Exhibit 10.11

 

PURPLE INNOVATION, INC. 2020 SHORT-TERM CASH INCENTIVE PLAN

 

The Board of Directors (the “Board”) of Purple Innovation, Inc., for itself and
its subsidiaries (collectively “Company”), has adopted this Purple Innovation,
Inc. 2020 Short-Term Cash Incentive Plan (the “Plan”) as of November 4, 2020.

 

1. Purpose of Plan.

 

The purposes of the Plan are to provide clear focus on the Company’s annual
strategic objectives, to align compensation with Company performance, to
motivate and reward personal performance, and to retain the talent needed to
drive success.

 

2. Definitions.

 

(a) “Annual Base Salary” with respect to the Plan Year (defined below) shall
mean the amount of salary paid by the Company to a Participant (defined below)
during such Plan Year without reduction for any amounts withheld pursuant to
participation in a qualified “cafeteria plan” under Section 125 of the Internal
Revenue Code (the “Code”) or a cash or deferred arrangement under Section 401(k)
of the Code. Annual Base Salary shall not include any amount paid or accruing to
a Participant under the Plan, equity awards granted under the Purple Innovation,
Inc. 2017 Equity Incentive Plan or any other incentive plan, any extraordinary
renumeration, expense allowance, imputed income or any other amounts deemed to
be indirect compensation, and any contributions made by the Company to this Plan
or any other plan or any other amounts which, in the discretion of the Board,
are not considered to be Annual Base Salary for purposes of the Plan.

 

(b) “Bonus Amount” is the amount of cash to be awarded to a Participant under
the Plan, and it is the product of (i) the Individual Allocation (defined below)
of the Participant multiplied by (ii) the Bonus Fund Amount (defined below).

 

(c) “Bonus Fund Amount” is the amount of cash made available under the Plan from
which each Bonus Amount is paid, and it is the product of (i) the Bonus
Percentage (defined below) multiplied by (ii) the sum of the products of (A)
each Participant’s Annual Base Salary multiplied by (B) that Participant’s
Participation Percentage (defined below).

 

(d) “Bonus Percentage” is the percentage determined by the Company meeting
certain Financial Targets (defined below). The Bonus Percentage will be a single
percentage from and between 50% to 150% as determined on a pro rata basis for
each of the two Financial Targets on a weighted basis. The percentage for each
Financial Target will be determined in proportion to the actual amount achieved
in between the Minimum Target Level and the Plan Target Level for the
incremental percentage increase between 50% and 100%, or in proportion to the
actual amount achieved in between the Plan Target Level and Maximum Target Level
for the incremental percentage increase between 100% and 150%, as these terms
are used in the definition of Financial Targets. In no event will the percentage
for either Financial Target be below 50% or above 150%. The percentage for each
Financial Target will be weighted at 60% for the Adjusted EBITDA Target and 40%
for the Net Revenue Target, as these terms are used in the definition of
Financial Targets, for a final combined Bonus Percentage. The Bonus Percentage
is used to determine the amount of the Bonus Fund from which a Bonus Amount will
be paid to each Participant.

 

 

 

 

(e) “Financial Targets” are the targets for net revenue (the “Net Revenue
Target”) and adjusted EBITDA (the “Adjusted EBITDA Target”) set by the Company
for the Plan Year and consist of the financial targets for each at plan (the
“Plan Target Level”) and at minimum and maximum levels (respectively, the
“Minimum Target Level” and “Maximum Target Level”). Both the Net Revenue Target
and Adjusted EBITDA Target must be at or exceed the Minimum Target Level before
any Bonus Amount will be determined and paid. For purposes of this definition,
“Adjusted EBITDA” and “net revenue” shall mean the amounts reported by the
Company in its Form 10-K, for the Plan Year. The Financial Targets shall account
for 70% of each Participant’s Incentive Factor.

 

(f) “Incentive Points” are the points for each Participant that are the quotient
of (i) the product of (A) the Participant’s Annual Base Salary multiplied by (B)
the Participant’s Incentive Factor, divided by (ii) 1,000,000.

 

(g) “Incentive Factor” is for each Participant the sum of (i) the Corporate
Factor and (ii) the Individual Factor applicable to that Participant. For
purposes of this definition, “Corporate Factor” is 70% of the Participant’s
Participation Percentage, and “Individual Factor” is 30% of the Participant’s
Participation Percentage. The Individual Factor portion is subject to adjustment
in accordance with the Participant’s Personal Performance Criteria (defined
below).

 

(h) “Individual Allocation” is a percentage applicable to each Participant that
is the quotient of (i) the Participant’s Incentive Points divided by (ii) the
sum of all Participants’ Incentive Points. Each Participant’s Individual
Allocation is multiplied by the Bonus Fund Amount to determine that
Participant’s Bonus Amount to be paid under the Plan.

 

(i) “Participant” is the executive officer or other employee determined by the
Board to be entitled to participate in the Plan and has the title of Senior
Director, Vice President or Senior Vice President.

 

(j) “Participation Percentage” is the percentage set forth in the participation
letter issued by the Company to each Participant determined to be eligible to
participate in the Plan. A Participant who is employed during the first three
quarters of the Plan Year will receive a prorated Participation Percentage in
accordance with the amount of time employed during the Plan Year in relation to
the entire Plan Year.

