Exhibit 4.10


 


20 November 2002


 


 


CHINA UNICOM
(BVI) LIMITED


 


 


CHINA UNICOM
LIMITED


 


 


Conditional Sale and Purchase
Agreement

relating to the entire issued capital of Unicom

New Century (BVI) Limited


 

















 


THIS AGREEMENT is made on 20 November 2002


 


BETWEEN:


 


(1)                                  CHINA
UNICOM (BVI) LIMITED a company incorporated under
the laws of the British Virgin Islands whose registered office is at Craigmuir
Chambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands (the Vendor);


 


(2)                                  CHINA
UNICOM LIMITED a company incorporated under the
laws of Hong Kong whose registered office is at 75th Floor, The
Center, 99 Queen’s Road, Central, Hong Kong (the Purchaser).


 


WHEREAS:


 


(A)                              As part of a series of restructurings, Unicom New Century
Telecommunications Corporation Limited (the Target Company) has acquired from Unicom
Group the mobile communications networks in each of Jilin, Heilongjiang,
Jiangxi, Henan, Sichuan and Shaanxi provinces, Chongqing municipality and the
Guangxi and Xinjiang autonomous regions (the Territory).


 


(B)                                Pursuant to a reorganisation agreement dated 20 November 2002,
Unicom Centenarian (BVI) Limited (UCBVI), a wholly-owned subsidiary of Unicom
Group, acquired the Target Company Shares.


 


(C)                                Pursuant to that reorganisation agreement, UCBVI on-sold the Target
Company Shares to its wholly-owned subsidiary, Unicom New Century (BVI) Limited
(the Target Holding Company).


 


(D)                               Pursuant to a conditional sale and purchase agreement dated 20
November 2002 between the Vendor, UCBVI and Unicom Group (the Initial Acquisition),
the Vendor agreed to acquire from UCBVI the entire issued share capital of the
Target Holding Company.


 


(E)                                 The Vendor is a subsidiary of the A Share Company, a limited
liability company whose shares are listed on the Shanghai Stock Exchange. The A
Share Company is in turn a subsidiary of Unicom Group.


 


(F)                                 Immediately prior to the signing of this Agreement, the corporate
structure of the parties to this Agreement in so far as it relates to the
Target Group Companies (as defined herein) is set out in Part A of Schedule 2.


 


(G)                                The Vendor has agreed to on-sell the Target Shares to the Purchaser
for the consideration and upon the terms and conditions set out in this
Agreement.


 


(H)                               The Vendor has agreed to make certain representations, warranties
and undertakings in relation to the Target Group Companies.


 


IT IS AGREED as follows:


 


2

















 


DEFINITIONS AND INTERPRETATION


 


1.                                       Words and expressions used in this Agreement shall have the meanings
set out in Schedule 1.


 


SALE OF THE TARGET SHARES AND
PRICE


 


2.1                                 The Vendor agrees to sell as legal and beneficial owner, and the
Purchaser agrees to purchase, the Target Shares. The Target Shares shall be
sold free from all security interests.


 


2.2                                 The total price payable on Completion by the Purchaser to the Vendor
for the Target Shares shall be HK$4,523,181,304 (the Total Price), payable in cash.


 


CONDITIONS PRECEDENT


 


3.1                                 Completion of the sale and purchase of the Target Shares shall be
conditional upon the fulfilment to the reasonable satisfaction of the Purchaser
or waiver of the following conditions:


 


(a)                                  the passing of resolutions by the independent shareholders of the
Purchaser at its general meeting approving (i) the transactions contemplated by
this Agreement, and (ii) the Connected Transactions;


 


(b)                                 the passing of resolutions by the independent shareholders of the A
Share Company at its general meeting approving the Initial Acquisition and the
related connected transactions for the A Share Company;


 


(c)                                  there having been no material adverse change to the financial
conditions, business operations or prospects of any of the Target Group
Companies;


 


(d)                                 the delivery by or on behalf of the Vendor to the Purchaser of
copies of all necessary Regulatory Approvals; and


 


(e)                                  the completion of the Initial Acquisition having taken place.


 


3.2                                 The Vendor undertakes to use all reasonable endeavours to ensure
that the Conditions Precedent set out in clauses 3.1(b), 3.1(c), 3.1(d) and
3.1(e) are fulfilled to the satisfaction of the Purchaser as soon as reasonably
practicable and in any event by 30 June 2003.


 


3.3                                 The Purchaser undertakes to use all reasonable endeavours to ensure
that the Condition Precedent set out in clause 3.1(a) is fulfilled to the
satisfaction of the Vendor as soon as reasonably practicable and in any event
by 30 June 2003.


 


3.4                                 The Purchaser shall be entitled in its absolute discretion, by
written notice to the Vendor, to waive any or all of the Conditions Precedent
set out in clauses 3.1(c) and 3.1(d) either in whole or in part.


 


3

















 


3.5                                 If any of the Conditions Precedent has not been fulfilled (or
waived) on or before the date specified in clauses 3.2 and 3.3 or such
other date as the parties to this Agreement may agree in writing, this
Agreement (other than clauses 1, 11 to 14, 16 to 22 and Schedule 1, which
shall continue to be in force) shall automatically terminate and no party shall
have any claim of any nature whatsoever against the other parties under this
Agreement (save in respect of its accrued rights arising from any prior breach
of this Agreement).


 


PRE-COMPLETION UNDERTAKINGS


 


4.1                                 Pending Completion, the Vendor shall procure that:


 


(a)                                  each Target Group Company shall carry on its business in the
ordinary and usual course and shall not make (or agree to make) any payment
other than routine payments in the ordinary and usual course of trading;


 


(b)                                 each Target Group Company shall take all reasonable steps to
preserve and protect its assets;


 


(c)                                  the Purchaser’s representatives shall be allowed, upon reasonable
notice and during normal business hours, access to the books and records of
each Target Group Company (including, without limitation, all statutory books,
minute books, leases, contracts, supplier lists and customer lists) together
with the right to take copies;


 


(d)                                 no Target Group Company shall do, allow or procure any act or
omission which would constitute or give rise to a breach of any Warranty as if
the Warranties were to be repeated on or at any time before Completion by
reference to the facts and circumstances then existing;


 


(e)                                  prompt disclosure is made to the Purchaser of all relevant
information which comes to the notice of the Vendor in relation to any fact or
matter (whether existing on or before the date of this Agreement or arising
afterwards) which may constitute a breach of any Warranty as if the Warranties
were to be repeated on or at any time before Completion by reference to the
facts and circumstances then existing;


 


(f)                                    no dividend or other distribution shall be declared, paid or made by
any Target Group Company;


 


(g)                                 no share or loan capital shall be allotted or issued or agreed to be
allotted or issued by any Target Group Company;


 


(h)                                 all transactions between each Target Group Company and each Vendor
Group Company shall be on arm’s length commercial terms and in their respective
ordinary and usual course of business;


 


4

















 


(i)                                     the amount of any Indebtedness owed by each Target Group Company or
existing as at the date of this Agreement shall not be increased or extended
and no new Indebtedness shall be entered into or assumed by any such company;
and


 


(j)                                     no action is taken by any Target Group Company or any Vendor Group
Company which is inconsistent with the provisions of this Agreement or the
consummation of the transactions contemplated by this Agreement.


 


4.2                                 Pending Completion, the Vendor shall procure that the Target Group
Companies consult fully with the Purchaser in relation to any matters which may
have a material effect upon the Target Group Companies.  Without the prior written consent of the
Purchaser, the Target Group Companies shall not, and the Vendor shall ensure
that the Target Group Companies do not:


 


(a)                                  enter into any contract or commitment (or make a bid or offer which
may lead to a contract or commitment) having a material value or involving
material expenditure or which is of a long term or unusual nature or which
could involve an obligation of a material nature or which may result in any
material change in the nature or scope of the operations of such Target Group
Company;


 


(b)                                 agree to any variation or termination of any existing contract to
which that Target Group Company is a party and which may have a material effect
upon the nature or scope of the operations of such Target Group Company;


 


(c)                                  (whether in the ordinary and usual course of business or otherwise)
acquire or dispose of, or agree to acquire or dispose of, any material business
or any material asset; or


 


(d)                                 enter into any agreement, contract, arrangement or transaction
(whether or not legally binding) other than in the ordinary and usual course of
business.


 


COMPLETION


 


5.1                                 The sale and purchase of the Target Shares shall be completed at 75th
Floor, The Centre, 99 Queen’s Road Central, Hong Kong on such date as may be
agreed between the Vendor and the Purchaser following notification by the
Purchaser to the Vendor of the fulfilment to the satisfaction of the Purchaser
(or waiver) of all the Conditions Precedent. 
The events referred to in the following provisions of this clause 5
shall take place on Completion.


