Sale and Purchase Agreement
 
This Sale and Purchase Agreement, dated as of May 12, 2005, is made by and among
Metaphor Corp., a Nevada corporation (the “Acquiror”), 8 Holdings LLC, a
Colorado limited liability company (“8 Holdings”), Hong Kong Huicong
International Group Limited, a British Virgin Islands company (the
“Shareholder”), each of Wu Xian, Li Shuangqing, Shen Qizhi and Wang Li Hong
(collectively, “CMN Management”), and China Media Network International Inc., a
British Virgin Islands company (the “Company”).
 
BACKGROUND
 
The Shareholder has agreed to transfer to the Acquiror, and the Acquiror has
agreed to acquire from the Shareholder, all of the Shares, which Shares
constitute 100% of the outstanding Common Stock of the Company, in exchange for
(a) shares representing 28.68% of the Acquiror’s Common Stock to be issued to
the Shareholder (the “Acquiror Shares”), subject to adjustment pursuant to
Section 2.2; and (b) payment to the Shareholder of US$3,785,000 in cash, in
accordance with Section 2.1.
 
Subject to the terms and conditions of this Agreement, the Shareholder and CMN
Management have agreed to procure the restructuring of the advertising and media
network businesses being currently carried out by the Company Subsidiaries, the
work of which shall commence immediately after the signing of this Agreement and
be completed before or on the Closing Date (“Restructuring”). Upon completion of
the Restructuring, (a) 北京华媒盛&#-30266;信息技术有&#-27056;公司 (Beijing Huamei Shengshi
Information Technology Co., Ltd.) (“Huamei Information”) shall become a
Chinese-foreign invested joint venture enterprise incorporated in China, and (b)
Huamei Information shall become the holding company of all the domestic
advertising businesses being carried out by the group members of HC
International at the date of signing of this Agreement. A more detailed plan of
the Restructuring is attached hereto as Exhibit F.
 
The Acquiror is a non-operating U.S. public shell company that ceased business
operations in 2003. Since then the Acquiror has sought a candidate with which to
merge.
 
SECTION I
DEFINITIONS
 
Unless the context otherwise requires, the terms defined in this Section 1 will
have the meanings herein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms herein
defined.
 
1.1  “Accredited Investor” has the meaning set forth in Regulation D under the
Securities Act and set forth on Exhibit B.
 
1.2  “Acquired Companies” means, collectively, the Company and the Company
Subsidiaries.
 
1.3  “Acquiror Balance Sheet” means the Acquiror’s balance sheet at December 31,
2004.
 
1.4  “Acquiror Board” means the Board of Directors of the Acquiror.
 
1.5   “Acquiror Nominees” means, from and after the Closing Date, the three
members of the Acquiror Board nominated by the Acquiror Stockholder pursuant to
this Agreement and the Voting Agreement.
 
1.6  “Acquiror’s Common Stock” means the Acquiror’s common stock.
 
1.7   “Acquiror Stockholder” means 8 Holdings.
 
1.8  “Acquisition Transaction” has the meaning set forth in Section 12.1.7.
 
1.9  “Affiliate” means any Person that directly or indirectly controls, is
controlled by or is under common control with the indicated Person.
 
1.10  “Agreement” means this Sale and Purchase Agreement, including all
Schedules and Exhibits hereto, as this Sale and Purchase Agreement may be from
time to time amended, modified or supplemented.
 
1.11  “Approved Plans” means a stock option or similar plan for the benefit of
employees or others which has been approved by the stockholders of the Acquiror.
 
1.12  “Business Day” means a day, other than Saturday or Sunday, on which banks
in New York are open for business.
 
1.13  “Claims Period” has the meaning set forth in Section 13.2.1.
 
1.14  “Closing” has the meaning set forth in Section 3.
 
1.15  “Closing Acquiror Shares” means the aggregate number of Acquiror Shares
issuable to the Shareholder at Closing
 
1.16  “Closing Date” has the meaning set forth in Section 3.
 
1.17  “CMN Management” means Wu Xian, Li Shuangqing, Shen Qizhi and Wang Li
Hong, collectively.
 
1.18  “CMN Executives” means the selected members of the senior management of
the Acquired Companies to whom the Shareholder will transfer 8.68% of the
Acquiror’s Common Stock as provided in Section 2.1 of this Agreement.
 
1.19  “Code” means the Internal Revenue Code of 1986, as amended.
 
1.20  “Common Stock” means the Company’s common shares.
 
1.21  “Commission” means the Securities and Exchange Commission or any other
federal agency then administering the Securities Act.
 
1.22  “Company Audited Financial Statements” has the meaning set forth in
Section 5.8.
 
1.23   “Company Balance Sheet” means the Company’s audited balance sheet at
December 31, 2004.
 
1.24  “Company Benefit Plans” means employee pension benefit plans, medical,
disability, severance pay, educational, life insurance and other employee
welfare benefit plans, and all other bonus, stock option, stock purchase or
other equity-based compensation arrangements, and incentive, deferred
compensation, supplemental retirement, severance, disability, vacation,
cafeteria and other similar employee benefit plans, policies, programs or
contracts (including those which contain change of control provisions or pending
change of control provisions), and any employment, executive compensation or
severance agreements (including those with change of control provisions or
pending change of control provisions), as amended, modified or supplemented, in
any case that (a) are maintained or contributed to (or to which there was an
obligation to contribute) by any Acquired Company, or (b) were formerly
maintained or contributed to (or to which there was an obligation to
contribute), by any Acquired Company, as well as each plan with respect to which
any Acquired Company has or could have any liability, whether direct or indirect
or actual or contingent (including any liability arising out of an
indemnification, guarantee, hold harmless or similar agreement).
 
1.25   “Company Board” means the Board of Directors of the Company.
 
1.26  “Company Disclosure Schedule” means the Company Disclosure Schedule
attached hereto, dated as of the date hereof, delivered by the Company to the
Acquiror in connection with this Agreement.
 
1.27  “Company Indemnified Party” has the meaning set forth in Section 13.3.1.
 
1.28  “Company Nominees” means, from and after the Closing Date, the two members
of the Acquiror Board, nominated by the Shareholder pursuant to this Agreement
and the Voting Agreement. 
 
1.29   “Company Subsidiaries” means all of the direct and indirect Subsidiaries
of the Company, Beijing Information&#-244;[B Company]
,北京华媒盛&#-30266;广告有&#-27056;公司 (Beijing Huamei Shengshi Advertising Co., Ltd.)
,&#-28463;州华媒盛&#-30266;广告传播有&#-27056;公司 (Zhengzhou Huamei Shengshi Advertising
Broadcasting Co., Ltd.) &#-244;济南华媒盛&#-30266;传播有&#-27056;公司 (Ji’nan Huamei
Shengshi Broadcasting Co., Ltd.) ,乌&#-25471;木&#-24752;华媒盛&#-30266;传播有&#-27056;公司
(Urumqi Huamei Shengshi Broadcasting Co., Ltd.) ,兰州华媒广告传播有&#-27056;公司 (Lanzhou
Huamei Advertising Broadcasting Co., Ltd.),and 兰州华媒盛&#-30266;广告传播有&#-27056;公司
(Lanzhou Huamei Shengshi Advertising Broadcasting Co., Ltd.),
and北京华媒盛&#-30266;信息技术有&#-27056;公司 (Beijing Huamei Shengshi Information
Technology Co., Ltd.).
 
1.30  “Damages” has the meaning set forth in Section 13.2.1.
 
1.31   “Distributor” means any underwriter, dealer or other Person who
participates, pursuant to a contractual arrangement, in the distribution of the
securities offered or sold in reliance on Regulation S.
 
1.32  “Environmental Laws” means any Law or other requirement relating to the
environment, natural resources, or public or employee health and safety.
 
1.33  “Environmental Permit” means all licenses, permits, authorizations,
approvals, franchises and rights required under any applicable Environmental Law
or Order.
 
1.34  “Equity Security” means any stock or similar security, including, without
limitation, securities containing equity features and securities containing
profit participation features, or any security convertible into or exchangeable
for, with or without consideration, any stock or similar security, or any
security carrying any warrant, right or option to subscribe to or purchase any
shares of capital stock, or any such warrant or right.
 
1.35  “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
 
1.36   “Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will then be in effect.
 
1.37  “Exhibits” means the several exhibits referred to and identified in this
Agreement.
 
1.38  “GAAP” means, with respect to any Person, United States or Hong Kong (as
the case may be) generally accepted accounting principles applied on a
consistent basis with such Person’s past practices.
 
1.39  “GEM Listing Rules” means the Rules Governing the Listing of Securities on
The Growth Enterprise Market of The Stock Exchange of Hong Kong Limited.
 
1.40  “Governmental Authority” means any federal or national, state or
provincial, municipal or local government, governmental authority, regulatory or
administrative agency, governmental commission, department, board, bureau,
agency or instrumentality, political subdivision, commission, court, tribunal,
official, arbitrator or arbitral body, in each case whether U.S. or non-U.S.
 
1.41  “HC International” means HC International, Inc., a Cayman
Island-incorporated company, the shares of which are listed on The Growth
Enterprise Market of The Stock Exchange of Hong Kong Limited.
 
1.42  “Hedging Transaction” means any short sale (whether or not against the
box) with respect to any security that includes, relates to or derives any
significant part of its value from the Shares.
 
1.43  “Hong Kong” means the Hong Kong Special Administrative Region of the PRC.
 
1.44  “Indebtedness” means any obligation, contingent or otherwise. Any
obligation secured by a Lien on, or payable out of the proceeds of, or
production from, property of the relevant party will be deemed to be
Indebtedness.
 
1.45  “Indebtedness for Borrowed Money” means (a) all Indebtedness in respect of
money borrowed; (b) all Indebtedness evidenced by a promissory note, bond or
similar written obligation to pay money; or (c) all such Indebtedness guaranteed
by the relevant party or for which the relevant party is otherwise contingently
liable.
 
1.46  “Intellectual Property” means all industrial and intellectual property,
including, without limitation, all patents, patent applications, patent rights,
trademarks, trademark applications, common law trademarks, Internet domain
names, trade names, service marks, service mark applications, common law service
marks, and the goodwill associated therewith, copyrights, in both published and
unpublished works, whether registered or unregistered, copyright applications,
franchises, licenses, know-how, trade secrets, technical data, designs, customer
lists, confidential and proprietary information, processes and formulae, all
computer software programs or applications, layouts, inventions, development
tools and all documentation and media constituting, describing or relating to
the above, including manuals, memoranda, and records, whether such intellectual
property has been created, applied for or obtained anywhere throughout the
world.
 
1.47  “Key Employees” means the persons who hold positions as the general
managers of the 4 TV Stations being acquired by the Acquiror immediately prior
to Closing and each of the CMN Management.
 
1.48  “Laws” means, with respect to any Person, any U.S. or non-U.S. federal,
national, state, provincial, local, municipal, international, multinational or
other law (including common law), constitution, statute, code, ordinance, rule,
regulation or treaty applicable to such Person.
 
1.49  “Lien” means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind, including, without limitation, any conditional sale or other
title retention agreement, any lease in the nature thereof and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction and including any lien or charge arising by Law.
 
1.50  “Material Acquiror Contract” means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Acquiror, filed with the
Commission.
 
1.51  “Material Adverse Effect” means, when used with respect to the Acquiror or
the Acquired Companies, as the case may be, any change, effect or circumstance
which, individually or in the aggregate, would reasonably be expected to (a)
have a material adverse effect on the business, assets, financial condition or
results of operations of the Acquiror or the Acquired Companies, as the case may
be, in each case taken as a whole or (b) materially impair the ability of the
Acquiror or the Company, as the case may be, to perform their obligations under
this Agreement, excluding any change, effect or circumstance resulting from (i)
the announcement, pendency or consummation of the transactions contemplated by
this Agreement, (ii) changes in the United States securities markets generally,
or (iii) changes in general economic, financial, currency exchange rate,
political or regulatory conditions in industries in which the Acquiror or the
Acquired Companies, as the case may be, operate.
 
1.52  “Material Company Contract” means any and all agreements, contracts,
arrangements, leases, commitments or otherwise, of the Acquired Companies set
forth on Schedule 5.21.1, including without limitation, the Advertisement Agency
Contracts entered into by certain of the Company Subsidiaries.
 
1.53  “Metaphor Disclosure Schedule” means the Metaphor Disclosure Schedule
attached hereto, dated as of the date hereof, delivered by the Acquiror to the
Company and the Shareholder in connection with this Agreement.
 
1.54  “NNM” means the Nasdaq National Market.
 
1.55  “OTCBB” means the Over the Counter Bulletin Board,
 
1.56  “Order” means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any Governmental
Authority.
 
1.57  “Organizational Documents” means (a) the articles or certificate of
incorporation and the by-laws, articles of association, or code of regulations
of a corporation; (b) the partnership agreement and any statement of partnership
of a general partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d) the articles or
certificate of formation and operating agreement of a limited liability company;
(e) any other document performing a similar function to the documents specified
in clauses (a), (b), (c) and (d) adopted or filed in connection with the
creation, formation or organization of a Person; and (f) any and all amendments
to any of the foregoing.
 
1.58  “Outside Date” has the meaning set forth in Section 12.1.3.
 
1.59  “Permitted Liens” means (a) Liens for Taxes not yet payable or in respect
of which the validity thereof is being contested in good faith by appropriate
proceedings and for the payment of which the relevant party has made adequate
reserves; (b) Liens in respect of pledges or deposits under workmen’s
compensation laws or similar legislation, carriers, warehousemen, mechanics,
laborers and materialmen and similar Liens, if the obligations secured by such
Liens are not then delinquent or are being contested in good faith by
appropriate proceedings conducted and for the payment of which the relevant
party has made adequate reserves; (c) statutory Liens incidental to the conduct
of the business of the relevant party which were not incurred in connection with
the borrowing of money or the obtaining of advances or credits and that do not
in the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business; and (d) Liens that
would not have a Material Adverse Effect.
 
1.60  “Person” means all natural persons, corporations, business trusts,
associations, companies, partnerships, limited liability companies, joint
ventures and other entities, governments, agencies and political subdivisions.
 
1.61  “PRC” means the People’s Republic of China.
 
1.62   “Proceeding” means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Authority.
 
1.63  “Regulation S” means Regulation S under the Securities Act, as the same
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.
 
1.64  “Restructuring” means the restructuring of the advertising and media
network businesses being currently carried by the Company Subsidiaries.
 
1.65   “Rule 144” means Rule 144 under the Securities Act, as the same may be
amended from time to time, or any successor statute.
 
1.66  “Schedule 14(f) Filing” has the meaning set forth in Section 5.4.
 
1.67  “Schedules” means the several schedules referred to and identified herein,
setting forth certain disclosures, exceptions and other information, data and
documents referred to at various places throughout this Agreement.
 
1.68  “SEC Documents” has the meaning set forth in Section 6.24.
 
1.69  “Section 4(2)” means Section 4(2) under the Securities Act, as the same
may be amended from time to time, or any successor statute.
 
1.70  “Securities Act” means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same will be in effect at the time.
 
1.71  “Service Contracts” means the service contracts, dated the Closing Date,
by and between the Acquiror and each member of CMN Management.
 
1.72  “Shares” means the 50,000 shares of Common Stock of the Company owned by
the Shareholder and exchanged pursuant to this Agreement.
 
1.73  “Shareholders’ Loan” means the indebtedness of the Company Subsidiaries to
the Shareholder, which shall be taken over and assumed by the Acquiror upon
Closing, as more particularly described in the term sheet of the Shareholders’
Loan attached hereto as Exhibit H.
 
1.74  “Shareholders’ Loan Agreement” means the Shareholders’ Loan Agreement to
be entered into between the Acquiror and the Shareholder in accordance with the
term sheet attached hereto as Exhibit H.
 
1.75   “Subsidiary” means, with respect to any Person, any corporation, limited
liability company, joint venture or partnership of which such Person (a)
beneficially owns, either directly or indirectly, more than 50% of (i) the total
combined voting power of all classes of voting securities of such entity, (ii)
the total combined equity interests, or (iii) the capital or profit interests,
in the case of a partnership; or (b) otherwise has the power to vote or to
direct the voting of sufficient securities to elect a majority of the board of
directors or similar governing body.
 
1.76  “Survival Period” has the meaning set forth in Section 13.1.
 
1.77  “Taxes” means all foreign, federal, state or local taxes, charges, fees,
levies, imposts, duties and other assessments, as applicable, including, but not
limited to, any income, alternative minimum or add-on, estimated, gross income,
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, unemployment, excise, severance,
stamp, occupation, premium, real property, recording, personal property, federal
highway use, commercial rent, environmental (including, but not limited to,
taxes under Section 59A of the Code) or windfall profit tax, custom, duty or
other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalties or additions to tax with
respect to any of the foregoing; and “Tax” means any of the foregoing Taxes.
 
1.78  “Tax Group” means any federal, state, local or foreign consolidated,
affiliated, combined, unitary or other similar group of which the Acquiror is
now or was formerly a member.
 
1.79  “Tax Return” means any return, declaration, report, claim for refund or
credit, information return, statement or other similar document filed with any
Governmental Authority with respect to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
 
1.80  “Transaction Documents” means, collectively, all agreements, instruments
and other documents to be executed and delivered in connection with the
transactions contemplated hereby, including the Voting Agreement, the Service
Contracts and the PRC Agreement.
 
1.81  “U.S.” means the United States of America.
 
1.82  “U.S. person” has the meaning set forth in Regulation S under the
Securities Act and set forth on Exhibit C hereto.
 
1.83  “Voting Agreement” means the Voting Agreement, dated the Closing Date, by
and among the Acquiror, the Acquiror Stockholder and the Shareholder, in
substantially the form attached hereto as Exhibit G.
 
1.84  “$” means United States dollars, the lawful currency of the United States.
 
1.85 “RMB” means Renminbi , the lawful currency of the People’s Republic of
China.
 
SECTION II  
 
EXCHANGE OF SHARES AND SHARE CONSIDERATION
 
2.1  Sale and Purchase of Shares. The Shareholder desires to transfer to, and
the Acquiror desires to acquire from the Shareholder, the Shares of the Company
for the consideration and on the terms set forth in this Agreement. Subject to
Section 2.2, the aggregate consideration for the Shares acquired by the Acquiror
pursuant to this Agreement will be shares representing 28.68% of the Acquiror’s
Common Stock to be issued to the Shareholder; and (ii) payment in the aggregate
amount of US$3,785,000 in cash (the “Cash Payment”) to the Shareholder payable
in two tranches. The first tranche, in the amount of US$3,500,000, shall be paid
within five business days of the Closing Date, and the second tranche, in the
amount of US$285,000, shall be paid within twelve (12) months of the Closing
Date. The Cash Payment shall be made by wire transfer of immediately available
funds in accordance with the Shareholder’s wire transfer instructions set forth
in Exhibit I.
 
The Acquiror acknowledges that the Shareholder will transfer 8.68% of the shares
of the Acquiror’s Common Stock to be issued to Shareholder by the Acquiror at
Closing pursuant to the foregoing provisions of this Section 2.1 to the CMN
Executives in consideration of CMN Executives entering into service contracts
with Acquired Companies and to provide incentive and reward to the CMN
Executives for their contribution to, and continuing efforts to promote the
interests of, the Company, at such time after the Closing as the Shareholder
shall deem desirable and appropriate, but in any event no later than December
31, 2006.
 
