Purple Innovation, Inc. appointed Mr. DeMartini as new CEO

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


On March 19, 2022, the Company and Robert T. DeMartini, the Company's Chief Executive Officer, entered an amended and restated employment agreement (the "Amended and Restated Employment Agreement") appointing Mr. DeMartini as chief executive officer. Under the Amended and Restated Employment Agreement, the Company agreed that Mr. DeMartini's compensation, among other things, included restricted stock units subject to 0.5 million shares of the Company's Class A common stock and stock options to purchase 0.5 million shares of Class A common stock, for which one third of each of the restricted stock units and options would vest on each annual anniversary of the grant date, provided Mr. DeMartini remains in continuous employment with the Company. The initial grant date occurred on March 25, 2022 (the "Initial Grant"). On April 8, 2022, the Company rescinded and cancelled from the Initial Grant 0.4 million of the restricted stock units and 0.4 million of the stock options, for no consideration and with Mr. DeMartini's consent, so that the Initial Grant would not exceed the annual limit on shares of Class A common stock underlying awards granted to a single participant as set forth in the Company's 2017 Equity Incentive Plan (the "Plan"), leaving the Initial Grant at 0.1 million of each of the restricted stock units and stock options.


On June 2, 2022, the Board adopted an amendment to Section 5(f) of the Plan, subject to shareholder approval of the amendment, to set the annual limit on shares subject to equity awards granted to individual participants at 1.5 million shares and to increase the annual limit of payable cash under equity awards to an individual participant to $7.5 million. This amendment is subject to shareholder approval and the Board plans to recommend the amendment at the upcoming annual meeting of shareholders. Also on June 2, 2022, the Company granted to Mr. DeMartini restricted stock units subject to 0.1 million shares of Class A common stock and stock options to purchase 0.1 million shares of Class A common stock (the "Reissued Grant"), making the total of the Initial Grant and Reissued Grant 0.2 million of each of the restricted stock units and stock options. The Company also conditionally granted restricted stock units subject to 0.3 million shares of Class A common stock and stock options to purchase 0.3 million shares of Class A common stock (the "Conditional Reissued Grant"). The Conditional Reissued Grant is conditioned on shareholder approval of the Company's proposed amendments to Section 5(f) of the Plan.


On March 15, 2023, the Company and Mr. DeMartini entered into amended and restated grant agreements relating to the Initial Grant, Reissued Grant and Conditional Reissued Grant (collectively the "Amended and Restated Grant Agreements"), revising the vesting schedule of the awards included in each grant. The amended and restated grant agreements provide that (i) 0.10 million of the restricted stock units and 0.10 million of the options included in the Initial Grant will vest in full on March 25, 2023, (ii) 0.06 million of the restricted stock units and 0.06 million of the options included in the Reissued Grant will vest on March 25, 2023, (iii) the remaining 0.04 million of the restricted stock units and 0.04 million of the options included in the Reissued Grant will vest on March 25, 2024, (iv) 0.13 million of the restricted stock units and 0.13 million of the options included in the Conditional Reissued Grant, subject to shareholder approval of the amendment to the Plan described above, also will vest on March 15, 2024; and (v) the remainder of the restricted stock units and options included in the Conditional Reissued Grant will vest in full on March 25, 2025. The amendments reflect the vesting intended in the Amended and Restated Employment Agreement and will result in an acceleration of stock-based compensation expense of approximately $0.8 million into the first quarter of 2023 from other future periods over the previous vesting period.


The foregoing summaries of the Amended and Restated Grant Agreements do not purport to be complete and are subject to, and qualified in their entirety by, the full text of the Amended and Restated Grant Agreements, copies of which are attached as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 to this report and are incorporated by reference herein.


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