 


5.2                                 The Vendor shall deliver (or cause to be delivered) to the
Purchaser:


 


(a)                                  duly executed transfers into the name of the Purchaser or its
nominee in respect of all of the Target Shares, together with the related share
certificates;


 


5

















 


(b)                                 the certificates of incorporation, common seal, share register,
share certificate book (with any unissued share certificates), business
licence, the documents evidencing the Regulatory Approvals (as the case may be)
and all minute books and other statutory books (which shall be written-up to
but not including Completion) of each Target Group Company;


 


(c)                                  all such other documents (including any necessary waivers of
pre-emption rights or other consents) as may be required to enable the
Purchaser and/or its nominee to be registered as the holder(s) of the Target
Shares;


 


(d)                                 a counterpart of the Tax Indemnity duly executed by the Vendor;


 


(e)                                  a copy of a resolution of the board of directors (certified by a
duly appointed officer as true and correct) of:


 


(i)                                     the Vendor, authorising the execution of and the performance by the
Vendor of its obligations under this Agreement and each of the other documents
to be executed by the Vendor (including the Tax Indemnity);


 


(ii)                                  each Vendor Group Company, authorising the execution of and the
performance by the relevant company of its obligations under each of the Connected
Transactions to which it is a party;


 


(f)                                   a copy of the sale and purchase agreement pursuant to which the
entire issued share capital of the Target Holding Company was transferred to
the Vendor;


 


(g)                                 a legal opinion from Commerce & Finance, PRC counsel, in form
and substance acceptable to the Purchaser; and


 


(h)                                 a legal opinion from Conyers, Dill & Pearman, in form and
substance acceptable to the Purchaser.


 


5.3                                 The Vendor shall procure that resolutions of the board of directors
of the Target Holding Company are passed to approve the registration of the
transfers in respect of the Target Shares referred to in clause 5.2.


 


5.4                                 The Purchaser shall:


 


(a)                                  in satisfaction of its obligations under clause 2.2, cause the
sum set out in clause 2.2 to be paid by electronic funds transfer (or such
other modes of payment as may be agreed between the Vendor and the Purchaser)
to the Vendor’s bank account, or if so directed by the Vendor, to its nominee’s
bank account, details of which shall be notified in writing to the Purchaser at
least two Business Days prior to Completion; and


 


(b)                                 deliver to the Vendor a copy of the minutes (certified by a duly
appointed officer as true and correct) of the Purchaser authorising the
execution and


 


6

















 


performance
by the Purchaser of its obligations under this Agreement, the Tax Indemnity and
each of the Connected Transactions to which it is a party.


 


Any payment
made in accordance with clause 5.4(a) shall constitute a good discharge by
the Purchaser of its obligations under clause 2.2 and the Purchaser shall
not be concerned to see that the funds are applied in payment to the Vendor.


 


5.5                                 If the Vendor fails or is unable to perform any material obligation
required to be performed by the Vendor pursuant to clauses 3.2, 5.2 and
5.3, respectively, by the last date on which Completion is required to occur,
the Purchaser shall not be obliged to complete the sale and purchase of the
Target Shares and may, in its absolute discretion, by written notice to the
Vendor:


 


(a)                                  rescind this Agreement without liability on the part of the
Purchaser; or


 


(b)                                 elect to complete this Agreement on that date, to the extent that
the Vendor is ready, able and willing to do so, and specify a later date on
which the Vendor shall be obliged to complete the outstanding obligations of
the Vendor; or


 


(c)                                  elect to defer the Completion by not more than 90 days to such other
date as it may specify in such notice, in which event the provisions of this
clause 5.5 shall apply, mutatis mutandis, if the Vendor fails or is unable
to perform any such obligations on such other date.


 


POST-COMPLETION UNDERTAKINGS;
RESTRICTIONS ON VENDOR GROUP COMPANIES


 


6.1                                 Following Completion, the Vendor undertakes to the Purchaser to use
all reasonable endeavours to obtain the release of each Target Group Company
from any Intra-Group Guarantees to which it is a party and, pending such
release, to indemnify the relevant Target Group Company against all amounts
paid by it to any third party pursuant to any such Intra-Group Guarantee in
respect of any liability of any Vendor Group Company (and all Costs incurred in
connection with such liability) whether arising before or after Completion.


 


6.2                                 Following Completion, the Purchaser undertakes to the Vendor to use
all reasonable endeavours to obtain the release of each Vendor Group Company
from any Intra-Group Guarantees to which it is a party and, pending such
release, to indemnify the relevant Vendor Group Company against all amounts
paid by it to any third party pursuant to any Intra-Group Guarantees in respect
of any liability of any Target Group Company (and all Costs incurred in
connection with such liability) whether arising before or after Completion.


 


6.3 (a)                The
Vendor shall not and shall cause that each other member of the Vendor Group
Company  shall
not (whether alone or jointly with another and whether directly or indirectly)
carry on or be engaged or (except as the owner for investment of securities
dealt in on a stock exchange and not exceeding 5 per cent. in nominal value of
the securities of that class) be interested


 


7

















 


economically
or otherwise in any manner whatsoever in any Competing Business during the
Relevant Period.


 


(b)                                 The Vendor shall not and shall cause that each other member of the
Vendor Group Company shall not during the Relevant Period, directly or
indirectly, solicit or endeavour to entice away from the Target Group
Companies, offer employment to or employ, or offer or conclude any contract for
services with, any person who was employed in skilled or managerial work in the
Business at any time during the 1 year prior to Completion.


 


(c)                                  Except so far as may be required by law and in such circumstances
only after prior consultation with the Purchaser, the Vendor shall not (and
shall cause that each other member of the Vendor Group Companies shall not) at
any time disclose to any person or use to the detriment of the Business any
trade secret or other confidential information of a technical character which
it holds in relation to the Business.


 


(d)                                 The Vendor (acting for itself and each other member of the Vendor
Group Companies) acknowledges and agrees that the duration, extent and
application of the respective restrictions in clauses (a), (b) and (c) are
no greater than is reasonable and necessary for the protection of the interests
of the Purchaser but that, if any such restriction shall be adjudged by any
court of competent jurisdiction to be void or unenforceable but would be valid
if part of the wording thereof was deleted and/or the period thereof was
reduced and/or the area dealt with thereby was reduced, the said restriction
shall apply within the jurisdiction of that court with such modifications as
may be necessary to make it valid and effective.


 


WARRANTIES


 


7.1                                 The Vendor represents, warrants and undertakes to the Purchaser in
the terms of the Warranties and acknowledges that the Purchaser has entered
into this Agreement in reliance upon the Warranties.


 


7.2                                 The Vendor undertakes (without limiting any other rights of the
Purchaser in any way including its rights to damages in respect of a claim for
breach of any Warranty on any other basis) that it shall pay in cash to the
Purchaser (or, if so directed by the Purchaser, to the Target Group Company in
question) (each an Indemnified Person)
by way of indemnity on demand in the case of a breach of any of the Warranties,
a sum equal to the aggregate of (i) the amount which, if received by the
Indemnified Person, would be necessary to put that Indemnified Person into the
financial position which would have existed had there been no breach of the
Warranty in question; and (ii) all Costs suffered or incurred by the
Indemnified Person, directly or indirectly, as a result of or in connection
with such breach of Warranty.


 


7.3                                 The Vendor agrees to waive the benefit of all rights (if any) which
the Vendor may have against any Target Group Company, or any present or former
officer or employee of any such company, on whom the Vendor may have relied in
agreeing to


 


8

















 


any term of
this Agreement and each of the Vendor undertakes not to make any claim in
respect of such reliance.


 


7.4                                 Each of the Warranties shall be construed as a separate Warranty and
(save as expressly provided to the contrary) shall not be limited or restricted
by reference to or inference from the terms of any other Warranty or any other
term of this Agreement.


 


7.5                                 The Warranties shall be deemed to be repeated immediately before
Completion with reference to the facts and circumstances then existing.


 


7.6                                 The Vendor undertakes to notify the Purchaser in writing promptly if
it becomes aware of any circumstance arising after the date of this Agreement
which would cause any Warranty (if the Warranties were repeated with reference
to the facts and circumstances then existing) to become untrue or inaccurate or
misleading in any respect which is material to the financial or trading
position of any of the Target Group Companies.


 


LIMITATIONS ON CLAIMS


 


8.1                                 The aggregate amount of the liability of the Vendor for all Claims
shall not exceed the Total Price.


 


8.2                                 None of the limitations contained in clause 8.1 shall apply to
any breach of any Warranty which (or the delay in discovery of which) is the
consequence of dishonest, deliberate or reckless mis-statement, concealment or
other conduct by any Vendor Group Company or any officer or employee, or former
officer or employee, of any Vendor Group Company.


