ex10_3.htm


  
    Exhibit
      10.3

     

    THIS
      NOTE
      AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF ARE SUBJECT TO THE TERMS
      AND CONDITIONS OF CERTAIN AGREEMENTS BY AND BETWEEN NETWORK CN INC. AND WEI
      AN DEVELOPMENTS LIMITED AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE. PLEDGED. HYPOTHECATED.
      OR
      OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
      UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO
      THE
      COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT.

    


    CONVERTIBLE
      PROMISSORY NOTE

    OF

    NETWORK
      CN INC.

    


    Note
      No.___

     

    
      	$5,000,000 	
               Made
                as of November 12, 2007

            


    

     

               For
      value received, Network CN Inc., a Delaware corporation (the
“Company”), with principal offices at 21/F, Chinachem
      Century Tower, 178 Gloucester Road, Wanchai, Hong Kong, hereby promises to
      pay
      to Wei An Developments Limited (“Holder”), or its registered assigns, the
      principal sum of Five Million Dollars (the “Principal
      Amount”), or such lesser amount as shall then equal the
      outstanding principal amount hereunder, together with simple interest on the
      unpaid principal balance at a rate equal to twelve percent (12%) per annum,
      computed on the basis of the actual number of days elapsed and a year of 365
      days from the date of this Note until the Principal Amount and all interest
      accrued thereon are paid (or converted, as provided in Section 2 hereof).
      The unpaid Principal Amount, together with any then unpaid accrued interest
      and
      other payment obligations of the Company hereunder, shall be due and payable
      upon the Payment Date (as defined in Section 1.6 hereof), at the
      principal offices of the Company or by mail to the address of the registered
      holder of this Note in lawful money of the United States, unless this Note
      shall
      have been previously converted pursuant to Section 2
      hereof.  Company may prepay all or any portion of the amounts due
      under this note at any time without penalty or premium.

    


               This
      Note is issued pursuant to that certain Note and Warrant Purchase Agreement
      dated as of the date hereof (the “Purchase
      Agreement”), by and among the Company, the original holder of this
      Note, and is subject to the provisions thereof. Any term used herein, but not
      defined herein, shall have the meaning ascribed to it in the Purchase
      Agreement.


     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


               The
      following is a statement of the rights of Holder and the conditions to which
      this Note is subject, and to which Holder hereof, by the acceptance of this
      Note, agrees:

    


               1.           DEFINITIONS.
      The following definitions shall apply for all purposes of this Note 
      


               
         1.1           “Company”
        means the “Company” as defined above and includes any
        corporation which shall succeed to or assume the obligations of the Company
        under this Note.

    

    
      


                 1.2           “Conversion
        Price” means $2.40 per share. The Conversion
        Price is subject to adjustment as provided herein.

    

    
      


                 1.3           “Conversion
        Stock” means the Company’s common stock, $0.001 par value per
        share. The number and character of shares of Conversion Stock are subject
        to
        adjustment as provided herein and the term “Conversion Stock”
shall include stock and other securities and
        property at any time
        receivable or issuable upon conversion of this Note in accordance with its
        terms.

    

     

    
                 1.4          “Holder”
        means any person who shall at the time be the registered
        holder of this Note.

    

     

    
                 1.5       
             “Note” means this
        Convertible Promissory Note,

    

     

    
                 1.6           “Payment
        Date” means the earlier to occur of: (i) the tenth
        (10th) day after delivery of written demand to the Company for payment by
        or on
        behalf of the holder of the Note provided such demand is made
        after six months from the date of this Note; or (ii) one year from the date
        this
        Note unless prepaid as otherwise permitted herein.

       

    

    
                 1.7           “Maturity
        Date” the Note will have an initial maturity of 6 months
        from the date of signing of the Purchase Agreement (the “Initial Maturity Date”)
        extendable for an additional six (6) months at the option of the Company
        (the
“Extended Maturity Date”)

       

    

    
                 1.8           “Interest
        rate and Step-up rate” the interest rate during the period
        before the Initial Maturity Date is set at 12% per annum. If the note is
        extended after the Initial Maturity Date, the interest rate will step-up
        to 14%
        until the Extended Maturity Date.

