**Exhibit4.26**

 

 

**28July 2004**

 

 

**CHINA UNICOM (HONG KONG) GROUP LIMITED**

 

 

**CHINA UNICOM LIMITED**

 

 

----

 

**AGREEMENTfor the sale and purchase ofthe issued share capital ofCHINA UNICOM INTERNATIONALLIMITED**

 

----

 

 

----

 

**CONTENTS**

 
| **CLAUSE**                                              | ** **                                            |
|---------------------------------------------------------|-------------------------------------------------------|
| ** **                                              | ** **                                            | ** ** |
| 1.                                                      | INTERPRETATION                                        |   |
|                                                    |                                                  |   |
| 2.                                                      | SALE OF THE SHARES AND PRICE |   |
|                                                    |                                                  |   |
| 3.                                                      | CONDITIONS PRECEDENT                                  |   |
|                                                    |                                                  |   |
| 4.                                                      | PRE-COMPLETION UNDERTAKINGS                           |   |
|                                                    |                                                  |   |
| 5.                                                      | COMPLETION                                            |   |
|                                                    |                                                  |   |
| 6.                                                      | POST-COMPLETION UNDERTAKINGS; RESTRICTIONS  ON VENDOR |   |
|                                                    |                                                  |   |
| 7.                                                      | WARRANTIES                                            |   |
|                                                    |                                                  |   |
| 8.                                                      | LIMITATIONS ON CLAIMS                                 |   |
|                                                    |                                                  |   |
| 9.                                                      | PURCHASER’S RIGHTS TO RESCISSION                 |   |
|                                                    |                                                  |   |
| 10.                                                     | ENTIRE AGREEMENT                                 |   |
|                                                    |                                                  |   |
| 11.                                                     | VARIATION                                             |   |
|                                                    |                                                  |   |
| 12.                                                     | ASSIGNMENT                                            |   |
|                                                    |                                                  |   |
| 13.                                                     | COSTS                                                 |   |
|                                                    |                                                  |   |
| 14.                                                     | SEVERABILITY                                          |   |
|                                                    |                                                  |   |
| 15.                                                     | FURTHER ASSURANCE                                     |   |
|                                                    |                                                  |   |
| 16.                                                     | NOTICES                                               |   |
|                                                    |                                                  |   |
| 17.                                                     | WAIVERS/PURCHASER’S RIGHTS AND REMEDIES          |   |
|                                                    |                                                  |   |
| 18.                                                     | GOVERNING LAW                                    |   |
|                                                    |                                                  |   |
| SCHEDULE 1 INTERPRETATION                          |                                                  |
|                                                    |                                                  |   |
| SCHEDULE 2 EACH GROUP COMPANY                      |                                                  |
|                                                    |                                                  |   |
| PART A  : DETAILS OF THE COMPANY    |                                                  |
|                                                    |                                                  |   |
| PART B  : DETAILS OF THE SUBSIDIARY |                                                  |
|                                                    |                                                  |   |
| SCHEDULE 3 THE WARRANTIES                     |                                                  |
|                                                    |                                                  |   |
| PART A  : GENERAL                                  |                                                  |
|                                                    |                                                  |   |
| PART B  : TAX WARRANTIES                           |                                                  |
|                                                    |                                                  |   |
| PART C  : PROPERTY WARRANTIES                      |                                                  |

 

----

 

**THIS AGREEMENT** is made on 28 July 2004

 

**BETWEEN**

 

(1)                                  **CHINA UNICOM (HONG KONG) GROUP LIMITED**whose registered office is at 75th Floor, The Centre, 99Queen’s Road Central, Hong Kong (the ***Vendor***)

 

(2)                                  **CHINA UNICOM LIMITED**whose registered office is at 75th Floor, The Center, 99 Queen’sRoad Central, Hong Kong and whose shares are listed on The Stock Exchange ofHong Kong Limited and whose American depository shares are listed on New YorkStock Exchange, Inc. (the ***Purchaser***)

 

**WHEREAS**

 

(A)                              ChinaUnicom International Limited (the ***Company***) isa private company limited by shares incorporated in Hong Kong.  The Vendor is the sole beneficial owner ofthe entire issued share capital of the Company.

 

(B)                                TheVendor has agreed to sell and the Purchaser has agreed to purchase all of theissued share capital of the Company for the consideration and upon the termsset out in this Agreement.

