Document:

Exhibit 10.4

     

    Exhibit
      10.4

     

     

    CLASS
      B WARRANT
      TO PURCHASE COMMON STOCK

     

    OF

     

    CHINA
      DIGITAL MEDIA CORPORATION (this “Warrant”)

    

    

    THIS
      WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
      HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED
      UNTIL
      (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR
      (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES
      ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH
      TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND
      SHALL
      BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES
      OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.

    

    

    ------------------------------------------

    

    

    This
      is
      to Certify That, FOR VALUE RECEIVED,     ,
      or its
      assigns (“Holder”), is entitled to purchase, subject to the provisions of this
      Class B Warrant,
      from China Digital Media Corporation, a Nevada corporation (the “Company”),
     
      (  )
      fully
      paid, validly issued and nonassessable shares of common stock, par value $0.001
      per share, of the Company (“Common Stock”) at a price per share of $1.20 (the
“Initial Exercise Price”), which exercise may take place at any time or from
      time to time during the period of six (6) years from the day which is ninety
      (90) days following the Company’s firm underwritten public offering of
      securities pursuant to a registration statement filed by the Company under
      the
      Securities Act (the “Public Offering”) or June 1, 2007 (the “Exercise Period”).
      This Warrant is subject to the lock-up provisions set forth in Section 2 of
      the
      Subscription Agreement. This Warrant comprises a portion of a Unit being sold
      by
      the Company pursuant to a Subscription Agreement dated November __, 2006 (the
      “Subscription Agreement”). Unless otherwise defined herein, terms defined in
      this Warrant shall have the meaning as set forth in the Subscription Agreement.
      The number of shares of Common Stock to be received upon the exercise of this
      Warrant and the price to be paid for each share of Common Stock may be adjusted
      from time to time as hereinafter set forth. The shares of Common Stock
      deliverable upon such exercise, and as adjusted from time to time, are
      hereinafter sometimes referred to as “Warrant Shares” and the exercise price of
      a share of Common Stock in effect at any time and as adjusted from time to
      time
      is hereinafter sometimes referred to as the “Exercise Price.” 

    

    (a) EXERCISE
      OF WARRANT; CANCELLATION OF WARRANT.

    

    (1) This
      Warrant may be exercised in whole or in part at any time or from time to time
      during the Exercise Period; provided, however, that (i) if either such day
      is a day on which banking institutions in the State of Nevada are authorized
      by
      law to close, then on the next succeeding day which shall not be such a day,
      and
      (ii) in the event of any merger, consolidation or sale of substantially all
      the assets of the Company as an entirety, which is anticipated to result in
      any
      distribution to the Company's stockholders prior to the commencement of the
      Exercise Period, the Company shall, as a condition precedent to such
      transaction, cause effective provisions to be made so that the Holder shall
      have
      the right to exercise this Warrant, in conjunction with such transaction, into
      the kind and amount of shares of stock and other securities and property
      (including cash) receivable by a holder of the number of shares of Common Stock
      into which this Warrant might have been exercisable immediately prior thereto.
      This Warrant may be exercised by presentation and surrender hereof to the
      Company at its principal office with the Purchase Form annexed hereto duly
      executed and accompanied by payment of the Exercise Price for the number of
      Warrant Shares specified in such form. As soon as practicable after each such
      exercise of the warrants, but not later than three (3) business days following
      the receipt of good and available funds, the Company shall issue and deliver
      to
      the Holder a certificate or certificate for the Warrant Shares issuable upon
      such exercise, registered in the name of the Holder or its designee. If this
      Warrant should be exercised in part only, the Company shall, upon surrender
      of
      this Warrant for cancellation, execute and deliver a new Warrant evidencing
      the
      rights of the Holder thereof to purchase the balance of the Warrant Shares
      purchasable thereunder. Upon receipt by the Company of this Warrant at its
      office in proper form for exercise accompanied by payment of the Exercise Price
      for the number of Warrant Shares specified in such form, the Holder shall be
      deemed to be the holder of record of the shares of Common Stock issuable upon
      such exercise, notwithstanding that the stock transfer books of the Company
      shall then be closed or that certificates representing such shares of Common
      Stock shall not then be physically delivered to the Holder.

     

    
      
         

      

      
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    (b) RESERVATION
      OF SHARES. The Company shall at all times reserve for issuance and/or delivery
      upon exercise of this Warrant such number of shares of its Common Stock as
      shall
      be required for issuance and delivery upon exercise of the
      Warrants.

    

    (c) STOCK
      FULLY PAID.
      The
      Company represents, warrants, covenants and agrees that all shares of Warrant
      Stock which may be issued upon the exercise of this Warrant or otherwise
      hereunder will, when issued in accordance with the terms of this Warrant, be
      duly authorized, validly issued, fully paid and nonassessable and free from
      all
      taxes, liens and charges created by or through the Company. The Company further
      covenants and agrees that during the period within which this Warrant may be
      exercised, the Company will at all times have authorized and reserved for the
      purpose of issuance upon exercise of this Warrant a number of shares of Common
      Stock equal to at least one hundred twenty percent (120%) of the aggregate
      number of shares of Common Stock to provide for the exercise of this Warrant.
      

    

    (d)  COVENANTS.
      The
      Company shall not by any action including, without limitation, amending the
      Articles of Incorporation or the by-laws of the Company, or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other action, avoid or seek to avoid the observance
      or
      performance of any of the terms of this Warrant, but will at all times in good
      faith assist in the carrying out of all such terms and in the taking of all
      such
      actions as may be necessary or appropriate to protect the rights of the Holder
      hereof against dilution (to the extent specifically provided herein) or
      impairment. Without limiting the generality of the foregoing, the Company will
      (i) not permit the par value, if any, of its Common Stock to exceed the then
      effective Warrant Price, (ii) not amend or modify any provision of the Articles
      of Incorporation or by-laws of the Company in any manner that would adversely
      affect the rights of the Holders of the Warrants, (iii) take all such action
      as
      may be reasonably necessary in order that the Company may validly and legally
      issue fully paid and nonassessable shares of Common Stock, free and clear of
      any
      liens, claims, encumbrances and restrictions (other than as provided herein)
      upon the exercise of this Warrant, and (iv) use its best efforts to obtain
      all
      such authorizations, exemptions or consents from any public regulatory body
      having jurisdiction thereof as may be reasonably necessary to enable the Company
      to perform its obligations under this Warrant.

    

    (e) FRACTIONAL
      SHARES. No fractional shares or script representing fractional shares shall
      be
      issued upon the exercise of this Warrant. With respect to any fraction of a
      share called for upon any exercise hereof, the Company, at its option, may
      either round the number of shares issuable up to the nearest whole share or
      shall pay to the Holder an amount in cash equal to such fraction multiplied
      by
      the current market value of a share, determined as follows:

    

    (1) If
      the
      Common Stock is listed on a national securities exchange or admitted to unlisted
      trading privileges on such exchange or listed for trading on the Nasdaq Global
      Market, the current market value shall be the last reported sale price of the
      Common Stock on such exchange or market on the last business day prior to the
      date of exercise of this Warrant or if no such sale is made on such day, the
      average of the closing bid and asked prices for such day on such exchange or
      market; or

    

    (2) If
      the
      Common Stock is not so listed or admitted to unlisted trading privileges, but
      is
      traded on the Nasdaq Capital Market, the current market value shall be the
      average of the closing bid and asked prices for such day on such market and
      if
      the Common Stock is not so traded, the current market value shall be the mean
      of
      the last reported bid and asked prices reported by the NASD Electronic Bulletin
      Board on the last business day prior to the date of the exercise of this
      Warrant; or

     

    
      
         

      

      
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    (3) If
      the
      Common Stock is not so listed or admitted to unlisted trading privileges and
      bid
      and asked prices are not so reported, the current market value shall be an
      amount, not less than book value thereof as at the end of the most recent fiscal
      year of the Company ending prior to the date of the exercise of the Warrant,
      determined in such reasonable manner as may be prescribed by the Board of
      Directors of the Company.

