Item 1.01. Entry Into A Material Definitive Agreement.
Purchase Agreement and Investment Transaction
On January 31, 2014, YOU On Demand Holdings, Inc. (the "Company") entered into a
Series E Preferred Stock Purchase Agreement (the "Purchase Agreement") with C
Media Limited ("C Media") and certain other purchasers (collectively, the
"Investors"), pursuant to which the Company issued to the Investors an aggregate
of 14,285,714 shares of Series E Convertible Preferred Stock of the Company (the
"Series E Preferred Stock") for $1.75 per share, or a total purchase price of
$25 million. Among the 14,285,714 shares of Series E Preferred Stock issued to
the Investors, (i) 1,142,857 shares were issued upon the conversion of that
certain convertible note issued to C Media in principal amount of $2,000,000,
(ii) 10,857,143 shares were issued for an aggregate purchase price of $19
million, and (iii) 2,285,714 shares were issued upon the conversion of 2,285,714
shares of Series D 4% Convertible Preferred Stock, par value $0.001 per share
("Series D Preferred Stock") held by C Media, which constitute all of the issued
and outstanding shares of Series D Preferred Stock, into the Series E Preferred
Stock pursuant to the Purchase Agreement.
In connection with the above transaction (the "Series E Financing"), the Company
is obligated to file one or more registration statements with the U.S.
Securities and Exchange Commission (the "Commission") to register the
Registrable Securities, as defined in the Purchase Agreement. The Company agreed
to use its reasonable best efforts to cause each registration statement to
become effective as soon as practicable. If the first registration statement is
not effective by June 30, 2014 if subject to review by the Commission, or within
45 days of filing with the Commission if not subject to review, the Company will
be obligated to pay to the Investors, pro rata based on the proportion of the
total purchase price paid by each Investor in an aggregate amount equal to 1% of
the purchase price paid by the Investors for each 30-day period or pro rata for
any portion thereof following June 30, 2014 until the registration statement is
declared effective; provided, however, that in no event should the aggregate
amount of payments relating to a delay in registration exceed, in the aggregate,
10% of the total purchase price paid by the Investors. If the Commission, by
written or oral comment or otherwise, limits the Company's ability to file, or
prohibits or delays the filing of, a registration statement with respect to any
or all of the Registrable Securities which were not included in the first
registration statement or any subsequent registration statement because of a
Registration Cap, as defined in the Purchase Agreement, it will not be deemed to
be a breach or default by the Company under the Purchase Agreement of its
The foregoing summary does not purport to be a complete statement of the
parties' rights and obligations under the Purchase Agreement or a complete
explanation of the material terms thereof. The foregoing summary is qualified in
its entirety by reference to the Purchase Agreement attached hereto as Exhibit
In addition, on January 31, 2014, Mr. Shane McMahon, the Company's Chairman and
the holder of all of the Company's issued and outstanding shares of Series A
Preferred Stock, par value $0.001 ("Series A Preferred Stock"), entered into an
Exchange Agreement with C Media that obligates Mr. McMahon to exchange all
7,000,000 of the shares of Series A Preferred Stock held by him for 933,333
shares of Series E Preferred Stock issued to C Media pursuant to the Purchase
Series E Preferred Stock
In connection with Purchase Agreement, the Company filed a Certificate of
Designation of Series E Convertible Preferred Stock with the Secretary of State
of the State of Nevada (the "Certificate of Designation") on January 31, 2014,
which became effective upon filing. Pursuant to the Certificate of Designation,
there are 16,500,000 shares of Series E Preferred Stock authorized for issuance.
The holders of Series E Preferred Stock are entitled to vote on all matters
submitted to a vote of the Company's stockholders and are entitled to the number
of votes equal to the lesser of (i) the number of whole shares of common stock
into which such shares of Series E Preferred Stock are convertible at the record
date for the determination of stockholders entitled to vote on such matters, and
(ii) the number of whole shares of common stock issuable if the conversion price
of the shares of Series E Preferred Stock is the closing trading price of the
Company's common stock as of the end of the trading day immediately preceding
the closing date of the transactions contemplated by the Purchase Agreement. In
addition, the holder of the shares of Series E Preferred Stock are entitled to
. . .