 

**IT IS AGREED** as follows:

 

**1.**                                      INTERPRETATION

** **

1.1                                 Wordsand expressions used in this Agreement shall have the meanings set out in Schedule 1,unless the context requires otherwise.

 

1.2                                 TheSchedules comprise schedules to this Agreement and form part of this Agreement.

 

**2.**                                      SALE OF THE SHARES AND PRICE

** **

2.1                                 TheVendor shall sell or procure the sale of, and the Purchaser shall purchase, theShares as beneficial owner.  The Sharesshall be sold free from all security interests, options, equities, claims orother third party rights (including rights of pre-emption) of any naturewhatsoever, together with all rights attaching to them.

 

2.2                                 Thetotal price payable by the Purchaser to the Vendor for the Shares shall be thesum of HK$37,159,995.77.

 

**3.**                                      CONDITIONSPRECEDENT

** **

3.1                                 Completionof the sale and purchase of the Shares shall be conditional upon the fulfilmentto the reasonable satisfaction of the Purchaser that there havebeen no material adverse change to the financial condition, businessoperations or prospects of the Company.

 

----

 

3.2                                 Ifthe condition precedent referred to in Clause 3.1 has not been fulfilled (orwaived) on or before 11 August 2004 or such other date as the parties tothis Agreement may agree in writing, this Agreement (other than Clauses 1, 3.2,10 to 18 and Schedule 1, which shall continue to be in force) shallautomatically terminate and no party shall have any claim of any naturewhatsoever against the other parties under this Agreement (save in respect ofits accrued rights arising from any prior breach of this Agreement).

 

**4.**                                      PRE-COMPLETION UNDERTAKINGS

** **

4.1                                 PendingCompletion, the Vendor shall procure that:

 

(a)                                  each Group Companyshall 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 andusual course of trading;

 

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

 

(c)                                  the Purchaser’s representatives shall be allowed, upon reasonablenotice and during normal business hours, access to the books and records ofeach Group Company (including, without limitation, all statutory books, minutebooks, leases, contracts, supplier lists and customer lists) together with theright to take copies;

 

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

 

(e)                                  prompt disclosure is made to the Purchaser of all relevantinformation which comes to the notice of the Vendor in relation to any fact ormatter (whether existing on or before the date of this Agreement or arisingafterwards) which may constitute a breach of any Warranty as if the Warrantieswere to be repeated on or at any time before Completion by reference to thefacts and circumstances then existing;

 

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

 

(g)                                 no share or loancapital shall be allotted or issued or agreed to be allotted or issued by anyGroup Company;

 

(h)                                 all transactionsbetween each Group Company and the Vendor shall be on arm’s length commercialterms and in their respective ordinary and usual course of business; and

 

(i)                                     no action is takenby any Group Company or the Vendor which is inconsistent with theprovisions of this Agreement or the consummation of the transactionscontemplated by this Agreement.

 

2

----

 

4.2                                 PendingCompletion, the Vendor shall procure that the Group Companies consult fullywith the Purchaser in relation to any matters which may have a material effectupon the Group Companies.  Without theprior written consent of the Purchaser, the Group Companies shall not, and theVendor shall ensure that the Group Companies do not:

 

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

 

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

 

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

 

(d)                                 enter into anyagreement, contract, arrangement or transaction (whether or not legallybinding) other than in the ordinary and usual course of business.

 

4.3                                 PendingCompletion, the Vendor shall obtain, effect or procurefor the obtaining and effecting of all approvals, registrations and filingsrequired by applicable laws and regulations for the Completion to be effected,including but not limited to approval by the Ministry of Commerce of China.

 

**5.**                                      COMPLETION

** **

5.1                                 Thesale and purchase of the Shares shall be completed at 75th Floor,The Centre, 99 Queen’s Road Central, Hong Kong on 11 August 2004 or suchlater date as the Vendor and the Purchaser may agree, following notification bythe Purchaser to the Vendor of the fulfilment to the satisfaction of thePurchaser (or waiver) of the condition precedent referred to in Clause3.1.  The events referred to in thefollowing provisions of this clause 5 shall take place on Completion.