 


PURCHASER’S RIGHTS TO RESCISSION


 


9.                                       The Purchaser may by written notice given to the Vendor at any time
prior to Completion rescind this Agreement without liability on the part of the
Purchaser:


 


(a)                                  if any fact, matter or event (whether existing or occurring on or
before the date of this Agreement or arising or occurring afterwards) comes to
the notice of the Purchaser at any time prior to Completion which:


 


(i)                                     constitutes a breach by the Vendor of this Agreement (including,
without limitation, any breach of the pre-Completion undertakings in
clause 4); or


 


(ii)                                  would constitute a breach of any Warranty if the Warranties are
repeated on or at any time before Completion by reference to the facts and
circumstances then existing; or


 


(iii)                               affects or is likely to affect in a materially adverse manner the
business, financial position or prospects of the Target Group Companies taken
as a whole; or


 


9

















 


(b)                                 if at any time after signing of this Agreement and before Completion
there is a significant adverse change in the market price of the shares of the
Company and the Company is of the opinion that it will not be in the interests
of its shareholders as a whole to proceed with the acquisition of the Target
Shares.


 


WITHHOLDING TAX AND GROSSING UP


 


10.1                           The Vendor shall pay all sums payable by it under clauses 6.1
and 7 free and clear of all deductions or withholdings unless the law requires
a deduction or withholding.  If a
deduction or withholding is so required the Vendor shall pay such additional
amount as will ensure that the net amount the payee receives equals the full
amount which it would have received had the deduction or withholding not been
required.


 


10.2                           If any tax authority brings any sum paid by the Vendor under or
pursuant to clauses 6.1 and 7 into charge to tax, then the Vendor shall
pay such additional amount as will ensure that the total amount paid, less the
tax chargeable on such amount, is equal to the amount that would otherwise be
payable under clauses 6.1 and 7.


 


ENTIRE AGREEMENT


 


11.                                 This Agreement and the Tax Indemnity constitute the entire agreement
and understanding between the parties in connection with the sale and purchase
of the Target Shares.  This Agreement
and the Tax Indemnity supersede all prior agreements or understandings in
connection with the subject matter hereof which shall cease to have any further
force or effect.  No party has entered
into this Agreement in reliance upon any representation, warranty or
undertaking which is not set out or referred to in this Agreement and the Tax
Indemnity.


 


VARIATION


 


12.1                           No variation of this Agreement (or of any of the legally binding
agreements referred to in this Agreement) shall be valid unless it is in
writing and signed by or on behalf of each of the parties to it.  The expression “variation” shall include any
variation, supplement, deletion or replacement however effected.


 


12.2                           Unless expressly agreed, no variation shall constitute a general
waiver of any provisions of this Agreement, nor shall it affect any rights,
obligations or liabilities under or pursuant to this Agreement which have
already accrued up to the date of variation, and the rights and obligations of
the parties under or pursuant to this Agreement shall remain in full force and
effect, except and only to the extent that they are so varied.


 


10

















 


ASSIGNMENT


 


13.                                 The Vendor shall not assign, transfer, charge or otherwise deal with
all or any of its rights under this Agreement nor grant, declare, create or dispose
of any right or interest in it without the prior written consent of the
Purchaser. Any purported assignment in contravention of this clause 13
shall be void.


 


ANNOUNCEMENTS


 


14.1                           Except as required by law or by any stock exchange or governmental
or other regulatory or supervisory body or authority of competent jurisdiction
to whose rules the party making the announcement or disclosure is subject,
whether or not having the force of law, no announcement or circular or
disclosure in connection with the existence or subject matter of this Agreement
shall be made or issued by or on behalf of any of the Vendor Group Companies
without the prior written approval of the Purchaser (such approval not to be
unreasonably withheld or delayed), or by or on behalf of the Purchaser without
the prior written approval of the Vendor Group Companies (such approval not to
be unreasonably withheld or delayed).


 


14.2                           Where any announcement or disclosure is made in reliance on the
exception in clause 14.1, the party making the announcement or disclosure
will so far as practicable consult with the other parties in advance as to the
form, content and timing of the announcement or disclosure.


 


COSTS


 


15.                                 Each party shall bear its own Costs incurred in connection with the
negotiation, preparation and completion of this Agreement.


 


CONFIDENTIALITY


 


16.                                 The Vendor undertakes with the Purchaser that it shall keep
confidential (and to ensure that its directors, officers, employees, agents and
professional and other advisers keep confidential) any information in its
possession (whether before or after the date of this Agreement):


 


(a)                                  in relation to the subscribers, business, assets or affairs of the
Target Group Companies (including any data held by the Target Group Companies);
or


 


(b)                                 which relates to the contents of this Agreement (or any agreement or
arrangement entered into pursuant to this Agreement),


 


provided that
the undertakings contained in this clause 16 shall not apply to any
information which is in or has entered the public domain otherwise than as a
result of an announcement or disclosure by the Vendor Group Companies in breach
of clause 14 or by their respective directors, officers, employees, agents and
professional and other advisers.


 


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The Vendor
shall not use for its own business purposes or disclose to any third party any
such information without the consent of the Purchaser.


 


SEVERABILITY


 


17.                                 If any provision of this Agreement is held to be invalid or
unenforceable, then such provision shall (so far as it is invalid or
unenforceable) be given no effect and shall be deemed not to be included in
this Agreement but without invalidating any of the remaining provisions of this
Agreement.  The parties shall then use
all reasonable endeavours to replace the invalid or unenforceable provisions by
a valid and enforceable substitute provision the effect of which is as close as
possible to the intended effect of the invalid or unenforceable provision.


 


COUNTERPARTS


 


18.                                 This Agreement may be executed in any number of counterparts and by
the parties to it on separate counterparts, each of which is an original but
all of which together constitute one and the same instrument.


 


WAIVER


 


19.1                           No failure or delay by any parties hereto in exercising any right or
remedy provided by law under or pursuant to this Agreement shall impair such
right or remedy or operate or be construed as a waiver or variation of it or
preclude its exercise at any subsequent time and no single or partial exercise
of any such right or remedy shall preclude any other or further exercise of it
or the exercise of any other right or remedy.


 


19.2                           The rights and remedies of the parties hereto under or pursuant to
this Agreement are cumulative, may be exercised as often as such party
considers appropriate and are in addition to its rights and remedies under
general law.


 


FURTHER ASSURANCE


 


20.                                 The Vendor agrees to perform (or procure the performance of) all
further acts and things, and execute and deliver (or procure the execution and
delivery of) such further documents, as may be required by law or as the
Purchaser may reasonably require, whether on or after Completion, to implement
and/or give effect to this Agreement and the transaction contemplated by it and
for the purpose of vesting in the Purchaser the full benefit of the assets,
rights and benefits to be transferred to the Purchaser under this Agreement.


 


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NOTICES


 


21.1                           Any notice or other communication to be given by one party to any
other party under, or in connection with, this Agreement shall be in writing
and signed by or on behalf of the party giving it.  It shall be served by sending it by fax to the number set out in
clause 21.2, or delivering it by hand, or sending it by pre-paid recorded
delivery or registered post, to the address set out in clause 21.2 and in
each case marked for the attention of the relevant party set out in
clause 21.2 (or as otherwise notified from time to time in accordance with
the provisions of this clause 21). 
Any notice so served by hand, fax or post shall be deemed to have been
duly given:


 


(a)                                  in the case of delivery by hand, when delivered;


 


(b)                                 in the case of fax, upon confirmation of transmission;


 


(c)                                  in the case of prepaid recorded delivery or registered post, at
10a.m. on the fifth Business Day following the date of posting


 


provided that
in each case where delivery by hand or by fax occurs after 6p.m. on a Business
Day or on a day which is not a Business Day, service shall be deemed to occur
at 9a.m. on the next following Business Day.


 


References to
time in this clause are to local time in the country of the addressee.


 


21.2                           The addresses and fax numbers of the parties for the purpose of
clause 21.1 are as follows:


 


	
  The Vendor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Craigmuir
  Chambers,

  P.O. Box 71,

  Road Town,

  Tortola,

  British Virgin Islands

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
   

  	
  (852) 2126
  2016

  
	
   

  	
   

  	
   

  
	
  For the
  attention of:

  	
   

  	
  The
  Directors

  
	
   

  	
   

  	
   

  
	
  The Purchaser:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  75th Floor

  The Center,

  99 Queen’s Road Central,

  Hong Kong

  
	
   

  	
   

  	
   

  
	
  Fax:

  	
   

  	
  (852) 2126
  2016

  
	
   

  	
   

  	
   

  
	
  For the
  attention of:

  	
   

  	
  The
  Directors

  



 


13

















 


21.3                           A party may notify any other party to this Agreement of a change to
its name, relevant addressee, address or fax number for the purposes of this
clause 21, provided that, such notice shall only be effective on:


 


(a)                                  the date specified in the notice as the date on which the change is
to take place; or


 


(b)                                 if no date is specified or the date specified is less than five
Business Days after the date on which notice is given, the date following five
Business Days after notice of any change has been given.


