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




 


 





 

















 


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

  	
   

  



 


i

















 


	
   

  	
   

  	
  10.12

  	
  Time

  	
   

  
	
   

  	
   

  	
  10.13

  	
  Specific Performance

  	
   

  
	
   

  	
   

  	
  10.14

  	
  Disclosure by CITIC Cultural and Beijing
  Multimedia

  	
   

  
	
   

  	
   

  	
  10.15

  	
  Languages

  	
   

  



 


ii

















 


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


 


1

















 


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.


 


2

















 


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.


 


3

















 


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


 


4

















 


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


 


5

















 


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


 


6

















 


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


 


7

















 


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


 


8

















 


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

















 


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

















 


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

















 


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

















 


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

















 


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

















 


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

















 


	
  

  	
   

  	
  [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

















 


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

















 


(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

















 


(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


 


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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;


 


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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

  



 


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