Document:

ex10_1.htm

  
    Exhibit
10.1

     

    FIRST
AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT

    

    THIS FIRST AMENDMENT TO NOTE AND
WARRANT PURCHASE AGREEMENT (this “First Amendment”) is made as
of January 31, 2008 by and among Network CN Inc., a Delaware corporation (the
“Company”), Shanghai Quo
Advertising Company Limited, a limited liability company, incorporated under the
laws of PRC (“Quo”), the
Designated Holders and the Investors.

    

    Each of
the parties listed above referred to herein individually as a “Party” and collectively as the
“Parties”.

     

    WHEREAS:

    

    
      A.       
The
Company, Quo, the Designated Holders and the Investors have entered into that
certain Note and Warrant Purchase Agreement dated November 19, 2007 (as amended,
modified or supplemented from time to time, the “Purchase Agreement”), to which
reference is made for the meaning of all capitalized terms not otherwise defined
herein; and

    

    

    
      B.       
The
Company has requested that the Purchase Agreement be amended to establish, among
other things, additional funding channels between the Company and its PRC
Operating Companies as hereinafter set forth and to provide for certain other
modifications in connections with the Third Closing, including relating to the
delivery of the Security Documents, and the Investors have agreed, subject to
the terms and conditions of this First Amendment, to so amend the Purchase
Agreement.

    

    

    NOW,
THEREFORE, in consideration of the mutual promises and covenants set forth
herein, and for other consideration, the receipt and adequacy of which is hereby
acknowledged, the Parties hereto agree as follows:

    

    Section
A.     Amendments to Purchase Agreement

    

    
      1.    
Amendments
to Recitals

    

    

    (a)           The
recitals of the Purchase Agreement are hereby amended by amending and restating
the third recital as follows:

    

    “WHEREAS, the Company shall enter into
a share purchase agreement with Cityhorizon Limited, a company incorporated
under the laws of the Hong Kong Special Administrative Region (“Cityhorizon”) to acquire 100%
of the equity in Cityhorizon BVI (the “Cityhorizon
Acquisition”).”

    

    
      2.    
Amendments
to Definitions

    

    

    (a)           Section
1 of the Purchase Agreement is hereby amended by adding thereto the following
definitions, which shall be inserted in proper alphabetical order:

    

    ““Ad JV” means the joint venture
to be established by Quo and Linkrich as further described in Section
7(cc).

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    “BVI” means the British Virgin
Islands.

    

    “Cityhorizon Acquisition” has
the meaning given in the recitals.

    

    “Cityhorizon BVI Acquisition”
means the acquisition of Cityhorizon BVI by Cityhorizon pursuant to the Share
Purchase Agreement, dated as of January 1, 2008 by and among the Company, NCN
Media Services Ltd., Cityhorizon, Cityhorizon BVI, Lianhe, Bona and Liu Man
Ling.

    

    “Cityhorizon BVI” means
Cityhorizon Limited, a company incorporated under the laws of BVI.

    

    “Collateral Agent” means
Sculptor Finance (MD) Ireland Limited as collateral agent for the benefit of
itself and the other Investors, and its successors and assigns.

    

    “Collateral Agency Agreement”
means that certain Collateral Agency Agreement dated as of January 31, 2008
among Sculptor Finance (MD) Ireland Limited, as collateral agent, and the
Investors and any successor agreement.

    

    “Crown Eagle” means Crown Eagle
Investments Limited, a company incorporated under the laws of HK.

    

    “Crown Eagle Assignment of Contracts” means any
Assignment of Contracts to be entered into between Crown Eagle and the Company,
in the form annexed hereto as Exhibit K-3 or as otherwise agreed by the
Collateral Agent.

    

    “Crown Eagle Mortgage
Agreement” means any Mortgage Agreement to be entered into between Crown
Eagle and the Operating Lease WFOE, in the form annexed hereto as Exhibit K-1 or
as otherwise agreed by the Collateral Agent.

    

    “Crown Eagle Shareholder Loan
Agreement” means any Shareholder Loan Agreement to be entered into
between Crown Eagle and the Operating Lease WFOE, in the form annexed hereto as
Exhibit K-2 or as otherwise agreed by the Collateral Agent.

    

    “Crown Eagle Shareholder Loan
Documents” means in respect of any Crown Eagle Shareholder Loan to the
Operating Lease WFOE, each of a Crown Eagle Shareholder Loan Agreement, a Crown
Eagle Mortgage Agreement and a Crown Eagle Assignment of Contracts.

    

    “Crown Eagle Shareholder Loans”
means the loans made from time to time by Crown Eagle to the Operating Lease
WFOE made pursuant to the Crown Eagle Shareholder Loan Documents.

    

    “Drawdown Notice” has the
meaning given in Section 7(bb).

    

    “Escrow Account” has the
meaning given in Section 7(bb).

    

    “HK” means the Hong Kong
Special Administrative Region.

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    “Linkrich” means Linkrich
Enterprise Advertising and Investment Limited, a company incorporated under the
laws of HK.

    

    “Linkrich Acquisition” means
the acquisition of Linkrich by NCN Media in December 2007.

    

    “Majority Holders” means the
holders of a majority of the principal amount of the Notes.

    

    “NCN Group” means NCN Group
Limited, a direct wholly-owned subsidiary of the Company, incorporated under the
laws of BVI.

    

    “NCN Group Note” means the
Secured Promissory Note, dated as of January 31, 2008, issued by NCN Group in
favour of the Company, in the aggregate principal amount of $50 million
evidencing the proceeds of the Notes loaned by the Company to NCN
Group.

    

    “NCN Group Share Charge” means
the Share Charge, dated as of January 31, 2008, entered into between the Company
and the Collateral Agent under BVI law whereby the Company pledges 66% of its
equity interest in NCN Group to the Collateral Agent for the benefit of the
Collateral Agent and the Investors (“NCN Group Share
Charge”).

     

    “NCN Media” means NCN Media
Services Ltd., an indirect wholly owned subsidiary of the Company, incorporated
under the laws of BVI.

    

    “Network Security Agreement”
means the Security Agreement dated as of January 31, 2008 between the Company and
the Collateral Agent, whereby the Company grants a security interest in all its
assets (excluding security interests in excess of 66% of the voting securities
of foreign subsidiaries directly owned by the Company) in favor of the
Collateral agent for the benefit of the Collateral Agent and the
Investors.

    

    “Network Security Documents”
means the Network Security Agreement, the NCN Group Note and the NCN Group Share
Charge.

    

    “Operating Lease WFOE” means
the WFOE to be established by Crown Eagle as further described in Section
7(dd).

    

    “PRC Subsidiaries” means
Lianhe, Ad JV, the Operating Lease WFOE and any other Subsidiary of the Company
organized under the laws of the PRC and approved by the Collateral
Agent.

    

    “Trust Documents” means the
agreements listed in Schedule IV attached hereto.

    

    “Undertaking Agreement” means
the NCN Parties Undertaking Agreement dated as of January 31, 2008, among the
Company, NCN Group, NCN Media, Cityhorizon, Cityhorizon BVI, Crown Eagle,
Linkrich and the Collateral Agent for the benefit of the Collateral Agent and
the Investors.

    

    “US” means the United States of
America.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “WFOE” means wholly foreign
owned enterprise.”

    

    (b)           Section
1 of the Purchase Agreement is hereby amended by amending and
restating the definitions of “Group Companies”, “Offshore
Security Documents”, “Onshore Documents”, “Security Documents”, “Shareholder
Loan” and “Transaction Documents” as follows:

    

    ““Group Companies” means the
Company, its Subsidiaries and the PRC Operating Companies.

    

    “Offshore Security Documents”
means the security documents listed in Exhibit E attached hereto and all other
mortgages, security agreements, documents, instruments and other materials,
entered into from time to time, necessary to create or perfect any Lien upon the
assets of the Company and its Subsidiaries, in form and substance satisfactory
to the Investors.

