8-K

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): January 26, 2016

PROPEL MEDIA, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	000-55360	47-2133177
(State or Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)
525 Washington Blvd, Suite 2620, Jersey City, New Jersey		07310
(Address of Principal Executive Offices)		(Zip Code)

(201) 539-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications 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-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e 4(c))

Item 1.01Entry into a Material Definitive Agreement.

On January 26, 2016, Propel Media, Inc. (the “Company”) entered into a Third Amendment (the “Amendment”) to the Unit Exchange Agreement (the “Exchange Agreement”), dated as of October 10, 2014, as amended, by and among the Company, Kitara Media Corp. (“Kitara”), Propel Media LLC, formerly known as Future Ads LLC (“Propel”), and the former members of Propel (the “Transferors”).

As previously reported, on January 28, 2015, the Company consummated the transactions contemplated by the Exchange Agreement and by the Agreement and Plan of Reorganization (the “Reorganization Agreement”), dated as of October 10, 2014, by and among Kitara, the Company, and Kitara Merger Sub, Inc. Upon consummation of such transactions, (i) Kitara and Propel became wholly-owned subsidiaries of the Company, (ii) the former stockholders of Kitara and certain of the Transferors became stockholders of the Company and (iii) the Company became the new publicly traded company.

Prior to the Amendment, the Exchange Agreement provided that, on or prior to June 30, 2016, $10,000,000 of additional consideration (the “Additional Consideration”) was payable by the Company to the Transferors in cash and/or shares of the Company’s common stock. The Amendment modifies the payment terms of the Additional Consideration by, among other things:

· Extending, from June 30, 2016 to June 30, 2019, the deadline for the payment of the Additional Consideration.

· Extending, from June 30, 2016 to June 30, 2019, the end of the period during which the Company and its affiliates are required to use their reasonable best efforts to complete equity financings that would raise sufficient net proceeds to pay the $10,000,000 of Additional Consideration in cash to the Transferors (the “Equity Financing Period”).

· Requiring the Company’s board of directors, at least two times per year during the Equity Financing Period, to determine, in its sole and absolute discretion, the amount, if any, of the Company’s working capital available to be used to pay the Additional Consideration in cash, taking into account such factors as it may deem relevant. If the Company’s board of directors determines that there is available working capital, the Company must use its reasonable best efforts to promptly obtain any required lender consent and, if such consent is obtained, must promptly pay to the Transferors an amount in cash equal to such available working capital.

· Permitting Mr. Pobre, on behalf of the Transferors, to elect, during the ten day period following each December 31^st during the Equity Financing Period, commencing with December 31, 2016, to receive any unpaid amount of the Additional Consideration in shares of the Company’s common stock.

The foregoing summary of the Amendment is qualified in its entirety by reference to the text of the Amendment, which is attached as an exhibit hereto and is incorporated herein by reference.

Item 9.01Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
2.1	Third Amendment, dated as of January 26, 2016, to the Unit Exchange Agreement, dated as of October 10, 2014, by and among Kitara Media Corp., Propel Media, Inc., formerly known as Kitara Holdco Corp., Propel Media LLC, formerly known as Future Ads LLC, Lowenstein Enterprises Corporation, Family Trust of Jared L. Pobre U/A DTD 12/13/2004, Newport Holding Trust and Neptune Capital Trust.

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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.

PROPEL MEDIA, INC.
By:	/s/ Robert Regular
	Name: Robert Regular Title: Chief Executive Officer

Dated: January 28, 2016

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Third Amendment, dated as of January 26, 2016, to the Unit Exchange Agreement, dated as of October 10, 2014, by and among Kitara Media Corp., Propel Media, Inc., formerly known as Kitara Holdco Corp., Propel Media LLC, formerly known as Future Ads LLC, Lowenstein Enterprises Corporation, Family Trust of Jared L. Pobre U/A DTD 12/13/2004, Newport Holding Trust and Neptune Capital Trust.

EX-2.1

Exhibit 2.1

THIRD AMENDMENT TO

UNIT EXCHANGE AGREEMENT

This Third Amendment (this “Amendment”) to the Unit Exchange Agreement (as amended and supplemented prior to the date hereof, the “Exchange Agreement”), dated as of October 10, 2014, is dated as of January 26, 2016, by and between Kitara Media Corp., a Delaware corporation (“Kitara”), Propel Media, Inc., formerly known as Kitara Holdco Corp., a Delaware corporation (“Holdco”), Propel Media LLC, formerly known as Future Ads LLC, a California limited liability company (“Future Ads”), Lowenstein Enterprises Corporation (“Lowenstein”), Family Trust of Jared L. Pobre, U/A DTD 12/13/2004 (“Pobre Trust”), Newport Holding Trust (“Newport”) and Neptune Capital Trust (“Neptune” and together with Kitara, Holdco, Future Ads, Lowenstein, Pobre Trust and Newport, the “Parties”).

