CONVERTIBLE PROMISSORY NOTE OF NETWORK CN INC.
Exhibit
10.3
THIS
NOTE
AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF ARE SUBJECT TO THE TERMS
AND CONDITIONS OF CERTAIN AGREEMENTS BY AND BETWEEN NETWORK CN INC. AND WEI
AN DEVELOPMENTS LIMITED AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE. PLEDGED. HYPOTHECATED.
OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO
THE
COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.
OF
Note
No.___
| $5,000,000 |
Made
as of November 12, 2007
|
For
value received, Network CN Inc., a Delaware corporation (the
“Company”), with principal offices at ▇▇/▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, hereby promises to
pay
to Wei An Developments Limited (“Holder”), or its registered assigns, the
principal sum of Five Million Dollars (the “Principal
Amount”), or such lesser amount as shall then equal the
outstanding principal amount hereunder, together with simple interest on the
unpaid principal balance at a rate equal to twelve percent (12%) per annum,
computed on the basis of the actual number of days elapsed and a year of 365
days from the date of this Note until the Principal Amount and all interest
accrued thereon are paid (or converted, as provided in Section 2 hereof).
The unpaid Principal Amount, together with any then unpaid accrued interest
and
other payment obligations of the Company hereunder, shall be due and payable
upon the Payment Date (as defined in Section 1.6 hereof), at the
principal offices of the Company or by mail to the address of the registered
holder of this Note in lawful money of the United States, unless this Note
shall
have been previously converted pursuant to Section 2
hereof. Company may prepay all or any portion of the amounts due
under this note at any time without penalty or premium.
This
Note is issued pursuant to that certain Note and Warrant Purchase Agreement
dated as of the date hereof (the “Purchase
Agreement”), by and among the Company, the original holder of this
Note, and is subject to the provisions thereof. Any term used herein, but not
defined herein, shall have the meaning ascribed to it in the Purchase
Agreement.
The
following is a statement of the rights of Holder and the conditions to which
this Note is subject, and to which Holder hereof, by the acceptance of this
Note, agrees:
1. DEFINITIONS.
The following definitions shall apply for all purposes of this Note
1.1 “Company”
means the “Company” as defined above and includes any
corporation which shall succeed to or assume the obligations of the Company
under this Note.
1.2 “Conversion
Price” means $2.40 per share. The Conversion
Price is subject to adjustment as provided herein.
1.3 “Conversion
Stock” means the Company’s common stock, $0.001 par value per
share. The number and character of shares of Conversion Stock are subject
to
adjustment as provided herein and the term “Conversion Stock”
shall include stock and other securities and
property at any time
receivable or issuable upon conversion of this Note in accordance with its
terms.
1.4 “Holder”
means any person who shall at the time be the registered
holder of this Note.
1.5
“Note” means this
Convertible Promissory Note,
1.6 “Payment
Date” means the earlier to occur of: (i) the tenth
(10th) day after delivery of written demand to the Company for payment by
or on
behalf of the holder of the Note provided such demand is made
after six months from the date of this Note; or (ii) one year from the date
this
Note unless prepaid as otherwise permitted herein.
1.7 “Maturity
Date” the Note will have an initial maturity of 6 months
from the date of signing of the Purchase Agreement (the “Initial Maturity Date”)
extendable for an additional six (6) months at the option of the Company
(the
“Extended Maturity Date”)
1.8 “Interest
rate and Step-up rate” the interest rate during the period
before the Initial Maturity Date is set at 12% per annum. If the note is
extended after the Initial Maturity Date, the interest rate will step-up
to 14%
until the Extended Maturity Date.
2. CONVERSION.
2.1 Conversion.
If the Note is not paid on or before November 11, 2008, the Holder has the
right, at the Holder’s option, prior to the repayment of the outstanding balance
under the Note by the Company, to convert such outstanding balance of this
Note,
into Conversion Stock at the Conversion Price. Conversion under this Section
2.1 shall occur only upon surrender of this Note for conversion at the
principal offices of the Company, accompanied by written notice of election
to
convert and execution and delivery of such stock purchase agreement and related
documents as are generally entered into by investors in the
Company.
2.2 Termination
of Rights. All rights with respect to this Note and the
Pledge Agreement shall terminate upon (i) the full payment of the Principal
Amount and the accrued interest thereon on or before the Payment Date or
(ii)
the issuance of shares of the Conversion Stock upon conversion of this Note,
whether or not this Note has been surrendered. Notwithstanding the foregoing,
Holder agrees to surrender this Note to the Company for cancellation as soon
as
is possible following conversion of this Note. The Holder shall not be entitled
to receive the stock certificate representing the shares of common stock
to be
issued upon conversion of this Note until the original of this Note (or if
the
Note has been lost, an indemnity acceptable to the Company) is surrendered
to
the Company and the agreements referenced in Section 2 and 3 have been
executed and delivered to the Company.