2.2  Adjustments. If the Company’s audited combined net profit after tax and net
of all minority interests for the year ended December 31, 2004 prepared in
accordance with Hong Kong GAAP, as reflected in the relevant Company Audited
Financial Statements (the “Net Profit”), is less than RMB10 million (the
“Estimated Net Profit”), the number of Acquiror Shares to be issued to the
Shareholder shall be adjusted in accordance with this Section 2.2. There shall
be no adjustment in the number of Acquiror Shares issued to the Shareholder if
the Net Profit is not less than RMB9 million under Hong Kong GAAP. In the event
the actual Net Profit is less than RMB9 million under Hong Kong GAAP (the
“Actual HK Net Profit”), the number of Acquiror Shares issued to the Shareholder
shall be adjusted so that the Shareholder’s aggregate percentage ownership of
the Acquiror Shares to be issued to it as originally contemplated by the terms
of this Agreement shall be decreased by the same amount of the decrease in
percentage from the Estimated Net Profit to the Actual HK Net Profit; provided,
however, that in no event shall the Shareholder’s percentage ownership of the
Acquiror Shares to be issued be decreased to less than 18.68%.. By way of
example only, upon the consummation of this Agreement, the Shareholder shall own
28.68% of the Acquiror. If Actual HK Net Profit is RMB8 million, which is 20%
less than the Estimated Net Profit, the number of Acquiror Shares issued to the
Shareholder shall be reduced so that their percentage ownership of the Acquiror
upon consummation of this Agreement shall be 22.94% of the Acquiror,
representing 20% reduction of the Acquiror Shares to be issued to the
Shareholder less than what was originally contemplated by the terms of this
Agreement.
 
2.3  Withholding. The Acquiror shall be entitled to deduct and withhold from the
Acquiror Shares otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Code or any provision of state, local,
provincial or foreign Tax Law. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of Shares in respect of which such deduction and
withholding was made.
 
2.4  Directors of Acquiror at Closing. Simultaneous with the Closing of the
transactions contemplated by this Agreement, the Company Nominees shall be
appointed to the Acquiror Board. From and after the Closing Date, the Acquiror
Stockholders and the Company shall have the right, pursuant to the terms of the
Voting Agreement, to designate Acquiror Nominees and Company Nominees,
respectively, to serve on the Acquiror Board for a period of two (2) years.
 
SECTION III
CLOSING
 
3.1  Closing. The closing (the “Closing”) of the sale and purchase of the Shares
will occur at the offices of Loeb & Loeb, LLP, in New York, New York, on July
31, 2005 or at such later date as all of the closing conditions set forth in
Sections 10 and 11 have been satisfied or waived (the “Closing Date”). At the
Closing the Shareholder will deliver to the Acquiror certificate(s) evidencing
the Shares, along with executed stock powers transferring the Shares to the
Acquiror, against delivery by the Acquiror to the Shareholder of certificates
evidencing the Acquiror Shares, and a wire transfer of the Cash Payment to the
Shareholder.
 
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER AND CMN MANAGEMENT
 
4.1  Generally. The Shareholder, each member of CMN Management, severally and
not jointly, hereby represents and warrants to the Acquiror
 
4.1.1  Authority. The Shareholder and each member of CMN Management have the
right, power, authority and capacity to execute and deliver this Agreement and
each of the Transaction Documents, to which they are a party, to consummate the
transactions contemplated by this Agreement and each of the Transaction
Documents, to which they are a party, and to perform its obligations under this
Agreement and each of the Transaction Documents, to which they are a party. This
Agreement has been, and each of the Transaction Documents will be, duly and
validly authorized and approved, executed and delivered by each member of CMN
Management. This Agreement has been, and each of the Transaction Documents will
be, upon the approval of the shareholders of HC International, Inc. as required
under Section 10 hereof, duly and validly authorized and approved, executed and
delivered by the Shareholder. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the
parties thereto other than the Shareholder and each member of CMN Management,
this Agreement is, and as of the Closing each of the Transaction Documents, to
which they are a party, will have been, duly authorized, executed and delivered
by the Shareholder and each member of CMN Management and constitute or will
constitute the legal, valid and binding obligation of the Shareholder and each
member of CMN Management, enforceable against the Shareholder and each member of
CMN Management in accordance with their respective terms, except as such
enforcement is limited by general equitable principles, or by bankruptcy,
insolvency and other similar Laws affecting the enforcement of creditors rights
generally.
 
4.1.2  No Conflict. Neither the execution or delivery by the Shareholder and CMN
Management of this Agreement or any Transaction Document, to which they are a
party, nor the consummation or performance by the Shareholder and CMN Management
of the transactions contemplated hereby or thereby will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of the Shareholder; (b) contravene, conflict with,
constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination or
acceleration of, any agreement or instrument to which the Shareholder or any
member of CMN Management is a party or by which the properties or assets of the
Shareholder or any member of CMN Management; or (c) contravene, conflict with,
or result in a violation of, any Law or Order to which the Shareholder or any
member of CMN Management, or any of the properties or assets of the Shareholder
or any member of CMN Management, may be subject.
 
4.1.3  Ownership of Shares. The Shareholder owns, of record and beneficially,
and has good, valid and indefeasible title to and the right to transfer to the
Acquiror pursuant to this Agreement, the Shares free and clear of any and all
Liens. Other than the Organizational Documents, there are no options, rights,
voting trusts, stockholder agreements or any other contracts or understandings
to which the Shareholder is a party or by which the Shareholder or the Shares
are bound with respect to the issuance, sale, transfer, voting or registration
of the Shares. At the Closing, the Acquiror will acquire good, valid and
marketable title to the Shares free and clear of any and all Liens.
 
4.1.4  Litigation. There is no pending Proceeding against the Shareholder or any
member of CMN Management, as the case may be, that challenges, or may have the
effect of preventing, delaying or making illegal, or otherwise interfering with,
any of the transactions contemplated by this Agreement and, to the knowledge of
the Shareholder or any member of CMN Management as the case may be, no such
Proceeding has been threatened, and no event or circumstance exists that is
reasonably likely to give rise to or serve as a basis for the commencement of
any such Proceeding.
 
4.1.5  No Brokers or Finders. Except as disclosed in the Company Disclosure
Schedule no Person has, or as a result of the transactions contemplated herein
will have, any right or valid claim against the Shareholder or any member of CMN
Management, as the case may be, for any commission, fee or other compensation as
a finder or broker, or in any similar capacity, and the Shareholder or any
member of CMN Management, as the case may be, will indemnify and hold the
Acquiror harmless against any liability or expense arising out of, or in
connection with, any such claim.
 
4.2  Investment Representations. The Shareholder hereby represents and warrants
to the Acquiror:
 
4.2.1  Acknowledgment. The Shareholder understands and agrees that the Acquiror
Shares have not been registered under the Securities Act or the securities laws
of any state of the U.S. and that the issuance of the Acquiror Shares is being
effected in reliance upon an exemption from registration afforded either under
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering or Regulation S for offers and sales of securities outside the
U.S.
 
4.2.2  Status. By its execution of this Agreement, the Shareholder represents
and warrants to the Acquiror as indicated on its signature page to this
Agreement, either that:
 
(a)  it is an Accredited Investor; or
(b)  it is not a U.S. person.
 
The Shareholder understands that the Acquiror Shares are being offered and sold
to the Shareholder in reliance upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
the Shareholder set forth in this Agreement, in order that the Acquiror may
determine the applicability and availability of the exemptions from registration
of the Acquiror Shares on which the Acquiror is relying.
 
4.2.3  Additional Representations and Warranties of Accredited Investors. If the
Shareholder indicates that it is an Accredited Investor on its signature page to
this Agreement it further makes the representations and warranties to the
Acquiror set forth on Exhibit D.
 
4.2.4  Additional Representations and Warranties of Non-U.S. Persons. If the
Shareholder indicates that it is not a U.S. person on its signature page to this
Agreement, it further makes the representations and warranties to the Acquiror
set forth on Exhibit E.
 
4.2.5  Stock Legends. The Shareholder hereby agrees with the Acquiror as
follows:
 
(a)  Securities Act Legend - Accredited Investors. If the Shareholder indicates
that it qualifies as an Accredited Investor the certificates evidencing the
Acquiror Shares, and each certificate issued in transfer thereof, will bear the
following legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN
WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR
OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
 
(b)  Securities Act Legend - Non-U.S. Persons. If the Shareholder indicates that
it qualifies as a non-U.S. person, the certificates evidencing the Acquiror
Shares, and each certificate issued in transfer thereof, will bear the following
legend:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS
AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE
PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN
OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE
COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.
 
(c)  Other Legends. The certificates representing such Acquiror Shares, and each
certificate issued in transfer thereof, will also bear any other legend required
under any applicable Law, including, without limitation, any U.S. state
corporate and state securities law, or contract.
 
(d)  Restriction on Disposal of Acquiror Shares. (i) For a period of 12 months
after the Closing (the “Lock-Up Period”), the Shareholder and the Acquiror
Stockholder shall not, without the prior written consent of the Acquiror Board,
directly or indirectly transfer, sell, gift, exchange, assign, pledge or
otherwise encumber or dispose of their respective shares of Acquiror Common
Stock, or enter into any Hedging Transaction (each of the foregoing referred to
as a “Disposition”). The foregoing restriction is intended to preclude the
Shareholder and the Acquiror Stockholder from engaging in any Hedging
Transaction, which is designed to or is reasonably expected to lead to or result
in a Disposition during the Lock-Up Period even if such shares of Acquiror
Common Stock would be disposed of by someone other than the Shareholder , or the
Acquiror Stockholder. The above restriction on disposal of Acquiror Shares shall
not apply to the transfer by the Shareholder to the CMN Executives of the 8.68%
shares of the Acquiror Common Stock as described in Section 2.1 of this
Agreement, provided that, the Shareholder shall (i) make the representations
required by the provisions of Sections 4.2.1 through 4.2.4 and (ii) procure the
agreement of each member of the CMN Executives to be bound by the provisions of
Section 4.2.5 and any other restrictions on transferability set forth in
Exhibits D and E after he/she become a stakeholder of the Acquiror.

 
(ii)  Notwithstanding the foregoing, the Shareholder and the Acquiror
Stockholder, with the prior written approval of the Acquiror Board, may engage
in a Disposition of their respective shares of Acquiror Common Stock during the
Lock-Up Period; provided, that, such Disposition of their respective shares of
Acquiror Common Stock is made in a private resale to a bona fide investor, who
is an Accredited Investor or not a U.S. Person in reliance upon the exemption
from registration of their respective shares of Acquiror Common Stock afforded
either under Section 4(2) of the Securities Act, or Regulation S. Each of the
Shareholder and the Acquiror Stockholder represent and warrant to the other
party that in the case of an approved Disposition of their respective shares of
Acquiror Common Stock, the Shareholder and/or the Acquiror Stockholder, as the
case may be, shall obtain appropriate representations and warranties of the
purchaser with respect to such purchaser’s investment intent and its status as
an accredited investor or a non-U.S. Person, and its agreement to be bound by
the provisions of Section 4.2.5(d) of this Agreement.
 
(iii)  The Shareholder and the Acquiror Stockholder individually covenant and
agree that upon the expiration of the Lock-Up Period they shall not engage in a
Disposition, without the prior written approval of the Acquiror Board, of more
than 5% of their respective shares of Acquiror Common Stock in any one trading
day; provided, however, that any such Disposition of their respective shares of
Acquiror Common Stock by the Shareholder and the Acquiror Stockholder shall
remain at all times subject to applicable securities laws, including without
limitation the resale restrictions imposed by Rule 144 of the Securities Act.
 
(e)  Opinion. Neither the Shareholder nor the Acquiror Stockholder, will engage
in a Disposition of any or all of their respective shares of Acquiror Common
Stock pursuant to Regulation S, Regulation D or absent an effective registration
statement under the Securities Act and applicable state securities law covering
the disposition of their respective shares of Acquiror Common Stock, without
first providing the Acquiror with an opinion of counsel (which counsel and
opinion are reasonably satisfactory to the Acquiror) to the effect that such
transfer will be made in compliance with Regulation S, or Regulation D, as
applicable, or will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification
requirements of any applicable U.S. state securities laws.
 
(f)  Consent. The Shareholder and the Acquiror Stockholder understand and
acknowledge that the Acquiror may refuse to transfer their respective shares of
Acquiror Common Stock, unless the Shareholder and the Acquiror Stockholder
comply with this Section 4.2.5 and any other restrictions on transferability set
forth in Exhibits D and E. The Shareholder and the Acquiror Stockholder consent
to the Acquiror making a notation on its records or giving instructions to any
transfer agent of their respective shares of Acquiror Common Stock in order to
implement the restrictions on transfer of the Acquiror Shares.
 
      (h)  Resales under Rule 144. The parties hereto acknowledge and understand
that pursuant to the Securities Act and Rule 144, promulgated thereunder, for a
period of one year after the Closing of the transactions, the Acquiror
Stockholder and the Shareholder are not permitted to engage in the public resale
of shares of Acquiror Common Stock, unless such shares have been registered on a
registration statement filed under the Securities Act. Upon the expiration of
such one year period, such shares may be re-sold subject to applicable
securities laws, including without limitation the resale restrictions imposed by
Rule 144 of the Securities Act
 
SECTION V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
 
The Shareholder and each member of CMN Management, severally and not jointly,
represent and warrant to the Acquiror on behalf of the Company, as follows:
 
5.1  Organization and Qualification. (a) Each of the Acquired Companies is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, has all requisite authority and power (corporate
and other), governmental licenses, authorizations, consents and approvals to
carry on its business as presently conducted and to own, hold and operate its
properties and assets as now owned, held and operated by it, except where the
failure to be so organized, existing and in good standing or to have such
authority and power, governmental licenses, authorizations, consents or
approvals would not have a Material Adverse Effect. Each of the Acquired
Companies is duly qualified, licensed or domesticated as a foreign corporation
in good standing in each jurisdiction wherein the nature of its activities or
its properties owned, held or operated makes such qualification, licensing or
domestication necessary, except where the failure to be so duly qualified,
licensed or domesticated and in good standing would not have a Material Adverse
Effect. The Company Disclosure Schedule sets forth a true, complete and correct
list of each Acquired Company’s jurisdiction of organization and each other
jurisdiction in which such Acquired Company presently conducts its business or
owns, holds and operates its properties and assets.
 
(b) As of the completion of the Restructuring, (i) Huamei Information and the
Company Subsidiaries shall be duly organized, validly existing and in good
standing as joint venture companies under the laws of the People’s Republic of
China, and shall have all requisite authority and power (corporate and other),
governmental licenses, authorizations, consents and approvals to carry on their
respective businesses as presently conducted and to own, hold and operate its
properties and assets as well as its Company Subsidiaries as now owned, held and
operated by it, except where the failure to be so organized, existing and in
good standing or to have such authority and power, governmental licenses,
authorizations, consents or approvals would not have a Material Adverse Effect;
(ii) all registered capital and other capital contributions regarding Huamei
Information and the Company Subsidiaries shall have been duly paid up in
accordance with the relevant PRC regulations and requirements and all necessary
capital verification reports have been duly issued and not revoked.

5.2  Subsidiaries. Except as required by the Restructuring, no Acquired Company
owns, directly or indirectly, any equity or other ownership interest in any
corporation, partnership, joint venture or other entity or enterprise.
 
5.3  Organizational Documents. True, correct and complete copies of the
Organizational Documents of each Acquired Company have been delivered to the
Acquiror prior to the execution of this Agreement, and no action has been taken
to amend or repeal such Organizational Documents. No Acquired Company is in
violation or breach of any of the provisions of its Organizational Documents,
except for such violations or breaches as, would not have a Material Adverse
Effect. The Organizational Documents of the Acquired Companies are valid and
subsisting and have been approved by all applicable Governmental Authorities,
including, without limitation, the State Administration of Industry and Commerce
of the PRC and the Ministry of Foreign Trade and Economic Corporation/Ministry
of Commerce, or their respective delegated local authorities, which have
jurisdiction over the registration of the Acquired Companies.
 
5.4  Authorization. As of the completion of the Restructuring, the Company will
have all requisite authority and power (corporate and other), governmental
licenses, authorizations, consents and approvals to enter into this Agreement
and each of the Transaction Documents to which the Company is a party, to
consummate the transactions contemplated by this Agreement and each of the
Transaction Documents to which the Company is a party and to perform its
obligations under this Agreement and each of the Transaction Documents to which
the Company is a party. The execution, delivery and performance by the Company
of this Agreement and each of the Transaction Documents to which the Company is
a party and the recording of the transfer of the Shares have been duly
authorized by all necessary corporate action The execution, delivery and
performance by the Company of this Agreement and each of the Transaction
Documents to which the Company is a party and the recording of the transfer of
the Shares requires no authorization, consent, approval, license, exemption of
or filing or registration with any Governmental Authority or other Person other
than (a) such filings and mailings required by Section 14(f) of the Exchange
Act, Rule 14f-1 promulgated thereunder and any other policy or requirement of
the Commission imposed in connection therewith (including, without limitation,
any requirement arising from any comments of the Commission occasioned by the
filing of the Schedule 14(f) (the “Schedule 14(f) Filing”) and (b) such other
customary filings with the Commission for transactions of the type contemplated
by this Agreement.
 
5.5  No Violation. Neither the execution or delivery by the Company of this
Agreement or any Transaction Document to which the Company is a party, the
consummation or performance by the Company of the transactions contemplated
hereby or thereby, nor the Restructuring will, directly or indirectly, (a)
contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of any Acquired Company; (b) contravene, conflict with,
constitute a default (or an event or condition which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination or
acceleration of, or result in the imposition or creation of any Lien under, any
agreement or instrument to which any Acquired Company is a party or by which the
properties or assets of any Acquired Company are bound; (c) contravene, conflict
with, or result in a violation of, any Law or Order to which any Acquired
Company, or any of the properties or assets owned or used by any Acquired
Company, may be subject; or (d) contravene, conflict with, or result in a
violation of, the terms or requirements of, or give any Governmental Authority
the right to revoke, withdraw, suspend, cancel, terminate or modify, any
licenses, permits, authorizations, approvals, franchises or other rights held by
any Acquired Company or that otherwise relate to the business of, or any of the
properties or assets owned or used by, any Acquired Company, except, in the case
of clause (b), (c) or (d), for any such contraventions, conflicts, violations,
or other occurrences as would not have a Material Adverse Effect.
 
5.6  Binding Obligations. Assuming this Agreement and the Transaction Documents
have been duly and validly authorized, executed and delivered by the parties
thereto other than the Company, this Agreement has been, and as of the Closing,
each of the Transaction Documents to which the Company is a party will be, duly
authorized, executed and delivered by the Company and constitutes or will
constitute, as the case may be, the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as such enforcement is limited by general equitable principles, or
by bankruptcy, insolvency and other similar Laws affecting the enforcement of
creditors rights generally.
 
5.7  Capitalization and Related Matters.
 
5.7.1  Capitalization. The Company has issued 50,000 shares which constitutes
the Shares. There are no outstanding or authorized options, warrants, purchase
agreements, participation agreements, subscription rights, conversion rights,
exchange rights or other securities or contracts that could require the Company
to issue, sell or otherwise cause to become outstanding any of its authorized
but unissued shares of capital stock or any Equity Security or to create,
authorize, issue, sell or otherwise cause to become outstanding any new class of
capital stock. Other than the Organizational Documents of the Company, there are
no outstanding stockholders’ agreements, voting trusts or arrangements,
registration rights agreements or agreements containing registration rights,
rights of first refusal or other contracts pertaining to the capital stock of
the Company. The Shares are duly authorized, validly issued, fully paid and
nonassessable and have not been issued in violation of any preemptive or similar
rights of any Person or in violation of any Law.
 