 


21.4                           All notices under or in connection with this Agreement shall be in
the English language.


 


GOVERNING LAW, JURISDICTION AND
SERVICE OF PROCESS


 


22.1                           This Agreement and the relationship between the parties shall be
governed by, and interpreted in accordance with, the laws of Hong Kong.


 


22.2                           The parties agree that the courts of Hong Kong are to have exclusive
jurisdiction to settle any disputes (including claims for set-off and
counterclaims) which may arise in connection with the creation, validity,
effect, interpretation or performance of, or the legal relationships
established by, this Agreement or otherwise arising in connection with this
Agreement, and for such purposes irrevocably submit to the jurisdiction of the
Hong Kong courts.


 


22.3                           The Vendor shall at all times maintain an agent for service of
process and any other documents in proceedings in Hong Kong or any other proceedings
in connection with this Agreement.  Such
agent shall be China Unicom (Hong Kong) Group Limited currently of 75th
Floor, The Centre, 99 Queen’s Road, Central, Hong Kong and any writ, judgment
or other notice of legal process shall be sufficiently served on the Vendor if
delivered to such agent at its address for the time being.  The Vendor undertakes not to revoke the
authority of the above agent and if, for any reason, the Purchaser requests the
Vendor to do so it shall promptly appoint another such agent with an address in
Hong Kong and advise the Purchaser.  If,
following such a request, the Vendor fails to appoint another agent, the
Purchaser shall be entitled to appoint one on behalf of the Vendor at the
expense of the Vendor.


 


AS WITNESS this Agreement has been signed on behalf of the parties the day and
year first before written.


 


14

















 


SCHEDULE 1


 


DEFINITIONS
AND INTERPRETATION


 


1.                                       In this Agreement, the following expressions shall have the following
meanings:


 


A Share Company means China United Telecommunications Corporation Limited;


 


Accounts means in
relation to the Target Company:


 


(a)                                  the combined audited balance sheets of the Target Company as of the
relevant Accounts Date in respect of that financial period; and


 


(b)                                 the combined audited statements of income, owner’s equity and cash
flows of the Target Company for the financial period ended on the relevant
Accounts Date,


 


together with
any notes, reports or statements included in or annexed to them;


 


Accounts Date means 31
December 2000, 31 December 2001, or 30 June 2002, as the case may be;


 


Business Day means a day
(excluding Saturdays) on which banks in Hong Kong and the PRC are generally
open for the transaction of normal banking business;


 


Claim means any claim for
breach of a Warranty;


 


Companies Ordinance means
the Companies Ordinance, Chapter 32 of the Laws of Hong Kong;


 


Competing Business means a business which carries on or is involved with the provision
of any mobile telephone (voice and data) and related value-added services using
GSM, CDMA, CDMA1x, WCDMA, 3G technology or otherwise in the Territory;


 


Completion means
completion of the sale and purchase of the Target Shares under this Agreement;


 


Conditions Precedent
means the conditions specified in clause 3.1;


 


Connected Transactions means
those transactions effected pursuant to the operating agreements in the agreed
forms as listed in Appendix 1;


 


Costs means liabilities,
losses, damages, costs (including legal costs) and expenses (including
taxation), in each case of any nature whatsoever;


 


HK$ means Hong Kong
dollars, the lawful currency of Hong Kong;


 


15

















 


holding company shall be
construed in accordance with section 2 of the Companies Ordinance;


 


Hong Kong means the Hong
Kong Special Administrative Region of the PRC;


 


Indebtedness means any
indebtedness in respect of all obligations to repay borrowed money, all
indebtedness evidenced by notes, bonds, loan stock, debentures or similar
obligations, acceptances or documentary credit facilities, all rental
obligations under finance leases, and hire purchase contracts, any other
transaction having the commercial effect of a borrowing or raising of money,
the net amount of any liability under any swap, hedging or other similar
treasury instrument, and all guarantees, sureties, indemnities,
counter-indemnities or letters of comfort of obligations of others of the
foregoing types;


 


Intellectual Property Rights means patents, trade marks, service marks, trade names, design
rights, copyright (including rights in computer software), rights in know-how
and other intellectual property rights, in each case whether registered or
unregistered and including applications for the grant of any such rights and
all rights or forms of protection having equivalent or similar effect anywhere
in the world;


 


Intra-Group Guarantees
means all guarantees, indemnities, counter-indemnities and letters of comfort
of any nature whatsoever (a) given to any third party by the Target Group
Company in respect of a liability of any Vendor Group Company; and/or (as the
context may require) (b) given to any third party by any Vendor Group Company
in respect of a liability of the Target Group Company;


 


Intra-Group Loans means
all debts outstanding between any Target Group Company and any Vendor Group
Company;


 


Last Accounts means the
Accounts of the Target Company in respect of the financial period ended on the
Last Accounts Date;


 


Last Accounts Date means
30 June 2002;


 


Leased Properties means
the properties currently leased by the Target Company as tenant;


 


Mainland China means the PRC
excluding Hong Kong and the Macau Special Administrative Region of the PRC;


 


PRC means the People’s
Republic of China;


 


Properties means the properties
currently owned by the Target Company;


 


Regulatory Approvals
means the approvals, consents and authorisations from all relevant regulatory
authorities in the PRC (including the State Council, the State Development and
Planning Commission, the Ministry of Information Industry, the Ministry of
Foreign Trade and Economic Cooperation, the Ministry of Finance and the China
Securities Regulatory Commission), Hong Kong (including the


 


16

















 


Telecommunications
Authority) and the United States of America (including the Federal
Communications Commission) being those necessary to effect the transactions
contemplated by this Agreement;


 


Relevant Period means the period commencing from the date of Completion and ending
on the date on which (i) the shares or the American Depository Shares of the
Purchaser cease to be listed and traded on the New York Stock Exchange, Hong
Kong Stock Exchange and any other stock exchanges or (ii) Unicom Group ceases
to be a controlling shareholder of the Purchaser or an associate of such
controlling shareholder under the Rules Governing the Listing of Securities on
the Stock Exchange of Hong Kong Limited, whichever is the earlier;


 


Reorganisation means the
acquisitions and transfers described in Recitals (A) to (C);


 


Restructuring Agreements
means the agreements listed in Appendix 2;


 


RMB means Renminbi, the
lawful currency of the PRC;


 


Schedules means Schedules
1, 2 and 3 to this Agreement and Schedule shall be construed accordingly;


 


security interest means
any security interest of any nature whatsoever including, without limitation,
any mortgage, charge, pledge, lien, assignment by way of security or other
encumbrance, options, equities, claims or other third party rights (including rights
of pre-emption) of any nature whatsoever, together with all rights attaching to
them;


 


subsidiary and subsidiaries shall be
construed in accordance with section 2 of the Companies Ordinance;


 


Target Company Shares
means all the issued shares in the capital of the Target Company, details of
which are set out in Part C of Schedule 2;


 


Target Shares means all
the issued shares in the capital of the Target Holding Company, details of
which are set out in Part B of Schedule 2;


 


Target Group Companies means
the Target Holding Company and/or the Target Company;


 


Tax Indemnity means the
Tax Indemnity in the agreed form to be entered into by the Vendor in favour of
the Purchaser;


 


Tax Warranties means the
warranties set out in paragraphs 1.1 to 1.9 in Part B of
Schedule 3;


 


Unicom Group means China United Telecommunications Corporation;


 


Vendor Group Company means
Unicom Group, any subsidiary from time to time of Unicom Group (but excluding
the Purchaser, the subsidiaries of the Purchaser from time to time and the
Target Group Companies); and


 


17

















 


Warranties means the
representations and warranties set out in Schedule 3.


 


2.                                       In this Agreement, unless the context otherwise requires:


 


(a)                                  any references to the Target Company shall include any predecessor
entity or person carrying on the business of such Target Company, whether
before or after the Reorganisation;


 


(b)                                references to persons shall include individuals, bodies corporate
(wherever incorporated), unincorporated associations and partnerships;


 


(c)                                  the headings are
inserted for convenience only and shall not affect the construction of this
Agreement;


 


(d)                                 any reference to an enactment or statutory provision is a reference to it as
it may have been, or may from time to time be, amended, modified, consolidated
or re-enacted;


 


(e)                                  any statement qualified by the expression to the best knowledge of the Vendor or so far as the Vendor is aware
or any similar expression shall be deemed to include an additional statement
that it has been made after due and careful enquiry and shall be deemed also to
include the best of the knowledge of each Vendor Group Company;


 


(f)                                    any reference to a document in the agreed form is to the form of the relevant
document agreed between the parties and for the purpose of identification
initialled by each of them or on their behalf (in each case with such
amendments as may be agreed by or on behalf of the Vendor and the Purchaser);


 


(g)                                 references to any Hong Kong legal term for any action, remedy,
method of judicial proceeding, legal document, legal status, court, official or
any other legal concept shall, in respect of any jurisdiction other than Hong
Kong, be deemed to include the legal concept which most nearly approximates in
that jurisdiction to the Hong Kong legal term.


