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): October 1, 2019

 

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))

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A Common Stock, par value $0.0001 per share   PRPL   The NASDAQ Stock Market LLC
Warrants to purchase one-half of one share of Class A Common Stock   PRPLW   OTC PINK

 

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. ☐

 

 

 

 

 

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

 

Appointment of Chief Financial Officer

 

On October 1, 2019 (the “Start Date”), Craig Phillips accepted a position to serve as the Company’s Chief Financial Officer. Mr. Phillips will be co-located at the Company’s headquarters and in New York, New York. As previously disclosed by Purple Innovation, Inc. (the “Company”) in its Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2019, on March 12, 2019, Craig Phillips accepted a position to serve as the Company’s Interim Chief Financial Officer, effective March 16, 2019. In this role, he has functioned as the Company’s Principal Financial Officer and Principal Accounting Officer for SEC reporting purposes.

 

Mr. Phillips, age 53, has served as a Managing Director in FTI Consulting Inc.’s Corporate Finance, Office of the CFO Solutions practice, a position he held since March 2015. Prior to that, he worked as an independent financial consultant from January 2014 to March 2015. From 2012 through 2013 he served as Chief Financial Officer of Latitude 360. Prior to that, Mr. Phillips served as Chief Financial Officer of Blue Medical Supply Co. from 2011 to 2012. Mr. Phillips is a Certified Public Accountant, licensed in the State of Florida. He received a Bachelor of Business Administration from the University of Georgia.

 

In connection with his appointment, Mr. Phillips entered into an employment offer (the “Employment Agreement”) that includes the following terms: (1) an annual base salary of $400,000; (2) participation in a short-term incentive plan, with potential bonus payment up to 45% of Mr. Phillips’s base salary, based on the achievement of certain financial and non-financial performance targets; (3) the grant of options to purchase 325,000 shares of the Company’s Class A Common Stock; (4) vacation and other benefits generally available to other senior executives of the Company; and (5) payment by the Company for the cost of reasonable airfare and other business-related travel costs necessary for commuting to the Company’s headquarters.

 

If Mr. Phillips is terminated without cause he will also be entitled to an amount equal to up to 6 months plus one week of base salary for each completed year of service. Upon termination without cause, all unvested stock options will be forfeited and cancelled.

 

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

 

Option Grant

 

On October 1, 2019, the board of directors of the Company approved an option grant to Mr. Phillips to purchase 325,000 shares of the Company’s Class A Common Stock (the “Common Shares”) at an exercise price of $8.17 per Common Share, which is the volume-weighted average price of the Common Shares over the 30 trading days preceding October 1, 2019.

 

In connection with the option grant, the Company entered into an Option Grant Agreement (the “Grant Agreement”) with Mr. Phillips, which includes the following terms: (i) 25% of the grant shall vest and become exercisable on March 16, 2020, and the remaining 75% shall vest and become exercisable in equal installments on a monthly basis, on the first day of each month, over the three-year period beginning April 1, 2020; (ii) in the event of a change in control (as that term is defined in Mr. Phillips’ offer letter) (A) prior to October 1, 2020, a maximum of 50% of the grant (162,500 options, which is inclusive of any options already vested) will vest and become exercisable or (B) after October 1, 2020, 100% of the grant will vest and become exercisable; (iii) the exercise price may be paid (A) in cash, (B) if there is a public market for the Common Shares at the time of exercise, 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 such 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 such option was exercised; (iv) the option has a term of five years; and (v) in the event of Mr. Phillips’ death, disability retirement or termination of employment, the terms of the Company’s 2017 Equity Incentive Plan shall apply.

 

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

 

1

 

 

Item 7.01 REGULATION FD DISCLOSURE.

 

On October 3, 2019, the Company issued a press release announcing the appointment of Mr. Phillips. A copy of the press release is attached hereto as Exhibit 99.1.

 

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.

 

ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS

 

(d) Exhibits

 

10.1 Employment Agreement between the Company and Craig L. Phillips.
10.2 Option Grant Agreement between the Company and Craig L. Phillips.
99.1 Press release issued by the Company, dated October 3, 2019.

 

2

 

 

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: October 3, 2019 PURPLE INNOVATION, INC.
   
  By: /s/ Craig L. Phillips
    Craig L. Phillips
    Chief Financial Officer

 

 

3

 

Exhibit 10.1

 

 

 

September 30, 2019

 

Craig Philips

Ridgewood, NJ

 

Dear Craig,

 

On behalf of Purple, it is my pleasure to extend to you this written offer to serve as an officer of Purple Innovation, Inc (the “Company”). This offer is contingent upon successful results of a background check and drug screen, and your execution of an agreement to protect the intellectual property and other rights of Purple and its affiliated companies.