W I T N E S S E T H:

WHEREAS, the Parties are party to the Exchange Agreement; and

WHEREAS, pursuant to Section 8.3 of the Exchange Agreement, the Exchange Agreement may be amended by a written agreement executed by the Parties; and

WHEREAS, the Parties previously amended certain provisions of the Exchange Agreement in the First Amendment to Unit Exchange Agreement dated as of December 23, 2014 and in the Second Amendment to Unit Exchange Agreement dated as of April 29, 2015; and

WHEREAS, the Parties desire to further amend certain provisions of the Exchange Agreement as set forth herein.

NOW THEREFORE, in consideration of the premises and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.Amendment to Exchange Agreement.

(a)Section 1.1 of the Exchange Agreement is hereby amended:

(i)by replacing the definition of “Equity Financing Period” with the following:

“Equity Financing Period” means the period between the Closing Date and the earlier of (i) the Early Equity Termination Date and (ii) June 30, 2019.”

; and

(ii)by inserting the following definition in alphabetical order:

““Lender Consent” shall mean (i) if that certain Financing Agreement, dated as of January 28, 2015, by and among Holdco, each subsidiary of Holdco listed as a “Borrower” on the signature pages thereto, each subsidiary of Holdco listed as a “Guarantor” on the signature pages thereto, the lenders from time to time party thereto, Highbridge Principal Strategies, LLC, and PNC Bank, National Association (the “Financing Agreement”), is then in effect, the consent of the Agents and the Required Lenders (each as defined in the Financing Agreement), and (ii) if any other credit agreement or similar document evidencing indebtedness for borrowed money to which Holdco or any Subsidiary of Holdco is a party is then in effect, any consent required of the agents or lenders under such document for the use by Holdco of its working capital to pay all or any portion of the Additional Consideration in cash.”

(b)Section 1.2 of the Exchange Agreement is hereby amended by adding the following rows in alphabetical order to the table of definitions:

Term	Section
Available Working Capital Amount	Section 2.3(b)
Early Election Date	Section 2.3(c)
Financing Agreement	Section 1.1

(c)Section 2.3 of the Exchange Agreement is hereby amended by replacing it in its entirety with the following:

“Section 2.3 Additional Consideration.

“(a) On or prior to June 30, 2019, Holdco shall pay to the Transferors, as additional consideration and in accordance with the Consideration Notice, $10,000,000 (the “Additional Consideration”) in cash and/or shares of Holdco Common Stock in accordance with Section 2.3(b); provided, that for purposes of any cross-references contained in the Financing Agreement to the definition of Additional Consideration (as defined in this Agreement), the term "Additional Consideration" shall also include each Available Working Capital Amount (as defined in Section 2.3(b) below).