3. ISSUANCE
OF CONVERSION ▇▇▇▇▇.▇▇
soon
as practicable after conversion of this Note, the Company at its
expense will
cause to be issued in the name of and delivered to the Holder, a
certificate or
certificates for the number of shares of Conversion Stock to which
the Holder
shall be entitled upon such conversion (bearing such legends as may
be required
by applicable state and federal securities laws in the opinion of
legal counsel
of the Company, by the Company’s Certificate of Incorporation or Bylaws, or by
any agreement between the Company and the Holder), together with
any other
securities and property to which the Holder is entitled upon such
conversion
under the terms of this Note. The Holder shall also enter into any
shareholders
and other agreements as are entered into by other holders of the
same class of
the Company’s stock so as to provide the Holder with comparable rights and
obligations with respect to such stock. Such conversion shall be
deemed to have
been made immediately prior to the close of business on the date
that this Note
shall have been surrendered for conversion, accompanied by written
notice of
election to convert. No fractional shares will be issued upon conversion
of this
Note. If upon any conversion of this Note, a fraction of a share
would otherwise
result, then in lieu of such fractional share the Company will round
up the
number shares issuable upon conversion to the nearest whole number,
calculated
on the basis of the applicable Conversion Price.
4.
ADJUSTMENT PROVISIONS. The number and character of
shares of Conversion Stock issuable upon conversion of this Note (or any
shares
of stock or other securities or property at the time receivable or issuable
upon
conversion of this Note) and the Conversion price therefore, are subject
to
adjustment upon occurrence of the following events between the date this
Note is
issued and the date it is converted:
4.1 Adjustment
for Stock Splits, Stock Dividends, Recapitalizations, etc.If the
conversion is made under Section 2.1 above, the Conversion Price of this
Note and the number of shares of Conversion Stock issuable upon conversion
of
this Note (or any shares of stock or other securities at the time issuable
upon
conversion of this Note) shall each be proportionally adjusted to reflect
any
stock dividend, stock split, reverse stock split, reclassification,
recapitalization or other similar event affecting the number of outstanding
shares of Conversion Stock (or such other stock or securities) unless the
conversion ratio in such Conversion Stock already reflects such
event.
4.2 Adjustment
for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the determination
of
eligible holders entitled to receive, a dividend or other distribution
payable
with respect to the capital stock that is payable in (a) securities of
the
Company (other than issuances with respect to which adjustment is made
under
Section 4.1), or (b) assets (other than cash dividends paid or payable
solely out of retained earnings), then, and in each such case, the Holder,
upon
conversion of this Note at any time after the consummation, effective date
or
record date of such event, shall receive, in addition to the shares of
Conversion Stock issuable upon such exercise prior to such date, the securities
or such other assets of the Company to which the Holder would have been
entitled
upon such date if the Holder had converted this Note immediately prior
thereto
(all subject to further adjustment as provided in this
Note).
4.3 Conversion
of Stock. In case all the authorized Conversion Stock of the
Company is convened, pursuant to the Company’s Certificate of Incorporation,
into Common Stock or other securities or property or the Conversion Stock
otherwise ceases to exist, then, in such case, the Holder, upon conversion
of
this Note at any time after the date on which the Conversion Stock is so
converted or ceases to exist (the “Termination Date”), shall receive, in lieu of
the number of shares of Conversion Stock that would have been issuable
upon such
exercise immediately prior to the Termination Date (the “Former Number of Shares
of Conversion Stock”), the stock and other securities and property which the
Holder would have been entitled to receive upon the Termination Date if
the
Holder had converted this Note with respect to the Former Number of Shares
of
Conversion Stock immediately prior to the Termination Date (all subject
to
further adjustment as provided in this Note).
4.4 Notice
of Adjustments. The Company shall promptly give written notice of
each adjustment or readjustment of the Conversion Price or the number of
shares
of Conversion Stock or other securities issuable upon conversion of this
Note.
The notice shall describe the adjustment or readjustment and show in reasonable
detail the facts on which the adjustment or readjustment is
based.
4.5 No
Change Necessary. The form of this Note need not be changed because
of any adjustment in the Conversion Price or in the number of shares of
Conversion Stock issuable upon its conversion.
4.6 Reservation
of Stock. If at any time the number of shares
of Conversion Stock or other securities issuable upon conversion of this
Note
shall not be sufficient to effect the conversion of this Note, the Company
will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Conversion Stock or other
securities issuable upon conversion of this Note as shall be sufficient
for such
purpose.
