Document:

ex4_1.htm

EXHIBIT 4.1

 

NEITHER THIS WARRANT NOR THE SECURITIES INTO WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE SECURITIES ACT.

YOU ON DEMAND HOLDINGS, INC.

COMMON STOCK PURCHASE WARRANT

	
Initial Holder:

	
Original Issue Date: August 30, 2012

	  	
Vesting Date: February 28, 2013

	  	
No. of Shares Subject to Warrant:

	  	
Exercise Price Per Share: $4.25

	  	
Expiration Time:  5:00 p.m., New York City time, on August 30, 2017

YOU On Demand Holdings, Inc., a Nevada corporation (the “Company”), hereby certifies that, for value received, the Initial Holder shown above, or its permitted registered assigns (the “Holder”), is entitled to purchase from the Company up to the number of shares of its common stock, par value $0.001 per share (the “Common Stock”), shown above (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at the exercise price shown above (as may be adjusted from time to time as provided herein, the “Exercise Price”), at any time and from time to time on or after the vesting date indicated above (the “Vesting Date”), which is the six month anniversary of the original issue date indicated above (the “Original Issue Date”), and through and including the expiration time shown above (the “Expiration Time”), and subject to the following terms and conditions:

 

This Warrant is being issued pursuant to a Securities Purchase Agreement, dated August 30, 2012 (the “SPA”), by and between the Company, the Holder and the other parties thereto.

1.          Definitions.  In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the SPA.

2.          List of Warrant Holders.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder from time to time).  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

  

1

  

3.          List of Transfers; Restrictions on Transfer. The Company shall register any transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein. Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a “New Warrant”), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder.  The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant.

4.          Exercise and Duration of Warrant.

(a)         All or any part of this Warrant shall be exercisable by the registered Holder in any manner permitted by Section 4 of this Warrant at any time and from time to time on or after the Vesting Date and through and including the Expiration Time. At the Expiration Time, the portion of this Warrant not exercised prior thereto shall be and become void and of no value and this Warrant shall be terminated and shall no longer be outstanding.

(b)         The Holder may exercise this Warrant by delivering to the Company: (i) an exercise notice, in the form attached hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment by wire transfer of immediately available funds to an account designated by the Company of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised.  The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.”  The Holder shall be required to deliver the original Warrant, or any New Warrant that may have been previously issued, in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant, or any New Warrant that may have been previously issued, and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.

(c)         The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant pursuant to the terms hereof.

  

2

  

5.          Delivery of Warrant Shares.

(a)         Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Trading Days after the Exercise Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends.  “Trading Day” shall mean a date on which the Company’s Common Stock trades on its principal trading market.  The Holder, or any Person permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date.  The Company shall, upon the written request of the Holder, use its best efforts to deliver, or cause to be delivered, Warrant Shares hereunder electronically through the Depository Trust and Clearing Corporation (“DTCC”) or another established clearing corporation performing similar functions, if available; provided, that, the Company may, but will not be required to, change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through DTCC or another established clearing corporation performing similar functions, if available.  If as of the time of exercise the Warrant Shares constitute restricted or control securities, the Holder, by exercising, agrees not to resell them except in compliance with all applicable securities laws.

(b)         To the extent permitted by law, the Company’s obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

(c)         If the Company fails to cause its transfer agent to transmit to the Holder a certificate or the certificates (or, if electronically, a book-entry position) representing the Warrant Shares pursuant to the terms hereof by applicable delivery date, then the Holder will have the right to rescind such exercise.

6.          Charges, Taxes and Expenses. Issuance and delivery of certificates (or, if electronically, a book-entry position) representing the Warrant Shares shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or the Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

  

3

  

7.          Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

8.          Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

9.          Certain Adjustments to Exercise Price.  The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

(a)         Adjustments for Stock Splits and Combinations and Stock Dividends.  If the Company shall at any time or from time to time after the date hereof, effect a stock split or combination of the outstanding Common Stock or pay a stock dividend in shares of Common Stock, then the Exercise Price shall be proportionately adjusted.  Any adjustments under this Section 9(a) shall be effective at the close of business on the date the stock split or combination becomes effective or the date of payment of the stock dividend, as applicable.