    

    (f)
      OWNERSHIP
      CAP AND EXERCISE RESTRICTION.
      Notwithstanding anything to the contrary set forth in this Warrant, at no time
      may a Holder of this Warrant exercise this Warrant if the number of shares
      of
      Common Stock to be issued pursuant to such exercise would exceed, when
      aggregated with all other shares of Common Stock owned by such Holder at such
      time, the number of shares of Common Stock which would result in such Holder
      beneficially owning (as determined in accordance with Section 13(d) of the
      Exchange Act and the rules thereunder) in excess of 9.9% of the then issued
      and
      outstanding shares of Common Stock; provided,
      however,
      that
      upon a holder of this Warrant providing the Company with sixty-one (61) days
      notice (pursuant to Section (l) hereof) (the "Waiver
      Notice")
      that
      such Holder would like to waive this Section (g) with regard to any or all
      shares of Common Stock issuable upon exercise of this Warrant, this Section
      (g)
      will be of no force or effect with regard to all or a portion of the Warrant
      referenced in the Waiver Notice; provided,
      further,
      that
      this provision shall be of no further force or effect during the sixty-one
      (61)
      days immediately preceding the expiration of the term of this
      Warrant

    

    (g) EXCHANGE,
      TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without
      expense, at the option of the Holder, upon presentation and surrender hereof
      to
      the Company or at the office of its stock transfer agent, if any, for other
      warrants of different denominations entitling the holder thereof to purchase
      in
      the aggregate the same number of shares of Common Stock purchasable hereunder.
      Upon surrender of this Warrant to the Company at its principal office or at
      the
      office of its stock transfer agent, if any, with the Assignment Form annexed
      hereto duly executed and funds sufficient to pay any transfer tax, the Company
      shall, without charge, execute and deliver a new Warrant in the name of the
      assignee named in such instrument of assignment and this Warrant shall promptly
      be cancelled. This Warrant may be divided or combined with other warrants which
      carry the same rights upon presentation hereof at the principal office of the
      Company or at the office of its stock transfer agent, if any, together with
      a
      written notice specifying the names and denominations in which new Warrants
      are
      to be issued and signed by the Holder hereof. The term “Warrant” as used herein
      includes any Warrants into which this Warrant may be divided or exchanged.
      Upon
      receipt by the Company of evidence satisfactory to it of the loss, theft,
      destruction or mutilation of this Warrant, and (in the case of loss, theft
      or
      destruction) of reasonably satisfactory indemnification, and upon surrender
      and
      cancellation of this Warrant, if mutilated, the Company will execute and deliver
      a new Warrant of like tenor and date. Any such new Warrant executed and
      delivered shall constitute an additional contractual obligation on the part
      of
      the Company, whether or not this Warrant so lost, stolen, destroyed, or
      mutilated shall be at any time enforceable by anyone.

    

    (h) RIGHTS
      OF
      THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights
      of
      a shareholder in the Company, either at law or equity, and the rights of the
      Holder are limited to those expressed in the Warrant and are not enforceable
      against the Company except to the extent set forth herein.

    

    (i) ANTI-DILUTION
      PROVISIONS. Subject to the provisions of Section l hereof, the Exercise Price
      in
      effect at any time and the number and kind of securities purchasable upon the
      exercise of the Warrants shall be subject to adjustment from time to time upon
      the happening of certain events as follows:

    

    (1) In
      case
      the Company shall hereafter (i) declare a dividend or make a distribution
      on its outstanding shares of Common Stock in shares of Common Stock,
      (ii) subdivide or reclassify its outstanding shares of Common Stock into a
      greater number of shares, or (iii) combine or reclassify its outstanding
      shares of Common Stock into a smaller number of shares, the Exercise Price
      in
      effect at the time of the record date for such dividend or distribution or
      of
      the effective date of such subdivision, combination or reclassification shall
      be
      adjusted so that it shall equal the price determined by multiplying the Exercise
      Price by a fraction, the denominator of which shall be the number of shares
      of
      Common Stock outstanding after giving effect to such action, and the numerator
      of which shall be the number of shares of Common Stock outstanding immediately
      prior to such action with an appropriate adjustment in the number of shares
      purchasable hereunder as described in Subsection (6). Such adjustment shall
      be
      made successively whenever any event listed above shall occur.

     

    
      
         

      

      
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    (2) Subject
      to the provisions of Subsection (6) below, in case the Company shall fix a
      record date for the issuance of rights or warrants to all of the holders of
      its
      Common Stock entitling them to subscribe for or purchase shares of Common Stock
      (or securities convertible into Common Stock) at a price (the “Subscription
      Price”) of $0.80 or less (which price shall be proportionately adjusted if any
      of the events in Subsections (1), (2), or (3) occur), the Exercise Price shall
      be adjusted so that the same shall equal the lower of (i) the price
      determined by multiplying the Exercise Price in effect immediately prior to
      the
      date of such issuance by a fraction, the numerator of which shall be the sum
      of
      the number of shares of Common Stock outstanding on the record date mentioned
      below and the number of additional shares of Common Stock which the aggregate
      offering price of the total number of shares of Common Stock so offered (or
      the
      aggregate conversion price of the convertible securities so offered) would
      purchase at such current market price per share of the Common Stock, and the
      denominator of which shall be the sum of the number of shares of Common Stock
      outstanding on such record date and the number of additional shares of Common
      Stock offered for subscription or purchase (or into which the convertible
      securities so offered are convertible) or (ii) in the event the
      Subscription Price is equal to or higher than the current market price but
      is
      less than the Exercise Price, the price determined by multiplying the Exercise
      Price in effect immediately prior to the date of issuance by a fraction, the
      numerator of which shall be the sum of the number of shares outstanding on
      the
      record date mentioned below and the number of additional shares of Common Stock
      which the aggregate offering price of the total number of shares of Common
      Stock
      so offered (or the aggregate conversion price of the convertible securities
      so
      offered) would purchase at the Exercise Price in effect immediately prior to
      the
      date of such issuance, and the denominator of which shall be the sum of the
      number of shares of Common Stock outstanding on the record date mentioned below
      and the number of additional shares of Common Stock offered for subscription
      or
      purchase (or into which the convertible securities so offered are convertible).
      Such adjustment shall be made successively whenever such rights or warrants
      are
      issued and shall become effective immediately after the record date for the
      determination of shareholders entitled to receive such rights or warrants;
      and
      to the extent that shares of Common Stock are not delivered (or securities
      convertible into Common Stock are not delivered) after the expiration of such
      rights or warrants the Exercise Price shall be readjusted to the Exercise Price
      which would then be in effect had the adjustments made upon the issuance of
      such
      rights or warrants been made upon the basis of delivery of only the number
      of
      shares of Common Stock (or securities convertible into Common Stock) actually
      delivered.

    

    (3) In
      case
      the Company shall hereafter distribute to the holders of its Common Stock
      evidences of its indebtedness or assets (excluding cash dividends or
      distributions and dividends or distributions referred to in Subsection (1)
      above) or subscription rights or warrants (excluding those referred to in
      Subsection (2) above), then in each such case the Exercise Price in effect
      thereafter shall be determined by multiplying the Exercise Price in effect
      immediately prior thereto by a fraction, the numerator of which shall be the
      total number of shares of Common Stock outstanding multiplied by the current
      market price per share of Common Stock, less the fair market value (as
      determined by the Company's Board of Directors) of said assets or evidences
      of
      indebtedness so distributed or of such rights or warrants, and the denominator
      of which shall be the total number of shares of Common Stock outstanding
      multiplied by such current market price per share of Common Stock. Such
      adjustment shall be made successively whenever such a record date is fixed.
      Such
      adjustment shall be made whenever any such distribution is made and shall become
      effective immediately after the record date for the determination of
      shareholders entitled to receive such distribution.

    

    (4) Subject
      to the provisions of Subsection (6) below, in case the Company shall hereafter
      issue shares of its Common Stock (excluding shares issued (a) in any of the
      transactions described in Subsection (1) above, (b) upon exercise of
      options, warrants, convertible preferred stock, and convertible debentures
      outstanding as of the date hereof or set forth on Schedule 9(c) of the
      Subscription Agreement, (c) to shareholders of any corporation acquired by
      the Company or which merges into the Company in proportion to their stock
      holdings of such corporation immediately prior to such merger, upon such merger,
      (d) issued in a bona fide public offering pursuant to a firm commitment
      underwriting, (e) upon the issuance of shares of Common Stock (or Common Stock
      equivalents) to the Company’s employees, directors, and consultants for services
      rendered to the Company, not to exceed an aggregate of 10% of the sum of (i)
      the
      number of shares of Common Stock outstanding plus (ii) the number of shares
      underlying the Debentures (as defined in the Subscription Agreement); provided,
      however, that the Company shall not issue any shares of Common Stock (or Common
      Stock equivalents) to its executive officers, directors or 5% or greater
      shareholders until such time as the Registration Statement registering the
      shares underlying the debentures has been continuously effective (excluding
      reasonable periods required for material updates) for a period of six months
      and
      thereafter, with regard to its executive officers, directors and 5% or greater
      shareholders, the Company shall issue no more than one tenth of the amount
      of
      Common Stock (or Common Stock equivalents) permitted hereunder during any fiscal
      quarter, and (f) issued to financial institutions in connection with financing
      arrangements) for a consideration per share (the “Offering Price”) less than
      $0.80 per share (which price shall be proportionately adjusted if any of the
      events in Subsections (1), (2), or (3) occur), the Exercise Price shall be
      adjusted immediately thereafter so that it shall equal the price determined
      by
      multiplying the Exercise Price in effect immediately prior to the date of
      issuance by a fraction, the numerator of which shall be the number of shares
      of
      Common Stock outstanding immediately prior to the issuance of such additional
      shares and the number of shares of Common Stock which the aggregate
      consideration received for the issuance of such additional shares would purchase
      at the Exercise Price in effect immediately prior to the date of such issuance,
      and the denominator of which shall be the number of shares of Common Stock
      outstanding immediately after the issuance of such additional shares. Such
      adjustment shall be made successively whenever such an issuance is
      made.