 

Key points to your employment and compensation include:

 

Position: Chief Financial Officer reporting to the Chief Executive Officer.
   
Base wage: $400,000 yearly paid on a bi-weekly basis less deductions required by law. Payable in accordance with normal payroll practices of the Company. This is an exempt position.
   
Bonus: An annual target bonus opportunity equal to 45% of base salary, to be payable based on both the Company and your individual performance. For the 2019 performance year, you will be eligible for a prorated target bonus, based on 6 months service in the 2019 performance year
   
Equity: 325,000 options, granted on your start date, October 1, 2019, as approved by the Board on or before your start date. The exercise price of the options will be equal to the greater of the Fair Market Value on the date of grant (October 1, 2019) and the 30-trading day VWAP. Twenty-five percent (25%) of this options grant will vest in a cliff on March 16, 2020 (the first anniversary of your consulting arrangement with the Company), and 1/48th will vest monthly thereafter over the following 36 months. In the event of a Change In Control (as defined below) prior to October 1, 2020, a maximum of 50% of this options grant (162,500 options, which is inclusive of any options already vested) will vest and become exercisable. In the event of a Change In Control after October 1, 2020, 100% of this options grant will vest and become exercisable. As a C-level position, you will also be eligible to participate in Purple LLC’s long-term incentive plan.
   
  The terms of the equity award specified in this letter are to supersede the terms set forth in the underlying equity plan, the “2017 Equity Incentive Plan,” and the award agreement evidencing the award cited in this letter is to conform to the terms set forth herein.

 

 

 

  

Change In Control: A Change In Control means the occurrence of any of the following: (i) one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; (ii) the Company enters into an agreement of reorganization, merger or consolidation pursuant to which the Company or a subsidiary of the Company is not the surviving corporation or (iii) the sale of all or substantially all of the Company's assets. A Change in Control shall not be considered to have occurred so long as either (a) the Company remains publicly traded with an independent Board, including without limitation in the event that a controlling shareholder of the Company sells more than 50% or more of the Company's Class A Common Stock, or (b) any person (or more than one person acting as a group) owns more than 50% of the total fair market value or total voting power of the Company's stock and acquires additional stock.
   
Severance: In the event your employment is involuntarily terminated by the Company for a reason other than cause, you will receive 6 months of base salary plus one week of base salary for each completed year of service. Upon your involuntary termination by the Company for a reason other than Cause, all unvested stock options will be forfeited and cancelled.
   
Responsibilities & Duties: As an officer of the Company, you will be expected to act throughout your employment in behalf of the Company in managing your responsibilities in connection with Purple LLC’s business, finance and operations. You will be paid by Purple LLC and subject to the policies of Purple LLC. During your employment with Purple LLC, you will devote your full business time, skill, attention, and best efforts to the performance of your duties, subject to customary carve-outs for charitable or religious activities and management of personal affairs that do not materially interfere with the performance of your duties to the Company. You will have such duties and authority as is customary for a CFO of a publicly traded company with subsidiaries and as determined from time to time by the CEO and the Board of Directors. You will comply with all lawful rules, policies, procedures, regulations and administrative directions now or hereafter reasonably established by the Company and Purple LLC.

 

2 

 

  

Corporate Opportunity: You are required to submit to the Company all business, commercial and investment opportunities or offers presented to you or of which you become aware which relate to the business of the Company at any time during your employment. Unless approved by the Board, you shall not accept or pursue, directly or indirectly, any Corporate Opportunities on your own behalf.
   
Cooperation: You shall both during and after your employment for the Company, subject to the Company reimbursing you for out-of-pocket expenses, cooperate with the Company in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company (including, without limitation, your being available to the Company upon reasonable notice for interviews and factual investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are or may come into your possession, all at times and on schedules that are reasonably consistent with your other permitted activities and commitments).
   
Travel Expenses: Purple will reimburse all reasonable airfare and other business-related travel costs necessary for your commuting to Purple Headquarters. Flights should be booked at least two (2) weeks in advance and travel should be coach unless you have personal miles to cover any seating upgrades.
   
Work Schedule: This is a full-time position co-located in Alpine, UT, and New York, NY, with the understanding that working in the co-located working arrangement between Alpine, UT and New York, NY location will be re-evaluated no later than the 24-month anniversary of the start date.
   