(b)         Merger Sale, Reclassification, etc.  In case of any: (i) consolidation or merger (including a merger in which the Company is the surviving entity), (ii) sale or other disposition of all or substantially all of the Company’s assets or distribution of property to shareholders (other than distributions payable out of earnings or retained earnings), or reclassification, change or conversion of the outstanding securities of the Company or of any reorganization of the Company (or any other corporation the stock or securities of which are at the time receivable upon the exercise of this Warrant) or any similar corporate reorganization on or after the date hereof, then and in each such case the Holder of this Warrant, upon the exercise hereof at any time thereafter shall be entitled to receive, in lieu of the stock or other securities and property receivable upon the exercise hereof prior to such consolidation, merger, sale or other disposition, reclassification, change, conversion or reorganization, the stock or other securities or property to which such Holder would have been entitled upon such consummation if such Holder had exercised this Warrant immediately prior thereto.

 

  

4

  

 

(c)         Adjustment of Exercise Price Upon Issuance of Additional Shares of Common Stock.  In the event the Company, at any time after the Original Issue Date, sells or grants any option to purchase, or sells or grants any right to reprice, or otherwise disposes of or issues, any Common Stock or any securities convertible or exercisable into Common Stock at an effective price per share that is lower than the Exercise Price, then the Exercise Price shall be reduced, concurrently with such issue, to the consideration per share received by the Company for such issue.  Notwithstanding the foregoing, no adjustment will be made under this Section 9(c) in respect of an Exempt Issuance.  For purposes of this Warrant, “Exempt Issuance” means the issuance of (i) shares of Common Stock or options issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the board of directors of the Company, (ii) securities upon the exercise or exchange of or conversion of any Securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into Common Stock issued and outstanding on the date of this Warrant, provided that such securities have not been amended since the date of this Warrant to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities, (iii) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Company, provided that any such issuance shall only be to a Person (or to the equityholders of a Person) which is, itself or through its subsidiaries, an operating company or an asset in a business synergistic with the business of the Company and shall provide to the Company additional benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities, (iv) shares of Common Stock (including securities convertible or exercisable into Common Stock) issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the board of directors of the Company, (v) shares of Common Stock (including securities convertible or exercisable into Common Stock) issued to suppliers or third party service providers in connection with the provision of goods or services pursuant to transactions approved by the board of directors of the Company, (vi) shares of Common Stock (including securities convertible or exercisable into Common Stock) issued pursuant to the acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided, that such issuances are approved by the board of directors of the Company, and (vii) shares of Common Stock (including securities convertible or exercisable into Common Stock) issued in connection with sponsored research, collaboration, technology license, development, marketing or other similar agreements or strategic partnerships approved by the board of directors of the Company.  Notwithstanding the foregoing, no adjustment will be made under this Section 9(c) until the provisions of this Section 9(c) are approved by shareholders holding a majority of the outstanding voting securities of the Company and such approval is deemed effective in accordance with the rules and regulations of the SEC; provided, however, that the Company hereby agrees to use commercially reasonable efforts (including by engaging a proxy solicitation firm in connection therewith) to obtain such effective shareholder approval in connection with its next annual meeting of shareholders, but in any event prior to the Vesting Date.

10.        Call Right.  In the event that (i) the closing price of the Common Stock as reported by the applicable Trading Market shall equal or exceed $15.00 (subject to adjustment for any stock splits, combinations or similar events with respect to the Common Stock after the Original Issue Date) per share for any twenty (20) Trading Days during any thirty (30) consecutive Trading Days and (ii) there is an effective registration statement covering the Warrant Shares on file with the SEC (or all of the Warrant Shares may be sold pursuant to Rule 144 of the Securities Act without restriction), the Company may obligate the Holder to exercise this Warrant in full pursuant to its terms (a “Call”) within thirty (30) days (even if such thirty (30)-day period shall extend beyond the Expiration Time).

 

  

5

  

 

11.        No Fractional Shares.  No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of the Company’s Common Stock as reported by the applicable Trading Market on the Exercise Date.

12.        Notices.  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be delivered in accordance with the procedures set forth in Section 10.2 of the SPA.

13.        Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

14.        Miscellaneous.

(a)         This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

 

(b)         Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Warrant (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively in the state and federal courts sitting in the City of New York.  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, New York for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Warrant, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is improper.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HERETO (INCLUDING ITS AFFILIATES, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS WARRANT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

  

6

  

 

(c)         The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(d)         In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefore, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(e)         Prior to exercise of this Warrant, the Holder hereof shall not, by reason of by being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

(f)         No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

 

[Signature Page Follows]

 

  

7

  

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

	  	
YOU ON DEMAND HOLDINGS, INC.

