Exhibit 10.2

 

PaulHastings

 

 

Execution Counterpart

 

 

 

 

TRANSFER AGREEMENT

 

 

by and between

 

 

CITIC CULTURAL AND SPORTS INDUSTRY CO. LTD.

 

 

and

 

 

BEIJING MULTIMEDIA LIMITED

 

 

Dated as of 2003.12.16

 

 

 

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TABLE OF CONTENTS

 

ARTICLE

 

 

 

I.

TABLE OF CONTENTS

 

II.

TRANSFER OF NET OPERATING PROFITS

 

 

 

1.1

Agreement to Transfer

 

III.

CLOSING

 

 

 

2.1

Time and Place of Closing

 

 

 

2.2

CITIC Cultural’s Actions at Closing

 

 

 

2.3

Beijing Multimedia’s Actions at Closing

 

IV.

ACTIONS PRIOR TO CLOSING

 

 

 

3.1

Efforts of CITIC Cultural to Satisfy Conditions

 

 

 

3.2

Efforts of Beijing Multimedia to Satisfy Conditions

 

V.

REPRESENTATIONS AND WARRANTIES

 

 

 

4.1

Representations and Warranties Relating to CITIC Cultural

 

 

 

4.2

Representations and Warranties Relating to the NOP Interest

 

 

 

4.3

Representations and Warranties of Beijing Multimedia

 

VI.

COVENANTS

 

 

 

5.1

Positive Covenants

 

 

 

5.2

Negative Covenants

 

VII.

INDEMNIFICATION

 

VIII.

CONDITIONS PRECEDENT

 

 

 

7.1

Conditions to Each Party’s Obligations

 

 

 

7.2

Conditions to the Obligations of CITIC Cultural

 

 

 

7.3

Conditions to the Obligations of Beijing Multimedia

 

IX.

shortfall undertaking

 

 

 

8.1

CITIC Cultural’s Undertaking

 

X.

TERMINATION

 

 

 

9.1

Right to Terminate

 

 

 

9.2

Cessation of Agreement

 

 

 

9.3

Effect of Termination

 

XI.

GENERAL

 

 

 

10.1

Expenses

 

 

 

10.2

Confidentiality

 

 

 

10.3

Entire Agreement

 

 

 

10.4

Captions

 

 

 

10.5

Assignments

 

 

 

10.6

Notices and Other Communications

 

 

 

10.7

Governing Law

 

 

 

10.8

Jurisdiction

 

 

 

10.9

Amendments

 

 

 

10.10

Counterparts

 

 

 

10.11

Partial Invalidity

 

 

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10.12

Time

 

 

 

10.13

Specific Performance

 

 

 

10.14

Disclosure by CITIC Cultural and Beijing Multimedia

 

 

 

10.15

Languages

 

 

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THIS TRANSFER AGREEMENT (this “Agreement”) dated as of 2003.12.16 is entered
into by and between:

 

(1)                                  CITIC CULTURAL AND SPORTS INDUSTRY CO. LTD.
(“CITIC Cultural”), a limited liability company organized under the laws of the
People’s Republic of China (the “PRC”); and

 

(2)                                  BEIJING MULTIMEDIA LIMITED, a company
organized and existing under the laws of the British Virgin Islands (“Beijing
Multimedia”).

 

WITNESSETH:

 

WHEREAS, CITIC Cultural holds forty-nine percent (49%) of the registered capital
(such 49% equity interest, the “Beijing Metro Media Equity Interest”) of Beijing
Metro Cultural Media Investment Co. Ltd (“Beijing Metro Media”), which holds
seventy percent (70%) of the registered capital (such 70% equity interest, the
“Beijing Metro Advertisement Equity Interest”) of Beijing Metro Media
Advertisement Co. Ltd. (“Beijing Metro Advertisement”).  That is CITIC Cultural
holds 34.3% indirect equity interest in Beijing Metro Advertisement.

 

WHEREAS, Beijing Metro Media possesses exclusive rights to distribute
publications and print advertisements in all of the subway system in Beijing
City and Beijing Metro Advertisement is in the business of the design,
production and publication of advertisements.

 

WHEREAS, CITIC Cultural, subject to the terms and conditions of this Agreement,
will transfer up to all its rights, title and interest in and to all dividends,
distributions and other income it receives from Beijing Metro Media which is
attributable to 87.5% of CITIC Cultural’s 34.3% indirect equity interest (87.5%
of 34.3% being approximately 30%) in Beijing Metro Advertisement (the “NOP
Interest”) subject to certain adjustments in accordance with the terms and
conditions of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

 

ARTICLE I

 

TRANSFER OF NET OPERATING PROFITS

 

1.1                                 Agreement to Transfer.

 

(a)                                  Transfer of NOP Rights.  Subject to the
terms and conditions hereof, , CITIC Cultural agrees to transfer (without
recourse except to the extent specifically provided herein) all its rights,
title and interest (present and future, actual or contingent) in and to the NOP
Interest during the period commencing on January 1, 2004 (the “Commencement
Date”) and ending on the later of December 31, 2016 or the date on which the
License Agreement, dated around August 6, 2002, between Beijing Metro Cultural
Media Co. Ltd. and Beijing Metro Group Co. Ltd. shall terminate (the “Ending
Date”, and the period from the Commencement Date to the Ending Date, the
“Relevant Period”) (provided, for the avoidance of doubt, that all NOP Interest
received after the Commencement Date but declared or arising prior to the
Commencement Date shall not be

 

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transferred hereunder) and Beijing Multimedia agrees to take a transfer of such
rights, title and interest in and to the NOP Interest subject to the terms and
conditions of this Agreement.

 

(b)                                 Transfer of NOP Interest.  CITIC Cultural
shall transfer all funds it shall receive from Beijing Metro Media representing
the NOP Interest transferred under this Agreement for every half fiscal year
period, within 60 days after the end of each half fiscal year, to a bank account
designated in writing by Beijing Multimedia (the “Designated Account”), except
that the last transfer of the appropriate NOP Interest transfer shall occur
within 60 days after the Ending Date (each such transfer, an “NOP Transfer”). 
By way of illustration, the first NOP Transfer for the NOP Interest transferred
hereunder relating to the period from the Commencement Date to June 30, 2004
shall occur on or before the 60th day after June 30, 2004 and the second NOP
Transfer relating to the next period from July 1, 2004 to December 31, 2004
shall occur on or before the 60th day after December 31, 2004.  The last NOP
Transfer shall occur on or before the 60th day after the Ending Date.  CITIC
Cultural shall be responsible for obtaining all approvals from the relevant
government agencies and authorities in the People’s Republic of China (“PRC
Authorities”), including, without limitation, approval from the PRC State
Administration of Foreign Exchange (“SAFE”), for the remittance of each NOP
Transfer transferred under this Agreement to the Designated Account in U.S.
dollars.