5.7.2  No Redemption Requirements. There are no outstanding contractual
obligations (contingent or otherwise) of the Company to retire, repurchase,
redeem or otherwise acquire any outstanding shares of capital stock of, or other
ownership interests in, the Company or to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
other Person.
 
5.7.3  Subsidiaries. The capitalization of each Company Subsidiary as of the
completion of the Restructuring will be as set forth on Schedule 5.7.3 of the
Company Disclosure Schedule. The issued and outstanding shares of capital stock
of each Company Subsidiary set forth on such schedule have been duly authorized
and are validly issued and outstanding, fully paid and non-assessable, and
constitute all of the issued and outstanding capital stock of such Company
Subsidiary. As of the Completion of the Restructuring, all registered capital
and other capital contributions regarding the Acquired Companies have been duly
paid up in accordance with the relevant PRC regulations and requirements and all
necessary capital verification reports have been duly issued and not revoked or
withdrawn. As of the completion of the Restructuring, the owners of the shares
of each of the Company Subsidiaries set forth on Schedule 5.7.3 of the Company
Disclosure Schedule own, and have good, valid and marketable title to, all
shares of capital stock of such Company Subsidiaries, and all such equity
transfers and change in shareholders of each Company Subsidiary as a result of
the Restructuring shall have been duly registered with the appropriate
Administration for Industry and Commerce, as required. As of the completion of
the Restructuring, there will be no outstanding or authorized options, warrants,
purchase agreements, participation agreements, subscription rights, conversion
rights, exchange rights or other securities or contracts that could require any
of the Company Subsidiaries to issue, sell or otherwise cause to become
outstanding any of its respective authorized but unissued shares of capital
stock or Equity Security, or to create, authorize, issue, sell or otherwise
cause to become outstanding any new class of capital stock. Other than the
Organizational Documents, as of the completion of the Restructuring, there will
be no outstanding stockholders’ agreements, voting trusts or arrangements,
registration rights agreements or agreements containing registration rights,
rights of first refusal or other contracts pertaining to the capital stock of
any of the Company Subsidiaries. None of the outstanding shares of capital stock
of any of the Company Subsidiaries has been issued in violation of any rights of
any Person or in violation of any Law.
 
5.8  Financial Statements. (a) Attached as Schedule 5.8 to the Company
Disclosure Schedules will be two sets of the Company’s and the Company
Subsidiaries’ audited combined financial statements, including, in each case,
the notes thereto (the “Company Audited Financial Statements”). The Company
Audited Financial Statements (i) are in accordance with the books and records of
the Acquired Companies; (ii) present fairly the financial condition and the
results of operations, changes in stockholder’s equity and cash flow of the
Acquired Companies for the periods therein specified; and (iii) one set shall
have been prepared in accordance with Hong Kong GAAP for the year ended 31
December 2004 and the other set shall have been prepared in accordance with US
GAAP for the two years ended 31 December 2003 and 2004 applied on a consistent
basis during the periods concerned. Also attached as Schedule 5.8 (as may be
updated after the execution of this Agreement but prior to Closing) shall be
such unaudited interim financial statements and such pro-forma combined
financial statements as may be required pursuant to applicable SEC regulations
(“Company Unaudited Financial Statements”). Specifically, but not by way of
limitation, the Company audited balance sheets included in the Company Audited
Financial Statements disclose all of the debts, liabilities and obligations of
any nature (whether absolute, accrued, contingent or otherwise and whether due
or to become due) of the Acquired Companies for the periods therein specified
which must be disclosed on a balance sheet in accordance with US GAAP. The
Company Audited Financial Statements and the Company Unaudited Financial
Statements shall reflect the advertising and media network business segment
undertaken by Shareholder prior to the establishment of the Company
Subsidiaries. The Company Audited Financial Statements will fairly contain the
costs associated with operating the Company Subsidiaries and will have such
costs allocated as required under US GAAP and Hong Kong GAAP for “carve out”
financial statements.
 
(b) As at Closing, the Company’s unaudited management accounts prepared in
accordance with Hong Kong GAAP, shall reflect that the Company Subsidiaries are
indebted to the Shareholder in the amount of no more than RMB30 million (on a
U.S. $ equivalent as of the Closing), including all payables due to the
Shareholder and/or its affiliates. Such indebtedness shall exist as of the
Closing.
 
5.9  Shareholder. The Shareholder is the holder of 100% of the issued and
outstanding shares of Common Stock of the Company. Except as expressly provided
in this Agreement, no Person is entitled to any preemptive right, right of first
refusal or similar right as a result of the sale and purchase of the Shares or
otherwise. There is no voting trust, agreement or arrangement affecting the
exercise of the voting rights of the Shares.
 
5.10  Compliance with Laws. Except as disclosed in the Company Disclosure
Schedule, (i) the business and operations of each Acquired Company have been and
are being, (ii) as of the Restructuring the business and operations of each
Acquired Company shall be, and (iii) the Restructuring shall have been conducted
in accordance with all applicable Laws and Orders in all material respects,
except where the failure to so conduct in accordance with all such applicable
Laws and Orders would not have a Material Adverse Effect. No Acquired Company
has received notice of any violation (or any Proceeding involving an allegation
of any violation) of any applicable Law or Order by or affecting such Acquired
Company and, to the knowledge of the Shareholder and CMN Management, no
Proceeding involving an allegation of violation of any applicable Law or Order
is threatened or contemplated. No Acquired Company is subject to any obligation
or restriction of any kind or character, nor is there any event or circumstance
relating to any Acquired Company that materially and adversely affects in any
way its business, properties, assets or prospects or that prohibits the Company
from entering into this Agreement or would prevent or make burdensome its
performance of or compliance with all or any part of this Agreement or the
consummation of the transactions contemplated hereby.
 
5.11  Certain Proceedings. There is no pending Proceeding that has been
commenced against the Company, or any Company Subsidiary, and that challenges,
or may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated by this Agreement, and to
the knowledge of the Shareholder and CMN Management, no such Proceeding has been
threatened.
 
5.12  No Brokers or Finders. Except as disclosed in the Company Disclosure
Schedule, no Person has, or as a result of the transactions contemplated herein
will have, any right or valid claim against any Acquired Company for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, and the Shareholder will indemnify and hold the Acquiror harmless
against any liability or expense arising out of, or in connection with, any such
claim.
 
5.13  Employees.
 
5.13.1  Except as disclosed in the Company Disclosure Schedule, (a) each
Acquired Company is in full compliance with all Laws regarding employment,
wages, hours, benefits, the payment of Taxes, occupational safety and health, in
all material respects, except where the failure to so comply with all such Laws
would not have a Material Adverse Effect; and (b) no Acquired Company is liable
for the payment of any compensation, including severance payments or other
termination payments, damages, Taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the foregoing Laws
 
5.13.2  To the knowledge of the Shareholder and CMN Management , no Key Employee
is a party to, or is otherwise bound by, any contract (including any
confidentiality, non-competition or proprietary rights agreement) with any other
Person that in any way adversely affects or will materially affect (a) the
performance of his or her duties as a director, officer or employee of such
Acquired Company or (b) the ability of such Acquired Company to conduct its
business.
 
5.13.3  Each of the Key Employees and consultants to the Acquired Companies has
executed and delivered to such Acquired Company a confidentiality and
non-competition agreement and an employment agreement or consulting agreement,
as the case may be. To the knowledge of the Shareholder and CMN Management, no
Key Employee or consultant of any Acquired Company has excluded works or
inventions made prior to his or her employment with such Acquired Company from
his or her employment agreement or consulting agreement. As requested by the
Acquiror, the Company has delivered to the Acquiror the form of each
confidentiality and non-competition agreement, and the employment agreement, or
consulting agreement. To the knowledge of the Shareholder and CMN Management, no
Key Employee or consultant is in violation of his or her non-competition
agreement, or employment agreement, or consulting agreement, as the case may be,
and the Company will, and will cause each Acquired Subsidiary to, use its best
efforts to prevent any such violation.
 
5.14  Litigation; Orders. Except as would not have a Material Adverse Effect on
the operation of the Acquired Companies, (a) there is no Proceeding (whether
federal, state, local or foreign) pending or, to the knowledge of the
Shareholder and CMN Management, threatened against or affecting any Acquired
Company or any Acquired Company’s properties, assets, business or employees and
there is no fact that might result in or form the basis for any such Proceeding;
and (b) no Acquired Company is subject to any Orders.
 
5.15  Licenses. Each Acquired Company possesses from the appropriate
Governmental Authority and as of the Restructuring will possess, all licenses,
permits, authorizations, approvals, franchises and rights that are necessary for
such Acquired Company to engage in its business as currently conducted and to
permit such Acquired Company to own and use its properties and assets in the
manner in which it currently owns and uses such properties and assets
(collectively, “Company Permits”), except where the failure to possess all such
licenses, permits, authorizations, approvals, franchises would not have a
Material Adverse Effect. No Acquired Company has received notice from any
Governmental Authority or other Person that there is lacking any license,
permit, authorization, approval, franchise or right necessary for such Acquired
Company to engage in its business as currently conducted and to permit such
Acquired Company to own and use its properties and assets in the manner in which
it currently owns and uses such properties and assets. The Company Permits are
valid and in full force and effect. To the knowledge of the Shareholder and CMN
Management, no event has occurred or, circumstance exists that may (with or
without notice or lapse of time): (a) constitute or result, directly or
indirectly, in a violation of or a failure to comply with any Company Permit; or
(b) result, directly or indirectly, in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Company Permit. No
Acquired Company has received notice from any Governmental Authority or any
other Person regarding: (a) any actual, alleged, possible or potential
contravention of any Company Permit; or (b) any actual, proposed, possible or
potential revocation, withdrawal, suspension, cancellation, termination of, or
modification to, any Company Permit. All applications required to have been
filed for the renewal of such Company Permits have been duly filed on a timely
basis with the appropriate Persons, and all other filings required to have been
made with respect to such Company Permits have been duly made on a timely basis
with the appropriate Person, except where the failure to so make such filings
would not have a Material Adverse Effect. All Company Permits are renewable by
their terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine fees or similar charges, all of which, to the extent due, have been duly
paid. In particular,
 
1. All land premiums, levies, charges, duties, taxes and imposts payable by the
Company Subsidiaries in respect of the Company Permits have been duly paid and
no amount is due or payable by any Company Subsidiaries in respect of the
Company Permits;
 
2. All the necessary licenses, permits, consents and approvals for the user of
the Company Permits as they are being used by the Company Subsidiaries have been
duly obtained and are in full force, validity and effect; and
 
3. The Company Permits are used by the Company Subsidiaries for legal purposes
and the Company Subsidiaries have not violated any law of the PRC relating to
such Company Permits, except where the failure to so pay any such land premiums,
levies, charges, duties, taxes and imposts, to so obtain such licenses, permits,
consents and approvals, or to so comply with such laws of the PRC would not have
a Material Adverse Effect.
 
5.16  Interested Party Transactions. Except as disclosed in the Company
Disclosure Schedule no officer, director, or beneficial holder of 5% or more of
the stock of any Acquired Company or any Affiliate or “associate” (as such term
is defined in Rule 405 of the Commission under the Securities Act) of any such
Person has or has had, either directly or indirectly, (1) an interest in any
Person which (a) furnishes or sells services or products which are furnished or
sold or are proposed to be furnished or sold by any Acquired Company, or (b)
purchases from or sells or furnishes to, or proposes to purchase from, sell to
or furnish any Acquired Company any goods or services; or (2) a beneficial
interest in any contract or agreement to which any Acquired Company is a party
or by which it may be bound or affected. 
 
5.17  Title to and Condition of Properties. Neither the Company nor any of the
Acquired Companies owns any real property. Each Acquired Company holds under
valid leases or other rights to use all real property, plants, machinery,
equipment and other personal property necessary for the conduct of its business
as presently conducted, free and clear of all Liens, except Permitted Liens,
except where the failure to hold any such valid lease would not have a Material
Adverse Effect. With respect to any and all sub-leases of office space by any
Company Subsidiary, each such sub-lease has been properly authorized and
consented to as required in such master lease agreement and is currently valid
and in full force and effect. The material buildings, plants, machinery and
equipment necessary for the conduct of the business of each Acquired Company as
presently conducted are structurally sound, are in good operating condition and
repair and are adequate for the uses to which they are being put, and none of
such buildings, plants, machinery or equipment is in need of maintenance or
repairs, except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The buildings, plants, machinery, equipment and
other personal property of the Acquired Companies are sufficient for the conduct
of the Acquired Companies’ businesses at Closing.
 
5.18  Board Recommendation; Shareholder Approval. The Company Board, at a
meeting duly called and held, by the vote of at least a quorum present, has
determined that this Agreement and the transactions contemplated by this
Agreement, are advisable and in the best interests of the Shareholder and the
Company. On or prior to the Closing Date, the Shareholder, by written consent,
shall have approved this Agreement and the transactions contemplated by this
Agreement.
 
5.19  Absence of Undisclosed Liabilities. No Acquired Company has any debt,
obligation or liability, which would have a Material Adverse Effect, that has
not been disclosed on the Company Balance Sheet.
 
5.20  Changes. Except as set forth in the Company Disclosure Schedule or as
required by the Restructuring, no Acquired Company has, since December 31, 2004:
 
5.20.1  Ordinary Course of Business. Conducted its business or entered into any
transaction other than in the usual and ordinary course of business, except for
this Agreement.
 
5.20.2  Adverse Changes. Suffered or experienced any change in, or affecting,
its condition (financial or otherwise), properties, assets, liabilities,
business, operations, results of operations or prospects other than changes,
events or conditions in the usual and ordinary course of its business, none of
which would have a Material Adverse Effect;
 
5.20.3  Loans. Made any loans or advances to any Person other than travel
advances and reimbursement of expenses made to employees, officers and directors
in the ordinary course of business;
 
5.20.4  Liens. Created or permitted to exist any Lien on any material property
or asset of the Acquired Companies, other than Permitted Liens;
 
5.20.5  Capital Stock. Issued, sold, disposed of or encumbered, or authorized
the issuance, sale, disposition or encumbrance of, or granted or issued any
option to acquire any shares of its capital stock or any other of its securities
or any Equity Security, or altered the term of any of its outstanding securities
or made any change in its outstanding shares of capital stock or its
capitalization, whether by reason of reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
 
5.20.6  Dividends. Declared, set aside, made or paid any dividend or other
distribution to any of its stockholders;
 
5.20.7  Employees. Materially increased the compensation or other remuneration
or benefits payable or to become payable to any of its directors, executive
officers or employees, except for increases in the ordinary course of business,
or entered into any employment, severance or similar contracts with any of the
foregoing;
 
5.20.8  Company Benefit Plans. Adopted, amended or increased the payments to or
benefits under any Company Benefit Plan;
 
5.20.9  Material Company Contracts. Terminated, modified, failed to renew or
extend the term of any Material Company Contract;
 
5.20.10  Claims. Released, waived or cancelled any claims or rights relating to
or affecting such Acquired Company in excess of $100,000 in the aggregate or
instituted or settled any Proceeding involving in excess of $100,000 in the
aggregate;
 
5.20.11  Discharged Liabilities. Paid, discharged or satisfied any claim,
obligation or liability in excess of $100,000 in the aggregate, except for
liabilities incurred prior to the date of this Agreement in the ordinary course
of business;
 
5.20.12  Indebtedness. Created, incurred, assumed or otherwise become liable for
any Indebtedness in excess of $100,000 in the aggregate;
 
5.20.13  Guarantees. Guaranteed or endorsed in a material amount any obligation
or net worth of any Person;
 
5.20.14  Acquisitions. Acquired the capital stock or other securities or any
ownership interest in, or substantially all of the assets of, any other Person;
 
5.20.15  Accounting. Changed its method of accounting or the accounting
principles or practices utilized in the preparation of its financial statements,
other than as required by GAAP;
 
5.20.16  Intellectual Property. Granted any license, sublicense or other rights
of use with respect to any Intellectual Property of the Acquired Companies.
 
5.20.17  Agreements. Entered any agreement, or otherwise obligated itself, to do
any of the foregoing.
 
5.21  Material Company Contracts.
 
5.21.1  The Company has made available to the Acquiror, prior to the date of
this Agreement, true, correct and complete copies of each written Material
Company Contract, including each amendment, supplement and modification relating
thereto. A list of each such Material Company Contract is set forth on Schedule
5.21.1 to the Company Disclosure Schedule, including, without limitation, a list
of each Advertising Agency Contract to which a Company Subsidiary is a party.
Each Material Company Contract is a valid and binding agreement of the Acquired
Company that is party thereto, and is in full force and effect. 
 
5.21.2  As of the Restructuring, (a) no Acquired Company will be in breach or
default of any Material Company Contract to which it is a party and, no other
party to any Material Company Contract will be in breach or default thereof in
any material respect; (b) no event will have occurred or circumstance will exist
that (with or without notice or lapse of time), would (i) contravene, conflict
with or result in a violation or breach of, or become a default or event of
default under, any provision of any Material Company Contract or (ii) permit any
Acquired Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate or modify any Material Company Contract.; (c) no Acquired Company has
received notice of the pending or threatened cancellation, revocation or
termination of any Material Company Contract to which it is a party; and (d)
there are no renegotiations of, or attempts to renegotiate, or outstanding
rights to renegotiate any material terms of any Material Company Contract.
 
5.22  Tax Matters.
 
5.22.1   (a) All material Tax Returns required to be filed by or on behalf of
the Acquired Companies have been timely filed and all such Tax Returns were (at
the time they were filed) and are true, correct and complete in all material
respects; (b) all material Taxes of each Acquired Company (whether or not
reflected on any Tax Return) have been fully and timely paid, except those Taxes
which are presently being contested in good faith or for which an adequate
reserve for the payment of such Taxes has been established on the Company
Balance Sheet; (c) no waivers of statutes of limitation have been given or
requested with respect to any Acquired Company in connection with any material
Tax Returns covering such Acquired Company or with respect to any Taxes payable
by it; (d) no Governmental Authority in a jurisdiction where an Acquired Company
does not file Tax Returns has made a claim, assertion or threat to such Acquired
Company that such Acquired Company is or may be subject to taxation by such
jurisdiction; (e) each Acquired Company has duly and timely collected or
withheld, and paid over and reported to the appropriate Governmental Authority
all amounts required to be so collected or withheld and paid over for all
periods under all applicable Laws, except where the failure to so collect or
withhold would not have a Material Adverse Effect(f) there are no Liens with
respect to Taxes on any Acquired Company’s property or assets other than
Permitted Liens; (g) there are no Tax rulings, requests for rulings, or closing
agreements relating to any Acquired Company for any period (or portion of a
period) that would affect any period after the date hereof; and (h) any
adjustment of Taxes of an Acquired Company made by a Governmental Authority in
any examination that such Acquired Company is required to report to the
appropriate state, local or foreign taxing authorities has been reported, and
any additional Taxes due with respect thereto have been paid.
 
5.22.2  No Acquired Company is, or has ever been, a controlled foreign
corporation, as that term is defined in Section 957 of the Code and the Treasury
Regulations promulgated thereunder.
 
