amounts of its assets and liabilities. This is due to the fact that tax positions available to individual members will not be pro rata to ownership interest but will instead reflect the different outside tax basis of the individual member and will depend on his or her individual tax position. It does not appear that disclosure of the aggregate tax basis would be meaningful in any event, since individual members may not share the tax basis pro rata. The Company believes that these circumstances make it impracticable for the Company to determine the aggregate tax basis of the individual owners, nor would a disclosure of available information be meaningful to these financial statements.

 

The Company follows the accounting guidance in Accounting Standards Codification (“ASC”) 740, Income Taxes , as it relates to uncertain tax positions. The guidance provides information and procedures for financial statement recognition and measurement of tax positions taken, or expected to be taken, in tax returns. The Company had no uncertain tax positions at December 31, 2016, 2015 or 2014. The Company’s policy is to recognize interest expense and penalties related to uncertain tax positions, when applicable as a component of income tax expense.

 

The Company files U.S. federal and certain state income tax returns. The income tax returns of the Company are subject to examination by U.S. federal and state taxing authorities for various time periods, depending on those jurisdictions’ rules, generally after the income tax returns are filed.

 

  8  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Advertising Costs

 

The Company charges advertising costs to operations as incurred. Advertising expense was $16,428,366, $448,010 and $90,376 for the years ended December 31, 2016, 2015 and 2014, respectively.

 

Revenue Recognition

 

The Company generates revenues from the sale of inventory. Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or the service has been provided; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Revenue generated from sales is recognized when the inventory is shipped to the customer, which is when title passes to the customer. Revenue is reported net of estimated sales returns and excludes sales taxes. Sales tax and other regulatory amounts collected from customers are not considered revenue and are included as a liability on the accompanying balance sheets.

 

The Company does not normally charge additional amounts above list price to the customer for shipping and handling. Orders with an exceptionally high shipping cost will be charged to the customer with those amounts recorded as revenue under the same policy as product revenue. Shipping costs are recorded as a component of cost of revenues.

 

Customer prepayments include cash amounts transacted with customers prior to product delivery. At December 31, 2016, $4,153,790 was included in current liabilities in the accompanying balance sheet. There were no customer prepayments as of December 31, 2015 or 2014.

 

Cost of Revenues

 

Costs associated with net revenues are recorded in cost of revenues, and are recorded in the same period in which related sales have been recorded. Cost of revenues includes the costs of receiving, producing, inspecting, warehousing, insuring, and shipping goods during the period, as well as depreciation and amortization of long-lived assets used in these processes. Cost of sales also includes shipping and handling costs associated with the delivery of goods to customers.

 

Related-Party Royalty Fees

 

The Company had technology licensing agreements with EdiZONE, LLC (“EdiZONE”), an entity under common control with the Company (see Note 9), whereby certain technology was licensed to the Company for a royalty fee. The Company incurred royalty fees to EdiZONE in the amount of $4,139,046, $519,877 and $391,539 during the years ended December 31, 2016, 2015 and 2014, respectively. On December 15, 2016, the technology license agreements between EdiZONE and the Company were amended to terminate the royalty fee the Company owed to EdiZONE with the unpaid royalties in the amount of $1,040,537 being forgiven and recorded as a capital contribution. On December 27, 2016, the license agreements were terminated and a new intellectual property assignment and license back agreement between the Company and EdiZONE (“IP Agreement”) was executed. In accordance with the IP Agreement, certain intellectual property owned by EdiZONE, including the intellectual property that was previously licensed to the Company, was assigned to the Company. There was no value assigned and no intangible asset recognized since the intellectual property was internally developed. A subset of the intellectual property that was not relevant to the Company was licensed back to EdiZONE for no consideration. The Company will not incur any royalty fees related to this intellectual property in the future.

 

  9  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Sales Returns

 

The Company guarantees its products and offers up to 100-days to return a mattress or pillow and 30-days to return a seat cushion for a full refund. The Company’s policy grants to customers a right of return requiring the Company to reduce the amount of the revenue recognized by the amount of the estimated returns. The estimated sales returns, which are recorded as a reduction of revenue at the time of sale and are recorded as a liability on the balance sheet, are based on historical trends and product return rates and are adjusted for any current or expected trends as appropriate. Actual sales returns could differ from these estimates. The Company regularly assesses and adjusts the estimate of accrued sales returns by updating the return rates for actual trends and projected costs. The Company classifies as a current liability the estimated sales returns as they are expected to be paid out in less than one year. As of December 31, 2016, 2015 and 2014, $2,054,352, $17,000 and $5,000, respectively, were included as accrued sales returns on the accompanying balance sheets. The Company had the following activity for sales returns:

 

    Years Ended December 31,  
    2016     2015     2014  
Balance at beginning of period   $ 17,000     $ 5,000     $  
Additions that reduced net sales     7,278,352       123,799       27,577  
Deduction from reserves for current year returns     (5,241,000 )     (111,799 )     (22,577 )
Balance at end of period   $ 2,054,352     $ 17,000     $ 5,000  

 

Warranty Liabilities

 

The Company provides a limited warranty on most of the products sold. The estimated warranty costs, which are expensed at the time of sale and included in cost of revenues, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for any current or expected trends as appropriate. Actual warranty claim costs could differ from these estimates. The Company regularly assesses and adjusts the estimate of accrued warranty claims by updating claims rates for actual trends and projected claim costs. The Company classifies as non-current those estimated warranty costs expected to be paid out in greater than one year. As of December 31, 2016, $217,709 of accrued warranty expense is included as a component of other accrued liabilities in current liabilities and $284,150 of accrued warranty expense is included in other long-term liabilities on the Company’s accompanying balance sheets. As of December 31, 2015 and 2014, $25,000 and $20,000, respectively, of accrued warranty expense is included as a component of other accrued liabilities in current liabilities on the Company’s accompanying balance sheets. The Company had the following activity for warranties:

 

    Years Ended December 31,  
    2016     2015     2014  
Balance at beginning of period   $ 25,000     $ 20,000     $  
Additions charged to expense for current year sales     607,901       20,035       34,774  
Deduction from reserves for current year claims     (131,042 )     (15,035 )     (14,774 )
Balance at end of period   $ 501,859     $ 25,000     $ 20,000  

 

Fair Value Measurements

 

The Company uses the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

 

  10  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Level 1—Quoted market prices in active markets for identical assets or liabilities;

 

Level 2—Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs); and

 

Level 3—Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions.

 

The carrying amounts of cash, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these accounts. Cash equivalents are comprised of level 1 fair value inputs. The carrying amount of the Company’s debt approximates fair value due to the short-term nature of the debt. Refer to Note 7 and Note 9 for additional information.

 

Member Equity

 

The originating Limited Liability Company Operating Agreement of WonderGel, LLC dated May 26, 2010 (“LLC Agreement”), provided that upon formation of the Company the equity ownership in the Company would be denominated as membership interest. As of December 31, 2015 and 2014, InnoHold held 100 percent of the membership interest. On December 30, 2016 the Company amended and restated the Limited Liability Company Agreement reorganizing the equity ownership of the Company and authorizing the Company to issue up to 100,000,000 common units. Pursuant to the agreement, 100 percent of the membership interest in the Company held by InnoHold was exchanged for 88,000,000 issued common units, representing 100 percent of the equity ownership continuing to be held by InnoHold.

 

New Accounting Pronouncements, Not Yet Adopted

 

In May 2017, the Financial Accounting Standards Board (“FASB”) issue Accounting Standards Update (“ASU”) 2017-09, “Compensation – Stock Compensation: Scope of Modification Accounting.” The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. These updates are effective for the Company for its annual period beginning January 1, 2018, and interim periods therein, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations: Clarifying the Definition of a Business.” These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. These updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods therein, with early adoption permitted. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance in this standard is not expected to have a material impact on the financial statements.

 

  11  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

In October 2016, the FASB issued ASU 2016-17, “Consolidation: Interests Held through Related Parties that are under Common Control.” These amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. These updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.” Among other clarifications, this updated accounting guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. These updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In June 2016, the FASB issued ASU No, 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. These updates are effective for the Company for its annual period beginning January 1, 2021, and interim periods within annual periods beginning January 1, 2022, with early adoption permitted. The Company is currently evaluating the potential impact this new standard may have on its financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting,” which updated the accounting guidance related to stock compensation. This update simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification in the statement of cash flows. The standard is effective for the Company for its annual period beginning January 1, 2018 and interim periods within annual periods beginning January 1, 2019. The guidance in this standard is not expected to have a material impact on the financial statements of the Company.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which updated the accounting guidance related to leases as part of a joint project with the International Accounting Standards Board (“IASB”) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months. Additionally, this update will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. The standard is effective for the Company for its annual period beginning January 1, 2020, and interim periods within annual periods beginning January 1, 2021, with early adoption permitted. The Company is currently evaluating the potential impact this new standard may have on its financial statements.

 

  12  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330) Simplifying the Measurement of Inventory.” The amendments clarify that an entity should measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those annual periods. The amendments are to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. This guidance will not have a material impact on the financial statements of the Company.

 

In May 2014, in addition to several amendments issued during 2016, the FASB issued ASU No. 2014- 09, “Revenue from Contracts with Customers.” This pronouncement updated the accounting guidance related to revenue from contracts with customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, and shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact that the standard will have on its financial statements.

 

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 

New Accounting Pronouncements, Adopted in 2016

 

In April 2015, the FASB issued ASU 2015-03, “Interest - Imputation of Interest,” which amends the current guidance to change the manner in which debt issuance costs are presented on an entity’s balance sheet. This new guidance requires the Company to present debt issuance costs related to recognized debt liabilities on the balance sheet as a direct deduction from the debt liability, as opposed to the previous guidance that provides for presentation of the cost of issuing debt as a separate asset. ASU 2015-03 requires retrospective application to all prior periods presented in the financial statements. The Company adopted this new guidance effective the first quarter of 2016. The impact of this adoption was not material to the financial statements.

 

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” The amendments are intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). In addition to reducing the number of consolidation models from four to two, the new standard simplifies and improves the guidance by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (VIE) and changing consolidation conclusions for public and private companies in several industries that typically make use of limited partnerships or VIEs. The Company adopted this new guidance effective the first quarter of 2016. The impact of this adoption was not material to the financial statements.

 

  13  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

  

Note 3 Inventories

 

Inventories consisted of the following:

   

    As of December 31,  
    2016     2015     2014  
Raw materials   $ 3,508,327     $ 97,710     $ 156,416  
Work-in-process     335,864       234,505       375,398  
Finished goods     1,675,296       58,626       93,850  
Inventory obsolescence reserve     (184,625 )     (8,514 )     (17,405 )
Inventories, net   $ 5,334,862     $ 382,327     $ 608,259  

 

Note 4 Property and Equipment

 

Property and equipment consisted of the following:

 

    As of December 31,  
    2016     2015     2014  
Equipment in progress   $ 3,868,796     $     $  
Equipment     1,576,714       96,937       96,937  
Equipment under capital lease     29,497              
Furniture and fixtures     143,288              
Computer equipment and software     136,740              
Leasehold improvements     496,515              
Total property and equipment     6,251,550       96,937       96,937  
Accumulated depreciation     (147,117 )     (67,585 )     (53,740 )
Property and equipment, net   $ 6,104,433     $ 29,352     $ 43,197  

 

Equipment in progress reflects equipment, primarily related to mattress manufacturing, which is being constructed and was not in service at December 31, 2016.

 

Depreciation expense was $79,532, $13,845 and $13,845 for the years ended December 31, 2016, 2015 and 2014, respectively.

 

  14  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Note 5 Intangible Assets

 

The Company did not have any intangible assets at December 31, 2015 or 2014. Intangible assets consisted of the following at December 31, 2016:

 

Trademarks   $ 14,015  
Patents     115,612  
Total intangible assets     129,627  
Accumulated amortization - patents     (126 )
Intangible assets, net   $ 129,501  

 

Note 6 Other Current Liabilities

 

The Company’s other accrued expenses consisted of the following:

 

    As of December 31,  
    2016     2015     2014  
Website commissions   $ 500,843     $     $  
Rent - related party     228,852       76,846       28,548  
Warranty accrual - current portion     217,709       25,000       20,000  
Accrued expenses     194,061       90,441       50,522  
Total other accrued liabilities   $ 1,141,465     $ 192,287     $ 99,070  

 

Website commissions represent the costs associated with arrangements the Company has with third party websites to send e-commerce traffic to the Company’s website to purchase products online.

 

Note 7 Long-Term Obligations

 

In December 2016, the Company received a non-cash capital contribution from InnoHold, LLC (“InnoHold”) who is the 100% member of the Company. The contribution included property equipment encumbered with a note payable to an unrelated entity, with the note payable being assumed by the Company (see Note 9). At December 31, 2016, $46,594 was outstanding on the note payable, which incurs interest at a fixed rate of 4.98 percent. The note payable has monthly payments of $9,435 due at the first of each month through May 1, 2017 and is collateralized by the underlying equipment.