 

(c)                                  The Consideration.  The consideration for
CITIC Cultural’s transfer of its rights, title and interest in and to the NOP
Interest (the “NOP Transfers”) to Beijing Multimedia during the Relevant Period
is cash calls by CITIC Cultural of US$50,000,000 (“NOP Cash Calls”).  CITIC
Cultural undertakes that the NOP Cash Calls shall be used to fund the working
capital requirements for the growth and expansion of its multimedia business in
the PRC and, as permissible, Asia, Europe and the United States of America.  The
NOP Cash Calls shall be paid by Beijing Multimedia to CITIC Cultural by payment
to a bank account in the PRC designated in writing by CITIC Cultural (“Payment
Account”) for the purpose of the receipt of the NOP Cash Calls.  CITIC Cultural
shall be responsible for obtaining all relevant approvals and procedures from
the PRC Authorities relating to payment and remittances under this Agreement and
the relevant NOP Interest shall be deemed to have been transferred upon the
relevant payment to the Payment Account.

 

(d)                                 Adjustments.  In the event that the full
amount of the NOP Cash Calls could not be paid by Beijing Multimedia to CITIC
Cultural for any reason whatsoever on or before March 31, 2004, the amount of
the NOP Interest transferred under this Agreement, including all relevant
references under this Agreement to the term “NOP Interest” shall be adjusted and
reduced by a factor of 0.0017% for each US$100,000 shortfall in the NOP Cash
Calls paid by Beijing Multimedia to CITIC Cultural Provided Always that the
minimum amount of the NOP Transfers under this Agreement shall in any event be
not less than 15% of the NOP Interest transferred hereunder if the full NOP Cash
Calls had been paid.  The minimum NOP Interest transferred under this Agreement
is in recognition of the substantial skill and effort utilized by Beijing
Multimedia in structuring the present transaction.

 

(e)                                  Ownership of the NOP Interest.  On and
after the Commencement Date, subject to Sections 3(d) and 9.3(b) hereof, Beijing
Multimedia shall own all of CITIC Cultural’s rights, title and interest (present
and future, actual or contingent) in and to the NOP Interest as they relate to
the Relevant Period and CITIC Cultural shall not take any action inconsistent
with such ownership nor shall CITIC Cultural claim any ownership interest in
such NOP Interest during the Relevant Period.

 

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ARTICLE II

 

CLOSING

 

2.1                                 Time and Place of Closing.  The closing
(“Closing”) for the transactions set forth in this Agreement between the parties
shall take place at such place as the parties deem appropriate on or before
January 15, 2004 or at such other time and/or on such other date as the parties
may mutually agree in writing (the “Closing Date”).

 

2.2                                 CITIC Cultural’s Actions at Closing.  At
Closing, against delivery by Beijing Multimedia of the documents referred to in
Section 2.3 hereof, CITIC Cultural shall deliver to Beijing Multimedia the
following:

 

(a)                                  A certificate dated as of the Closing Date,
executed and delivered by a duly authorized officer of CITIC Cultural pursuant
to Section 7.3(a) hereof; and

 

(b)                                 The legal opinion referred to in Section
7.3(f) hereof.

 

2.3                                 Beijing Multimedia’s Actions at Closing.  At
Closing, against delivery by CITIC Cultural of the documents referred to in
Section 2.2 hereof, Beijing Multimedia shall deliver to CITIC Cultural the
following:

 

(a)                                  A certificate dated as of the Closing Date,
executed and delivered by a duly authorized officer of Beijing Multimedia
pursuant to Section 7.2(a) hereof;

 

(b)                                 True and complete copies of the resolutions
or consents of the board of directors of Beijing Multimedia approving this
Agreement and the transactions that are the subject of this Agreement;

 

(c)                                  True and complete copies of the resolutions
of Beijing Multimedia’s sole shareholder approving this Agreement and the
transactions that are the subject of this Agreement;

 

(d)                                 The legal opinion referred to in Section
7.2(g) hereof; and

 

(e)                                  Satisfaction of Section 7.2(i) hereof
regarding the payment of the NOP Cash Calls.

 

ARTICLE III

 

ACTIONS PRIOR TO CLOSING

 

3.1                                 Efforts of CITIC Cultural to Satisfy
Conditions.  CITIC Cultural shall use its reasonable best efforts to cause all
the conditions set forth in Sections 7.1 and 7.3 to be satisfied prior to or at
Closing.

 

3.2                                 Efforts of Beijing Multimedia to Satisfy
Conditions.  Beijing Multimedia shall use its reasonable efforts to cause all
the conditions set forth in Sections 7.1 and 7.2 to be satisfied prior to or at
Closing.

 

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ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

4.1                                 Representations and Warranties Relating to
CITIC Cultural.  CITIC Cultural represents and warrants to Beijing Multimedia as
of the date hereof as follows:

 

(a)                                  CITIC Cultural (i) is a corporation duly
organized and validly existing under the laws of the People’s Republic of China
and has or will, by the Closing Date, have taken all necessary action and
corporate approvals to authorize the execution and delivery of this Agreement
and the performance of its obligations hereunder; (ii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now conducted; and (iii) has all
licenses, permits, consents or approvals from or by, and has made all filings
with, and has given all notices to, all government authorities having
jurisdiction, to the extent required for such ownership operation and conduct,
except where failure to do so could not reasonably be expected to have a
Material Adverse Effect on CITIC Cultural.  When used in connection with any
party to this Agreement, the term “Material Adverse Effect” means, with respect
to any entity, any event, change, occurrence, development, circumstance or
effect that is or would reasonably be expected to be materially adverse to the
assets, properties, condition (financial or otherwise), business or results of
operations of such entity and its subsidiaries taken as a whole or the ability
of such entity to consummate the transactions contemplated by this Agreement;

 

(b)                                 No litigation is pending or, to the
knowledge of CITIC Cultural, threatened against CITIC Cultural that (i)
challenges CITIC Cultural’s right or power to enter into or perform any of its
obligations under this Agreement or any related document, or the validity or
enforceability of this Agreement or any related document or any action taken
hereunder or thereunder, or (ii) seeks to prevent the NOP Transfer or the
consummation of any of the transactions that are the subject of this Agreement
or any related documents or (iii) has a reasonable risk of being determined
adversely to CITIC Cultural and that, if so determined, would reasonably be
expected to have a Material Adverse Effect on CITIC Cultural;

 

