Duluth Holdings Inc. Announces Inducement Grant Under NASDAQ Listing Rule 5635(c)(4)

Rhea-AI Summary

Duluth Holdings Inc. (NASDAQ: DLTH) has announced an inducement grant to Stephanie L. Pugliese, who joins as the company's new President and Chief Executive Officer effective May 5, 2025. The grant includes a total of 1,759,532 shares of Class B common stock, structured in two parts:

1) An immediate grant of 586,511 shares with a one-year pro-rata clawback provision

2) A restricted stock grant of 1,173,021 shares vesting over three years: 33% in 2026, 33% in 2027, and 34% in 2028

The stock awards were granted outside the Company's 2024 Equity Incentive Plan under NASDAQ Listing Rule 5635(c)(4) for employment inducement purposes.

Positive

• Appointment of new CEO with significant equity incentive alignment
• Structured vesting schedule promotes long-term commitment
• Immediate equity ownership demonstrates confidence in new leadership

Negative

• Significant equity grant may lead to shareholder dilution
• Accelerated vesting provisions could result in immediate vesting of all shares under certain termination scenarios

Insights

Corporate Governance Specialist

New CEO Pugliese receives substantial equity package with balanced immediate and long-term incentives, structured outside standard compensation plan.

The inducement grant to new President and CEO Stephanie Pugliese represents a significant equity award structured to balance immediate incentives with long-term retention. The total grant of 1,759,532 Class B common shares is divided into two components: an immediate award of 586,511 shares with a one-year clawback provision, and 1,173,021 restricted shares vesting over three years.

The immediate grant's clawback mechanism provides company protection – if Pugliese leaves without good reason or is terminated for cause within her first year, she must return a pro-rated portion of these shares. This structure creates immediate alignment while protecting against early departure.

The restricted stock follows a standard executive vesting schedule: 33% after year one, 33% after year two, and 34% after year three. The accelerated vesting provisions for termination scenarios including death, disability, termination without cause, or resignation for good reason are consistent with market practices for executive protection.

Notably, this package was granted outside Duluth's 2024 Equity Incentive Plan using NASDAQ's employment inducement exemption (Rule 5635(c)(4)), suggesting these grants exceeded standard plan limitations – a common approach when attracting high-level executive talent.

Financial Analyst

CEO compensation package worth 1.76M shares combines immediate equity with three-year vesting schedule, signaling commitment to new leadership.

Duluth Trading's equity award to incoming CEO Stephanie Pugliese represents a structured approach to executive compensation with clear financial implications. The total grant of 1,759,532 Class B shares divides into an upfront award of 586,511 shares (subject to first-year clawback) and 1,173,021 restricted shares vesting over three years.

From an accounting perspective, this creates a specific expense recognition pattern. The immediate grant will be recognized upfront as compensation expense, while the restricted shares will be expensed over the three-year vesting period (33% in year one, 33% in year two, and 34% in year three). The acceleration provisions for certain termination scenarios create contingent liabilities that could alter this expense timing.

The use of the NASDAQ employment inducement exemption (Rule 5635(c)(4)) indicates this package was structured outside standard plan parameters to provide competitive compensation for the new CEO. This approach is common for incoming executives but does create immediate dilution for existing shareholders. Without context on Duluth's total outstanding shares, however, the relative dilutive impact cannot be precisely quantified.

MOUNT HOREB, Wis., May 05, 2025 (GLOBE NEWSWIRE) -- Duluth Holdings Inc. (dba, Duluth Trading Company) (“Duluth Trading” or the “Company”) (NASDAQ: DLTH), a lifestyle brand of men’s and women’s workwear, casual wear, outdoor apparel, and accessories, today announced that it made an inducement grant to Ms. Stephanie L. Pugliese in connection with her employment as the Company’s new President and Chief Executive Officer, effective May 5, 2025, the material terms of which were previously disclosed.

The Company granted a total of 1,759,532 shares of Class B common stock to Ms. Pugliese pursuant to the terms of the Inducement Stock Award Agreement and the Inducement Restricted Stock Award Agreement, entered between the Company and Ms. Pugliese on May 5, 2025, each as a material inducement to Ms. Pugliese’s hiring.

Pursuant to the Inducement Stock Award Agreement, 586,511 shares were granted to Ms. Pugliese on May 5, 2025. If Ms. Pugliese terminates her employment without good reason or is terminated by the Company for cause prior to May 5, 2026, she will be required to reimburse the Company for a pro rata portion of the 586,511 shares granted to Ms. Pugliese under such agreement. In connection with the 1,173,021 shares of restricted stock granted to Ms. Pugliese pursuant to the Inducement Restricted Stock Award Agreement, (i) 33% percent of such shares will vest on May 5, 2026, (ii) 33% percent of such shares will vest on May 5, 2027, and (iii) the remaining 34% of the shares will vest May 5, 2028. If Ms. Pugliese’s employment with the Company is terminated (i) due to her death, (ii) due to her disability, (iii) without cause, or (iv) by Ms. Pugliese for good reason, then all unvested stock will vest immediately. If her employment with the Company is terminated for any other reason, all unvested stock will be forfeited and revert to the Company.

The stock awards were granted outside the terms of the Company’s 2024 Equity Incentive Plan and were approved by the Company’s Board of Directors, Compensation Committee, and the Subcommittee of the Compensation Committee of the Board of Directors, consisting of the independent directors of the Compensation Committee, in reliance on the employment inducement exemption under NASDAQ Listing Rule 5635(c)(4), which requires public announcement of inducement awards. Pursuant to the requirements of that rule, the Company is issuing this press release.

About Duluth Trading

Duluth Trading is a lifestyle brand for the Modern, Self-Reliant American. Based in Mount Horeb, Wisconsin, we offer high quality, solution-based casual wear, workwear and accessories for men and women who lead a hands-on lifestyle and who value a job well-done. We provide our customers an engaging and entertaining experience. Our marketing incorporates humor and storytelling that conveys the uniqueness of our products in a distinctive, fun way, and are available through our content-rich website, catalogs, and “store like no other” retail locations. We are committed to outstanding customer service backed by our “No Bull Guarantee” - if it’s not right, we’ll fix it. Visit our website at http://www.duluthtrading.com.

Investor Contacts:
Tom Filandro
ICR, Inc.
(646) 277-1200
DuluthIR@icrinc.com

FAQ

Who is the new CEO of Duluth Holdings (DLTH) and when does she start?

Stephanie L. Pugliese is the new President and CEO of Duluth Holdings, starting effective May 5, 2025.

How many shares were granted to Duluth Holdings' new CEO in the inducement grant?

The total inducement grant consists of 1,759,532 shares of Class B common stock, including 586,511 immediate shares and 1,173,021 restricted shares.

What is the vesting schedule for DLTH CEO's restricted stock grant?

The restricted stock vests over three years: 33% on May 5, 2026, 33% on May 5, 2027, and 34% on May 5, 2028.

Under what conditions will Duluth Holdings' CEO's restricted shares vest immediately?

The shares will vest immediately if employment is terminated due to death, disability, without cause, or if the CEO leaves for good reason.

What happens to the initial 586,511 shares if DLTH's CEO leaves before May 5, 2026?

If she terminates without good reason or is terminated for cause before May 5, 2026, she must reimburse the company for a pro-rata portion of these shares.