0001214659-20-000547.txt : 20200123 0001214659-20-000547.hdr.sgml : 20200123 20200123061107 ACCESSION NUMBER: 0001214659-20-000547 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20200123 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20200123 DATE AS OF CHANGE: 20200123 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK CN INC CENTRAL INDEX KEY: 0000934796 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 113177042 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30264 FILM NUMBER: 20540322 BUSINESS ADDRESS: STREET 1: 2ND FLOOR, GOLDSLAND BUILDING STREET 2: 22-26 MINDEN AVENUE, TSIM SHA TSUI CITY: KOWLOON STATE: K3 ZIP: 00000 BUSINESS PHONE: 852 2833 2186 MAIL ADDRESS: STREET 1: 2ND FLOOR, GOLDSLAND BUILDING STREET 2: 22-26 MINDEN AVENUE, TSIM SHA TSUI CITY: KOWLOON STATE: K3 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: TEDA TRAVEL GROUP INC DATE OF NAME CHANGE: 20040420 FORMER COMPANY: FORMER CONFORMED NAME: ACOLA CORP DATE OF NAME CHANGE: 20011026 FORMER COMPANY: FORMER CONFORMED NAME: MEGACHAIN COM LTD DATE OF NAME CHANGE: 19990827 8-K 1 s1222008k.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 23,2020 (January 20, 2020)

 

NETWORK CN INC.

(Exact Name of Registrant as Specified in Charter)

 

Delaware   000-30264   90-0370486
(State or Other Jurisdiction
of Incorporation)		   (Commission File Number)   (I.R.S. Employer
Identification No.)

 

3/F., D. J. Securities Building, 171 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong

(Address of Principal Executive Offices)
(Zip Code)

 

852-2833 2186
(Registrant's telephone number, including area code)

 

     
(Former name, former address and former fiscal year, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value NWCN OTC market 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

 

 

 

   
 

 

Item 1.01.Entry into a Material Definitive Agreement.

 

On January 20, 2020, the Company entered into a Letter of Intent with Earthasia Worldside Holdings Limited (the “Seller”) that the Company will acquire 100% of the Seller’s issued and outstanding stock owned by the shareholders of the Seller and the Seller will become a wholly owned subsidiary of the Company.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Issuance of Convertible Promissory Note

 

On January 14, 2020, the Company entered into a Subscription Agreement with Tsang Wai Yee Terri (“the Subscriber”) under which the Subscriber agreed to purchase the 1% Senior Unsecured Convertible Note Agreement from the Company for an agreement purchase price of six hundred and forty-five thousand US Dollars ($645,000). On the same date, the Company signed the with 1% Senior Unsecured Convertible Note Agreement under which the Company may sell and issue to the Subscriber up to an aggregate maximum amount of $645,000 in principal amount of Convertible Notes prior to January 13, 2025. The Convertible Promissory Notes issued to the Investor are convertible at the holder’s option into shares of Company common stock at $1.00 per share.

 

ITEM 9.01.EXHIBITS.

 

The following exhibits are filed as part of this report or incorporated by reference:

 

Exhibit No.   Description
     
10.1   Letter of Intent
10.2   Subscription Agreement
10.3   1% Senior Unsecured Convertible Note

 

   
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: January 22, 2020

  NETWORK CN INC.
   
   
  By: /s/ Earnest Leung                                       
  Earnest Leung 
  Chief Executive Officer

 

 

 

 

 

 

 EX-10.1 2 ex10_1.htm EXHBIT 10.1

 

Exhibit 10.1

 

LETTER OF INTENT

NETWORK CN INC.

AND

EARTHASIA WORLDSIDE

HOLDINGS LIMITED

 

 

This letter of intent ("LOI") sets forth the understanding, which has been reached between Earthasia Worldwide Holdings Limited (“Seller") and Network CN Inc. ("Company"), concerning the acquisition of Seller by Company.

 

1.     Acquisition. The Company will acquire 100% of Seller's issued and outstanding stock (the "Seller’s Shares") owned by the shareholders of the Seller (the "Acquisition"). Upon completion of the Acquisition, Seller will become a wholly owned subsidiary of the Company.

 

2.     Share Exchange. Seller and Seller’s shareholders shall receive ordinary shares of the Company’s common stock (the “Company Shares”) upon the closing of the Acquisition (the “Closing”), in exchange for all of the Seller Shares. It is hereby agreed that the total number of ordinary shares to be received by the Seller is subject to valuation basing on audited financials of the Seller.

 

3.     Bonus Shares. It is hereby agreed that the parties shall negotiate in good faith a bonus package (“Bonus Package”) for Seller’s advisory. This Bonus Package shall in accordance with industry standards and listing laws and regulations in the USA.

 

4.     Operating Capital. It is hereby agreed that Seller shall be provided sufficient operating capital to achieve certain milestones as per a pre-approved budget. Budget and milestones must be mutually agreed upon prior to Acquisition.

 

5.     Auditors Costs. It is hereby agreed that the Company will help to identify proper PCAOB auditors to conduct audit works for Seller basing on applicable listing laws, regulations and USGAAP. The Company shall pay down payment to the auditors and Seller shall be responsible for progress payments.

 

6.     Additional Terms and Conditions of the Acquisition. Consummation of the Acquisition will be subject to the following terms and conditions:

 

(a)       A definitive agreement (the "Definitive Agreement") satisfactory to the Company and Seller and Seller’s shareholders shall be executed by Company, Seller and all of Seller's shareholders as soon as practicable. The Definitive Agreement shall contain terms, conditions, representations and warranties, covenants and legal opinions normal and appropriate for a transaction of the type contemplated, including, without limitation, those summarized in this LOI;

 

(b)       Upon signing the Definitive Agreement, the Company shall prepare and file with the SEC all appropriate documents including, but not limited to, a Super 8K and 13D of the Securities Act of 1933. The filings will include, as necessary, description of Seller’s business and Seller’s audited and interim unaudited financial statements prepared in accordance with GAAP and/or PCAOB approved Audit statements and applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Seller shall provide such financial statements and information and any additional information the Company may require for inclusion in its filings.

 

   
 

 

(c)       Each party and its agents, attorneys and representatives shall have full and free access to the properties, books and records of the other party (the confidentiality of which the investigating party agrees to retain) for purposes of conducting investigations of the other party;

 

(d)       The Company and Seller shall have received all permits, authorizations, regulatory approvals and third-party consents necessary for the consummation of the Acquisition and all applicable legal requirements shall have been satisfied;

 

(e)       It is hereby agreed that the Sellers current Officers and Directors shall receive management contracts that shall include bonuses and stock incentives based upon performance and milestones.

 

(f)       Conduct of Business. The Seller shall use its reasonable best efforts to preserve intact the business organization and employees and other business relationships of the Seller; shall continue to operate in the ordinary course of business and maintain its books, records and accounts in accordance with generally accepted accounting principles, consistent with past practice; shall use its reasonable best efforts to maintain the Seller's current financial condition, including working capital levels; shall not incur any indebtedness or enter into any agreements to make business or product line stock purchase agreements; and shall not declare or make any dividend or stock distributions.

