NOTE EXCHANGE AND OPTION AGREEMENT
Exhibit
10.2
THIS NOTE
EXCHANGE AND OPTION AGREEMENT (this “Agreement”) is effective as of
April 2, 2009, by and between KEYWIN HOLDINGS LIMITED, a British Virgin Islands
company (“Noteholder”),
and NETWORK CN INC., a Delaware corporation (the “Company”).
RECITAL
WHEREAS, the Noteholder
purchased that certain 3% Senior Secured Convertible Notes due June 30, 2011 of
the Company in the aggregate principal amount of $45,000,000 (the “Notes”) from Sculptor Finance
(MD) Ireland Limited, Sculptor Finance (AS) Ireland Limited and Sculptor Finance
(SI) Ireland Limited pursuant to the Note Purchase Agreement, dated April 2,
2009;
WHEREAS, the Noteholder
desires to exchange the Notes (the “Exchange”) for 307,035,463
shares of the Company’s common stock (the “Common Stock”);
WHEREAS, the Company desires
to issue to the Noteholder 307,035,463 shares of the Common Stock in exchange
for the Notes; and
WHEREAS, in connection with
the Exchange, the Company desires to grant the Noteholder an option (the “Option”) to purchase from the
Company an aggregate of 122,814,185 shares of the Common Stock for an aggregate
purchase price of $2,000,000, exercisable within 3 months after April 2, 2009 or
such other date as agreed by the parties hereto (the “Closing Date”).
NOW,
THEREFORE, in
consideration of the mutual covenants and agreements herein set forth, the
parties hereby agree as follows:
1.
Exchange of
Notes.
(a) Notwithstanding
any provisions or terms to the contrary contained in the Notes, the Noteholder
hereby elects to exchange the Notes for 307,035,463 shares of the Common Stock
and the Company hereby agrees to issue to the Noteholder 307,035,463 shares of
the Common Stock in full satisfaction of its obligations under the Notes,
including all principal and accrued and unpaid interest
thereon. After the Exchange, the Noteholder shall have no rights in
respect of the Notes, and, in lieu thereof, will only have those rights afforded
to the holders of Common Stock. The Noteholder hereby acknowledges and agrees
that it shall have no further right or entitlement under the Notes, and the
Company shall have no further obligation under the Notes.
(b) On
the Closing Date, the Noteholder shall tender to the Company the original Notes
and in exchange, the Company shall deliver an irrevocable instruction letter to
the Company’s transfer agent in which the Company shall instruct the transfer
agent to issue a stock certificate representing 307,035,463 shares of the Common
Stock to the Noteholder. Such stock certificate shall be delivered to
the Noteholder within five (5) business days after the Closing
Date.
(c) As
of the Closing Date, the Noteholder and Company irrevocably cancel the Notes and
the Notes are of no further force or effect.
2.
Option to Purchase Common
Stock.
(a) For a
three (3) month period commencing on the Closing Date (the “Exercise Period”), the
Noteholder shall have the right to purchase from the Company an aggregate of
122,814,185 shares of the Common Stock for an aggregate purchase price of
$2,000,000 (the “Purchase
Price”). The Option may be exercised by the Noteholder at any
time during the Exercise Period by giving written notice to the
Company.
(b) The
Purchase Price shall be paid to the Company in cash or immediately available
funds, unless otherwise mutually agreed. Upon receipt of the Purchase
Price and written notice, the Company shall, as promptly as practical, issue the
Noteholder a stock certificate representing 122,814,185 shares of the Common
Stock.
(c) If the
Noteholder fails to exercise the Option during the Exercise Period pursuant to
this Section 2, the Option shall terminate.
3.
Representations and Warranties
of the
Company. The Company hereby makes the following representations,
warranties, and covenants each of which is true and correct on the date
hereof.
(a) The
Company is a corporation duly formed, validly existing and in good standing
under the laws of the State of Delaware. The Company has the power
and authority to own its own property and assets and to transact the business in
which it is engaged. The Company is qualified to do business in each
state or jurisdiction in which the failure to so qualify would have a material
adverse effect on its business.
(b) The
Company has the power and authority to execute, deliver and perform this
Agreement, and the Company has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement. This
Agreement constitutes the authorized, valid and legally binding obligations of
the Company, enforceable against the Company in accordance with its terms,
except that such enforcement may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of Noteholders’ rights generally, and (b) general principles of
equity.