 

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

 

(a)                                  duly executedinstruments of transfer into the name of the Purchaser or its nominee and eachduly pre-stamped with nominal stamp duty, in respect of all of the Shares,together with the relative share certificates;

 

(b)                                 duly executed soldnotes in favour of the Purchaser and/or its nominees in respect of all the Shares;

 

(c)                                  the Certificate of Incorporation, Common Seal, Register of Membersand Share Certificate Books (with any unissued share certificates), all minutebooks and other statutory books (which shall be written-up to but not includingCompletion) of each Group Company; and

 

3

----

 

(d)                                 all such otherdocuments (including any necessary waivers or consents) as may be required toenable the Purchaser and/or its nominee to be registered as the holder(s) ofthe Shares.

 

5.3                                 TheVendor shall procure that resolutions of the Board of Directors of the Companyare passed by which the registration (subject to their being duly stamped) ofthe transfers in respect of the Shares referred to in clause 5.2 areapproved and any additional directors nominated by the Purchaser are appointedto the Board of Directors of the Company;

 

5.4                                 ThePurchaser shall:

 

(a)                                  in satisfaction of its obligations under 2.2, cause the price to bepaid by banker’s draft made payable to the Vendor or electronic funds transferto such a bank account as may be directed by the Vendor; and

 

(b)                                 produce to theVendor duly executed bought notes in respect of all the Shares.

 

Any payment made in accordance withclause 5.4(a) shall constitute a good discharge for the Purchaser ofits obligations under clause 2.2 and the Purchaser shall not be concernedto see that the funds are applied in payment to the Vendor.

 

**6.**                                      POST-COMPLETION UNDERTAKINGS;RESTRICTIONS ON VENDOR

** **

6.1                                 TheVendor shall not (whether alone or jointly with another and whether directly orindirectly) carry on or be engaged or (except as the owner for investment ofsecurities dealt in on a stock exchange and not exceeding 5 per cent. innominal value of the securities of that class) be interested economically orotherwise in any manner whatsoever in any Competing Business during theRelevant Period.

 

6.2                                 TheVendor shall not during the Relevant Period, directly or indirectly, solicit orendeavour to entice away from the Group Companies, offer employment to oremploy, or offer or conclude any contract for services with, any person who wasemployed in skilled or managerial work in the Group Companies’ business atany time during the 1 year prior to Completion.

 

6.3                                 Exceptso far as may be required by law and in such circumstances only after priorconsultation with the Purchaser, the Vendor shall not at any time disclose toany person or use to the detriment of the Group Companies’ businessany trade secret or other confidential information of a technical characterwhich it holds in relation to the Group Companies’ business.

 

TheVendor acknowledges and agrees that the duration, extent and application of therespective restrictions in clauses 6.1, 6.2 and 6.3 are no greaterthan is reasonable and necessary for the protection of the interests of thePurchaser but that, if any such restriction shall be adjudged by any court ofcompetent jurisdiction to be void or unenforceable but would be valid if partof the wording thereof was deleted and/or the period thereof was reduced and/orthe area dealt with thereby was reduced, the said restriction shall applywithin the jurisdiction of that court with such modifications as may benecessary to make it valid and effective.

 

4

----

 

**7.**                                      WARRANTIES

** **

7.1                                 TheVendor represents, warrants and undertakes to thePurchaser in the terms of the Warranties and acknowledges that the Purchaserhas entered into this Agreement in reliance upon the Warranties.

 

7.2                                 TheVendor undertakes (without limiting any other rights of the Purchaser in anyway including its rights to damages in respect of a claim for breach of anyWarranty on any other basis) that it shall pay in cash to the Purchaser (or, ifso directed by the Purchaser, to the Group Company in question) (each an ***Indemnified Person***) by way ofindemnity on demand in the case of a breach of any of the Warranties, a sumequal to the aggregate of (i) the amount which, if received by theIndemnified Person, would be necessary to put that Indemnified Person into thefinancial position which would have existed had there been no breach of theWarranty in question; and (ii) all Costs suffered or incurred by theIndemnified Person, directly or indirectly, as a result of or in connectionwith such breach of Warranty.

 

7.3                                 TheVendor agrees to waive the benefit of all rights (if any) which the Vendor mayhave against any Group Company, or any present or former officer or employee ofany such company, on whom the Vendor may have relied in agreeing to any term ofthis Agreement and the Vendor undertakes not to make any claim in respect ofsuch reliance.

 

7.4                                 Eachof the Warranties shall be construed as a separate Warranty and (save asexpressly provided to the contrary) shall not be limited or restricted byreference to or inference from the terms of any other Warranty or any otherterm of this Agreement.

 

7.5                                 TheWarranties shall be deemed to be repeated immediately before Completion withreference to the facts and circumstances then existing.