 

During 2016, the Company acquired equipment valued at $29,497 pursuant to two capital lease agreements with interest rates of 10.67 percent. The leases were entered into in August and November 2016 for a sixty month period with monthly payments in the amount of $637. The obligations are collateralized by the related equipment and future minimum payments under the capital leases are as follows:

 

Year ended December 31,      
2017   $ 7,638  
2018     7,638  
2019     7,638  
2020     7,638  
2021     5,914  
Total minimum lease payments     36,466  
Less amount representing interest     (7,993 )
Present value of net minimum lease payments     28,473  
Current portion     (4,832 )
Long term obligations   $ 23,641  

 

  15  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Note 8 Commitments and Contingencies

 

Required Member Distributions

 

Pursuant to the December 30, 2016 Amended and Restated Limited Liability Company Agreement, the Company is required to distribute to the members an amount equal to 45 percent of the Company’s net taxable income that was allocated to each such member following the end of each fiscal year.

 

Employment Agreements

 

On December 31, 2016 the Company entered into agreements with two key employees that are also controlling members of the Company. The agreements outline compensation and severance commitments. If these key employees are terminated without cause, the Company is required to pay up to $3.4 million in compensation and maintain certain benefits for up to five years.

 

Operating Leases

 

The Company leases various office and warehouse facilities under two non-cancelable operating leases. Building space for its headquarters facility in Alpine, Utah is leased from TNT Holdings, LLC (“TNT”), an entity under common control with the Company. The lease was entered into in 2010, with a lease term of 10 years and expires in April 2020. The Company also leases a facility located in Grantsville, Utah for use primarily as manufacturing and warehouse space. The lease was entered into in August 2016 with a lease term of 66 months and expires in January 2022. Rent expense on lease payments, including those with rent escalations and rent free periods, is recognized on a straight-line basis over the lease term. The difference between the straight-line rent amounts and amounts payable under the leases are recorded as part of deferred rent, in other current liabilities or other long-term liabilities, as appropriate. There was no deferred rent at December 31, 2015 or 2014. At December 31, 2016, all of the deferred rent in the amount of $629,360 is included in other long-term liabilities on the accompanying balance sheets. During the year ended December 31, 2016, 2015, and 2014, the Company recognized rent expense in the amount of $1,057,507, $319,233 and $224,638, respectively.

 

Minimum future lease obligations at December 31, 2016, are as follows:

 

Year ended December 31,   Related Party     Other     Total  
2017   $ 884,963     $ 1,360,631     $ 2,245,594  
2018     937,783       1,877,327       2,815,110  
2019     967,835       1,946,219       2,914,054  
2020     335,497       2,015,112       2,350,609  
2021           2,084,005       2,084,005  
Thereafter           177,973       177,973  
Total   $ 3,126,078     $ 9,461,267     $ 12,587,345  

 

Legal Proceedings

 

The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might be required to pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

 

  16  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Note 9 Related-Party Transactions

 

The Company had various transactions with entities or individuals which are considered related parties.

 

InnoHold

 

InnoHold is the 100 percent owner of the Company and had the following transactions with the Company.

 

Prior to 2014, the Company entered into various revolving credit demand note payable agreements (“Demand Notes”) with InnoHold. These Demand Notes provided funds to the Company for general working capital needs. The Demand Notes allow for additional proceeds to be provided to the Company as funds are needed and partial or full repayments by the Company if, and when, funds are available. The Demand Notes accrue interest at a rate of 7 percent per annum.

 

During the year ended December 31, 2014, the Company required additional proceeds in the amount of $791,000 and made payments on the Demand Notes in the amount of $1,395,000 in principal.

 

During the year ended December 31, 2015, the Company required additional proceeds in the amount of $885,000 and made payments on the Demand Notes in the amount of $789,544 in principal plus accrued interest of $131,580.

 

During the year ended December 31, 2016, the Company required additional proceeds in the amount of $245,000 and made payments on the Demand Notes in the amount of $495,000. In December 2016, the Demand Notes in the amount of $863,456 plus accrued interest of $224,112 was partially forgiven and the terms of the remaining $300,000 Demand Notes were amended to be due on April 22, 2017 with interest accruing at 7 percent. The forgiveness of debt was treated as a member contribution.

 

Demand Notes in the amount of $300,000, $1,113,456 and $1,018,000 in principal were outstanding as of December 31, 2016, 2015 and 2014, respectively.

 

During the year ended December 31, 2016, certain expenses of the Company in the amount of $26,233 were paid by InnoHold and are to be reimbursed by the Company. The amount is included in accounts payable on the accompanying balance sheet.

 

In December 2016, the Company received a non-cash capital contribution from InnoHold of property and equipment valued at a carrying cost of $414,180 encumbered with a $46,594 note payable to an unrelated entity. The obligation was assumed by the Company.

 

The Company paid member distributions with cash in the amount of $76,549 and $209,814 during the years ended December 31, 2016 and 2015, respectively. There were no member distributions during the year ended December 31, 2014.

 

TNT

 

TNT is an entity under common control with the Company and owns the Alpine facility the Company leases. The Company determined that TNT is not a variable interest entity as it does not hold any explicit or implicit variable interest in TNT and does not have a controlling financial interest in TNT. Accordingly, TNT is not a variable interest entity.

 

During the year ended December 31, 2016 the Company incurred $911,787 in rent expense to TNT for the building lease of the Alpine facility. As of December 31, 2016, the Company has deferred rent in the amount of $88,573 included as a long-term liability on the balance sheet. The Company also has accrued rent in the amount of $228,852 to TNT and $115,319 in other current liabilities due to TNT for property taxes.

 

  17  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

During the years ended December 31, 2015 and December 2014, the Company incurred $319,233 and $224,638, respectively, to TNT for rent expense for the building lease on the Alpine facility. As of December 31, 2015 and December 31, 2014 the Company has a payable to TNT for accrued rent and insurance in the amount of $88,141 and $33,670, respectively, included in other current liabilities. The Company also paid a rent security deposit of $10,000 in 2015 to TNT which comprises long term assets on the balance sheet.

 

Controlling Members of InnoHold

 

The Company had various revolving credit demand loans from the controlling members of InnoHold with an interest rate of 7 percent. During the year ended December 31, 2016, the Company extinguished these related-party notes payable in full by paying $45,200 in principal plus $19,929 in accrued interest. During the year ended December 31, 2015, the Company extinguished two of the notes in the aggregate principal amount of $46,100 plus accrued interest of $17,913 by conversion to member’s equity. Loans in the amount of $45,200 and $91,300 in principal were outstanding as of December 31, 2015 and 2014, respectively.

 

EdiZONE

 

EdiZONE is owned 100 percent by TNT which develops new technologies and products and licenses the technology to other companies including the Company. The Company determined that EdiZONE is not a variable interest entity as it does not hold any explicit or implicit variable interest in EdiZONE and does not have a controlling financial interest in EdiZONE. Accordingly, EdiZONE is not a variable interest entity.

 

The Company and EdiZONE entered into technology licensing agreements whereby certain technology was licensed to the Company for a royalty fee. The Company incurred $4,139,046, $519,877 and $391,539 in royalty fees during the years ended December 31, 2016, 2015 and 2014, respectively.

 

On December 15, 2016, the technology license agreements between EdiZONE and the Company were amended to terminate the royalty that the Company owed to EdiZONE. During the year ended December 31, 2016, the Company incurred $4,139,046 in royalty fees with the unpaid royalty fees on December 15, 2016 in the amount of $1,040,537 forgiven and recorded as a member contribution on behalf of InnoHold.

 

Effective December 27, 2016, the IP Agreement between the Company and EdiZONE was executed. In accordance with the IP Agreement, certain intellectual property owned by EdiZONE was assigned to the Company and a subset of such intellectual property that was not relevant to the Company was licensed back to EdiZONE. There are no royalty payments from EdiZONE to the Company for the license in the future. The IP Agreement stipulates that EdiZONE is entitled to all third-party royalties from the license.

 

During the year ended December 31, 2016, certain expenses of the Company in the amount of $96,121 were paid by EdiZONE and are to be reimbursed by the Company. The amount is included in accounts payable on the accompanying balance sheet. As of December 31, 2015 and December 31, 2014 the Company has a payable to EdiZONE for royalties and certain other expenses to reimbursed by the Company in the amount of $77,627 and $45,400, respectively.

  

  18  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Note 10 Concentrations

 

The Company had the following revenues by product:

 

    Years Ended December 31,  
    2016     2015     2014  
Mattress   $ 55,029,818     $ 185,529     $  
Cushion     7,917,419       5,648,458       4,294,374  
Bases 1     1,750,827              
Top of bed 2     774,837       4,623       11,237  
Total revenue, net   $ 65,472,901     $ 5,838,610     $ 4,305,611  

 

(1)  Includes platforms and power bases.

(2)  Includes pillows, sheets and mattress protectors.

 

All revenue was generated from sales in North America. No individual customer accounted for more than 10 percent of revenue during the year ended December 31, 2016. At December 31, 2016, approximately 61 percent of accounts receivable was comprised of two credit card processors with funds being deposited within 2 to 3 days. One customer accounted for approximately 41 percent and 30 percent of revenues during the year ended December 31, 2015 and 2014, respectively, and comprised approximately 55 percent and 35 percent of accounts receivable as of December 31, 2015 and 2014, respectively.

 

The Company currently obtains materials and components used in production from outside sources. As a result, the Company is dependent upon suppliers that in some instances, are the sole source of supply. The Company is continuing efforts to dual-source key components. The failure of one or more of the Company’s suppliers to provide materials or components on a timely basis could significantly impact the results of operations. The Company believes that it can obtain these raw materials and components from other sources of supply in the ordinary course of business, although an unexpected loss of supply over a short period of time may not allow for the replacement of these sources in the ordinary course of business.

 

The Company maintains its cash balances in financial institutions based in the United States that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 for each financial institution per entity. At times, the Company’s cash balance deposited at financial institutions exceed the federally insured deposit limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to these deposits.

 

Note 11 Income Taxes

 

Entities that are public and are not taxed should disclose the net difference between their tax bases and the reported amounts of their assets and liabilities. This disclosure is meant to indicate to an owner (or prospective owner) what future taxable income or deductions, disproportionate to reported amounts, will be generated for his/her ownership interest by the entity’s future operations. However, for some entities, tax positions available to individual owners will not be pro rata to ownership interest but will instead reflect the different outside tax basis of the individual owners. Further, each owner’s tax accounting depends on his or her individual tax position. Thus, the entity itself frequently will not have information about individual owners’ tax basis. It does not appear that disclosure of the aggregate tax basis would be meaningful in any event, since individual owners may not share the tax basis pro rata. The Company believes that these circumstances make it impracticable for the Company to determine the aggregate tax basis of the individual owners, nor would a disclosure of available information be meaningful to these financials.

 

  19  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

Note 12 Subsequent Events

 

Management has evaluated subsequent events through January 30, 2018, the date on which the financial statements were available to be issued.

 

On January 27, 2017, a certificate of amendment was filed with the Delaware Secretary of State changing Purple’s legal name from “WonderGel, LLC” to “Purple Innovation, LLC”.

 

In January 2017, pursuant to the 2016 Equity Incentive Plan that authorized the issuance of 12,000,000 incentive units (the “Plan”), the Company issued 11,250,006 incentive units to an entity for the benefit of certain employees. These incentive units are non-voting and the holders will only participate in potential liquidating distributions after a future majority sale of the Company. Incentive unit holders are only eligible to participate after the distribution threshold of approximately $135 million is met. Incentive unit holders do not participate in tax or discretionary distributions prior to final liquidating distributions, but may be eligible to receive a catch up discretionary distribution once the common unit holders receive the distribution threshold from a liquidating event. The units vest over four years (with 25 percent vesting after one year and monthly vesting over 36 months thereafter) from the later of the first of the month after their respective date of hire or January 1, 2016. No more incentive units can be awarded after September 30, 2017 and all reserved units that are not issued by that date, or that are otherwise forfeited, will be held in the plan. As of the date on which the financial statements were available to be issued there were 8,590,674 issued incentive units outstanding.