 

(g)      Disclosure. Without the prior written consent of Company, the Seller will, and each party hereto will cause its directors, officers, shareholders, employees, agents, other representatives and affiliates not to, disclose to any person the fact that discussions or negotiations are taking place concerning the transactions contemplated hereby, the status thereof, or the existence of this letter and the terms thereof, unless in the opinion of such party disclosure is required to be made by applicable law, regulation or court order, and such disclosure is made after prior consultation with Company.

 

(h)      Access to Seller. The Seller will give Company and its representatives full access to any personnel and all properties, documents, contracts, books, records and operations of the Seller relating to its business. The Seller will furnish Company with copies of documents and with such other information as Company may request.

 

(I)       Upon completion of the Acquisition, all officers, except the acting CFO, and directors of the Company will stay with and appoint new officers and directors of the Company as instructed by the Seller. It is agreed that the assets, as listed in audited financial statements as of December 31, 2019, in the Company PRIOR to this business combination will be retained.

 

7.     Expenses. Each Party shall have independent counsel and as such all legal fees and expenses shall be borne by each Party.

 

8.     Conduct of Business of Seller Pending Closing. Until consummation or termination of the Acquisition, Seller will conduct its business only in the ordinary course and none of the assets of Seller shall be sold or disposed of except in the ordinary course of Seller's business.

  

   
 

 

9.     Representations and Warranties. The Definitive Agreement will contain representations and warranties customary to transactions of this type, including without limitation, representations and warranties by the selling shareholders and the Seller as to (a) the accuracy and completeness of the Seller's financial statements for the past two years and current financial statements; (b) disclosure of all the Seller's contracts, commitments and liabilities, direct or contingent; (c) the physical condition, suitability, ownership and absence of liens, claims and other adverse interests with respect to the Seller's assets; (d) the selling shareholders’ ownership of the Shares; (e) the absence of liabilities with respect to the Seller, other than as set forth in the balance sheet dated December 31, 2019, and liabilities incurred in the ordinary course of business since that date; (f) the absence of a material adverse change in the condition (financial or otherwise), business, properties, assets or prospects of the Seller; (g) absence of pending or threatened litigation (other than disclosed in writing), investigations or other matters affecting the Stock purchase agreement; (h) the Seller's compliance with laws and regulations applicable to its business and obtaining all licenses and permits required for its business; and (i) the due incorporation, organization, valid existence, good standing and capitalization of the Seller.

 

10.   No Other Offers. The Seller and its principal shareholders each acknowledges that Company will incur significant expense in connection with its due diligence review and preparation and negotiation of the Purchase Agreement. As a result, upon execution of this letter the Seller and the Principal Shareholder shall terminate any existing discussions or negotiations with, and shall cease to provide information to or otherwise cooperate with, any party other than Company and its representatives with respect to an Stock purchase agreement Transaction (as defined below). In addition, from and after the date hereof, none of the Seller nor any of its shareholders, subsidiaries or affiliates, or any of their respective officers, directors, employees, members, managers, representatives or agents, will directly or indirectly encourage, solicit, initiate, have or continue any discussions or negotiations with or participate in any discussions or negotiations with or provide any information to or otherwise cooperate in any other way with, or enter into any agreement, letter of intent or agreement in principle with, or facilitate or encourage any effort or attempt by any corporation, partnership, Seller, person or other entity or group (other than Company and its shareholders, subsidiaries or affiliates, or any of their respective officers, directors, employees, members, managers, representatives or agents) concerning any merger, joint venture, recapitalization, reorganization, sale of substantial assets, sale of any shares of capital stock, investment or similar transaction involving the Seller or any subsidiary or division of the Seller (each, an "Stock purchase agreement Transaction"). The Seller shall notify Company promptly of any inquiries, proposals or offers made by third parties to the Seller or any of its shareholders, subsidiaries or affiliates, or any of their respective officers, directors, employees, members, managers, representatives or agents with respect to an Stock purchase agreement Transaction and furnish Company the terms thereof (including, without limitation, the type of consideration offered and the identity of the third party). The Seller and the Principal Shareholder shall deal exclusively with Company with respect to any possible Stock purchase agreement Transaction and Company shall have the right to match the terms of any proposed transactions in lieu of such parties.

 

11.   Enforceable Agreement; Compliance with Applicable Laws. This LOI shall constitute an enforceable agreement between the Company and Seller, and shall serve as the Agreement until such time as the Definitive Agreement may be prepared, however, no longer than thirty (30) days from the signing date. Upon the concurrence of the Company and Seller as provided below, both the Company and Seller agree to use their respective best efforts to negotiate a mutually acceptable Definitive Agreement and to consummate the Acquisition and shall include the above terms and conditions but is not limited thereto. It is the understanding of the Company and Seller that all matters referred to in this LOI are conditioned upon compliance with applicable Federal and state securities laws and other applicable laws.

 

   
 

 

The undersigned concur with the matters set forth in the foregoing LOI.

 

NETWORK CN INC.   EARTHASIS WORLDWIDE  
    HOLDINGS LIMITED  
       
       
       
By: Earnest Leung   By: Andross Chan  
C.E.O.   C.E.O.  
Date:      Date:     

 

 

 

 

 

 

 

 EX-10.2 3 ex10_2.htm EXHBIT 10.2

 

Exhibit 10.2

 

THIS SUBSCRIPTION AGREEMENT RELATES TO AN OFFERING OF A CONVERTIBLE NOTE (THE “NOTE”) IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).

 

THE NOTE TO WHICH THIS SUBSCRIPTION AGREEMENT (THE “SUBSCRIPTION AGREEMENT”) RELATES HAS NOT BEEN REGISTERED UNDER THE  1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, IT MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO A U.S. PERSON EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.  IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE NOTE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT.   "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.

 

SUBSCRIPTION AGREEMENT

(Offshore Subscribers)

 

TO:

NETWORK CN INC. (the “Company”)
a company with offices at 3/F, D.J. Securities Building, 171 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong.

 

Purchase of Convertible Note

 

1.Subscription

 

1.1On the basis of the representations and warranties and subject to the terms and conditions set forth herein, TSANG WAI YEE TERRI, holder of Hong Kong Identity Card No.: G815027(2), whose address is at House D39, Regalia Bay, 88 Wong Ma Kok Road, Stanley, Hong Kong (the “Subscriber”), hereby irrevocably subscribes for and agrees to purchase one senior convertible note (the “Note”) from the Company for an aggregate purchase price of SIX HUNDRED AND FORTY-FIVE THOUSAND US DOLLARS ($645,000) (the “Principle”), ”), plus accrued and unpaid interest thereon on January 13, 2026 (the “Maturity Date”), substantially in the form attached to this Subscription Agreement as Exhibit 1 (the subscription and agreement to purchase being the “Subscription”). 

 

1.2On the basis of the representations and warranties and subject to the terms and conditions set forth herein, the Company hereby irrevocably agrees to sell the Note to the Subscriber.

 

1.3Subject to the terms hereof, the Subscription will be effective upon its acceptance by the Company.

 

1.4Unless otherwise provided, all dollar amounts referred to in this Subscription Agreement are in lawful money of the United States of America.

 

2.Payment

 

2.1the Principle pertaining to the purchase of the Note shall be paid on or before the Closing Date (as defined in Section 4.1, below) by cheque or wire transfer to the Company (Information of the Company attached hereto Exhibit 2).