5.22.3  There is no pending Proceeding with respect to any Taxes of the Acquired
Companies, nor, to the knowledge of the Shareholder and CMN Management, is any
such Proceeding threatened. The Company has made available to the Acquiror,
prior to the date of this Agreement, true, correct and complete copies of all
material Tax Returns, examination reports and statements of deficiencies
assessed or asserted against or agreed to by the Acquired Companies since their
inception and any and all correspondence with respect to the foregoing.
 
5.22.4  The Company is not a party to any Tax allocation or sharing agreement.
 
5.22.5  Each Company Subsidiary has duly obtained required state and local tax
registration certificates. Each such certificate is valid and in full force and
effect.
 
5.23  Material Assets. The Company Audited Financial Statements reflect, the
material assets owned or leased by each Acquired Company and necessary for the
conduct of its business as presently conducted, and include all of the operating
assets of the Acquired Companies. The Acquired Companies have, and will continue
to have as of the completion of the Restructuring and upon consummation of the
transactions contemplated by this Agreement, good and marketable title to, or a
valid interest in, such assets, free and clear of all Liens, other than
Permitted Liens. Such assets have been owned by the Company through the date
reflected in the Company Audited Financial Statements, and have not been
disposed of since the date of the Company Audited Financial Statements. As of
the completion of the Restructuring, no Person other than the Acquiror will have
any contract, right or option to purchase or acquire any of such properties or
assets from the Acquired Companies. No Affiliate of any Acquired Company or the
Shareholder owns or otherwise has any interest in or right to use any assets
used or held for use in, or otherwise arising from or relating to, the business
of the Acquired Companies. As of the completion of the Restructuring, all of the
business, assets, rights and interests in relation to the advertising and media
network business currently carried out by the Company Subsidiaries as of the
date of signing this Agreement will be owned by the Acquired Companies.
 
5.24  Insurance Coverage. None of the Acquired Companies maintain any insurance
policy on their properties or assets.
 
5.25  Intellectual Property. Except as disclosed in the Company Disclosure
Schedule, (a) each Acquired Company owns, licenses or otherwise has the legal
right to use all Intellectual Property for its business as currently conducted;
and (b) there are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is any Acquired Company bound by or a party to
any options, licenses or agreements of any kind with respect to the Intellectual
Property of any other Person other than licenses or agreements arising from the
purchase of “off the shelf” or standard products. Except as would not have a
Material Adverse Effect, each Acquired Company’s Intellectual Property is in
compliance will all applicable legal requirements in all material respects. No
Intellectual Property of any Acquired Company has been or is now involved in any
dispute, opposition, invalidation or cancellation proceeding, and to the
knowledge of the Shareholder and CMN Management, no such action has been
threatened. No Intellectual Property, wherever situated, of any Acquired
Company, is infringed, or has been challenged or, to the knowledge of the
Shareholder and CMN Management , threatened in any way, and no Intellectual
Property of any Acquired Company interferes with or is alleged to infringe or
interfere with the Intellectual Property of any other Person. Except as would
not have a Material Adverse Effect. No Acquired Company has taken any action
that would result in the voiding or invalidation of any of its Intellectual
Property. No Acquired Company is aware that any of its employees, officers or
consultants is obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement, or subject to any Order, that
would interfere with their duties to the Acquired Companies or that would
conflict with the business of the Acquired Companies as currently conducted. It
is not necessary for any Acquired Company to utilize in its business any
inventions, trade secrets or proprietary information of any of its officers,
employees, consultants or persons it currently intends to hire made prior to
their employment with any such Acquired Company, except for inventions, trade
secrets or proprietary information that have been assigned to such Acquired
Company.
 
5.26  Employee Benefits.
 
5.26.1  The Company has made available to the Acquiror, prior to the date of
this Agreement, copies of each written Company Benefit Plan and any related
agreements and other contracts.
 
5.26.2  Except as disclosed in the Company Disclosure Schedule and would not
have a Material Adverse Effect, (a) all Company Benefit Plans have been
established, maintained and operated in accordance with their terms and the
requirements of applicable Law, have been maintained in good standing with
applicable Government Authorities in all material respects, and may by their
terms be amended and/or terminated at any time to the greatest extent permitted
by applicable Law; (b) all Company Subsidiaries have obtained social security
registration in respect of its employees and have punctually paid all social
security payments and made all social security filings as required by relevant
laws and regulations of the People’s Republic of China in all material respects;
(c) no Company Subsidiary has failed to implement, or make required
contributions to its Company Benefit Plans as required by relevant PRC laws and
local regulations; and (d) no Company Subsidiary has any outstanding
administrative penalties and late payment interest for failure to form and
contribute to such Company Benefit Plans. No event has occurred and, to the
knowledge of the Shareholder and CMN Management, there does not now exist any
condition or set of circumstances, that could subject any Acquired Company to
any liability arising under any applicable Law, or under any indemnity agreement
to which any Acquired Company is a party, excluding liability for benefit claims
and funding obligations payable in the ordinary course.
 
5.26.3  Except as would not have a Material Adverse Effect, there are no
outstanding or unpaid severance or employee-related obligations or amounts due
to employees or former employees of any Acquired Company.
 
5.26.4  Neither the consummation of the transactions contemplated hereby alone,
nor in combination with another event, with respect to each director, officer,
employee and consultant of the Acquired Companies, will not result in (a) any
payment (including, without limitation, severance, unemployment compensation or
bonus payments) becoming due from any Acquired Company or under any Company
Benefit Plan, (b) any increase in the amount of compensation or benefits payable
to any such individual or (c) any acceleration of the vesting or timing of
payment of benefits or compensation payable to any such individual. No Company
Benefit Plan provides benefits or payments contingent upon, triggered by, or
increased as a result of a change in the ownership or effective control of the
Company.
 
5.27  Receivables and Payables. All accounts and notes receivable of each
Acquired Company as of the date hereof have arisen in the ordinary course of
business, represent valid obligations to such Acquired Company arising from bona
fide transactions in the ordinary course of business and, are not subject to
claims or set-off or other defenses or counterclaims. All accounts and notes
payable by each Acquired Company as of the date hereof arose in bona fide
transactions in the ordinary course of business. All items which are required by
the Hong Kong and US GAAP to be reflected as receivables and payables in the
Company Audited Financial Statements and on the books and records of each
Acquired Company are so reflected and have been recorded in accordance with GAAP
in a manner consistent with past practice.
 
5.28  Foreign Corrupt Practices Act. No Acquired Company, nor any director,
officer, Key Employee, or other Person associated with or acting on behalf of
any Acquired Company, has used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; made any direct or indirect unlawful payment to any
Governmental Authority from corporate funds; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment in connection with the
operations of any Acquired Company. No Acquired Company, nor any director,
officer or Key Employee of such Acquired Company has committed any acts or
omissions which would constitute a breach of relevant PRC criminal laws,
including but not limited to corruption laws.
 
5.29  Money Laundering Laws. The operations of the Acquired Companies are and
have been conducted at all times in compliance with laundering statutes in all
applicable PRC jurisdictions, the rules and regulations thereunder and any
related or similar rules, regulations or guidelines, issued, administered or
enforced by any Governmental Authority (collectively, the “Money Laundering
Laws”) and no Proceeding involving any Acquired Company with respect to the
Money Laundering Laws is pending or, to the knowledge of the Shareholder and CMN
Management, threatened.
 
5.30  Governmental Inquiry. Neither the Company, nor any Acquired Company has
received any material written inspection report, questionnaire, inquiry, demand
or request for information from a Governmental Authority.
 
5.31  Customers. Set forth in the Company Disclosure Schedules is a true,
correct and complete list, for each of the three (3) years prior to the date
hereof, of the Company’s top 10 customers, based on the amount of the Company’s
revenue generated from each such customer in each such year. All services
necessary for the conduct of each Acquired Company’s business as presently
conducted may be obtained from readily available alternate sources on terms and
conditions comparable to those presently available to such Acquired Company.
There exists no actual or, to the knowledge of the Shareholder and CMN
Management threatened, termination, cancellation or material limitation of, or
any material change in, the business relationship of any Acquired Company with
any such customer or suppliers. There are no pending material disputes or
controversies between any customer or supplier of any Acquired Company and such
Acquired Company. No customer of any Acquired Company has any right to any
credit or refund for products sold or services rendered or to be rendered by the
Company pursuant to any contract or practice of the applicable Acquired Company
other than pursuant to the normal course return policy of such Acquired
Company. 
 
SECTION VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
 
The Acquiror represents and warrants to the Shareholder, the Company and CMN
Management as follows:
 
6.1  Organization and Good Standing.
 
6.1.1  The Acquiror is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under applicable Contracts. The Acquiror is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction where such qualification is required.
 
6.1.2  The Acquiror has delivered to the Company and the Shareholder complete
and correct copies of the Acquiror’s Organizational Documents as currently in
effect, and such Organizational Documents have not been amended, corrected,
restated or superseded in any way. The Acquiror is not in violation, nor has it
taken any action in violation, of any provisions of its Organizational
Documents. The Acquiror has delivered to the Company and the Shareholder minutes
of all of The Acquiror’s board of directors and stockholders meetings, all of
which are complete and accurate as of the date of this Agreement and as of the
Closing Date.
 
6.1.3  The Acquiror has delivered to the Company and the Shareholder complete
and correct copies of the Organizational Documents of ABCI Holdings, Inc., a
Delaware corporation (“ABCI”), as in effect as of the date of the merger between
the Acquiror and ABCI (the “ABCI Merger”). ABCI took no action in violation of
any provisions of its Organizational Documents in consummating either the ABCI
Merger, or any transactions incident to the ABCI Merger. The Acquiror has
delivered to the Company and the Shareholder minutes of all of ABCI’s board of
directors and stockholders meetings, all of which were complete and accurate as
of the date of the ABCI Merger.
 
6.2  Authority; No Conflict.
 
6.2.1  This Agreement constitutes the legal, valid, and binding obligation of
the Acquiror, enforceable against the Acquiror in accordance with its terms.
Upon the execution and delivery of this Agreement b this Agreement will
constitute the legal, valid, and binding obligations of the Acquiror,
enforceable against the Acquiror in accordance with their respective terms. The
Acquiror has the absolute and unrestricted right, power, authority, and capacity
to execute and deliver this Agreement and the Metaphor Closing Documents and to
perform its obligations under this Agreement and the Metaphor Closing Documents.
 
6.2.2  This Agreement constitutes the legal, valid, and binding obligation of
the Acquiror, enforceable against the Acquiror in accordance with its terms.
 
6.2.3  Except as set forth in the Metaphor Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation or performance of
the transactions contemplated by this Agreement will, directly or indirectly
(with or without notice or lapse of time):
 
(a)  contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of the Acquiror, or (B) any resolution adopted by
the board of directors or the stockholders of the Acquiror;
 
(b)  contravene, conflict with, or result in a violation of, or give any
Governmental Authority or other Person the right to challenge any of
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any legal requirement, Governmental Authorization, or any
Order to which the Acquiror, or any of the assets owned or used by the Acquiror,
may be subject;
 
(c)  cause the Acquiror to become subject to, or to become liable for the
payment of, any Tax;
 
(d)  cause any of the assets owned by the Acquiror to be reassessed or revalued
by any taxing authority or other Governmental Authority;
 
(e)  contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Contract; or
 
(f)  result in the imposition or creation of any Encumbrance upon or with
respect to any of the assets owned or used by the Acquiror.
 
6.2.4  Except as set forth in the Metaphor Disclosure Schedule, the Acquiror is
not or will not be required to give any notice to or obtain any consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the transactions contemplated herein.
 
6.3  Capitalization; Shareholders.
 
6.3.1  The authorized equity securities of the Acquiror consists of: (1)
100,000,000 shares of Acquiror Common Stock of which 509,705 shares are issued
and outstanding, and (ii) 10,000,000 shares of preferred stock, none of which is
issued or outstanding. All of the outstanding shares of Acquiror Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments relating to the issuance, sale, or transfer of
any Acquiror Common Stock or other securities of the Acquiror. None of the
outstanding equity securities or other securities of the Acquiror was issued in
violation of the Securities Act or any other legal requirement. The Acquiror
does not own, or have any contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
 
6.3.2  The Acquiror has delivered to the Shareholder, and will update at
Closing, a complete and correct list of all the shareholders of the Acquiror,
including the number of shares of Acquiror Common Stock each shareholder owns.
As of the date of this Agreement, as well as on the Closing Date, there are, and
will be, at least 100 round-lot shareholders of the Acquiror. A “round-lot
shareholder” is a shareholder owning at least 100 shares of the Acquiror.
 
6.4  Financial Statements; Securities and Exchange Commission Filings.
 
6.4.1  The Acquiror has made available to the Company and the Shareholder each
statement, report, registration statement (with the prospectus in the form filed
pursuant to Rule 424(b) of the Securities Act), definitive proxy statement, and
other reports filed with the SEC by the Acquiror prior to the date of this
Agreement, and will furnish to the Company and the Shareholder, at the time of
filing with the SEC, true and complete copies of any additional documents filed
with the SEC by the Acquiror after the date hereof and prior to the Closing
(collectively, the "SEC Documents"). As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and the rules promulgated thereunder,
except as modified by subsequent reports. All documents required to be filed as
exhibits to the SEC Documents have been so filed, and all material contracts so
filed as exhibits are in full force and effect, except those which have expired
in accordance with their terms, and neither the Acquiror nor any of its
Affiliates is in material default thereof. None of the SEC Documents, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
 
6.4.2  The financial statements of the Acquiror, including the notes thereto,
included in the SEC Documents (the "Acquiror Financial Statements") were
complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with GAAP and Regulation S-X (17 CFR Part 210), applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in quarterly reports on Form 10-QSB, as permitted by Form
10-QSB of the SEC). The Acquiror Financial Statements and the Balance Sheet
fairly present the financial condition and operating results of Acquiror at the
dates and during the periods indicated therein (subject, in the case of
unaudited statements, o normal year-end adjustments).Books and Records
 
6.4.3  The books of account, minute books, stock record books, and other records
of Acquiror, all of which have been made available to the Purchaser, are
complete and correct and have been maintained in accordance with sound business
practices and the requirements of Section 13(b)(2) of the Exchange Act,
including the maintenance of an adequate system of internal controls. The minute
book of Acquiror contains accurate and complete records of all meetings held of,
and corporate action taken by, the stockholders, the boards of directors, and
committees of the boards of directors of Acquiror, and no meeting of any such
stockholders, board of directors, or committee has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of Acquiror.
 
6.5  Assets; Accounts Receivable. Except as set forth in the Metaphor Disclosure
Schedule, Acquiror owns no direct or indirect interest in any properties or
assets (whether real, personal, or mixed and whether tangible or intangible).
All accounts receivable, if any, of Acquiror on the accounting records of
Acquiror as of the Closing Date (collectively, the “Accounts Receivable”)
represent or will represent valid obligations arising from the ordinary course
of business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the accounting records of Acquiror as of the Closing Date
(which reserves are adequate and calculated consistent with past practice).
There is no contest, claim, or right of set-off under any Contract with any
obligor of an Accounts Receivable relating to the amount or validity of such
Accounts Receivable.
 
6.6  No Undisclosed Liabilities; Liabilities as of the Closing Date. Acquiror
has no liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Balance Sheet and current
liabilities incurred in the ordinary course of business since the date thereof.
 
6.7  Taxes.
 
6.7.1   Acquiror has filed or caused to be filed on a timely basis all Tax
Returns that are or were required to be filed by or with respect to either of
them, either separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. Acquiror has delivered the Company and
Shareholders copies of, and the Metaphor Disclosure Statement contains a
complete and accurate list of, all such Tax Returns. Acquiror has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by Acquiror, except such Taxes, if any, as are listed in the Metaphor
Disclosure Schedule and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Metaphor Disclosure Statement.
 
6.7.2  The United States federal and state income Tax Returns of Acquiror
subject to such Taxes have not been audited by the IRS or relevant state tax
authorities. Except as described in the Metaphor Disclosure Schedule, Acquiror
has not given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of Acquiror, or for which Acquiror
may be liable.
 
6.7.3  The charges, accruals, and reserves with respect to Taxes on the
respective books of Acquiror are adequate (determined in accordance with GAAP)
and are at least equal to Acquiror’s liability for Taxes. There exists no
proposed tax assessment against Acquiror. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or
assets held, acquired, or to be acquired by Acquiror. All Taxes that Acquiror is
or was required to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Authority or
other Person.
 
6.7.4  All Tax Returns filed by Acquiror are true, correct, and complete. There
is no tax sharing agreement that will require any payment by Acquiror after the
date of this Agreement. 
 
6.8  No Material Adverse Change. Since the date of the Balance Sheet, there has
not been any material adverse change in the business, operations, properties,
prospects, assets, or condition of Metaphor, and no event has occurred or
circumstance exists that may result in such a material adverse change.
 
6.9  Securities Laws. Assuming the accuracy of the representations and
warranties of the Shareholder and each member of CMN Management contained in
Section 4 and Exhibits D and E, the issuance of the Acquiror Shares pursuant to
this Agreement are and will be (a) exempt from the registration and prospectus
delivery requirements of the Securities Act, (b) have been registered or
qualified (or are exempt from registration and qualification) under the
registration permit or qualification requirements of all applicable state
securities laws, and (c) accomplished in conformity with all other applicable
federal and state securities laws.
 
6.10  Employee Benefits; Labor Matters.
 
6.10.1  Except as disclosed in the Metaphor Disclosure Schedule, neither
Acquiror has never sponsored, maintained, or participated in any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, employee pension benefit plans, stock or stock-related awards, welfare
benefits, fringe benefits or other employee benefits or remuneration of any
kind, whether written, unwritten or otherwise, funded or unfunded, including
each “employee benefit plan,” within the meaning of Section 3(3) of ERISA for
the benefit of any employee. Except as set forth in the Metaphor Disclosure
Schedule, Acquiror has no employees, consultants, or independent contractors.
The Metaphor Disclosure Schedule sets forth any compensation, accrued time off,
retention bonus, or transaction bonus payable to any employee, consultant, or
independent contractor of Acquiror.
 
6.10.2  There are no collective bargaining agreements to which either Acquiror
was a party or was subject to. Acquiror complied with all applicable then
current laws respecting employment and employment practices, terms and
conditions of employment and wages and hour. Acquiror has not received written
notice of any unfair labor practices complaint pending against them before the
National Labor Relations Board.
 
6.11  Compliance With Legal Requirements; Governmental Authorizations.
 
6.11.1  Except as set forth in the Metaphor Disclosure Schedule:
 
(a)   Acquiror is, and Acquiror at all times since December 31, 1996 have been,
in full compliance with each Legal Requirement that is or was applicable to them
or to the conduct or operation of their business or the ownership or use of any
of their assets;
 
(b)  no event has occurred or circumstance exists that (with or without notice
or lapse of time):
 

(A) may constitute or result in a violation by Acquiror of, or a failure on the
part of Acquiror to comply with, any Legal Requirement; or
 
(B) may give rise to any obligation on the part of Acquiror to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature; and
 
 
(c)  Acquiror has not received any notice or other communication (whether oral
or written) from any Governmental Body or any other Person regarding:
 

(A) any actual, alleged, possible, or potential violation of, or failure to
comply with, any Legal Requirement or Government Authorization; or
 
(B) any actual, alleged, possible, or potential obligation on the part of
Acquiror to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
 
 
6.12  Legal Proceedings; Orders.
 
6.12.1  There is no pending Proceeding: (i) that has been commenced by or
against the Acquiror, or that otherwise relates to or may affect the business
of, or any of the assets owned or used by, Acquiror; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated by this Agreement. To the
knowledge of Acquiror, (1) no such Proceeding has been Threatened, and (2) no
event has occurred or circumstance exists that may give rise to or serve as a
basis for the commencement of any such Proceeding.
 