    

     

    
                 2.          CONVERSION.

    

    
      


                 2.1        Conversion.
        If the Note is not paid on or before November 11, 2008, the Holder has the
        right, at the Holder’s option, prior to the repayment of the outstanding balance
        under the Note by the Company, to convert such outstanding balance of this
        Note,
        into Conversion Stock at the Conversion Price. Conversion under this Section
        2.1 shall occur only upon surrender of this Note for conversion at the
        principal offices of the Company, accompanied by written notice of election
        to
        convert and execution and delivery of such stock purchase agreement and related
        documents as are generally entered into by investors in the
        Company.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
                 2.2           Termination
        of Rights.  All rights with respect to this Note and the
        Pledge Agreement shall terminate upon (i) the full payment of the Principal
        Amount and the accrued interest thereon on or before the Payment Date or
        (ii)
        the issuance of shares of the Conversion Stock upon conversion of this Note,
        whether or not this Note has been surrendered. Notwithstanding the foregoing,
        Holder agrees to surrender this Note to the Company for cancellation as soon
        as
        is possible following conversion of this Note. The Holder shall not be entitled
        to receive the stock certificate representing the shares of common stock
        to be
        issued upon conversion of this Note until the original of this Note (or if
        the
        Note has been lost, an indemnity acceptable to the Company) is surrendered
        to
        the Company and the agreements referenced in Section 2 and 3 have been
        executed and delivered to the Company.

    

       

    
      
        
          
            
                       3.         ISSUANCE
                OF CONVERSION STOCK.As
                soon
                as practicable after conversion of this Note, the Company at its
                expense will
                cause to be issued in the name of and delivered to the Holder, a
                certificate or
                certificates for the number of shares of Conversion Stock to which
                the Holder
                shall be entitled upon such conversion (bearing such legends as may
                be required
                by applicable state and federal securities laws in the opinion of
                legal counsel
                of the Company, by the Company’s Certificate of Incorporation or Bylaws, or by
                any agreement between the Company and the Holder), together with
                any other
                securities and property to which the Holder is entitled upon such
                conversion
                under the terms of this Note. The Holder shall also enter into any
                shareholders
                and other agreements as are entered into by other holders of the
                same class of
                the Company’s stock so as to provide the Holder with comparable rights and
                obligations with respect to such stock. Such conversion shall be
                deemed to have
                been made immediately prior to the close of business on the date
                that this Note
                shall have been surrendered for conversion, accompanied by written
                notice of
                election to convert. No fractional shares will be issued upon conversion
                of this
                Note. If upon any conversion of this Note, a fraction of a share
                would otherwise
                result, then in lieu of such fractional share the Company will round
                up the
                number shares issuable upon conversion to the nearest whole number,
                calculated
                on the basis of the applicable Conversion Price.

               

            

          

        

      

    

    
                 4.            
        ADJUSTMENT PROVISIONS. The number and character of
        shares of Conversion Stock issuable upon conversion of this Note (or any
        shares
        of stock or other securities or property at the time receivable or issuable
        upon
        conversion of this Note) and the Conversion price therefore, are subject
        to
        adjustment upon occurrence of the following events between the date this
        Note is
        issued and the date it is converted:

    

     

    
                 4.1           Adjustment
        for Stock Splits, Stock Dividends, Recapitalizations, etc.If the
        conversion is made under Section 2.1 above, the Conversion Price of this
        Note and the number of shares of Conversion Stock issuable upon conversion
        of
        this Note (or any shares of stock or other securities at the time issuable
        upon
        conversion of this Note) shall each be proportionally adjusted to reflect
        any
        stock dividend, stock split, reverse stock split, reclassification,
        recapitalization or other similar event affecting the number of outstanding
        shares of Conversion Stock (or such other stock or securities) unless the
        conversion ratio in such Conversion Stock already reflects such
        event.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