 

 1 
 

 

3.Documents Required from Subscriber

 

3.1The Subscriber must:
(a)complete, sign and return to the Company an executed copy of this Subscription Agreement prior to the Closing Date; and,
(b)complete, sign and return to the Company as soon as possible, on request by the Company, any documents, questionnaires, notices and undertakings as may be required by regulatory authorities and applicable law (collectively the “Transaction Documents.”)

 

4.Closing

 

4.1There shall be no formal closing ceremony with respect to the transactions contemplated by this Agreement. Instead, the parties shall execute and exchange the Transaction Documents by facsimile and email and the closing of the transactions contemplated by this Agreement shall be deemed to have occurred (the "Closing") on the date (the "Closing Date") that the Company receives the Subscription Proceeds in full. There may be multiple Closings.

 

5.Acknowledgements of Subscriber

 

5.1The Subscriber acknowledges and agrees that:

(a) Neither the Note nor the shares of common stock (“Shares”) that may be issued upon a conversion of the Note (the Note and the Shares may be hereinafter referred to collectively as the “Securities”) have been or will be registered under the 1933 Act, or under any state securities or “blue sky” laws of any state of the United States, and, unless so registered, none of them may be offered or sold in the United States or, directly or indirectly, to a U.S. Person, as that term is defined in Regulation S under the 1933 Act (“Regulation S”), except in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act, or pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and in each case in accordance with applicable state securities laws;

(b) the Company has not undertaken to, and will have no obligation to, register the Securities, or any of them, under the 1933 Act;

(c) it has received and carefully read this Subscription Agreement;

(d) the decision to execute this Subscription Agreement and acquire the Note hereunder has not been based upon any oral or written representation as to fact or otherwise made by or on behalf of the Company, and such decision is based entirely upon a review of information (the adequacy of which is hereby acknowledged) about the Company that is available to the Subscriber on request;

(e) there are risks associated with an investment in the Company including, by way of example and not in limitation, the specific risks identified in the Company’s communications with the Subscriber.

(f) it and its advisor(s) have had a reasonable opportunity to ask questions of and receive answers from the Company in connection with the sale of the Note hereunder, and to obtain additional information, to the extent possessed or obtainable by the Company without unreasonable effort or expense;

(g) all information which the Subscriber has provided to the Company is correct and complete as of the date the Subscription Agreement is signed, and if there should be any change in such information prior to this Subscription Agreement being executed by the Company, the Subscriber will immediately provide the Company with such information;

(h) the Company is entitled to rely on the representations and warranties of the Subscriber contained in this Subscription Agreement and the Subscriber will hold the Company harmless from any loss or damage it may suffer as a result of the Subscriber’s failure to correctly complete this Subscription Agreement;

(i) the Subscriber has been advised to consult the Subscriber’s own legal, tax and other advisors with respect to the merits and risks of an investment in the Securities and with respect to applicable resale restrictions, and it is solely responsible (and the Company is not in any way responsible) for compliance with:

(i) any applicable laws of the jurisdiction in which the Subscriber is resident in connection with the distribution of the Securities hereunder, and

(ii) applicable resale restrictions;

 

 2 
 

 

(j) none of the Securities are listed on any stock exchange or automated dealer quotation system and no representation has been made to the Subscriber that any of the Securities will become listed on any stock exchange or automated dealer quotation system until the Company has successfully obtained the approval of Securities and Exchange Commission (“SEC”).

(k) none of the Securities may be offered or sold by the Subscriber to a U.S. Person (as defined in Section 6.2, below, or for the account or benefit of a U.S. Person (other than a distributor) prior to the end of the Distribution Compliance Period (as defined herein);

(l) the Subscriber is not acquiring the Note as a result of, and will not itself engage in, any “directed selling efforts” (as that term is defined in Regulation S under the 1933 Act) in the United States in respect of the Securities which would include any activities undertaken for the purpose of, or that could reasonably be expected to have the effect of, conditioning the market in the United States for the resale of any of the Securities; provided, however, that the Subscriber may sell or otherwise dispose of the Securities pursuant to registration thereof under the 1933 Act and any applicable state securities laws or under an exemption from such registration requirements;

(m) the Company will refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to an effective registration statement under the 1933 Act or pursuant to an available exemption from the registration requirements of the 1933 Act and in each case in accordance with applicable state securities laws;

(n) neither the SEC nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;

(o) no documents in connection with the sale of the Note hereunder have been reviewed by the SEC or any state securities administrators;

(p) there is no government or other insurance covering any of the Securities;

(q) the issuance and sale of the Securities to the Subscriber will not be completed if it would be unlawful or if, in the discretion of the Company acting reasonably, it is not in the best interests of the Company;

(r) the Subscriber is purchasing the Securities pursuant to an exemption from the registration and the prospectus requirements of applicable securities legislation on the basis that the Subscriber is not a resident of either the United States or Canada and, as a consequence:

(i) is restricted from using most of the civil remedies available under securities legislation,

(ii) may not receive information that would otherwise be required to be provided under securities legislation, and

(iii) the Company is relieved from certain obligations that would otherwise apply under securities legislation; and

(s) the statutory and regulatory basis for the exemption from U.S. registration requirements claimed for the offer of the Note, although in technical compliance with Regulation S, would not be available if the offering is part of a plan or scheme to evade the registration provisions of the 1933 Act or any applicable state securities laws.

 

6.Representations, Warranties and Covenants of the Subscriber

 

6.1The Subscriber hereby represents and warrants to and covenants with the Company (which representations, warranties and covenants shall survive the Closing), and acknowledges that the Company is relying thereon, that:

(a) the Subscriber is not a U.S. Person as that term is defined in Regulation S;

(b) the Subscriber is not acquiring the Note for the account or benefit of, directly or indirectly, any U.S. Person as that term is defined in Regulation S;

(c) the Subscriber is resident in the jurisdiction set out under the heading “Name and Address of Subscriber” on the signature page of this Subscription Agreement and the sale of the Securities to the Subscriber as contemplated in this Subscription Agreement complies with or is exempt from the applicable securities legislation of the jurisdiction of residence of the Subscriber;

(d) the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Subscription Agreement on behalf of the Subscriber;

 

 3 
 

 

(e)if the Subscriber is a corporation or other entity, the entering into of this Subscription Agreement and the transactions contemplated hereby do not and will not result in the violation of any of the terms and provisions of any law applicable to, or the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber may be a party or by which the Subscriber is or may be bound;

(f) the Subscriber has duly executed and delivered this Subscription Agreement and upon acceptance thereof by the Company it will constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber in accordance with its terms;

(g) the Subscriber is acquiring the Securities as principal for its own account for investment purposes only and not for the account of any other person and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest in such Securities, and it has not subdivided its interest in the Securities with any other person;

(h) the Subscriber is outside the United States when receiving and executing this Subscription Agreement and is acquiring the Note as principal for the Subscriber’s own account for investment purposes only, and not with a view to, or for, resale, distribution or fractionalisation thereof, in whole or in part, and no other person has a direct or indirect beneficial interest in the Securities;

(i) the Subscriber is aware that an investment in the Company is speculative and involves certain risks, including the possible loss of the entire investment and it has carefully read and considered risk factors being communicated by the Company and/or the Subscriber’s professional advisor(s);