 


3.                                       The Schedules and Appendices comprise schedules and appendices to
this Agreement and form part of this Agreement.


 


18

















 


SCHEDULE 2


 


CORPORATE
STRUCTURE PRIOR TO COMPLETION


 


PART A


 


Corporate Structure


 





 


19

















 


PART B


 


Details of the Target Holding Company


 


UNICOM NEW CENTURY (BVI) LIMITED


 


	
  1.

  	
  Name:

  	
  Unicom New
  Century (BVI) Limited

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Date of Incorporation:

  	
  23 October
  2002

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Place of Incorporation:

  	
  British
  Virgin Islands

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Class of Company:

  	
  International
  Business Company

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registered Number:

  	
  518427

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Registered Office:

  	
  Romasco
  Place

  Wickhams Cay 1

  P.O. Box 3140

  Road Town, Tortola

  British Virgin Islands

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Directors:

  	
  Yang Xianzu,
  Wang Jianzhou,

  Shi Cuiming and Tan Xinghui

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Registered Shareholders:

  	
  China Unicom
  (BVI) Limited

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Authorised Capital:

  	
  HK$10,000
  divided into 10,000 shares of HK$1.00 each

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Issued Capital:

  	
  10,000 shares
  of HK$1.00 each

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Subsidiary:

  	
  Unicom New
  Century Telecommunications Corporation Limited

  
	
   

  	
   

  	
   

  
	
  12.

  	
  Mortgages and Charges:

  	
  None

  



 


20

















 


PART C


 


Details of the Target Company


 


UNICOM NEW CENTURY PRC


 


	
  1.

  	
  Name:

  	
  Unicom New
  Century Telecommunications Corporation Limited

  
	
   

  	
   

  	
   

  
	
  2.

  	
  Place of Incorporation:

  	
  Beijing, PRC

  
	
   

  	
   

  	
   

  
	
  3.

  	
  Nature of Incorporation:

  	
  Wholly
  foreign-owned enterprise

  
	
   

  	
   

  	
   

  
	
  4.

  	
  Scope of Business:

  	
  Mobile telecommunication businesses in Sichuan, Shaanxi, Henan,
  Heilongjiang, Jilin and Jiangxi Provinces, Chongqing Municipality and the
  Guangxi and Xinjiang Autonomous Regions; technology development, service and
  consultation; telecommunication equipment and electronic equipment sale.

  
	
   

  	
   

  	
   

  
	
  5.

  	
  Registered Office:

  	
  Room 1012,
  10th Floor, Tower 1, Henderson Centre, 18 Jianguomen Nei Dajie,
  Beijing, PRC

  
	
   

  	
   

  	
   

  
	
  6.

  	
  Registered Capital:

  	
  RMB328,936,300

  
	
   

  	
   

  	
   

  
	
  7.

  	
  Total Investment:

  	
  RMB328,936,300

  
	
   

  	
   

  	
   

  
	
  8.

  	
  Equity Holder:

  	
  Unicom New
  Century (BVI) Limited

  
	
   

  	
   

  	
   

  
	
  9.

  	
  Tax Residence:

  	
  Beijing, PRC

  
	
   

  	
   

  	
   

  
	
  10.

  	
  Subsidiaries:

  	
  None

  
	
   

  	
   

  	
   

  
	
  11.

  	
  Mortgages and Charges:

  	
  None

  



 


21

















 


SCHEDULE 3


 


THE
WARRANTIES


 


Part A: General


 


INFORMATION


 


1.1                                 All information relating to the Target Group Companies provided to
the Purchaser or its representatives and advisers for the purposes of
preparation of the Accounts is true, accurate and not misleading and does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.


 


1.2                                 Save as already disclosed in writing to the Purchaser, there are no
other facts or matters which might reasonably be expected to have a material
adverse effect on the financial or trading position or prospects of any Target
Group Company.


 


CORPORATE MATTERS


 


The Target Group Companies


 


2.1(a)                   All of the Target Shares are fully-paid or properly credited as
fully-paid and the Vendor is the sole legal and beneficial owner of them free
from all security interests.


 


(b)                                 The information in respect of the Target Holding Company set out in
Part B of Schedule 2 is true and accurate and not misleading.


 


(c)                                  The Target Holding Company has been duly incorporated and is validly
existing under the laws of the BVI, with legal right, power and authority
(corporate and other) to own, use, lease and operate its properties and conduct
its business in the manner presently conducted, and is duly qualified to
transact business in any jurisdiction in which it owns or leases properties or
conducts any business and such qualification is required, or is subject to no
material liability or disability by reason of the failure to be so qualified in
any such jurisdiction; the Memorandum of Association and Articles of Association
of the Target Holding Company comply with the requirements of applicable BVI
law and are in full force and effect.


 


2.2(a)                   The Target Holding Company is the sole legal and beneficial owner of
the whole of the registered capital of the Target Company free from all
security interests.


 


(b)                                 The information in respect of each of the Target Company set out in
Part C of Schedule 2 is true and accurate.


 


(c)                                  The Target Company is currently a domestic enterprise with limited
liability and has been duly organised and is validly existing under the laws of
the PRC, and its business licence is in full force and effect; its Articles of
Association


 


22

















 


comply
with the requirements of applicable PRC law and are in full force and effect;
it has all consents, approvals, authorizations, orders, registrations,
clearances and qualifications of or with any court, governmental agency or body
having jurisdiction over it or any of its properties in each jurisdiction in which
the ownership or lease of property by it or the conduct of its business
requires such qualification and has the legal right and authority to own, use,
lease and operate its assets and to conduct its business in the manner
presently conducted.


 


2.3                                 No Target Group Company owns or has any interest of any nature
whatsoever in any shares, debentures or other securities issued by any
undertaking other than, (a) in respect of the Target Holding Company, the
Target Company.


 


2.4                                 The Target Holding Company does not carry on any business other than
holding the Target Company.


 


The Vendor


 


2.5                                 The Vendor (the Warrantor) is duly incorporated or established and is
validly existing under the laws of its jurisdiction of incorporation, with full
power and authority to own, lease and operate its properties and assets and to
execute and perform its obligations under this Agreement.


 


2.6                                 The execution, delivery and performance by the Warrantor of this
Agreement has been duly authorised by it and this Agreement constitutes a
legal, valid and binding obligation of such Warrantor enforceable in accordance
with its terms, subject to the laws of bankruptcy and other similar laws
affecting the rights of creditors generally.


 


2.7                                 All regulatory, corporate and other approvals (including Regulatory
Approvals and shareholder approvals) and authorisations required by the
Warrantor for the execution and delivery of this Agreement and any agreement or
instrument contemplated hereby, the performance of the terms hereof and thereof
and the sale of the Target Shares have been obtained, are unconditional and are
in full force and effect.


 


2.8                                 The execution and delivery by the Warrantor of this Agreement, and
the performance and completion of the transactions herein contemplated:
(a) will not infringe any applicable laws or regulations; (b) will
not result in any breach of the terms of, or constitute a default under, its
constitutional documents and business licence (as applicable) or any
instrument, agreement or governmental, regulatory or other judgement, decree or
order to which the Warrantor is a party or by which it or its property is
bound; and (c) will not conflict with any of the certificates, licences or
permits of the Warrantor that enable it to carry on the business or operations
now operated by it.


 


2.9                                 The Warrantor is not: (a) in breach of the terms of, or in
default under, any instrument, agreement or order to which it is a party or by
which it or its property is bound to an extent which is material in the context
of the transactions herein


 


23

















 


contemplated;
(b) involved in or the subject of any current or pending investigation or
proceedings (whether administrative, regulatory or otherwise), whether in the
PRC, Hong Kong  or elsewhere.


 


FINANCIAL MATTERS


 


Accounts


 


3.1(a)                   The Accounts give a true and fair view of the state of affairs and
financial results of the Target Company for the periods and as at the dates
stated therein.


 


(b)                                 Without limiting the generality of paragraph (a):


 


(i)                                     the Accounts of the Target Company either make full provision for or
disclose all liabilities (whether actual, contingent or disputed and including
financial lease commitments and pension liabilities), all outstanding capital
commitments and all bad or doubtful debts of the Target Company as at the
Accounts Dates, in each case in accordance with applicable accounting
principles;


 


(ii)                                  the Accounts of the Target Company for each of the periods ended on
the Accounts Date were prepared under the historical convention, complied with
the requirements of all relevant laws and regulations then in force and with
all statements of standard accounting practice (or financial reporting
standards) and applicable accounting principles then in force;


 


(iii)                               the rate of depreciation adopted by the Target Company in its
Accounts for each of the periods ended on the Accounts Dates was sufficient for
each of the fixed assets of the Target Company to be written down to nil by the
end of its useful life;


 


(iv)                              except as stated in its Accounts, no changes in the accounting
policies were made by any of the Target Company in any of the periods ended on
the Accounts Dates;


 


(v)                                 the results shown by the Accounts of the Target Company for each of
the periods ended on the Accounts Dates were not (except as therein disclosed)
affected by any extraordinary or exceptional item or by any other factor
rendering such results for all or any of such periods unusually high or low.