 

7.6                                 TheVendor undertakes to notify the Purchaser in writing promptly if it becomesaware of any circumstance arising after the date of this Agreement which wouldcause any Warranty (if the Warranties were repeated with reference to the factsand circumstances then existing) to become untrue or inaccurate or misleadingin any respect which is material to the financial or trading positionof either of the Group Companies.

 

**8.**                                      LIMITATIONSON CLAIMS

** **

8.1                                 Theaggregate amount of the liability of the Vendor for all Claims shall not exceedthe total price referred to in Clause 2.2.

 

8.2                                 Noneof the limitations contained in clause 8.1 shall apply to any breach ofany Warranty which (or the delay in discovery of which) is the consequence ofdishonest, deliberate or reckless mis-statement, concealment or other conductby the Vendor or any officer or employee, or former officer oremployee, of the Vendor.

 

5

----

 

**9.**                                      PURCHASER’S RIGHTS TO RESCISSION

** **

9.1                                 ThePurchaser may by written notice given to the Vendor at any time prior toCompletion rescind this Agreement without liability on the part of thePurchaser:

 

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

 

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

 

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

 

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

 

(b)                                 if at any timeafter signing of this Agreement and before Completion there is a materialadverse change in the market price of the shares of the Purchaser and thePurchaser is of the opinion that it will not be in the interests of itsshareholders as a whole to proceed with the acquisition of the Shares.

 

**10.**                               ENTIRE AGREEMENT

** **

This Agreement constitutes the entireagreement and understanding between the parties in connection with the sale andpurchase of the Shares. Neither party has entered into this Agreement inreliance upon any representation, warranty or undertaking which is not set outor referred to in this Agreement.

 

**11.**                               VARIATION

** **

11.1                           Novariation of this Agreement (or of any of the documents referred to in thisAgreement) shall be valid unless it is in writing and signed by or on behalf ofeach of the parties to it.  Theexpression “variation” shall include any variation, supplement, deletion orreplacement however effected.

 

11.2                           Unlessexpressly agreed, no variation shall constitute a general waiver of anyprovisions of this Agreement, nor shall it affect any rights, obligations orliabilities under or pursuant to this Agreement which have already accrued upto the date of variation, and the rights and obligations of the parties underor pursuant to this Agreement shall remain in full force and effect, except andonly to the extent that they are so varied.

 

6

----

 

**12.**                               ASSIGNMENT

** **

Neither party shall nor shall it purport toassign, transfer, charge or otherwise deal with all or any of its rights underthis Agreement nor grant, declare, create or dispose of any right or interestin it without the prior written consent of the other party.

 

**13.**                               COSTS

** **

Each of the parties shall bear its ownCosts incurred in connection with the negotiation, preparation andimplementation of this Agreement.  Anystamp duty payable in respect of the transfer of Shares shall be paid by theVendor and the Purchaser in equal shares.

 

**14.**                               SEVERABILITY

** **

If any provision of this Agreement is heldto be invalid or unenforceable, then such provision shall (so far as it isinvalid or unenforceable) be given no effect and shall be deemed not to beincluded in this Agreement but without invalidating any of the remainingprovisions of this Agreement.

 

**15.**                               FURTHERASSURANCE

** **

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

 

**16.**                               NOTICES

** **

16.1                           Any noticeor other communication to be given by one party to the other under, or inconnection with, this Agreement shall be in writing and signed by or on behalfof the party giving it.  It shall beserved by sending it by fax to the number set out in clause 16.2, ordelivering it by hand, or sending it by pre-paid recorded delivery, specialdelivery or registered post, to the address set out in clause 16.2 and ineach case marked for the attention of the relevant party set out inclause 16.2 (or as otherwise notified from time to time in accordance withthe provisions of this clause 16). Any notice so served by hand, fax or post shall be deemed to have beenduly given:

 

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

 

(b)                                 in the case of fax,at the time of transmission;

 

7

----

 

(c)                                  in the case ofprepaid recorded delivery, special delivery or registered post, at 10am on thesecond Business Day following the date of posting

 

provided that in each case where deliveryby hand or by fax occurs after 6pm on a Business Day or on a day which is not aBusiness Day, service shall be deemed to occur at 9am on the next followingBusiness Day.