(j) the Subscriber has made an independent examination and investigation of an investment in the Securities and the Company and has depended on the advice of its legal and financial advisors and agrees that the Company will not be responsible in any way whatsoever for the Subscriber’s decision to invest in the Securities and the Company;

(k) the Subscriber (i) has adequate net worth and means of providing for its current financial needs and possible personal contingencies, (ii) has no need for liquidity in this investment, and (iii) is able to bear the economic risks of an investment in the Securities for an indefinite period of time;

(l) the Subscriber understands and agrees that the Company and others will rely upon the truth and accuracy of the acknowledgements, representations and agreements contained in this Subscription Agreement and agrees that if any of such acknowledgements, representations and agreements are no longer accurate or have been breached, the Subscriber shall promptly notify the Company;

(m) the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto;

(n) the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber in accordance with its terms;

(o) the Subscriber is not an underwriter of, or dealer in, the Company’s Shares, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of any of the Shares;

(p) the Subscriber is not an underwriter of, or dealer in, the Company’s Shares, nor is the Subscriber participating, pursuant to a contractual agreement or otherwise, in the distribution of any of the Securities;

(q) the Subscriber understands and agrees that offers and sales of any of the Securities prior to the expiration of restricted period after the date of original issuance of the Securities (the twelve month period hereinafter referred to as the “Distribution Compliance Period”) shall only be made in compliance with the safe harbor provisions set forth in Regulation S, pursuant to the registration provisions of the 1933 Act or an exemption therefrom, and that all offers and sales after the Distribution Compliance Period shall be made only in compliance with the registration provisions of the 1933 Act or an exemption therefrom and in each case only in accordance with applicable state securities laws;

(r) the Subscriber agrees not to engage in any hedging transactions involving any of the Securities unless such transactions are in compliance with the provisions of the 1933 Act and in each case only in accordance with applicable state securities laws;

 

 4 
 

 

(s) the Subscriber (i) is able to fend for itself in the Subscription; (ii) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment in the Securities and the Company; and (iii) has the ability to bear the economic risks of its prospective investment and can afford the complete loss of such investment;

(t) the Subscriber will indemnify the Company against, and will hold the Company and, where applicable, its respective directors, officers, employees, agents, advisors and shareholders harmless from, any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber to the Company in connection therewith;

(u) the Subscriber is not aware of any advertisement of any of the Securities and is not acquiring the Securities as a result of any form of general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; and

(v) no person has made to the Subscriber any written or oral representations:

(i) that any person will resell or repurchase any of the Securities,

(ii) that any person will refund the purchase price of any of the Securities,

(iii) as to the future price or value of any of the Securities, or

(iv) that any of the Securities will be listed and posted for trading on any stock exchange or automated dealer quotation system or that application has been made to list and post any of the Securities of the Company on any stock exchange or automated dealer quotation system, except that currently the Company’s common shares are quoted on any exchange once the Company has obtained approval from the SEC.

 

6.2In this Subscription Agreement, the term “U.S. Person” shall have the meaning ascribed thereto in Regulation S.

 

7.Acknowledgement and Waiver

 

7.1The Subscriber has acknowledged that the decision to purchase the Securities was solely made on the basis of information available to the Subscriber by the Company.  The Subscriber hereby waives, to the fullest extent permitted by law, any rights of withdrawal, rescission or compensation for damages to which the Subscriber might be entitled in connection with the distribution of the Securities.

 

8.Legending of Subject Securities

 

8.1The Subscriber hereby acknowledges that that upon the issuance thereof, and until such time as the same is no longer required under the applicable securities laws and regulations, the certificates representing any of the Securities will bear a legend in substantially the following form:

 

“THESE SECURITIES WERE ISSUED IN AN OFFSHORE TRANSACTION TO PERSONS WHO ARE NOT U.S. PERSONS (AS DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”).  

 

ACCORDINGLY, NONE OF THE SECURITIES TO WHICH THIS CERTIFICATE RELATES HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED, NONE MAY BE OFFERED OR SOLD IN THE UNITED STATES (AS DEFINED HEREIN) OR, DIRECTLY OR INDIRECTLY, TO U.S. PERSONS (AS DEFINED HEREIN) EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN ACCORDANCE WITH THE 1933 ACT. “UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE 1933 ACT.”

 

 5 
 

 

8.2The Subscriber hereby acknowledges and agrees to the Company making a notation on its records or giving instructions to the registrar and transfer agent of the Company in order to implement the restrictions on transfer set forth and described in this Subscription Agreement.

 

9.Costs

 

9.1The Subscriber acknowledges and agrees that all costs and expenses incurred by the Subscriber (including any fees and disbursements of any special counsel retained by the Subscriber) relating to the purchase of the Note or to the conversion of the Note or the Conversion Shares shall be borne by the Subscriber.

 

10.Governing Law

 

10.1      This Subscription Agreement is governed by the laws of the State of New York and the federal laws applicable thereto. The Subscriber, in its personal or corporate capacity and, if applicable, on behalf of each beneficial purchaser for whom it is acting, irrevocably attorns to the jurisdiction of the courts of the Hong Kong Special Administrative Region.

 

11.Survival

 

11.1      This Subscription Agreement, including without limitation the representations, warranties and covenants contained herein, shall survive and continue in full force and effect and be binding upon the parties hereto notwithstanding the completion of the purchase of the Note by the Subscriber pursuant hereto.

 

12.Assignment and Transfer

 

12.1      This Subscription Agreement is assignable and transferrable.

 

12.2      Subscriber and new holder shall duly complete and sign the NOTICE OF SALES OR TRANSFER as attached hereto ANNEX B and deliver the Company within five (5) calendar days.

 

13.Severability

 

13.1      The invalidity or unenforceability of any particular provision of this Subscription Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Subscription Agreement.

 

14.Entire Agreement

 

14.1      Except as expressly provided in this Subscription Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Subscription Agreement contains the entire agreement between the parties with respect to the sale of the Securities and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute or common law, by the Company or by anyone else. This subscription may only be amended by instrument in writing signed by the parties hereto.

 

15.Notices

 

15.1      All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Subscriber shall be directed to the address on the signature page of this Subscription Agreement and notices to the Company shall be directed to it NETWORK CN INC. (the “Company”) at 3/F, D.J. Securities Building, 171 Hoi Bun Road, Kwun Tong, Kowloon, Hong Kong., Attention: C.E.O.

 

 6 
 

 

16.Counterparts and Electronic Means

 

16.1      This Subscription Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall constitute an original and all of which together shall constitute one instrument.  Delivery of an executed copy of this Subscription Agreement by electronic facsimile transmission or other means of electronic communication capable of producing a printed copy will be deemed to be execution and delivery of this Subscription Agreement as of the date hereinafter set forth.

 

17.Registration Instructions

 

17.1      The Subscriber hereby directs the Company to cause any Note issued pursuant to this Subscription Agreement to be registered on the books of the Company as directed on the signature page of this Agreement.

 

 

IN WITNESS WHEREOF the Subscriber has duly executed this Subscription Agreement as of the date of acceptance by the Company.

