Exhibit 10.3
 
LETTER AGREEMENT AND TERMINATION OF INVESTOR RIGHTS AGREEMENT

 
April 2, 2009
 
To:  The Investors (as defined below)
Cc:  Keywin Holdings Limited

Re:           Agreement and Termination of Investor Rights Agreement
(“Termination Agreement”)
 
Gentlemen:
 
We refer to the Investor Rights Agreement (the “Investor Rights Agreement”),
dated as of November 19, 2007, by and among Network CN Inc. (the “Company”);
Sculpture Finance (MD) Ireland Limited,  Sculpture Finance (AS) Ireland Limited
and Sculpture Finance (SI) Ireland Limited (the “Initial Investors”); and OZ
Master Fund, Ltd., OZ Asia Master Fund, Ltd. and OZ Global Special Investments
Master Fund, L.P. (together with the Initial Investors, the “Investors”),
pursuant to which, among other things, the Company granted certain rights to the
Initial Investors in connection with their purchase of 3% Senior Secured
Convertible Notes Due June 30, 2011 of the Company (the “Original Notes”) in
aggregate principal amount of $50,000,000, under that certain Note and Warrant
Purchase Agreement, dated as of November 19, 2007, by and among the Company, the
Investors and certain other parties named therein, as amended by the First
Amendment to the Note and Warrant Purchase Agreement, dated as of January 31,
2008.

As you know, the Initial Investors have agreed to transfer and sell to Keywin
Holdings Limited (“Keywin”), a portion of the Original Notes held by them (the
“Keywin Note”), pursuant to a certain Note Purchase Agreement, dated April 2,
2009, by and among Keywin and the Initial Investors. Keywin desires, among other
things, to exchange the Keywin Note into 307,035,463 shares of the Company’s
common stock, in full satisfaction of the Company’s obligations under the Keywin
Note, and to be granted an option to purchase from the Company an aggregate of
122,814,185 shares of the Company’s common stock for an aggregate purchase price
of $2,000,000, on the terms and conditions set forth in that certain Note
Exchange and Option Agreement, dated as of the date hereof, among the Company
and Keywin (the “Option Agreement”).   In connection with the foregoing
transactions, the Initial Investors desire, among other things, to exchange the
balance of the Original Notes in the aggregate principal amount of $5,000,000,
for new notes of the Company (the “New Notes”), on the terms and conditions set
forth in that certain Note Exchange Agreement, dated as of the date hereof,
among the Company and the Investors (the “Exchange Agreement”).
 
In consideration of the Company’s agreement to enter onto the Option Agreement
and the Exchange Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Company, Keywin and
the Investors have agreed as follows:
 
1.      Termination.  The Company and each of the undersigned agree to terminate
the Investor Rights Agreement in its entirety, effective upon the execution of
this Termination Agreement and the consummation of the transactions contemplated
by the Option Agreement and the Exchange Agreement  (“Termination Date”).  As of
the Termination Date, the Investor Rights Agreement will be deemed in all
instances and for all purposes to be fully and finally surrendered and
terminated and of no further force and effect, and none of the parties thereto
will have any further rights or obligations thereunder. The Company and Keywin
hereby covenant and agree not to waive, modify or amend any provision of the
Option Agreement prior to the close of the transactions contemplated therein
without the prior written consent of the Investors.

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2.      Right of Co-Sale.