(c)                                  (i) CITIC Cultural has not incurred any
obligations, contingent or non-contingent liabilities, liabilities for charges,
long-term leases or unusual forward or long-term commitments that, alone or in
the aggregate, could reasonably be expected to have a Material Adverse Effect on
CITIC Cultural, (ii) no contract, lease or other agreement or instrument has
been entered into by CITIC Cultural or has become binding upon CITIC Cultural’s
assets and no law or regulation applicable to CITIC Cultural has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect
on CITIC Cultural, and (iii) CITIC Cultural is not in default and no third party
is in default under any material contract, lease or other agreement or
instrument to which CITIC Cultural is a party that alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect on CITIC
Cultural.  As of the Closing Date, no event has occurred that alone or together
with other events could reasonably be expected to have a Material Adverse Effect
on CITIC Cultural;

 

(d)                                 This Agreement has been duly executed and
delivered by CITIC Cultural and is a valid and binding agreement of CITIC
Cultural, enforceable against CITIC Cultural in accordance with its terms;

 

(e)                                  Neither the execution or delivery of this
Agreement nor the consummation of the

 

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transactions that are the subject of this Agreement will violate, result in a
breach of, or constitute a default (or an event which, with notice or lapse of
time or both would constitute a default) under the Articles of Association and
Enterprise Legal Person Business Licence of CITIC Cultural or any agreement or
instrument to which CITIC Cultural or any subsidiary of CITIC Cultural is a
party or by which any of them is bound nor will it, as at the Closing Date,
violate, result in a breach of, or constitute a default (or an event which, with
notice or lapse of time or both would constitute a default) under any law, or
any order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over CITIC Cultural or any of its
subsidiaries;

 

(f)                                    CITIC Cultural has good and valid title
to the Beijing Metro Media Equity Interest, which represents 49% of the equity
interest in Beijing Metro Media as of the date hereof, free and clear of all
liens and encumbrances and to the best of its knowledge, has a 34.3% indirect
interest in the Beijing Metro Advertisement Equity Interest, which is
represented by Beijing Metro Media’s 70% equity interest in Beijing Metro
Advertisement, free and clear of all liens and encumbrances; CITIC Cultural has
all the absolute right and authority to receive and transfer all of its rights,
title and interest in and to the NOP Interest under this Agreement, and the
transfer of such rights, title and interests in and to the NOP Interest
constitutes, as applicable, a valid sale, transfer, assignment and conveyance to
Beijing Multimedia of all rights, title and interests of CITIC Cultural in and
to such NOP Interest;

 

(g)                                 All consents, approvals, licences and
authorizations of, and all filings and registrations with, any governmental or
statutory agency or authority, including the PRC Authorities (including, without
limitation, SAFE), necessary for the due execution and delivery of this
Agreement have been obtained or will, as far as the same are required to be done
or performed by CITIC Cultural, by the Closing Date, be necessary for the
performance by CITIC Cultural of the terms of this Agreement have been obtained
or will, by the Closing Date, be obtained;

 

(h)                                 No information contained in this Agreement,
any related document, or any written statement furnished by or on behalf of
CITIC Cultural to Beijing Multimedia pursuant to the terms of this Agreement or
any of the other related documents, taken as a whole, contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made; and

 

(i)                                     There have been no examinations or
audits of any tax returns or reports of CITIC Cultural or any of its
subsidiaries by any applicable governmental agency; each of CITIC Cultural and
all of its subsidiaries has duly filed all tax returns required to have been
filed by it and paid all Taxes  (as defined below) shown to be due on such
returns, and there are in effect no waivers of applicable statutes of
limitations with respect to Taxes for any year with respect to such entities. 
When used in connection with any party to this Agreement, “Taxes” means (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax or
other assessment or charge of a similar nature, together with any interest or
any penalty, addition to tax or additional amount payable by an entity and
imposed by any governmental authority responsible for the imposition of any such
tax.

 

4.2                                 Representations and Warranties Relating to
the NOP Interest.  CITIC Cultural represents and warrants to Beijing Multimedia
as of the date hereof in connection with its rights, title

 

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and interest in and to the NOP Interest as follows:

 

(a)                                  CITIC Cultural shall have sold all of its
rights, title and interest in and to the NOP Interest during the Relevant Period
for cash consideration and have transferred such rights pursuant to Section
1.1(a), for an amount that constitutes fair consideration and reasonable value
therefor; and

 

(b)                                 CITIC Cultural is not aware of the existence
of any fact that could result in material impairment in the distribution or
collectability of the NOP Interest.

 

4.3                                 Representations and Warranties of Beijing
Multimedia.  Beijing Multimedia represents and warrants to CITIC Cultural as of
the date hereof as follows:

 

(a)                                  Beijing Multimedia (i) is a corporation
duly organized and validly existing under the laws of the British Virgin Islands
and has or will, by the Closing Date, have taken all necessary action and
corporate approvals, including board and sole shareholder approval, to authorize
the execution and delivery of this Agreement and the performance of its
obligations hereunder; and (ii) has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
government authorities having jurisdiction, to the extent required for such
ownership, operation and conduct, except where failure to do so could not
reasonably be expected to have a Material Adverse Effect on Beijing Multimedia;

 

(b)                                 No litigation is pending or, to the
knowledge of Beijing Multimedia, threatened against Beijing Multimedia that (i)
challenges Beijing Multimedia’s right or power to enter into or perform any of
its obligations under this Agreement or any related document, or the validity or
enforceability of this Agreement or any related document, or any action taken
hereunder or thereunder; (ii) seeks to prevent the consummation of any of the
transactions that are the subject of this Agreement or any related documents or
(iii) has a reasonable risk of being determined adversely to Beijing Multimedia
and that, if so determined, could have a Material Adverse Effect on Beijing
Multimedia;

 

(c)                                  (i)  Beijing Multimedia has not incurred
any obligations, contingent or non-contingent liabilities, liabilities for
charges, long-term leases or unusual forward or long-term commitments that,
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect on Beijing Multimedia, (ii) no contract, lease or other agreement
or instrument has been entered into by Beijing Multimedia or has become binding
upon Beijing Multimedia’s assets and no law or regulation applicable to Beijing
Multimedia has been adopted that has had or could reasonably be expected to have
a Material Adverse Effect on Beijing Multimedia, and (iii) Beijing Multimedia is
not in default and no third party is in default under any material contract,
lease or other agreement or instrument to which Beijing Multimedia is a party
that alone or in the aggregate could reasonably be expected to have a Material
Adverse Effect on Beijing Multimedia.  As of the Closing Date, no event has
occurred that alone or together with other events could reasonably be expected
to have a Material Adverse Effect on Beijing Multimedia;

 

(d)                                 This Agreement has been duly executed and
delivered by Beijing Multimedia and is a valid and binding agreement of Beijing
Multimedia, enforceable against Beijing Multimedia in accordance with its terms;

 

(e)                                  Neither the execution or delivery of this
Agreement nor the consummation of the transactions that are the subject of this
Agreement will violate, result in a breach of, or constitute a