 

(k) “Payment Date” shall mean the date payments are made under the Plan which
shall occur promptly following the filing of the Company’s audited financial
results in Form 10-K for the Plan Year (defined below).

 

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(l) “Personal Performance Criteria” for participants in the Plan may include one
or more criteria as set by management and approved by the Board in their
discretion to promote the Company’s key strategic objectives. The Personal
Performance Criteria shall account for 30% of the Incentive Factor used to
determined Incentive Points. Individual performance is ranked on a scale of 1 to
5. Those scoring a 1 or 2 will have this portion of the Incentive Factor reduced
to 0%, meaning only the Corporate Factor will be included in the Incentive
Factor and used to determine Incentive Points. Those scoring a 3 will retain the
full 30%, meaning both the Corporate Factor and the Individual Factor will be
included in the Incentive Factor used to determine Incentive Points. Those
scoring a 4 or 5 receive an additional amount above the 30% Individual Factor
portion of the Incentive Factor, with 30% multiplied by 1.25% for those scoring
a 4 and multiplied by 1.5% for those scoring a 5, resulting in an incrementally
higher Incentive Factor used to determine such Participant’s Incentive Points.

 

(m) “Plan Year” shall mean calendar year 2020 (January 1, 2020 – December 31,
2020). (If the Plan is extended to apply to subsequent years it shall mean the
Company’s fiscal year if then different from the calendar year.)

 

3. Administration of the Plan.

 

The Plan is authorized by the Board and shall be administered by the Company
under the oversight of the HR & Compensation Committee (“Committee”). All awards
made under the Plan shall be approved by the Board. No member of the Board,
while serving as such, shall be eligible for participation in the Plan as a
director but shall be eligible as an employee if also employed by the Company.
The Board shall have exclusive and final authority in all determinations and
decisions affecting the Plan and its Participants. The Board shall also have
sole authority to interpret the Plan, to establish and revise rules and
regulations relating to the Plan, to delegate such responsibilities or duties as
it deems desirable, and to make any other determination that it believes
necessary or advisable for the administration of the Plan including, but not
limited to: (i) approving the designation of eligible Participants; (ii)
determining the Participation Percentage of each Participant; (iii) setting the
Personal Performance Criteria for each Participant; and (iv) determining
attainment of Personal Performance Criteria and other material terms.

 

4. Participation.

 

The Board may from time to time designate when a Participant ceases to
participate in the Plan or return to participation in the Plan. Cash awards for
new Participants during the Plan Year shall be pro-rated for employees who are
hired and begin service before the fourth quarter of the Plan Year.

 

5. Performance Gate Trigger.

 

For the Plan to activate, the Company must achieve annual 2020 Financial
Targets. If the Company does not reach both of the Financial Targets at the
Minimum Target Level set forth therein, no cash awards will be paid to any of
the Participants under the Plan. This does not preclude management from making
individual discretionary bonuses to any person regardless of whether the person
is selected to be a Participant under this Plan, subject to any needed Board
approval.

 

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6. Right to Payment.

 

Unless otherwise determined by the Board, in its sole discretion, a Participant
shall have no right to receive a payment under the Plan unless the Participant
remains in the employ of the Company through and including the Payment Date and
remains in good standing with the Company during the Plan Year. No Participant
shall have a right to more than the amount of an award approved by the Board.

 

7. Payment.

 

Subject to the other provisions of the Plan, payment to a Participant of a Bonus
Amount will be made in cash on the Payment Date.

 

8. Miscellaneous Provisions.

 

(a) A Participant’s rights and interests under the Plan are personal to the
Participant and may not be sold, assigned, pledged, or otherwise transferred or
encumbered in any manner, without the express approval of or exceptions allowed
by the Committee in its discretion.

 

(b) No award will be earned on a pro rata basis for a termination (including for
voluntary or involuntary separation, retirement, death or disability) of
employment occurring during the Plan Year or before the Payment Date.

 

(c) Neither the Plan nor any action taken under the Plan shall be construed as
giving any Participant any right to continued employment with the Company either
before or after the Payment Date.

 

(d) The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
income or other taxes incurred because of payments made under the Plan.

 

(e) The Board may at any time, and from time to time, alter, amend, suspend, or
terminate the Plan in whole or in part prior to any payment under the Plan.
Notwithstanding the foregoing, no such action may be taken that affects
adversely any of the rights of a Participant, without such Participant’s
consent, to an award that has been paid under the Plan.

 

(f) The Company has the right to recoup or “clawback” awards paid under this
Plan in accordance with the Company’s Incentive Compensation Clawback Policy in
effect at the time.

 

(g) The Plan shall apply only to the 2020 calendar year and shall not continue
thereafter for subsequent years or from year to year, except as hereafter may be
determined by the Board.

 

(h) In the absence of a written employment contract, the relationship between
Participants and the Company is one of at-will employment. The Plan does not
alter this relationship. The Plan will not supersede any specific employment
contract obligations the Company may have with a Plan Participant.

 

 

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