 

(Name of Subscriber – TSANG WAI YEE TERRI)

 

 

 

 

(Signature and, if applicable, Office)

 

(Address of Subscriber – House D39, Regalia Bay, 88 Wong Ma Kok Road, Stanley, Hong Kong)

(Country of Subscriber – Hong Kong Special Administrative Region, People’s Republic of China)

 

(Fax and/or E-mail Address of Subscriber – +852-25272331)

 

 

Registration Information (if different from above)

(Name of Subscriber – _______________)

 

 

 

 

(Signature and, if applicable, Office)

(Address of Subscriber)

(Country of Subscriber)

 

(Fax and/or E-mail Address of Subscriber)

 

 7 
 

 

A C C E P T A N C E

 

The above-mentioned Subscription Agreement in respect of the Note is hereby accepted by NETWORK CN INC..

 

DATED at the 14th day of January, 2020.

 

NETWORK CN INC.
Earnest Leung, C.E.O.

 

 

 

 

 

 
 
Authorized Signatory

 

 8 
 

 

Exhibit 1

 

Form of Convertible Note

 

 1 
 

 

Exhibit 2

 

Bank information of the Company

 

Beneficiary Bank: HSBC Hong Kong
‎Beneficiary Bank Address: 1 Queen's Road Central, Hong Kong
Beneficiary A/C Name:

NCN Group Limited

(a wholly owned subsidiary of Network CN Inc.)

Bank Code: 004
Beneficiary A/C No.: 126-535913-838
SWIFT code of beneficiary bank HSBCHKHHHKH

 

 

1

 

 

 EX-10.3 4 ex10_3.htm EXHBIT 10.3

 

Exhibit 10.3

 

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (AS AMENDED, THE “ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE. THIS SECURITY MAY NOT BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (B) AN EXEMPTION OR QUALIFICATION UNDER APPLICABLE SECURITIES LAWS OR (C) AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. ANY ATTEMPT TO TRANSFER, SELL, PLEDGE OR HYPOTHECATE THIS SECURITY IN VIOLATION OF THESE RESTRICTIONS SHALL BE VOID.

 

1% SENIOR UNSECURED CONVERTIBLE NOTE

 

$645,000 January 14, 2020

 

FOR VALUE RECEIVED, NETWORK CN INC., a Delaware corporation (the “Company”), hereby promises to pay to the order of TSANG WAI YEE TERRI, holder of Hong Kong Identity Card No.: G815027(2), whose address is at House D39, Regalia Bay, 88 Wong Ma Kok Road, Stanley, Hong Kong (the “Holder”), or its registered assigns or successors in interest or order, without demand, the sum of SIX HUNDRED AND FORTY-FIVE THOUSAND US DOLLARS ($645,000) (the “Principal”), plus accrued and unpaid interest thereon on January 13, 2025 (the “Maturity Date”). The following terms shall apply to this Note:

 

ARTICLE I

 

INTEREST

 

1.1       Interest Rate.  The Company hereby agrees to pay interest to the Holder in respect of the outstanding Principal, at a per annum rate equal to one percent (1%) in cash. Such interest shall accrue on the outstanding Principal from and after the date hereof, and shall be payable semi-annually in arrears with the first interest payment due on July 13, 2020 and succeeding interest payments due on the 13th Day of each  July and January thereafter (each, an “Interest Payment Date”). All computations of interest hereunder shall be made on the basis of a year of 365 days for the actual number of days (including the first but excluding the last day) occurring in the period for which such interest is payable. As used in this Note, “Business Day” means a day, excluding a Saturday, Sunday, legal holiday or other days on which banks are required to be closed in the People’s Republic of China, Hong Kong or New York.

 

1.2       Default Redemption.  Notwithstanding anything to the contrary herein, upon the occurrence and during the continuation of any Event of Default (as defined in Article 4 hereof), the Holder shall have the right, at its option, to require the Company to repurchase this Note (or any part thereof), in accordance with the terms set forth in Article 5 hereof.

 

1.3       No Prepayment.  The Company may not prepay all or any part of the amounts outstanding under this Note at any time without the express written consent of the Holder. For the avoidance of doubt, any redemption pursuant to Article 5 hereof shall not be deemed a prepayment.

 

  
 

 

1.4       Taxes and payment. Any and all payments by the Company to or for the account of the Holder under this Note shall be made free and clear of and without deduction for any taxes, except as required by applicable law.  If the Company shall be required by any applicable law to deduct any taxes from or in respect of any sum payable under this Note to the Holder, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this ‎ Section 1.4 ), the Holder receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Company shall make such deductions, (iii) the Company shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law, and (iv) as promptly as practicable after the date of such payment, the Company shall furnish to the Holder the original or a certified copy of a receipt evidencing payment thereof. All payments made by the Company will be pay to the following bank accounts:

 

Beneficiary Bank: The Bank of East Asia, Limited
Bank Code: 015
Beneficiary A/C No: 015-192-40-400169-0 (HKD) or 015-192-40-400361-8 (USD)
Beneficiary A/C Name: China Times Securities Limited Client’s Account
SWIFT Code: BEASHKHH

 

ARTICLE II

 

CONVERSION

 

2.1       Note Conversion. The Holder shall have the right, but not the obligation, to convert all or any part of the outstanding Principal of this Note, together with any accrued and unpaid interest thereon to the date of such conversion, into such number of fully paid and non-assessable shares of the Company’s common stock, par value US$0.001 per share (the “Common Stock”) or other securities of the Company as and if required pursuant to Section 2.3(b), at any time and from time to time prior to the later of the Maturity Date or the date on which this Note is paid in full, subject to the terms and conditions set forth in this Article 2, at a conversion price per share of Common Stock equal to US$1.00 (the “Conversion Price”), as the same may be adjusted from time to time in accordance with this Note and as proportionally adjusted for any subdivision, consolidation, reclassification or similar event of the Common Stock) calculated in accordance with Section 2.3.

 

2.2       Conversion Procedures

 

(a)       In the event that the Holder elects to convert this Note, the Holder shall give notice of such election by delivering an executed and completed notice of conversion (a “Notice of Conversion”) to the Company, which Notice of Conversion shall provide a breakdown in reasonable detail of the Principal, accrued and unpaid interest amounts being converted and the name of the entity to be issued the Shares of Common Stock upon conversion.  The date specified in the Notice of Conversion, or if no date is specified, then the date of the delivery of the Notice of Conversion, shall be referred to as the “Conversion Date.”  A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A.

 

(b)       Pursuant to the terms of the Notice of Conversion, the Company shall deliver, or cause to be delivered, such number of Shares of Common Stock (or other securities of the Company as and if required pursuant to Section 2.3(b)) as determined pursuant to this Note (the “Conversion Shares”) via physical certificates to the Holder or its assignee (if and as designated in the Notice of Conversion and to the extent permitted by applicable securities laws). In the case of the exercise of the conversion rights set forth herein, the conversion privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the Conversion Date.  The Holder or its assignee (if and as designated in the Notice of Conversion) shall be treated for all purposes as the beneficial holder of such Conversion Shares, unless the Holder provides the Company written instructions to the contrary.  

 

 -2- 
 

 

(c)       The number of Conversion Shares to be issued upon each conversion of this Note pursuant to this Article 2 shall be the quotient obtained by dividing the Principal and accrued interest by the then applicable Conversion Price.  No fractional shares of Common Stock shall be issued upon any conversion of this Note.  In lieu of the Company issuing any fractional shares to the Holder upon any conversion of this Note, the Company shall make an adjustment and payment in cash to the Holder.