6.12.2   Acquiror is, and at all times Acquiror has been, in full compliance
with all of the terms and requirements of each Order to which it, or any of the
assets owned or used by it, is or has been subject.
 
6.13  .No Brokers or Finders. Except as disclosed in the Metaphor Disclosure
Schedules, no Person has, or as a result of the transactions contemplated herein
will have, any right or valid claim against any Acquiror Company for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, and the Acquiror will indemnify and hold the Company harmless against
any liability or expense arising out of, or in connection with, any such claim.
 
6.14  Absence of Certain Changes and Events. Except as set forth in the Metaphor
Disclosure Schedule, since December 31, 2004, Acquiror has conducted its
business only in the Ordinary Course of Business and there has not been any of
the following:
 
6.14.1  change in Acquiror’s authorized or issued capital stock; grant of any
stock option or right to purchase shares of capital stock of Acquiror; issuance
of any security convertible into such capital stock; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by Acquiror of
any shares of any such capital stock; or declaration or payment of any dividend
or other distribution or payment in respect of shares of capital stock;
 
6.14.2  amendment to the Organizational Documents of Acquiror;
 
6.14.3  payment or increase by Acquiror of any bonuses, salaries, or other
compensation to any stockholder, director, officer, employee, or independent
contractor, or entry into any employment, severance, or similar Contract with
any director, officer, employee, or independent contractor;
 
6.14.4  damage to or destruction or loss of any asset or property of Acquiror,
whether or not covered by insurance, materially and adversely affecting the
properties, assets, business, financial condition, or prospects of Acquiror,
taken as a whole;
 
6.14.5  entry into, termination of, or receipt of notice of termination of any
Contract or transaction;
 
6.14.6  sale, lease, or other disposition of any asset or property of Acquiror
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of Acquiror, including the sale, lease, or other
disposition of any of the Intellectual Property Assets;
 
6.14.7  cancellation or waiver of any claims or rights with a value to Acquiror;
 
6.14.8  material change in the accounting methods used by Acquiror; or
 
6.14.9  agreement, whether oral or written, by Acquiror to do any of the
foregoing.
 
6.15  Contracts; No Defaults.
 
6.15.1  The Metaphor Disclosure Schedule contains a complete and accurate list,
and Metaphor has delivered to the Company and the Shareholder true and complete
copies, of each Material Acquiror Contract entered into by Acquiror, including
without limitation, each of the following:
 
(a)  each joint venture, partnership, and other agreement (however named)
involving a sharing of profits, losses, costs, or liabilities by Acquiror with
any other Person;
 
(b)  each agreement containing covenants that in any way purport to restrict the
business activity of Acquiror or limit the freedom of Acquiror to engage in any
line of business or to compete with any Person;
 
(c)  each power of attorney that is currently effective and outstanding;
 
(d)  each agreement for capital expenditures by Acquiror;
 
(e)  each written warranty, guaranty, and or other similar undertaking with
respect to contractual performance extended by Acquiror; and
 
(f)  each amendment, supplement, and modification (whether oral or written) in
respect of any of the foregoing.

 
The Metaphor Disclosure Schedule sets forth reasonably complete details
concerning the terms of such Material Acquiror Contracts, including the parties
to the Material Acquiror Contracts, and the amount of the remaining commitment
of Metaphor under the Material Acquiror Contracts.
 
6.15.2  Except as set forth in the Metaphor Disclosure Schedule, each Contract
or other agreement identified or required to be identified in the Metaphor
Disclosure Schedule is in full force and effect and is valid and enforceable in
accordance with its terms.
 
6.15.3  Except as set forth in the Metaphor Disclosure Schedule:
 
(a)  Acquiror is in full compliance with all applicable terms and requirements
of each Contract under which Acquiror has or had any obligation or liability or
by which Acquiror is bound;
 
(b)  each other Person that has or had any obligation or liability under any
Contract under which Acquiror has or had any rights is in full compliance with
all applicable terms and requirements of such Contract;
 
(c)  no event has occurred or circumstance exists that (with or without notice
or lapse of time) may contravene, conflict with, or result in a violation or
breach of, or give Acquiror or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Contract entered into by Acquiror; and
 
(d)  Acquiror has not given to or received from any other Person any notice or
other communication (whether oral or written) regarding any actual, alleged,
possible, or potential violation or breach of, or default under, any Contract.
 
6.15.4  Except as set forth in the Metaphor Disclosure Schedule, there are no
renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate
any material amounts paid or payable to or by Acquiror under current or
completed Contracts with any Person, and no such Person has made written demand
for such renegotiation.
 
6.16  Insurance.
 
6.16.1  Acquiror has delivered to the Company and the Shareholder true and
complete copies of all policies of insurance to which Acquiror is a party or
under which Acquiror, or any director or officer of Acquiror is or has been
covered with respect to matters related to Acquiror at any time;
 
6.16.2  Acquiror is not: (i) a Party to any self-insurance arrangement by or
affecting Acquiror, including any reserves established thereunder; (ii) a party
to any contract or arrangement, other than a policy of insurance, for the
transfer or sharing of any risk by Acquiror; and (iii) obligated to third
parties with respect to insurance (including such obligations under leases and
service agreements).
 
6.17  Environmental Matters. Except as set forth in the Metaphor Disclosure
Schedule:
 
6.17.1  Acquiror is, and Acquiror at all times has been, in full compliance
with, and have not been and are not in violation of or liable under, any
Environmental Law. Acquiror has no basis to expect, nor has it or any other
Person for whose conduct it is or may be held to be responsible received, any
actual or Threatened order, notice, or other communication from any Governmental
Body or Person of any actual or potential violation or failure to comply with
any Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any properties or assets (whether real, personal, or mixed) in which Acquiror
has had an interest, or with respect to any property at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by Acquiror, or any other Person for whose conduct they are or may be
held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
 
6.17.2  There are no pending or, to the knowledge of Acquiror, Threatened
claims, Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any properties and assets
(whether real, personal, or mixed) in which Acquiror has or had an interest.
 
6.17.3  Acquiror has no basis to expect to receive, nor has it or any other
Person for whose conduct it is or may be held responsible received, any
citation, directive, inquiry, notice, Order, summons, warning, or other
communication that relates to Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any properties or
assets (whether real, personal, or mixed) in which Acquiror had an interest, or
with respect to any property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by Acquiror, or
any other Person for whose conduct Acquiror is or may be held responsible, have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
 
6.18  Disclosure.
 
6.18.1  No representation or warranty of Acquiror in this Agreement and no
statement in the Metaphor Disclosure Schedule omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
 
6.18.2  No notice given pursuant to Section 14.4 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
 
6.18.3  There is no fact known to Acquiror that has specific application to
Acquiror (other than general economic or industry conditions) and that
materially adversely affects the assets, business, prospects, financial
condition, or results of operations of Acquiror that has not been set forth in
this Agreement or the Metaphor Disclosure Schedule.
 
6.19  Board Recommendation. The Acquiror Board, at a meeting duly called and
held, has determined that this Agreement and the transactions contemplated by
this Agreement are advisable and in the best interests of the Acquiror’s
stockholders and has duly authorized this Agreement and the transactions
contemplated by this Agreement.
 
SECTION VII
REPRESENTATIONS AND WARRANTIES OF THE
ACQUIROR STOCKHOLDER
 
The Acquiror Stockholder represents and warrants to the Acquiror, the
Shareholder, the Company and CMN Management as follows:
 
7.1  Authority. The Acquiror Stockholder has the right, power, authority and
capacity to execute and deliver this Agreement and each of the Transaction
Documents, to which it is a party, to consummate the transactions contemplated
by this Agreement and each of the Transaction Documents, to which it is a party,
and to perform its obligations under this Agreement and each of the Transaction
Documents, to which it is a party. This Agreement has been, and each of the
Transaction Documents will be, duly and validly authorized and approved,
executed and delivered by the Acquiror Stockholder.
 
7.2  No Violation. Neither the execution or delivery by the Acquiror
Stockholder, nor the consummation or performance by the Acquiror Stockholder of
the transactions contemplated hereby or thereby will, directly or indirectly,
(a) contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of the Acquiror Stockholder; (b) contravene, conflict
with, constitute a default (or an event or condition which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
or acceleration of, or result in the imposition or creation of any Lien under,
any agreement or instrument to which the Acquiror Stockholder is a party or by
which the properties or assets of the Acquiror Stockholder are bound; (c)
contravene, conflict with, or result in a violation of, any Law or Order to
which the Acquiror Stockholder, or any of the properties or assets owned or used
by the Acquiror Stockholder, may be subject; or (d) contravene, conflict with,
or result in a violation of, the terms or requirements of, or give any
Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate
or modify, any licenses, permits, authorizations, approvals, franchises or other
rights held by the Acquiror Stockholder or that otherwise relate to the business
of, or any of the properties or assets owned or used by, the Acquiror
Stockholder, except, in the case of clause (b), (c) or (d), for any such
contraventions, conflicts, violations, or other occurrences as would not have a
Material Adverse Effect.
 
7.3  Binding Obligation. Assuming this Agreement and the Transaction Documents
have been duly and validly authorized, executed and delivered by the parties
thereto other than the Acquiror Stockholder, this Agreement is, and as of the
Closing each of the Transaction Documents, to which the Acquiror Stockholder is
a party, will have been, duly authorized, executed and delivered by the Acquiror
Stockholder and constitute or will constitute the legal, valid and binding
obligation of the Acquiror Stockholder, enforceable against the Acquiror
Stockholder in accordance with their respective terms, except as such
enforcement is limited by general equitable principles, or by bankruptcy,
insolvency and other similar Laws affecting the enforcement of creditors rights
generally.
 
SECTION VIII
COVENANTS OF THE COMPANY, THE SHAREHOLDER
AND CMN MANAGEMENT
 
8.1  Access and Investigation. Subject to the confidentiality provisions set
forth in Section 14.3 hereof, and the reasonable availability of Company
personnel, between the date of this Agreement and the Closing Date, the Company
will, and will cause each Company Subsidiary to, (a) afford the Acquiror, the
Acquiror Stockholder, and their respective agents, advisors and attorneys during
normal business hours, all reasonable access to the Company’s and the Company
Subsidiaries’ personnel, properties, contracts, books and records, and other
documents and data, (b) furnish the Acquiror, the Acquiror Stockholder, and
their respective agents, advisors and attorneys with copies of all such
contracts, books and records, and other existing documents and data as the
Acquiror may reasonably request, and (c) furnish the Acquiror, the Acquiror
Stockholder, and their respective and its agents, advisors and attorneys with
such additional financial, operating, and other data and information as the
Acquiror or the Acquiror Stockholder, may reasonably request in relation to the
operation, business and financial condition of the Company and the Company
Subsidiaries.
 
8.2  Operation of the Business of the Company and the Company Subsidiaries.
 
8.2.1  Except as required by the Restructuring, between the date of this
Agreement and the Closing Date, the Company will, and will cause each Company
Subsidiary to:
 
(a)  conduct its business only in the ordinary course of business;
 
(b)  use its best efforts to preserve intact its current business organization
and business relationships, including, without limitation, relationships with
suppliers, customers, landlords, creditors, officers, employees and agents;
 
(c)  obtain the prior written consent of the Acquiror prior to taking any action
of the type specified in Section 5.20 or entering into any Material Company
Contract;
 
(d)  confer with the Acquiror concerning operational matters of a material
nature; and
 
(e)  otherwise report periodically to the Acquiror concerning the status of its
business, operations, and finances.
 
8.2.2  Notwithstanding the foregoing, between the date of this Agreement and the
Closing Date, except as required by the Restructuring, the Company will not, and
will cause each Company Subsidiary not to, directly or indirectly, without the
prior written consent of the Acquiror, engage in any transaction with, or enter
into any agreement with any officer, director or stockholder of the Company or
any Company Subsidiary, or any Affiliate or “associate” (as such term is defined
in Rule 405 of the Commission under the Securities Act) of any such Person with
a transaction or agreement value in excess of US$10,000.
 
8.3  No Transfers of Capital Stock.
 
8.3.1  Except as required by the Restructuring, between the date of this
Agreement and the Closing Date, the Shareholder shall not assign, transfer,
mortgage, pledge or otherwise dispose of any or all of the Shares (or any
interest therein) or grant any Person the option or right to acquire such Shares
(or any interest therein).
 
8.3.2  Except as required by the Restructuring, between the date of this
Agreement and the Closing Date, the Company shall not, and shall cause each
Company Subsidiary not to, assign, transfer, mortgage, pledge or otherwise
dispose of any or all of the capital stock of any Acquired Company (or any
interest therein) or grant any Person the option or right to acquire the capital
stock of any Acquired Company (or any interest therein).
 
8.4  Required Filings and Approvals.
 
8.4.1  As promptly as practicable after the date of this Agreement, the Company
will, and will cause each Company Subsidiary to, make all filings required to be
made by it in order to consummate the transactions contemplated by this
Agreement, if applicable. Between the date of this Agreement and the Closing
Date, the Company will, and will cause each Company Subsidiary to, (a) cooperate
with the Acquiror with respect to all filings that the Acquiror elects to make
or is required to make in connection with the transactions contemplated by this
Agreement, and (b) cooperate with the Acquiror in obtaining any consents or
approvals required to be obtained by the Acquiror in connection herewith.
 
8.4.2  Without limiting the foregoing, the Company and the Shareholder shall
promptly furnish to the Acquiror any information reasonably requested by the
Acquiror in connection with the preparation, filing and mailing of the Schedule
14(f) Filing, including, without limitation, information concerning the Acquired
Companies, the Shareholder and the Company Nominees. The Shareholder and CMN
Management, severally and not jointly, represent and warrant to the Acquiror
that the information supplied by the Company for inclusion in the Schedule 14(f)
Filing will not, on the date the Schedule 14(f) Filing is filed with the
Commission or first mailed to the stockholders of the Acquiror, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not false or misleading. If, at any time prior to
the Closing Date, any information should be discovered by the Company, the
Shareholder or any member of CMN Management which should be set forth in an
amendment to the Schedule 14(f) Filing so that such Schedule 14(f) Filing would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the Shareholder or CMN Management,
as the case may be, shall promptly notify the Acquiror.
 
8.5  Notification. Between the date of this Agreement and the Closing Date, the
Company, the Shareholder and CMN Management will promptly notify the Acquiror in
writing if the Company, the Shareholder, any Company Subsidiary or any member of
CMN Management becomes aware of any fact or condition that causes or constitutes
a material breach of any of the representations and warranties of the Company,
the Shareholder or CMN Management, as the case may be, as of the date of this
Agreement, or if the Company, the Shareholder, CMN Management or any Company
Subsidiary becomes aware of the occurrence after the date of this Agreement of
any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a material breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Schedules to this Agreement if the Schedules
to the Agreement were dated the date of the occurrence or discovery of any such
fact or condition, the Company, the Shareholder or CMN Management, as the case
may be, will promptly deliver to the Acquiror a supplement to the Schedules to
the Agreement specifying such change; provided, however, that such delivery
shall not materially adversely affect any rights of the Acquiror set forth
herein, including the right of the Acquiror to seek a remedy in damages for
losses incurred as a result of such supplemented disclosure. During the same
period, the Company, the Shareholder and CMN Management will, and will cause
each Company Subsidiary to, promptly notify the Acquiror of the occurrence of
any breach of any covenant of the Company, the Shareholder or CMN Management in
this Section 8 or of the occurrence of any event that may make the satisfaction
of the conditions in Section 10 impossible or unlikely.
 
8.6  Closing Conditions. Between the date of this Agreement and the Closing
Date, each of the Company, the Shareholder and CMN Management will use its
commercially reasonable efforts to cause the conditions in Section 10 to be
satisfied.
 
SECTION IX
COVENANTS AND UNDERTAKING OF THE ACQUIROR
 
9.1  Access and Investigation. Subject to the confidentiality provisions set
forth in Section 14.3 hereof, and the reasonable availability of Acquiror
personnel, between the date of this Agreement and the Closing Date, the Acquiror
will (a) afford the Company and its agents, advisors and attorneys during normal
business hours full and free access to the Acquiror’s personnel, properties,
contracts, books and records, and other documents and data, (b) furnish the
Company and its agents, advisors and attorneys with copies of all such
contracts, books and records, and other existing documents and data as the
Company may reasonably request, and (c) furnish the Company and its agents,
advisors and attorneys with such additional financial, operating, and other data
and information as the Company may reasonably request.
 
9.2  Operation of the Business of the Acquiror. Between the date of this
Agreement and the Closing Date, the Acquiror will:
 
9.2.1  conduct its business only in the ordinary course of business;
 
9.2.2  use its best efforts to preserve intact the current business organization
and business relationships, including, without limitation, relationships with
suppliers, customers, landlords, creditors, officers, employees and agents;
 
9.2.3  obtain the prior written consent of the Company prior to taking any
action of the type specified in Section 6.13 or entering into any Material
Acquiror Contract;
 
9.2.4  confer with the Company concerning operational matters of a material
nature; and
 
9.2.5  otherwise report periodically to the Company concerning the status of its
business, operations, and finances.
 
9.2.6  Notwithstanding the foregoing, between the date of this Agreement and the
Closing Date, the Acquiror will not, directly or indirectly, without the prior
written consent of the Company and the Shareholder, engage in any transaction
with, or enter into any agreement with any officer, director or stockholder of
the Acquiror, or any Affiliate or “associate” (as such term is defined in Rule
405 of the Commission under the Securities Act) of any such Person with a
transaction or agreement value in excess of US$10,000.
 
9.3  Required Filings and Approvals.
 
9.3.1  As promptly as practicable after the date of this Agreement, the Acquiror
will make all filings legally required to be made by it to consummate the
transactions contemplated by this Agreement. Between the date of this Agreement
and the Closing Date, the Acquiror will cooperate with the Company with respect
to all filings that the Company is legally required to make in connection with
the transactions contemplated hereby.
 
9.3.2  Without limiting the foregoing, as promptly as practicable after the
execution of this Agreement, the Acquiror shall prepare and file the Schedule
14(f) Filing with the Commission. The Acquiror will advise the Company, promptly
after it receives notice thereof, of any request by the Commission for the
amendment of the Schedule 14(f) Filing or comments thereon and responses thereto
or requests by the Commission for additional information. The Acquiror shall
mail the Schedule 14(f) Filing to its stockholders as promptly as practicable
pursuant to the Securities Act, the Exchange Act and the rules and regulations
of the Commission related thereto.
 
9.4  Notification. Between the date of this Agreement and the Closing Date, the
Acquiror will promptly notify the Company, the Shareholder and CMN Management in
writing if the Acquiror becomes aware of any fact or condition that causes or
constitutes a breach of any of the representations and warranties of the
Acquiror, as of the date of this Agreement, or if the Acquiror becomes aware of
the occurrence after the date of this Agreement of any fact or condition that
would (except as expressly contemplated by this Agreement) cause or constitute a
breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any change in the Schedules
to this Agreement if the Schedules to the Agreement were dated the date of the
occurrence or discovery of any such fact or condition, the Acquiror will
promptly deliver to the Company, the Shareholder and CMN Management a supplement
to the Schedules to the Agreement specifying such change; provided, however,
that such delivery shall not materially adversely affect any rights of the
Shareholder or CMN Management set forth herein, including the right of the
Shareholder and CMN Management to seek a remedy in damages for losses incurred
as a result of such supplemented disclosure. During the same period, the
Acquiror will promptly notify the Company, the Shareholder and CMN Management of
the occurrence of any breach of any covenant of the Acquiror in this Section 9
or of the occurrence of any event that may make the satisfaction of the
conditions in Section 11 impossible or unlikely.
 