    

    “Onshore Security Documents”
means the security documents listed in Exhibit F attached hereto and all other
mortgages, security agreements, documents, instruments and other materials,
entered into from time to time, necessary to create or perfect any Lien upon the
assets of the Company and its Subsidiaries, in form and substance satisfactory
to the Investors.

    

    “Security Documents” means the
Network Security Documents, the Offshore Security Documents, the Onshore
Security Documents, the Crown Eagle Shareholder Loan Documents and all other
mortgages, security agreements, documents, instruments and other materials,
entered into from time to time, necessary to create or perfect any Lien upon the
assets of the Company and its Subsidiaries.

    

    “Shareholder Loans” means the
Crown Eagle Shareholder Loans and any other loans approved by the Collateral
Agent and made from time to time by each of Cityhorizon BVI, Cityhorizon, Crown
Eagle, Linkrich or any other Subsidiary of the Company, as the case may be, to
the Company’s PRC Subsidiaries.

    

    “Transaction
Documents”  means the Purchase Agreement (including the updated
Disclosure Schedules), the Securities, the NCN Group Note, the Undertaking
Agreement, the Security Documents, the Restructuring Documents, the Investor
Rights Agreement, the Bloompoint Lock-up Agreement, the Management Lock-Up
Agreement, the Non-Competition Agreements, the Registration Rights Agreement,
the Bloompoint Waiver and all other agreements, instruments and documents
delivered from time to time in connection herewith and therewith as any or all
of the foregoing may be supplemented or amended from time to time.”

    

    (c)           Section
1 of the Purchase Agreement is hereby further amended by deleting the
definitions of “Acquisition” and “Joinder to the Purchase Agreement” in their
entirety.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      3.    
Amendments
to the Representations and Warranties of the Company and Quo

    

    

    (a)       Section
6 of the Purchase Agreement is hereby amended by adding the following at the end
of the first sentence in subsection (6)(d)(i):

    

    “;
provided, however, that as of the Third Closing 71,546,608 shares of Common
Stock are issued and outstanding”

    

    (b)           Section
6 of the Purchase Agreement is hereby amended by amending and restating
subsection 6(k) as follows:

    

    “(k)           Security
Interests

    

    (i)           Each
Network Security Document creates valid and enforceable security interests in
favour of the Collateral Agent, for the benefit of the Collateral Agent and the
Investors, subject to no other prior or pari passu Liens, in all the collateral
specified therein, including without limitation, the NCN Group Note and all
rights of the Company under the other Security Documents, which security
interests will secure the repayment of the Notes issued hereunder and the other
obligations purported to be secured thereby.

    

    (ii)           Each
Security Document other than the Network Security Documents and the Crown Eagle
Shareholder Loan Documents creates valid and enforceable security interests in
favour of the Company, subject to no other prior or pari passu Liens, in all the
collateral specified therein, which security interests secure the repayment of
the NCN Group Note and the other obligations purported to be secured
thereby.”

    

    (iii)           When
executed and delivered, the Crown Eagle Shareholder Loan Documents will create
valid and enforceable security interests in favour of Crown Eagle subject to no
other prior or pari passu Liens, in all the collateral specified therein, which
security interest secures the repayment of the relevant Crown Eagle Shareholder
Loan and the other obligations purported to be secured thereby.

    

    (c)           Section
6 of the Purchase Agreement is hereby amended by amending and restating the
first sentence in subsection 6(q) as follows:

    

    “Except
as set forth in Schedule 6(q) of the Disclosure Schedule, all tax returns
required to be filed by each of the Group Companies have been filed (taking into
account all extensions of due dates), and all such returns are true, complete
and correct.”

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    
      4.    
Amendments
to the Covenants of the Company and Quo

    

    

    Section 7
of the Purchase Agreement is hereby amended by adding immediately after
sub-section 7(aa) the following:

    
    

    

    
      	 	b

              “(bb)

            	The
      Company shall immediately cause NCN Group to deposit US$32,000,000 of the
      Third Note Purchase Price into bank account No. 263-693-500288-111 (Swift
      Code: CATHUS6L) owned by NCN Group in Cathay Bank Hong-Kong Branch (the
      “Escrow Account”)
      and cause the Escrow Account to be continuously subject to the Fixed
      Charge over Bank Account referred to in Exhibit E annexed
      hereto.  The Company shall submit to the Collateral Agent for
      approval a written application for every drawdown from the Escrow Account,
      which application shall detail the proposed use of such drawdown amount,
      the estimated timeline for such usage, the cash flow channel utilized with
      respect thereto and include such other information with respect thereto
      requested by the Collateral Agent (each, a “Drawdown
      Notice”).  The Company may withdraw amounts from the
      Escrow Account only with the express written consent of the Collateral
      Agent and shall only use the proceeds of any such withdrawal in accordance
      with the description thereof set out in the relevant Drawdown Notice; it
      being understood that, if the amounts withdrawn are not promptly applied
      in accordance with such Drawdown Notice and the Transaction Documents, the
      Company shall immediately provide written notice to the Collateral Agent
      of such event and, unless otherwise agreed by the Collateral Agent,
      redeposit any such amount in the Escrow Account or, as the case maybe, a
      new PRC escrow account satisfactory to the Collateral Agent whereby the
      written approval of a designee of the Collateral Agent is required, in a
      manner satisfactory to the Collateral Agent, for any withdraw of funds
      from such PRC escrow account.
	 	 	 
	
               
      

            	
              (cc)

            	
              Within
      30 days after the Third Closing or such later date as agreed to by the
      Collateral Agent, the Company and Quo shall take all necessary action in
      accordance with Applicable Law to establish a joint venture between
      Linkrich and Quo in the PRC, in form and substance satisfactory to the
      Collateral Agent (the “Ad
      JV”).  Linkrich and Quo shall initially hold 51% and 49%,
      respectively, of the equity interests of the Ad JV and the Company and Quo
      agree to take all necessary actions in accordance with Applicable Law to
      increase Linkrich’s equity holding in the Ad JV to at least 90%, in such
      case in form and substance satisfactory to the Collateral Agent. Upon written
      notice by the Collateral Agent or Majority Holders to the Company, the
      Company shall promptly replace any of the Designated Holders of Quo with a
      nominee chosen by the Collateral Agent or Majority Holders at any time
      after the Third Closing, such that the Investors control at least 90% of
      the equity interest of Quo; it being understood that the price for such
      transfer of equity interest in Quo shall be nominal as to the
      Investors.

            

    

    

    
      	
               
      

            	
              (dd)

            	
              Within
      30 days of the Third Closing or such later date as agreed to by the
      Collateral Agent, the Company shall cause NCN Media, through its wholly
      owned subsidiary Crown Eagle, to establish a new WFOE in accordance with
      Applicable Law, in form and substance satisfactory to the Collateral Agent
      (the “Operating Lease
      WFOE”).  The Company and its Subsidiaries will cause the
      Operating Lease WFOE to purchase all the LED panels and, unless otherwise
      agreed by the Collateral Agent, all other LED
      panels of any nature purchased by the Company or any of its
      Subsidiaries, and all such
      purchases shall be on terms and conditions in form and substance
      satisfactory to the Collateral Agent.  For each Crown Eagle
      Shareholder Loan, the Company shall cause Crown Eagle and the Operating
      Lease WFOE to execute and deliver to the Company and the Collateral Agent
      a set of Crown Eagle Shareholder Loan Documents with respect thereto in
      form and substance satisfactory to the Collateral
  Agent.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (ee)

            	
              The
      Company represents, warrants and covenants that all amounts invested
      (through a Shareholder Loan or otherwise) in any PRC Subsidiary, PRC
      Operating Company or otherwise into the PRC, including any direct or
      indirect proceeds of the Notes, will be in compliance with all Applicable
      Laws except for de minimus violations that are curable and are cured
      promptly.  The Company represents, warrants and covenants that
      all such investments will be made into any PRC
      Subsidiary by their respective offshore direct holding company in the form
      of a Shareholder Loan in form and substance satisfactory to the Collateral
      Agent, except to the extent otherwise agreed by the Collateral
      Agent.