Benefits: You will be eligible to participate in the Purple benefits programs such as health, dental, and vision insurance plans, as well as Life Insurance, on the same basis as other personnel. You are eligible for the medical, dental, and vision plan on the first day of the month following your date of hire. You are also eligible to participate in our 401(k) plan at a 5% company match on the first of the month following a four-month qualification period.

 

3 

 

  

Paid Time Off: You will receive 120 hours of paid time off (PTO) per annum accrued in accordance with the company’s vacation policy. The company also provides employees with 10 paid holidays per year.
   
At Will Employment: In accepting our offer of employment, you certify your understanding that your employment will be on an at-will basis, and that neither you nor any company representative has entered into a contract regarding the terms or the duration of your employment. As an At-Will employee, you will be free to terminate your employment with the company at any time, with or without cause or advance notice. Similarly, the company is free to conclude its employment relationship with you at any time, with or without cause, or advance notice.
   
Drug/alcohol testing: By accepting this offer: You acknowledge yourself as being free of inappropriate drug or alcohol use; you agree to submit to a drug/alcohol screening test as a condition of employment; and you accept that Purple has a smoke-free workplace policy and a drug/alcohol-free workplace program which could include ongoing random or comprehensive testing of all employees or individual employees.

 

In addition, Purple will provide you with the necessary materials and equipment to effectively perform the responsibilities of your position. Any equipment, proprietary information, or other materials must be returned to the company upon termination for any reason.

 

As with any employment at will, all compensations, benefits, work assignments, etc. are subject to change in accordance with the needs of the company, with the exception of any vested rights.

 

Craig, I am confident that you will find this position both challenging and rewarding. We look forward to your contributions and success with Purple. Upon acceptance of this offer, please sign and date the letter to indicate your acceptance of the position as well as the attached Proprietary Information & Invention Assignment and return it to HR at careers@purple.com.

 

Sincerely,

 

/s/ Joseph B. Megibow

 

Joseph B. Megibow, Purple, CEO

 

I accept this employment offer:

 

/s/ Craig Phillips  
Craig Philips  
   
October 1, 2019  
Date  

 

Employment Start Date: October 1, 2019

 

 

4

 

Exhibit 10.2

 

Purple Innovation, Inc.

 

2017 EQUITY INCENTIVE PLAN

 

Option Grant Agreement

 

This Option Grant Agreement evidences the grant of a Nonqualified Stock Option (the “Grant”), pursuant to the provisions of the Purple Innovation, Inc. 2017 Equity Incentive Plan (the “Plan”) to the individual whose name appears below (the “Participant”), covering the specific number of shares of stock set forth below, pursuant to the provisions of the Plan and on the following express terms and conditions (capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Plan):

 

1. Name of Participant: Craig Phillips

 

2. Grant. The option to purchase 325,000 Common Shares of Purple Innovation, Inc. (the “Company”). The grant date of the Grant is October 1, 2019 (the “Grant Date”).

 

3. Exercise Price per Share. The exercise price of the Grant shall be the greater of (i) the closing price of the Company’s Common Shares on the Grant Date or (ii) the trailing thirty (30)-trading day volume weighted average price of the Company’s Common Shares determined as of the Grant Date.

 

4. Vesting and Exercisability: The Grant shall be subject to vesting following an initial 25% “cliff”; the date of the 25% “cliff” is March 16, 2020. Vesting of the remaining 75% will occur on the first day of each calendar month thereafter (1/48th per month for the following three years starting on April 1, 2020). “Cliff” means herein that no vesting will occur until the date when the first 25% vests and the remaining 75% begins to vest monthly thereafter.

 

5. Change in Control: Notwithstanding the foregoing, upon a Change in Control prior to October 1, 2020, a maximum of 50% of the options issued under the Grant (162,500 options) that are then outstanding, inclusive of options already vested, shall vest and become exercisable; and upon a Change in Control on or after October 1, 2020, 100% of the options issued under the Grant that are then outstanding shall vest and become exercisable. For purposes of this Grant, “Change in Control” shall mean the following, which supersedeas the definition in the Plan: “the occurrence of any of the following: (i) one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company; (ii) the Company enters into an agreement of reorganization, merger or consolidation pursuant to which the Company or a subsidiary of the Company is not the surviving corporation or (iii) the sale of all or substantially all of the Company’s assets. A Change in Control shall not be considered to have occurred so long as either (a) the Company remains publicly traded with an independent Board, including without limitation in the event that a controlling shareholder of the Company sells more than 50% or more of the Company’s Class A Common Stock, or (b) any person (or more than one person acting as a group) owns more than 50% of the total fair market value or total voting power of the Company’s stock and acquires additional stock.”