 


3.2                                 None of the financial information provided to the Purchaser or its
representatives and advisers is misleading in any material respect nor
materially over-state the value of the assets nor materially under-state the
liabilities of the Target Company as at the dates to which they were drawn up
and do not materially over-state the profits of the Target Company in respect
of the periods to which they relate.


 


24

















 


Position since Last Accounts Date


 


3.3(a)                   Since the Last Accounts Date and compared to the Last Accounts, there
has been no material adverse change in the financial or trading position or
(save to the extent that the same would be likely to affect to a similar extent
generally all companies carrying on similar businesses) in the prospects of the
Target Company and no event, fact or matter has occurred which is likely to
give rise to any such change.


 


(b)                                 Since the Last Accounts Date and compared to the Last Accounts:


 


(i)                                     the business of the Target Company has been carried on in the
ordinary and usual course and the Target Company has not made or agreed to make
any payment other than routine payments in the ordinary and usual course of
trading;


 


(ii)                                  no dividend or other distribution has been declared, paid or made by
the Target Company;


 


(iii)                               there has been no material change in the level of borrowing or in
the working capital requirements of the Target Company (except for changes of
not more than 10% arising from expenditure of a capital nature which has been
budgeted or otherwise provided for in the Target Company’s approved business
plan);


 


(iv)                              all transactions between the Target Company and any Vendor Group
Company have been on an arm’s length basis and commercial terms;


 


(v)                                 save for the Restructuring Agreements and the Connected
Transactions, no contract, liability or commitment (whether in respect of
capital expenditure or otherwise) has been entered into by the Target Company
which is of a long term or unusual nature or which involved or could involve an
obligation of a material nature or magnitude;


 


(vi)                              save as provided in the Restructuring Agreements, the Target Company
has not (whether in the ordinary and usual course of business or otherwise)
acquired or disposed of, or agreed to acquire or dispose of, any material
business or any material asset having a value in excess of RMB4 billion;


 


(vii)                           no debtor has been released by the Target Company on terms that it
pays less than the book value of its debt and no material debt owing to the
Target Company has been deferred, subordinated or written off or has proved to
any extent irrecoverable;


 


(viii)                        no change has been made in terms of employment and any benefits in
kind payable to employees and other employment related matters by the Target
Company or any Vendor Group Company (other than those required by law) which
could materially increase the total costs


 


25

















 


attributable to employment and employee
benefits of the Target Company;


 


(ix)                                there has been no material increase or decrease in the levels of
trade debtors or creditors or in the average collection or payment periods for
the trade debtors and creditors respectively;


 


(x)                                   the Target Company has not repaid any borrowing or indebtedness in
advance of its stated maturity;


 


(xi)                                there has been no material reduction in the cash balances of the
Target Company;


 


(xii)                             no resolution of the members of the Target Company has been passed
whether in general meeting or otherwise (other than resolutions relating to the
routine business of annual general meetings); and


 


(xiii)                          the business of the Target Company has not been affected by any
abnormal factor not affecting to a similar extent generally all companies
carrying on similar businesses.


 


Working Capital


 


3.4                                 Having regard to existing bank and other financial facilities, the
Target Company has sufficient working capital available to it as at the date of
this Agreement to enable it to continue to carry on its business in its present
form and at its present level of turnover and for the purpose of performing in
accordance with their terms all orders, projects and other obligations and
discharging all liabilities which ought properly to be discharged during the
period of 12 months after Completion.


 


Accounting and other Records


 


3.5(a)                   The books of account and other records of the Target Company:


 


(i)                                     are up-to-date and have been maintained in accordance with all
applicable laws and generally accepted accounting practices on a proper and
consistent basis;


 


(ii)                                  comprise complete and accurate records of all information required
to be recorded therein;


 


(iii)                               are in its possession or under its control together with all
documents of title and executed copies of all existing agreements to which the
Target Company is a party.


 


(b)                                 All accounts, documents and returns required by law to be delivered
or made by the Target Company to any government authority or regulatory body or
any other authority have been duly and correctly delivered or made.


 


26

















 


DEBT POSITION


 


Debts owed to the Target Company


 


4.1(a)                   There are no debts owing to the Target Company other than:


 


(i)                                     the Intra-Group Loans; and


 


(ii)                                  other trade debts incurred in the ordinary and usual course of
business which do not exceed RMB600 million in aggregate for the Target Company
as a whole.


 


(b)                                 The book debts shown in the Last Accounts of the Target Company have
realised, or will realise within a period of six months from the Last Accounts
Date, their nominal amount less any specific provision for bad or doubtful
debts included in such accounts. The book debts incurred by the Target Company
since the Last Accounts Date and which are outstanding as at the date of this
Agreement will realise within three months from such date not less than 90% of
their nominal amount.


 


Debts owed by the Target Company


 


4.2(a)                   The Target Company does not have outstanding any borrowing or
indebtedness in the nature of borrowing (including, without limitation, any
indebtedness for moneys borrowed or raised under any acceptance credit, bond,
note, bill of exchange or commercial paper, finance lease, hire purchase
agreement, trade bills (other than those on terms normally obtained), forward
sale or purchase agreement or conditional sale agreement or other transaction
having the commercial effect of a borrowing) other than:


 


(i)                                     the Intra-Group Loans; and


 


(ii)                                  moneys borrowed from or otherwise owed to third parties (which do
not exceed RMB22 billion in aggregate for the Target Company as a whole).


 


(b)                                 The Target Company has not received any notice to repay under any
agreement relating to any borrowing or indebtedness in the nature of borrowing
which is repayable on demand.


 


(c)                                  There has not occurred any event of default or any other event or
circumstance which would entitle any person to call for early repayment under
any agreement relating to any borrowing or indebtedness of the Target Company
or to enforce any security given by the Target Company (or, in either case, any
event or circumstance which with the giving of notice and/or the lapse of time
and/or a relevant determination would constitute such an event or
circumstance).


 


27

















 


REGULATORY MATTERS


 


5.1(a)                   Save as envisaged in the Connected Transactions, the Target Company
has (or will by Completion have) obtained all licences, permissions,
authorisations and consents required for carrying on its business effectively
in the places and in the manner in which such business is now carried on.


 


(b)                                 The licences, permissions, authorisations and consents referred to
in paragraph (a) are (or will by Completion be) in full force and effect,
not limited in duration or subject to any unusual or onerous conditions and
have been (or will by Completion have been) complied with in all respects.


 


(c)                                  To the best knowledge of the Vendor, there are no circumstances
which indicate that any of the licences, permissions, authorisations or
consents referred to in paragraph (a) will or are likely to be revoked or
not renewed, in whole or in part, in the ordinary course of events (whether as
a result of the acquisition of the Target Shares by the Purchaser, the
Restructuring or otherwise).


 


5.2(a)                   The Target Company has conducted its business and corporate affairs
in accordance with its business licence and with all applicable laws and
regulations (whether of the PRC, Hong Kong or any other jurisdiction).


 


(b)                                 The Target Company is not in default of any order, decree or
judgment of any court or any governmental or regulatory authority (whether of
the PRC, Hong Kong or any other jurisdiction).


 


THE REORGANISATION AND THE ASSETS


 


The Reorganisation


 


6.1(a)                   The assets injected into the Target Company pursuant to the
Reorganisation comprise all the assets necessary for the carrying on of the
business carried on by the Target Company in the manner it is presently
conducted and the liabilities assumed by the Target Company pursuant to the
Reorganisation represent the only liabilities of the Target Company and are
fully, fairly and accurately provided for in the Accounts.


 


6.2                                 The events and transactions contemplated by the Reorganisation do
not contravene any provision of applicable law, rule or regulation and do not
contravene the Articles of Association or the business licence of the Target
Company or contravene the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, note, lease or
other agreement or instrument binding upon the Target Company that, singly or
in the aggregate, is material to the Target Company, or any judgement, rule or
regulation, order or decree of any governmental body, agency or court having
jurisdiction over the Target Company and will not result in the creation or
imposition of any lien, charge, encumbrance or other restriction upon any
assets of the Target Company.


 


6.3                                 Save for the conditions precedent referred to in clauses 3.1(a)
and 3.1(b), all consents, approvals, authorisations, orders, registrations and
qualifications required in


 


28

















 


the PRC in
connection with the events and transactions contemplated by the Reorganisation
have been (or will by Completion have been) made or unconditionally obtained in
writing (including, without limitation, all PRC Regulatory Approvals and
shareholders’ approval), and no such consent, approval, authorisation, order,
registration or qualification has been withdrawn or is subject to any condition
precedent which has not been fulfilled or performed.