            

    

    

    
      	
               
      

            	
              (ff)

            	
              The
      Company shall cause Lianhe to maintain its status as a Chinese hi-tech
      WFOE under Applicable Laws and shall cause any revenues generated by the
      PRC Operating Companies to be transferred to Lianhe or another PRC
      Subsidiary of the Company in accordance with the Structure Agreements or
      as otherwise agreed by the Collateral
Agent.

            

    

    

    
      	
               
      

            	
              (gg)

            	
              Concurrently
      with the establishment of the Ad JV and the Operating Lease WFOE,
      respectively, the Company shall cause each of Linkrich and Crown Eagle to
      enter into the share pledge agreements listed in Schedule VI attached
      hereto, in form and substance satisfactory to the Collateral Agent and
      pledge not less than 66% of the equity of the Ad JV and the Operating
      Lease WFOE to secure the NCN Group Note and the other obligations set
      forth therein.  The Company shall further cause each of
      Linkrich, Crown Eagle, the Ad JV and the Operating Lease WFOE to obtain
      approvals from, and complete filing procedures with relevant Governmental
      Authorities in respect of the aforementioned share pledge agreements
      within sixty (60) days after the Third Closing Date or such later date
      agreed to by the Collateral Agent.  The Company shall, as
      required by the Collateral Agent, cause the Ad JV and the Operating Lease
      WFOE to enter into similar Structure Agreements with the PRC Operating
      Companies, in form and substance satisfactory to the Collateral Agent;
      provided
      that, except as otherwise agreed by the Collateral Agent, the
      Company shall simultaneously cause any existing Structure Agreements
      entered into by Lianhe with the PRC Operating Companies to be terminated
      such that at any given time the PRC Operating Companies shall have entered
      into valid and effective Structure Agreements with only one of Lianhe, the
      Ad JV or the Operating Lease WFOE.

            

    

     

    
      	
               
      

            	
              (ii)

            	
              Within
      thirty (30) days after the Third Closing or such later date agreed to by
      the Collateral Agent, the Company shall cause Cityhorizon BVI and Lianhe,
      respectively, to obtain approvals from, and complete filing procedures
      with, relevant Governmental Authorities in respect of the security
      provided by the Security Documents.

            

    

     

    
      	
               
      

            	
              (jj)

            	
              As
      soon as practicable after the Third Closing but, in any event, no later
      than December 31, 2008, the Company shall cause Cityhorizon BVI to be
      liquidated with and into Citihorizon HK and, in connection with such
      liquidation, shall cause Citihorizon HK and its other Subsidiaries to
      enter into Security Documents requested by the Collateral
      Agent.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (kk)

            	
              Upon
      written notice by the Collateral Agent or Majority Holders to the Company,
      the Company shall promptly replace certain shareholders of Bona and Botong
      with a nominee chosen by the Collateral Agent or Majority Holders such
      that the Investors control at least 51% of the equity interest of each of
      Bona and Botong; it being understood that the price for such transfer of
      equity interest in Bona and Botong shall be nominal as to the
      Investors.

            

    

     

    
      	
               
      

            	
              (ll)

            	
              The
      Company shall, and shall cause each of the Group Companies to, comply with
      all applicable tax laws at all times and in all respects, including, but
      not limited to, the due and timely filing of all tax
    returns.

            
	 	 	 
	 	b

              (mm)

            	b

              In
      the event the Company intends to form or acquire any additional
      Subsidiaries after the Third Closing, the Company shall, prior to such
      formation or acquisition, notify the Collateral Agent and the Investors
      thereof, and provide to the Collateral Agent and the Investors such
      formation or acquisition documents for approval by the Collateral Agent.
      In the event that the Collateral Agent and Majority Holders provide
      consent to such formation or acquisition, the Company may form or acquire
      such additional Subsidiaries and shall cause such Subsidiaries to
      concurrently execute and become a party to any and all Security Documents
      and other Transaction Documents required by the Collateral Agent and
      Majority Holders.  The Company agrees to provide such evidence
      as the Collateral Agent or Majority Investors shall request as to the
      perfection and priority status of each of the security interests and Liens
      created by such Security Documents and any other Security
      Documents.

            

    

     

    
      	
               
      

            	
              (nn)

            	
              The
      Company shall and shall cause its Subsidiaries to take such actions as are
      necessary or as the Collateral Agent or the Majority Holders may request
      from time to time (including the execution and delivery of joinders and/or
      guaranties to this Agreement and any other applicable Security Documents,
      Transaction Documents, deposit account control agreements and other
      documents, the filing or recording of any of the foregoing, and the
      delivery of stock certificates and other collateral with respect to which
      perfection is obtained by possession) to ensure that the obligations of
      the Company and its Subsidiaries hereunder and under the other Transaction
      Documents are secured by substantially all of the assets, equity
      securities and personal property of the Company and its Subsidiaries
      (whether now existing or promptly upon the acquisition or creation thereof
      after the date hereof) and to give effect to the other provisions of this
      Agreement and the other Transaction
Documents.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (oo)

            	
              The
      Company acknowledges and agrees that, notwithstanding anything contrary
      provided in any Warrant, if any of the Notes have not been paid in full on
      or prior to June 30, 2011, the Warrants shall continue in full force and
      effect until such time as the Notes have been paid in full.  If
      requested by any Investor, the Company shall issue replacement warrants
      for the Warrants of such Investor issued in connection with the First
      Closing and the Second Closing adding at the end of Section 14 thereof the
      following: “; provided, however, if any of the Notes have not been paid in
      full on or prior to June 30, 2011, this Warrant shall continue in full
      force and effect until such time as the Notes have been paid in
      full”.

            

    

     

    

    
      5.     
Amendments
to Conditions Precedent to the Third Closing

    

    

    Section 9(c) of the
Purchase Agreement is hereby amended and restated in its entirety as
follows:

    

    “(c)        The
Investors’ obligation to purchase the Third Note under this Agreement at the
Third Closing is subject to the satisfaction or waiver of each of the following
conditions on or prior to the Third Closing:

     

    
      	
              (i)  

            	
              All
      the representations and warranties of each of the Group Companies shall be
      true and correct as of the Closing Date.  Each of the Group
      Companies shall have performed, satisfied and complied with, as of the
      Closing Date and to the Investors’ satisfaction, all covenants, agreements
      and conditions required by the Transaction Documents, as applicable to
      each of the Group Companies.

            

    

     

    
      	
              (ii)  

            	
              The
      Company shall provide to the Investors evidence to the
      satisfaction of the Investors that the procedure contemplated by sections
      47A-48 of the Companies Ordinance (Cap. 32 of the Laws of Hong Kong) (the
      “Whitewash
      Procedure”) has been completed by each of Company’s Subsidiaries
      organized under HK law in relation to any relevant Transaction
      Document.

            

    

     

    
      	
              (iii)  

            	
              No
      injunction, restraining order or order of any nature by a Governmental
      Authority shall have been issued as of the Closing Date that could prevent
      or interfere with the consummation of the transactions contemplated under
      the Transaction Documents to be entered into at the Third Closing; and no
      stop order suspending the qualification or exemption from qualification of
      any of the Securities in any jurisdiction shall have been issued and no
      Proceeding for that purpose shall have been commenced or be pending or
      threatened as of the Closing Date.

            

    

     

    
      	
              (iv)  

            	
              No
      action shall have been taken and no Applicable Law shall have been
      enacted, adopted or issued that could, as of the Closing Date, reasonably
      be expected to prevent the consummation of the transactions contemplated
      under the Transaction Documents.  No Proceeding shall be pending
      or threatened other than Proceedings that if adversely determined could
      not, individually or in the aggregate, adversely affect the issuance or
      marketability of the Securities.