 

On March 23, 2017, the Company filed its First Amended Complaint against Honest Reviews, LLC (“HMR”), Ryan Monahan (“Mr. Monahan”) and GhostBed, Inc. (“GhostBed”) (collectively, the “Defendants”), alleging that the Defendants are working together on a competitive campaign to intentionally disseminate false and misleading statements regarding the safety of the Company’s mattresses, while at the same time failing to disclose to the public the fact that Mr. Monahan has, since 2015, provided significant digital marketing services to GhostBed, for which his company received substantial compensation. The Defendants have published a number of articles and related materials claiming, without substantiation, that the non-toxic anti-tack powder used in connection with the Company’s products can cause respiratory distress, exacerbate asthma or other respiratory conditions, and cause cancer or even death. Defendants have widely published these materials, including on the HMR website, honestmattressreviews.com , and all of associated HMR social media pages. GhostBed has alleged a number of counterclaims against the Company but, at this state of the litigation, management believes it unlikely that the Company will be liable or owe damages to GhostBed. On September 22, 2017, the United States District Court in Utah issued a preliminary injunction requiring full disclosure of the relationship between GhostBed and Monahan on the HMR website and social media, to remove certain prior articles and other content regarding the Company, the anti-tack powder, and the lawsuit from the HMR website and social media, and requiring that any future posts by the Defendants regarding the Company or the lawsuit be accompanied by a full disclosure of the relationship between Monahan and GhostBed. Despite the Court’s issuance of the preliminary injunction, the Company is unable to determine, at this stage, the possible outcome of the litigation.

 

In April 2017, the Company made member distributions in cash of $2,388,881.

 

In April 2017, the Company extinguished a related-party note payable by paying $300,000 in principal plus $28,686 in accrued interest.

 

In April 2017, the Company amended the Amended and Restated Limited Liability Company Agreement so that required member distributions for the year 2017 shall not be reduced by discretionary distributions occurring in 2017.

 

  20  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

In July 2017, the Company entered into a non-binding letter of intent with Global Partner Acquisition Corp, a special purpose acquisition company ("GPAC") relating to a business combination (the "LOI"), pursuant to which the Company would become a publicly traded company. Under the terms of the LOI, GPAC and the Company intended to enter into a definitive agreement, pursuant to which GPAC would acquire the Company, with GPAC paying a portion of the purchase price in cash to the current equity holders and with the remainder being paid in rollover equity interests in the combined public company.

 

In October 2017, the Company amended and restated its lease agreement with TNT for its headquarters facility in Alpine, Utah. The term of the lease is for an initial period of 10 years with the option for a 5-year extension period. Lease payments remain consistent with the prior lease and the amendment continues to include a 3% annual escalator through the life of the lease.

 

In October 2017, the Company entered into an agreement with Wells Fargo Bank for a $10 million revolving line of credit for working capital requirements and general corporate purposes (“LOC”). The LOC has an interest rate equal to 3% above the LIBOR rate and interest is to be paid by the Company on a quarterly basis. All outstanding principal balance of the LOC is due and payable in full on October 8, 2019. The LOC is secured by certain assets of the Company. The LOC has an unused commitment fee to be paid quarterly commencing January 1, 2018, equal to 0.25% of the daily unused amount of the LOC. The LOC also includes certain covenants made by the Company including making payments on time, providing timely audited financial statements, maintain adequate insurance, maintaining an EBITDA not less than $500,000 based on a rolling 4-quarter basis, asset coverage ratio not less than 1.5 to 1, no capital expenditures greater than $10,000,000 in any fiscal year and other usual and customary covenants. During October and November 2017, the Company has drawn $8.0 million on the LOC. The Company was in breach of terms of the agreement by failing to timely provide the 2017 third quarter financial reporting information and by failing to facilitate collateral audits, both in accordance with the provisions of the agreement. The Company received waivers from Wells Fargo Bank of its default rights so long as the Company delivers the third quarter financial reporting information by December 15, 2017 and facilitating collateral audits by January 19, 2018. The Company delivered the third quarter financial reporting information and collateral audit information to Wells Fargo by the respective deadlines.

 

On November 1, 2017, the Company and EdiZONE executed an Amended and Restated Confidential Assignment and License Back Agreement, pursuant to which EdiZONE assigned substantially all of its intellectual property to the Company and the Company licensed back to EdiZONE such intellectual property for use outside the consumer comfort and cushioning field of use reserved by the Company. EdiZONE also agreed to notify the Company of any breach of a third party license agreement relating to consumer comfort intellectual property or consumer comfort products and the Company reserved the right to enforce EdiZONE’s rights with respect to such violations, provided that the Company agreed to pay the costs of such enforcement and to indemnify EdiZONE for any losses arising therefrom. EdiZONE further agreed not to extend such third party licenses or waive any such violations, or to settle any claim with respect thereto, without the Company’s consent. In addition, EdiZONE also agreed to not sell or transfer any of its assets or assign any intellectual property or licenses relating to certain consumer comfort products and related intellectual property without the Company’s consent. EdiZONE has agreed not to use any intellectual property in the consumer comfort or cushioning field of use, subject only to its existing third party licenses.

 

  21  

 

 

PURPLE INNOVATION, LLC

(Formerly known as WonderGel, LLC)

 

Notes to Financial Statements – (continued)

 

On November 2, 2017, the Company and GPAC, entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among GPAC, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), the Company and InnoHold. Pursuant to the Merger Agreement, the Company will be acquired through a merger of Merger Sub with and into the Company, with the Company being the survivor in the merger. The Merger Agreement was amended by the Amendment No. 1 to the Merger Agreement dated January 6, 2018 to reflect a revised enterprise value of $500 million and extending the required closing date of the transaction to February 5, 2018. Pursuant to the terms of the Merger Agreement, as amended, InnoHold will receive, as consideration for its common units in the Company, cash (the “Cash Consideration”), newly issued shares of Class B Stock and newly issued Class B membership units of the Company. The total merger consideration (the “Merger Consideration”) payable to InnoHold will be determined by a formula which deducts from the Company’s agreed upon enterprise value of $500 million the amount of the Company’s indebtedness and transaction expenses and adds the amount of cash held by the Company. The closing is expected to take place following the GPAC stockholder approval of the Merger Agreement and the business combination and other transactions and matters required to be approved by the stockholders pursuant to the Merger Agreement subject to the satisfaction or waiver of certain conditions, including, but not limited to the unanimous approvals of the merger agreement by the board of directors of the Company and the manager of InnoHold, and the members of the Company and InnoHold shall not have been modified or revoked. The Merger Agreement may be terminated and the business combination abandoned at any time prior to the closing by mutual agreement of the Company and GPAC or by the Company if the closing has not occurred by February 5, 2018. Concurrently with the consummation of the business combination, the existing amended and restated limited liability company agreement of the Company will be further amended and restated in its entirety (as so amended and restated, the “Operating Agreement”). The Operating Agreement of the Company will provide for Class A Units and Class B Units. The Class A Units will be voting common units of the Company entitled to share in the profits and losses of The Company and to receive distributions as and if declared by the board of managers of the Company. The Class B Units will be entitled to share in the profits and losses of the Company and to receive distributions as and if declared by the board of managers of the Company and will have limited voting rights. On January 16, 2018, GPAC filed the Definitive Proxy detailing the Merger Agreement. In addition, the Definitive Proxy announced the special meeting for GPAC shareholders to vote on and approve the Merger Agreement will be held on February 2, 2018. On January 9, 2018, Chris Knudsen filed a complaint against the Company in the Fourth Judicial District Court of the State of Utah. Mr. Knudsen is a former consultant to the Company. His contract with the Company ended in March 2016. Mr. Knudsen alleges that the Company orally agreed before the end of his consulting contract to appoint him as its chief executive officer and that the Company breached an alleged oral arrangement to immediately issue him 4% of the Company’s equity at the time of his appointment. Mr. Knudsen alleges that the Company owes him a sum of $44 million for his purported equity stake in the Company, plus interest, based on an initially announced $1.1 billion valuation. Mr. Knudsen also seeks declaratory relief that he owns the 4% equity position in the Company. The Company has not yet responded to the complaint that has been filed. The Company believes that this lawsuit is without merit and intends to vigorously contest it. The Company has insurance to defend against claims of this nature, which management believes is adequate.

 

 

22

 

 

Exhibit 99.2

 

PURPLE INNOVATION, LLC
(Formerly known as WonderGel, LLC)
Condensed Balance Sheets
September 30, 2017 and December 31, 2016
(Unaudited)

 

    September 30,
2017
    December 31,
2016
 
Assets            
Current assets:            
Cash and cash equivalents   $ 3,155,210     $ 4,013,217  
Accounts receivable, net     2,901,494       2,327,928  
Inventories, net     8,712,180       5,334,862  
Prepaid inventory     3,337,684       674,592  
Other current assets     454,817       247,382  
Total current assets     18,561,385       12,597,981  
Property and equipment, net     11,460,853       6,104,433  
Intangible assets, net     296,236       129,501  
Other long term assets     5,000       10,000  
Total assets   $ 30,323,474     $ 18,841,915  
                 
Liabilities and Member’s Deficit                
Current liabilities:                
Accounts payable   $ 19,226,747     $ 6,892,995  
Accrued sales returns     4,226,050       2,054,352  
Compensation and benefits     1,613,353       1,809,706  
Customer prepayments     2,168,340       4,153,790  
Accrued sales tax     8,232,236       2,292,018  
Other accrued liabilities     1,363,274       1,163,152  
Current portion of long-term obligations     16,344       51,426  
Related party notes payable           300,000  
Total current liabilities     36,846,344       18,717,439  
Long-term obligations, net of current portion     20,821       23,641  
Other long term liabilities     1,492,161       913,510  
Total liabilities     38,359,326       19,654,590  
Member’s deficit:                
Common units, no par value, 100,000,000 units authorized; 88,000,000 units issued and outstanding     2,259,704       2,259,704  
Distributions     (4,076,246 )     (286,363 )
Accumulated deficit     (6,219,310 )     (2,786,016 )
Total member’s deficit     (8,035,852 )     (812,675 )
Total liabilities and member’s deficit   $ 30,323,474     $ 18,841,915  

 

The accompanying notes are an integral part of these condensed financial statements (unaudited).

 

 

 

 

PURPLE INNOVATION, LLC
(Formerly known as WonderGel, LLC)
Condensed Statements of Operations
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)

 

    Nine Months Ended
September 30,
 
    2017     2016  
Revenues, net   $ 133,820,332     $ 40,882,484  
Cost of revenues:                
Cost of revenues     73,904,098       25,572,911  
Related party royalty fees           3,611,053  
Total cost of revenues     73,904,098       29,183,964  
Gross profit     59,916,234       11,698,520  
Operating expenses:                
Marketing and sales     53,970,103       9,978,453  
General and administrative     8,462,617       2,844,535  
Research and development     904,416       521,663  
Loss on disposal of property and equipment     10,260        
Total operating expenses     63,347,396       13,344,651  
Operating loss     (3,431,162 )     (1,646,131 )
Other income (expense):                
Other income     1,918       1,748  
Interest expense     (4,050 )     (20,254 )
Total other income (expense)     (2,132 )     (18,506 )
Net loss   $ (3,433,294 )   $ (1,664,637 )

 

The accompanying notes are an integral part of these condensed financial statements (unaudited).

 

  2  

 

 

PURPLE INNOVATION, LLC
(Formerly known as WonderGel, LLC)
Condensed Statement of Member’s Deficit
For the Nine Months Ended September 30, 2017
(Unaudited)

 

    Contributed
Common
Equity
    Member
Distributions
    Accumulated
Deficit
    Total
Member’s
Deficit
 
Balance – December 31, 2016   $ 2,259,704     $ (286,363 )   $ (2,786,016 )   $ (812,675 )
Net loss                 (3,433,294 )     (3,433,294 )
Member distributions           (3,789,883 )           (3,789,883 )
Balance – September 30, 2017   $ 2,259,704     $ (4,076,246 )   $ (6,219,310 )   $ (8,035,852 )

 

The accompanying notes are an integral part of these condensed financial statements (unaudited).

 

  3  

 

 

PURPLE INNOVATION, LLC
(Formerly known as WonderGel, LLC)
Condensed Statements of Cash Flows
For the Nine Months Ended September 30, 2017 and 2016
(Unaudited)

 

    Nine Months Ended
September 30,
 
    2017     2016  
Cash flows from operating activities:            
Net loss   $ (3,433,294 )   $ (1,664,637 )
Adjustments to reconcile net loss to net cash provided in operating activities:                
Depreciation and amortization     465,022       37,532  
Loss on disposal of property and equipment     10,260        
Bad debt reserve     25,370        
Changes in operating assets and liabilities:                
Increase in accounts receivable     (598,936 )     (1,293,288 )
Increase in inventories     (3,377,318 )     (2,322,335 )
Increase in prepaid inventory and other assets     (2,865,527 )     (657,367 )
Increase in accounts payable     11,823,210       3,089,265  
Increase in accrued sales returns     2,171,698       1,990,922  
Increase (decrease) in accrued compensation and benefits     (196,353 )     751,025  
Increase (decrease) in customer prepayments     (1,985,450 )     440,276  
Increase in other accrued liabilities     6,718,991       3,613,403  
Net cash provided by operating activities     8,757,673       3,984,796  
                 
Cash flows from investing activities:                
Purchase of property and equipment     (5,316,705 )     (3,007,164 )
Investment in intangible assets     (166,773 )      
Net cash used in investing activities     (5,483,478 )     (3,007,164 )
                 
Cash flows from financing activities:                
Proceeds from related-party notes payable           245,000  
Payments on related-party notes payable     (300,000 )     (538,977 )
Payments on long-term obligations     (42,319 )     (178 )
Member distributions     (3,789,883 )     (83,437 )
Net cash used in financing activities     (4,132,202 )     (377,592 )
                 
Net increase (decrease) in cash     (858,007 )     600,040  
Cash, beginning of the period     4,013,217       70,865  
Cash, end of the period   $ 3,155,210     $ 670,905  
                 
Supplemental disclosures of cash flow information:                
Cash paid during the period for interest   $ 31,230     $ 23,937  
                 
Supplemental schedule of non-cash investing and financing activities:                
Property and equipment included in accounts payable   $ 511,364     $ 709,598  
Equipment acquired through capital lease   $ 3,595     $ 6,977  

 

The accompanying notes are an integral part of these condensed financial statements (unaudited).