 


6.4                                 There are no legal or government proceedings pending against the
Target Company in the PRC challenging the effectiveness or validity of the
events and transactions contemplated by the Reorganisation and, to the best
knowledge of the Vendor, no such proceedings are threatened or contemplated by
any governmental agencies in the PRC or elsewhere.


 


Ownership


 


6.5(a)                   For the purpose of this Warranty 6.5, assets shall not include the properties
disclosed in the Accounts, to which the provisions of Part B of this Schedule
shall apply.


 


(b)                                 Each of the assets included in the Last Accounts of the Target
Company or acquired by it since the Last Accounts Date (other than assets
disposed of in the ordinary course of business and pursuant to the
Reorganisation) is the absolute property of the Target Company.  Save as disclosed in the Last Accounts,
those assets are not the subject of any security interest, factoring
arrangement, leasing or hiring agreement, hire purchase agreement, conditional
sale or credit sale agreement, agreement for payment on deferred terms or any
similar agreement or arrangement (or any agreement or obligation, including a
conditional obligation, to create or enter into any of the foregoing).


 


Possession and Third Party
Facilities


 


6.6(a)                   All of the assets owned by the Target Company, or in respect of
which the Target Company has a right of use, are in the possession or under the
control of the Target Company.


 


(b)                                 Where any assets are used but not owned by the Target Company or any
facilities or services are provided to the Target Company by any third party,
there has not occurred any event of default or any other event or circumstance
which may entitle any third party to terminate any agreement or licence in
respect of the provision of such facilities or services (or any event or
circumstance which with the giving of notice and/or the lapse of time and/or a
relevant determination would constitute such an event or circumstance).


 


Adequacy of Assets


 


6.7(a)                   The assets of the Target Company and the facilities and services to
which the Target Company has a contractual right include all rights,
properties, assets,


 


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facilities
and services necessary or desirable for the carrying on of the business of the
Target Company in the manner in which it is currently carried on.


 


(b)                                 The assets of the Target Company and the facilities and services to
which the Target Company has a contractual right include all assets, facilities
and services necessary to enable the Target Company to conduct its business
after Completion in the same manner in all material respects as it was
conducted immediately prior to the transfer of such business to the Target
Company pursuant to the Reorganisation.


 


(c)                                  Save as otherwise provided in the Connected Transactions, the Target
Company does not depend in any material respect upon the use of assets owned
by, or facilities or services provided by, any Vendor Group Company.


 


Condition


 


6.8                                 All the plant, machinery, systems, equipment and vehicles used by
the Target Company:


 


(a)                                  are in a good state of repair and have been regularly and properly
maintained in accordance with appropriate technical specifications, safety
regulations and the terms and conditions of any applicable agreement;


 


(b)                                 are capable of being efficiently and properly used for the purposes
for which they were acquired or are retained;


 


(c)                                  are not dangerous, inefficient, obsolete or in need of renewal or
replacement.


 


Insurances


 


6.9(a)                   The business, undertakings, properties and other assets of the
Target Company are adequately insured against such risks as are normally
insured by persons carrying on similar businesses in the PRC as those carried
on by the Target Company and such insurances include all the insurances which
the Target Company is required under the terms of any leases or any contracts
in respect of any of its properties to undertake and such insurances are in
full force and effect and there are no circumstances which could render any of
such insurances void or voidable and all due premiums in respect thereof have
(if due) been paid.


 


(b)                                 No claim is outstanding by the Target Company under any such policy
of insurance and, to the best knowledge of the Vendor, there are no
circumstances likely to give rise to such a claim.


 


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INTELLECTUAL PROPERTY RIGHTS


 


Registered Rights


 


7.1(a)                   The Target Company is the sole legal owner of all Intellectual
Property Rights registered or sought to be registered in any jurisdiction which
are held or beneficially owned by the Target Company.


 


(b)                                 No act has been done or omitted to be done and no event has occurred
or is likely to occur which may render any of such Intellectual Property Rights
subject to revocation, compulsory licence, cancellation or amendment or may
prevent the grant or registration of a valid Intellectual Property Right
pursuant to a pending application.


 


Infringement


 


7.2(a)                   None of the operations of the Target Company infringe, or are likely
to infringe, any rights held by any third party or involve the unauthorised use
of confidential information disclosed to the Target Company (or any Vendor
Group Company) in circumstances which might entitle a third party to make a
claim against the Target Company.


 


(b)                                 No claim has been made by any third party which alleges any
infringing act or process which would fall within paragraph (a) above or
which otherwise disputes the right of the Target Company to use any
Intellectual Property Rights relating to its business and the Vendor is not
aware of any circumstances (including any act or omission to act) likely to
give rise to such a claim.


 


(c)                                  There exists no actual or threatened infringement by any third party
of any Intellectual Property Rights held or used by the Target Company
(including misuse of confidential information) or any event likely to
constitute such an infringement nor has the Target Company (or any Vendor Group
Company) acquiesced in the unauthorised use by any third party of any such
Intellectual Property Rights.


 


Intellectual Property Licences


 


7.3                                 The Target Company is not in default under any licence, sub-licence
or assignment granted to it in respect of any Intellectual Property Rights used
by the Target Company.


 


Loss of Rights


 


7.4                                 No Intellectual Property Rights owned or used by the Target Company
and no licence of Intellectual Property Rights of which the Target Company has
the benefit will be lost, or rendered liable to any right of termination or
cessation by any third party, by virtue of the acquisition by the Purchaser of
the Target Shares.


 


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Records and Software


 


7.5(a)                   All the accounting records and systems (including but not limited to
computerised accounting systems) of the Target Company are recorded, stored,
maintained or operated or otherwise held by the Target Company and are not
wholly or partly dependent on any facilities or systems which are not under the
exclusive ownership or control of the Target Company.


 


(b)                                 The Target Company is licensed to use all software necessary to
enable it to continue to use its computerised records for the foreseeable
future in the same manner in which they have been used prior to the date of
this Agreement and does not share any user rights in respect of such software
with any other person.


 


CONTRACTUAL MATTERS


 


Material Contracts


 


8.1                                 Save for the Restructuring Agreements and the Connected
Transactions, there is not outstanding any agreement or arrangement to which
the Target Company is a party:


 


(a)                                  which, by virtue of the acquisition of the Target Shares by the
Purchaser or other performance of the terms of this Agreement, will result in:


 


(i)                                     any other party being relieved of any obligation or becoming
entitled to exercise any right (including any right of termination or any right
of pre-emption or other option); or


 


(ii)                                  the Target Company being in default under any such agreement or
arrangement or losing any benefit, right or licence which it currently enjoys
or in a liability or obligation of the Target Company being created or
increased;


 


(b)                                 to which any Vendor Group Company is a party or in which any Vendor
Group Company or any connected person (as defined under the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited) is interested
or from which any such person takes benefit, whether directly or indirectly;


 


(c)                                  entered into otherwise than by way of a bargain at arm’s length and
on commercial terms;


 


(d)                                 which establishes any guarantee, indemnity, suretyship, form of
comfort or support (whether or not legally binding) given by the Target Company
in respect of the obligations or solvency of any third party;


 


(e)                                  pursuant to which the Target Company has sold or otherwise disposed
of any company or business in circumstances such that it remains subject to any


 


32

















 


liability
(whether contingent or otherwise) which is not fully provided for in its Last
Accounts;


 


(f)                                    which, upon completion by the Target Company of its work or the
performance of its other obligations under it, is likely to result in a loss
for the Target Company which is not fully provided for in its Last Accounts or
which either is not expected to make a normal profit margin or involves an
abnormal degree of risk;


 


(g)                                 which establishes any joint venture, consortium, partnership or profit
(or loss) sharing agreement or arrangement to which the Target Company is a
party;


 


(h)                                 any power of attorney given by the Target Company or any other
authority which would enable any person not employed by the Target Company to
enter into any contract or commitment on behalf of the Target Company;


 


(i)                                     which involves or is likely to involve (i) material expenditure
by the Target Company or (ii) material obligations or restrictions of the
Target Company of an unusual or exceptional nature or magnitude and not in the
ordinary and usual course of business;


 


(j)                                     which establishes any material agency, distributorship, marketing,
purchasing, manufacturing or licensing agreement or arrangement to which the
Target Company is a party;


 


(k)                                  which is a currency and/or interest rate swap agreement, asset swap,
future rate or forward rate agreement, interest cap, collar and/or floor
agreement or other exchange or rate protection transaction or combination
thereof or any option with respect to any such transaction or any other similar
transaction to which the Target Company is a party;


 


(l)                                     which is any other agreement or arrangement having or likely to have
a material effect on the financial or trading position or prospects of the
Target Company;


 


(m)                               which is a bid, tender, proposal or offer which, if accepted, would
result in the Target Company becoming a party to any agreement or arrangement
of a kind described in sub-paragraphs (a) to (l) above.


 


Defaults


 


8.2 (a)                The
Target Company is not in default under any agreement to which it is a party and
there are no circumstances likely to give rise to any such default.