5. NO
RIGHTS OR LIABILITIES AS SHAREHOLDER. This Note does not by itself
entitle the Holder to any voting rights or other rights as a shareholder
of the
Company. In the absence of conversion of this Note, no provisions of this
Note,
and no enumeration herein of the rights or privileges of the Holder, shall
cause
the Holder to be a shareholder of the Company for any
purpose
6. NO
IMPAIRMENT. The Company will not, by amendment of its Certificate
of Incorporation or Bylaws, or through reorganization, consolidation, merger,
dissolution, issue or sale of securities, sale of assets or any other voluntary
action, willfully avoid or seek to avoid the observance or performance
of any of
the terms of this Note, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of an such action as may
be
necessary or appropriate in order to protect the rights of the Holder under
this
Note against wrongful impairment. Without limiting the generality of the
foregoing, the Company will take all such action as may be necessary or
appropriate in order that the Company may duly and validly issue fully
paid and
nonassessable shares of Conversion Stock upon the conversion of this
Note.
7. NOTES
ARE PARI PASSU. The Notes shall rank equally
without preference or priority of any kind over one another, and all payments
on
account of principal and interest with respect to any of the Notes shall
be
applied ratably and proportionately on all outstanding Notes on the basis
of the
original principal amount of outstanding Notes.
8. WAIVERS.
The Company and all endorsers of this Note hereby waive notice,
presentment, protest and notice of dishonor.
9. ATTORNEYS’
FEES. In the event any party is required to engage the
services
of any attorneys for the purpose of enforcing this Note, or any provision
thereof, the prevailing party shall be entitled to recover its reasonable
expenses and costs in enforcing this Note, including attorneys’
fees.
10. COMMITMENT
FEE. 2% of the Notional Amount payable to the Investor and to be
deduct from the principle sum at the time the amount is made to the Company.
If
the Note is being extended after Initial Maturity Date by the Company, an
additional 2% commitment fee is payable to the Investor.
11. TRANSFER
Neither this Note nor any rights hereunder may be assigned, conveyed
or transferred, in whole or in part, without the Company’s prior written
consent, which the Company may withhold in its sole discretion; provided,
however, that this Note may be assigned, conveyed or transferred without the
prior written consent of the Company to any person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with the Holder; provided, further, that such
transferee executes an acknowledgement that such transferee is subject to all
the terms and conditions of this Note and satisfies the Company as to compliance
with State and federal securities law. The rights and obligations of the Company
and the Holder under this Note and the Purchase Agreement shall be binding
upon
and benefit their respective permitted successors, assigns, heirs,
administrators and transferees.
12. OVERNING
LAW. This Note shall be governed by and construed
under the internal laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California, without reference to principles of conflict of laws or choice of
laws.
13. HEADINGS.
The headings and captions used in this Note are used only for convenience and
are not to be considered in construing or interpreting this Note. All references
in this Note to sections and exhibits shall, unless otherwise provided, refer
to
sections hereof and exhibits attached hereto, all of which exhibits are
incorporated herein by this reference.
14. NOTICES.
Unless otherwise provided, any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given (i) at the
time
of personal delivery, if delivery is in person; (ii) one (1) business day after
deposit with an express overnight courier for United States deliveries, or
two
(2) business days after such deposit for deliveries outside of the United
States, with proof of delivery from the courier requested; (iii) three (3)
business days after deposit in the United States mail by certified mail (return
receipt requested) for United States deliveries when addressed to the Investor,
at ▇/▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, or, in the case
of the Company, at ▇▇/▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇, or at such other address as any party or the Company may designate
by
giving ten (10) days’ advance written notice to all other parties.
15. AMENDMENTS
AND WAIVERS. This Note and all other Notes issued
under the Purchase Agreement may be amended and the provisions may be waived
by
the Holders and the Company as provided in Section 6 of the Purchase
Agreement.
16. SEVERABILITY.
If one or more provisions of this Note are held to be unenforceable under
applicable law, such provision(s) shall be excluded from this Note and the
balance of the Note shall be interpreted as if such provision(s) were so
excluded and shall be enforceable in accordance with its terms.
17. PURCHASE
AGREEMENT . This Note incorporates by reference all the terms of
the Purchase Agreement.
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IN
WITNESS WHERE OF, the Company has caused this Note to be signed in its
name as
of the
date first above written.
| THE COMPANY | |||
| NETWORK CN INC. | |||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇▇▇ | ||
| ▇▇▇▇▇▇▇ ▇▇▇ | |||
| Chief Executive Officer | |||