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.