     

    
      
         

      

      
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    (5) Subject
      to the provisions of Subsection (6) below, in case the Company shall hereafter
      issue any securities convertible into or exchangeable for its Common Stock
      (excluding securities issued in transactions described in Subsections (2),
      (3), and (4) above) for a consideration of $0.80 per share or less (which price
      shall be proportionately adjusted if any of the events in Subsections (1),
      (2),
      or (3) occur), the Exercise Price shall be adjusted immediately thereafter
      so
      that it shall equal the price determined by multiplying the Exercise Price
      in
      effect immediately prior to the date of issuance by a fraction, the numerator
      of
      which shall be the sum of the number of shares outstanding immediately prior
      to
      the issuance of such securities and the number of shares of Common Stock which
      the aggregate consideration received for such securities would purchase at
      the
      Exercise Price in effect immediately prior to the date of such issuance, and
      the
      denominator of which shall be the sum of the number of shares of Common Stock
      outstanding immediately prior to the issuance of such securities and the maximum
      number of shares of Common Stock of the Company deliverable upon conversion
      of
      or in exchange for such securities at the initial conversion or exchange price
      or rate. Such adjustment shall be made successively whenever such an issuance
      is
      made.

    

    (6) Whenever
      the Exercise Price payable upon exercise of each Warrant is adjusted pursuant
      to
      Subsections (1), (2), (3), (4) and (5) above, the number of Shares
      purchasable upon exercise of this Warrant shall simultaneously be adjusted
      by
      multiplying the number of Shares initially issuable upon exercise of this
      Warrant by the Exercise Price in effect on the date hereof and dividing the
      product so obtained by the Exercise Price, as adjusted.

    

    (7) For
      purposes of any computation respecting consideration received pursuant to
      Subsections (4) and (5) above, the following shall apply:

    

    (A) in
      the
      case of the issuance of shares of Common Stock for cash, the consideration
      shall
      be the amount of such cash, provided that in no case shall any deduction be
      made
      for any commissions, discounts or other expenses incurred by the Company for
      any
      underwriting of the issue or otherwise in connection therewith;

    

    (B) in
      the
      case of the issuance of shares of Common Stock for a consideration in whole
      or
      in part other than cash, the consideration other than cash shall be deemed
      to be
      the fair market value thereof as determined in good faith by the Board of
      Directors of the Company (irrespective of the accounting treatment thereof),
      whose determination shall be conclusive; and 

    

    (C) in
      the
      case of the issuance of securities convertible into or exchangeable for shares
      of Common Stock, the aggregate consideration received therefor shall be deemed
      to be the consideration received by the Company for the issuance of such
      securities plus the additional minimum consideration, if any, to be received
      by
      the Company upon the conversion or exchange thereof (the consideration in each
      case to be determined in the same manner as provided in clauses (A) and (B)
      of this Subsection (7)).

    

    (8) For
      the
      purpose of any computation under Subsections (2), (3), (4) and (5) above,
      the current market price per share of Common Stock at any date shall be
      determined in the manner set forth in Section (e) hereof except that the current
      market price per share shall be deemed to be the higher of (i) the average
      of the closing prices for 30 consecutive business days before such date or
      (ii) the closing price on the business day immediately preceding such date.

    

    (9) No
      adjustment in the Exercise Price shall be required unless such adjustment would
      require an increase or decrease of at least five cents ($0.05) in such price;
      provided, however, that any adjustments which by reason of this
      Subsection (9) are not required to be made shall be carried forward and
      taken into account in any subsequent adjustment required to be made hereunder.
      All calculations under this Section (i) shall be made to the nearest cent
      or to the nearest one-hundredth of a share, as the case may be. Anything in
      this
      Section (i) to the contrary notwithstanding, the Company shall be entitled,
      but shall not be required, to make such changes in the Exercise Price, in
      addition to those required by this Section (i), as it shall determine, in
      its sole discretion, to be advisable in order that any dividend or distribution
      in shares of Common Stock, or any subdivision, reclassification or combination
      of Common Stock, hereafter made by the Company shall not result in any Federal
      Income tax liability to the holders of Common Stock or securities convertible
      into Common Stock (including Warrants).

     

    
      
         

      

      
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    (10) Whenever
      the Exercise Price is adjusted, as herein provided, the Company shall promptly
      but no later than 30 days after any request for such an adjustment by the
      Holder, cause a notice setting forth the adjusted Exercise Price and adjusted
      number of Shares issuable upon exercise of each Warrant, and, if requested,
      information describing the transactions giving rise to such adjustments, to
      be
      mailed to the Holders at their last addresses appearing in the Warrant Register,
      and shall cause a certified copy thereof to be mailed to its transfer agent,
      if
      any. In the event the Company does not provide the Holder with such notice
      and
      information within 30 days of a request by the Holder, the failure of which
      causes the Holder material damage, then notwithstanding the provisions of this
      Section (i), the Exercise Price shall be immediately adjusted to equal the
      lowest Offering Price, Subscription Price or Conversion Price, as applicable,
      since the date of this Warrant, and the number of shares issuable upon exercise
      of this Warrant shall be adjusted accordingly. The Company may retain a firm
      of
      independent certified public accountants selected by the Board of Directors
      (who
      may be the regular accountants employed by the Company) to make any computation
      required by this Section (i), and a certificate signed by such firm shall
      be conclusive evidence of the correctness of such adjustment.

    

    (11) In
      the
      event that at any time, as a result of an adjustment made pursuant to
      Subsection (1) above, the Holder of this Warrant thereafter shall become
      entitled to receive any shares of the Company, other than Common Stock,
      thereafter the number of such other shares so receivable upon exercise of this
      Warrant shall be subject to adjustment from time to time in a manner and on
      terms as nearly equivalent as practicable to the provisions with respect to
      the
      Common Stock contained in Subsections (1) to (10), inclusive
      above.

    

    (12) Irrespective
      of any adjustments in the Exercise Price or the number or kind of shares
      purchasable upon exercise of this Warrant, Warrants theretofore or thereafter
      issued may continue to express the same price and number and kind of shares
      as
      are stated in the similar Warrants initially issuable pursuant to this
      Agreement.

    

    (j) OFFICER'S
      CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the
      provisions of the foregoing Section, the Company shall forthwith file in the
      custody of its Secretary or an Assistant Secretary at its principal office
      and
      with its stock transfer agent, if any, an officer's certificate showing the
      adjusted Exercise Price determined as herein provided, setting forth in
      reasonable detail the facts requiring such adjustment, including a statement
      of
      the number of additional shares of Common Stock, if any, and such other facts
      as
      shall be necessary to show the reason for and the manner of computing such
      adjustment. Each such officer's certificate shall be made available at all
      reasonable times for inspection by the holder or any holder of a Warrant
      executed and delivered pursuant to Section (a) and the Company shall,
      forthwith after each such adjustment, mail a copy by certified mail of such
      certificate to the Holder or any such holder.

    

    (k) NOTICES
      TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if
      the Company shall pay any dividend or make any distribution upon the Common
      Stock or (ii) if the Company shall offer to the holders of Common Stock for
      subscription or purchase by them any share of any class or any other rights
      or
      (iii) if any capital reorganization of the Company, reclassification of the
      capital stock of the Company, consolidation or merger of the Company with or
      into another corporation, sale, lease or transfer of all or substantially all
      of
      the property and assets of the Company to another corporation, or voluntary
      or
      involuntary dissolution, liquidation or winding up of the Company shall be
      effected, then in any such case, the Company shall cause to be mailed by
      certified mail to the Holder, at least ten (10) days prior the date specified
      in
      (x) or (y) below, as the case may be, a notice containing a brief
      description of the proposed action and stating the date on which (x) a
      record is to be taken for the purpose of such dividend, distribution or rights,
      or (y) such reclassification, reorganization, consolidation, merger,
      conveyance, lease, dissolution, liquidation or winding up is to take place
      and
      the date, if any is to be fixed, as of which the holders of Common Stock or
      other securities shall receive cash or other property deliverable upon such
      reclassification, reorganization, consolidation, merger, conveyance,
      dissolution, liquidation or winding up.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    (l) RECLASSIFICATION,
      REORGANIZATION OR MERGER. 