      
                   4.2           Adjustment
          for Other Dividends and Distributions.  In case the
          Company shall make or issue, or shall fix a record date for the determination
          of
          eligible holders entitled to receive, a dividend or other distribution
          payable
          with respect to the capital stock that is payable in (a) securities of
          the
          Company (other than issuances with respect to which adjustment is made
          under
Section 4.1), or (b) assets (other than cash dividends paid or payable
          solely out of retained earnings), then, and in each such case, the Holder,
          upon
          conversion of this Note at any time after the consummation, effective date
          or
          record date of such event, shall receive, in addition to the shares of
          Conversion Stock issuable upon such exercise prior to such date, the securities
          or such other assets of the Company to which the Holder would have been
          entitled
          upon such date if the Holder had converted this Note immediately prior
          thereto
          (all subject to further adjustment as provided in this
          Note).

      

    

    
       

      
                   4.3           Conversion
          of Stock. In case all the authorized Conversion Stock of the
          Company is convened, pursuant to the Company’s Certificate of Incorporation,
          into Common Stock or other securities or property or the Conversion Stock
          otherwise ceases to exist, then, in such case, the Holder, upon conversion
          of
          this Note at any time after the date on which the Conversion Stock is so
          converted or ceases to exist (the “Termination Date”), shall receive, in lieu of
          the number of shares of Conversion Stock that would have been issuable
          upon such
          exercise immediately prior to the Termination Date (the “Former Number of Shares
          of Conversion Stock”), the stock and other securities and property which the
          Holder would have been entitled to receive upon the Termination Date if
          the
          Holder had converted this Note with respect to the Former Number of Shares
          of
          Conversion Stock immediately prior to the Termination Date (all subject
          to
          further adjustment as provided in this Note).

      

    

    
       

      
                   4.4           Notice
          of Adjustments. The Company shall promptly give written notice of
          each adjustment or readjustment of the Conversion Price or the number of
          shares
          of Conversion Stock or other securities issuable upon conversion of this
          Note.
          The notice shall describe the adjustment or readjustment and show in reasonable
          detail the facts on which the adjustment or readjustment is
          based.

      

    

    
       

      
                   4.5           No
          Change Necessary. The form of this Note need not be changed because
          of any adjustment in the Conversion Price or in the number of shares of
          Conversion Stock issuable upon its conversion.

      

    

    
       

      
                   4.6           Reservation
          of Stock. If at any time the number of shares
          of Conversion Stock or other securities issuable upon conversion of this
          Note
          shall not be sufficient to effect the conversion of this Note, the Company
          will
          take such corporate action as may, in the opinion of its counsel, be necessary
          to increase its authorized but unissued shares of Conversion Stock or other
          securities issuable upon conversion of this Note as shall be sufficient
          for such
          purpose.

      

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      
                   5.           NO
          RIGHTS OR LIABILITIES AS SHAREHOLDER. This Note does not by itself
          entitle the Holder to any voting rights or other rights as a shareholder
          of the
          Company. In the absence of conversion of this Note, no provisions of this
          Note,
          and no enumeration herein of the rights or privileges of the Holder, shall
          cause
          the Holder to be a shareholder of the Company for any
          purpose

      

    

    
       

      
                   6.           NO
          IMPAIRMENT. The Company will not, by amendment of its Certificate
          of Incorporation or Bylaws, or through reorganization, consolidation, merger,
          dissolution, issue or sale of securities, sale of assets or any other voluntary
          action, willfully avoid or seek to avoid the observance or performance
          of any of
          the terms of this Note, but will at all times in good faith assist in the
          carrying out of all such terms and in the taking of an such action as may
          be
          necessary or appropriate in order to protect the rights of the Holder under
          this
          Note against wrongful impairment. Without limiting the generality of the
          foregoing, the Company will take all such action as may be necessary or
          appropriate in order that the Company may duly and validly issue fully
          paid and
          nonassessable shares of Conversion Stock upon the conversion of this
          Note.

      

    

     

    
      
                   7.           NOTES
          ARE PARI PASSU. The Notes shall rank equally
          without preference or priority of any kind over one another, and all payments
          on
          account of principal and interest with respect to any of the Notes shall
          be
          applied ratably and proportionately on all outstanding Notes on the basis
          of the
          original principal amount of outstanding Notes.

