Exhibit 10.4
THIS WARRANT AND THE COMMON
SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS
WARRANT AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO SUN NEW
MEDIA, INC. THAT SUCH REGISTRATION IS NOT REQUIRED
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Right to Purchase
shares of Common Stock of Sun
New Media, Inc. (subject to adjustment as provided
herein)
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CLASS B COMMON STOCK PURCHASE
WARRANT
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No. 2007-B-003
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Issue Date: March
,
2007
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SUN NEW MEDIA, INC., a corporation
organized under the laws of the State of Minnesota (the
“Company”), hereby certifies that, for value received,
the “Holder”, is entitled, subject to the terms set
forth below, to purchase from the Company at any time after the
Issue Date until 5:00 p.m., E.S.T on the fifth (5
th ) anniversary of the Issue Date (the
“Expiration Date”), up to
fully
paid and nonassessable shares of Common Stock at a per share
purchase price of $1.50. The aforedescribed purchase price
per share, as adjusted from time to time as herein provided, is
referred to herein as the “Purchase Price.” The
number and character of such shares of Common Stock and the
Purchase Price are subject to adjustment as provided herein.
The Company may reduce the Purchase Price without the consent of
the Holder. Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in that certain
Subscription Agreement (the “ Subscription Agreement
”), dated March , 2007,
entered into by the Company and Holders of the Warrants.
As used herein the following terms,
unless the context otherwise requires, have the following
respective meanings:
(a)
The term “ Company ” shall include Sun New
Media, Inc. and any corporation which shall succeed or assume the
obligations of Sun New Media, Inc. hereunder.
(b)
The term “ Common Stock ” includes (a) the
Company’s Common Stock, $0.01 par value per share, as
authorized on the date of the Subscription Agreement, and (b) any
other securities into which or for which any of the securities
described in (a) may be converted or exchanged pursuant to a
plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
(c)
The term “ Other Securities ” refers to any
stock (other than Common Stock) and other securities of the Company
or any other person (corporate or otherwise) which the holder of
the Warrant at any time shall be entitled to receive, or shall have
received, on the exercise of the Warrant, in lieu of or in addition
to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock
or Other Securities pursuant to Section 5 or
otherwise.
(d)
The term “ Warrant Shares ” shall mean the
Common Stock issuable upon exercise of this Warrant.
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1.
Exercise of Warrant .
1.1.
Number of Shares Issuable upon Exercise . From and
after the Issue Date through and including the Expiration Date, the
Holder hereof shall be entitled to receive, upon exercise of this
Warrant in whole in accordance with the terms of
subsection 1.2 or upon exercise of this Warrant in part in
accordance with subsection 1.3: (A) shares of Common Stock of
the Company, subject to adjustment pursuant to Section 4; and
(B) a Class C Warrant to purchase that number of shares of Common
Stock equal to the Warrant Shares issued upon exercise of this
Warrant. This Class C Warrant will be on the same terms and
conditions as this Warrant, except for the Purchase Price which
shall be $2.00 (subject to adjustment as provided
herein).
1.2.
Full Exercise . This Warrant may be exercised in full
by the Holder hereof by delivery of an original or facsimile copy
of the form of subscription attached as Exhibit A hereto (the
“Subscription Form”) duly executed by such Holder and
surrender of the original Warrant within four (4) days of exercise,
to the Company at its principal office or at the office of its
Warrant Agent (as provided hereinafter), accompanied by payment, in
cash, wire transfer or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying
the number of shares of Common Stock for which this Warrant is then
exercisable by the Purchase Price then in effect.
1.3.
Partial Exercise . This Warrant may be exercised in
part (but not for a fractional share) by surrender of this Warrant
in the manner and at the place provided in subsection 1.2
except that the amount payable by the Holder on such partial
exercise shall be the amount obtained by multiplying (a) the
number of whole shares of Common Stock designated by the Holder in
the Subscription Form by (b) the Purchase Price then in
effect. On any such partial exercise, the Company, at its
expense, will forthwith issue and deliver to or upon the order of
the Holder hereof a new Warrant of like tenor, in the name of the
Holder hereof or as such Holder (upon payment by such Holder of any
applicable transfer taxes) may request, the whole number of
remaining shares of Common Stock for which such Warrant may still
be exercised.
1.4.
Fair Market Value . Fair Market Value of a share of Common
Stock as of a particular date (the “Determination
Date”) shall mean:
(a)
If the Company’s Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc.