 

  4  

 

 

PURPLE INNOVATION, LLC
(Formerly known as WonderGel, LLC)
Notes to Condensed Financial Statements (Unaudited)

 

Note 1 Description of Business

 

Purple Innovation, LLC (the Company), formerly known as WonderGel, LLC, was established as a limited liability company under the laws of the State of Delaware on May 26, 2010. The name was changed to Purple Innovation, LLC on January 27, 2017. The Company is a comfort technology company which designs and manufactures products to improve how people sleep, sit, and stand. It designs and manufactures a range of comfort technology products, including mattresses, pillows, and cushions, using its proprietary Hyper-Elastic Polymer ® technology designed to improve comfort. The Company markets and sells its products through direct-to-consumer and traditional retail channels.

 

Note 2 Summary of Significant Accounting Policies

 

This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements.

 

Basis of Presentation

 

These unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. The accompanying condensed financial statements and notes are unaudited. These unaudited condensed financial statements and notes should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2016. In management’s opinion, all necessary adjustments for a fair presentation of the results for the interim periods presented have been made and are of a recurring nature. The results for the nine months ended September 30, 2017 are not necessarily indicative of the results expected for the full fiscal year or any other interim period.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of those instruments.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded net of an allowance for expected losses and consist primarily of receivables from wholesale customers and receivables from third-party processors for customer credit card purchases. The allowance is recognized in an amount equal to anticipated future write-offs. Management estimates allowance for doubtful accounts based on delinquencies, aging trends, industry risk trends, our historical experience and current trends. Account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered. Management maintained an allowance for doubtful accounts of $35,370 as of September 30, 2017 and $10,000 as of December 31, 2016.

 

  5  

 

 

Inventories

 

Inventories consist of raw materials, work-in-process and finished goods and are stated at the lower of cost or net realizable value. Manufactured inventory consists of raw material, direct labor and manufacturing overhead cost components. Cost is calculated using the average cost method. The Company reviews the components of its inventory on a regular basis for excess and obsolete inventory and makes appropriate adjustments when necessary. Once established, the original cost of the inventory less the related inventory allowance represents the new cost basis of such products. The reserve for inventory obsolescence was $184,625 as of September 30, 2017 and December 31, 2016.

 

Intangible Assets

 

Intangible assets consist of legal costs for obtaining patents for developed technologies and legal cost of trademarks. Patents are being amortized using the straight-line method over their estimated useful lives of 20 years. Trademarks have indefinite lives and are not amortized, but instead are tested for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. No impairments on intangible assets were recorded during the nine months ended September 30, 2017 or for the year ended December 31, 2016.

 

Revenue Recognition

 

The Company generates revenues from the sale of inventory. Revenue is recognized when the following revenue recognition criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or the service has been provided; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured. Revenue generated from sales is recognized when the inventory is shipped to the customer, which is when title passes to the customer. Revenue is reported net of estimated sales returns and excludes sales taxes. Sales tax and other regulatory amounts collected from customers are not considered revenue and are included as other accrued liabilities on the accompanying balance sheet.

 

The Company does not normally charge additional amounts above list price to the customer for shipping and handling. Orders with an exceptionally high shipping cost will be charged to the customer with those amounts recorded as revenue under the same policy as product revenue. Shipping costs are recorded as a component of cost of revenues.

 

Customer prepayments include cash amounts transacted with customers prior to product delivery. At September 30, 2017 and December 31, 2016, $2,168,340 and $4,153,790, respectively, was included in current liabilities in the accompanying condensed balance sheets.

 

Sales Returns

 

The Company guarantees its products and offers up to 100-days to return a mattress or pillow and 30-days to return a seat cushion for a full refund. The Company’s policy grants to customers a right of return requiring the Company to reduce the amount of the revenue recognized by the amount of the estimated returns. The estimated sales returns, which are recorded as a reduction of revenue at the time of sale and are recorded as a liability on the balance sheet, are based on historical trends and product return rates and are adjusted for any current or expected trends as appropriate. Actual sales returns could differ from these estimates. We regularly assess and adjust the estimate of accrued sales returns by updating the return rates for actual trends and projected costs. We classify as a current liability the estimated sales returns as they are expected to be paid out in less than one year. As of September 30, 2017 and December 31, 2016, $4,226,050 and $2,054,352 was included as returns reserve liability in the accompanying Condensed Balance Sheets, respectively. The Company had the following activity for refunds for the nine months ended September 30, 2017:

 

Balance at January 1, 2017   $ 2,054,352  
Additions that reduced net sales for current period     13,233,262  
Deduction from reserves for current period returns     (11,061,564 )
Balance at September 30, 2017   $ 4,226,050  

 

  6  

 

 

Warranty Liabilities

 

The Company provides a limited warranty on most of the products sold. The estimated warranty costs, which are expensed at the time of sale and included in cost of revenues, are based on the results of product testing, industry and historical trends and warranty claim rates incurred and are adjusted for any current or expected trends as appropriate. Actual warranty claim costs could differ from these estimates. The Company regularly assesses and adjusts the estimate of accrued warranty claims by updating claims rates for actual trends and projected claim costs. The Company classifies as non-current those estimated warranty costs expected to be paid out in greater than one year. As of September 30, 2017 and December 31, 2016, $347,168 and $217,709 of accrued warranty expense is included as a component of accrued expenses and other current liabilities and $508,502 and $284,150 of accrued warranty expense is included in other long term liabilities on the Company’s accompanying condensed balance sheets, respectively. The Company had the following activity for warranties for the nine months ended September 30, 2017:

 

Balance at January 1, 2017   $ 501,859  
Additions charged to expense for current period sales     836,915  
Deduction from reserves for current period claims     (483,104 )
Balance at September 30, 2017   $ 855,670  

 

Fair Value Measurements

 

The Company uses the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability. The levels of the fair value hierarchy are:

 

Level 1 — Quoted market prices in active markets for identical assets or liabilities;

 

Level 2 — Significant other observable inputs (e.g. quoted prices for similar items in active markets, quoted prices for identical or similar items in markets that are not active, inputs other than quoted prices that are observable, such as interest rate and yield curves, and market-corroborated inputs); and

 

Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting unit to develop its own assumptions.

 

The Company has no assets or liabilities recorded at fair value on a recurring or non-recurring basis at September 30, 2017 or December 31, 2016. The carrying amounts of cash, cash equivalents, receivables, accounts payable and accrued expenses approximate fair value because of the short-term nature of these accounts. The carrying amount of the Company’s debt approximates fair value due to the short term nature of the debt.

 

Incentive Units

 

The Company grants incentive units to certain employees in conjunction with the authorized equity incentive plan. The Company accounts for the incentive units in accordance with ASC 718, Compensation — Stock Compensation. The Company determined that the incentive units are accounted for as a liability which requires the fair value of the award to be determined at each reporting date with the change in fair value recorded in earnings. The awards have a performance condition and the compensation expense is recognized when it is probable the performance condition will be achieved. The incentive units contain a performance condition that the Company has concluded has not occurred, nor is it probable that one will occur. Therefore, as of September 30, 2017, no compensation expense has been recognized.

 

New Accounting Pronouncements, Not Yet Adopted

 

In May 2017, the Financial Accounting Standards Board (“FASB”) issue Accounting Standards Update (“ASU”) 2017-09, “Compensation — Stock Compensation: Scope of Modification Accounting.” The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718. These updates are effective for the Company for its annual period beginning January 1, 2018, and interim periods therein, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

  7  

 

 

In January 2017, the FASB issued ASU 2017-01, “Business Combinations: Clarifying the Definition of a Business.” These amendments clarify the definition of a business. The amendments affect all companies and other reporting organizations that must determine whether they have acquired or sold a business. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The amendments are intended to help companies and other organizations evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In October 2016, the FASB issued ASU 2016-17, “Consolidation: Interests Held through Related Parties that are under Common Control.” These amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. If a reporting entity satisfies the first characteristic of a primary beneficiary (such that it is the single decision maker of a variable interest entity), the amendments require that reporting entity, in determining whether it satisfies the second characteristic of a primary beneficiary, to include all of its direct variable interests in a variable interest entity and, on a proportionate basis, its indirect variable interests in a variable interest entity held through related parties, including related parties that are under common control with the reporting entity. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.” Among other clarifications, this updated accounting guidance on the following eight specific cash flow classification issues: (1) debt prepayment or debt extinguishment costs; (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (3) contingent consideration payments made after a business combination; (4) proceeds from the settlement of insurance claims; (5) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (6) distributions received from equity method investees; (7) beneficial interests in securitization transactions; and (8) separately identifiable cash flows and application of the predominance principle. Current GAAP does not include specific guidance on these eight cash flow classification issues. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements.

 

In June 2016, the FASB issued ASU No, 2016-13, “Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments.” These amendments require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2021, and interim periods within annual periods beginning January 1, 2022, with early adoption permitted. The Company is currently evaluating the potential impact this new standard may have on its financial statements.

 

In March 2016, the FASB issued ASU No. 2016-09, “Compensation-Stock Compensation: Improvements to Employee Share-Based Payment Accounting,” which updated the accounting guidance related to stock compensation. This update simplifies the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification in the statement of cash flows. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2018, and interim periods within annual periods beginning January 1, 2019, with early adoption permitted. The guidance in this standard is not expected to have a material impact on the financial statements of the Company.

 

  8  

 

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases,” which updated the accounting guidance related to leases as part of a joint project with the International Accounting Standards Board (“IASB”) to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under the new guidance, a lessee will be required to recognize assets and liabilities for capital and operating leases with lease terms of more than 12 months. Additionally, this update will require disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases, including qualitative and quantitative requirements. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2020, and interim periods within annual periods beginning January 1, 2021, with early adoption permitted. The Company is currently evaluating the potential impact this new standard may have on its financial statements.

 

In May 2014, in addition to several amendments issued during 2016, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” This pronouncement updated the accounting guidance related to revenue from contracts with customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The standard defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. In accordance with allowed private company guidelines, these updates are effective for the Company for its annual period beginning January 1, 2019, and interim periods within annual periods beginning January 1, 2020, with early adoption permitted. It shall be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact that the standard will have on its financial statements.

 

The Company has reviewed all other recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on its financial statements.

 

New Accounting Pronouncements, Adopted in 2017

 

In July 2015, the Financial Accounting Standards Board (“FASB”) issued ASU 2015-11, “Inventory (Topic 330) Simplifying the Measurement of Inventory.” The amendments clarify that an entity should measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. This guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those annual periods. The amendments are to be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The impact of this adoption was not material to the financial statements of the Company.

 

Note 3 Property and Equipment

 

Property and equipment consisted of the following:

 

    September 30,
2017
    December 31,
2016
 
Equipment in progress   $ 3,390,122     $ 3,868,796  
Equipment     7,146,086       1,576,714  
Equipment under capital lease     33,092       29,497  
Furniture and fixtures     154,149       143,288  
Computer equipment     248,803       136,740  
Leasehold improvements     1,100,702       496,515  
Total property and equipment     12,072,954       6,251,550  
Accumulated depreciation     (612,101 )     (147,127 )
Property and equipment, net   $ 11,460,853     $ 6,104,423  

 

  9  

 

 

Depreciation expense was $464,984 and $37,532 for the nine months ended September 30, 2017 and September 30, 2016, respectively.

 

Note 4 Other Current Liabilities

 

The Company’s other accrued expenses consisted of the following:

 

    September 30,
2017
    December 31,
2016
 
Website commissions   $ 537,846     $ 500,843  
Related party interest           21,687  
Rent — related party     79,769       228,852  
Warranty expense — current portion     347,168       217,709  
All other accrued expenses     398,491       194,061  
Total other current liabilities   $ 1,363,274     $ 1,163,152  

 

Website commissions represent the costs associated with arrangements the Company has with third party websites to send e-commerce traffic to the Company’s website to purchase products online.