(a)      In the event that Keywin, its affiliates and/or any of the persons
listed in the Company’s filings with the Securities and Exchange Commission, as
current officers or directors of the Company (collectively, the “Controlling
Stockholders”) propose to transfer, sell, assign or otherwise dispose of, or
transfer, sell, assign or otherwise dispose of, in each case, directly or
indirectly, any of its or their securities in the Company (the “Selling
Controlling Stockholder”) in a transaction which, together with previous
transfers or sales, would constitute a Change in Control (a “Proposed
Transfer”), then each of the Investors (and their assigns) shall have the right
to sell at their sole election, together with such Selling Controlling
Stockholder, up to their entire interest in the Company (including, for the
avoidance of doubt, at such Investor’s sole election, either the New Notes or
the securities issuable upon and pursuant to the conversion of the New Notes
(the “Conversion Shares”)); provided, however, that any such co-sale shall be on
the same terms and conditions agreed to by the Selling Controlling Stockholder
(it being understood that in the event that the Electing Investor elects to
transfer the New Notes in connection with the Proposed Transfer, the
consideration for the New Notes shall equal in the aggregate the consideration
payable per Transfer Share (defined below) multiplied by the aggregate amount of
the Conversion Shares without giving effect to the Conversion Limitation
(defined below) (the “Notes Purchase Price”)).  The Company shall cause the
Selling Controlling Stockholder to deliver (and in the event the Selling
Controlling Stockholder is Keywin and/or any of its affiliates, Keywin shall
deliver) to the Investors, notice of any Proposed Transfer, not later than
thirty (30) days prior to the consummation of such Proposed Transfer (“Transfer
Notice”).  The Transfer Notice shall contain the material terms and conditions
(including price and form of consideration) of the Proposed Transfer, the amount
and type of securities to be transferred and sold by the Selling Controlling
Stockholder (the “Transfer Shares”) and the identity of the prospective
transferee(s) (the “Proposed Transferee”).  Each Investor who desires to
exercise its co-sale rights hereunder (each an “Electing Investor”) must give
the Selling Controlling Stockholder written notice to that effect within fifteen
(15) days after receipt of the Transfer Notice, which notice shall include the
amount and type of securities in the Company such Electing Investor elects to
transfer to the Proposed Transferee, and upon giving such notice such Electing
Investor shall be deemed to have effectively exercised its right of co-sale
hereunder.  To the extent that any Proposed Transferee prohibits the
participation of any Investor exercising its right of co-sale hereunder in a
Proposed Transfer or otherwise refuses to purchase the New Notes or Conversion
Shares (as applicable) from such Investor(s) exercising its right of co-sale
hereunder, the Selling Controlling Stockholder shall not sell to such Proposed
Transferee any securities of the Company unless and until, simultaneously with
such sale, the Selling Controlling Stockholder shall purchase the New Notes or
the Conversion Shares from such Investor for the same consideration (it being
understood that in the event that the Electing Investor elects to transfer the
New Notes in connection with the Proposed Transfer, the consideration for the
New Notes shall equal the Notes Purchase Price) and on terms no less favorable
than described in the sale notice.  Notwithstanding anything to the contrary
contained herein, in the event that the Electing Investors are required to
provide any representations, warranties or indemnities in connection with the
exercise of their co-sale rights hereunder, each Electing Investor shall only be
required to provide representations, warranties and indemnities concerning such
Electing Investor’s (i) title and ownership of such securities, and (ii) power
and authority to enter into the Proposed Transfer, and shall not be obligated to
make any other representations and warranties, including without limitation,
general Company representations and warranties; and provided further, with
respect to any indemnification required to be given by such Electing Investor:
(a) the liability of such Electing Shareholder shall be several and not joint,
(b) such  Electing Investor shall be liable for no more than its pro-rata share
(based upon the consideration actually received by it) of any liability
for misrepresentation, breach of warranty or indemnity and (c) the liability of
such Electing Investor with respect to any indemnification obligation will not
exceed the net cash proceeds paid to such Electing Investor in connection with
the Proposed Transfer. Each Electing Investor shall pay its own expenses
incurred in any exercise of its co-sale rights hereunder.  For the purposes of
this Termination Agreement, “Change of Control” means any transaction or series
of related transactions involving (i) a merger, consolidation, amalgamation,
scheme of arrangement, reorganization, or other similar transaction of the
Company with or into any other person in which the Controlling Stockholders own
less than a majority (50.1%) of the outstanding common stock or voting power of
the surviving entity immediately following the consummation of such transaction,
(ii) a transfer or issuance of securities or voting power of the Company
following which the Controlling Stockholders own less than a majority (50.1%) of
the outstanding common stock or voting power of the Company, (iii) sale,
transfer, lease or other disposition of all or substantially all of the assets
of the Company and its subsidiaries (including the licenses and permits
necessary to conduct the business of the Company and its subsidiaries the
People’s Republic of China), or (iv) a transfer of a majority (50.1%) of the
outstanding common stock or voting power of Keywin; and “affiliate” has the
meaning set forth in Rule 405 under the Securities Act of 1933, as amended.

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3.      Note Conversion Limitation.  Notwithstanding any provision of the New
Notes, the Investors shall not convert, and the Company shall not issue any
shares of the Company’s common stock (“Common Stock”) upon any attempted
conversion or exercise of, any portion of the New Notes, to the extent that
after giving effect to such conversion, the Investors (together with their
affiliates) collectively would have acquired, through the conversion of the New
Notes or otherwise, beneficial ownership of a number of shares of Common Stock
in excess of 9.99% of the aggregate number of shares of Common Stock outstanding
immediately after giving effect to such conversion or exercise (the “Conversion
Limitation”).  For purposes of the foregoing, the number of shares of Common
Stock beneficially owned by the Investors and their affiliates shall include the
number of shares of Common Stock issuable upon conversion of the New Notes with
respect to which such determination is being made, and shall include additional
shares of Common Stock issued to the Investors after the date hereof, but shall
exclude the number of shares of Common Stock which would be issuable upon (A)
conversion of the remaining, nonconverted portion of any New Notes beneficially
owned by the Investors or any of their Affiliates and (B) exercise or conversion
of the unexercised or nonconverted portion of any other securities of the
Company subject to a limitation on conversion or exercise analogous to the
limitation contained herein beneficially owned by the Investors or any of their
Affiliates.  Except as set forth in the preceding sentence, for purposes of this
paragraph, beneficial ownership shall be calculated in accordance with Section
13(d) of the Securities and Exchange Act of 1934, as amended (together with the
rules and regulations promulgated thereunder from time to time in effect, the
“Exchange Act”).  By not less than 65 days’ prior written notice to the Company,
the Investor may, at its election, (i) increase or decrease the Conversion
Limitation to any other percentage not in excess of 9.99% specified in such
notice, and the Conversion Limitation shall continue to apply until such 65th
day (or such later date, as determined by the Investor, as may be specified in
such notice); or (ii) waive in whole or in part permanently or temporarily at
any time the provisions of this Section and this Section shall not be waived
until such 65th day (or such later date, as determined by the Investor, as may
be specified in such notice).