    

    (1)  Subject
      to the provisions of Section (i) above, in case the Company after the Original
      Issue Date shall do any of the following (each, a "Triggering
      Event"):
      (a)
      consolidate or merge with or into any other Person and the Company shall not
      be
      the continuing or surviving corporation of such consolidation or merger, or
      (b)
      permit any other Person to consolidate with or merge into the Company and the
      Company shall be the continuing or surviving Person but, in connection with
      such
      consolidation or merger, any Capital Stock of the Company shall be changed
      into
      or exchanged for Securities of any other Person or cash or any other property,
      or (c) transfer all or substantially all of its properties or assets to any
      other Person, then, and in the case of each such Triggering Event, proper
      provision shall be made to the Warrant Price and the number of shares of Warrant
      Stock that may be purchased upon exercise of this Warrant so that, upon the
      basis and the terms and in the manner provided in this Warrant, the Holder
      of
      this Warrant shall be entitled upon the exercise hereof at any time after the
      consummation of such Triggering Event, to the extent this Warrant is not
      exercised prior to such Triggering Event, to receive at the Warrant Price as
      adjusted to take into account the consummation of such Triggering Event, in
      lieu
      of the Common Stock issuable upon such exercise of this Warrant prior to such
      Triggering Event, the Securities, cash and property to which such Holder would
      have been entitled upon the consummation of such Triggering Event if such Holder
      had exercised the rights represented by this Warrant immediately prior thereto
      (including the right of a shareholder to elect the type of consideration it
      will
      receive upon a Triggering Event), subject to adjustments (subsequent to such
      corporate action) as nearly equivalent as possible to the adjustments provided
      for elsewhere in Section (i), and the Warrant Price shall be adjusted to equal
      the product of (A) the closing price of the common stock of the continuing
      or
      surviving corporation as a result of such Triggering Event as of the date
      immediately preceding the date of the consummation of such Triggering Event
      multiplied by (B) the quotient of (i) the Warrant Price divided by (ii) the
      Per
      Share Market Value of the Common Stock as of the date immediately preceding
      the
      Original Issue Date.

     

    (2)  In
      the
      event that the Holder has elected not to exercise this Warrant prior to the
      consummation of a Triggering Event, the surviving entity and/or each Person
      (other than the Company) which may be required to deliver any Securities, cash
      or property upon the exercise of this Warrant as provided herein shall assume,
      by written instrument delivered to, and reasonably satisfactory to, the Holder
      of this Warrant, (A) the obligations of the Company under this Warrant (and
      if
      the Company shall survive the consummation of such Triggering Event, such
      assumption shall be in addition to, and shall not release the Company from,
      any
      continuing obligations of the Company under this Warrant) and (B) the obligation
      to deliver to such Holder such Securities, cash or property as, in accordance
      with the foregoing provisions of this subsection (a), such Holder shall be
      entitled to receive, and the surviving entity and/or each such Person shall
      have
      similarly delivered to such Holder an opinion of counsel for the surviving
      entity and/or each such Person, which counsel shall be reasonably satisfactory
      to such Holder, or in the alternative, a written acknowledgement executed by
      the
      President or Chief Financial Officer of the Company, stating that this Warrant
      shall thereafter continue in full force and effect and the terms hereof
      (including, without limitation, all of the provisions of this subsection (ii))
      shall be applicable to the Securities, cash or property which the surviving
      entity and/or each such Person may be required to deliver upon any exercise
      of
      this Warrant or the exercise of any rights pursuant hereto. 

    

    (3)  Immediately
      upon the occurrence of a Triggering Event, the Company shall notify the Holder
      in writing of such Triggering Event and provide the calculations in determining
      the number of shares of Warrant Stock issuable upon exercise of the new warrant
      and the adjusted Warrant Price.  Upon the Holder’s request, the continuing
      or surviving corporation as a result of such Triggering Event shall issue to
      the
      Holder a new warrant of like tenor evidencing the right to purchase the adjusted
      number of shares of Warrant Stock and the adjusted Warrant Price pursuant to
      the
      terms and provisions of this Section (l)(1).  

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    (4) Notwithstanding
      the foregoing, the provisions of Sections (l)(1), (l)(2) and (l)(3), if the
      surviving entity pursuant to any such Triggering Event is not a company that
      has
      (i) a class of equity securities registered
      pursuant to the Securities Exchange Act of 1934, as amended; (ii) its common
      stock listed or quoted on a national securities exchange, national automated
      quotation system or the OTC Bulletin Board; and, (iii)
      average
      monthly trading volume of its securities which exceeds 4% of its outstanding
      shares for the previous three months (a surviving entity that does meet such
      criteria is hereafter referred to as a “Qualified Issuer”), then
      the
      surviving entity, at the Holder’s request, shall pay to the Holder an amount in
      cash equal to the value of this Warrant calculated in accordance with the Agreed
      Valuation Formula (as defined below).

    

    (5) Upon
      the
      Occurrence of a Triggering Event, the Company and the Holder agree to value
      this
      Warrant using
      the
      Black-Scholes option-pricing formula as set forth herein and further agree
      that
      the use of such assumptions, as set forth below, in conjunction with such
      formula is a fair and equitable method for valuing this Warrant regardless
      of
      whether or not the Black-Scholes formula would normally be used to value similar
      instruments in such a circumstance or would normally apply to such an
      instrument. The following assumptions shall be used to calculate the value
      of
      this Warrant in conjunction with the Black Scholes option-pricing formula upon
      the occurrence of a Triggering Event: (1) volatility of 90%; (2) risk-free
      interest rate based on the Federal
      Reserve Statistical Release H.15(and/or such new release by the Federal Reserve
      that supplements or replaces Statistical Release H.15) using the Nominal
      Treasury constant maturities, the starting date being the date that the final
      acquisition price was announced and using the instrument with the closest
      maturity date but not less than the maturity date (e.g. if our warrant has
      2.5
      years left we would use the 3 year not the 2 year); (3) share price equals
      the
      final share price used in the Triggering Event; and (4) expected life beginning
      on the date the final price used for the Triggering Event is announced (the
      “Agreed Valuation Formula”).

    

    (6) Notwithstanding
      the provisions of Sections (l)(1), (l)(2) and (l)(3), provided the surviving
      entity pursuant to a Triggering Event is a Qualified Issuer as defined in
      Section (l)(4), then the surviving entity may elect to pay the Holder the value
      of this Warrant, calculated in accordance with the Agreed Valuation Formula
      in
      registered shares of its common stock valued at fair market value calculated
      based upon the closing price of the surviving entity’s common stock, as of the
      date of the Triggering Event. 

    

    (7) The
      foregoing provisions of this Section (l) shall similarly apply to
      successive consolidations, mergers, sales or conveyances. In the event that
      in
      connection with any such capital reorganization, consolidation, merger, sale
      or
      conveyance, additional shares of Common Stock shall be issued in exchange,
      conversion, substitution or payment, in whole or in part, for a security of
      the
      Company other than Common Stock, any such issue shall be treated as an issue
      of
      Common Stock covered by the provisions of Subsection (1) of
      Section (i) hereof.

    

    (m) REGISTRATION
      RIGHTS. The Holders of this Warrant shall have the registration rights set
      forth
      in Section 5(c) of the Subscription Agreement. 

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    CHINA
      DIGITAL MEDIA CORPORATION

    

    

    By:
      __________________________      

    Name:
      Ng
      Chi Shing (a.k.a. Daniel Ng)

    Title:
      President and Chief Executive Officer

    

    Dated:
      ________, 2006

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    PURCHASE
      FORM

    

    

                                                            
      Dated

    

    The
      undersigned hereby irrevocably elects to exercise the within Warrant to the
      extent of purchasing ____
      shares
      of Common Stock and hereby makes payment of ____
      in
      payment of the actual exercise price thereof.

     

    ___________________________________ 

     

    INSTRUCTIONS
      FOR REGISTRATION OF STOCK

    

    Name

    (Please
      typewrite or print in block letters)

    

    

    Address

    

    

    Signature

    

     

    ASSIGNMENT
      FORM

     

    

    FOR
      VALUE
      RECEIVED, ____________
      hereby
      sells, assigns and transfers unto

    

    

    Name

    (Please
      typewrite or print in block letters)

     

    Address

    

    the
      right
      to purchase Common Stock represented by this Class B Warrant to the extent
      of
 
      shares
      as to which such right is exercisable and does hereby irrevocably constitute
      and
      appoint  
      Attorney, to transfer the same on the books of the Company with full power
      of
      substitution in the premises.