Automated Quotation (“ NASDAQ ”), National
Market System, the NASDAQ SmallCap Market or the American Stock
Exchange, LLC, then the closing or last sale price, respectively,
reported for the last business day immediately preceding the
Determination Date;
(b)
If the Company’s Common Stock is not traded on an exchange or
on the NASDAQ National Market System, the NASDAQ SmallCap Market or
the American Stock Exchange, Inc., but is traded in the
over-the-counter market, then the average of the closing bid and
ask prices reported for the last business day immediately preceding
the Determination Date;
(c)
Except as provided in clause (d) below, if the Company’s
Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by
arbitration in accordance with the rules then standing of the
American Arbitration Association, before a single arbitrator to be
chosen from a panel of persons qualified by education and training
to pass on the matter to be decided; or
(d)
If the Determination Date is the date of a liquidation, dissolution
or winding up, or any event deemed to be a liquidation, dissolution
or winding up pursuant to the Company’s charter, then all
amounts to be payable per share to holders of the Common Stock
pursuant to the charter in the event of such liquidation,
dissolution or winding up, plus all other amounts to be
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payable per share in respect of the
Common Stock in liquidation under the charter, assuming for the
purposes of this clause (d) that all of the shares of Common
Stock then issuable upon exercise of all of the Warrants are
outstanding at the Determination Date.
1.5.
Company Acknowledgment . The Company will, at the time of
the exercise of the Warrant, upon the request of the Holder hereof
acknowledge in writing its continuing obligation to afford to such
Holder any rights to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of
this Warrant. If the Holder shall fail to make any such request,
such failure shall not affect the continuing obligation of the
Company to afford to such Holder any such rights.
1.6.
Trustee for Warrant Holders . In the event that a bank or
trust company shall have been appointed as trustee for the Holder
of the Warrants pursuant to Subsection 3.2, such bank or trust
company shall have all the powers and duties of a warrant agent (as
hereinafter described) and shall accept, in its own name for the
account of the Company or such successor person as may be entitled
thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Warrant pursuant
to this Section 1.
1.7
Delivery of Stock Certificates, etc. on Exercise . The
Company agrees that the shares of Common Stock purchased upon
exercise of this Warrant shall be deemed to be issued to the Holder
hereof as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been
surrendered and payment made for such shares as aforesaid. As soon
as practicable after the exercise of this Warrant in full or in
part, and in any event within five (5) business days thereafter,
the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder hereof, or as such Holder (upon payment by
such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or
certificates for the number of duly and validly issued, fully paid
and nonassessable shares of Common Stock (or Other Securities) to
which such Holder shall be entitled on such exercise, plus, in lieu
of any fractional share to which such Holder would otherwise be
entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any
other stock or other securities and property (including cash, where
applicable) to which such Holder is entitled upon such exercise
pursuant to Section 1 or otherwise.
2.
Cashless Exercise .
(a)
Except as described below, if a Registration Statement (as defined
in the Subscription Agreement) (“Registration
Statement”) is effective and the Holder may sell its shares
of Common Stock upon exercise hereof pursuant to the Registration
Statement, this Warrant may be exercisable in whole or in part for
cash only as set forth in Section 1 above. Beginning on March
, 2008, if no such Registration
Statement is available, or if after the Maturity Date (accelerated
or otherwise) of the Note issued pursuant to the Subscription
Agreement any sums due under the Note remains unpaid after any
applicable cure period, then payment upon exercise may be made at
the option of the Holder either in (i) cash, by wire transfer
or certified or official bank check payable to the order of the
Company equal to the applicable aggregate Purchase Price, (ii) by
cashless exercise in accordance with Section (b) below or
(iii) by a combination of any of the foregoing methods, for
the number of Common Stock specified in such form (as such exercise
number shall be adjusted to reflect any adjustment in the total
number of shares of Common Stock issuable to the holder per the
terms of this Warrant) and the holder shall thereupon be entitled
to receive the number of duly authorized, validly issued,
fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.
(b)
If the Notice of Exercise form elects a “cashless”
exercise, the Holder shall thereby be entitled to receive a number
of shares of Common Stock equal to (x) the excess of the Current
Market Value (as defined below) over the total cash exercise price
of the portion of the Warrant then
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being exercised, divided by (y) the
Market Price of the Common Stock as of the trading day immediately
prior to the date of exercise. For the purposes of this Warrant,
the term “ Current Market Value ” shall be an
amount equal to the Market Price of the Common Stock as of the
trading day immediately prior to the Exercise Date, multiplied by
the number of shares of Common Stock specified in such Notice of
Exercise Form, and “Market Price of the Common Stock”
shall be the average of the closing bid price of the Common Stock
(as reported by Bloomberg L.P. for the