 

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default (or an event which, with notice or lapse of time or both would
constitute a default) under the Memorandum of Association and Articles of
Association of Beijing Multimedia or any agreement or instrument to which
Beijing Multimedia is a party or by which any of them is bound nor will it, as
at the Closing Date, violate, result in a breach of, or constitute a default (or
an event which, with notice or lapse of time or both would constitute a default)
under any law, or any order, rule or regulation of any court or governmental
agency or other regulatory organization having jurisdiction over Beijing
Multimedia or any of its subsidiaries;

 

(f)                                    All consents, approvals, licences and
authorizations of, and all filings and registration with, any governmental or
statutory agency or authority necessary for the due execution and delivery of
this Agreement have been obtained or will, as far as the same are required to be
done or performed by Beijing Multimedia by the Closing Date, be necessary for
the performance by Beijing Multimedia of the terms of this Agreement have been
obtained or will, by the Closing Date, be obtained and all consents, approvals,
licences, authorizations, filings and registrations necessary for the
performance or enforceability hereof and for the performance by Beijing
Multimedia of the terms of this Agreement have been obtained or will, by the
Closing Date, be obtained; and

 

(g)                                 No information contained in this Agreement,
any of the other related documents, or any written statement furnished by or on
behalf of Beijing Multimedia to CITIC Cultural pursuant to the terms of this
Agreement or any of the other related documents, taken as a whole, contains any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made.

 

ARTICLE V

 

COVENANTS

 

5.1                                 Positive Covenants.

 

(a)                                  Conduct of Business.  CITIC Cultural shall,
and shall use reasonable efforts to cause Beijing Metro Media and Beijing Metro
Advertisement to, carry on and conduct their respective business in
substantially the same manner and in substantially the same fields of enterprise
as they are presently conducted and do all things necessary to remain duly
incorporated, validly existing and in good standing as domestic limited
liability companies in the People’s Republic of China and maintain all requisite
authority to conduct their business in the People’s Republic of China.

 

(b)                                 Further Assurance.  At any time and from
time to time, each party to this Agreement agrees, subject to the terms and
conditions of this Agreement, to take such actions and to execute and deliver
such documents as may be necessary to effectuate the purposes of this Agreement
at the earliest practicable time and agrees to co-operate with Beijing
Multimedia and provide all information that is necessary or desirable in
connection with the obtaining of the shareholder, regulatory and government
approval contemplated hereunder.

 

(c)                                  Notices.

 

(i)                                     CITIC Cultural shall give prompt notice
to Beijing Multimedia of (a) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty by CITIC

 

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Cultural contained in this Agreement to be untrue or inaccurate in any material
respect, and (b) any failure of CITIC Cultural to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, that the delivery of any notice by CITIC Cultural pursuant
to this Section 5.1(c)(i) shall not limit or otherwise affect the remedies
available to Beijing Multimedia; and

 

(ii)                                  Beijing Multimedia shall give prompt
notice to CITIC Cultural of (a) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would be likely to cause any
representation or warranty by Beijing Multimedia contained in this Agreement to
be untrue or inaccurate in a material respect, and (b) any failure of Beijing
Multimedia to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, that the delivery of any
notice by Beijing Multimedia pursuant to this Section 5.1(c)(ii) shall not limit
or otherwise affect the remedies available to CITIC Cultural.

 

(d)                                 Payment of PRC Taxes.  CITIC Cultural shall
pay when due, and the amount of NOP Interest deliverable to Beijing Multimedia
and shall be subject to the payment and withholding of, any Taxes (including but
not limited to value added tax, withholding tax and any similar taxes) imposed
or which may be imposed by the PRC Authorities and any other Tax authority which
has any right to any portion of the NOP Interest payable in connection with the
sale of its rights, title and interest in and to the NOP Interest or in
connection with each Transfer.

 

5.2                                 Negative Covenants.

 

(a)                                  Sale of the NOP Interest.  CITIC Cultural
shall not sell, transfer, convey, assign (by operation of law or otherwise) or
otherwise dispose of, or assign any right to receive income and distributions in
respect of the NOP Interest during the Relevant Period, in whole or in part.

 

(b)                                 Liens.  CITIC Cultural shall not create or
incur, assume and shall use reasonable efforts not to permit to exist any
adverse claim on or with respect to its NOP Interest or any of its other
properties or assets relating to the NOP Interest (whether now owned or
hereafter acquired).  In addition, CITIC Cultural shall not become a party to
any agreement, note, indenture or instrument or take any other action that would
prohibit the creation of a lien on any of its properties or other assets
relating to the NOP Interest in favor of Beijing Multimedia as additional
collateral for the recourse and indemnity obligations of CITIC Cultural to
Beijing Multimedia hereunder, or with respect to any NOP Transfer.

 

ARTICLE VI

 

INDEMNIFICATION

 

6.1 (a)  CITIC Cultural agrees to indemnify and hold harmless Beijing
Multimedia, its successors in title, and any of its assignees against all or any
losses, damages, claims, demands or liabilities (including without limitation,
any legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) arising out of a breach or breaches by
CITIC Cultural of any of the representations, warranties, undertakings or
covenants given by it in this Agreement or for any breach of any term or
condition of this Agreement or for any

 

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failure or default by CITIC Cultural to transfer the NOP Interest in accordance
with the terms of this Agreement.

 

(b)                                 Beijing Multimedia agrees to indemnify and
hold harmless CITIC Cultural, its successors in title, and any of its assignees
against all or any losses, damages, claims, demands or liabilities (including
without limitation, any legal or other expenses reasonably incurred in
connection with defending or investigating any such action or claim) arising out
of a breach or breaches by Beijing Multimedia of any of the representations,
warranties, undertakings or covenants given by it in this Agreement or for any
breach of any term or condition of this Agreement or for any failure or default
by Beijing Multimedia to pay the NOP Cash Calls in accordance with the terms of
this Agreement.

 

(c)                                  No claim shall be made by either party
hereto against the other party in respect of any breach of any representation or
warranty by the other party to the extent that such breach or claim would not
have arisen but for a change in law, legislation or the rules or regulations of
any regulatory authority in the People’s Republic of China, the British Virgin
Islands, the Hong Kong Special Administrative Region or any relevant
jurisdiction coming into force after the date of this Agreement.

 

ARTICLE VII

 

CONDITIONS PRECEDENT

 

7.1                                 Conditions to Each Party’s Obligations.  The
performance of each party’s obligations at Closing is subject to the
satisfaction of the following conditions (any or all of which may be waived in
writing by each party):

 

(a)                                  The issuance of a valuation report based on
the valuation date of August 25, 2003 relating to the rights, title and interest
in and to the NOP Interest transferred hereunder to the satisfaction of both
CITIC Cultural and Beijing Multimedia.