9.5  Closing Conditions. Between the date of this Agreement and the Closing
Date, the Acquiror will use commercially reasonable efforts to cause the
conditions in Section 11 to be satisfied.
 
9.6  Elections Under Treasury Regulations Section 301.7701-3. From and after the
Closing, Acquiror shall execute and/or cause execution of any elections made
with respect to certain of the Acquired Companies under Treasury Regulations
301.7701-3, as described on Schedule 5.22.2.
 
9.7  Books and Records. The Acquiror shall maintain all of its books and records
currently in its possession as of the date hereof, for a period of at least six
(6) years after the Closing Date.
 
9.8  NNM Listing Undertaking. Insofar as the Acquiror Stockholder is a
controlling stockholder of the Acquiror, at such time after the Closing Date the
Acquiror Stockholder shall procure the Acquiror to satisfy, all the initial
listing requirements of the NNM as soon as practically possible, and shall
procure the Acquiror to use its commercially reasonable efforts to apply for
listing on the NNM.
 
 
 
SECTION X
CONDITIONS PRECEDENT TO THE ACQUIROR’S
OBLIGATION TO CLOSE
 
The Acquiror’s obligation to acquire the Shares and to take the other actions
required to be taken by the Acquiror at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by the Acquiror, in whole or in part):
 
10.1  Accuracy of Representations. The representations and warranties of the
Company, the Shareholder and CMN Management set forth in this Agreement,
including Section 10.11, or in any Company Disclosure Schedule or certificate
delivered pursuant hereto that are not qualified as to materiality shall be true
and correct in all material respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in
all material respects, except to the extent a representation or warranty is
expressly limited by its terms to another date and without giving effect to any
supplemental Schedule. The representations and warranties of the Company, the
Shareholder and CMN Management set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are qualified as to materiality shall
be true and correct in all respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in
all respects, except to the extent a representation or warranty is expressly
limited by its terms to another date and without giving effect to any
supplemental Schedule.
 
10.2  Performance by the Company, the Shareholder and CMN Management.
 
10.2.1  All of the covenants and obligations that the Company, Shareholder and
CMN Management are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing (considered collectively), and each of
these covenants and obligations (considered individually), must have been duly
performed and complied with in all respects.
 
10.2.2  Each document required to be delivered by the Company, the Shareholder
and CMN Management pursuant to this Agreement at or prior to Closing must have
been delivered.
 
10.3  No Force Majeure Event. Since December 31, 2004, there shall not have been
any delay, error, failure or interruption in the conduct of the business of any
Acquired Company, or any loss, injury, delay, damage, distress, or other
casualty, due to force majeur including but not limited to (a) acts of God; (b)
fire or explosion; (c) war, acts of terrorism or other civil unrest; or (d)
national emergency that would severally or in the aggregate have a Material
Adverse Effect.
 
10.4  Certificate of Officer. The Company will have delivered to the Acquiror a
certificate, dated the Closing Date, executed by an officer of the Company,
certifying the satisfaction of the conditions specified in Sections 10.1, 10.2
and 10.3.
 
10.5  Certificate of Shareholder and CMN Management. The Shareholder and each
member of CMN Management will have delivered to the Acquiror a certificate,
dated the Closing Date, executed by an authorized officer of the Shareholder,
and by each member of CMN Management, certifying the satisfaction of the
conditions specified in Sections 10.1 and 10.2.
 
10.6  Consents.
 
10.6.1  All material consents, waivers, approvals, authorizations or orders
required to be obtained, and all filings required to be made, by the Company,
the Shareholder and/or CMN Management for the authorization, execution and
delivery of this Agreement and the consummation by them of the transactions
contemplated by this Agreement, shall have been obtained and made by the
Company, the Shareholder and CMN Management, as the case may be, except where
the failure to receive such consents, waivers, approvals, authorizations or
orders or to make such filings would not have a Material Adverse Effect on the
Company or the Acquiror.
 
10.6.2  Without limiting the foregoing, the Schedule 14(f) Filing shall have
been mailed to the stockholders of the Acquiror not less than 10 days prior to
the Closing Date. No Proceeding occasioned by the Section 14(f) Filing shall
have been initiated or threatened by the Commission (which Proceeding remains
unresolved as of the Closing Date).
 
10.7  Documents. The Company, the Shareholder and CMN Management must have
caused the following documents to be delivered to the Acquiror:
 
10.7.1  share certificate evidencing the Shares along with an executed stock
power transferring the Shares to the Acquiror;
 
10.7.2  a Secretary’s Certificate of the Company, dated the Closing Date,
certifying attached copies of (A) the Organizational Documents of the Company
and each Company Subsidiary, (B) the resolutions of the Company Board and the
Shareholder approving this Agreement and the transactions contemplated hereby;
and (C) the incumbency of each authorized officer of the Company signing this
Agreement and any other agreement or instrument contemplated hereby to which the
Company is a party;
 
10.7.3  a certificate of good standing, or equivalent thereof, of the Company,
 
10.7.4  each of the Transaction Documents to which the Company, the Shareholder,
and CMN Management is a party, duly executed; and
 
10.7.5  such other documents as the Acquiror may reasonably request for the
purpose of (i) evidencing the accuracy of any of the representations and
warranties of the Company, the Shareholder and CMN Management pursuant to
Section 10.1, (ii) evidencing the performance of, or compliance by the Company,
the Shareholder and CMN Management with, any covenant or obligation required to
be performed or complied with by the Company, the Shareholder or CMN Management,
as the case may be, (iii) evidencing the satisfaction of any condition referred
to in this Section 10, or (iv) otherwise facilitating the consummation or
performance of any of the transactions contemplated by this Agreement.
 
10.8  No Proceedings. Since the date of this Agreement, there must not have been
commenced or threatened against, the Company, the Shareholder or any member of
CMN Management, or against any Affiliate thereof, any Proceeding (which
Proceeding remains unresolved as of the Closing Date) (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
transactions contemplated by this Agreement, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
transactions contemplated by this Agreement.
 
10.9  No Claim Regarding Stock Ownership or Consideration. There must not have
been made or threatened by any Person any claim asserting that such Person (a)
is the holder of, or has the right to acquire or to obtain beneficial ownership
of the Shares or any other stock, voting, equity, or ownership interest in, the
Company, or (b) is entitled to all or any portion of the Shares.
 
10.10  Delivery of Service Contracts. On the Closing Date, each member of CMN
Management shall have executed for delivery their respective Service Contracts
with the Acquiror.
 
10.11  Satisfactory Due Diligence. The Acquiror shall have completed and
reasonably satisfied itself, in its sole discretion, with the final results of
its due diligence review of the Acquired Companies’ contracts, books, records
and other information or documents reasonably requested by the Acquiror,
including, without limitation, the corporate structure of the Acquired
Companies.
 
10.12  Regulatory Approval.
 
On or prior to the Closing Date, the Shareholder shall obtain any necessary
regulatory approval to enter into this Agreement and consummate the transactions
contemplated hereby.  
 
10.13  HC International Required Approvals.
 
On or prior to the Closing Date, HC International shall have obtained the
approval of its shareholders to confirm and ratify the execution of this
Agreement including, without limitation, the Shareholder’s sale of the Shares to
the Acquiror and the Restructuring, as required by its Organizational Documents
and the GEM Listing Rules.
 
10.14  Completion of Restructuring. Resignations and appointments with respect
to Company Subsidiaries.
 
The Restructuring of the PRC Acquired Companies shall have been duly approved by
the competent PRC examination and approval authorities in accordance with
application PRC laws and regulations and duly completed as envisaged by the
parties. Except for those directors, legal representatives and bank signatories
who are nominated or appointed by independent third parties that own minority
interests in certain of the Acquired Companies, the Acquired Companies shall
appoint such directors, legal representatives and bank signatories as nominated
by the Acquiror Stockholder for each Acquired Company and each existing
director, legal representative and bank guarantor of the Acquired Companies
shall resign at Closing.
 
10.15  Agreement under PRC law. The Shareholder and CMN Management shall enter
into an agreement governed under PRC law and subject to the jurisdiction of the
PRC acceptable to the Acquiror Stockholder (the “PRC Agreement”) that shall
provide that they shall not disturb the intention and purpose of Section 10.14
hereof and that they shall fully cooperate with the intention and purpose of
such paragraph which may include, but not be limited, to amendments to the
articles of association of such Company Subsidiaries. The Acquiror and the
Acquiror Shareholder shall have the right under such agreement to petition a
Chinese court of competent jurisdiction to obtain the equitable relief to
achieve such purposes.
 
10.16  Financial Statements. The Acquiror shall have received finalized Company
Audited Financial Statements, Company Unaudited Financial Statements and the
Company’s unaudited management accounts prepared in accordance with Hong Kong
GAAP.
 

 
SECTION XI
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY,
THE SHAREHOLDER AND CMN MANAGEMENT TO CLOSE
 
The Shareholder’s obligation to transfer the Shares and the obligations of the
Company, the Shareholder and CMN Management to take the other actions required
to be taken by the Company at the Closing are subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by the Company, the Shareholder and CMN Management, in whole or in part):
 
11.1  Accuracy of Representations. The representations and warranties of the
Acquiror and the Acquiror Stockholder set forth in this Agreement or in any
Schedule or certificate delivered pursuant hereto that are not qualified as to
materiality shall be true and correct in all material respects as of the date of
this Agreement, and shall be deemed repeated as of the Closing Date and shall
then be true and correct in all material respects, except to the extent a
representation or warranty is expressly limited by its terms to another date and
without giving effect to any supplemental Schedule. The representations and
warranties of the Acquiror and the Acquiror Stockholder set forth in this
Agreement or in any Schedule or certificate delivered pursuant hereto that are
qualified as to materiality shall be true and correct in all respects as of the
date of this Agreement, and shall be deemed repeated as of the Closing Date and
shall then be true and correct in all respects, except to the extent a
representation or warranty is expressly limited by its terms to another date and
without giving effect to any supplemental Schedule.
 
11.2  Performance by the Acquiror and the Acquiror Stockholder.
 
11.2.1  All of the covenants and obligations that the Acquiror and the Acquiror
Stockholder are required to perform or to comply with pursuant to this Agreement
at or prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been performed
and complied with in all respects.
 
11.2.2  Each document required to be delivered by the Acquiror and the Acquiror
Stockholder pursuant to this Agreement must have been delivered.
 
11.3  No Force Majeure Event. Since December 31, 2004, there shall not have been
any delay, error, failure or interruption in the conduct of the business of the
Acquiror and the Acquiror Stockholder, or any loss, injury, delay, damage,
distress, or other casualty, due to force majeure including but not limited to
(a) acts of God; (b) fire or explosion; (c) war, acts of terrorism or other
civil unrest; or (d) national emergency that would severally or in the aggregate
have a Material Adverse Effect.
 
11.4  Certificate of Officer. Each of the Acquiror and the Acquiror Stockholder
will have delivered to the Company a certificate, dated the Closing Date,
executed by an officer of the Acquiror and the Acquiror Stockholder, certifying
the satisfaction of the conditions specified in Sections 11.1, 11.2 and 11.3.
 
11.5  Consents.
 
11.5.1  All material consents, waivers, approvals, authorizations or orders
required to be obtained, and all filings required to be made, by the Acquiror
and the Acquiror Stockholder for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated by
this Agreement, shall have been obtained and made by the Acquiror and the
Acquiror Stockholder, except where the failure to receive such consents,
waivers, approvals, authorizations or orders or to make such filings would not
have a Material Adverse Effect on the Company ,the Acquiror or the Acquiror
Stockholder.
 
11.5.2  Without limiting the foregoing, the Schedule 14(f) Filing shall have
been mailed to the stockholders of the Acquiror not less than 10 days prior to
the Closing Date. No Proceeding occasioned by the Section 14(f) Filing shall
have been initiated or threatened by the Commission (which Proceeding remains
unresolved as of the Closing Date).
 
11.6  Documents. Each of the Acquiror and the Acquiror Stockholder, as
applicable, must have caused the following documents to be delivered to the
Company, the Shareholder, and CMN Management:
 
11.6.1  In respect of the Acquiror, share certificates evidencing the
Shareholder’s Closing Acquiror Shares;
 
11.6.2  a Secretary’s Certificate, dated the Closing Date certifying attached
copies of (A) its Organizational Documents Acquiror Stockholder, (B) the
resolutions of its Board approving this Agreement and the transactions
contemplated hereby; and (C) the incumbency of each authorized officer of it
signing this Agreement and any other agreement or instrument contemplated hereby
to which it Acquiror is a party;
 
11.6.3  a certificate of its good standing;
 
11.6.4  each of the Transaction Documents to which it is a party, duly executed;
and
 
11.6.5  such other documents as the Company may reasonably request for the
purpose of (i) evidencing the accuracy of any of its representations or
warranties pursuant to Section 11.1, (ii) evidencing its performance of, or the
compliance by it with, any covenant or obligation required to be performed or
complied with by it, (iii) evidencing the satisfaction of any condition referred
to in this Section 11, or (iv) otherwise facilitating the consummation of any of
the transactions contemplated by this Agreement.
 
11.7  No Proceedings. Since the date of this Agreement, there must not have been
commenced or threatened against the Acquiror or the Acquiror Stockholder, or
against any Affiliate thereof, any Proceeding (which Proceeding remains
unresolved as of the Closing Date) (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
hereby, or (b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated hereby.
 
11.8  Resignation of Officers. On the Closing Date, each officer of the Acquiror
shall execute and deliver to the Company a letter of resignation, which shall
include mutual releases of such officer and the Acquiror
 
11.9  Satisfactory Due Diligence. The Company shall have completed and
reasonably satisfied themselves, in their sole discretion, with the final
results of their due diligence review of the Acquiror’s contracts, books,
records and other information or documents reasonably requested by the Company.
 
11.10  Delivery of Service Contracts. On the Closing Date, the Acquiror shall
have executed for delivery a Service Contract with each member of CMN
Management.
 
11.11  Cash Account. As reflected on the most recent balance sheet of the
Acquiror, after payment of the Cash Payment, the Acquiror shall have not less
than US$10 million in cash.
 
11.12  Undertaking to Repay the Advance. On the Closing Date, the Acquiror shall
have executed for delivery an undertaking to the Shareholder that within twenty
(20) days from the Closing Date, it will repay the Shareholder in cash an amount
in the U.S. Dollar equivalent of Renminbi nineteen million (as of the execution
date of this Agreement) being the advances that the Shareholder shall have
injected into Huamei Information as capital contribution for carrying out the
Restructuring contemplated hereby. Such undertaking shall be in substantially
the form attached hereto as Exhibit ____.
 
11.13  Conclusion of Shareholder’s Loan Agreement. On the Closing Date, the
Acquiror shall have entered into the Shareholders’ Loan Agreement with the
Shareholder in accordance with the term sheet of the Shareholder’s Loan attached
hereto as Exhibit H, pursuant to which the Acquiror agrees to repay the
Shareholder’s Loan at such time and in such amount as specified therein.
 
11.14  NNM Listing Undertaking. On the Closing Date, the Acquiror shall have
executed for delivery an undertaking to the Shareholder that at such time after
the Closing Date that the Acquiror shall satisfy, all the initial listing
requirements of the NNM as soon as practically possible, the Acquiror shall use
its commercially reasonable efforts to apply for listing on the NNM. Such
reasonable efforts shall include, without limitation, submitting an application
and applicable documentation, and responding to any comments to the application
provided by the NNM. The failure by the Acquiror to meet the criteria for
listing, or to obtain approval for listing on the NNM after it has made
commercially reasonable effort to achieve the same, shall not be a breach of
this Section 11.14.
 
SECTION XII
TERMINATION
 
12.1  Termination Events. This Agreement may, by notice given prior to or at the
Closing, be terminated:
 
12.1.1  by mutual consent of the Acquiror, the Acquiror Stockholder and the
Shareholder (acting jointly);
 
12.1.2  by the Acquiror, if any of the conditions in Section 10 have not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of the Acquiror to comply
with its obligations under this Agreement) and the Acquiror has not waived such
condition on or before the Closing Date; or (ii) by the Shareholder, if any of
the conditions in Section 11 have not been satisfied as of the Closing Date or
if satisfaction of such a condition is or becomes impossible (other than through
the failure of the Shareholder and/or any member of CMN Management to comply
with its obligations under this Agreement) and the Shareholder has not waived
such condition on or before the Closing Date;
 
12.1.3  by the Acquiror or the Shareholder, if the Closing has not occurred
other than due to the failure of the Acquiror (in the event the Acquiror seeks
to terminate this Agreement) or the Shareholder (in the event it seeks to
terminate this Agreement) to comply with their respective obligations under this
Agreement, forty-five (45) days after the final mailing of the Schedule 14(f)
Filing to the stockholders of the Acquiror (which mailing shall occur within
five (5) Business Days after the end of the SEC review period of the Schedule
14(f) Filing),or such later date as the parties may agree upon ( the “Outside
Date”);
 
12.1.4  by the Acquiror, if there shall have been entered a final, nonappealable
order or injunction of any PRC Governmental Authority restraining or prohibiting
the consummation of the transactions contemplated hereby or the Company or the
Shareholder has not received all required PRC government approvals by September
30, 2005 required to consummate the transaction contemplated by this agreement;
 
12.1.5  by the Acquiror, if, prior to the Closing Date, the Company, the
Shareholder or any member of CMN Management is in material breach of any
representation, warranty, covenant or agreement herein contained and such breach
shall not be cured within 10 days of the date of notice of default served by the
Acquiror claiming such breach; provided, however, that the right to terminate
this Agreement pursuant to this Section 12.1.5 shall not be available to the
Acquiror if the Acquiror is in material breach of this Agreement at the time
notice of termination is delivered;
 
12.1.6  by the Company or the Shareholder, if, prior to the Closing Date, the
Acquiror or the Acquiror Stockholder is in material breach of any
representation, warranty, covenant or agreement herein contained and such breach
shall not be cured within 10 days of the date of notice of default served by the
Company, or the Shareholder claiming such breach or, if such breach is not
curable within such 10 day period, such longer period of time as is necessary to
cure such breach; provided, however, that the right to terminate this Agreement
pursuant to this Section 12.1.6 shall not be available if the Company, the
Shareholder or any member of CMN Management to is in material breach of this
Agreement at the time notice of termination is delivered; or
 
12.1.7  by the Company or the Shareholder (acting jointly), if prior to the
Closing Date, the Company approves any merger, liquidation, recapitalization,
consolidation or other business combination involving the Company or the Company
Subsidiaries or any capital stock or any material portion of the assets of the
Company or any Company Subsidiary, or any combination of the foregoing (an
“Acquisition Transaction”), except as required by the Restructuring.
 
12.1.8  by the Acquiror, if, in its sole discretion, the results of the
Company’s corporate and financial due diligence are unsatisfactory.
 
12.1.9  by the Acquiror if the Actual HK Net Profit is at or below RMB6 million.
 