Item 3.02. Unregistered Sales of Equity Securities.
The information pertaining to the sale of shares of the Company's Series E
Preferred Stock in connection with the offering and the issuance of warrants to
Chardan discussed in Item 1.01 of this Form 8-K is incorporated herein by
reference in its entirety. The issuance of the shares of Series E Preferred
Stock and the underlying securities to the Investors pursuant to the Purchase
Agreement and the issuance of warrants to Chardan were not registered under the
Securities Act of 1933, as amended (the "Securities Act") and may not be offered
or sold in the United States absent registration or an applicable exemption from
The Company issued the shares of Company's Series E Preferred Stock to the
Investors and the warrants to Chardan in reliance on the exemption from
registration provided by Section 4(a)(2) of the Securities Act for the offer and
sale of securities not involving a public offering and Rule 506 of Regulation D
promulgated thereunder. Each of the Investors and Chardan represented that it is
an accredited investor as defined in Rule 501(a) under the Securities Act and
that there was no general solicitation or advertising in connection with the
offer and sale of the shares.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Simultaneous with closing of the Series E Financing, Mr. Xuesong Song
director of the Company, was appointed as the Company's Executive Chairman, a
newly created office of the Company, pursuant to the Company's Second Amended
and Restated Bylaws, as described under Item 5.03 of this report. Mr. McMahon
who is the Chairman of the Company, will continue to serve as the Company's
principal executive officer.
Resignation and Appointment of Directors
Also upon the closing of the Series E Financing, Mr. Michael Birkin
resigned from the board of directors of the Company. Mr.
and Mr. Jackson's
resignations were not a result of any disagreement
with the Company on any matter relating to the Company's operations, policies or
Messrs. Clifford H. Higgerson
, Jin Shi
and Arthur Wong
were appointed as
directors of the Company. The board of directors determined that each newly
elected director is an "independent director" as defined by Rule 5605(a)(2) of
the NASDAQ Listing Rules.Mr. Higgerson
has more than 40 years of experience in research, consulting,
planning and venture investing primarily in the telecommunications industry,
with an emphasis on carrier systems and equipment. In 2006, he became a partner
with Walden International
, a global venture capital firm focused on four key
industry sectors: communications, electronics/digital consumer software and IT
services, and semiconductors. Mr. Higgerson
was a founding partner of
ComVentures from 1986 to 2005, and has been a general partner with Vanguard
since 1991. He currently serves as a member of the board of
directors of Aviat Networks, Inc., Kotura Inc.
, Xtera Communications Inc.
Ygnition Networks, Inc.
, Ormet Circuits, Inc.
, Thrupoint, Inc.
Windpower. He served as a member of the Stratex board of directors from March
to January 2007
and served on the Compensation and Strategic Business
Development Committees. He previously served as a member of the board of
directors of Hatteras Networks Inc.
and World of Good. Mr. Higgerson
MBA from the University of California at Berkeley
, and a BS from the University
has been a managing partner of Chum Capital Group Limited
since 2007, a
merchant banking firm that invests in Chinese growth companies and advises them
on financings, mergers & acquisitions and restructurings. He is also the
independent director of Pingtan Marine Enterprise Limited ("Pingtan Marine"),
one of the largest deep-sea fishing companies in China
. From 2011 through 2013,
served as the chief executive officer and a director on the board of
China Growth Equity Investment Limited
, which acquired Pingtan Marine in
. From 2010 through 2011, he served as the vice-chairman and a
director of the board of China Growth Equity Investment Limited
From 2006 through 2009, Mr. Shi
served as the chief executive officer and a
director of the board of ChinaGrowth North Acquisition Corporation
acquired UIB Group Limited in January 2009
, the second largest insurance
brokerage firm in China
. From 2006 through 2009, Mr. Shi
also served as the
chief financial officer and a director of the board of ChinaGrowth South
, which acquired Olympia Media Holdings Ltd.