 

Note 5 Long-Term Obligations

 

In December 2016, the Company received a non-cash capital contribution from InnoHold, LLC (“InnoHold”) who is the 100% member of the Company. The contribution included property and equipment that was encumbered with a note payable to an unrelated entity, with the note payable being assumed by the Company. The note payable has monthly payments of $9,435, including interest, at a fixed rate of 4.98 percent and is collateralized by the underlying equipment. The remaining outstanding principal balance on the note payable was $9,396 and $46,594 at September 30, 2017 and December 31, 2016, respectively.

 

The Company acquired equipment valued at $33,092 pursuant to two capital lease agreements. The leases were entered into in August 2016 and August 2017 with monthly payments of $839 over the lease periods of four to five years. The leases are collateralized by the underlying equipment.

 

Note 6 Commitments and Contingencies

 

Required Member Distributions

 

Pursuant to the December 30, 2016 Amended and Restated Limited Liability Company Agreement, the Company is required to distribute to the members an amount equal to 45 percent of the Company’s net taxable income that was allocated to each such member following the end of each fiscal year. For the nine months ended September 30, 2017 and September 30, 2017, the Company made member distributions of cash in the amount of $3,789,883 and $83,437 respectively.

 

Employment Agreements

 

On December 31, 2016, the Company has entered into agreements with two key employees that are also controlling members of the Company. The agreements outline compensation and severance commitments. If these key employees are terminated without cause, the Company is required to pay up to $3.4 million in compensation and maintain certain benefits for up to five years.

 

  10  

 

 

Operating Leases

 

The Company leases various office and warehouse facilities under two non-cancelable operating leases. Building space for its headquarters facility in Alpine, Utah is leased from TNT Holdings, LLC (“TNT”), an entity under common control with the Company, with a lease term of 10 years and expires in April 2020. The Company also leases a facility located in Grantsville, Utah for use primarily as manufacturing and warehouse space with a lease term of 66 months and expires in January 2022. Rent expense on lease payments, including those with rent escalations and rent free periods, is recognized on a straight-line basis over the lease term. The difference between the straight-line rent amounts and amounts payable under the leases are recorded as part of deferred rent in, in other current liabilities or long-term liabilities, as appropriate. At September 30, 2017 and December 31, 2016, there was $99,164 and $0 of deferred rent included in other current liabilities in the condensed balance sheets, and deferred rent included in long term liabilities in the condensed balance sheets was $983,659 and $629,360, respectively. During the nine months ended September 30, 2017 and September 30, 2016, the Company recognized rent expense in the amount of $2,007,099 and $1,026,893, respectively.

 

Legal Proceedings

 

On March 23, 2017, the Company filed its First Amended Complaint against Honest Reviews, LLC (“HMR”), Ryan Monahan (“Mr. Monahan”) and GhostBed, Inc. (“GhostBed”) (collectively, the “Defendants”), alleging that the Defendants are working together on a competitive campaign to intentionally disseminate false and misleading statements regarding the safety of the Company’s mattresses, while at the same time failing to disclose to the public the fact that Mr. Monahan has, since 2015, provided significant digital marketing services to GhostBed, for which his company received substantial compensation. The Defendants have published a number of articles and related materials claiming, without substantiation, that the non-toxic anti-tack powder used in connection with the Company’s products can cause respiratory distress, exacerbate asthma or other respiratory conditions, and cause cancer or even death. Defendants have widely published these materials, including on the HMR website, honestmattressreviews.com , and all of associated HMR social media pages. GhostBed has alleged a number of counterclaims against the Company but, at this state of the litigation, management believes it unlikely that the Company will be liable or owe damages to GhostBed. On September 22, 2017, the United States District Court in Utah issued a preliminary injunction requiring full disclosure of the relationship between GhostBed and Monahan on the HMR website and social media, to remove certain prior articles and other content regarding the Company, the anti-tack powder, and the lawsuit from the HMR website and social media, and requiring that any future posts by the Defendants regarding the Company or the lawsuit be accompanied by a full disclosure of the relationship between Monahan and GhostBed. Despite the Court’s issuance of the preliminary injunction, the Company is unable to determine, at this stage, the possible outcome of the litigation.

 

The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any such pending or threatened proceedings, or any amount that the Company might be required to pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

 

Note 7 Related-Party Transactions

 

The Company had related-party transactions with certain entities that are considered related parties.

 

During the nine months ended September 30, 2017 and September 30, 2016, the Company incurred $698,970 and $698,970 in rent expense to TNT for the building lease on the Alpine facility. As of September 30, 2017 and September 30, 2016, the Company has deferred rent in the amount of $147,900 and $80,220, respectively included as a long-term liability on the balance sheet. The Company also has a security deposit of $5,000 with TNT which comprises long term assets on the balance sheets.

 

InnoHold is the 100% member of the Company and during the nine months ended September 30, 2017, the Company extinguished a note payable to InnoHold by paying $300,000 in principal plus accrued interest of $28,596.

 

The Company paid member distributions to InnoHold with cash in the amount of $3,789,883 and $83,437 during the nine months ended September 30, 2017 and September 30, 2016, respectively.

 

As of September 30, 2017, the Company has payables to EdiZONE, LLC, an entity that is under common control with the Company, and InnoHold for certain expenses in the amount of $7,369 and $3,986, respectively, which are included in accounts payable on the balance sheet. As of December 31, 2016, the Company has payables to EdiZONE, LLC, TNT, LLC, an entity that is under common control, and InnoHold for certain expenses in the amount of $96,121, $344,171 and $26,233, respectively, which are included in accounts payable on the balance sheets.

 

  11  

 

 

On February 10, 2017, the Company entered into a Shared Services Agreement with EdiZONE, pursuant to which the Company and EdiZONE agreed to provide certain operational and administrative support services. There were no services performed during the nine months ended September 30, 2017 under this agreement.

 

Note 8 Concentrations

 

The Company had the following revenues by product for the nine months ended September 30, 2017:

 

Mattress   $ 96,306,592  
Top of bed 1     15,907,082  
Bases 2     12,808,023  
Cushion     8,798,635  
Total revenue, net   $ 133,820,332  

 

 

(1) Includes pillows, sheets and mattress protectors.

(2) Includes platforms and power bases.

 

All revenue was generated from sales in North America and no individual customer accounts for more than 10 percent of revenue. At September 30, 2017, approximately 66 percent of accounts receivable was comprised of credit card processors and fulfillment centers with funds being deposited within 2 to 3 days. At December 31, 2016, approximately 48 percent of accounts receivable was comprised of two credit card processors with funds being deposited within 2 to 3 days.

 

The Company currently obtains materials and components used in production from outside sources. As a result, the Company is dependent upon suppliers that in some instances, are the sole source of supply. The Company is continuing efforts to dual-source key components. The failure of one or more of the Company’s suppliers to provide materials or components on a timely basis could significantly impact the results of operations. The Company believes that it can obtain these raw materials and components from other sources of supply in the ordinary course of business, although an unexpected loss of supply over a short period of time may not allow for the replacement of these sources in the ordinary course of business.

 

The Company maintains its cash balances in financial institutions based in the United States that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 for each financial institution per entity. At times, the Company’s cash balance deposited at financial institutions exceed the federally insured deposit limits but the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to these deposits.

 

Note 9 Incentive Units

 

In January 2017 pursuant to the 2016 Equity Incentive Plan that authorized the issuance of 12,000,000 incentive units (the “Plan”), the Company granted 11,250,006 incentive units to an entity for the benefit of certain employees, which vest over four years (with 25% vesting after the first year and the remaining monthly vesting thereafter for the following 36 months) from the later of the first of the month after their respective date of hire or January 1, 2016. These incentive units are non-voting and the unit holders will only participate in potential liquidating distributions after a future majority sale of the Company. Incentive unit holders are only eligible to participate after the distribution threshold of approximately $135 million is met. Incentive unit holders do not participate in tax or discretionary distributions prior to final liquidating distributions, but may be eligible to receive a catch up discretionary distribution once the common unit holders receive the distribution threshold from a liquidating event. The incentive units contain a performance condition that the Company has concluded has not occurred, nor is it probable that one will occur. Therefore, for the nine months ended September 30, 2017 no compensation expense has been recognized. All reserved units that are not issued by September 30, 2017, or that are otherwise forfeited, will be held in the plan.

 

  12  

 

 

The following table summarizes the Company’s total incentive unit activity for the nine months ended September 30, 2017:

 

    Incentive
Units
 
Incentive units outstanding as of January 1, 2017      
Granted     11,250,006  
Exercised      
Forfeited     (2,569,543 )
Expired      
Incentive units outstanding as of September 30, 2017     8,680,463  
         
Incentive units vested as of September 30, 2017     1,473,445  

 

Note 10 Subsequent Events

 

Management has evaluated subsequent events through December 15, 2017, the date on which the financial statements were issued.

 

Subsequent to September 30, 2017, 63,380 incentive units were forfeited. After September 30, 2017 no more incentive units could be awarded and all reserved units that were not issued by that date, or that are otherwise forfeited are being held in the plan. As of December 15, 2017 there were 8,617,083 incentive units outstanding.

 

In October 2017, the Company entered into an agreement with Wells Fargo Bank for a $10 million revolving line of credit for working capital requirements and general corporate purposes (“LOC”). The LOC has an interest rate equal to 3% above the LIBOR rate and interest is to be paid by the Company on a quarterly basis. All outstanding principal balance of the LOC is due and payable in full on October 8, 2019. The LOC is secured by certain assets of the Company. The LOC has an unused commitment fee to be paid quarterly commencing January 1, 2018, equal to 0.25% of the daily unused amount of the LOC. The LOC also includes certain covenants made by the Company including making payments on time, providing timely audited financial statements, maintain adequate insurance, maintaining an EBITDA not less than $500,000 based on a rolling 4-quarter basis, asset coverage ratio not less than 1.5 to 1, no capital expenditures greater than $10,000,000 in any fiscal year and other usual and customary covenants. Subsequent to September 30, 2017, the Company has drawn approximately $8.0 million on the LOC. The Company was in breach of one of the terms of the agreement by failing to provide the 2017 third quarter financial reporting information in accordance with the provisions of the agreement. The Company received a waiver from Wells Fargo Bank of its default rights so long as the Company delivers the information by December 15, 2017. The Company delivered the third quarter financial reporting information to Wells Fargo on December 15, 2017.

 

On November 1, 2017, the Company and EdiZONE executed an Amended and Restated Confidential Assignment and License Back Agreement, pursuant to which EdiZONE assigned substantially all of its intellectual property to the Company and the Company licensed back to EdiZONE such intellectual property for use outside the consumer comfort and cushioning field of use reserved by the Company. EdiZONE also agreed to notify the Company of any breach of a third party license agreement relating to consumer comfort intellectual property or consumer comfort products and the Company reserved the right to enforce EdiZONE’s rights with respect to such violations, provided that the Company agreed to pay the costs of such enforcement and to indemnify EdiZONE for any losses arising therefrom. EdiZONE further agreed not to extend such third party licenses or waive any such violations, or to settle any claim with respect thereto, without the Company’s consent. In addition, EdiZONE also agreed to not sell or transfer any of its assets or assign any intellectual property or licenses relating to certain consumer comfort products and related intellectual property without the Company’s consent. EdiZONE has agreed not to use any intellectual property in the consumer comfort or cushioning field of use, subject only to its existing third party licenses.

 

On November 2, 2017, the Company and Global Partner Acquisition Corp., a Delaware corporation (“GPAC”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among GPAC, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), the Company and InnoHold. Pursuant to the Merger Agreement, the Company will be acquired through a merger of Merger Sub with and into the Company, with the Company being the survivor in the merger. InnoHold will receive, as consideration for its common units in the Company, cash (the “Cash Consideration”), newly issued shares of Class B Stock and newly issued Class B membership units of the Company. The total merger consideration (the “Merger Consideration”) payable to InnoHold will be determined by a formula which deducts from the Company’s agreed upon enterprise value of $900 million the amount of the Company’s indebtedness and transaction expenses and adds the amount of cash held by the Company. The closing is expected to take place two business days after the satisfaction or waiver of certain conditions including the stockholders of GPAC shall have approved the Merger Agreement and the business combination and other transactions and matters required to be approved by the stockholders pursuant to the Merger Agreement. In addition, the unanimous approvals of the merger agreement by the board of directors of the Company and the manager of InnoHold, and the members of the Company and InnoHold shall not have been modified or revoked. The Merger Agreement may be terminated and the business combination abandoned at any time prior to the closing by mutual agreement of the Company and GPAC or by the Company if the closing has not occurred by January 31, 2018; provided, however, that the right to terminate the Merger Agreement will not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the business combination to occur on or before such date and such action or failure to act constitutes a breach of the Merger Agreement. Concurrently with the consummation of the business combination, the existing amended and restated limited liability company agreement of the Company will be further amended and restated in its entirety (as so amended and restated, the “Operating Agreement”). The Operating Agreement of the Company will provide for Class A Units and Class B Units. The Class A Units will be voting common units of the Company entitled to share in the profits and losses of The Company and to receive distributions as and if declared by the board of managers of the Company. The Class B Units will be entitled to share in the profits and losses of the Company and to receive distributions as and if declared by the board of managers of the Company and will have limited voting rights.

