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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements
of Certain Officers.
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On June 21, 2018, Propel Media, Inc. (the
“
Company
”) entered into an employment agreement with each of Marv Tseu, the Company’s Chief Executive
Officer, and David Shapiro, the Company’s Chief Operating Officer, and, on June 22, 2018, the Company entered into an employment
agreement with Daniela Nabors, the Company’s Chief Revenue Officer. The employment agreements are referred to herein as the
“
Employment Agreement
” and individually, as an “
Employment Agreement
.” Each of Messrs. Tseu
and Shapiro and Ms. Nabors is referred to herein as an “
Executive
” and together, as the “
Executives
.”
The Employment Agreements are effective as of April 1, 2018.
Each of
the Employment Agreements is for a term of three years, unless earlier terminated in accordance with its terms. The Employment
Agreements provide for a base salary of $700,000 for Mr. Tseu, $550,000 for Mr. Shapiro and $350,000 for Ms. Nabors. Each Executive
is also entitled to receive an annual performance bonus, with an annual target amount as determined by the Company’s board
of directors (the “
Board
”), subject to certain minimum target amounts for each Executive. The Executives also
are eligible to receive long-term incentive awards from the Company, including equity awards, as determined by the Board. In addition,
Ms. Nabors is eligible to receive a monthly commission bonus as determined by the Board.
If an Executive’s employment
is terminated by the Company without “cause” or by the Executive for “good reason” (each as defined in
the Employment Agreements), the Executive will be entitled to receive severance equal to (i) an amount equal to 100% of his or
her base salary, payable over the ensuing 12 months, (ii) an amount equal to 100% of his or her performance bonus earned over
the four fiscal quarters ending immediately prior to his or her termination, payable over the ensuing four fiscal quarters, (iii)
all valid expense reimbursements, and (iv) all accrued but unused paid time off. Ms. Nabors will also receive an amount equal
to 100% of her commission bonus earned over the 12 full calendar months ending immediately prior to her termination, payable over
the ensuing 12 months. All equity awards granted to the Executive will fully vest and will be exercisable for one year following
such termination. In addition, if Executive timely and properly elects health continuation coverage under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (“
COBRA
”), the Company will reimburse the Executive for the monthly COBRA
premium for a period not exceeding 12 months.
Each of the Employment Agreements restricts
the Executive from disclosing confidential information concerning the business of the Company.
On June 21, 2018, the Company also adopted
an Incentive Cash Bonus Plan (the “
Cash Bonus Plan
”), pursuant to which the Company may grant performance cash
bonuses to its employees. Each participant in the Cash Bonus Plan will have an annual target bonus as established by the Board,
which will be earned based on the Company’s performance against one or more financial measures as established by the Board.
The Board also will determine the percentage of the target bonus allocated to each such measure. The amount of the bonus earned
in respect of each such financial measure will be calculated using the ratio of the Company’s actual results for such financial
measure over the Company’s forecasted results for such financial measure (and, accordingly, may be either higher or lower
than the target bonus). The bonuses will be paid on a quarterly basis, commencing with the second fiscal quarter of 2018. However,
no bonus will be payable for a fiscal quarter if the Company’s actual EBITDA (as defined in the Cash Bonus Plan) is less
than 80% of its budgeted EBITDA or if the Company is, or upon payment of the bonus would be, out of compliance with its senior
credit facility. The Cash Bonus Plan provides for an additional annual bonus if the Company’s actual EBITDA for the fiscal
year exceeds 110% of its forecasted EBITDA for the fiscal year, with each participant eligible to receive his or her pro rata share
(based on the Executives’ annual target performance bonuses) of a bonus pool equal to 15% of such excess.
Pursuant to the Employment Agreements and
the Cash Bonus Plan, effective on June 21, 2018, the Company determined that the annual target performance bonus amount for Mr.
Tseu would be $450,000 and for Mr. Shapiro would be $600,000 and, effective on June 22, 2018, the Company determined that the annual
target performance bonus amount for Ms. Nabors would be $100,000. Each performance bonus will be earned 30% based on the revenue
of the Company, 60% based on the EBITDA of the Company and 10% based on the EBITDA of DeepIntent Technologies, Inc., the Company’s
wholly owned subsidiary. For fiscal year 2018, the performance bonuses will be prorated to cover only the period from April 1,
2018 through December 31, 2018. In addition, each Executive was granted the right to participate in any additional annual bonus
payable under the Cash Bonus Plan.
Consistent with her Employment Agreement,
Ms. Nabors will continue to receive a monthly commission bonus based on the Company’s gross profit, excluding certain divisions
of the Company’s business. The Company pays her a bonus equal to 0.50% of the Company’s monthly gross profit, excluding
certain divisions of the Company’s business, as reported on the Company’s financial statements, if such gross profit
reaches a specified threshold in such month, and 0.25% of the Company’s gross profit, if such gross profit is below such
specified threshold in such month. However, at the end of each fiscal quarter, if the Company’s aggregate gross profit for
such quarter reaches a specified threshold, the gross profit bonus for any month during such quarter that was calculated at 0.25%
of the Company’s gross profit for such month shall be recalculated at 0.50% for such month and Ms. Nabors would receive the
difference of such recalculation at the end of such fiscal quarter.