      

    

    
       

      
                   8.           WAIVERS.
          The Company and all endorsers of this Note hereby waive notice,
          presentment, protest and notice of dishonor.

      

    

     

               9.           ATTORNEYS’
      FEES. In the event any party is required to engage the
services
      of any attorneys for the purpose of enforcing this Note, or any provision
      thereof, the prevailing party shall be entitled to recover its reasonable
      expenses and costs in enforcing this Note, including attorneys’
fees.

    


               10.         COMMITMENT
      FEE. 2% of the Notional Amount payable to the Investor and to be
      deduct from the principle sum at the time the amount is made to the Company.
      If
      the Note is being extended after Initial Maturity Date by the Company, an
      additional 2% commitment fee is payable to the Investor.

    


               11.        TRANSFER
      Neither this Note nor any rights hereunder may be assigned, conveyed
      or transferred, in whole or in part, without the Company’s prior written
      consent, which the Company may withhold in its sole discretion; provided,
      however, that this Note may be assigned, conveyed or transferred without the
      prior written consent of the Company to any person that directly, or indirectly
      through one or more intermediaries, controls, is controlled by, or is under
      common control with the Holder; provided, further, that such
      transferee executes an acknowledgement that such transferee is subject to all
      the terms and conditions of this Note and satisfies the Company as to compliance
      with State and federal securities law. The rights and obligations of the Company
      and the Holder under this Note and the Purchase Agreement shall be binding
      upon
      and benefit their respective permitted successors, assigns, heirs,
      administrators and transferees.


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

               12.        OVERNING
      LAW. This Note shall be governed by and construed
      under the internal laws of the State of California as applied to agreements
      among California residents entered into and to be performed entirely within
      California, without reference to principles of conflict of laws or choice of
      laws.

    


               13.        HEADINGS.
      The headings and captions used in this Note are used only for convenience and
      are not to be considered in construing or interpreting this Note. All references
      in this Note to sections and exhibits shall, unless otherwise provided, refer
      to
      sections hereof and exhibits attached hereto, all of which exhibits are
      incorporated herein by this reference.

    


               14.        NOTICES.
      Unless otherwise provided, any notice required or permitted under this Agreement
      shall be given in writing and shall be deemed effectively given (i) at the
      time
      of personal delivery, if delivery is in person; (ii) one (1) business day after
      deposit with an express overnight courier for United States deliveries, or
      two
      (2) business days after such deposit for deliveries outside of the United
      States, with proof of delivery from the courier requested; (iii) three (3)
      business days after deposit in the United States mail by certified mail (return
      receipt requested) for United States deliveries when addressed to the Investor,
      at 9/F, Central Building, 3 Pedder Street, Central, Hong Kong, or, in the case
      of the Company, at 21/F, Chinachem Century Tower, 178 Gloucester Road, Wanchai,
      Hong Kong, or at such other address as any party or the Company may designate
      by
      giving ten (10) days’ advance written notice to all other parties.

    


               15.        AMENDMENTS
      AND WAIVERS. This Note and all other Notes issued
      under the Purchase Agreement may be amended and the provisions may be waived
      by
      the Holders and the Company as provided in Section 6 of the Purchase
      Agreement.

    


               16.        SEVERABILITY.
      If one or more provisions of this Note are held to be unenforceable under
      applicable law, such provision(s) shall be excluded from this Note and the
      balance of the Note shall be interpreted as if such provision(s) were so
      excluded and shall be enforceable in accordance with its terms.

    


               17.        PURCHASE
      AGREEMENT . This Note incorporates by reference all the terms of
      the Purchase Agreement.

    


    


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    IN
      WITNESS WHERE OF, the Company has caused this Note to be signed in its
      name as
      of the
      date first above written.

     

    
      	 	THE
              COMPANY	 
	 	 	 
	 	NETWORK
              CN
              INC.	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	
            	
              By:

            	 /s/
              Godfrey Hui	 
	 	 	Godfrey
              Hui	 
	 	 	Chief
              Executive Officer