 

 

13

 

Exhibit 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial statements give effect to the Business Combination, as defined below, under the acquisition method of accounting in accordance with Financial Accounting Standards Board (FASB) Accounting Standard Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). This transaction is between Global Partner Acquisition Corp., a public shell (“GPAC”), and Purple Innovation, LLC, an operating company (“Purple”). Purple’s parent, InnoHold, obtained voting control of GPAC. Although GPAC is the legal acquirer of Purple, InnoHold maintains control of Purple at the time of the transaction. Purple’s senior management comprises the senior management of the combined company and a majority of the directors of the company post-transaction are the previous investors in InnoHold and Purple or individuals identified by Purple for election to the Board. As such the net assets will be accounted for on a carryover basis with no goodwill or other intangible assets recorded. Operations prior to the merger will be those of Purple. This determination was primarily based on Purple comprising the ongoing operations of the combined company, Purple senior management comprising the senior management of the combined company, and the fact that a majority of directors of the combined company will be the owners of Purple or individuals identified by Purple for election to the board.

 

The historical financial information has been adjusted in these unaudited pro forma condensed combined financial statements to give effect to pro forma events that are (1) directly attributable to the Business Combination, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the post-Business Combination company. The unaudited pro forma condensed combined balance sheet is based on the historical unaudited condensed balance sheet of Purple, and the historical unaudited condensed balance sheet of GPAC, as of September 30, 2017 and has been prepared to reflect the Business Combination as if it occurred on September 30, 2017. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2017 combines the historical unaudited results of operations of Purple, and the historical unaudited results of operations of GPAC, for the nine months ended September 30, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2016 combines the historical results of operations of Purple for the year ended December 31, 2016, with the historical results of operations for GPAC for the year ended December 31, 2016. The pro forma condensed combined statements of operations presented are prepared giving effect to the Business Combination as if it had occurred on January 1, 2016, the beginning of the fiscal year presented, and carried forward though the interim period presented.

 

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2017 was derived from Purple’s unaudited condensed statement of operations, and GPAC’s unaudited condensed statement of operations, for the nine months ended September 30, 2017, each of which is included elsewhere in this proxy statement. Such unaudited condensed interim financial information has been prepared on a basis consistent with the audited financial statements of Purple and GPAC, respectively, and should be read in conjunction with the interim unaudited financial statements and audited financial statements and related notes, each of which is included elsewhere in this proxy statement. The unaudited pro forma condensed combined statement of operations information for the year ended December 31, 2016 was derived from Purple’s audited statement of operations, and GPAC’s audited statement of operations, for the year ended December 31, 2016, all as included elsewhere in this proxy statement.

 

These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would actually have been obtained had the Business Combination and the proposed related financing transactions been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. The post-Business Combination company will incur additional costs after the Business Combination in order to satisfy its obligations as a fully reporting public company. In addition, the company anticipates the adoption of various stock compensation plans or programs that are typical for employees, officers and directors of public companies. No adjustment to the unaudited pro forma statement of operations has been made for these items as they are not directly related to the Business Combination and their amounts are not yet known.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and the sections entitled “Purple Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “GPAC Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and notes thereto of GPAC and Purple, included elsewhere in this Current Report on Form 8-K or in the Company’s definitive proxy statement filed with the Securities and Exchange Commission on January 16, 2018 (the “Proxy Statement”).

 

Upon the closing of the Business Combination, shareholders representing 9,013,165 shares redeemed their shares and the Company entered into: (a) the PIPE financing issuing 4,000,000 new class A shares and assigning an aggregate of 1,293,750 Founder Shares (as that term defined in the Current Report on Form 8-K to which this is an exhibit) and an aggregate of 3,282,500 Sponsor Warrants (as that term defined in the Current Report on Form 8-K to which this is an exhibit) from the Sponsor to the PIPE investors in exchange for $40,000,000 and (b) the Purple Debt agreement for $25,000,000 in 12% five-year notes payable as described in Note 1, including the assignment of an aggregate of 2,500,000 Sponsor Warrants from the Sponsor to the lenders. The unaudited pro forma condensed combined financial statements have been prepared to reflect the redemptions of Common Stock and the PIPE and Purple Debt financings.

 

Subsequent to September 30, 2017 on October 9, 2017, Purple entered into a credit agreement with Wells Fargo Bank, National Association (“Wells Fargo”), for a $10 million secured revolving loan facility. The Company drew approximately $8.0 million under this facility. In connection with the closing of the Business Combination, the Wells Fargo facility was paid off in full and Purple entered into the $25.0 million Purple Debt agreement described in the previous paragraph. No effect has been given to the assumption, or payoff, of the Wells Fargo revolving loan facility in the pro forma information presented as of September 30, 2017 as (a) the debt falls outside the date presented and (b) such transactions are not directly attributable to the Business Combination.

 

 

 

  

Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 2017
(in thousands)

 

    Global Partner Acquisition Corp.     Purple Innovation, LLC     Pro Forma Adjustments     Footnote Reference   Pro Forma Combined  
ASSETS                                    
Current assets:                                    
Cash and cash equivalents   $ 374     $ 3,155     $ 121,545     3(b)   $ 49,556  
                      40,000     3(b)        
                      23,500     3(b)        
                      (90,617 )   3(b)        
                      (38,801 )   3(c)        
                      (2,260 )   3(d)        
                      (7,340 )   3(d)        
Accounts receivable, net           2,901                 2,901  
Inventories, net           8,712                 8,712  
Prepaid expenses and other current assets     19       3,794                 3,813  
Total current assets   $ 393     $ 18,562     $ 46,027         $ 64,982  
Cash and investments held in Trust Account     121,749             (121,545 )   3(b)      
                      (204 )   3(b)        
Property and equipment, net           11,461                 11,461  
Intangible assets, net           296                 296  
Deferred tax asset, non-current                 23,500     3(f)     23,500  
Other assets           5                 5  
TOTAL ASSETS   $ 122,142     $ 30,324     $ (52,222 )       $ 100,244  
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)                                    
Current liabilities:                                    
Accounts payable   $ 522     $ 19,227     $ (800 )   3(d)   $ 18,949  
Accrued sales returns           4,226                 4,226  
Accrued expenses and other current liabilities     493       11,209       (204 )   3(b)     11,373  
                      (125 )   3(d)        
Customer prepayments           2,168                 2,168  
Current portion of long-term obligations           16                 16  
Total current liabilities   $ 1,015     $ 36,846     $ (1,129 )       $ 36,732  
Payable under tax agreement                 18,800     3(f)     18,800  
Deferred underwriting compensation     4,000             (2,260 )   3(d)      
                      (1,740 )   3(d)        
Long-term obligations, net of current portion           21       22,300     3(b)     22,321  
Other long-term liabilities           1,492                 1,492  
Total liabilities   $ 5,015     $ 38,359     $ 35,971         $ 79,345  
Common stock subject to possible redemption     112,127             (112,127 )   3(a)      
Commitments and contingencies                                    
Stockholders’ Equity (Deficit):                                    
Preferred stock                            
Common stock                     3(a)      
Class A common stock                 2     3(a)     2  
                          3(a)      
                          3(b)        
                      (1 )   3(b)        
Class B common stock                 44     3(c)     44  
Additional paid-in capital     6,179             112,125     3(a)     4,701  
                      40,000     3(b)        
                      (90,616 )   3(b)        
                      1,200     3(b)        
                      (38,801 )   3(c)        
                      443,042     3(c)        
                      (443,086 )   3(c)        
                      (50,000 )   3(c)        
                      1,740     3(d)        
                      (7,340 )   3(d)        
                      925     3(d)        
                      (1,179 )   3(e)        
                      (1,438 )   3(e)        
                      4,700     3(f)        
                      27,250     3(g)        
Members (deficit)           (8,035 )     6,597     3(c)      
                      1,438     3(e)        
Retained earnings     (1,179 )           1,179     3(e)      
Non-controlling interests (deficit)                 50,000     3(c)     16,153  
                      (6,597 )   3(c)        
                      (27,250 )   3(g)        
Total stockholders’ equity (deficit)   $ 5,000     $ (8,035 )   $ 23,934         $ 20,899  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 122,142     $ 30,324     $ (52,222 )       $ 100,244  

 

See accompanying notes to unaudited condensed combined pro forma financial statements

  2  

 

 

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2017
(dollars in thousands except per share amounts)

 

    Global Partner Acquisition Corp.     Purple Innovation, LLC     Pro Forma Adjustments     Footnote Reference   Pro Forma Combined (Assuming no Redemption of Common Stock)  
Revenues, net           133,820                 133,820  
Cost of revenues           73,904                 73,904  
Gross profit           59,916                 59,916  
                                     
Operating expenses                                    
Marketing and sales           53,970                 53,970  
General and administrative     1,421       8,463       (925 )   4(a)     8,959  
Research and development, other           914                 914  
Total operating expenses     1,421       63,347       (925 )         63,843  
Income (loss) from operations     (1,421 )     (3,431 )     925           (3,927 )
Other income (expense)                                    
        Transaction fee income     2,500                           2,500  
Interest and other income (expense), net     678       (2 )     (678 )   4(b)     (2,657 )
                      (2,655 )   4(c)        
Income (loss) before income tax expense     1,757       (3,433 )     (2,408 )         (4,084 )
Income tax expense     (306 )           306     4(b)     279  
                  279     4(d)      
Net income (loss)   $ 1,451     $ (3,433 )   $ (1,823 )       $ (3,805 )
Less: Non-controlling interests                 3,349     4(e)     3,349  
                                     
Income (loss) attributable to common stockholders   $ 1,451     $ (3,433 )   $ 1,526         $ (456 )
                                     
Weighted average common shares outstanding:                                    
Basic     4,995,000               4,687,855     5(a)     9,682,855  
Diluted     18,263,000               (8,580,145 )   5(a)     9,682,855  
Net income (loss) per share attributable: to common stockholders:                                    
Basic   $ 0.29                         $ (0.05 )
Diluted   $ 0.08                         $ (0.05 )

 

See accompanying notes to unaudited condensed combined pro forma financial statements

 

  3  

 

 

Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2016
(dollars in thousands except per share amounts)

 

    Global Partner Acquisition Corp.     Purple Innovation, LLC     Pro Forma Adjustments     Footnote Reference   Pro Forma Combined (Assuming no Redemption of Common Stock)  
Revenues, net   $     $ 65,473     $         $ 65,473  
Cost of revenues           43,996                 43,996  
Gross profit           21,477                 21,477  
                                     
Operating expenses                                    
Marketing and sales           17,901                 17,901  
General and administrative and other     2,657       4,666                 7,323  
Research and development           792                 792  
Total operating expenses     2,657       23,359                 26,016  
Income (loss) from operations     (2,657 )     (1,882 )               (4,539 )
Interest and other income (expense), net     330       (19 )     (330 )   4(b)     (3,559 )
                      (3,540 )   4(c)        
Loss before income tax expense     (2,327 )     (1,901 )     (3,870 )         (8,098 )
Income tax expense                 554     4(d)     554  
Net income (loss)   $ (2,327 )   $ (1,901 )   $ (3,316 )       $ (7,544 )
Less: Non-controlling interests                 6,640     4(e)     6,640  
Loss attributable to common stockholders   $ (2,327 )   $ (1,901 )   $ 3,324         $ (904 )
                                     
Weighted average common shares outstanding: Basic and diluted     4,787,000               4,895,855     5(a)     9,682,855  
                                     
Net (loss) per share attributable to common stockholders: Basic and diluted   $ (0.49 )                       $ (0.09 )

 

See accompanying notes to unaudited condensed combined pro forma financial statements

 

  4  

 

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

1. Description of Transaction

 

The Business Combination consists of a series of transactions pursuant to which we acquired the Purple business through the merger of Merger Sub with and into Purple, with Purple being the survivor in the merger. GPAC’s name has been changed to Purple Innovation, Inc. (the “Company”).

 

The Business Combination involves a change to the capital structure of the Company. Each of the outstanding shares of common stock of the Company (“Common Stock”) remain outstanding and have been renamed as Class A common stock of the Company (“Class A Stock”), with the same voting and other rights currently represented by the shares of Common Stock. In addition, a new class of Class B common stock of the Company (“Class B Stock”) has been created. The Class B Stock has one vote per share, and votes together with the Class A Stock, but has no economic rights. As described further below, the Class B Stock has been issued to Innohold, LLC, Purple’s prior sole common equity holder (“InnoHold”).