            

    

     

    
      	
              (v)  

            	
              The
      Company shall have obtained any and all approvals, consents and waivers
      necessary for consummation of the transactions contemplated by the
      Transaction Documents, including, but not limited to, all Permits,
      authorizations, approvals or consents of any Governmental
      Authority.

            

    

     

    
      	
              (vi)  

            	
              The
      Company shall have received due and proper waivers, or shall have entered
      into amendments or agreements effecting such waivers, by the security
      holder, creditor or anyone who holds similar rights in the Company (other
      than the holders of the Securities), of any restrictions with respect to
      the issuance or sale of the Securities or the consummation of the
      transactions contemplated under the Transaction Documents, or any
      provisions that would materially and adversely affect the interests of the
      holders of the Securities or the consummation of the transactions
      contemplated under the Transaction Documents, including without limitation
      any right of first refusal or right to be consulted or to make a
      comparable offer with respect to the Securities, held by any such security
      holder, creditor or  holder of similar
  rights.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              (vii)  

            	
              The
      Investors shall have received on the Closing Date a certificate dated as
      of the Closing Date, signed by the Chief Executive Officer of the Company
      on behalf of the Group Companies to the effect that (a) the
      representations and warranties set forth in the Agreement and the other
      Transaction Documents are true and correct with the same force and effect
      as though expressly made at and as of the Closing Date, (b) each of the
      Group Companies has complied with all agreements and satisfied all
      conditions on its part to be performed or satisfied hereunder at or prior
      to the Closing Date in the Transaction Documents, (c) at the Closing Date,
      since the date hereof or since the date of the most recent financial
      statements in the SEC Reports, no event or events have occurred, no
      information has become known nor does any condition exist that could,
      individually or in the aggregate, have a Material Adverse Effect on the
      Group Companies, (d) since the date of the most recent financial
      statements in the SEC Reports, none of the Group Companies has incurred
      any liabilities or obligations, direct or contingent, not in the ordinary
      course of business, or entered into any other transactions not in the
      ordinary course of business, and there has not been any change in the
      Capital Stock or long-term indebtedness of any of the Group Companies, and
      (e) the sale of any of the Notes or Warrants has not been enjoined
      (temporarily or permanently) and (f) the Cityhorizon BVI Acquisition and
      the Linkrich Acquisition have
occurred.

            

    

     

    
      	
              (viii)  

            	
              The
      respective board of directors (or its equivalent) of the Group Companies
      shall have approved and authorized by all necessary corporate or other
      action, as applicable, (i) the execution and delivery of the Transaction
      Documents to which they are a party, (ii) all actions to be performed or
      satisfied under the Transaction Documents to which they are a party, (iii)
      the consummation of the transactions contemplated by the Transaction
      Documents to which they are a party, and (iv) all other actions necessary
      in connection with the transactions contemplated by the Transaction
      Documents and the offering of the Notes and the issuance of the Warrants,
      and shall have provided the Investors with a copy of such
      authorizations.

            

    

     

    
      	
              (ix)  

            	
              The
      consummation of the Cityhorizon BVI Acquisition and the Linkrich
      Acquisition and the termination of the Trust Documents with the Designated
      Holders in accordance with Applicable Laws and to the satisfaction of the
      Investors.

            

    

     

    
      	
              (x)  

            	
              Lianhe
      submitted application to the relevant Governmental Authority in the PRC to
      amend its business scope and adjust its total investment and registered
      capital, and Lianhe shall enter into the Structure Agreements with the PRC
      Operating Companies.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              (xi)  

            	
              NCN
      Group shall issue the NCN Group Note and the Company, NCN Group, NCN
      Media, Cityhorizon, Cityhorizon BVI, Linkrich and Crown Eagle shall
      execute and deliver to the Collateral Agent a fully executed original (or
      clearly legible facsimile copy) of the Undertaking
    Agreement.

            

    

     

    
      	
              (xii)  

            	
              The
      Offshore Security Documents and the Onshore Security Documents shall have
      been executed and delivered by the parties thereto and the Collateral
      Agent shall have received a fully executed original (or clearly legible
      facsimile copy) of the Offshore Security Documents and the Onshore
      Security Documents.  The security provided by the Offshore
      Security Documents shall have been perfected, charged, approved,
      registered with relevant filing agents or Government Authorities, as
      applicable.

            

    

     

    
      	
              (xiii)  

            	
              The
      Collateral Agent and the Investors and their counsel shall be satisfied
      that (i) the Liens granted to the Collateral Agent, for the benefit of the
      Investors, in the collateral described in the Network Security Documents
      is a first priority Lien; (ii) no Lien exists on any of the collateral
      described therein other than the Lien created in favor of the Collateral
      Agent, for the benefit of the Investors, (iii) the Liens granted to the
      Company in the collateral described in the other Security Documents is a
      first priority Lien, and (iv) no Lien exists on any of the collateral
      described therein other than the Lien created in favor of the
      Company.

            

    

     

    
      	
              (xiv)  

            	
              The
      Collateral Agent and the Investors shall have received copies of all
      documents executed and delivered under or in connection with the
      transactions contemplated in the Transaction Documents that are required
      to be executed and delivered at or prior to the Third Closing Date and
      shall have received updated Disclosure Schedules to the extent
      circumstances have changed since the Second Closing in form and substance
      satisfactory to the Collateral Agent and the
  Investors.

            

    

     

    
      	
              (xv)  

            	
              Neither
      the Company nor any other party to any of the Transaction Documents shall
      be in breach or default under their respective obligations
      thereunder.

            

    

     

    
      	
              (xvi)  

            	
              The
      Collateral Agent and the Investors shall have received at the Third
      Closing, the opinions of BVI counsel, US counsel, HK counsel, and PRC
      Counsel, in each case, dated the Third Closing Date, in form and substance
      satisfactory to the Collateral Agent and the
  Investors;

            

    

     

    
      	
              (xvii)  

            	
              The
      Collateral Agent and the Investors shall have approved a fund flow chart
      setting forth how the proceeds from the issue of the Notes shall be
      transferred to the PRC Operating Companies and converted into
      RMB.

            

    

     

    
      	
              (xviii)  

            	
              The
      Collateral Agent and the Investors shall have received certified copies of
      searches of all applicable registers of security interests applicable to
      the Group Companies, such searches to be satisfactory to the
      Investors.

            

    

     

    
      	
              (xix)  

            	
              All
      the conditions specified in Section 9(b) above shall have been fulfilled,
      satisfied or remain satisfied for the Third Closing, unless waived in
      writing by the Investors.”

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    6.           Substitution
of Exhibits

     

    Exhibits
A, E and F of the Purchase Agreement are hereby amended by deleting said
Exhibits in their entirety and substituting in place thereof the new exhibits
attached hereto as Annex A to this Amendment.

     

    7.           Addition
of Exhibits

     

    The
Purchase Agreement is hereby amended by adding Exhibits K-1, K-2 and K-3
attached hereto as Annex B.

     

    8.           Substitution
of Schedules

     

    All of
the Disclosure Schedules of the Purchase
Agreement are hereby amended and restated in their entirety as attached hereto
as Annex C to this Amendment.

     

    9.           Addition
of Schedules

     

    The
Purchase Agreement is hereby amended by adding Schedules IV, V and VI thereto
attached hereto as Annex D.