 

(d)        The Company shall deliver or cause to be delivered certificates representing the Conversion Shares within seven (7) business days of the Conversion Date (the “Certificate Delivery Date”). If the Holder has made a sale or transfer of any such Conversion Shares either pursuant to Rule 144 or pursuant to a registration statement and (1) the Company shall fail to deliver or cause to be delivered to the Holder by the Certificate Delivery Date, a certificate representing such Conversion Shares and (2) following the Certificate Delivery Date the Holder, or any third party on behalf of the Holder, purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of such Conversion Shares (a “Buy-In”), then, the Company shall pay in cash to the Holder (for costs incurred either directly by such Holder or on behalf of a third party) the amount by which the total purchase price paid for Common Stock as a result of the Buy-In (including brokerage commissions, if any) exceed the proceeds received by such Holder as a result of the sale to which such Buy-In relates. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

 

2.3       Adjustment Events. The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows:

 

(a)       Merger, Sale of Assets, etc.  If (i) the Company effects any merger or consolidation of the Company with or into another entity, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (iv) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more persons or entities whereby such other persons or entities (such other persons or entities, the “Purchasers”) acquire more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Purchasers or such other persons or entities associated or affiliated with the Purchasers), or (v) any “person” or “group” (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of the Company (in any such case, a “Fundamental Transaction”), this Note, as to the Principal and accrued and unpaid interest thereon, shall thereafter, at the Holder’s election, be deemed to evidence the right to convert into such number and kind of shares or other securities and property as would have been issuable or distributable on account of such Fundamental Transaction, upon or with respect to the securities subject to the conversion right immediately prior to such Fundamental Transaction.  The foregoing provision shall similarly apply to successive Fundamental Transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the provisions of this Section 2.3 shall apply to such securities of such successor or purchaser after any such Fundamental Transaction.

 

(b)       Reclassification, etc.  If the Company at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the Principal hereof and accrued and unpaid interest hereon, shall thereafter be deemed to evidence the right to convert into an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change.

 

 -3- 
 

 

(c)       Stock Splits, Combinations and Dividends.  If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock (whether by a stock split or otherwise), or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

 

(d)       Share Issuance.  So long as any amount of this Note is outstanding, if the Company shall issue any Equity-Linked Securities (as defined below), except for securities issued or issuable pursuant to an Exempt Issuance (as defined below), prior to the full conversion or payment of this Note, for a consideration that is less than the Conversion Price, then, and thereafter successively upon each such issuance, the Conversion Price shall be reduced to such other lower issue price.  For purposes of this Note, “Equity-Linked Securities” means any equity securities of the Company (including any Common Stock) and any equity-linked securities of the Company (including any instruments, warrants, options or rights to acquire any equity securities of the Company). For purposes of this adjustment, the issuance of any Equity-Linked Securities shall result in an adjustment to the Conversion Price upon the issuance of such Equity-Linked Security, and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the then applicable Conversion Price. For purposes of this Article 2, “Exempt Issuance” shall mean (a) the issuance of shares of Common Stock to employees, consultants, service providers, officers or directors of the Company, pursuant to any other stock or option plan duly adopted for such purpose by the Company, (b) the issuance of securities upon the exercise or exchange of or conversion of any securities issued hereunder and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date of this Note, provided that such securities have not been amended since the date of this Note to increase the number of such securities or to decrease the exercise, exchange or conversion price of such securities, and (c) the issuance of securities to bona fide third party purchasers on an arm’s length basis.

 

(e)       Replacement Note. In the event of any partial conversion of the outstanding Principal and any accrued and unpaid interest under this Note, the Holder agrees to surrender this Note to the Company and the Company shall issue to the Holder a replacement Note in the amount of the remaining Principal (and accrued and unpaid interest, if applicable) after giving effect to such partial conversion.

 

2.4       Notice as to Adjustments. Whenever the Conversion Price is adjusted pursuant to this Article 2, the Company shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment.

 

2.5       Reservation and Registration.  The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Note, free from all mortgages, charges, pledges, liens, hypothecations or other security interests (“Liens”), preemptive rights or any other actual contingent purchase rights of persons other than the Holder, not less than the aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of this Article 2) upon the conversion of this Note.  The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, pursuant to the Registration Rights Agreement, shall be registered for public sale in accordance therewith.  The Company agrees that its issuance of this Note shall constitute full authority to its officers, agents, and transfer agents who are charged with the duty of executing and issuing stock certificates to execute and issue the necessary certificates for shares of Common Stock upon the conversion of this Note.

 

 -4- 
 

 

2.6       Transfer Taxes.  The issuance of certificates for shares of the Common Stock on conversion of this Note shall be made without charge to the Holder hereof for any documentary, stamp or similar taxes that may be payable in respect of the issue or delivery of such certificates.

 

2.7 Note Transferable. Subject to compliance with applicable laws and the transfer restrictions set forth in the Agreement, under which this Note was issued, this Note and all rights hereunder may be transferred, in whole or in part, without charge to Holder (except for transfer taxes), and, thereafter, upon surrender of this Note properly endorsed and in compliance with the provisions of the Agreement; provided, however, that in the event Holder desires to sell or otherwise transfer this Note to any third party, Holder shall provide the Company with prior written notice of such sale or transfer (including the terms and conditions of such proposed sale or transfer) and the Company shall have a right of first refusal for thirty (30) days following the Company’s receipt of such notice, at the Company’s option to prepay or redeem this Note or purchase this Note on the terms set forth in such notice.

 

 

ARTICLE III

 

COVENANTS

 

3.1       Affirmative Covenants of the Company. The Company covenants and agrees that, so long as all or any of the Principal of this Note remains outstanding, it shall:

 

(a)       pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income and profits, or upon any properties belonging to it before the same shall be in default; provided, however, that the Company shall not be required to pay any such tax, assessment, charge or levy which is being contested in good faith by proper proceedings and adequate reserves for the accrual of same are maintained if required by generally accepted accounting principles;

 

(b)       preserve its corporate existence and continue to engage in business of the same general type as conducted as of the date hereof; and

 

(c)       comply in all respects with all statutes, laws, ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits, licenses, authorizations and requirements (the “Requirement(s)”) of all governmental bodies, departments, commissions, boards, companies or associates insuring the premises, courts, authorities, officials, or officers, which are applicable to the Company or its property; except wherein the failure to comply would not have a materially adverse on (i) the business, property, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or (ii) the ability of the Company to perform its obligations under this Note, the Exchange Agreement, the Registration Rights Agreement or the Letter Agreement (collectively, the “Transaction Documents”); provided that nothing contained herein shall prevent the Company from contesting the validity or the application of any Requirements. As used in this Note, “Subsidiary” means, with respect to a person, any corporation, company (including any limited liability company), association, partnership, joint venture or other business entity of which at least a majority of the total voting power of the voting stock is at the time owned or controlled, directly or indirectly, by such person, and, in respect of the Company, shall also include any corporation, company (including any limited liability company), association, partnership, joint venture or other business entity from time to time organized and existing under the laws of the People’s Republic of China whose financial reporting is consolidated with the Company in any audited financial statements filed by the Company with the Commission in accordance with the Securities and Exchange of 1934 as amended, together with the rules and regulations promulgated thereunder from time to time in effect.