12.2  Effect of Termination.
 
12.2.1  (a) If the Acquiror or the Acquiror Stockholder terminates this
Agreement pursuant to Sections 12.1.5, or 12.1.9, then the Company and the
Shareholder shall immediately pay to the Acquiror Stockholder a termination fee
equal to $500,000 in cash, or (b) if the Company or the Shareholder terminates
this Agreement pursuant to Section 12.1.6, then the Acquiror Stockholder shall
immediately pay to the Company and the Shareholder a termination fee equal to
$500,000 in cash (the “Termination Fee”). If the Acquiror or Acquiror
Stockholder terminates this Agreement pursuant to Section 12.1.4, then the
Shareholder shall immediately pay to the Acquiror Stockholder a termination fee
of $375,000 in cash. If the Company terminates this Agreement pursuant to
Section 12.1.7, then the Company shall immediately pay to the Acquiror
Stockholder the Termination Fee. By executing this Agreement Metaphor agrees
that any such payment of the Termination Fee be made directly to the Acquiror
Stockholder.
 
12.2.2  Each party’s right of termination under Section 12.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 12.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
5.12, 6.12, 12.2, and 14 will survive; provided, however, that if this Agreement
is terminated by a party because of the breach of the Agreement by another party
or because one or more of the conditions to the terminating party’s obligations
under this Agreement is not satisfied as a result of another party’s failure to
comply with its obligations under this Agreement, the terminating party’s right
to pursue all legal remedies will survive such termination unimpaired.
 
SECTION XIII
INDEMNIFICATION; REMEDIES
 
13.1  Survival. All representations, warranties, covenants, and obligations in
this Agreement shall survive the Closing and expire ninety (90) days from the
date on which the audited financial statements of the Acquiror for its fiscal
year ended December 31, 2006 shall have been filed as part of the Acquiror’s
Annual Report on Form 10-KSB, but in no event earlier than June 30, 2007 (the
“Survival Period”). . The right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
 
13.2  Indemnification by the Company.
 
13.2.1  From and after the Closing until (a) the expiration of the Survival
Period, or (b) with respect to a specific claim made by the Acquiror against the
Company prior to the expiration of the Survival Period, until a court of
competent jurisdiction renders a final unappealable decision (or appeals of a
decision are not taken within the time period permitted for filing same) (the
“Claims Period”), the Shareholder and CMN Management, severally and not jointly
shall indemnify and hold harmless the Acquiror from and against any liabilities,
loss, claims, damages (excluding consequential, punitive and other similar
damages), fines, penalties, expenses (including costs of investigation and
defense and reasonable attorneys’ fees) or diminution of value (collectively,
“Damages”) arising, directly or indirectly, from or in connection with:
 
(a)  any breach of any representation or warranty made by the Company in this
Agreement or in any certificate delivered by the Company pursuant to this
Agreement required to be performed by the Company on or prior to the Closing
Date;
 
(b)  any breach by the Company of its covenants or obligations in this Agreement
required to be performed by the Company on or prior to the Closing Date;
 
(c)  any Tax, interest or penalty on the Company, including without limitation
as a result of the untimely filing of any Tax returns relating to any tax period
ending prior to Closing, or any portion of a tax period prior to Closing; and
 
(d)  liabilities arising out of events that occurred prior to the Closing.
 
13.2.2  The amount of any and all Damages suffered by the Acquiror shall be
recovered by an offset to any amounts of the Shareholder’s Loan owed by the
Company Subsidiaries to the Shareholder equal to the aggregate amount of the
Damages suffered by the Acquiror.
 
13.2.3  All claims of the Acquiror pursuant to this Section 13.2 shall be
brought by the Acquiror Stockholder on behalf of the Acquiror and those Persons
who were stockholders of the Acquiror immediately prior to the Closing.
 
13.3  Indemnification by the Acquiror.
 
13.3.1  From and after the Closing until the expiration of the Claims Period,
the Acquiror shall indemnify and hold harmless the Company, the Shareholder and
CMN Management (collectively, the “Company Indemnified Parties”), from and
against any Damages arising, directly or indirectly, from or in connection with:
 
(a)  any breach of any representation or warranty made by the Acquiror in this
Agreement or in any certificate delivered by the Acquiror pursuant to this
Agreement;
 
(b)  any breach by the Acquiror of any covenant or obligation of the Acquiror in
this Agreement required to be performed by the Acquiror on or prior to the
Closing Date; or
 
(c)  any Tax, interest or penalty on the Acquiror, including without limitation
as a result of the untimely filing of any Acquiror Tax returns relating to any
tax period ending prior to Closing, or any portion of a tax period prior to
Closing; or
 
(d)  liabilities arising out of events that occurred prior to the Closing.
 
13.4  Indemnification by the Acquiror Stockholder.
 
13.4.1  From and after the Closing until the expiration of the Claims Period,
the Acquiror Stockholder shall indemnify and hold harmless the Company
Indemnified Parties, from and against any Damages arising, directly or
indirectly, from or in connection with:
 
(a)  any breach of any representation or warranty made by the Acquiror
Stockholder in this Agreement or in any certificate delivered by Acquiror
Stockholder pursuant to this Agreement;
 
13.5  Indemnification Shares. The Company Indemnified Parties shall be
indemnified by the Acquiror by the Acquiror issuing to the Company Indemnified
Parties an additional number of Acquiror Shares equal to the aggregate amount of
the Damages suffered by the Company Indemnified Parties, divided by the market
value of the Acquiror Common Stock to be calculated using the average of the
closing price as quoted on the Over the Counter Bulletin Board (or such other
public trading market on which the Acquiror’s Common Stock may be trading at
such time) for the thirty (30) trading days immediately prior to the date that
such amount of Damages is determined by a court of competent jurisdiction or
pursuant to a binding settlement agreement among the Acquiror and the Company
Indemnified Parties (the “Market Value”).
 
13.6  Limitations on Amount - the Shareholder and CMN Management. The Acquiror
shall not be entitled to indemnification from the Shareholder and/or CMN
Management pursuant to Section 13.2, unless and until the aggregate amount of
Damages to the Acquiror with respect to such matters under Section 13.2.1
exceeds $50,000, at which time, the Acquiror shall be entitled to
indemnification for the total amount of such Damages in excess of $50,000
subject to a cap of Damages from the Shareholder and CMN Management in the
aggregate amount of RMB30,000,000 (on a U.S. $ equivalent as of the date of
execution of this Agreement). Notwithstanding the foregoing cap, in the event
any claim for indemnification and Damages suffered by the Acquiror directly or
indirectly arise out of or from the gross negligence, fraud or willful
misconduct of the Company, the Shareholder, and/or CMN Management, there shall
be no cap.
 
13.7  Limitations on Amount - the Acquiror 
 
No Company Indemnified Party shall be entitled to indemnification pursuant to
Section 13.3, unless and until the aggregate amount of Damages to all Company
Indemnified Parties with respect to such matters under Sections 13.3.1 and 13.4
exceeds $50,000, at which time, the Company Indemnified Parties shall be
entitled to indemnification for the total amount of such Damages in excess of
$50,000 subject to a cap of $4,000,000. Notwithstanding the foregoing cap, in
the event any claim for indemnification and Damages suffered by the Company or
the Shareholder directly or indirectly arise out of or from the gross
negligence, fraud or willful misconduct of the Acquiror or the Acquiror
Shareholder, there shall be no cap
 
13.8  Determining Damages. Materiality qualifications to the representations and
warranties of the Company and the Acquiror shall not be taken into account in
determining the amount of Damages occasioned by a breach of any such
representation and warranty for purposes of determining whether the baskets set
forth in Sections 13.5 and 13.6 have been met.
 
13.9  Breach by Shareholder and CMN Management. Nothing in this Section 13 shall
limit the Acquiror or Acquiror Stockholder’s right to pursue any appropriate
legal or equitable remedy against the Shareholder or any member of CMN
Management with respect to any Damages arising, directly or indirectly, from or
in connection with: (a) any breach by the Shareholder and CMN Management of any
representation or warranty made by the Shareholder and CMN Management in this
Agreement or in any certificate delivered by the Shareholder and CMN Management
pursuant to this Agreement or (b) any breach by the Shareholder and CMN
Management of its covenants or obligations in this Agreement. All claims of the
Acquiror pursuant to this Section 13 shall be brought by the Acquiror
Stockholders on behalf of the Acquiror and those Persons who were stockholders
of the Acquiror immediately prior to the Closing.
 
13.10  Breach by the Acquiror and/or the Acquiror Stockholder. Nothing in this
Section 13 shall limit the right of the Shareholder and any member of CMN
Management to pursue any appropriate legal or equitable remedy against the
Acquiror with respect to any Damages arising, directly or indirectly, from or in
connection with: (a) any breach by the Acquiror or the Acquiror Stockholder of
any representation or warranty made by the Acquiror or the Acquiror Stockholder
in this Agreement or in any certificate delivered by the Acquiror or the
Acquiror Stockholder pursuant to this Agreement or (b) any breach by the
Acquiror or the Acquiror Stockholder of its covenants or obligations in this
Agreement.
 
SECTION XIV
GENERAL PROVISIONS
 
14.1  Expenses. Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
transactions contemplated by this Agreement, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
 
14.2  Public Announcements. The Acquiror shall promptly, but no later than three
days following the effective date of this Agreement, issue a press release
disclosing the transactions contemplated hereby. Between the date of this
Agreement and the Closing Date, the Company and the Acquiror shall consult with
each other in issuing any other press releases or otherwise making public
statements or filings and other communications with the Commission or any
regulatory agency or stock market or trading facility with respect to the
transactions contemplated hereby and neither party shall issue any such press
release or otherwise make any such public statement, filings or other
communications without the prior written consent of the other, which consent
shall not be unreasonably withheld or delayed, except that no prior consent
shall be required if such disclosure is required by law or applicable
regulations and/or regulator, including, in the case of the Shareholder, the
Hong Kong Stock Exchange, in which case the disclosing party shall provide the
other party with prior notice of such public statement, filing or other
communication and shall incorporate so far as practicable, into such public
statement, filing or other communication the reasonable comments of the other
party. After the Closing Date, the Acquiror shall consult with the Acquiror
Nominees in issuing any press releases or otherwise making public statements or
filings and other communications with the Commission or any regulatory agency or
stock market or trading facility with respect to the transactions contemplated
hereby and the Acquiror shall not issue any such press release or otherwise make
any such public statement, filings or other communications without the prior
written consent of the Acquiror Nominees, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law or applicable regulations and/or
regulator, in the case of the Shareholder, the Hong Kong Stock Exchange, in
which case the Acquiror shall provide the Acquiror Nominees with prior notice of
such public statement, filing or other communication and shall incorporate so
far as practicable into such public statement, filing or other communication the
reasonable comments of the Acquiror Nominees.
 
14.3  Confidentiality.
 
14.3.1  Subsequent to the date of this Agreement, the Acquiror, the Shareholder,
the Company, CMN Management will maintain in confidence, and will cause their
respective directors, officers, employees, agents, and advisors to maintain in
confidence, any written, oral, or other information obtained in confidence from
another party in connection with this Agreement or the transactions contemplated
by this Agreement, unless (a) such information is already known to such party or
to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any required filing with the
Commission, or obtaining any consent or approval required for the consummation
of the transactions contemplated by this Agreement, or (c) the furnishing or use
of such information is required by or necessary or appropriate in connection
with legal proceedings.
 
14.3.2  In the event that any party is required to disclose any information of
another party pursuant to clause (b) or (c) of Section 14.3.1, the party
requested or required to make the disclosure (the “disclosing party”) shall
provide the party that provided such information (the “providing party”) with
prompt notice of any such requirement so that the providing party may seek a
protective order or other appropriate remedy and/or waive compliance with the
provisions of this Section 14.3. If, in the absence of a protective order or
other remedy or the receipt of a waiver by the providing party, the disclosing
party is nonetheless, in the opinion of counsel, legally compelled to disclose
the information of the providing party, the disclosing party may, without
liability hereunder, disclose only that portion of the providing party’s
information which such counsel advises is legally required to be disclosed,
provided that the disclosing party exercises its reasonable efforts to preserve
the confidentiality of the providing party’s information, including, without
limitation, by cooperating with the providing party to obtain an appropriate
protective order or other relief assurance that confidential treatment will be
accorded the providing party’s information.
 
14.3.3  If the transactions contemplated by this Agreement are not consummated,
each party will return or destroy as much of such written information as the
other party may reasonably request.
 
14.4  Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
 
 
If to Acquiror:
Metaphor Corp.
c/o 8 Holdings LLC
1900 Ninth Street, 3rd Floor
Boulder, CO 80302
USA
 
 
with a copy to:
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
Attention: Harlan Kleiman 
Telephone No.: 415-477-9911
Facsimile No.: 415-399-1366
Attention: Mitchell S. Nussbaum, Esq.
Telephone No.: (212) 407-4159
Facsimile No.: (212) 407-4990
 
If to Company:
HC International, Inc. 
Tower B, Huaxing Building 
No. 42 North Street Xizhimen, Haidian
Beijing, PRC 100088 
 
with a copy to:
Herbert Smith 
1410 China World Tower 1 
1 Jianguomenwai Avenue
Beijing, PRC 100004 
 
Attention: Guo Fansheng 
Telephone No.: +86 (0)10 8221 1850 
Facsimile No.: +86 (0)10 8221 1933 
 
Attention: Michael Fosh 
Telephone No.: +86 (0)10 6505 6512 
Facsimile No.: +86 (0)10 6505 6516 
 
If to Shareholder:
 
HC International, Inc. 
Tower B, Huaxing Building 
No. 42 North Street Xizhimen, Haidian
Beijing, PRC 100088 
 
with a copy to:
 
Herbert Smith 
1410 China World Tower 1 
1 Jianguomenwai Avenue
Beijing, PRC 100004 
 
Attention: Guo Fansheng 
Telephone No.: +86 (0)10 8221 1850 
Facsimile No.: +86 (0)10 8221 1933 
 
Attention: Michael Fosh 
Telephone No.: +86 (0)10 6505 6512 
Facsimile No.: +86 (0)10 6505 6516 
 
If to CMN Management:
 
Wu Xian 
Room 502-505, Tower B Tianhai Commercial Building 
107 North Dongsi Road, Beijing, PRC 
 
with a copy to:
 
Shen Qizhi 
Room 502-505, Tower B Tianhai Commercial Building 
107 North Dongsi Road, Beijing, PRC 
 
Telephone No.: +86 (0)10 8404 3133 
Facsimile No.: +86 (0)10 8404 3131 
 
Telephone No.: +86 (0)10 8404 3133 
Facsimile No.: +86 (0)10 8404 3131 
 
If to the Acquiror Stockholder:
 
8 Holdings LLC
1900 Ninth Street, 3rd Floor
Boulder, CO 80302
USA
Attention: Harlan Kleiman 
Telephone No.: 415-477-9911
Facsimile No.: 415-399-1366
 
with a copy to:
 
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154
 
Attention: Mitchell S. Nussbaum, Esq.
Telephone No.: (212) 407-4159
Facsimile No.: (212) 407-4990 

 
14.5  Arbitration. Any dispute or controversy under this Agreement shall be
settled exclusively by arbitration in the City of New York, County of New York
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitration award in any court having
jurisdiction.
 
14.6  Further Assurances. The parties agree (a) to furnish upon request to each
other such further information, (b) to execute and deliver to each other such
other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
 
14.7  Waiver. The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
 
14.8  Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including the
Term Sheet between the Acquiror and the Company, dated December 6, 2004) and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party against whom the enforcement of such
amendment is sought.
 
14.9  Assignments, Successors, and No Third-Party Rights. No party may assign
any of its rights under this Agreement without the prior consent of the other
parties. Subject to the preceding sentence, this Agreement will apply to, be
binding in all respects upon, and inure to the benefit of and be enforceable by
the respective successors and permitted assigns of the parties. This Agreement
and all of its provisions and conditions are for the sole and exclusive benefit
of the parties to this Agreement and their successors and assigns.
 
14.10  Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
 
14.11  Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word “including” does not
limit the preceding words or terms.
 
14.12  Governing Law. This Agreement will be governed by the laws of the State
of New York without regard to conflicts of laws principles.
 
14.13  Shareholder Representative.
 
14.13.1  The Acquiror shall be entitled to deal exclusively with __________ (the
“Representative”) as the sole and exclusive representative and agent of the
Shareholder and CMN Management in respect of all matters arising under or
pertaining to this Agreement, unless and until the Acquiror receives notice to
the contrary as provided in Section 14.13.2 below. Without limiting the
foregoing, (a) any notice, communication, demand, claim, action or proceeding
required or permitted hereunder may be delivered by the Acquiror to, or brought
by the Acquiror against, the Representative in its capacity as agent and
representative of the Shareholder and CMN Management with the same effect, and
which shall be binding to the same degree, as if delivered to, or brought
against, the Shareholder and CMN Management individually; (b) any settlement or
other agreement of the Acquiror with the Shareholder and CMN Management in its
capacity as agent and representative of the Shareholder and CMN Management in
respect of all matters arising under or pertaining to this Agreement shall have
the same effect, and be binding upon, the Shareholder and CMN Management to the
same degree as if made with the Shareholder and CMN Management individually; and
(c) except as provided in Section 14.13.2, the Acquiror shall not be required to
recognize or respond to, and shall not be bound by, any notice, communication,
demand, claim, action or proceeding delivered to or brought against the Acquiror
by the Shareholder and CMN Management in respect of all matters arising under or
pertaining to this Agreement except through the Representative in its capacity
as agent and representative of the Shareholder.
 
14.13.2  The Shareholder and CMN Management by notice in writing to the Acquiror
signed by each of them or their legal representative may designate another
Person to act as representative and agent as provided in Section 14.13.1 above.
 
14.14  Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.

--------------------------------------------------------------------------------

 
COUNTERPART SIGNATURE PAGE
 
IN WITNESS WHEREOF, the parties have executed and delivered this Sale and
Purchase Agreement as of the date first written above.
 
Acquiror:
METAPHOR CORP.
Signed:
 

 
Printed name: Harlan Kleiman
Title: Partner
 
Company:
CHINA MEDIA NETWORK INTERNATIONAL INC.
 
Signed:
Printed name: Guo Fansheng
Title: Director
 
Acquiror Stockholder:
8 HOLDINGS, LLC
Signed:
 
Printed name: Harlan Kleiman
Title: Partner
 
CMN Management:
Wu Xian
Li Shuangqing
Shen Qizhi
Wang Li Hong
 

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COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
 
IN WITNESS WHEREOF, the parties have executed and delivered this Sale and
Purchase Agreement as of the date first written above.
 
Hong Kong Huicong International Group Limited

By: 
Name: Guo Fansheng
Title: CEO
 
OFFSHORE DELIVERY INSTRUCTIONS:
 
Hong Kong Huicong International Group Limited 
Attn: Guo Fansheng
Address: Tower B, Huaxing Building
No. 42 North Street Xizhimen, Haidian,
Beijing,
People’s Republic of China
Phone No. 86 (0)10 8221 1850
Facsimile No. 86 (0)10 8221 1933 
 

 

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COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO SECTION 4(2))
IN WITNESS WHEREOF, the parties have executed and delivered this Sale and
Purchase Agreement as of the date first written above.
 
[ENTITY]
 

 
By: 
Name:
Title:
 
Circle the category under which you are an “accredited investor” pursuant to
Exhibit C:
 
1 2 3 4 5 6 7 8
 
____________________ 
 
PRINT EXACT NAME IN WHICH YOU WANT THE SECURITIES TO BE REGISTERED
 
Attn:  
Address:  
Phone No.  
Facsimile No.  
 