4.      Representations of the Parties.  Each of the Company and the undersigned
hereby represents and warrants to each other that it has all necessary power and
authority to execute the Termination Agreement on its own behalf, and that the
Termination Agreement constitutes a legal, valid and binding obligation of the
Company and each of the undersigned, as the case may be, enforceable against
each of them in accordance with its terms, except that such enforcement may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors’ rights
generally, and (ii) general principles of equity.

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5.      Governing Law.  This Termination 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.

6.      Specific Enforcement.  Upon a breach by the Company and/or Keywin of
this Termination Agreement, in addition to any such damages as the Investors are
entitled to, directly or indirectly, by reason of said breach, the Investors
shall be entitled to injunctive relief against the Company and/or Keywin if such
relief is applicable and available, as a remedy at law would be inadequate and
insufficient.  Nothing in this paragraph shall be construed as limiting the
Investors’ remedies in any way.

7.      Public Disclosure. The parties hereto will consult with each other
before issuing, and provide each other the opportunity to review and comment
upon and use reasonable efforts to agree on any press release, filing with the
Securities Exchange Commission or public statement with respect to this
Agreement and the transactions contemplated hereby and under the other
Transaction Documents, and will not issue any such press release or make any
filings with the Securities Exchange Commission or any public statement prior to
such consultation and (to the extent practical) agreement, except as may be
required by law.

8.      Successors and Assigns.  Except as otherwise provided herein, the terms
and conditions of this Termination Agreement shall be binding upon, and inure to
the benefit of, the respective representatives, successors and assigns of the
parties hereto; provided, however, that subject to applicable laws and
regulations, this Termination Agreement and all rights hereunder may be
transferred or assigned in whole or in part by the Investors, and the Company
and Keywin shall assist the Investors in consummating any such transfer or
assignment.

9.      Entire Agreement; Amendment.  This Termination Agreement and the other
documents and agreements executed in connection with this Termination Agreement
and referenced herein contain 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.

10.    Counterparts.  This Termination 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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If the foregoing provisions correctly state our understanding with respect to
the above matters, please indicate your agreement by signing two copies of this
letter in the space provided below and returning one of the copies to us.
 
 

  Very truly yours,             NETWORK CN INC.                  
 
By:
/s/ Godfrey Hui        Name:  Godfrey Hui     Title: Chief Executive Officer    
     

 

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Acknowledged this _2_ day of  April, 2009:
 
 
 
SCULPTOR FINANCE (MD) IRELAND
LIMITED
 
OZ GLOBAL SPECIAL INVESTMENTS
MASTER FUND, L.P.
                  By: /s/ Carmel Naughton     By: OZ Advisors II LP, its General
Partner   Name: Carmel Naughton   By: Och-Ziff Holding LLC, its General Partner
  Title:  Director                   By: /s/ Joel Frank       Name: Joel Frank  
    Title: CFO          
SCULPTOR FINANCE (SI) IRELAND
LIMITED
  OZ MASTER FUND, LTD.               By: OZ Management LP, its Investment
Manager       By: Och-Ziff Holding Corporation, its General Partner   By: /s/
Carmel Naughton          Name: Carmel Naughton      
Title:  Director
  By: /s/ Joel Frank       Name: Joel Frank       Title: CFO          
SCULPTOR FINANCE (AS) IRELAND
LIMITED
  OZ ASIA MASTER FUND, LTD.               By: OZ Management LP, its Investment
Manager       By: Och-Ziff Holding Corporation, its General Partner   By: /s/
Jennifer Coyne         Name: Jennifer Coyne        Title:  Director   By: /s/
Joel Frank       Name: Joel Frank       Title: CFO                   KEYWIN
HOLDINGS LIMITED                       By: /s/       Name:       Title:      

 
 
 

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