(c) The
Common Stock to be issued pursuant to the Exchange, have been duly authorized,
and upon consummation of the transactions contemplated by this Agreement, will
be validly issued, fully paid and nonassessable.
(d) The
Common Stock to be issued pursuant to the exercise of the Option, have been duly
authorized, and upon exercise of the Option in accordance with the terms of this
Agreement against payment of the Purchase Price, will be validly issued, fully
paid and nonassessable.
4.
Representations and Warranties
of the Noteholder.
The Noteholder hereby makes the following representations, warranties, and
covenants each of which is true and correct on the date hereof.
(a) The
Noteholder is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
(b) The
Noteholder has the power and authority to execute, deliver and perform this
Agreement, and the Noteholder has taken all necessary corporate action to
authorize the execution, delivery and performance of this
Agreement. This Agreement constitutes the authorized, valid and
legally binding obligations of the Noteholder, enforceable against the
Noteholder in accordance with its terms, except that such enforcement may be
subject to (a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of Noteholders’ rights
generally, and (b) general principles of equity.
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(c) The
Noteholder has good and valid title to the Notes, free and clear of any
mortgage, lien, pledge, charge, security interest, encumbrance, title retention
agreement, option, equity or other adverse claim thereto. The
Noteholder has not, in whole or in part, (i) assigned, transferred,
hypothecated, pledged or otherwise disposed of the Notes or its rights in such
Notes, or (ii) given any person or entity any transfer order, power of
attorney or other authority of any nature whatsoever with respect to such Notes
which would limit the Noteholder’s power to exchange the Notes
hereunder.
5. Legend. The
Noteholder acknowledges that it understands that the certificate(s) representing
the Common Stock issuable upon the Exchange or the exercise of the Option will
bear a legend to the following effect unless registered under the Securities Act
of 1933, as amended (the “Securities
Act”):
THIS
SECURITY HAS 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) DELIVERY TO THE COMPANY OF 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.
6. Accredited
Investor. The Noteholder is an “accredited investor” as
defined in Rule 501(b) promulgated under the Securities Act and understands that
the Common Stock issuable upon the Exchange and the exercise of the Option (the
“Securities”)
have not been registered under the Securities Act or the securities laws of any
state and that the Noteholder is purchasing the Securities for investment
only. The Noteholder agrees and represents that the Noteholder will
not sell, assign, pledge or otherwise dispose of the Securities unless, in the
opinion of the Company’s counsel, the same may be legally sold or disposed of
without registration or qualification under applicable state or federal
statutes, or the Securities to be disposed of shall have been so registered or
qualified and an appropriate registration statement shall then be in effect; and
the Noteholder understands that it must bear the economic risk of the investment
for an indefinite period of time.
7. Notice. Except
as otherwise provided herein, all notices, requests, consents, demands,
approvals and other communications hereunder must be in writing and shall be
deemed to have been duly given, made, served or received (i) on the date when
delivered personally, (ii) on the third day after being sent when mailed first
class mail, postage prepaid, return receipt requested, or (iii) on the next day
after being delivered to an overnight delivery courier, charges prepaid to the
respective parties to this Agreement at the address listed under such party’s
name in the signature block hereof. The designation of the person to
be so notified or the address of such person for the purposes of such notice may
be changed from time to time by similar notice in writing, except that any
communication with respect to a change of address shall be deemed to be given or
made when actually received by the party to whom such communication was
sent.
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8. Governing
Law. This Agreement and the rights and obligations of all
parties hereunder shall be deemed to have been made in the State of New York and
shall be governed by and construed in accordance with, the laws of the State of
New York without giving effect to any choice or conflict of law provision or
rule (whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
New York.
9. Authority. Each
of the undersigned executing this Agreement hereby represents that he or she is
a duly authorized representative and that he or she has authority to execute and
bind the organization on behalf of the organization.
10. Entire Agreement;
Amendment. This Agreement contains the entire agreement among the parties hereto with respect
to the transactions contemplated herein, and can be amended only by the written instrument of each
party.
11. Counterparts. This
Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed on the date first written above.
| NETWORK CN INC. | |||
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By
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/s/ Xxxxxxx Xxx | |
| Name: | Xxxxxxx Xxx | ||
| Title: | Chief Executive Officer | ||
| KEYWIN HOLDINGS LIMITED | |||
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By
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/s/ | |
| Name: | |||
| Title: | |||