	  	  	 
	  	
By: 

	 	 
	 	 	
Name:

	 
	 	 	
Title:

	 

Signature Page

Warrant

 

  

 

  

 

YOU ON DEMAND HOLDINGS, INC.

EXERCISE NOTICE

Ladies and Gentlemen:

(1)           The undersigned hereby elects to exercise its Warrant with respect to ______________ shares of Common Stock.  Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)           The holder hereby tenders the sum of $ ______________ to the Company in accordance with the terms of the Warrant.

(3)           Pursuant to this Exercise Notice, the Company shall deliver to the Holder the number of Warrant Shares determined in accordance with the terms of the Warrant and, in lieu of any fractional shares, cash.

 

	Dated:	 	 	HOLDER:
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	Print name
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	 	 
	 	 	 	Title:	 

 

  

 

  

 

YOU ON DEMAND HOLDINGS, INC.

FORM OF ASSIGNMENT

To be completed and signed only upon transfer of Warrant

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _________________ the right represented by the within Warrant to purchase _________________ shares of Common Stock to which the within Warrant relates and appoints __________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.

	
Dated:

	  	  	
TRANSFEROR:

	  	  	  
	  	  	
Print name

	  	  	  
	 	  	
By:

	  
	  	  	  	  
	  	  	
Title:

	  
	  	  	  	  
	  	  	
TRANSFEREE:

	  	  	  
	  	  	
Print name

	  	  	  
	  	  	
By:

	  
	  	  	  	  
	  	  	
Title:

	  
	
WITNESS:

	  	  	  
	  	  	
Address of Transferee:

	  	  	  	  
	
Print nameex4_2.htm

EXHIBIT 4.2

 

CERTIFICATE OF DESIGNATION

 

OF

 

SERIES C PREFERRED STOCK

 

OF

 

 

YOU ON DEMAND HOLDINGS, INC.

 

 

1.             Designation.  This series of Preferred Stock shall be designated as the “Series C Preferred Stock.”

 

2.             Authorization.  YOU On Demand Holdings, Inc. (the “Company”) shall have the authority to issue 250,000 shares of the Series C Preferred Stock, par value US$0.001 per share, of the Company (the “Series C Preferred Stock”).  Such number of shares may be increased or decreased, but not to a number less than the number of shares of Series C Preferred Stock then issued and outstanding, by resolution adopted by the full Board of Directors (the “Board”) of the Company.

 

3.             Rank.           The Series C Preferred Stock shall, with respect to dividend rights and rights on liquidation, winding up and dissolution, rank (a) on a parity with any other series of Preferred Stock hereafter established by the Board, and (b) prior to the Company’s Common Stock, par value $0.001 per share (“Common Stock”).

 

4.             Dividend Provisions.  The Series C Preferred Stock shall not be entitled to receive dividends.

 

5.             Liquidation Preference.

 

(a)           Upon the occurrence of a Liquidation Event (as defined below), the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, whether from capital, surplus or earnings, an amount per share (the “Liquidation Preference”) equal to $0.50, as may be adjusted from time to time plus all accrued, but unpaid dividends, whether declared or not.

 

(b)           If, upon the occurrence of a Liquidation Event, the assets and funds of the Company legally available for distribution to stockholders by reason of their ownership of stock of the Company shall be insufficient to permit the payment to such holders of Series C Preferred Stock, of the full aforementioned Liquidation Preference, then the entire assets and funds of the Company legally available for distribution to stockholders by reason of their ownership of stock of the Company shall be distributed ratably among the holders of Series C Preferred Stock.

 

  

1

  

 

(c)           For purposes of this Section 4, a “Liquidation Event” is any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, and upon the election of the holders of a majority of the then outstanding Series C Preferred Stock shall be deemed to be occasioned by, or to include, (i) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation, or other transaction in which control of the Company is transferred, but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company) unless the Company’s stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Company’s acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity or (ii) a sale of all or substantially all of the assets of the Company.