    

    Date

    

    Signature

     

     

    
      
         

      

      
        109.01

     

    Exhibit
      10.5

     

     

    CLASS
      C WARRANT
      TO PURCHASE COMMON STOCK

     

    OF

     

    CHINA
      DIGITAL MEDIA CORPORATION (this “Warrant”)

    

    

    THIS
      WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
      HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED
      UNTIL
      (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR
      (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE SECURITIES
      ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH
      TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND
      SHALL
      BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES
      OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.

    

    

    ------------------------------------------

    

    

    This
      is
      to Certify That, FOR VALUE RECEIVED, ________________ ,
      or its
      assigns (“Holder”), is entitled to purchase, subject to the provisions of this
      Class C Warrant,
      from China Digital Media Corporation, a Nevada corporation (the “Company”),
     (  )
      fully
      paid, validly issued and nonassessable shares of common stock, par value $0.001
      per share, of the Company (“Common Stock”) at a price per share of $2.25 (the
“Initial Exercise Price”), which exercise may take place at any time or from
      time to time during the period of six (6) years from the day which is ninety
      (90) days following the Company’s firm underwritten public offering of
      securities pursuant to a registration statement filed by the Company under
      the
      Securities Act (the “Public Offering”) or June 1, 2007 (the “Exercise Period”).
      This Warrant is subject to the lock-up provisions set forth in Section 2 of
      the
      Subscription Agreement. This Warrant comprises a portion of a Unit being sold
      by
      the Company pursuant to a Subscription Agreement dated November __, 2006 (the
      “Subscription Agreement”). Unless otherwise defined herein, terms defined in
      this Warrant shall have the meaning as set forth in the Subscription Agreement.
      The number of shares of Common Stock to be received upon the exercise of this
      Warrant and the price to be paid for each share of Common Stock may be adjusted
      from time to time as hereinafter set forth. The shares of Common Stock
      deliverable upon such exercise, and as adjusted from time to time, are
      hereinafter sometimes referred to as “Warrant Shares” and the exercise price of
      a share of Common Stock in effect at any time and as adjusted from time to
      time
      is hereinafter sometimes referred to as the “Exercise Price.” 

    

    (a) EXERCISE
      OF WARRANT; CANCELLATION OF WARRANT.

    

    (1) This
      Warrant may be exercised in whole or in part at any time or from time to time
      during the Exercise Period; provided, however, that (i) if either such day
      is a day on which banking institutions in the State of Nevada are authorized
      by
      law to close, then on the next succeeding day which shall not be such a day,
      and
      (ii) in the event of any merger, consolidation or sale of substantially all
      the assets of the Company as an entirety, which is anticipated to result in
      any
      distribution to the Company's stockholders prior to the commencement of the
      Exercise Period, the Company shall, as a condition precedent to such
      transaction, cause effective provisions to be made so that the Holder shall
      have
      the right to exercise this Warrant, in conjunction with such transaction, into
      the kind and amount of shares of stock and other securities and property
      (including cash) receivable by a holder of the number of shares of Common Stock
      into which this Warrant might have been exercisable immediately prior thereto.
      This Warrant may be exercised by presentation and surrender hereof to the
      Company at its principal office with the Purchase Form annexed hereto duly
      executed and accompanied by payment of the Exercise Price for the number of
      Warrant Shares specified in such form. As soon as practicable after each such
      exercise of the warrants, but not later than three (3) business days following
      the receipt of good and available funds, the Company shall issue and deliver
      to
      the Holder a certificate or certificate for the Warrant Shares issuable upon
      such exercise, registered in the name of the Holder or its designee. If this
      Warrant should be exercised in part only, the Company shall, upon surrender
      of
      this Warrant for cancellation, execute and deliver a new Warrant evidencing
      the
      rights of the Holder thereof to purchase the balance of the Warrant Shares
      purchasable thereunder. Upon receipt by the Company of this Warrant at its
      office in proper form for exercise accompanied by payment of the Exercise Price
      for the number of Warrant Shares specified in such form, the Holder shall be
      deemed to be the holder of record of the shares of Common Stock issuable upon
      such exercise, notwithstanding that the stock transfer books of the Company
      shall then be closed or that certificates representing such shares of Common
      Stock shall not then be physically delivered to the Holder.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    

    (b) RESERVATION
      OF SHARES. The Company shall at all times reserve for issuance and/or delivery
      upon exercise of this Warrant such number of shares of its Common Stock as
      shall
      be required for issuance and delivery upon exercise of the
      Warrants.

    

    (c) STOCK
      FULLY PAID.
      The
      Company represents, warrants, covenants and agrees that all shares of Warrant
      Stock which may be issued upon the exercise of this Warrant or otherwise
      hereunder will, when issued in accordance with the terms of this Warrant, be
      duly authorized, validly issued, fully paid and nonassessable and free from
      all
      taxes, liens and charges created by or through the Company. The Company further
      covenants and agrees that during the period within which this Warrant may be
      exercised, the Company will at all times have authorized and reserved for the
      purpose of issuance upon exercise of this Warrant a number of shares of Common
      Stock equal to at least one hundred twenty percent (120%) of the aggregate
      number of shares of Common Stock to provide for the exercise of this Warrant.
      

    

    (d)  COVENANTS.
      The
      Company shall not by any action including, without limitation, amending the
      Articles of Incorporation or the by-laws of the Company, or through any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other action, avoid or seek to avoid the observance
      or
      performance of any of the terms of this Warrant, but will at all times in good
      faith assist in the carrying out of all such terms and in the taking of all
      such
      actions as may be necessary or appropriate to protect the rights of the Holder
      hereof against dilution (to the extent specifically provided herein) or
      impairment. Without limiting the generality of the foregoing, the Company will
      (i) not permit the par value, if any, of its Common Stock to exceed the then
      effective Warrant Price, (ii) not amend or modify any provision of the Articles
      of Incorporation or by-laws of the Company in any manner that would adversely
      affect the rights of the Holders of the Warrants, (iii) take all such action
      as
      may be reasonably necessary in order that the Company may validly and legally
      issue fully paid and nonassessable shares of Common Stock, free and clear of
      any
      liens, claims, encumbrances and restrictions (other than as provided herein)
      upon the exercise of this Warrant, and (iv) use its best efforts to obtain
      all
      such authorizations, exemptions or consents from any public regulatory body
      having jurisdiction thereof as may be reasonably necessary to enable the Company
      to perform its obligations under this Warrant.

    

    (e) FRACTIONAL
      SHARES. No fractional shares or script representing fractional shares shall
      be
      issued upon the exercise of this Warrant. With respect to any fraction of a
      share called for upon any exercise hereof, the Company, at its option, may
      either round the number of shares issuable up to the nearest whole share or
      shall pay to the Holder an amount in cash equal to such fraction multiplied
      by
      the current market value of a share, determined as follows:

    

    (1) If
      the
      Common Stock is listed on a national securities exchange or admitted to unlisted
      trading privileges on such exchange or listed for trading on the Nasdaq Global
      Market, the current market value shall be the last reported sale price of the
      Common Stock on such exchange or market on the last business day prior to the
      date of exercise of this Warrant or if no such sale is made on such day, the
      average of the closing bid and asked prices for such day on such exchange or
      market; or

    

    (2) If
      the
      Common Stock is not so listed or admitted to unlisted trading privileges, but
      is
      traded on the Nasdaq Capital Market, the current market value shall be the
      average of the closing bid and asked prices for such day on such market and
      if
      the Common Stock is not so traded, the current market value shall be the mean
      of
      the last reported bid and asked prices reported by the NASD Electronic Bulletin
      Board on the last business day prior to the date of the exercise of this
      Warrant; or

    

    (3) If
      the
      Common Stock is not so listed or admitted to unlisted trading privileges and
      bid
      and asked prices are not so reported, the current market value shall be an
      amount, not less than book value thereof as at the end of the most recent fiscal
      year of the Company ending prior to the date of the exercise of the Warrant,
      determined in such reasonable manner as may be prescribed by the Board of
      Directors of the Company.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    (f)
      OWNERSHIP
      CAP AND EXERCISE RESTRICTION.
      Notwithstanding anything to the contrary set forth in this Warrant, at no time
      may a Holder of this Warrant exercise this Warrant if the number of shares
      of
      Common Stock to be issued pursuant to such exercise would exceed, when
      aggregated with all other shares of Common Stock owned by such Holder at such
      time, the number of shares of Common Stock which would result in such Holder
      beneficially owning (as determined in accordance with Section 13(d) of the
      Exchange Act and the rules thereunder) in excess of 9.9% of the then issued
      and
      outstanding shares of Common Stock; provided,
      however,
      that
      upon a holder of this Warrant providing the Company with sixty-one (61) days
      notice (pursuant to Section (l) hereof) (the "Waiver
      Notice")
      that
      such Holder would like to waive this Section (g) with regard to any or all
      shares of Common Stock issuable upon exercise of this Warrant, this Section
      (g)
      will be of no force or effect with regard to all or a portion of the Warrant
      referenced in the Waiver Notice; provided,
      further,
      that
      this provision shall be of no further force or effect during the sixty-one
      (61)
      days immediately preceding the expiration of the term of this
      Warrant