 

In connection with the Business Combination, the current operating agreement of Purple have been amended to reflect the following:

 

  The existing single class of common membership interests in Purple been reclassified into two new classes of Units, Class A membership units (the “Class A Units”) and Class B membership units (the “Class B Units”). Each Class A Unit and Class B Unit has equal economic rights in Purple but different voting rights in Purple. The Class A Units are solely held by the Company and have all of the voting rights in Purple, and the Class B Units are, initially, solely held by InnoHold and have limited voting rights in Purple. The amended operating agreement appoints the Company as the sole managing member of Purple.

 

  Pursuant to the Exchange Agreement (as defined in the Current Report on Form 8-K to which this is an exhibit) and the provisions of the amended operating agreement, following the lock-up period provided for in the Lock-Up Agreement (as defined in the Current Report on Form 8-K to which this is an exhibit), InnoHold is entitled to exchange one share of Class B Stock and one Class B Unit together for one share of Class A Stock (subject to the Company’s option to pay cash in lieu of issuing Class A Stock).

 

The changes to the Company’s capital structure and the restructuring of Purple described above are intended to allow InnoHold to receive the equity consideration payable in connection with the Business Combination in a tax-free manner and to allow each of the Company and InnoHold to benefit from certain expected increased depreciation and amortization tax deductions that may arise following an exchange of Class B Units and Class B Stock for Class A Stock.

 

On February 2, 2018 (the “Closing Date”), the Company consummated the business combination pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”), by and among the registrant, PRPL Acquisition, LLC, a Delaware limited liability company and a wholly owned subsidiary of the registrant (“Merger Sub”), Purple Innovation, LLC, a Delaware limited liability company (“Purple LLC”), InnoHold, LLC, a Delaware limited liability company and the sole equity holder of Purple LLC (“InnoHold”), and Global Partner Sponsor I LLC, solely in its capacity thereunder as the representative of GPAC after the consummation of the transactions contemplated by the Merger Agreement (the “Parent Representative” or the “Sponsor”), which provided for the registrant’s acquisition of Purple LLC’s business through a merger of Merger Sub with and into Purple LLC, with Purple LLC being the survivor in the merger (the “Business Combination,” and together with the other transactions contemplated by the Merger Agreement and agreements attached thereto as an exhibit, the “Transactions”).

 

  5  

 

 

Pursuant to the terms of the Merger Agreement, the aggregate purchase price for the Business Combination and related transactions was approximately $483 million. The consideration paid to InnoHold consisted of a combination of cash and stock consideration. The aggregate cash consideration paid to InnoHold was approximately $38.8 million, consisting of (i) approximately $31.1 million of cash available to us from the Company’s trust account that holds the proceeds from the Company’s initial public offering (the “Trust Account”), after giving effect to redemptions and the Baleen Investment (discussed elsewhere), plus (ii) approximately $26.8 million of cash on hand at Purple LLC, including approximately $24.0 million of net proceeds received pursuant to the Coliseum Credit Agreement (discussed below), plus (iii) gross proceeds of approximately $40 million from the Coliseum Private Placement (discussed below), less (iv) certain transaction fees and expenses of approximately $9.2 million, including the payment of deferred expenses agreed to at the time of the Company’s initial public offering, less (v) approximately $50 million retained by Purple LLC for working capital needs. The remainder of the consideration paid to InnoHold consisted of equity consideration (“Equity Consideration”), including 44,071,318 newly issued shares of Company Class B Stock and 44,071,318 Purple LLC Class B Units.

 

The foregoing consideration paid to InnoHold may be further increased by amounts payable under the Tax Receivable Agreement. The Class B Stock together with an equivalent number of shares of Class B Units may be exchanged by the holders thereof for shares of Class A Stock, in accordance with the Exchange Agreement. In order to facilitate the Business Combination, GPAC’s Sponsor has agreed to the cancellation of approximately 1,293,750 shares of the Company’s Class A Stock held by it, to the acquisition of shares of Class B Stock by InnoHold (pursuant to the Merger Agreement), the assignment of an aggregate of 1,293,750 Sponsor Shares and 9,532,500 Sponsor Warrants from the Sponsor to the investors and lenders in the PIPE financing and Purple Debt transaction and the acquisition of shares of Class A Stock by the participants in the Coliseum Private Placement (pursuant to subscription agreements entered into in connection therewith).

 

In connection with the shareholder vote and closing of the business combination, shareholders representing 9,013,165 net shares elected to redeem their shares at the proportional value in the Trust Account of 10.05 representing redemptions of approximately $90,617,000. In addition:

 

  Pursuant to a Tax Receivable Agreement entered into at the Closing, the Company will share tax savings resulting from (A) the amortization of the anticipated step-up in tax basis in Purple’s assets as a result of (i) the Business Combination and (ii) the exchange of the Class B Units and the Class B Stock received in connection with the Business Combination for shares of Class A Stock and (B) certain other related transactions with InnoHold, based on the timing of when those tax savings are realized as follows: tax savings attributable to the Purple equity held by the Company will be paid 80% to InnoHold and retained 20% by the Company.

 

  Third party transaction expenses for the Business Combination were paid at the Closing.

 

  To secure the payment of a certain portion of specified post-closing indemnification rights of the Company under the Merger Agreement, 500,000 shares of Class B Stock and 500,000 Class B Units otherwise issuable to InnoHold as Equity Consideration have been deposited in an escrow account for up to three years upon the Closing pursuant to a contingency escrow agreement.

 

  Pursuant to the Sponsor Share Agreement (as defined below) and the Assignment Agreement (as defined below), the Sponsor: (a) forfeited 1,293,750 of its founder shares (or 33.3% of its 3,881,250 founder shares) and (b) subject another 1,293,750 shares of Company common stock owned by it to vesting and forfeiture based on the common stock price performance of the Company over eight years following the consummation of the Business Combination. In connection with the PIPE financing, the Sponsor assigned to the investors an aggregate of 1,293,750 shares of Class A Stock, of which 646,874 shares are subject to vesting and forfeiture based on the common stock price performance of the Company over eight years following the consummation of the Business Combination.

 

In order to finance the business combination, the Company entered into financings agreements as follows:

 

Coliseum Private Placement (the “PIPE” investment) - On February 1, 2018 the company entered into a subscription agreement (the “Coliseum Subscription Agreement”) with Coliseum Capital Partners, L.P. (“CCP”) and Blackwell Partners LLC – Series A (“Blackwell” and, together with CCP, together the “Coliseum Investors”), pursuant to which CCP agreed to purchase from the Company 2,900,000 shares of Class A common stock of the Company at a purchase price of $10.00 per share and Blackwell agreed to purchase from the Company 1,100,000 shares of Class common stock of the Company at a purchase price of $10.00 per share (the “Coliseum Private Placement”). In addition, in connection with the PIPE financing the Sponsor agreed to assign an aggregate of 1,293,750 Sponsor Shares and 3,282,500 Sponsor Warrants to the Coliseum Investors.

  6  

 

 

In connection with the Coliseum Private Placement and the Coliseum Credit Agreement, on February 2, 2018 the Sponsor, the Company, Continental Stock Transfer and Trust Company, Coliseum, Blackwell and Coliseum Co-Invest Debt Fund, L.P. (“CCDF”) entered into an Agreement to Assign Sponsor Warrants (the “Coliseum Warrant Assignment Agreement”), pursuant to which the Sponsor agreed to assign to the Coliseum Investors and CCDF an aggregate of 5,782,500 outstanding Sponsor Warrants (the “Coliseum Warrants”), including 3,282,500 warrants related to the Coliseum Private Placement and 2,500,000 warrants related to the Credit Agreement. See also below regarding assignment of certain warrants in connection with the Purple Debt agreement. Also in connection with the Coliseum Private Placement, on February 2, 2018 the Sponsor, the Company, Continental Stock Transfer and Trust Company, Coliseum and Blackwell entered into an Agreement to Assign Founder Shares (the “Founder Share Assignment Agreement”), pursuant to which the Sponsor agreed to assign to CCP and Blackwell an aggregate of 1,293,750 outstanding founder shares of the Company (the “Coliseum Founder Shares”), 646,874 of which will be subject to certain vesting conditions.

 

Coliseum Credit Agreement (the “Purple Debt” agreement) -   On February 2, 2018, Purple LLC entered into a Credit Agreement (the “Credit Agreement”) with Coliseum Capital Partners, L.P. (“CCP”), Blackwell Partners LLC – Series A (“Blackwell”) and Coliseum Debt Fund, L.P. (together with CCP and Blackwell, the “Lenders”), pursuant to which the Lenders agreed to make a loan to Purple LLC in an aggregate principal amount of $25 million (the “Loan”). The Loan was closed and funded in connection with the Closing of the Business Combination on February 2, 2018. As part of the Credit Agreement, the Sponsor agreed to assign to the Lenders an aggregate of 2,500,000 Sponsor Warrants to purchase 1,250,000 shares of Class A Stock.

 

The Loan bears interest at 12% per annum and matures on February 2, 2023. Any pre-payments in the first year are subject to a make-whole payment, while pre-payments in years two through four are subject to certain pre-payment penalties. The Credit Agreement provides for certain remedies to the Lenders in the event of customary events of default. In connection with the Credit Agreement, pursuant to an Assignment Agreement by the PIPE investors, the lenders were assigned 2.5 million Sponsor Warrants to purchase 1.25 million shares of common stock. The estimated fair value of such warrants, approximately $1.2 million, is considered to be additional debt discount (in addition to the $1 million debt discount at closing) and additional paid in capital in the accompanying unaudited pro forma condensed balance sheet.

 

The Credit Agreement also provides for standard indemnification of the Lenders and contains representations, warranties and certain covenants of Purple LLC.   In connection with the Credit Agreement, on February 2, 2018 the Company entered into a Parent Guaranty (the “Parent Guaranty”) pursuant to which the Company agreed to an unconditional guaranty of the payment of all obligations and liabilities of Purple LLC under the Credit Agreement.

 

2. Basis of Presentation

 

This transaction is between a public shell (GPAC) and an operating company (Purple). Purple’s parent, InnoHold, obtained voting control of GPAC. Although GPAC is the legal acquirer of Purple, InnoHold maintains control of Purple upon consummation of the transaction. Purple’s senior management comprise the senior management of the combined company and a majority of the directors of the company post-transaction are the previous investors in InnoHold and Purple or individuals identified by Purple for election to the Board. As such the net assets are being accounted for on a carryover basis with no goodwill or other intangible assets recorded. Operations prior to the merger will be those of Purple. This determination was primarily based on Purple comprising the majority ownership of the combined company, Purple senior management comprising the senior management of the combined company, and the fact that a majority of directors of the combined company will be the owners of Purple or individuals identified by Purple for election to the Board. The unaudited pro forma condensed combined balance sheet as of September 30, 2017 was derived from Purple’s unaudited balance sheet, and GPAC’s unaudited condensed balance sheet, as of September 30, 2017. The unaudited pro forma condensed combined balance sheet as of September 30, 2017 assumes that the Business Combination was completed on September 30, 2017.

 

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2017 was derived from Purple’s unaudited statement of operations, and GPAC’s unaudited condensed statement of operations, for the nine months ended September 30, 2017. The unaudited pro forma condensed combined statement of operations information for the year ended December 31, 2016 was derived from Purple’s audited statement of operations, and GPAC’s audited statement of operations for the year ended December 31, 2016. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2017 and for the year ended December 31, 2016 gives pro forma effect to the Business Combination and related financing and redemption transactions as if they had occurred on January 1, 2016, the beginning of the fiscal year presented, and carried forward to the subsequent interim period.

 

  7  

 

 

3. Unaudited Pro Forma Condensed Combined Balance Sheet Adjustments

 

The pro forma adjustments to the unaudited combined pro forma balance sheet consist of the following.

 

  a) Reflects (i) the renaming of all of our outstanding Common Stock into 15,989,770 (4,777,057 after shares deemed redeemable) shares of Class A Stock, (ii) the restoration to capital of the 11,212,713 shares deemed redeemable at September 30, 2017 and (iii) the forfeiture of 1,293,750 Founder Shares.

 

  b) Reflects cash funding as follows: (i) the transfer of approximately $121.5 million from the Trust Account at September 30, 2017 to fund the transaction, (ii) the transfer of $0.204 million from the Trust Account to pay taxes, (iii) the issuance of 4,000,000 shares of class A common stock to investors in the $40 million PIPE financing, (iv) the issuance of $25 million in 12%, five year notes payable in the Purple Debt financing (net of $1 million of original issue discount, approximately $1.2 million of additional debt discount related to warrants assigned to the debt holders in connection with the debt, measured at an approximately 50% discount to the $0.94 trading price of the public warrants to reflect lack of marketability, and approximately 0.5 million of debt offering costs) and (v) redemption of 9,013,165 shares of class A common stock by stockholders for approximately $90.6 million at approximately $10.05 per share.