, the largest privately-owned newspaper aggregator and operator in China
has also been the chairman of Shanghai RayChem Industries Co., Ltd.
research & development based active pharmaceutical ingredient producer, since he
founded the company in 2005. Mr. Shi
is also the president of PharmaSource Inc.
a company he founded in 1997. Mr. Shi
received an EMBA from Guanghua School of
, Peking University
and a BS degree in Chemical Engineering from
is advisor and part-time CFO of Beijing Radio Cultural Transmission
("Beijing Radio"). Prior to joining Beijing Radio, Mr. Wong
served as CFO of Shanghai GreenTree Inns Hotel Management Group
, Shanghai Nobao
Renewable Energy and Henan Asia New-Energy. From 1982 to 2008, Mr. Wong
years at Deloitte
, including in Hong Kong
, San Jose
positions including TMT (Technology, Media, Telecom) leader for northern China
national media sector leader, audit leader for northern China
, lead partner for
venture capital strategic partnership programs and representative of Deloitte
In addition to his role at Beijing Radio, Mr. Wong
serves as a board member and
chairperson of the audit committee of the following companies: VisionChina Media
Inc. (NASDAQ: VISN), China Automotive Systems, Inc. (NASDAQ: CAAS), Daqo New
Energy Corp. (NYSE: DQ), Besunyen Holdings Company Limited (SEHK: 926) and
Termbray Petro-king Oilfield Services Limited (SEHK: 2178). Mr. Wong
is a member
of the American Institute of Certified Public Accountants
, the Hong Kong
Institute of Certified Public Accountants
and the Chartered Association of
. Mr. Wong
holds a Bachelor of Science in Applied Economics
from University of San Francisco
and a Higher Diploma of Accountancy from The
Hong Kong Polytechnic University
In connection with the appointment of the new directors, the board of directors
also adopted the following resolutions with respect to the composition of each
of the committees of the board:
Each of Mr. Wong
and Mr. Higgerson
was appointed to serve with Mr. James Cassano
. . .
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
1) Certificate of Designation
The information pertaining to the Certificate of Designation discussed in Item
1.01 of this Form 8-K is incorporated herein by reference in its entirety.
2) Amendment to the Bylaws
On January 31, 2014
, the board of directors of the Company adopted the Second
Amended and Restated Bylaws, which revised the Company's former bylaws to create
the office of Executive Chairman and adjust the powers and duties of Chairman
and Chief Executive Officer accordingly.
The summary herein is qualified in its entirety by reference to the Second
Amended and Restated Bylaws, a copy of which is attached hereto as Exhibit 3.1
and is incorporated herein by reference.
Item 8.01. Other Events.
Upon the closing of the Series E financing, the Company formed a financial
oversight committee to aid the board of directors in discharging its
responsibilities relating to the oversight of the Company's financial plans and
policies of the Company and the implementation of such plans and policies. The
members of the financial oversight committee include Shane McMahon
, Xuesong Song
, Marc Urbach
, Jin Shi
and Rainer Li
. Mr. McMahon
as Chair of the committee.
Item 9.01. Financial Statements and Exhibits.
Exhibit No. Description
3.1 Second Amendment and Restated Bylaws, adopted on January 31, 2014
4.1 Series E Convertible Preferred Stock Certificate of Designation
10.1 Form of Series E Preferred Stock Purchase Agreement, dated as of
January 31, 2014, between the Company and the Investors
10.2 Employment Agreement, dated as of January 31, 2014, by and between
the Company and Mr. McMahon.
10.3 Employment Agreement, dated as of January 31, 2014, by and between
the Company and Mr. Liu.
10.4 Employment Agreement, dated as of January 31, 2014, by and between
the Company and Mr. Urbach.
10.5 Employment Agreement, dated as of January 31, 2014, by and between
the Company and Mr. Song.
10.6 Amendment No. 4 to Convertible Promissory Note in $3,000,000
principal amount issued to Shane McMahon.
99.1 Press Release, dated as of February 3, 2014