    

    (g) EXCHANGE,
      TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without
      expense, at the option of the Holder, upon presentation and surrender hereof
      to
      the Company or at the office of its stock transfer agent, if any, for other
      warrants of different denominations entitling the holder thereof to purchase
      in
      the aggregate the same number of shares of Common Stock purchasable hereunder.
      Upon surrender of this Warrant to the Company at its principal office or at
      the
      office of its stock transfer agent, if any, with the Assignment Form annexed
      hereto duly executed and funds sufficient to pay any transfer tax, the Company
      shall, without charge, execute and deliver a new Warrant in the name of the
      assignee named in such instrument of assignment and this Warrant shall promptly
      be cancelled. This Warrant may be divided or combined with other warrants which
      carry the same rights upon presentation hereof at the principal office of the
      Company or at the office of its stock transfer agent, if any, together with
      a
      written notice specifying the names and denominations in which new Warrants
      are
      to be issued and signed by the Holder hereof. The term “Warrant” as used herein
      includes any Warrants into which this Warrant may be divided or exchanged.
      Upon
      receipt by the Company of evidence satisfactory to it of the loss, theft,
      destruction or mutilation of this Warrant, and (in the case of loss, theft
      or
      destruction) of reasonably satisfactory indemnification, and upon surrender
      and
      cancellation of this Warrant, if mutilated, the Company will execute and deliver
      a new Warrant of like tenor and date. Any such new Warrant executed and
      delivered shall constitute an additional contractual obligation on the part
      of
      the Company, whether or not this Warrant so lost, stolen, destroyed, or
      mutilated shall be at any time enforceable by anyone.

    

    (h) RIGHTS
      OF
      THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights
      of
      a shareholder in the Company, either at law or equity, and the rights of the
      Holder are limited to those expressed in the Warrant and are not enforceable
      against the Company except to the extent set forth herein.

    

    (i) ANTI-DILUTION
      PROVISIONS. Subject to the provisions of Section l hereof, the Exercise Price
      in
      effect at any time and the number and kind of securities purchasable upon the
      exercise of the Warrants shall be subject to adjustment from time to time upon
      the happening of certain events as follows:

    

    (1) In
      case
      the Company shall hereafter (i) declare a dividend or make a distribution
      on its outstanding shares of Common Stock in shares of Common Stock,
      (ii) subdivide or reclassify its outstanding shares of Common Stock into a
      greater number of shares, or (iii) combine or reclassify its outstanding
      shares of Common Stock into a smaller number of shares, the Exercise Price
      in
      effect at the time of the record date for such dividend or distribution or
      of
      the effective date of such subdivision, combination or reclassification shall
      be
      adjusted so that it shall equal the price determined by multiplying the Exercise
      Price by a fraction, the denominator of which shall be the number of shares
      of
      Common Stock outstanding after giving effect to such action, and the numerator
      of which shall be the number of shares of Common Stock outstanding immediately
      prior to such action with an appropriate adjustment in the number of shares
      purchasable hereunder as described in Subsection (6). Such adjustment shall
      be
      made successively whenever any event listed above shall occur.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    (2) Subject
      to the provisions of Subsection (6) below, in case the Company shall fix a
      record date for the issuance of rights or warrants to all of the holders of
      its
      Common Stock entitling them to subscribe for or purchase shares of Common Stock
      (or securities convertible into Common Stock) at a price (the “Subscription
      Price”) of $0.80 or less (which price shall be proportionately adjusted if any
      of the events in Subsections (1), (2), or (3) occur), the Exercise Price shall
      be adjusted so that the same shall equal the lower of (i) the price
      determined by multiplying the Exercise Price in effect immediately prior to
      the
      date of such issuance by a fraction, the numerator of which shall be the sum
      of
      the number of shares of Common Stock outstanding on the record date mentioned
      below and the number of additional shares of Common Stock which the aggregate
      offering price of the total number of shares of Common Stock so offered (or
      the
      aggregate conversion price of the convertible securities so offered) would
      purchase at such current market price per share of the Common Stock, and the
      denominator of which shall be the sum of the number of shares of Common Stock
      outstanding on such record date and the number of additional shares of Common
      Stock offered for subscription or purchase (or into which the convertible
      securities so offered are convertible) or (ii) in the event the
      Subscription Price is equal to or higher than the current market price but
      is
      less than the Exercise Price, the price determined by multiplying the Exercise
      Price in effect immediately prior to the date of issuance by a fraction, the
      numerator of which shall be the sum of the number of shares outstanding on
      the
      record date mentioned below and the number of additional shares of Common Stock
      which the aggregate offering price of the total number of shares of Common
      Stock
      so offered (or the aggregate conversion price of the convertible securities
      so
      offered) would purchase at the Exercise Price in effect immediately prior to
      the
      date of such issuance, and the denominator of which shall be the sum of the
      number of shares of Common Stock outstanding on the record date mentioned below
      and the number of additional shares of Common Stock offered for subscription
      or
      purchase (or into which the convertible securities so offered are convertible).
      Such adjustment shall be made successively whenever such rights or warrants
      are
      issued and shall become effective immediately after the record date for the
      determination of shareholders entitled to receive such rights or warrants;
      and
      to the extent that shares of Common Stock are not delivered (or securities
      convertible into Common Stock are not delivered) after the expiration of such
      rights or warrants the Exercise Price shall be readjusted to the Exercise Price
      which would then be in effect had the adjustments made upon the issuance of
      such
      rights or warrants been made upon the basis of delivery of only the number
      of
      shares of Common Stock (or securities convertible into Common Stock) actually
      delivered.

    

    (3) In
      case
      the Company shall hereafter distribute to the holders of its Common Stock
      evidences of its indebtedness or assets (excluding cash dividends or
      distributions and dividends or distributions referred to in Subsection (1)
      above) or subscription rights or warrants (excluding those referred to in
      Subsection (2) above), then in each such case the Exercise Price in effect
      thereafter shall be determined by multiplying the Exercise Price in effect
      immediately prior thereto by a fraction, the numerator of which shall be the
      total number of shares of Common Stock outstanding multiplied by the current
      market price per share of Common Stock, less the fair market value (as
      determined by the Company's Board of Directors) of said assets or evidences
      of
      indebtedness so distributed or of such rights or warrants, and the denominator
      of which shall be the total number of shares of Common Stock outstanding
      multiplied by such current market price per share of Common Stock. Such
      adjustment shall be made successively whenever such a record date is fixed.
      Such
      adjustment shall be made whenever any such distribution is made and shall become
      effective immediately after the record date for the determination of
      shareholders entitled to receive such distribution.

    

    (4) Subject
      to the provisions of Subsection (6) below, in case the Company shall hereafter
      issue shares of its Common Stock (excluding shares issued (a) in any of the
      transactions described in Subsection (1) above, (b) upon exercise of
      options, warrants, convertible preferred stock, and convertible debentures
      outstanding as of the date hereof or set forth on Schedule 9(c) of the
      Subscription Agreement, (c) to shareholders of any corporation acquired by
      the Company or which merges into the Company in proportion to their stock
      holdings of such corporation immediately prior to such merger, upon such merger,
      (d) issued in a bona fide public offering pursuant to a firm commitment
      underwriting, (e) upon the issuance of shares of Common Stock (or Common Stock
      equivalents) to the Company’s employees, directors, and consultants for services
      rendered to the Company, not to exceed an aggregate of 10% of the sum of (i)
      the
      number of shares of Common Stock outstanding plus (ii) the number of shares
      underlying the Debentures (as defined in the Subscription Agreement); provided,
      however, that the Company shall not issue any shares of Common Stock (or Common
      Stock equivalents) to its executive officers, directors or 5% or greater
      shareholders until such time as the Registration Statement registering the
      shares underlying the debentures has been continuously effective (excluding
      reasonable periods required for material updates) for a period of six months
      and
      thereafter, with regard to its executive officers, directors and 5% or greater
      shareholders, the Company shall issue no more than one tenth of the amount
      of
      Common Stock (or Common Stock equivalents) permitted hereunder during any fiscal
      quarter, and (f) issued to financial institutions in connection with financing
      arrangements) for a consideration per share (the “Offering Price”) less than
      $0.80 per share (which price shall be proportionately adjusted if any of the
      events in Subsections (1), (2), or (3) occur), the Exercise Price shall be
      adjusted immediately thereafter so that it shall equal the price determined
      by
      multiplying the Exercise Price in effect immediately prior to the date of
      issuance by a fraction, the numerator of which shall be the number of shares
      of
      Common Stock outstanding immediately prior to the issuance of such additional
      shares and the number of shares of Common Stock which the aggregate
      consideration received for the issuance of such additional shares would purchase
      at the Exercise Price in effect immediately prior to the date of such issuance,
      and the denominator of which shall be the number of shares of Common Stock
      outstanding immediately after the issuance of such additional shares. Such
      adjustment shall be made successively whenever such an issuance is
      made.