     

    
      Section
B.           Representations
and Warranties

    

     

    1.        In order to induce Investors to enter
into this First Amendment, the Company, Quo and each of the other Group
Companies that is a party hereto represents and warrants to the Collateral Agent
and the Investors that the following statements are true, correct and
complete:

     

    (a)          each
of the Company and Quo has all requisite corporate or other organizational power
and authority to enter into this First Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Purchase
Agreement as amended by this First Amendment (the “Amended
Agreement”);

     

    (b)         the
execution and delivery of this First Amendment and the performance of the
Amended Agreement have been duly authorized by all necessary corporate action on
the part of the Company and Quo;

     

    (c)          the
execution and delivery by the Company and Quo of this First Amendment and the
performance by the Company and Quo of the Amended Agreement do not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) except as created pursuant to the Security
Documents, result in the creation of any Lien upon any of the Company’s and its
Subsidiaries capital stock or assets pursuant to, (iv) give any third party the
right to accelerate any obligation under, (v) result in a violation of, or (vi)
require any authorization, consent, approval, exemption or other action by or
notice to any Governmental Authority pursuant to, (A) the Charter Documents or
By-Laws of the Company and its Subsidiaries and Quo, or (B) any Law to which the
Company and its Subsidiaries and Quo are subject, or (C) any agreement,
instrument, contract, order, judgment or decree to which each of the Company or
its Subsidiaries or Quo is a party;

     

    (d)         Except
as specifically provided by the Transaction Documents, no registration with or
consent or approval of, or other action by, any Governmental Authority is
required in connection with the execution and delivery by the Company and Quo of
this First Amendment and the performance by the Company and Quo of the Amended
Agreement, except for those which if not made, obtained or taken could not
reasonably be expected to result in a Material Adverse Effect;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (e)          this
First Amendment and the Amended Agreement constitute, legal, valid and binding
obligations of each of the Company and Quo, enforceable in accordance with their
respective terms subject to applicable bankruptcy, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors’
rights and subject to general equitable principles which may limit the right to
obtain equitable remedies;

     

    (f)           the
representations and warranties contained in Section 6 of the Purchase Agreement
are and true, correct and complete in all material respects on and as of the
date hereof and the Third Closing to the same extent as though made on and as of
such dates, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date;
and

     

    (g)          no
event has occurred and is continuing or will result from the consummation of the
transactions contemplated by this First Amendment that would constitute a
Default or an Event of Default.

     

    
      Section
C.           Conditons
to Effectiveness

    

     

    1.           This
First Amendment shall be a Transaction Document and become effective only upon
the satisfaction of the following conditions precedent (the “Closing
Conditions”):

     

    (a)         The
Collateral Agent and the Investors shall have received on or prior to the Third
Closing this First Amendment, duly executed and delivered by all
Parties.

     

    Section
D.           Miscellaneous

    

    1.           Reference
to and Effect on the Purchase Agreement and the SecurityDocuments

     

    (a)         On
and after the effective date of this First Amendment, each reference in the
Purchase Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words
of like import referring to the Purchase Agreement and each reference in the
Security Documents to the “Purchase Agreement”, “thereunder”, “thereof” or words
of like import referring to the Purchase Agreement shall mean and be a reference
to the Purchase Agreement as amended hereby.

     

    (b)         Except
as specifically amended by this First Amendment, the Purchase Agreement and the
Security Documents shall remain in full force and effect and are hereby ratified
and confirmed.

     

    (c)         The
execution, delivery and performance of this First Amendment shall not, except as
expressly provided herein, constitute a waiver of any provision of, or operate
as a waiver of any right, power or remedy of any Investor under the Purchase
Agreement or any Security Document.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    2.           Headings

     

    Section
and subsection headings in this First Amendment are included herein for
convenience of reference only and shall not constitute a part of this First
Amendment for any other purpose or be given any substantive effect.

     

    3.           Applicable
Law

     

    THIS
FIRST AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES

     

    4.           Consent
to Jurisdiction and Service of Process

     

    ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PARTIES HERETO ARISING OUT OF OR
RELATING TO THIS FIRST AMENDMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND
CITY OF NEW YORK.

     

    5.           Waiver
of Jury Trial

     

    THE
PARTIES HERETO HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS FIRST
AMENDMENT.  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.

     

    6.           Counterparts

     

    This
First Amendment may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument; signature pages may be detached from
multiple separate counterparts and attached to a single counterpart so that all
signature pages are physically attached to the same document.

     

    

    

    

    (Signature
Pages Follow)

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    

    IN WITNESS WHEREOF, the
Parties hereto have executed this First Amendment on the day and year first
before written.

     

     

    

     

    NETWORK
CN INC.

     

    By:    /s/ Godfrey C.
Hui                                           

    Name:
Godfrey C. Hui

    Title:
CEO and Director

    

     

    SHANGHAI
QUO ADVERTISING COMPANY LIMITED

     

    By: 
  /s/ Lina
Zhang                                                

    Name:
Lina Zhang

    Title:
Legal Representative

    

     

    
 

     /s/ Lina
Zhang                                                    

    Lina
Zhang 

    

     

     /s/ Qinxiu
Zhang                                                

    Qinxiu
Zhang

     

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

     

    INVESTORS:

     

    

     

    SCULPTOR
FINANCE (MD) IRELAND LIMITED

     

    

     

    By:  /s/ Jennifer
Coyne                                             

    Name:
Jennifer Coyne

    Title:
Director

    

    

    SCULPTOR
FINANCE (AS) IRELAND LIMITED

     

    

     

    By:  /s/ Jennifer
Coyne                                           

    Name:
Jennifer Coyne

    Title:
Director

    

    

    SCULPTOR
FINANCE (SI) IRELAND LIMITED

     

    

     

    By:  /s/ Jennifer
Coyne                                          

    Name:
Jennifer Coyne

    Title:
Director

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

     

    OZ MASTER
FUND, LTD.

    

    By: OZ
Management LP, its Investment Manager

    By:
Och-Ziff Holding Corporation, its General Partner

    

    

    By:  /s/ Joel
Frank                                                        

    Name: Joel
Frank

    Title:  CFO

     

    

    

    OZ ASIA
MASTER FUND, LTD.

    

    By: OZ
Management LP, its Investment Manager

    By:
Och-Ziff Holding Corporation, its General Partner

    

    

    By:  /s/ Joel
Frank                                                        

    Name:
Joel Frank

    Title:
CFO

     

    

    

    OZ GLOBAL
SPECIAL INVESTMENTS MASTER FUND, L.P.

     

    By: OZ Advisors II LP,
its General Partner

    By: Och-Ziff Holding
LLC, its General Partner

    

    

    By:  /s/ Joel
Frank                                                          

    Name:
Joel Frank

    Title:
CFO

     

     

     

     

     

    17ex10_2.htm

  
    Exhibit 10.2

     

    SECURITY
AGREEMENT

     

    This
SECURITY AGREEMENT (this
“Agreement”) is dated as
of January 31, 2008 and entered into by and between NETWORK CN INC., a Delaware
corporation (“Company”
or “Grantor”), and
SCULPTOR FINANCE (MD) IRELAND LIMITED, as Collateral Agent for and
representative of the Investors (as herein defined) (in such capacity herein
called “Secured Party”).
Capitalized terms used in this Agreement and not otherwise defined herein have
the meanings specified in the Network Notes referenced below.

     

    PRELIMINARY
STATEMENTS

     

    A.           Pursuant
to the Note and Warrant Purchase Agreement dated as of November 19, 2007 by and
among Company, Investors, Shanghai Quo Advertising Company Limited, Lina Zhang
and Qinxiu Zhang (said Note and Warrant Purchase Agreement, as it may hereafter
be amended, restated, supplemented or otherwise modified from time to time,
being the “Purchase
Agreement”), Investors have made certain commitments, subject to the
terms and conditions set forth in the Purchase Agreement, to, among other
things, purchase certain 3% Senior Secured Convertible Notes all due June 30,
2011 (as they may hereafter be amended, restated, supplemented or otherwise
modified from time to time, the “Network Notes”) from the
Company.

     

    B.           Concurrently
with the purchase of the Network Notes, Company will also issue to the Investors
certain warrants to purchase shares of common stock of Company and Company will
lend the proceeds of the Network Notes to its wholly-owned subsidiary, NCN Group
Limited, a company incorporated under the laws of the British Virgin Islands
(“NCN
Group”).  Such loan will be evidenced by a Secured Promissory
Note issued by NCN Group in favor of the Company (as it may hereafter be
amended, restated, supplemented or otherwise modified from time to time, the
“NCN Group
Note”).

     

    C.           It
is a condition precedent to the Third Closing under the Purchase Agreement that
Grantor listed on the signature pages hereof shall have granted the security
interests and undertaken the obligations contemplated by this
Agreement.