 

 -5- 
 

 

3.2       Negative Covenants of the Company. The Company covenants that so long as all or any of the Principal of this Note remains outstanding, it shall not, and shall ensure that none of its Subsidiaries shall, without the prior written consent of the holders of a majority of the principal amount of the Notes:

 

(a)       Charter Documents. Except with respect to any amendment of the Company’s certificate of incorporation to implement a reverse stock split and increase or decrease the authorized shares of the Company; modify, alter, repeal or amend the Company’s certificate of incorporation, by-laws or other organizational documents or effect any change of legal form of the Company; provided, however, that the number of Conversion Shares issuable hereunder shall be adjusted to prevent the dilution of such shares in the event of a reverse stock split as contemplated under Section 2.3(c) hereof;

 

(b)       Dividends. Declare or pay dividends or other distributions by the Company or any of its Subsidiaries in respect of the equity securities of such entity other than dividends or distributions of cash which amounts during any 12-month period that do not exceed ten percent (10%) of the consolidated net income of the Company based on the Company’s most recent audited financial statements disclosed in the Company’s annual report on Form 10-K (or equivalent form) filed with the U.S. Securities and Exchange Commission.

 

(c)       Redemptions or Repurchases. Except for any redemption pursuant to Article V hereof, redeem or repurchase shares of Common Stock or any other securities of the Company unless the Holders shall have first received, in respect of the Notes or the Conversion Shares, an amount in cash equal to the greater of (i) the Redemption Price and (ii) the amounts the Holders would be entitled to receive assuming the Conversion Shares are subject the redemption or repurchase.

 

ARTICLE IV

 

EVENTS OF DEFAULT

 

The occurrence of any of the following events shall constitute an event of default (“Event of Default “):

 

4.1       Failure to Pay Principal or Interest.  The Company shall fail to pay the Principal, when due, or any interest or other sum when due under this Note.

 

4.2       Breach of Covenant or Representations and Warranties.  The Company breaches any covenant or other term or condition of the Transaction Documents (including but not limited to the conversion obligations in Article 2) in any material respect, which failure is not cured, if possible to cure, within five Business Days after the Company has become or should have become aware of such failure, or any representation or warranty of the Company made in Transaction Documents shall be false or misleading in any material respect as of the date hereof.

 

4.3        General Assignment.  The Company or any Subsidiary makes an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for them or for a substantial part of their property or business; or such a receiver or trustee shall otherwise be appointed.

 

4.4       Bankruptcy. Bankruptcy, insolvency, reorganization, or liquidation proceedings or other such proceedings or relief under any bankruptcy, insolvency or restructuring law or any law, or the issuance of any notice in relation to such event, shall be instituted by or against the Company or any Subsidiary.

 

4.5       Judgments. Any judgment against the Company or any Subsidiary or any of their property or other assets with actual damages, net of insurance proceeds, in excess of $1,000,000 and such judgment, writ or similar final process shall remain unvacated, unbonded or unstayed for a period of thirty (30) calender days.

 

 -6- 
 

 

4.6       Delisting. The Common Stock shall not be eligible for listing or quotation for trading on a Trading Market for a period of ten (10) consecutive trading days, and shall not be eligible to resume listing or quotation for trading thereon within thirty (30) trading days. As used in this Note, “Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the OTC Bulletin Board, the New York Stock Exchange, NYSE Alternext U.S. (formerly known as the American Stock Exchange), the Nasdaq Global Market or the Nasdaq Capital Market.

 

4.7       Stop Trade. Stop trade order imposed judicially or by the U.S. Securities and Exchange Commission or by the OTC Bulletin Board or other exchange trading suspension with respect to Company’s Common Stock and such stop order not being rectified and resumed within thirty (30) trading days.

 

4.8       Non-Registration. The failure to timely file the registration statements covering the Conversion Shares in accordance with the Registration Rights Agreement.

 

4.9       Reservation Default. Failure by the Company to have reserved for issuance upon conversion of this Note the amount of Common Stock as set forth in this Note and the Transaction Documents.

 

4.10     Cross Default. A default by the Company or any of its Subsidiaries under any loan, mortgage, indenture, notes, debentures or any other instrument evidencing any indebtedness of the Company or any of its Subsidiaries in excess of $1,000,000, that results in acceleration of the maturity of such debt or liability, or failure to pay any such debt when due.

 

ARTICLE V

 

REDEMPTION

 

5.1       Optional Redemption Rights.  If there is an occurrence of any Event of Default hereunder, the Holder shall have the right, at its option, to require the Company to repurchase this Note (the “Redemption Rights”) from the Holder for an aggregate purchase price in cash equal to 110% of the aggregate Principal and any accrued and unpaid interest (the “Redemption Price”).  

 

5.2       Redemption Procedures.  The Holder may exercise the Redemption Rights under Section 5.1 by delivering written notice to the Company (the “Redemption Notice”).  The Company shall pay the Holder the Redemption Price not later than thirty (30) Business Days after delivery of such Redemption Notice by the Holder (the “Redemption Date”), and this Note shall be immediately cancelled and retired.   If the Redemption Notice shall have been duly given, and if on the Redemption Date the Redemption Price payable upon repurchase of this Note is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor, then notwithstanding that this Note shall not have been surrendered by the Holder, interest with respect to this Note shall cease to accrue after the Redemption Date and all rights with respect to this Note (other than the right to receive the Redemption Price) shall forthwith after the Redemption Date terminate.

 

5.3       Failure to Pay.  In the event that the Holder exercises the Redemption Rights and the Company does not have sufficient funds to pay the Redemption Price in full, this Note and the then outstanding Principal plus all accrued and unpaid interest thereon shall, notwithstanding the Holder’s surrender of this Note to the Company pursuant to Section 5.2, remain outstanding until the date the Holder receives the Redemption Price in full and the Holder shall maintain all of its rights and remedies under this Note.  For the avoidance of doubt, interest on the Principal shall continue to accrue to the extent provided in Section 1.1 until the date the Holder receives the Redemption Price in full.

 

 -7- 
 

 

ARTICLE VI

 

STATUS OF NOTE

 

6.1       Status of Note.  Except for obligations arising from Permitted Liens, and subject to Section 6.2 below, the obligations of the Company under this Note shall rank senior to all indebtedness of the Company, whether now or hereinafter existing. “Permitted Liens” means the individual and collective reference to any: (a) Liens for taxes, assessments and other governmental charges or levies not yet due, or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with U.S. generally accepted accounting principals, consistently applied, and duly reflected in the Company’s financial statements; (b) Liens imposed by law which were incurred in the ordinary course of the Company’s business, such as carriers,’ warehousemen’s and mechanics’ liens, statutory landlords’ liens, and other similar liens arising in the ordinary course of the Company’s business, and which (i) do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and its consolidated Subsidiaries or (ii) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien; and (c) Liens incurred in connection with lease obligations, purchase money indebtedness of up to two million dollars ($2,000,000), in the aggregate, incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, provided that such liens are not secured by assets of the Company or its Subsidiaries other than the assets so acquired or leased.