 

7.2                                 Conditions to the Obligations of CITIC
Cultural.  The performance of the obligations of CITIC Cultural at Closing is
subject to the satisfaction of the following conditions (any or all of which may
be waived by CITIC Cultural):

 

(a)                                  The representations and warranties of
Beijing Multimedia contained in this Agreement shall be true and correct in all
material respects at the Closing Date, and Beijing Multimedia shall have
delivered to CITIC Cultural a certificate dated the Closing Date signed by an
authorized officer of Beijing Multimedia to that effect in form and substance
reasonably satisfactory to CITIC Cultural;

 

(b)                                 Beijing Multimedia shall have fulfilled all
of its obligations under this Agreement required to have been fulfilled on or
prior to the Closing Date;

 

(c)                                  No order shall have been entered by any
court or governmental authority and be in force which invalidates this Agreement
or restrains CITIC Cultural from completing the transactions that are the
subject of this Agreement;

 

(d)                                 Beijing Multimedia shall have received all
authorizations and approvals from its board of directors and its sole
shareholder, to consummate the transactions that are the subject of this

 

9

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Agreement;

 

(e)                                  All consents, approvals, licences and
authorizations of, and all filings and registrations with, any governmental or
statutory agency or regulatory authority necessary for the transfer of CITIC
Cultural of its rights, title and interest in and to the NOP Interest to Beijing
Multimedia hereunder, and the receipt of the NOP Transfers from CITIC Cultural,
pursuant to this Agreement shall have been obtained by Beijing Multimedia;

 

(f)                                    All regulatory and third party
permissions, approvals or consents necessary for the consummation of the
transactions at Closing shall have been obtained by Beijing Multimedia;

 

(g)                                 Issuance of a legal opinion by Beijing
Multimedia’s British Virgin Islands counsel acceptable to CITIC Cultural of the
transactions that are the subject of this Agreement;

 

(h)                                 No Termination Event as set out in Article
IX shall have occurred and be continuing; and

 

(i)                                     Beijing Multimedia shall provide
confirmation and sufficient evidence (if required) to the satisfaction of CITIC
Cultural that payment of the NOP Cash Calls will be made on or before March 31,
2004.

 

7.3                                 Conditions to the Obligations of Beijing
Multimedia.  The performance of the obligations of Beijing Multimedia at Closing
is subject to the satisfaction of the following conditions (any or all of which
may be waived by Beijing Multimedia):

 

(a)                                  The representations and warranties of CITIC
Cultural contained in this Agreement shall be true and correct in all material
respects at the Closing Date, and CITIC Cultural shall have delivered to Beijing
Multimedia a certificate dated the Closing Date and signed by a duly authorized
officer of CITIC Cultural to that effect in form and substance reasonably
satisfactory to Beijing Multimedia;

 

(b)                                 CITIC Cultural shall have fulfilled in all
material respects all of its obligations under this Agreement required to have
been fulfilled on or prior to the Closing Date;

 

(c)                                  No order shall have been entered by any
court or governmental authority and be in force which invalidates this Agreement
or restrains Beijing Multimedia from completing the transactions that are the
subject of this Agreement;

 

(d)                                 All consents, approvals, licences and
authorizations of, and all filings and registrations with, any governmental or
statutory agency or regulatory authority, including the PRC Authorities,
necessary for the transfer of the NOP Interest to Beijing Multimedia pursuant to
this Agreement should have been obtained by CITIC Cultural, or Beijing
Multimedia shall have received an officer’s certificate from CITIC Cultural in
form and substance satisfactory to Beijing Multimedia affirming that no such
consents or approvals are required;

 

(e)                                  No Termination Event as set out in Article
IX shall have occurred and be continuing; and

 

(f)                                    CITIC Cultural’s PRC counsel shall have
issued a legal opinion acceptable to Beijing Multimedia in relation to the
validity of the transactions that are the subject of this Agreement under

 

10

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the laws of the People’s Republic of China, including without limitation, the
third party consents and government approvals necessary for the NOP Transfers.

 

ARTICLE VIII

 

SHORTFALL UNDERTAKING

 

8.1                                 CITIC Cultural’s Undertaking.  On the
assumption that the full amount of the NOP Cash Calls is paid by Beijing
Multimedia to CITIC Cultural for the transfer of the entire NOP Interest on or
before March, 31, 2004, for each of the first three (3) years after the
Commencement Date (such three (3) year period, the “Shortfall Period”), the
aggregate annual amounts of the NOP Transfers, calculated as of thirty (30) days
after December 31, to Beijing Multimedia by CITIC Cultural for the year ended
December 31 (the “Annual Aggregate NOP Transfers”) is expected to be at least
US$20 million.  During each year in the Shortfall Period, in the event that the
Annual Aggregate NOP Transfers is less than US$20 million, CITIC Cultural
undertakes to provide to Beijing Multimedia cash or other businesses of CITIC
Cultural (subject to all relevant approvals) generating an additional amount
(the “Additional Amounts”) equal to such shortfall, such that the Annual
Aggregate NOP Transfers together with the Additional Amounts for the prior
fiscal year shall not be less than US$20 million, within ninety (90) days after
December 31 without any prior notice served by Beijing Multimedia. 
Notwithstanding any provision herein or elsewhere to the contrary, to the extent
that the sum of the combined NOP Transfers and any Additional Amounts paid or
payable to Beijing Multimedia in the aggregate during or with respect to the
Shortfall Period shall exceed US$60 million, CITIC Cultural’s obligation to
provide the Additional Amounts shall cease.  For the avoidance of doubt, any
Annual Aggregate NOP Transfer or Additional Amount hereunder shall be subject to
payment or provision for Taxes, including without limitation, a 20% PRC
withholding tax to which any Annual Aggregate NOP Transfer or Additional Amount
currently may be subject.  In the event that less than the full amount of the
NOP Cash Calls paid by Beijing Multimedia to CITIC Cultural by March 31, 2004,
the obligations under this Clause 8.1 shall be pro rated by the amount of the
actual NOP Interest transferred on or before March, 31 2004 in relation to the
total NOP Interest which would have been transferred save for the adjustments
under Section 3(d).

 

ARTICLE IX

 

TERMINATION

 

9.1                                 Right to Terminate.  This Agreement may be
terminated at any time:

 

(a)                                  By CITIC Cultural if Beijing Multimedia
shall have breached any of the material terms and conditions of, or otherwise
failed to fulfill its obligations under this Agreement, and such breach or
failure is not cured within five (5) business days after notice thereof by CITIC
Cultural to Beijing Multimedia.