 

6. Clawback: The Grant is subject to any Company clawback policy as may be adopted or amended from time to time.

 

7. Exercise: With respect to the Grant, the Exercise Price shall be payable, at the Participant’s election (A) in cash; (B) if there is a public market for the Common Shares at the time of exercise, 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 such 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 such option was exercised. Any fractional Common Shares shall be settled in cash.

 

8. Expiration/Termination of Option: This option shall have a term of five years. For the avoidance of doubt, to the extent not expired, terminated or cancelled earlier in accordance with the terms of Plan, the Grant shall expire on October 1, 2024. The provisions of Section 7 of the Plan regarding death, Disability, Retirement and termination of employment (with and without Cause) shall apply.

 

 

 

The Participant hereby acknowledges receipt of a copy of the Plan as presently in effect. The text and all of the terms and provisions of the Plan are incorporated herein by reference, and this option is subject to these terms and provisions in all respects. At any time when the Participant wishes to exercise this option, in whole or in part, the Participant shall submit to the Company a written notice of exercise, specifying the exercise date and the number of Common Shares to be exercised. Upon exercise, the Participant shall remit to the Company the exercise price in cash or in such other form as permitted under the Plan, plus an amount sufficient to satisfy the required withholding tax obligation of the Company, if any, that arises in connection with such exercise.

 

Purple Innovation, Inc.

 

By: /s/ Joseph B. Megibow   October 1, 2019  
 

Joseph B. Megibow

CEO

  Dated  

 

Agreed to and Accepted by:  
         
/s/ Craig Phillips   October 3, 2019  
Craig Phillips   Dated  

 

 

 

 

 

 

Exhibit 99.1

 

 

Purple Appoints Craig Phillips as Chief Financial Officer

Experienced Chief Financial Officer Joins Purple’s Leadership Team 

 

ALPINE, Utah, October 3, 2019 — Purple Innovation, Inc. (NASDAQ: PRPL) (“Purple”), the creator of the renowned Purple® Mattress, today announced that Craig Phillips has been appointed as Chief Financial Officer, leading both the accounting and finance teams, effective October 1, 2019. 

 

“Craig Phillips brings significant depth of experience and maturity into Purple,” said Joe Megibow, Purple’s Chief Executive Officer. “Having worked with Craig as our interim-CFO over the last two quarters, I am thrilled that he has decided to join us full-time. Craig has been a terrific partner and has proven himself as an exceptional leader and operator. We look forward to leveraging his leadership as we continue to rapidly scale and mature our company.”

 

Mr. Phillips has accumulated over two decades of experience with a number of organizations, including over 15 years in “Big 4” public accounting firms serving large public and privately held high-growth companies in a broad spectrum of industries. Over the course of his career, Mr. Phillips has assisted companies in the execution of public and private offerings of debt and equity securities, as well as numerous purchase and sale transactions. Mr. Phillips has served as Chief Financial Officer for several privately held companies at the regional and national level in the service, distribution, entertainment, and restaurant industries, and most recently served as the Managing Director at FTI Consulting. In that role, Mr. Phillips has been serving since March of 2019 as Purple’s Interim Chief Financial Officer and has developed a deep understanding of the business. 

 

“Over the past six months I have seen Purple continue to take advantage of significant opportunities to expand its customer base and execute on plans to gain efficiencies in production capabilities. Joe has assembled an outstanding management team and I am excited to become a permanent part of that team,” said Mr. Phillips. “We see incredible opportunity to continue finding ways to expand growth profitably as well as take advantage of the unique innovation capabilities at the Company.”

 

Mr. Phillips earned a Bachelor of Business Administration in Accounting from the University of Georgia.

 

###

 

About Purple

Purple is a comfort innovation company that designs and manufactures products to improve people’s lives. It designs and manufactures a range of comfort products, including mattresses, pillows, and cushions, using its patented Purple® Grid technology designed to improve comfort. The Company markets and sells its products through its direct-to-consumer online channel, traditional retail partners, and third-party online retailers. For more information on Purple, visit www.purple.com.

 

Forward Looking Statements

Certain statements made in this release that are not historical facts are "forward looking statements" within the meaning of the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company's expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. 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. Factors that could influence the realization of forward-looking statements include the risk factors outlined in the "Risk Factors" section of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 14, 2019 and our Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2019 and August 13, 2019. 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 Contact 

Savannah Hobbs 

Director of Communications, Purple 

savannah@purple.com  

 

ICR Public Relations 

Sara Davis

Account Supervisor

646-277-1826

PurplePR@icrinc.com