     

    NOW, THEREFORE, in
consideration of the agreements set forth herein and in order to induce
Investors to purchase the Network Notes under the Purchase Agreement, Grantor
hereby agrees with Secured Party as follows:

     

    SECTION
1.          Grant of
Security.

     

    Grantor
hereby assigns to Secured Party, and hereby grants to Secured Party a security
interest in, all of Grantor’s right, title and interest in and to all of the
personal property of Grantor including the following, in each case whether now
or hereafter existing, whether tangible or intangible, whether now owned or
hereafter acquired and wherever the same may be located (the “Collateral”):

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (a)          all
Accounts;

     

    (b)          all
Chattel Paper;

     

    (c)          all
Money and all Deposit Accounts, together with all amounts on depositfrom time to
time in such Deposit Accounts;

     

    (d)          all
Documents;

     

    (e)          all
General Intangibles (including patents, trademarks, service marks,copyrights,
and other intellectual property), Payment Intangibles andSoftware;

     

    (f)           all
Goods, including Inventory, Equipment and Fixtures;

     

    (g)          all
Instruments;

     

    (h)          all
Investment Property;

     

    (i)           all
Letter-of-Credit Rights and other Supporting Obligations;

     

    (j)           all
Records;

     

    (k)          all
Commercial Tort Claims; and

     

    (l)           all
Proceeds and Accessions with respect to any of the
foregoingCollateral.

     

    Each
category of Collateral set forth above shall have the meaning set forth in the
UCC, it being the intention of the Grantor that the description of the
Collateral set forth above be construed to include the broadest possible range
of assets.

     

    Notwithstanding the foregoing, the
Collateral shall not include any Equity Interests owned by Grantor or a
Subsidiary of Grantor if the Subsidiary is a controlled foreign corporation (as
such term is defined in Section 957(a) of the United States Internal Revenue
Code of 1986, as amended) in excess of 66% of the voting power of all classes of
Equity Interests of such Subsidiary entitled to vote.

    

     

    SECTION
2.          Security
for Obligations.

     

    This
Agreement secures, and the Collateral is collateral security for, the prompt
payment in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise, of all Secured Obligations of
Grantor.  “Secured
Obligations” means all obligations and liabilities of every nature owed
by Grantor to Secured Party and each Investor now or hereafter existing under or
arising out of or in connection with the Purchase Agreement and the other
Transaction Documents and in each case together with all extensions or renewals
thereof, whether for principal, interest, fees, expenses, indemnities or
otherwise, whether voluntary or involuntary, direct or indirect, absolute or
contingent, liquidated or unliquidated, whether or not jointly owed with others,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred, and all or any portion of such obligations or
liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party or any Investor
as a preference, fraudulent transfer or otherwise, and all obligations of every
nature of Grantor now or hereafter existing under this Agreement (including,
without limitation, interest and other amounts that, but for the filing of a
petition in bankruptcy with respect to Grantor, would accrue on such
obligations, whether or not a claim is allowed against Grantor for such amounts
in the related bankruptcy proceeding).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    SECTION
3.          Representations and
Warranties.

     

    Grantor
represents and warrants as follows:

     

    (a)           Jurisdiction of
Organization.  Grantor’s name as it appears in official filings
in the state of its organization, type of organization (i.e. corporation,
limited partnership, etc.), jurisdiction of organization and organization number
provided by the applicable government authority of the jurisdiction of
organization are set forth on Schedule 1 annexed
hereto.

     

    (b)           Names.  Grantor (or
predecessor by merger or otherwise of Grantor) has not, within the five year
period preceding the date hereof, had a different name from the name of Grantor
listed on the signature pages hereof, except as set forth on Schedule 2 annexed
hereto.

     

    (c)           Due Authorization,
etc.  Grantor is duly formed, validly existing and in good
standing under the law of its jurisdiction of organization and has full entity
power and authority to execute, deliver and perform this
Agreement.  The execution, delivery and performance of this Agreement
has been duly authorized by all necessary entity action.  This
Agreement constitutes a legally valid and binding obligation of Grantor,
enforceable against such Grantor in accordance with its terms, except as
enforcement hereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors’
rights generally or by general equitable principles.

     

    (d)           No Conflict.  The
execution, delivery and performance of this Agreement by Grantor will not
violate the organizational documents of Grantor, any U.S. federal or state law
typically applicable to agreements similar to this Agreement, transactions of
the nature contemplated by this Agreement, or generally applicable to companies
engaged in the same line of business as the Company, which violation would
adversely affect the Company, the Secured Party or the Investors, or any order,
judgment or decree of any court or other governmental agency to which the
Grantor is a party.

     

    (e)           Security
Interests.  The security interests in the Collateral granted
hereunder constitute valid security interests in the Collateral, securing
payment of the Secured Obligations.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    SECTION
4.          Further Assurances.

     

    Grantor
agrees that from time to time, at the expense of Grantor, Grantor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that Secured Party may reasonably request, in
order to perfect and protect any security interest granted or purported to be
granted hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Collateral.  Without limiting
the generality of the foregoing, Grantor will:  (a) (i) execute (if
necessary) and file such financing or continuation statements, or amendments
thereto, (ii) execute and deliver, and cause to be executed and delivered,
agreements establishing that Secured Party has control of Deposit Accounts and
Investment Property of Grantor, (iii) deliver to Secured Party all
certificates or Instruments representing or evidencing Investment Property,
accompanied by duly executed endorsements or instruments of transfer or
assignment in blank, all in form and substance satisfactory to Secured Party and
(iv) deliver such other instruments or notices, in each case, as may be
necessary, or as Secured Party may reasonably request, in order to perfect and
preserve the security interests granted or purported to be granted hereby;
(b) furnish to Secured Party from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as Secured Party may reasonably request, all in
reasonable detail; (c) at any reasonable time, upon request by Secured
Party, exhibit the Collateral to and allow inspection of the Collateral by
Secured Party, or persons designated by Secured Party; (d) at Secured
Party’s request, appear in and defend any action or proceeding that may affect
Grantor’s title to or Secured Party’s security interest in all or any part of
the Collateral; and (e) use commercially reasonable efforts to obtain any
necessary consents of third parties to the creation and perfection of a security
interest in favor of Secured Party with respect to any Collateral. Grantor
hereby authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral (including any financing statement indicating that it covers “all
assets” or “all personal property” of Grantor).

     

    SECTION
5.         Certain
Covenants of Grantor.

     

    Grantor
shall:

     

    (a)           not
use or permit any Collateral to be used in violation of any provision of this
Agreement or in violation in any material respect of any applicable statute,
regulation or ordinance or any policy of insurance covering the
Collateral;

     

    (b)           give
Secured Party at least 30 days’ prior written notice of any change in Grantor’s
name, identity or corporate structure;

     

    (c)           give
Secured Party at least 30 days’ prior written notice of any reincorporation,
reorganization or other action that results in a change of the jurisdiction of
organization of Grantor;

     

    (d)           pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
services, materials and supplies) against, the Collateral except to the extent
the validity thereof is being contested in good faith; provided that Grantor
shall in any event pay such taxes, assessments, charges, levies or claims not
later than five days prior to the date of any proposed sale under any judgment,
writ or warrant of attachment entered or filed against Grantor or any of the
Collateral as a result of the failure to make such payment; and

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    (e)           permit
representatives of Secured Party at any time during normal business hours to
inspect and make abstracts from Records of the Collateral, and Grantor agrees to
render to Secured Party, at Grantor’s cost and expense, such clerical and other
assistance as may be reasonably requested with regard thereto.

     

    SECTION
6.          Special Covenants with
respect to Accounts.