 

6.             Conversion.  The holders of the Series C Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

 

(a)           Subject to the terms and condi­tions of this Section 6, the holder of any share or shares of Series C Preferred Stock shall have the right, at its option at any time, to convert any such shares of Series C Preferred Stock into such number of fully paid and nonassessable shares of Common Stock as is obtained by (i) multiplying the number of shares of Series C Preferred Stock to be converted by $4.00, subject to adjustment as set forth in Section 6(c) (the “Original Issue Price”) and (ii) dividing the result by the Conversion Price.  For purposes of this Section 6(a), “Conversion Price” means the lesser of (x) the Original Issue Price and (y) the price per share paid by investors in the next underwritten public offering (a “Subsequent Public Financing”) of the Company’s common stock or preferred stock following the date of issuance of the Series C Preferred Stock (after giving effect to the conversion of any preferred stock and disregarding any common stock purchase warrants issued in connection with such underwritten public offering); provided, however, that the Conversion Price shall not, in any event, be less than $2.50, subject to adjustment as set forth in Section 6(c).  Notwithstanding the foregoing, the Conversion Price shall equal the Original Issue Price, and there shall be no adjustment to the Conversion Price resulting from the price per share paid by investors in a Subsequent Public Financing as set forth in this Section 6(a), until the provisions of this Section 6(a) are approved by shareholders holding a majority of the outstanding voting securities of the Company and such approval is deemed effective in accordance with the rules and regulations of the U.S. Securities and Exchange Commission; provided, however, that the Company hereby agrees to use commercially reasonable efforts (including by engaging a proxy solicitation firm in connection therewith) to obtain such effective shareholder approval in connection with its next annual meeting of shareholders, but in any event prior to the closing of a Subsequent Public Financing.

 

(b)           Mechanics of Conversion.  Before any holder of Series C Preferred Stock shall be entitled to convert the same into shares of Common Stock, he, she or it shall surrender the certificate or certificates therefor, duly endorsed, at the office of the Company or of any transfer agent, and shall give written notice to the Company at its principal corporate office, of the election to convert the same and shall state therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued.  The Company shall, as soon as practicable thereafter and in any event within three business days after such notice, issue and deliver at such office to such holder of Series C Preferred Stock, or to the nominee or nominees of such holder, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled as aforesaid.  Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series C Preferred Stock to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock as of such date.  If the conversion is in connection with an underwritten public offering of the Company’s Common Stock, the conversion may, at the option of any holder tendering Series C Preferred Stock for conversion, be conditioned upon the closing with the underwriters of the sale of the Company’s Common Stock pursuant to such offering, in which event the persons entitled to receive the Common Stock upon conversion of the Series C Preferred Stock shall not be deemed to have converted such Series C Preferred Stock until immediately prior to the closing of such public offering.

 

  

2

  

 

(c)           Conversion Adjustments.  The number of shares of Common Stock issuable upon conversion, the Original Issue Price and the Conversion Price shall be subject to adjustment from time to time as follows:

 

(i)           Adjustments for Subdivisions or Combinations of Common Stock.  In the event the outstanding shares of Common Stock shall be subdivided by stock split, stock dividend or otherwise, into a greater number of shares of Common Stock, Original Issue Price and the Conversion Price shall, concurrently with the effectiveness of such subdivision, be proportionately increased.  In the event the outstanding shares of Common Stock shall be combined or consolidated into a lesser number of shares of Common Stock, the Original Issue Price and the Conversion Price shall, concurrently with the effectiveness of such combination or consolidation, be proportionately decreased.

 

(ii)           Adjustments for Stock Dividends and Other Distributions.  In the event the Company makes, or fixes a record date for the determination of holders of Common Stock entitled to receive, any distribution (excluding repurchases of securities by the Company not made on a pro rata basis) payable in property or in securities of the Company other than shares of Common Stock, then and in each such event the holders of Series C Preferred Stock shall receive, at the time of such distribution, the amount of property or the number of securities of the Company that they would have received had their Series C Preferred Stock been converted into Common Stock on the date of such event.

 

(iii)           Adjustments for Reorganizations, Reclassifications or Similar Events.  If the Common Stock shall be changed into the same or a different number of shares of any other class or classes of stock or other securities or property, whether by capital reorganization, reclassification or otherwise, then each share of Series C Preferred Stock shall thereafter be convertible into the number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Company deliverable upon conversion of such shares of Series C Preferred Stock shall have been entitled upon such reorganization, reclassification or other event.

 

(iv)           Certificate as to Adjustments.  Upon the occurrence of each adjustment or readjustment pursuant to this Section 6, the Company at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series C Preferred Stock to which such adjustment pertains a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based.  The Company shall, upon the written request at any time of any holder of Series C Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder’s Series C Preferred Stock.