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    (5) Subject
      to the provisions of Subsection (6) below, in case the Company shall hereafter
      issue any securities convertible into or exchangeable for its Common Stock
      (excluding securities issued in transactions described in Subsections (2),
      (3), and (4) above) for a consideration of $0.80 per share or less (which price
      shall be proportionately adjusted if any of the events in Subsections (1),
      (2),
      or (3) occur), the Exercise Price shall be adjusted immediately thereafter
      so
      that it shall equal the price determined by multiplying the Exercise Price
      in
      effect immediately prior to the date of issuance by a fraction, the numerator
      of
      which shall be the sum of the number of shares outstanding immediately prior
      to
      the issuance of such securities and the number of shares of Common Stock which
      the aggregate consideration received for such securities would purchase at
      the
      Exercise Price in effect immediately prior to the date of such issuance, and
      the
      denominator of which shall be the sum of the number of shares of Common Stock
      outstanding immediately prior to the issuance of such securities and the maximum
      number of shares of Common Stock of the Company deliverable upon conversion
      of
      or in exchange for such securities at the initial conversion or exchange price
      or rate. Such adjustment shall be made successively whenever such an issuance
      is
      made.

    

    (6) Whenever
      the Exercise Price payable upon exercise of each Warrant is adjusted pursuant
      to
      Subsections (1), (2), (3), (4) and (5) above, the number of Shares
      purchasable upon exercise of this Warrant shall simultaneously be adjusted
      by
      multiplying the number of Shares initially issuable upon exercise of this
      Warrant by the Exercise Price in effect on the date hereof and dividing the
      product so obtained by the Exercise Price, as adjusted.

    

    (7) For
      purposes of any computation respecting consideration received pursuant to
      Subsections (4) and (5) above, the following shall apply:

    

    (A) in
      the
      case of the issuance of shares of Common Stock for cash, the consideration
      shall
      be the amount of such cash, provided that in no case shall any deduction be
      made
      for any commissions, discounts or other expenses incurred by the Company for
      any
      underwriting of the issue or otherwise in connection therewith;

    

    (B) in
      the
      case of the issuance of shares of Common Stock for a consideration in whole
      or
      in part other than cash, the consideration other than cash shall be deemed
      to be
      the fair market value thereof as determined in good faith by the Board of
      Directors of the Company (irrespective of the accounting treatment thereof),
      whose determination shall be conclusive; and 

    

    (C) in
      the
      case of the issuance of securities convertible into or exchangeable for shares
      of Common Stock, the aggregate consideration received therefor shall be deemed
      to be the consideration received by the Company for the issuance of such
      securities plus the additional minimum consideration, if any, to be received
      by
      the Company upon the conversion or exchange thereof (the consideration in each
      case to be determined in the same manner as provided in clauses (A) and (B)
      of this Subsection (7)).

    

    (8) For
      the
      purpose of any computation under Subsections (2), (3), (4) and (5) above,
      the current market price per share of Common Stock at any date shall be
      determined in the manner set forth in Section (e) hereof except that the current
      market price per share shall be deemed to be the higher of (i) the average
      of the closing prices for 30 consecutive business days before such date or
      (ii) the closing price on the business day immediately preceding such date.

    

    (9) No
      adjustment in the Exercise Price shall be required unless such adjustment would
      require an increase or decrease of at least five cents ($0.05) in such price;
      provided, however, that any adjustments which by reason of this
      Subsection (9) are not required to be made shall be carried forward and
      taken into account in any subsequent adjustment required to be made hereunder.
      All calculations under this Section (i) shall be made to the nearest cent
      or to the nearest one-hundredth of a share, as the case may be. Anything in
      this
      Section (i) to the contrary notwithstanding, the Company shall be entitled,
      but shall not be required, to make such changes in the Exercise Price, in
      addition to those required by this Section (i), as it shall determine, in
      its sole discretion, to be advisable in order that any dividend or distribution
      in shares of Common Stock, or any subdivision, reclassification or combination
      of Common Stock, hereafter made by the Company shall not result in any Federal
      Income tax liability to the holders of Common Stock or securities convertible
      into Common Stock (including Warrants).

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    (10) Whenever
      the Exercise Price is adjusted, as herein provided, the Company shall promptly
      but no later than 30 days after any request for such an adjustment by the
      Holder, cause a notice setting forth the adjusted Exercise Price and adjusted
      number of Shares issuable upon exercise of each Warrant, and, if requested,
      information describing the transactions giving rise to such adjustments, to
      be
      mailed to the Holders at their last addresses appearing in the Warrant Register,
      and shall cause a certified copy thereof to be mailed to its transfer agent,
      if
      any. In the event the Company does not provide the Holder with such notice
      and
      information within 30 days of a request by the Holder, the failure of which
      causes the Holder material damage, then notwithstanding the provisions of this
      Section (i), the Exercise Price shall be immediately adjusted to equal the
      lowest Offering Price, Subscription Price or Conversion Price, as applicable,
      since the date of this Warrant, and the number of shares issuable upon exercise
      of this Warrant shall be adjusted accordingly. The Company may retain a firm
      of
      independent certified public accountants selected by the Board of Directors
      (who
      may be the regular accountants employed by the Company) to make any computation
      required by this Section (i), and a certificate signed by such firm shall
      be conclusive evidence of the correctness of such adjustment.

    

    (11) In
      the
      event that at any time, as a result of an adjustment made pursuant to
      Subsection (1) above, the Holder of this Warrant thereafter shall become
      entitled to receive any shares of the Company, other than Common Stock,
      thereafter the number of such other shares so receivable upon exercise of this
      Warrant shall be subject to adjustment from time to time in a manner and on
      terms as nearly equivalent as practicable to the provisions with respect to
      the
      Common Stock contained in Subsections (1) to (10), inclusive
      above.

    

    (12) Irrespective
      of any adjustments in the Exercise Price or the number or kind of shares
      purchasable upon exercise of this Warrant, Warrants theretofore or thereafter
      issued may continue to express the same price and number and kind of shares
      as
      are stated in the similar Warrants initially issuable pursuant to this
      Agreement.

    

    (j) OFFICER'S
      CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the
      provisions of the foregoing Section, the Company shall forthwith file in the
      custody of its Secretary or an Assistant Secretary at its principal office
      and
      with its stock transfer agent, if any, an officer's certificate showing the
      adjusted Exercise Price determined as herein provided, setting forth in
      reasonable detail the facts requiring such adjustment, including a statement
      of
      the number of additional shares of Common Stock, if any, and such other facts
      as
      shall be necessary to show the reason for and the manner of computing such
      adjustment. Each such officer's certificate shall be made available at all
      reasonable times for inspection by the holder or any holder of a Warrant
      executed and delivered pursuant to Section (a) and the Company shall,
      forthwith after each such adjustment, mail a copy by certified mail of such
      certificate to the Holder or any such holder.

    

    (k) NOTICES
      TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if
      the Company shall pay any dividend or make any distribution upon the Common
      Stock or (ii) if the Company shall offer to the holders of Common Stock for
      subscription or purchase by them any share of any class or any other rights
      or
      (iii) if any capital reorganization of the Company, reclassification of the
      capital stock of the Company, consolidation or merger of the Company with or
      into another corporation, sale, lease or transfer of all or substantially all
      of
      the property and assets of the Company to another corporation, or voluntary
      or
      involuntary dissolution, liquidation or winding up of the Company shall be
      effected, then in any such case, the Company shall cause to be mailed by
      certified mail to the Holder, at least ten (10) days prior the date specified
      in
      (x) or (y) below, as the case may be, a notice containing a brief
      description of the proposed action and stating the date on which (x) a
      record is to be taken for the purpose of such dividend, distribution or rights,
      or (y) such reclassification, reorganization, consolidation, merger,
      conveyance, lease, dissolution, liquidation or winding up is to take place
      and
      the date, if any is to be fixed, as of which the holders of Common Stock or
      other securities shall receive cash or other property deliverable upon such
      reclassification, reorganization, consolidation, merger, conveyance,
      dissolution, liquidation or winding up.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    (l) RECLASSIFICATION,
      REORGANIZATION OR MERGER. 