 

(b)                                 By Beijing Multimedia if CITIC Cultural
shall have breached any of the material terms and condition of, or otherwise
failed to fulfill its obligations under this Agreement and such breach or
failure is not cured within five (5) business days after notice thereof by
Beijing Multimedia to CITIC Cultural.

 

11

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9.2                                 Cessation of Agreement.  If (a) any of the
conditions in Sections 7.1 and 7.2 is not satisfied or waived by CITIC Cultural;
(b) any of the conditions in Sections 7.1 and 7.3 is not satisfied or waived by
Beijing Multimedia; or (c) Closing for whatever reason does not occur on or
prior to 5 business days for the date of this Agreement or such other date as
may be mutually agreed in writing between the parties, this Agreement shall,
without further action from any party, cease and be terminated.

 

9.3                                 Effect of Termination.

 

(a)                                  Upon termination of this Agreement pursuant
to Sections 9.1 and 9.2 above, neither party shall have any further rights or
obligations, or any claim against the other party for any costs, damages,
compensation or otherwise, under this Agreement, except for any liability for
any breach of this Agreement that occurs before this Agreement is terminated.

 

(b)                                 The termination or cessation of this
Agreement however caused shall not affect any provision of this Agreement which
is expressly provided to come into effect or to continue in effect after such
termination or cessation.

 

ARTICLE X

 

GENERAL

 

10.1                           Expenses.  CITIC Cultural and Beijing Multimedia
shall each pay its own expenses in connection with the transactions that are the
subject of this Agreement, including applicable transaction Taxes and legal fees
in connection with the enforcement of this Agreement and the other related
documents, but excluding any costs of enforcement or collection of the NOP
Interest.

 

10.2                           Confidentiality.  The parties hereto each agree
not to disclose any information with respect to the terms of this Agreement or
the transactions contemplated in this Agreement, except in accordance with this
Section 10.2 or Section 10.14 hereof.  Neither party hereto shall issue any
press releases or otherwise make any public statements with respect to this
Agreement, except that nothing in this Section 10.2 shall prevent either party
from making any statement when and as required by applicable law or any
regulation or requirement of any governmental or regulatory authority or by the
rules of any securities exchange or securities quotation system on which the
securities of that party or an affiliate are listed or quoted, provided that
such party first consults with the other party regarding the wording of such
statement.  The provisions of this Section 10.2 shall continue and endure
notwithstanding the termination or cessation of this Agreement.

 

10.3                           Entire Agreement.  This Agreement contains the
entire agreement between CITIC Cultural and Beijing Multimedia relating to the
transactions that are the subject of this Agreement; all prior negotiations,
understandings and agreements between CITIC Cultural and Beijing Multimedia
shall be superseded by this Agreement; and there are no representations,
warranties, understandings or agreements concerning the transactions which are
the subject of this Agreement other than those expressly set forth in this
Agreement.

 

10.4                           Captions.  The captions of the Articles and
Sections of this Agreement are for reference only, and do not affect the meaning
or interpretation of this Agreement.

 

10.5                           Assignments.  Except for assignment to an
affiliate, neither this Agreement nor any

 

12

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right of any party under it may be assigned without the prior written consent of
the other parties.

 

10.6                           Notices and Other Communications.  Any notice or
other communication under this Agreement must be in writing and will be deemed
given when delivered in person or sent by facsimile (with evidence of
transmission to the number to which it is required to be sent), on the day after
the day on which sent by a recognized overnight courier service, or on the third
business day after the day on which mailed by first class mail to the following
addresses (or such other address as may be specified after the date of this
Agreement by the party to which the notice or communication is sent):

 

If to CITIC Cultural:

 

CITIC Cultural and Sports Industry Co. Ltd.

 

 

No.23 Dong Zhi Men Wei

 

 

Beijing 100600

 

 

People’s Republic of China

 

 

 

 

 

Attention:  Mr. Li Bolun

 

 

Facsimile No:  +8610 6532 7604

 

 

 

If to Beijing Multimedia:

 

Beijing Multimedia Limited

 

 

c/o East Asia Corporate Services (BVI) Limited

 

 

East Asia Chambers, P.O. Box 901

 

 

Road Town, Tortola

 

 

British Virgin Islands

 

 

 

 

 

Attention:  Mak Wai Keung, Shawn

 

 

Facsimile No:  +284 49 55088

 

 

 

with a copy to:

 

Mak Wai Keung, Shawn

 

 

9/F, Villa Elegance

 

 

1 Robinson Road

 

 

Hong Kong

 

 

 

 

 

Facsimile No:  +852 2868 3666

 

10.7                           Governing Law.  This Agreement shall be governed
by and construed in accordance with the laws of the Hong Kong Special
Administrative Region without regard to any conflicts of laws provision thereof.

 

10.8                           Jurisdiction.  The parties to this Agreement
hereby submit to the non-exclusive jurisdiction of the courts of the Hong Kong
Special Administrative Region (and of the appropriate appellate courts) and
waive any objections to venue laid therein.

 

10.9                           Amendments.  This Agreement shall not be altered,
changed, supplemented or amended except by an instrument or document in writing
signed by CITIC Cultural and Beijing Multimedia.

 

13

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10.10                     Counterparts.   This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, and all of
which together shall constitute one and the same agreement.

 

10.11                     Partial Invalidity.    If any term or provision in
this Agreement shall be held to be illegal or unenforceable, in whole or in
part, under any enactment or rule of law, such term or provision or part thereof
shall to that extent be deemed not to form part of this Agreement but the
enforceability of the remainder of this Agreement shall not be affected.

 

10.12                     Time.   Time shall be of the essence hereof.

 

10.13                     Specific Performance.   The parties hereto acknowledge
that irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.

 

10.14                     Disclosure by CITIC Cultural and Beijing
Multimedia.   CITIC Cultural and Beijing Multimedia may disclose any information
with respect to this Agreement or the transactions contemplated hereby (a
“Disclosure”) to any potential investors or providers of financing to the
transactions that are the subject of this Agreement and any related agreement
without any need to obtain the approval of the other party; provided, however,
that prior to the Closing Date:

 

(a)                                  Each of CITIC Cultural or Beijing
Multimedia shall provide the other party with an advance copy of the draft of
any proposed Disclosure at least two business days in advance of its disclosure
date; and

 

(b)                                 The receiving party of any proposed
Disclosure may submit any objections, proposed corrections or comments
concerning the proposed Disclosure to the other party within the two day period
referred to in Section 10.14(a) above, but any such submission shall not
obligate the other party to modify or withhold release of the Disclosure
(regardless of the final form thereof).

 

10.15                     Languages.   This Agreement is executed in both the
Chinese and English languages.

 

14

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representatives, as of the date first above
written.

 

 

[SEAL]

 

 

 

CITIC CULTURAL AND SPORTS INDUSTRY
CO. LTD.