 

  

3

  

 

(d)           No Impairment.  The Company will not go through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, or avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by the Company pursuant to this Section 6, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the holders of Series C Preferred Stock against impairment.

 

(e)           Reservation of Stock Issuable Upon Conversion.  The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of the shares of Series C Preferred Stock such number of shares of its Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series C Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series C Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

 

(f)            Status of Converted or Contributed Shares.  In case any shares of Series C Preferred Stock are converted into Common Stock pursuant to this Section 6 or are contributed back to the Company (through repurchase or otherwise) after the date such shares of Series C Preferred Stock were first issued, all such shares so converted or contributed shall, upon such conversion or contribution, be cancelled and shall not be issuable by the Company.  The Company may from time to time take such appropriate corporate action as may be necessary to reduce accordingly the number of authorized shares of the Company’s Series C Preferred Stock

 

(g)           Limitations and Restrictions on Conversion.  The Company shall not effect any conversion of Series C Preferred Stock, and no holder of Series C Preferred Stock shall have the right to convert any portion of their Series C Preferred Stock, pursuant to Section 6(a) or otherwise, to the extent that after giving effect to such conversion, such holder (together with such holder’s affiliates) would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion unless such holder shall have, in its sole discretion, elected to increase such amount to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion.  For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by a holder of Series C Preferred Stock (together with such holder’s affiliates) shall include the number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of the holder’s Series C Preferred Stock beneficially owned by such holder or any of its affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by such holder of Series C Preferred Stock or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 6(h), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act.  To the extent that the limitation contained in this section applies, the determination of whether the Series C Preferred Stock is convertible (in relation to other securities owned by such holder of Series C Preferred Stock) and of which a portion of such holder’s Series C Preferred Stock is convertible shall be in the sole discretion of such holder. To ensure compliance with this restriction, such holder will be deemed to represent to the Company each time it delivers written notice the Company in accordance with Section 6(b) with respect to the conversion of Series C Preferred Stock that such holder has not violated the restrictions set forth in this paragraph, and the Company shall have no obligation to verify or confirm the accuracy of such determination.  For purposes of this Section 6(g), in determining the number of outstanding shares of Common Stock, a holder of Series C Preferred Stock may rely on the number of outstanding shares of Common Stock as reflected in a Company filing with the U.S. Securities and Exchange Commission, a public announcement by the Company, or any other notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding.  The provisions of this Section 6(g) may be waived by a holder with respect to the Series C Preferred Stock held by such holder, upon not less than sixty-one (61) days’ prior notice to the Company, and the provisions of this Section 6(g) shall continue to apply until such 61st day (or such later date, as determined by such holder).

 

  

4

  

 

7.             Voting Rights.  Except as provided in Section 8 and Section 9 hereof, and except for any other matters brought before the holders of Series C Preferred Stock for a vote of the holders of Series C Preferred Stock as a separate class, the holders of Series C Preferred Stock shall not be entitled to vote on matters submitted to a vote of the shareholders of the Company.  Without limiting the generality of the foregoing, the holders of the Series C Preferred Stock shall not be entitled to vote on an as converted basis with the holders of the Company’s Common Stock.

 

8.             Approval of Issuance of Company Warrants In a Financing Transaction.  At any time prior to August 30, 2013, the Company shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, issue any warrants to purchase the Company’s Common Stock to investors in a financing transaction without (in addition to any other vote required by law or the Articles of Incorporation) the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series C Preferred Stock, given in writing or by vote at a meeting, consenting, or voting (as the case may be) separately as a single class.

 

9.             Amendments.  The terms, conditions, rights and preferences contained in this Certificate of Designation may be amended, modified, waived, amended and restated or replaced in its entirety upon the approval of the Board with the consent of at least a majority of the then outstanding shares of Series C Preferred Stock voting as a separate class.

 

*     *     *     *     *

 

  

5

  

 

IN WITNESS WHEREOF, the foregoing Certificate of Designation has been duly executed on behalf of the Company by the undersigned on August 30, 2012.

 

	  	
YOU ON Demand Holdings, Inc.

	 	 
	  	
By: 

	/s/ Marc Urbach
	  	
Marc Urbach

	  	
President

SIGNATURE PAGE TO CERTIFICATE OF DESIGNATION

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00207-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00207-of-00352.parquet"}]]