    

    (1)  Subject
      to the provisions of Section (i) above, in case the Company after the Original
      Issue Date shall do any of the following (each, a "Triggering
      Event"):
      (a)
      consolidate or merge with or into any other Person and the Company shall not
      be
      the continuing or surviving corporation of such consolidation or merger, or
      (b)
      permit any other Person to consolidate with or merge into the Company and the
      Company shall be the continuing or surviving Person but, in connection with
      such
      consolidation or merger, any Capital Stock of the Company shall be changed
      into
      or exchanged for Securities of any other Person or cash or any other property,
      or (c) transfer all or substantially all of its properties or assets to any
      other Person, then, and in the case of each such Triggering Event, proper
      provision shall be made to the Warrant Price and the number of shares of Warrant
      Stock that may be purchased upon exercise of this Warrant so that, upon the
      basis and the terms and in the manner provided in this Warrant, the Holder
      of
      this Warrant shall be entitled upon the exercise hereof at any time after the
      consummation of such Triggering Event, to the extent this Warrant is not
      exercised prior to such Triggering Event, to receive at the Warrant Price as
      adjusted to take into account the consummation of such Triggering Event, in
      lieu
      of the Common Stock issuable upon such exercise of this Warrant prior to such
      Triggering Event, the Securities, cash and property to which such Holder would
      have been entitled upon the consummation of such Triggering Event if such Holder
      had exercised the rights represented by this Warrant immediately prior thereto
      (including the right of a shareholder to elect the type of consideration it
      will
      receive upon a Triggering Event), subject to adjustments (subsequent to such
      corporate action) as nearly equivalent as possible to the adjustments provided
      for elsewhere in Section (i), and the Warrant Price shall be adjusted to equal
      the product of (A) the closing price of the common stock of the continuing
      or
      surviving corporation as a result of such Triggering Event as of the date
      immediately preceding the date of the consummation of such Triggering Event
      multiplied by (B) the quotient of (i) the Warrant Price divided by (ii) the
      Per
      Share Market Value of the Common Stock as of the date immediately preceding
      the
      Original Issue Date.

     

    (2)  In
      the
      event that the Holder has elected not to exercise this Warrant prior to the
      consummation of a Triggering Event, the surviving entity and/or each Person
      (other than the Company) which may be required to deliver any Securities, cash
      or property upon the exercise of this Warrant as provided herein shall assume,
      by written instrument delivered to, and reasonably satisfactory to, the Holder
      of this Warrant, (A) the obligations of the Company under this Warrant (and
      if
      the Company shall survive the consummation of such Triggering Event, such
      assumption shall be in addition to, and shall not release the Company from,
      any
      continuing obligations of the Company under this Warrant) and (B) the obligation
      to deliver to such Holder such Securities, cash or property as, in accordance
      with the foregoing provisions of this subsection (a), such Holder shall be
      entitled to receive, and the surviving entity and/or each such Person shall
      have
      similarly delivered to such Holder an opinion of counsel for the surviving
      entity and/or each such Person, which counsel shall be reasonably satisfactory
      to such Holder, or in the alternative, a written acknowledgement executed by
      the
      President or Chief Financial Officer of the Company, stating that this Warrant
      shall thereafter continue in full force and effect and the terms hereof
      (including, without limitation, all of the provisions of this subsection (ii))
      shall be applicable to the Securities, cash or property which the surviving
      entity and/or each such Person may be required to deliver upon any exercise
      of
      this Warrant or the exercise of any rights pursuant hereto. 

    

    (3)  Immediately
      upon the occurrence of a Triggering Event, the Company shall notify the Holder
      in writing of such Triggering Event and provide the calculations in determining
      the number of shares of Warrant Stock issuable upon exercise of the new warrant
      and the adjusted Warrant Price.  Upon the Holder’s request, the continuing
      or surviving corporation as a result of such Triggering Event shall issue to
      the
      Holder a new warrant of like tenor evidencing the right to purchase the adjusted
      number of shares of Warrant Stock and the adjusted Warrant Price pursuant to
      the
      terms and provisions of this Section (l)(1).  

    

    (4) Notwithstanding
      the foregoing, the provisions of Sections (l)(1), (l)(2) and (l)(3), if the
      surviving entity pursuant to any such Triggering Event is not a company that
      has
      (i) a class of equity securities registered
      pursuant to the Securities Exchange Act of 1934, as amended; (ii) its common
      stock listed or quoted on a national securities exchange, national automated
      quotation system or the OTC Bulletin Board; and, (iii)
      average
      monthly trading volume of its securities which exceeds 4% of its outstanding
      shares for the previous three months (a surviving entity that does meet such
      criteria is hereafter referred to as a “Qualified Issuer”), then
      the
      surviving entity, at the Holder’s request, shall pay to the Holder an amount in
      cash equal to the value of this Warrant calculated in accordance with the Agreed
      Valuation Formula (as defined below).

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    (5) Upon
      the
      Occurrence of a Triggering Event, the Company and the Holder agree to value
      this
      Warrant using
      the
      Black-Scholes option-pricing formula as set forth herein and further agree
      that
      the use of such assumptions, as set forth below, in conjunction with such
      formula is a fair and equitable method for valuing this Warrant regardless
      of
      whether or not the Black-Scholes formula would normally be used to value similar
      instruments in such a circumstance or would normally apply to such an
      instrument. The following assumptions shall be used to calculate the value
      of
      this Warrant in conjunction with the Black Scholes option-pricing formula upon
      the occurrence of a Triggering Event: (1) volatility of 90%; (2) risk-free
      interest rate based on the Federal
      Reserve Statistical Release H.15(and/or such new release by the Federal Reserve
      that supplements or replaces Statistical Release H.15) using the Nominal
      Treasury constant maturities, the starting date being the date that the final
      acquisition price was announced and using the instrument with the closest
      maturity date but not less than the maturity date (e.g. if our warrant has
      2.5
      years left we would use the 3 year not the 2 year); (3) share price equals
      the
      final share price used in the Triggering Event; and (4) expected life beginning
      on the date the final price used for the Triggering Event is announced (the
      “Agreed Valuation Formula”).

    

    (6) Notwithstanding
      the provisions of Sections (l)(1), (l)(2) and (l)(3), provided the surviving
      entity pursuant to a Triggering Event is a Qualified Issuer as defined in
      Section (l)(4), then the surviving entity may elect to pay the Holder the value
      of this Warrant, calculated in accordance with the Agreed Valuation Formula
      in
      registered shares of its common stock valued at fair market value calculated
      based upon the closing price of the surviving entity’s common stock, as of the
      date of the Triggering Event. 

    

    (7) The
      foregoing provisions of this Section (l) shall similarly apply to
      successive consolidations, mergers, sales or conveyances. In the event that
      in
      connection with any such capital reorganization, consolidation, merger, sale
      or
      conveyance, additional shares of Common Stock shall be issued in exchange,
      conversion, substitution or payment, in whole or in part, for a security of
      the
      Company other than Common Stock, any such issue shall be treated as an issue
      of
      Common Stock covered by the provisions of Subsection (1) of
      Section (i) hereof.

    

    (m) REGISTRATION
      RIGHTS. The Holders of this Warrant shall have the registration rights set
      forth
      in Section 5(c) of the Subscription Agreement.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    CHINA
      DIGITAL MEDIA CORPORATION

    

    

    By: __________________________     

    Name:
      Ng
      Chi Shing (a.k.a. Daniel Ng)

    Title:
      President and Chief Executive Officer

    

    Dated:
      ________, 2006

     

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    PURCHASE
      FORM

    

    

    Dated______

    

    The
      undersigned hereby irrevocably elects to exercise the within Warrant to the
      extent of purchasing  
      shares
      of Common Stock and hereby makes payment of  
      in
      payment of the actual exercise price thereof.

    

    ___________________________________ 

    

    INSTRUCTIONS
      FOR REGISTRATION OF STOCK

    

    Name

    (Please
      typewrite or print in block letters)

    

    

    Address

    

    

    Signature

    

     

    ASSIGNMENT
      FORM

    

    FOR
      VALUE
      RECEIVED, _______
      hereby
      sells, assigns and transfers unto

    

    

    Name

    (Please
      typewrite or print in block letters)

    

    

    Address

    

    the
      right
      to purchase Common Stock represented by this Class C Warrant to the extent
      of
 
      shares
      as to which such right is exercisable and does hereby irrevocably constitute
      and
      appoint  
      Attorney, to transfer the same on the books of the Company with full power
      of
      substitution in the premises.

    

    Date

    

    Signature

     

     

    
      
         

      

      
        10

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