 


(b)                                 No party with whom the Target Company has entered into any agreement
or arrangement is in default under such agreement or arrangement and there are
no circumstances likely to give rise to any such default.


 


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LITIGATION AND INVESTIGATIONS


 


Litigation


 


9.1(a)                   Except as plaintiff in the collection of debts arising in the
ordinary course of business, the Target Company is not a plaintiff or defendant
in or otherwise a party to any litigation, arbitration or administrative
proceedings which are in progress or threatened or pending by or against or
concerning the Target Company or any of its assets.


 


(b)                                 No governmental or official investigation or inquiry concerning the
Target Company is in progress or pending.


 


(c)                                  The Vendor Group are not aware of any circumstances which are likely
to give rise to any such proceeding, investigation or inquiry as is referred to
in paragraph (a) or paragraph (b).


 


DIRECTORS AND EMPLOYEES


 


Employees


 


10.1                           The Target Company has not entered into any arrangements regarding
any future variation in any contract of employment in respect of any of its
directors and employees or any agreement imposing an obligation on the Target
Company to increase the basis and/or rates of remuneration and/or the provision
of other benefits in kind to or on behalf of any of its directors or employees
at any future date.


 


Compliance


 


10.2                           The Target Company has in relation to each of its employees (and so
far as relevant to each of its former employees) complied in all material
respects with all statutes, regulations, codes of conduct, collective
agreements, terms and conditions of employment, orders and awards relevant to
their conditions of service or to the relations between it and its employees
(or former employees, as the case may be) or any recognised trade union.


 


Incentive Schemes


 


10.3                           The Target Company does not have in existence (or is proposing to
introduce) any share incentive scheme, share option scheme or profit sharing
scheme for all or any of its directors or employees.


 


Payments on Termination


 


10.4                           Except to the extent (if any) to which provision or allowance has
been made in the Last Accounts of the Target Company:


 


(a)                                  no outstanding liability has been incurred by the Target Company for
breach of any contract of employment or for services or for long service or
redundancy payments, protective awards, compensation for dismissal or for any
other


 


34

















 


liability
accruing from the termination of any contract of employment or for services,
and no such liability will be incurred by the Target Company as a result of the
Reorganisation or the acquisition of the Target Shares by the Purchaser or
other performance of the terms of this Agreement and the Restructuring
Agreements;


 


(b)                                 no gratuitous payment has been made or benefit given (or promised to
be made or given) by the Target Company in connection with the actual or
proposed termination or suspension of employment, or variation of any contract
of employment, of any present or former director or employee of the Target
Company.


 


INSOLVENCY ETC.


 


11.1                           No order has been made, petition presented or meeting convened for
the purpose of considering a resolution for the winding up of any Target Group
Company or for the appointment of any provisional liquidator.  No petition has been presented for an
administration order to be made in relation to any Target Group Company, and no
receiver (including any administrative receiver) has been appointed in respect
of the whole or any part of any of the property, assets and/or undertaking of
any Target Group Company.


 


11.2                           No composition in satisfaction of the debts of any Target Group
Company, or scheme of arrangement of its affairs, or compromise or arrangement
between it and its creditors and/or members or any class of its creditors
and/or members, has been proposed, sanctioned or approved.


 


11.3                           No distress, distraint, charging order, garnishee order, execution
or other process has been levied or applied for in respect of the whole or any
part of any of the property, assets and/or undertaking of any Target Group
Company.


 


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Part B: Tax and Property Warranties


 


TAX


 


1.1                                 The Target Company has a tax registration certificate which is in
full force and effect.


 


1.2                                 The Target Company has complied in all material respects with all
statutory provisions, rules, regulations, orders and directions concerning
profits or corporate tax, value-added tax, business tax and stamp duty in their
respective jurisdictions.


 


1.3                                 No tax authority has agreed to operate any special arrangement
(being an arrangement which is not based on a uniform application of the
relevant legislation whether expressly provided for in the relevant legislation
or operated by way of extra statutory concession or otherwise) in relation to
the Target Company.


 


1.4                                 The Target Company has duly, within any appropriate time limits,
made all returns, given all notices and supplied all information required to be
supplied to all relevant tax authorities. 
All such information was when provided and remain complete and accurate and
all such returns and notices were when provided and remain complete and
accurate and were made on a proper basis.


 


1.5                                 The Target Company has not received any notice or allegation from
any tax authorities that it has not complied with any relevant legal
requirement relating to registration or notification for taxation purposes and
the Target Company is not involved in any dispute or investigation with any tax
authority and there are no facts or matters which it reasonably believes will
cause any such dispute or investigation or any liability for taxation (present
or future).


 


1.6                                 The Target Company:


 


(a)                                  has paid or accounted for all taxation (if any) due to be paid or
accounted for by it before the date of this Agreement;


 


(b)                                 is not under any liability to pay any penalty or interest in connection
with any taxation referred to in paragraph (a);


 


(c)                                  has made all deductions and withholdings in respect or on account of
taxation which it is required or entitled by any relevant legislation to make
from any payments made by it including, without limitation, interest annuities
or other annual payments, royalties, rent, remuneration payable to employees or
sub-contractors or payments to a non-resident and where appropriate the Target
Company has accounted in full to the relevant fiscal authority for any taxation
so deducted or withheld; and


 


(d)                                 taken all necessary steps to obtain any repayment of or relief from
taxation available to it.


 


36

















 


1.7                                 All sums due and payable to any taxation authority in respect of
emoluments paid and benefits provided to the employees of the Target Company at
the date of this Agreement have been paid and all such deductions and
retentions as are required under the applicable laws have been made.


 


1.8                                 All remuneration, compensation payments, payments on retirement or
removal from an office or employment and other sums paid or payable to
employees or officers or former employees or officers of the Target Company and
all interest, annuities, royalties, rent and other annual payments paid or
payable by the Target Company (whether before or after the date hereof)
pursuant to any obligation in existence at the date hereof are and will (on the
basis of the taxation legislation in force at the date hereof) be deductible
for incomes tax purposes either in computing the profits of the Target Company
or as a charge on the income of the Target Company.


 


1.9                                 The Target Company has made or caused to be made the returns which
ought to be made by or in respect of the Target Company for any taxation
purposes and no returns are the subject of any dispute with any tax authority.


 


PROPERTY


 


2.1                                 The Properties and the Leased Properties are in the possession and
under the control of the Target Company. The Target Company has valid title to,
and leasehold interests in, all of the Properties, free and clear of all
security interests except for those which do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Target Company.


 


2.2                                 Each Leased Property held under lease by the Target Company is held
by it under valid and enforceable leases in full force and effect with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Target Company and no
material default (or event which with notice or lapse of time, or both, would
constitute such a default) by the Target Company has occurred and is continuing
under any of such leases.


 


2.3                                 The Target Company does not own, operate, manage or have any other
right or interest, directly or indirectly, in any other material real property
of any kind save for those reflected in the Last Accounts or other than as
would not, individually or in the aggregate, have a material adverse effect on
the combined financial position, shareholder’s equity or results of operations
of the Target Company taken as a whole.


 


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APPENDIX 1


 


Connected
Transactions


 


1.                                       Transfer Agreement dated 1 July 2002 between the A Share Company and
the Purchaser regarding a CDMA network capacity lease agreement.


 


2.                                       Transfer Agreement dated 1 July 2002 between the A Share Company and
the Purchaser regarding the transfer of rights and obligations under a services
agreement.


 


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APPENDIX 2


 


The
Restructuring Agreements


 


1.                                       Reorganisation Agreement dated 18 November 2002 pursuant to which
Unicom New Century Telecommunications Corporation acquired from Unicom Group
its cellular business assets and operations in the Territory.


 


2.                                       Restructuring Agreement dated 23 October 2002 pursuant to which (a)
Unicom Centenarian (BVI) Limited acquired from China United Telecommunications
Corporation the registered capital of Unicom New Century Telecommunications
Corporation; and (b) Unicom New Century (BVI) Limited acquired from Unicom
Centenarian (BVI) Limited the registered capital of Unicom New Century
Telecommunications Corporation.


 


3.                                       Sale and Purchase Agreement dated 20 November 2002 pursuant to which
China Unicom (BVI) Limited acquired from Unicom Centenarian (BVI) Limited the
registered capital of Unicom New Century (BVI) Limited.


 


39

















 


SIGNATURE PAGE


 


	
  SIGNED by

  	
  /s/ Tan Xing
  Hui

  	
   

  	
   

  	
  )

  
	
  for and on
  behalf of

  	
   

  	
  )

  
	
  CHINA UNICOM (BVI) LIMITED

  	
   

  	
  )

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SIGNED by

  	
  /s/ Tan Xing
  Hui

  	
   

  	
   

  	
  )

  
	
  for and on
  behalf of

  	
   

  	
  )

  
	
  CHINA UNICOM LIMITED

  	
   

  	
  )

  



 


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