 

 

 

 

 

By:

 /s/ Li Bolun

 

 

Name:

Li Bolun

 

Title:

Chairman

 

 

 

 

 

BEIJING MULTIMEDIA LIMITED

 

 

 

 

 

By:

 /s/ Mak Wai Keung, Shawn

 

 

Name:

Mak Wai Keung, Shawn

 

Title:

Director

 

15

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[g19411kcimage002.jpg]

 

[ILLEGIBLE]
DeHeng Law Offices

 

 

 

Tower B 12th Floor, Focus Place

 

 

No. 19 Financial Street

 

Tel:   86 10 6657 5888  6523 2180

Beijing 100032, PRC

 

Fax:   86 10 6523 2181

[ILLEGIBLE]

 

Website:   www.dhl.com.cn

[ILLEGIBLE] 12 [ILLEGIBLE]: 100032

 

Email:   jllu@dhl.com.cn

 

CITIC Cultural and Sports Industry Co., Ltd.

 

 

 

 

No. 23 Dong Zhi Men Wai

 

 

 

 

Beijing 100600

 

 

 

 

People’s Republic of China

 

 

 

 

Attn.: Mr. Li Bolun

 

 

 

 

 

 

 

 

 

Mr. Mak Wai Keung, Shawn

 

 

 

 

9/F, Villa Elegance

 

 

 

 

1 Robinson Road

 

 

 

 

Hong Kong

 

 

 

 

 

 

 

 

 

Eagle Treasure Limited

 

 

 

 

c/o East Asia Corporate Services (BVI) Limited

 

&

 

c/o Haldanes

East Asia Chambers, P.O. Box 901

 

 

 

8/F, Ruttonjee House

Road Town, Tortola

 

 

 

11 Duddell Street

British Virgin Islands

 

 

 

Central, Hong Kong

Attn.: Mr. Mak Wai Keung, Shawn

 

 

 

Attn.: Mr. John McLellan

 

 

 

 

 

Beijing Multimedia Limited

 

 

 

 

c/o East Asia Corporate Services (BVI) Limited

 

&

 

c/o Mr. Mak Wai Keung, Shawn

East Asia Chambers, P.O. Box 901

 

 

 

9/F, Villa Elegance

Road Town, Tortola

 

 

 

1 Robinson Road

British Virgin Islands

 

 

 

Hong Kong

Attn.: Mr. Mak Wai Keung, Shawn

 

 

 

 

 

 

 

 

 

CENTIV INC.

 

 

 

 

988 Forest Edge Drive

 

 

 

 

Vernon Hills

 

 

 

 

IL 60061

 

 

 

 

 

 

 

 

 

Rosy Hill Investment Limited

 

 

 

 

c/o East Asia Corporate Services (BVI) Limited

 

&

 

c/o Haldanes

East Asia Chambers, P.O. Box 901

 

 

 

8/F, Ruttonjee House

Road Town, Tortola

 

 

 

11 Duddell Street

British Virgin Islands

 

 

 

Central, Hong Kong

 

 

 

 

Attn.: Mr. John McLellan

 

1

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December 16, 2003

 

Ladies and Gentlemen:

 

The Agreement and the Transfer of NOP Interest Thereunder

 

We are qualified to practice law in the People’s Republic of China (the PRC) and
are qualified to issue this PRC legal opinion at your request and in connection
with the Transfer Agreement dated December 16, 2003 by and between CITIC
Cultural and Sports Industry Co., Ltd. (CITIC Cultural) and Beijing Multimedia
Limited (Beijing Multimedia) (the Agreement) and the transfer of the NOP
Interest thereunder. This legal opinion is given pursuant to clause 7.3(f) of
the Agreement.

 

Unless the context otherwise requires, terms defined in the Agreement shall have
the same meaning when used in this legal opinion.

 

This legal opinion is confined to, and given on, the basis of the laws of the
PRC effective as at the date hereof. We have not investigated and we do not
express or imply any opinion on the laws of any other jurisdiction, and we have
assumed that no such other laws would affect the opinion stated herein.

 

For the purposes of this opinion we have reviewed a copy of each of the
following documents:

 

(A)                              In relation to CITIC Cultural

 

1.                                       Enterprise Legal Person Business
License issued by Beijing Municipal Administration of Industry and Commerce (the
Beijing AIC) on February 16, 2001;

2.                                       Articles of Association dated January
15, 2001;

3.                                       Amendment to the Articles of
Association dated May 9, 2001;

4.                                       Amendment to the Articles of
Association dated October 29, 2001;

5.                                       Amendment to the Articles of
Association dated April 3, 2002;

6.                                       Amendment to the Articles of
Association dated January 6, 2003;

 

(B)                                In relation to New Concept Media Investment
Co., Ltd. (New Concept)

 

7.                                       Equity Transfer Agreement between
Beijing Xinxin Advertisement Co., Ltd. and Beijing Tianping Economic and
Cultural Co., Ltd. (Tianping) dated August 26, 2003;

8.                                       Resolution of the 8th session of the
1st Shareholders’ Meeting dated August 26, 2003;

9.                                       Resolution of the 9th session of the
1st Shareholders’ Meeting dated August 26, 2003;

10.                                 Amendment to the Articles of Association
dated August 26, 2003;

11.                                 Enterprise Legal Person Business License
issued by Beijing AIC on November 3, 1999;

 

2

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(C)                                In relation to Beijing Metro Cultural Media
Investment Co. Ltd (Beijing Metro Media)

 

12.                                 Enterprise Legal Person Business License
issued by Beijing AIC on March 27, 2003;

13.                                 Articles of Association effective as of
March 27, 2003;

14.                                 Shareholders Agreement among Beijing Metro
Group Co., Ltd., CITIC Cultural and Men Fan Shao dated August 6, 2002;

15.                                 Supplemental Agreement to the Shareholders
Agreement;

 

(D)                               In relation to Beijing Metro Media
Advertisement Co. Ltd (Beijing Metro Advertisement)

 

16.                                 Enterprise Legal Person Business License
issued by Beijing AIC on August 8, 2003;

17.                                 Advertising Operation License issued by
Beijing AIC on August 8, 2003;

18.                                 Articles of Association dated June 4, 2003;

19.                                 Shareholders Agreement among Beijing Metro
Media, Beijing Metro Economic & Technology Trade Limited and Beijing Century
Guan Yin Advertisement Limited dated June 4, 2003;

 

(E)                                 In relation to the Franchise Agreement

 

20.                                 Franchise Agreement between Beijing Metro
Group Co., Ltd. and Beijing Metro Media dated around August 6, 2002 (the
Franchise Agreement);

21.                                 Confirmation Letter issued by Beijing Metro
Group Co., Ltd. to Beijing Metro Media and Beijing Metro Advertisement dated
October 9, 2003;

22.                                 Confirmation Letter issued by Beijing Metro
Group Co., Ltd. to Beijing Municipal News and Publications Bureau dated October
9, 2003;

 

(F)                                 In relation to the Agreement

 

23.                                 the Agreement; and

24.                                 Resolution of Shareholders’ Meeting of CITIC
Cultural dated September 8, 2003 approving the execution of the Agreement and
the transfer of NOP Interest thereunder.