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EXHIBIT A

 
SHARES AND ACQUIROR SHARES TO BE EXCHANGED
 
Total Shares to be delivered by the Shareholder to Acquiror:
 
__________
 
Total Acquiror Shares to be delivered by the Acquiror to the Shareholder:
 
__________

 

Name and Address of
Each Acquiror Shareholder
Number of Shares Owned
Percentage of Total Shares Owned
Number of Total Acquiror Shares
Percentage of Acquiror Common Stock
 
Hong Kong Huicong International Group Limited
 
 
 
 
 
 
 
                                               

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EXHIBIT B
 

 
Definition of “Accredited Investor”
 
The term “accredited investor” means:
 

(1)  
A bank as defined in Section 3(a)(2) of the Securities Act, or a savings and
loan association or other institution as defined in Section 3(a)(5)(A) of the
Securities Act, whether acting in its individual or fiduciary capacity; a broker
or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; an insurance company as defined in Section 2(13) of the Securities Act; an
investment company registered under the Investment Company Act of 1940 (the
“Investment Company Act”) or a business development company as defined in
Section 2(a)(48) of the Investment Company Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under Section 301(c)
or (d) of the Small Business Investment Act of 1958; a plan established and
maintained by a state, its political subdivisions or any agency or
instrumentality of a state or its political subdivisions for the benefit of its
employees, if such plan has total assets in excess of $5,000,000; an employee
benefit plan within the meaning of the Employee Retirement Income Security Act
of 1974 (“ERISA”), if the investment decision is made by a plan fiduciary, as
defined in Section 3(21) of ERISA, which is either a bank, savings and loan
association, insurance company, or registered investment advisor, or if the
employee benefit plan has total assets in excess of $5,000,000 or, if a
self-directed plan, with investment decisions made solely by persons that are
accredited investors.

 

(2)  
A private business development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.

 

(3)  
An organization described in Section 501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar business trust, or partnership, not formed
for the specific purpose of acquiring the securities offered, with total assets
in excess of $5,000,000.

 

(4)  
A director or executive officer of the Acquiror.

 

(5)  
A natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of his or her purchase exceeds $1,000,000.

 

(6)  
A natural person who had an individual income in excess of $200,000 in each of
the two most recent years or joint income with that person’s spouse in excess of
$300,000 in each of those years and has a reasonable expectation of reaching the
same income level in the current year.

 

(7)  
A trust, with total assets in excess of $5,000,000, not formed for the specific
purpose of acquiring the securities offered, whose purchase is directed by a
sophisticated person as described in Rule 506(b)(2)(ii) (i.e., a person who has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the prospective investment).

 

(8)  
An entity in which all of the equity owners are accredited investors. (If this
alternative is checked, the Shareholder must identify each equity owner and
provide statements signed by each demonstrating how each is qualified as an
accredited investor.)

H:\Company\3013\30850858\a001SPA07(HS comments)(240405).DOC

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EXHIBIT C
 

 
Definition of “U.S. Person”
 

(1)  
“U.S. person” (as defined in Regulation S) means:

 

(i)  
Any natural person resident in the United States;

 

(ii)  
Any partnership or corporation organized or incorporated under the laws of the
United States;

 

(iii)  
Any estate of which any executor or administrator is a U.S. person;

 

(iv)  
Any trust of which any trustee is a U.S. person;

 

(v)  
Any agency or branch of a foreign entity located in the United States;

 

(vi)  
Any non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. person;

 

(vii)  
Any discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; and

 

(viii)  
Any partnership or corporation if: (A) organized or incorporated under the laws
of any foreign jurisdiction; and (B) formed by a U.S. person principally for the
purpose of investing in securities not registered under the Securities Act,
unless it is organized or incorporated, and owned, by accredited investors (as
defined in Rule 501(a)) who are not natural persons, estates or trusts.

 

(2)  
Notwithstanding paragraph (1) above, any discretionary account or similar
account (other than an estate or trust) held for the benefit or account of a
non-U.S. person by a dealer or other professional fiduciary organized,
incorporated, or (if an individual) resident in the United States shall not be
deemed a “U.S. person.”

 

(3)  
Notwithstanding paragraph (1), any estate of which any professional fiduciary
acting as executor or administrator is a U.S. person shall not be deemed a U.S.
person if:

 

(i)  
An executor or administrator of the estate who is not a U.S. person has sole or
shared investment discretion with respect to the assets of the estate; and

 

(ii)  
The estate is governed by foreign law.

 

(4)  
Notwithstanding paragraph (1), any trust of which any professional fiduciary
acting as trustee is a U.S. person shall not be deemed a U.S. person if a
trustee who is not a U.S. person has sole or shared investment discretion with
respect to the trust assets, and no beneficiary of the trust (and no settlor if
the trust is revocable) is a U.S. person.

 

(5)  
Notwithstanding paragraph (1), an employee benefit plan established and
administered in accordance with the law of a country other than the United
States and customary practices and documentation of such country shall not be
deemed a U.S. person.

 

(6)  
Notwithstanding paragraph (1), any agency or branch of a U.S. person located
outside the United States shall not be deemed a “U.S. person” if:

 

(i)  
The agency or branch operates for valid business reasons; and

 

(ii)  
The agency or branch is engaged in the business of insurance or banking and is
subject to substantive insurance or banking regulation, respectively, in the
jurisdiction where located.

 

(7)  
The International Monetary Fund, the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank,
the African Development Bank, the United Nations, and their agencies, affiliates
and pension plans, and any other similar international organizations, their
agencies, affiliates and pension plans shall not be deemed “U.S. persons.”

 

--------------------------------------------------------------------------------

 
EXHIBIT D
 

 
ACCREDITED INVESTOR REPRESENTATIONS
 
Each Shareholder indicating that it is an Accredited Investor, severally and not
jointly, further represents and warrants to the Acquiror as follows:
 

1.  
Such Shareholder qualifies as an Accredited Investor on the basis set forth on
its signature page to this Agreement.

 

2.  
Such Shareholder has sufficient knowledge and experience in finance, securities,
investments and other business matters to be able to protect such Shareholder’s
interests in connection with the transactions contemplated by this Agreement.

 

3.  
Such Shareholder has consulted, to the extent that it has deemed necessary, with
its tax, legal, accounting and financial advisors concerning its investment in
the Acquiror Shares.

 

4.  
Such Shareholder understands the various risks of an investment in the Acquiror
Shares and can afford to bear such risks for an indefinite period of time,
including, without limitation, the risk of losing its entire investment in the
Acquiror Shares.

 

5.  
Such Shareholder has had access to the Acquiror’s publicly filed reports with
the SEC.

 

6.  
Such Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information regarding the
Acquiror that such Shareholder has requested and all such public information is
sufficient for such Shareholder to evaluate the risks of investing in the
Acquiror Shares.

 

7.  
Such Shareholder has been afforded the opportunity to ask questions of and
receive answers concerning the Acquiror and the terms and conditions of the
issuance of the Acquiror Shares.

 

8.  
Such Shareholder is not relying on any representations and warranties concerning
the Acquiror made by the Acquiror or any officer, employee or agent of the
Acquiror, other than those contained in this Agreement.

 

9.  
Such Shareholder is acquiring the Acquiror Shares for such Shareholder’s own
account, for investment and not for distribution or resale to others.

 

10.  
Such Shareholder will not sell or otherwise transfer the Acquiror Shares, unless
either (A) the transfer of such securities is registered under the Securities
Act or (B) an exemption from registration of such securities is available.

 

11.  
Such Shareholder understands and acknowledges that the Acquiror is under no
obligation to register the Acquiror Shares for sale under the Securities Act.

 

12.  
Such Shareholder consents to the placement of a legend on any certificate or
other document evidencing the Acquiror Shares substantially in the form set
forth in Section 4.2.5(a).

 

13.  
Such Shareholder represents that the address furnished by such Shareholder on
its signature page to this Agreement and in Exhibit A is such Shareholder’s
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.

 

14.  
Such Shareholder understands and acknowledges that the Acquiror Shares have not
been recommended by any federal or state securities commission or regulatory
authority, that the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any information concerning the Acquiror that has been
supplied to such Shareholder and that any representation to the contrary is a
criminal offense.

 

15.  
Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution and
delivery of this Agreement and the purchase of the Acquiror Shares.

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EXHIBIT E
 

 
NON U.S. PERSON REPRESENTATIONS
 
Each Shareholder indicating that it is not a U.S. person, severally and not
jointly, further represents and warrants to the Acquiror as follows:
 

1.  
At the time of (a) the offer by the Acquiror and (b) the acceptance of the offer
by such Shareholder, of the Acquiror Shares, such Shareholder was outside the
United States.

 

2.  
No offer to acquire the Acquiror Shares or otherwise to participate in the
transactions contemplated by this Agreement was made to such Shareholder or its
representatives inside the United States.

 

3.  
Such Shareholder is not purchasing the Acquiror Shares for the account or
benefit of any U.S. person, or with a view towards distribution to any U.S.
person, in violation of the registration requirements of the Securities Act.

 

4.  
Such Shareholder will make all subsequent offers and sales of the Acquiror
Shares either (x) outside of the United States in compliance with Regulation S;
(y) pursuant to a registration under the Securities Act; or (z) pursuant to an
available exemption from registration under the Securities Act. Specifically,
such Shareholder will not resell the Acquiror Shares to any U.S. person or
within the United States prior to the expiration of a period commencing on the
Closing Date and ending on the date that is one year thereafter (the
“Distribution Compliance Period”), except pursuant to registration under the
Securities Act or an exemption from registration under the Securities Act.

 

5.  
Such Shareholder is acquiring the Acquiror Shares for such Shareholder’s own
account, for investment and not for distribution or resale to others.

 

6.  
Such Shareholder has no present plan or intention to sell the Acquiror Shares in
the United States or to a U.S. person at any predetermined time, has made no
predetermined arrangements to sell the Acquiror Shares and is not acting as a
Distributor of such securities.

 

7.  
Neither such Shareholder, its Affiliates nor any Person acting on such
Shareholder’s behalf, has entered into, has the intention of entering into, or
will enter into any put option, short position or other similar instrument or
position in the U.S. with respect to the Acquiror Shares at any time after the
Closing Date through the Distribution Compliance Period except in compliance
with the Securities Act.

 

8.  
Such Shareholder consents to the placement of a legend on any certificate or
other document evidencing the Acquiror Shares substantially in the form set
forth in Section 4.2.5(b).

 

9.  
Such Shareholder is not acquiring the Acquiror Shares in a transaction (or an
element of a series of transactions) that is part of any plan or scheme to evade
the registration provisions of the Securities Act.

 

10.  
Such Shareholder has sufficient knowledge and experience in finance, securities,
investments and other business matters to be able to protect such Shareholder’s
interests in connection with the transactions contemplated by this Agreement.

 

11.  
Such Shareholder has consulted, to the extent that it has deemed necessary, with
its tax, legal, accounting and financial advisors concerning its investment in
the Acquiror Shares.

 

12.  
Such Shareholder understands the various risks of an investment in the Acquiror
Shares and can afford to bear such risks for an indefinite period of time,
including, without limitation, the risk of losing its entire investment in the
Acquiror Shares.

 

13.  
Such Shareholder has had access to the Acquiror’s publicly filed reports with
the SEC.

 

14.  
Such Shareholder has been furnished during the course of the transactions
contemplated by this Agreement with all other public information regarding the
Acquiror that such Shareholder has requested and all such public information is
sufficient for such Shareholder to evaluate the risks of investing in the
Acquiror Shares.

 

15.  
Such Shareholder has been afforded the opportunity to ask questions of and
receive answers concerning the Acquiror and the terms and conditions of the
issuance of the Acquiror Shares.

 

16.  
Such Shareholder is not relying on any representations and warranties concerning
the Acquiror made by the Acquiror or any officer, employee or agent of the
Acquiror, other than those contained in this Agreement.

 

17.  
Such Shareholder will not sell or otherwise transfer the Acquiror Shares, unless
either (A) the transfer of such securities is registered under the Securities
Act or (B) an exemption from registration of such securities is available.

 

18.  
Such Shareholder understands and acknowledges that the Acquiror is under no
obligation to register the Acquiror Shares for sale under the Securities Act.

 

19.  
Such Shareholder represents that the address furnished by such Shareholder on
its signature page to this Agreement and in Exhibit A is such Shareholder’s
principal residence if he is an individual or its principal business address if
it is a corporation or other entity.

 

20.  
Such Shareholder understands and acknowledges that the Acquiror Shares have not
been recommended by any federal or state securities commission or regulatory
authority, that the foregoing authorities have not confirmed the accuracy or
determined the adequacy of any information concerning the Acquiror that has been
supplied to such Shareholder and that any representation to the contrary is a
criminal offense.

 

21.  
Such Shareholder acknowledges that the representations, warranties and
agreements made by such Shareholder herein shall survive the execution and
delivery of this Agreement and the purchase of the Acquiror Shares.

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EXHIBIT F
 
PLAN OF RESTRUCTURING
 

1.
Background

Subject to the terms and conditions of this Agreement, the Shareholder and the
CMN Management have agreed to procure the restructuring of the advertising and
media network businesses being currently carried out by the Company
Subsidiaries, the work of which shall commence immediately after the signing of
this Agreement and be completed before or on the Closing Date (“Restructuring”).
The Restructuring will, briefly comprise of two parts: equity transfers and
capital increase.

2.
Equity Transfer

The equity transfers contemplated by the Restructuring will be carried out in
the following manner and sequence:-

 
2.1
北京慧翔信息技术有&#-27056;公司(Beijing Huixiang Information Technology Co., Ltd.,
‘Huixiang Information”) will transfer its entire interest
in北京华媒盛&#-30266;信息技术有&#-27056;公司 (Beijing Huamei Shengshi Information Technology
Co., Ltd.) (“Huamei Information”)
to北京慧&#-32662;国&#-27067;&#-29372;&#-29777;有&#-27056;公司 (Beijing HC International
Information Co., Ltd, (“Beijing HC International”);

 
2.2
Huamei Information and the CMN Management will jointly set up a new company in
China (“Company B”).

 
2.3
Huamei Information will transfer the 20% interest in
&#-28463;州华媒盛&#-30266;广告传播有&#-27056;公司(Zhengzhou Huamei Shengshi Advertising
Broadcasting Co., Ltd., “Zhengzhou Huamei”)
and济南华媒盛&#-30266;广告传播有&#-27056;公司Jinan Huamei Shengshi Broadcasting Co., Ltd.,
“Jinan Huamei”) owned and held by it to Huaxiang Information;

 

 
2.4
Beijing HC International will transfer its entire interest in Huamei Information
to a BVI company (“BVI Company”) wholly owned by the Company
(i.e.&#-26215;港慧&#-32662;国&#-27067;&#-26938;团有&#-27056;公司 (Hong Kong Huicong
International Group Limited)). The remaining 2% interest in Huamei Information
will be owned and held by the CMN Management. At this point, Huamei Information
will be transformed into a Chinese-foreign joint venture enterprise.

 
2.6
Huixiang Information will transfer the 80% interest
in北京华媒盛&#-30266;广告有&#-27056;公司Beijing Huamei Shengshi Advertising Co., Ltd.,
“Beijing Huamei”) owned and held by it to Company B.

 
2.7
北京慧&#-32662;&#-28207;网广告有&#-27056;公司(Beijing Huicong Goldnet Advertising Co.,
Ltd.) will transfer the 51% interest in兰州华媒广告传播有&#-27056;公司(Lanzhou Huamei
Advertising Broadcasting Co., Ltd.) owned and held by it to Beijing Huamei;

 
2.8
北京慧翔网络技术有&#-27056;公司 (Beijing Huixiang Network Technology Co., Ltd.) and Xian Wu
will transfer the 51% and 25% interest in 兰州华媒盛&#-30266;广告传播有&#-27056;公司
(Lanzhou Huamei Shengshi Advertising Broadcasting Co., Ltd.) respectively owned
and held by them to Beijing Huamei.

2.9  
Huixiang Information will transfer the 20% interest in Zhengzhou Huamei and
Jinan Huamei held and owned by it to Company B.

3.  
Capital Increase

To carry out the equity transfers and the overseas investment described in
Section 2 above, Huamei Information will need to increase its registered capital
from RMB1,000,000 to RMB20,000,000. Beijing HC International will, in turn, have
to increase its equity investment in Huamei Information by RMB19,000,000.

4.
Outcome of the Restructuring 

Upon completion of the Restructuring, (a) Huamei Information shall become a
Chinese-foreign invested enterprise incorporated in China, 98% interest of which
shall be directly held by the Company; and (b) Huamei Information shall become
the holding company of all the domestic advertising businesses being carried out
by the group members of HC International at the date of signing of this
Agreement.

 

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EXHIBIT G
 
VOTING AGREEMENT
 

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EXHIBIT H
 

Term Sheet of the Shareholders’ Loan Agreement
 

 
Borrower:  Metaphor Corp.
 
Lender:   Hong Kong Huicong International Group Limited
 
Loan Amount:
U.S. $ equivalent of RMB30,000,000 as of the execution of the Sale and Purchase
Agreement

 
Purpose:

To repay the indebtedness owed to the Lender by the Acquired Companies (as
defined in the Sale and Purchase Agreement between Metaphor Corp., Hong Kong
Huicong International Group Limited and 8 Holdings LLC (“SPA”), which will
become the subsidiaries of the Borrower upon closing of the SPA.

 
Final Maturity Date:

Five years from the closing of. The SPA (“Closing”)

 
Interest Rate:

1% over LIBOR

 
Interest Payment Dates:

The interest payment dates shall be June 30 and December 31 of each year.
Interest shall be payable semi-annually in arrear on the interest payment dates.

 
Repayment (US$ equivalent as of the execution of the Sale and Purchase
Agreement)

 
3rd anniversary of Closing RMB10,000,000
 
5th anniversary of Closing RMB20,000,000
 
Currency:

All principal repayments and interest payments to the Lender shall be made in
cash and be the equivalent in US Dollars. The exchange rate of US Dollars for
Renminbi to be applied to the principal repayment and interest payment shall be
based on the average of the bid and offer prices for cash remittance quoted by
the People’s Bank of China on the date of repayment and payment as the case may
be.

 
Taxation and Deductions:

All payments by the Borrower to the Lender under the Shareholder’s Loan
Agreement shall be made free and clear of all taxes, levies, withholding or
deductions of whatever nature, as well as stamp duty, levy or other form of
charge applied by the relevant tax authorities.

 
Documentation:

The Shareholder’s Loan will be subject to execution of a Shareholder’s Loan
Agreement in form and content satisfactory to the parties containing provisions
customary for transactions of this nature. The parties shall execute the
Shareholder’s Loan Agreement on or prior to the Closing.

 
Governing Law:

The Laws of the Hong Kong Special Administrative Region.

 

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EXHIBIT I
 
SHAREHOLDER WIRE TRANSFER INSTRUCTIONS
 

 
Bank Name:  The Hongkong and Shanghai Banking Corporation Limited
 
Bank Address: No. 1 Queen’s Road, Central, Hong Kong
 
SWIFT Code: HSBCHKHHHKH
 
Company Name: Hong Kong Huicong International Group Limited
 
Account No.:  
 
USD account: 162-201214-274
 
HSBC phone no.: 00852-27483322