“(b) During the Equity Financing Period, Holdco and its Affiliates shall use their reasonable best efforts to issue additional shares of Holdco Common Stock or other equity securities of Holdco in one or more offerings, pursuant to which Holdco will raise sufficient net proceeds to enable Holdco to pay to the Transferors the Additional Consideration in cash without violation of any express covenants in any loan documents to which Holdco is a party by (including with respect to the Debt Financing so long as those obligations remain applicable) (such equity offering or offerings, the “Equity Capital Raise”). As promptly as practicable following completion of each Equity Capital Raise, Holdco shall pay a portion of the net proceeds received from such Equity Capital Raise to the Transferors, unless otherwise instructed by a Transferor, in accordance with the Consideration Notice. With respect to the Equity Capital Raises as provided in this Section 2.3(b), the parties acknowledge and agree that a material consideration for undertaking such Equity Capital Raises is to enable Holdco to be able to pay to the Transferors the full Additional Consideration in cash; provided, however, that if the Board of Directors of Holdco determines in good faith that the aggregate net proceeds raised pursuant to the Equity Capital Raises was insufficient for Holdco to pay the full Additional Consideration in cash, then Holdco shall pay to the Transferors such maximum amount that the Holdco Board of Directors determines in good faith. In addition, at least two times per year during the Equity Financing Period, in connection with the approval of the filing of the Company’s quarterly report on Form 10-Q for its second fiscal quarter and in connection with the approval of the filing of the Company’s annual report on Form 10-K, the Holdco Board of Directors shall determine, in its sole and absolute discretion, the amount, if any, of Holdco’s working capital available to be used to pay the Additional Consideration in cash to the Transferors in accordance with the immediately following sentence (the “Available Working Capital Amount”), taking into account such factors as it may deem relevant, including without limitation, the cash generated by Holdco’s operating activities during the fiscal quarters completed since its last such determination, the prospects for Holdco’s business, general economic and business conditions, any plans for acquisitions, capital expenditures or other investments in Holdco’s business and any other factors that the Holdco Board of Directors deems, in its sole and absolute discretion, germane to such determination. If the Holdco Board of Directors determines that there is an Available Working Capital Amount, Holdco shall use its reasonable best efforts to promptly obtain any applicable Lender Consent and, if such consent is obtained, promptly shall pay the Available Working Capital Amount in cash to the Transferors, unless otherwise instructed by a Transferor, in accordance with the Consideration Notice. The difference between the aggregate amount paid to the Transferors pursuant to this Section 2.3(b), including out of Holdco’s working capital, and the Additional Consideration, is referred to in this Agreement as the “Capital Raise Deficit Amount.” In the event of a Capital Raise Deficit Amount at the end of the Equity Financing Period, Holdco shall, in accordance with the Consideration Notice, unless otherwise instructed by a Transferor, issue and deliver to the Transferors shares of Holdco Common Stock valued at the Capital Raise Deficit Amount. For purposes of the preceding sentence, each share of Holdco Common Stock will be valued at the closing market price of the Holdco Common Stock as reported on NASDAQ or such other national securities exchange on which the Holdco Common Stock is listed (or if not so listed, the bid price on the over-the-counter bulletin board) on the date prior to the date on which the Additional Consideration is paid to the Transferors. The shares of Holdco Common Stock issued and delivered to the Transferors pursuant to this Section 2.3, if any, shall not be subject to the Future Ads Lockup Agreements.

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“(c) If, as of any December 31^st occurring during the Equity Financing Period commencing with December 31, 2016 (each an “Early Election Date”), Holdco has not been able to successfully complete the Equity Capital Raise or otherwise pay the Additional Consideration in full in accordance with Section 2.3(b), then during the ten Business Day period following any such Early Election Date, Jared Pobre, on behalf of the Transferors, may elect to receive the Additional Consideration (or, if applicable, the Capital Raise Deficit Amount) in shares of Holdco Common Stock (the date of such election, the “Early Equity Termination Date”) valued at the closing market price of the Holdco Common Stock as reported on NASDAQ or such other national securities exchange on which the Holdco Common Stock is listed (or if not so listed, the bid price on the over-the-counter bulletin board) as of the close of market on the Early Equity Termination Date (it being understood that if a closing price or bid price, as applicable, is not reported on such day, then the parties shall value the stock at the last closing price or bid price, as applicable, reported).”

2.Governing Law. This Amendment shall be governed in all respects in accordance with the provisions of Section 8.9 of the Exchange Agreement.

3.No Other Amendment. Except as amended hereby, the Exchange Agreement shall remain in full force and effect. By executing this Amendment below, each of the Parties certifies that this Amendment has been executed and delivered in compliance with the amendment provisions of the Exchange Agreement.

4.Counterparts. This Amendment may be executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Parties.

5.Facsimile or Portable Document File Signature. This Amendment may be executed by facsimile or portable document file signature and a facsimile or portable document file signature shall constitute an original for all purposes.

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives as of the date hereof.

PROPEL MEDIA, INC.
By:	/s/ Robert Regular
Name: Title:	Robert Regular CEO
KITARA MEDIA CORP.
By:	/s/ Robert Regular
Name: Title:	CEORobert Regular
PROPEL MEDIA LLC
By:	/s/ Robert Regular
Name: Title:	Robert Regular CEO
LOWENSTEIN ENTERPRISES CORPORATION
By:	/s/ Jared Pobre
Name: Title:	Jared Pobre CEO
FAMILY TRUST OF JARED L. POBRE, U/A DTD 12/31/2004
By:	/s/Jared Pobre
Name: Title:	Jared Pobre Trustee
NEWPORT HOLDING TRUST
By:	/s/ David McNair
Name: Title:	David McNair Managing Trustee
NEPTUNE CAPITAL TRUST
By:	/s/ Brian Mason
Name: Title:	Brian Mason Managing Trustee

Signature Page to THIRD Amendment to Unit Exchange Agreement

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