 

In providing our opinion below, we have assumed:

 

(i)                                     all copy documents sent to us conform to
their originals, including documents “certified” as true copies;

(ii)                                  all of the original or copies of which
have been sent to us are authentic;

(iii)                               the signatures on all documents are genuine;

(iv)                              the legal capacity of the natural person
signatories of the documents; and

 

3

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(v)                                 all factual statements made in such
documents are correct, and the Shareholders Agreement, Articles of Association
and Business License have not been amended or modified and the information
contained therein remains true and accurate.

 

Based upon and subject to the foregoing, we are of the legal opinion that:

 

1.                                       CITIC Cultural is a corporation duly
organized and validly existing under PRC laws, of which China CITIC Group
Company duly holds forty percent (40%), Tianping duly holds thirty-five percent
(35%) and New Concept duly holds twenty-five percent (25%) of its registered
capital, respectively;

 

2.                                       Upon completion of the equity
restructuring of New Concept, by which Tianping duly holds forty-nine percent
(49%) of the registered capital of New Concept, and through appointing the Legal
Representative and the Chairman of the Board of CITIC Cultural, Tianping
actually enjoys the biggest share of control over CITIC Cultural attributable to
its thirty five percent (35%) direct equity interest in CITIC Cultural and
twelve-point-two-five percent (12.25%) indirect equity interest in CITIC
Cultural through New Concept;

 

3.                                       All shareholders of CITIC Cultural,
China CITIC Group Company, Tianping and New Concept, have duly approved the
execution of the Agreement and the transfer of NOP Interest thereunder;

 

4.                                       Beijing Metro Media is a corporation
duly organized and validly existing under PRC laws, of which CITIC Cultural duly
holds forty-nine percent (49%) of its registered capital;

 

5.                                       Beijing Metro Advertisement is a
corporation duly organized and validly existing under PRC laws, of which Beijing
Metro Media duly holds seventy percent (70%) of the registered capital;

 

6.                                       CITIC Cultural has good and valid title
to the Beijing Metro Media Equity Interest, which represents forty-nine percent
(49%) of the equity interest in Beijing Metro Media as of the date hereof, and
has a thirty-four-point-three percent (34.3%) indirect interest in the Beijing
Metro Advertisement Equity Interest, which is represented by Beijing Metro
Media’s seventy percent (70%) equity interest in Beijing Metro Advertisement;
CITIC Cultural has all the absolute right and authority under PRC Laws to
receive and transfer all of its rights, title and interest in and to the NOP
Interest under the Agreement;

 

7.                                       The Franchise Agreement is legitimate
and valid under PRC laws, and constitutes a legally binding agreement for
Beijing Metro Media enforceable in accordance with its terms.  Beijing Metro
Media duly possesses exclusive right to distribute publications and

 

4

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print advertisements in the area of Line 1 and Line 2 of the subway system in
Beijing City for a duration of fifteen years commencing from the date on which
the Business License of Beijing Metro Media is issued under the terms of the
Franchise Agreement;

 

8.                                       According to Article 5.1 and Article 7
of the Franchise Agreement, Beijing Metro Media shall obtain Publication
Distribution License from relevant authority within six months from the date of
execution of the Franchise Agreement; and if Beijing Metro Media fails to do so,
Beijing Metro Group Co., Ltd. shall have the right to terminate the Franchise
Agreement before the duration of which expires.  Beijing Metro Group Co., Ltd,
agreed to grant Beijing Metro Media an extension of the period for it to obtain
the above license, which shall be six months commencing from October 9, 2003.

 

9.                                       By the confirmation letter addressed to
Beijing Metro Media and Beijing Metro Advertisement dated October 9, 2003,
Beijing Metro Group Co., Ltd. expanded the scope of the franchise held by
Beijing Metro Media pursuant to the Franchise Agreement from Line 1 and Line 2
of the subway system in Beijing City to all of the subway system in Beijing
City.  According to the aforementioned confirmation letter, both Beijing Metro
Media and Beijing Metro Advertisement, by authorization of Beijing Metro Group
Co., Ltd., duly possesses the right to distribute print advertisements in all of
the subway system in Beijing City;

 

10.                                 Beijing Metro Advertisement has duly
obtained the Advertising Operation License to engage in the business of the
design, production, agency and publication of advertisements;

 

11.                                 CITIC Cultural has the full rights,
corporate power and authority to execute and deliver, or perform any of its
obligations under the Agreement; and all action required to be taken for the due
and proper authorization, execution and delivery by it of the Agreement and the
consummation by it of the transactions contemplated thereby has been duly and
validly taken.

 

12.                                 The Agreement has been duly authorized and
executed by CITIC Cultural.  If PRC law were applied as the governing law in the
Agreement, the Agreement will constitute a legally binding agreement for CITIC
Cultural, enforceable in accordance with its own terms.

 

13.                                 Both the execution or delivery of the
Agreement and performance of any obligation thereunder by CITIC Cultural are
within its business scope as prescribed by its Articles of Association and
approved by Beijing AIC and covered under its Enterprise Legal Person Business
Licence;

 

5

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14.                                 There is no mandatory requirement under
currently existing PRC laws and administrative regulations that the execution or
delivery of the Agreement or performance of any of obligations thereunder by
CITIC Cultural shall be subject to any additional approval by any PRC
governmental authorities, particularly PRC State Assets Administration
Authority, since the transactions contemplated under the Agreement does not
involve any transfer or variation of equity interest of CITIC Cultural or any of
its subsidiaries, and CITIC Cultural is not de facto controlled by Stated-owned
shareholding;

 

15.                                 A Verification Certificate shall be applied
and obtained by CITIC Cultural from Beijing Municipal Administration of Foreign
Exchange before each NOP Transfer in order to purchase sufficient amount of
foreign exchange for each NOP Transfer from and remit the same through banks
authorized to conduct foreign exchange business, within PRC.

 

This opinion is addressed to you in connection with the Agreement and the
transfer of NOP Interest thereunder.  It may not be produced or referred to or
relied upon by any person other than yourselves and Beijing Multimedia or for
any other purpose and neither its contents nor its existence may be disclosed
without our prior written consent, save that its delivery may be referred to as
a condition of the Agreement, and its existence may be referred to in any list
of closing documents.

 

 

/s/ Jeff Liu

 

Jeff Liu

Member of the Firm

 

6

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