 

6.2       Unsecured Debt and Bank Loan Facilities. Notwithstanding anything to the contrary in Section 6.1 above: (a) the Company may issue unsecured debt ranking pari passu with this Note so long as the maturity date (and any other repayment or prepayment date) for such new indebtedness or any other provision allowing for such indebtedness to be redeemed or put to the Company is later than the Maturity Date; and (b) the Company may enter into bank loan facilities that are senior to this Note.

 

6.3       Liquidation. Upon any Liquidation Event, the Holder will be entitled to receive, before any distribution or payment is made upon, or set apart with respect to, any other indebtedness of the Company or any class of capital stock of the Company, an amount equal to the Principal plus all accrued and unpaid interest thereon.  For purposes of this Note, “Liquidation Event” means a liquidation pursuant to a filing of a petition for bankruptcy under applicable law or any other insolvency or debtor’s relief, an assignment for the benefit of creditors, or a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.

 

ARTICLE VII

 

MISCELLANEOUS

 

7.1       Non-Waiver and Other Remedies. No course of dealing, failure or delay on the part of the Holder of this Note in exercising any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

 

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7.2       Notices. Any notice required or permitted pursuant to this Note shall be given in writing and shall be given either personally or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below (or at such other address as such party may designate by fifteen (15) days’ advance written notice to the other parties to this Note given in accordance with this section):

 

If to the Holder: TSANG WAI YEE TERRI
  HOUSE D39, REGALIA BAY, 88 WONG MA KOK ROAD, STANLEY, HONG KONG
   
   
  with a copy to:
   
  c/o CHINA TIMES SECURITIES LIMITED
  ROOM 1608, 16/F, HARCOURT HOUSE, 39 GLOUCESTER ROAD, WANCHAI, HONG KONG
   
  Fax: +852-25272331
   
   
If to the Company: Network CN Inc.
  3/F, D.J. Securities Building,
  171 Hoi Bun Road, Kwun Tong
  Kowloon, Hong
  Email: e.leung@ncnmedia.com
   
  with a copy to (which shall not constitute notice):
   
  SCOTT KLINE
  KLINE LAW GROUP PC
15615 Alton Parkway, Suite 450
Irvine, CA 92618
  Office: (949) 271-6355
  Fax: (949) 271-6301
  Mobile: (415) 745-0314

 

 

Where a notice is sent by next-day or second-day courier service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the expiration of two (2) days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.

 

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7.3       Assignability.  This Note shall be binding upon the Company and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. Subject to applicable laws and regulations, this Note and all rights hereunder may be transferred or assigned in whole or in part by the Holder, and the Company shall assist the Holder in consummating any such transfer or assignment. The Company may not assign this Note without the consent of the Holder. A transfer of this Note may be effected only by a surrender hereof to the Company and the issuance by the Company of a new note or notes in replacement thereof, which shall be registered by the Company in accordance with Section 7.4 hereof once an executed copy of the replacement note has been executed by the transferee.

 

7.4       Transfer Register. In the event of a transfer, the Company shall maintain a register (the “Register”) for the registration or transfer of this Note, and shall enter the names and addresses of the registered holders of this Note, the transfers of this Note and the names and addresses of the transferees of this Note. The Company shall treat any registered holder as the absolute owner of this Note held by such holder, as indicated in the Register, for the purpose of receiving payment of all amounts payable with respect to this Note and for all other purposes.  The Note and the right, title, and interest of any person in and to such Note shall be transferable only upon notation of such transfer in the Register.  Solely for purposes of this Section 7.4 and for tax purposes only, the keeper of the Register, if it is not the Company, shall be the Company’s agent for purposes of maintaining the Register.  This Section 7.4 shall be construed so that this Note is at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the United States Internal Revenue Code (the “Code”) and any related regulations (and any other relevant or successor provisions of the Code or such regulations).

 

7.5       Collection Costs; Attorneys’ Fees. If default is made in the payment of this Note, the Company shall be obligated to pay the Holder hereof reasonable costs of collection, including attorneys’ fees and, in addition, the Company and of any amendment or modification of any of the foregoing requested by the Company or arising following an Event of Default.

 

7.6       Governing Law; Rules of Construction. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE COMPANY HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE’S REPUBLIC OF CHINA.

 

7.7       Consent to Jurisdiction and Service of Process. ALL JUDICIAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY COURT OF COMPETENT JURISDICTION IN HONG KONG SPECIAL ADMINISTRATIVE REGION OF THE PEOPLE’S REPUBLIC OF CHINA.

 

7.8       Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS.

 

7.9       Usury Savings Clause. This Note is subject to the express condition that at no time shall the Company be obligated or required to pay interest at a rate which could subject the Holder to either civil or criminal liability as a result of being in excess of the maximum rate which Company is permitted by law to agree to pay. If, by the terms of this Note, the Company is at any time required or obligated to pay interest on the outstanding balance at a rate in excess of such maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and interest pay able hereunder shall be computed at such maximum rate and the portion of all prior interest payments in excess of such maximum rate shall be applied and shall he deemed to have been payments in reduction of the outstanding balance.

 

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7.10     United States Dollars. All references to “$” or dollars in this Note shall refer to the currency of the United States.

 

7.11     Section Headings. Section headings herein have been inserted for reference only and shall not be deemed to limit or otherwise affect, in any matter, or be deemed to interpret in whole or in part any of the terms or provisions of this Note.

 

*    *    *

 

[Remainder of Page Left Blank Intentionally]

 

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IN WITNESS WHEREOF, this Note has been executed and delivered on the date specified above by the duly authorized representative of the Company.

 

 

  NETWORK CN INC.  
       
       
  By:    
  Name:  Earnest Leung  
  Title: Chief Executive Officer  

 

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Exhibit A

 

NOTICE OF CONVERSION

 

The undersigned hereby elects to convert the following amount of the outstanding principal [and accrued and unpaid interest thereon] under that certain 1% Senior Unsecured Convertible Promissory Note, due January 13, 2026 of NETWORK CN INC., a Delaware corporation (the “Company”), into shares of Common Stock according to the conditions therein, as of the date written below.  No fee will be charged to the holder for any conversion.

 

 

 

Conversion calculation:   

 

 

 

Date to Effect Conversion:   

 

 

 

Number of shares of Common Stock to be issued:   

 

 

 

Shares of Common Stock to be issued in the name of: [Insert name of Holder or its assignee]

 

 

 

HOLDER:  
     
   
(Print Name of Holder)  
     
By:    
Name:    
Title:    

 

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Exhibit B

 

NOTICE OF SALES OR TRANSFER

 

I, ________________, holder of Hong Kong Special Administrative Region passport No.: ________________, (the “Holder”) of 1% Senior Unsecured Convertible Promissory Note (“the Note”), due January 13, 2026 of NETWORK CN INC., hereby give notice that the note was sold or ownership transferred to:

 

Name (“New Holder”):

Passport No.:

Date of sales or transfer:

Address:

Contact No.:

Bank Accounts information:

Beneficiary Bank:

Beneficiary Bank Address:

Beneficiary A/C Name:

Bank Code:

Beneficiary A/C No.:

SWIFT code for beneficiary bank:

 

 

 

 

 

 

HOLDER:  
     
   
(Print Name of Holder)  
     
By:    
Name:    

 

 

 

NEW HOLDER:  
     
   
(Print Name of Holder)  
     
By:    
Name:    

 

 

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