     

    Except as
otherwise provided in this section, Grantor shall continue to collect, at its
own expense, all amounts due or to become due to Grantor under the
Accounts.  In connection with such collections, Grantor may take (and,
upon the occurrence and during the continuance of an Event of Default, at
Secured Party’s direction, shall take) such action as Grantor or Secured Party
may deem necessary or advisable to enforce collection of amounts due or to
become due under the Accounts; provided, however, that Secured Party shall have
the right at any time, upon the occurrence and during the continuation of an
Event of Default and upon written notice to Grantor of its intention to do so,
to (a) notify the account debtors or obligors under any Accounts of the
assignment of such Accounts to Secured Party and to direct such account debtors
or obligors to make payment of all amounts due or to become due to Grantor
thereunder directly to Secured Party, (b) notify each Person maintaining a
lockbox or similar arrangement to which account debtors or obligors under any
Accounts have been directed to make payment to remit all amounts representing
collections on checks and other payment items from time to time sent to or
deposited in such lockbox or other arrangement directly to Secured Party, (c)
enforce collection of any such Accounts at the expense of Grantor, and (d)
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as Grantor might have done.  After receipt by
Grantor of the notice from Secured Party referred to in the proviso to the
preceding sentence, (i) all amounts and proceeds (including checks and
other Instruments) received by Grantor in respect of the Accounts shall be
received in trust for the benefit of Secured Party hereunder, shall be
segregated from other funds of Grantor and shall be forthwith paid over or
delivered to Secured Party in the same form as so received (with any necessary
endorsement), and (ii) Grantor shall not, without the written consent of Secured
Party, adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.

     

    SECTION
7.          Secured Party Appointed
Attorney-in-Fact.

     

    Grantor
hereby irrevocably appoints Secured Party as Grantor’s attorney-in-fact, with
full authority in the place and stead of Grantor and in the name of Grantor,
Secured Party or otherwise, from time to time in Secured Party’s discretion to
take any action and to execute any instrument that Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:

     

    (a)           upon
the occurrence and during the continuance of an Event of Default, to obtain and
adjust insurance required to be maintained by such Grantor;

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (b)           upon
the occurrence and during the continuance of an Event of Default, to ask for,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral;

     

    (c)           upon
the occurrence and during the continuance of an Event of Default, to receive,
endorse and collect any drafts or other Instruments, Documents, Chattel Paper
and other documents in connection with clauses (a) and (b) above;

     

    (d)           upon
the occurrence and during the continuance of an Event of Default, to file any
claims or take any action or institute any proceedings that Secured Party may
deem necessary or desirable for the collection of any of the Collateral or
otherwise to enforce or protect the rights of Secured Party with respect to any
of the Collateral;

     

    (e)           upon
the occurrence and during the continuance of an Event of Default, to pay or
discharge liens (other than liens permitted under this Agreement or the Purchase
Agreement) levied or placed upon or threatened against the Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of Grantor to Secured Party, due and payable
immediately without demand;

     

    (f)           upon
the occurrence and during the continuance of an Event of Default, to sign and
endorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral; and

     

    (g)           upon
the occurrence and during the continuance of an Event of Default, generally to
sell, transfer, pledge, make any agreement with respect to or otherwise deal
with any of the Collateral as fully and completely as though Secured Party were
the absolute owner thereof for all purposes, and to do, at Secured Party’s
option and Grantor’s expense, at any time or from time to time, all acts and
things that Secured Party deems necessary to protect, preserve or realize upon
the Collateral and Secured Party’s security interest therein in order to effect
the intent of this Agreement, all as fully and effectively as such Grantor might
do.

     

    SECTION
8.          Secured Party May Perform;
Standard of
Care .

     

    Upon the
occurrence and during the continuance of an Event of Default, Secured Party may
itself perform, or cause performance of, such agreement, and the expenses of
Secured Party incurred in connection therewith shall be payable by Grantor under
Section 11 hereof.  The powers conferred on Secured Party
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers.  Except for the
exercise of reasonable care in the custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Collateral or as to the taking of any necessary
steps to preserve rights against prior parties or any other rights pertaining to
any Collateral.  Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of Collateral in its possession
if such Collateral is accorded treatment substantially equal to that which
Secured Party accords its own property.

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

     

    SECTION
9.          Remedies.

     

    (a)           Generally.  If any
Event of Default shall have occurred and be continuing, Secured Party may
exercise in respect of the Collateral, in addition to all other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party on default under the UCC, and also may
(i) require Grantor to, and Grantor hereby agrees that it will at its
expense and upon request of Secured Party forthwith, assemble all or part of the
Collateral as directed by Secured Party and make it available to Secured Party
at a place to be designated by Secured Party that is reasonably convenient to
both parties, (ii) enter onto the property where any Collateral is located
and take possession thereof with or without judicial process, (iii) prior
to the disposition of the Collateral, store, process, repair or recondition the
Collateral or otherwise prepare the Collateral for disposition in any manner to
the extent Secured Party deems appropriate, (iv) take possession of
Grantor’s premises or place custodians in exclusive control thereof, remain on
such premises and use the same and any of Grantor’s equipment for the purpose of
completing any work in process, taking any actions described in the preceding
clause (iii) and collecting any Secured Obligation, (v) sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
Secured Party’s offices or elsewhere, for cash, on credit or for future
delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable, (vi) exercise dominion
and control over and refuse to permit further withdrawals from any Deposit
Account maintained with Secured Party or any Investor and provide instructions
directing the disposition of funds in Deposit Accounts not maintained with
Secured Party or any Investor and (vii) provide entitlement orders with respect
to Security Entitlements and other Investment Property constituting a part of
the Collateral and, without notice to Grantor, transfer to or register in the
name of Secured Party or any of its nominees any or all of the Collateral
constituting Investment Property.  Secured Party or any Investor may
be the purchaser of any or all of the Collateral at any such sale and Secured
Party, shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold at
any such public sale, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable by Secured
Party at such sale.  Each purchaser at any such sale shall hold the
property sold absolutely free from any claim or right on the part of Grantor,
and Grantor hereby waives (to the extent permitted by applicable law) all rights
of redemption, stay and/or appraisal which it now has or may at any time in the
future have under any rule of law or statute now existing or hereafter
enacted.  Grantor agrees that, to the extent notice of sale shall be
required by law, at least ten days’ notice to Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  Secured Party shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  Secured Party may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was so
adjourned.  Grantor hereby waives any claims against Secured Party
arising by reason of the fact that the price at which any Collateral may have
been sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Collateral to more than one
offeree.  If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, Grantor shall be
liable for the deficiency and the fees of any attorneys employed by Secured
Party to collect such deficiency.  Grantor further agrees that a
breach of any of the covenants contained in this Section 9 will cause
irreparable injury to Secured Party, that Secured Party has no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section shall be specifically enforceable against
Grantor, and Grantor hereby waives and agrees not to assert any defenses against
an action for specific performance of such covenants except for a defense that
no default has occurred giving rise to the Secured Obligations becoming due and
payable prior to their stated maturities.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

     

    (b)           Intellectual
Property.  In addition to, and not by way of limitation of, the
granting of a security interest in the Collateral pursuant hereto, Grantor,
effective upon the occurrence and during the continuation of an Event of
Default, hereby assigns, transfers and conveys to Secured Party the nonexclusive
right and license to use all trademarks, tradenames, copyrights, patents or
technical processes owned or used by Grantor that relate to the Collateral,
together with any goodwill associated therewith, all to the extent necessary to
enable Secured Party to realize on the Collateral in accordance with this
Agreement and to enable any transferee or assignee of the Collateral to enjoy
the benefits of the Collateral.  This right shall inure to the benefit
of all successors, assigns and transferees of Secured Party and its successors,
assigns and transferees, whether by voluntary conveyance, operation of law,
assignment, transfer, foreclosure, deed in lieu of foreclosure or
otherwise.  Such right and license shall be granted free of charge,
without requirement that any monetary payment whatsoever be made to such
Grantor.

     

    SECTION
10.        Application of
Proceeds.