 

  c) Reflects the consideration for the Business Combination payable as follows: (i) approximately $38.8 million in Cash Consideration to InnoHold and approximately $50.0 million to the working capital of Purple and (ii) Equity Consideration consisting of the issuance of 44,071,318 newly issued shares of Class B Stock and (iii) approximately 44,071,318 newly issued limited liability Class B Units, which, together with the Class B Stock, are exchangeable for approximately 44,071,318 shares of Class A Stock subject to adjustment after twelve months at the option of the holder. The Class B Units issued as part of the Equity Consideration will be non-voting common units of Purple entitled to share in the profits and losses of Purple and to receive distributions as and if declared by the board of managers of Purple. Purple intends to make tax distributions to the holders of the Class A Units and the Class B Units as necessary to enable these holders to pay their estimated income tax liabilities and may make any additional distributions to the holders of these units on a pro rata basis as the board of managers may determine. The Equity Consideration represents approximately 82.0% of the operations of the combined company and is treated as a non-controlling interest in the accompanying pro forma balance sheet as it is convertible at the option of the holder.

 

Also reflects the transfer of $50.0 million of cash in (i) above from the Company to the working capital of Purple (no net change to condensed combined cash) as a transfer from additional paid in capital of the Company to non-controlling interests.

 

The enterprise value was determined by the parties based on analyses performed by investment bankers retained by the parties in the context of the enterprise value of other companies in the industry and the historic and expected growth rate of Purple.

 

  8  

 

 

The calculation of the “Merger Consideration,” “Cash Consideration” and “Equity Consideration” is as follows:

 

  Merger Consideration; Equity Consideration:   $  
  -Enterprise Value   $ 500,000,000  
  -Adjustments:        
  ●Debt assumed     (42,380,000 )
  ●Cash at target at closing     26,812,000  
  ●Purple transaction costs     (2,545,000 )
  -Merger Consideration   $ 481,887,000  
  -Less: Cash Consideration (below)     (38,801,000 )
  -Equity Consideration   $ 443,086,000  
  Class B Stock and Class B Units to be issued at $10.05     44,071,318  
  Ownership %     82.0 %
           
  Cash Consideration:        
  -Trust account at closing   $ 121,831,000  
  -Plus: PIPE financing, common stock     40,000,000  
  Purple cash     26,812,000  
  Operating cash     55,000  
  -Less:        
  - Redemptions     (90,617,000 )
  - Tax accrual and other reductions at closing     (93,000 )
  - Estimated Company transaction expenses     (6,642,000 )
  - Cash to balance sheet     (50,000,000 )
  Purple transaction expenses     (2,545,000 )
           
  Cash consideration     38,801,000  

 

To secure the payment of certain liabilities accrued as of September 30, 2017, 500,000 shares of Class B Stock and 500,000 Class B Units otherwise issuable to InnoHold as Equity Consideration will be deposited in an escrow account. InnoHold will be entitled to exercise voting rights with respect to the Escrow Securities while they are held in the escrow account. The Class B Stock and Class B Units will be released from escrow at the earlier of 3 years from the closing of the transaction or the settlement of certain liabilities.

 

  d) Reflects the payment of transaction costs associated with the Business Combination which are estimated to be approximately $11.1 million in total for both parties, which includes approximately $7.3 million of Company transaction expenses (including deferred underwriting fees from GPAC’s initial public offering which are due upon consummation of the Business Combination and which was reduced by $1.740 million from $4 million to $2.26 million by agreement with the underwriter) and approximately $3.8 million of estimated Purple transaction costs. Transaction costs include $1 million of original issue discount on the Purple Debt and an estimated $0.5 million of debt issuance costs which are charged to the debt.

 

Such costs are then adjusted to eliminate the duplication that results from the approximately $0.925 million of costs that are already reflected in the indiv idual September 30, 2017 financial statements of GPAC and Purple, aggregating approximately $0.8 million in accounts payable and $0.125 million in accrued liabilities. Transaction costs paid using cash at September 30, 2017 were not material.

 

  e) Reflects other transaction effects including the elimination of (i) the accumulated deficit of GPAC ($1.2 million) and (ii) the elimination of the residual members’ deficit of Purple ($8.0 million), after reflecting the 82.0% non-controlling interest of GPAC.

 

  f) Reflects the deferred tax asset that results from the step-up, for tax purposes of certain assets of Purple plus the agreement under the Tax Receivable Agreement (approximately $23.5 million) and to record the liability to provide 80% of that tax benefit to InnoHold as additional purchase price (approximately $18.8 million). The tax impacts of the acquisition were estimated based on the applicable law in effect on September 30, 2017.

 

  g) To adjust non-controlling interests to 82.0%, after excluding the effect of the $1.2 million debt discount from the assignment of the 2.5 million Sponsor warrants.

 

  9  

 

 

4. Notes and Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

 

The notes and pro forma adjustments to the unaudited condensed combined pro forma statements of operations consist of the following:

 

  a) Elimination of costs of the Business Combination incurred, approximately $0.925 million, by both GPAC ($0.725 million) and Purple ($0.215 million).

 

  b) Elimination of interest income on the Trust Account, as well as interest expense on the related party notes, and related income tax expense.

 

  c) Reflects $3.54 million, annually, ($2.655 million in the nine months ended September 30, 2018) of interest and financing costs on the $25.0 million of Purple Debt including annual interest at 12% ($3.0 million) and $0.54 million of annual amortization of original issue discount ($1 million), amount assigned to warrants (approximately $1.2 million) and deferred financing costs (approximately $0.5 million).

 

  d) Reflects an income tax provision on the combined pro forma income at 38% reflecting the federal statutory rate of 35%, and a blended statutory rate for state income taxes, net of federal benefit, of 3%, applied to pre-tax income after deducting the approximately 82.0% non-controlling interest of the Class B Units. The tax impacts of the acquisition were estimated based on the applicable law in effect on September 30, 2017.

 

  e) Reflects (i) approximately 82.0% interest in the pro forma combined pre-tax loss of the Company representing the non-controlling interest of the Purple class B equity holders (approximately $3.3 million and $6.6 million, respectively, in the nine months ended September 30, 2017 and the year ended December 31, 2016).

 

5. Earnings per Share

 

The pro forma adjustments to the unaudited combined pro forma statements of operations earnings per share consist of the following:

 

  a) unaudited pro forma condensed combined basic and diluted earnings per share calculations are based on the historical GPAC weighted average number of shares outstanding of 4,995,000 and 4,787,000, respectively, basic shares, and 18,263,000 and 4,787,000, respectively, diluted shares, for the nine months ended September 30, 2017 and for the year ended December 31, 2016, adjusted by: (i) 10,994,770 and 11,202,770 shares, respectively, basic shares, and (2,273,230) and 11,202,770, respectively, diluted shares, to adjust the weighted average share amount to 15,989,770 at September 30, 2017 and December 31, 2016, representing the total number of shares outstanding as of those dates inclusive of the shares that would no longer be subject to possible redemption as a result of the Business Combination, (ii) is redemption by shareholders of 9,013,165 shares upon consummation of the Business Combination, (iii) the issuance of 4,000,000 shares in connection with the PIPE financing and (iv) the forfeiture of 1,293,750 Founder Shares in connection with the Business Combination as follows:

 

Basic earnings per share:   Nine Months Ended
September 30,
2017
    Year ended
December 31,
2016
 
Weighted average shares reported     4,995,000       4,787,000  
Add: Redeemable IPO shares     10,994,770       11,202,770  
subtotal - shares previously outstanding     15,989,770       15,989,770  
Add (subtract):                
Subtract: Shares redeemed by shareholders     (9,013,165 )     (9,013,165 )
Subtract: Shares forfeited by Sponsor     (1,293,750 )     (1,293,750 )
Add:       Shares issued to PIPE investors     4,000,000       4,000,000  
subtotal – net reduction in shares     (6,306,915 )     (6,306,915 )
Weighted average shares – Basic     9,682,855       9,682,855  
                 

 

  10  

 

 

Diluted earnings per share:   Nine Months Ended
September 30,
2017
    Year ended
December 31,
2016
 
Weighted average shares reported     18,263,000       4,787,000  
Adjust for IPO shares deemed: Redeemable and redeemed     (2,273,230 )     11,202,770  
subtotal - shares previously outstanding     15,989,770       15,989,770  
Add (subtract):                
Subtract: Shares redeemed by shareholders     (9,013,165 )     (9,013,165 )
Subtract: Shares forfeited by Sponsor     (1,293,750 )     (1,293,750 )
Add:       Shares issued to PIPE investors     4,000,000       4,000,000  
subtotal – net reduction in shares     (6,306,915 )     (6,306,915 )
Weighted average shares – Diluted     9,682,855       9,682,855  
                 

The Company currently has 28,340,000 warrants outstanding to purchase up to a total of 14,170,000 shares. At the closing of the Business Combination, the Sponsor assigned 9,532,500 of its 12,815,000 Sponsor Warrants as follows: 3,282,500 warrants to the PIPE investors 2.500,000 warrants to the Lenders and 3,750,000 warrants to a backstop investor. Because the warrants are exercisable at per share amounts exceeding the current market price of Common Stock such Warrants are considered anti-dilutive and any shares that would be issued upon exercise of the warrants are not included in earnings per share. The approximately 44,071,318 shares of Class A Stock that are issuable upon exchange of the Class B Stock and Class B Units are not considered in the calculation of earnings per share because they are anti-dilutive.

 

 

11

 

 

Exhibit 99.4

 

Purple Innovation Appoints Adam Gray to Its Board of Directors

 

Appointment to Expand the Board to Eight Directors

 

Alpine, Utah, February 6, 2018 – Purple Innovation, Inc. (NASDAQ: PRPL) (“Purple”), a comfort technology company known for creating the “World’s First No Pressure ™ Mattress,” today announced that Adam Gray, Managing Partner at Coliseum Capital Management, LLC (“Coliseum”), has been appointed to its Board of Directors. With this appointment, the Board will expand to eight directors.

 

Mr. Gray’s appointment to the Board follows Coliseum’s previously announced $65 million of committed equity and debt investment.

 

“I look forward to partnering closely with Purple’s Board and management team at this exciting stage in the Company’s development,” said Mr. Gray. “Our recent strategic investment in Purple reflects our confidence in the Company’s innovative business model and unique product. We believe that Purple is positioned to aggressively pursue exciting new growth initiatives while maintaining its focus on delivering comfort tech globally.”

 

“We are excited to welcome Adam to our Board,” said Terry Pearce, Co-founder, director and majority shareholder of Purple. “Coliseum’s strategic investment, combined with Adam’s financial and operational experience and track record of working constructively with management teams to create long-term shareholder value will enhance our ability to pursue profitable growth.”

 

Adam Gray, co-founder and Managing Partner of alternative investment manager Coliseum Capital Management, LLC, has nearly 30 years of capital stewardship, private equity and operating experience. Mr. Gray has significant expertise leading operational and financial restructurings and has helped guide organizations through highly complex growth-oriented and distressed situations. He was most recently appointed to the Board of Directors of The Pas Group, one of Australia’s largest apparel businesses, and currently serves as Non-Executive Chairman and Non-Executive Director of Redflex Holdings Limited. He is also a Director of New Flyer Industries Inc. Mr. Gray is a former Director of Blue Bird Corporation, Benihana, Inc., and DEI Holdings, Inc. Prior to founding Coliseum, Mr. Gray held senior positions at Burger King Holdings, Inc. and Metromedia Restaurant Group. Mr. Gray began his career with the Merchant Banking Division at Morgan Stanley before joining Kluge & Co (the internal merchant bank of Metromedia Company).

 

About Purple

 

Purple is a leading comfort technology company, which designs and manufactures products to improve how people sleep, sit, and stand. It offers mattresses, cushions, pillows, and other comfort products using its proprietary Hyper-Elastic Polymer® technology. All products are focused on founders Terry and Tony Pearce’s vision to improve comfort. Purple continues to be a disruptor to the traditional mattress industry with its innovative products, packaging and shipping, direct-to-consumer sales, and generous trial and return policies.

 

Forward Looking Statements

 

Certain statements made in this release are “forward looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside the Company’s control, that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Media Contacts

 

Purple Innovation, Inc.
For information regarding Purple products, please contact Savannah Turk:
Savannah Turk
Director of Purple Communications
savannah@purple.com

 

For investors, media and general inquires:
Brendon Frey
brendon.frey@icrinc.com
203-682-8216

 

Alecia Pulman/Kate Kohlbrenner
purplePR@icrinc.com