     

    Except as
expressly provided elsewhere in this Agreement, all proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all
or any part of the Collateral shall be applied in the following order of
priority:

     

    FIRST:  To
the payment of all reasonable costs and expenses of such sale, collection or
other realization, including reasonable compensation to Secured Party and
its  agents and counsel, and all other reasonable expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith or the other Transaction Documents and all advances made by Secured
Party hereunder for the account of Grantor, and to the payment of all costs and
expenses paid or incurred by Secured Party in connection with the exercise of
any right or remedy hereunder;

     

    SECOND:  To
the payment of all other Secured Obligations (for the ratable benefit of the
holders thereof); and

     

    THIRD:  To
the payment to or upon the order of Company, or to whosoever may be lawfully
entitled to receive the same or as a court of competent jurisdiction may direct,
of any surplus then remaining from such proceeds.

     

    SECTION
11.        Indemnity and
Expenses.

     

    Grantor
agrees to pay to Secured Party upon demand the amount of any and all costs and
expenses, including the fees and expenses of counsel and of any experts and
agents, that Secured Party may incur in connection with the exercise of rights
or remedies hereunder following an Event of Default or the failure by any
Grantor to perform or observe any of the provisions hereof.  The
obligations of Grantor in this Section 11 shall survive the termination of
this Agreement and the discharge of Grantor’s other obligations under this
Agreement, the Purchase Agreement and the other Transaction
Documents.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    SECTION
12.        Amendments;
Etc.

     

    No
amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by Grantor therefrom, shall in any
event be effective unless the same shall be in writing and signed by Secured
Party and, in the case of any such amendment or modification, by
Grantor.

     

    SECTION
13.        Notices.

     

    Any
notice or other communication herein required or permitted to be given shall be
in writing and may be personally served or sent by telefacsimile or United
States mail or courier service and shall be deemed to have been given when
delivered in person or by courier service, upon receipt of telefacsimile, or
three business days after depositing it in the United States mail with postage
prepaid and properly addressed.  For the purposes hereof, the address
of each party hereto shall be set forth under such party’s name on the signature
pages hereof or such other address as shall be designated by such party in a
written notice delivered to the other parties hereto.

     

    SECTION
14.        Failure or Indulgence Not
Waiver; Remedies Cumulative; Severability.

     

    (a)           No
failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or
privilege.  All rights and remedies existing under this Agreement are
cumulative to, and not exclusive of, any rights or remedies otherwise
available.

     

    (b)           In
case any provision in or obligation under this Agreement shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

     

    SECTION
15.        Continuing Security
Interest; Transfer of Loans; Termination andRelease.

     

    (a)           This
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until the payment in full of the
Secured Obligations (other than Unasserted Obligations) and termination of all
commitments to extend credit under the Purchase Agreement, (ii) be binding
upon Grantor and its successors and assigns, and (iii) inure, together with
the rights and remedies of Secured Party hereunder, to the benefit of Secured
Party and its successors, transferees and assigns.  Without limiting
the generality of the foregoing clause (iii), Secured Party may assign or
otherwise transfer any loans held by it to any other Person, and such other
Person shall thereupon become vested with all the benefits in respect thereof
granted to Secured Party herein or otherwise.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    (b)           Upon
the payment in full of all Secured Obligations (other than Unasserted
Obligations) and termination of all commitments to extend credit under the
Purchase Agreement, the security interest granted hereby shall terminate and all
rights to the Collateral shall revert to Grantor.  Upon such
termination, Secured Party shall, upon Grantor’s request and at Grantor’s
request, to file any UCC termination statements necessary to effect such
termination and Secured Party shall, at Grantor’s expense, execute and deliver
to Grantor any additional documents or instruments as Grantor shall reasonably
request to evidence such termination.

     

    SECTION
16.        Headings.

     

    Section
and subsection headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.

     

    SECTION
17.        Governing Law; Rules of
Construction.

     

    THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT LIMITATION, SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE
PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK, IN WHICH CASE THE LAWS OF SUCH JURISDICTION SHALL
GOVERN WITH RESPECT TO THE PERFECTION OF THE SECURITY INTEREST IN, OR THE
REMEDIES WITH RESPECT TO, SUCH PARTICULAR COLLATERAL.

     

    SECTION
18.        Consent to Jurisdiction and
Service of Process.

     

    ALL
JUDICIAL PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY OBLIGATIONS HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL
COURT OF COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW
YORK.

     

    SECTION
19.        Waiver of Jury
Trial.

     

    GRANTOR
AND SECURED PARTY HEREBY AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT.  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.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    SECTION
20.        Counterparts.

     

    This
Agreement may be executed in one or more counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute
but one and the same instrument; signature pages may be detached from multiple
separate counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document.

     

    SECTION
21.        Definitions.

     

    (a)           Each
capitalized term utilized in this Agreement that is not defined in this
Agreement, but that is defined in the UCC, including the categories of
Collateral listed in Section 1 hereof, shall have the meaning set forth in
Articles 1, 8 or 9 of the UCC.

     

    (b)           In
addition, the following terms used in this Agreement shall have the following
meanings:

     

    “Collateral” has the meaning
set forth in Section 1 hereof.

     

    “Purchase Agreement” has the
meaning set forth in the Preliminary Statementsof this Agreement.

     

    “Event of Default” means any
Event of Default as defined in each of theNetwork Notes, the NCN Group Note or
any other Transaction Document.

     

    “Equity Interests” means all
shares of stock, partnership interests, interests injoint ventures, limited
liability company interests and all other equity interests in aPerson, whether
such stock or interests are classified as Investment Property or General
Intangibles under the UCC.

     

    “Investors” has the meaning
set forth in the Purchase Agreement.

     

    “Transaction Documents” has
the meaning set forth in the Purchase Agreement.

     

    “Secured Obligations” has the
meaning set forth in Section 2 hereof.

     

    “Subsidiary” has the meaning
set forth in the Purchase Agreement.

     

    “UCC” means the Uniform
Commercial Code, as it exists on the date of thisAgreement or as it may
hereafter be amended, in the State of New York.

     

    

    [Remainder of page intentionally left
blank]

     

     

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, Grantor
and Secured Party have caused this Agreement to be duly executed and delivered
by their respective officers thereunto duly authorized as of the date first
written above.

     

     

    
      
        	 	NETWORK CN
INC.	 
	 	 	 	 	 
	 	

                By:

              	/s/
      Godfrey C. Hui	 
	 	 	 Name:	Godfrey C.
    Hui	 
	 	 	 Title: 	CEO and
      Director	 
	 	 	 	 	 
	 	 	 
	 	
                Notice
      Address:

                 

                21F,
      Chinachem Century Tower,

                178
      Gloucester Road,

                Wanchai,
      Hong Kong

                
                  
                    Fax:
      (852) 2295-6977

                  

                

              	 

      

    

     

     

    
 

    

    

    

    

    

    
      
         

      

      
        S-1

        
          

        

      

      
         

      

    

     

     

    
      

      
      

      
        	 
      	SCULPTOR FINANCE (MD) IRELAND
      LIMITED, as 
Collateral Agent, as Secured Party	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	
                By:

              	/s/
      Jennifer Coyne	 
      
	 
      	 
      	
                Name:

              	Jennifer
      Coyne	 
      
	 
      	 
      	
                Title:

              	Director	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
                Notice
      Address:

                 

                
                  5
      Harbourmaster Place, IFSC

                  Dublin,
      Ireland

                  Facsimilie number: +353 1
      6806050

                

              	 
      

      

       

      

       

    

     

    

     

    
      
         

      

      
        S-2

        
          

        

      

      
         

      

    

    SCHEDULE
1

    TO

    SECURITY
AGREEMENT

     

    Type and Jurisdiction of
Organization

     

    
      	
              Name of
      Grantor

            	
              Type
      of

              Organization

            	
              Jurisdiction

              of
      Organization

            	
              Organization

              Number

            
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
2

    TO

    SECURITY
AGREEMENT

     

    Other
Names

     

    
      	
              Name of
      Grantor

            	
              Other
      Names

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