 

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

 

16.2                           Theaddresses and fax numbers of the parties for the purpose of clause 16.1are as follows:

 

**Vendor**

 
| Address:               | 75th  Floor, The Center       |
|------------------------|-------------------------------|
|                   | 99 Queen’s  Road Central |
|                   | Hong Kong                     |
|                   |                          |
| Fax:                   | 852 2126  2016                |
|                   |                          |
| For the  attention of: | The  Directors                |

 

**Purchaser**

 
| Address:               | 75th  Floor, The Center       |
|------------------------|-------------------------------|
|                   | 99 Queen’s  Road Central |
|                   | Hong Kong                     |
|                   |                          |
| Fax:                   | 852 2126  2016                |
|                   |                          |
| For the  attention of: | The  Directors                |

 

16.3                           A party maynotify the other party to this Agreement of a change to its name, relevantaddressee, address or fax number for the purposes of this clause 16,provided that, such notice shall only be effective on:

 

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

 

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

 

8

----

 

**17.**                               WAIVERS/PURCHASER’S RIGHTS AND REMEDIES

** **

17.1                           No failureor delay by the Purchaser in exercising any right or remedy provided by lawunder or pursuant to this Agreement shall impair such right or remedy oroperate or be construed as a waiver or variation of it or preclude its exerciseat any subsequent time and no single or partial exercise of any such right orremedy shall preclude any other or further exercise of it or the exercise ofany other right or remedy.

 

17.2                           The rightsand remedies of the Purchaser under or pursuant to this Agreement arecumulative, may be exercised as often as such party considers appropriate andare in addition to its rights and remedies under general law.

 

17.3                           The rightsand remedies of the Purchaser under this Agreement shall not be affected, andthe Vendor’s liabilities under this Agreement shall not be released, dischargedor impaired, by (i) Completion, (ii) any investigation made into theaffairs of any Group Company or any knowledge held or gained of any suchaffairs by or on behalf of the Purchaser, (iii) the expiry of anylimitation period prescribed by law, or (iv) any event or matterwhatsoever, other than a specific and duly authorised written waiver or releaseby the Purchaser.

 

**18.**                               GOVERNING LAW

** **

This Agreement and the relationship betweenthe parties shall be governed by, and interpreted in accordance with, Hong Konglaw.

 

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

 

9

----

 

**SCHEDULE 1**

** **

**INTERPRETATION**

** **

1.1                                 Inthis Agreement the following expressions shall have the following meanings:

 

***Accounts***means the audited balance sheet of eachGroup Company as at the Accounts Date and the audited profit and loss accountof each Group Company in respect of the financial year ended on the AccountsDate, together with any notes, reports, statements or documents included in orannexed to them;

 

***AccountsDate***means31 December 2003;

 

***BusinessDay***meansa day (excluding Saturdays) on which banks generally are open in Hong Kong forthe transaction of normal banking business;

 

***Business IP***means the registered and materialunregistered Intellectual Property Rights owned by either of the GroupCompanies, for which purpose ***registered***includesregistrations and applications for registration;

 

***China*** or the ***PRC*** means thePeople’s Republic of China;

 

***Companies Ordinance*** meansthe Companies Ordinance (Chapter 32 of the Laws of Hong Kong);

 

***Company*** means ChinaUnicom International Limited, the details of which are set out in Part A of Schedule 2;

 

*****Competing Business*****means a business which is carried on by either Group Company on thedate of this Agreement;

 

***Completion***means completion of the sale andpurchase of the Shares under this Agreement;

 

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

 

***Group*** means the Company and the Subsidiary;

 

***Group Company*** means the Company or the Subsidiary;

 

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

 

***HK$*** means the lawful currency of Hong Kong;

 

10

----

 

***IntellectualProperty Rights***means patents,trade marks, service marks, logos, get-up, trade names, internet domain names,rights in designs, copyright (including rights in computer software) and moralrights, database rights, semi-conductor topography rights, utility models,rights in know-how and other intellectual property rights, in each case whetherregistered or unregistered and including applications for registration, and allrights or forms of protection having equivalent or similar effect anywhere inthe world;

 

***Leased Properties*** means the properties leased by the Group;

 

***Management Accounts*** means the unaudited balance sheet and profit and loss account ofeach Group Company as at the Management Accounts Date;

 

***ManagementAccounts Date***means June 30 2004;

 

***Relevant Period*** means the period commencing from the date of Completion and endingon the date on which (i) the shares or the American Depository Shares ofthe Purchaser cease to be listed and traded on the New York Stock Exchange,Hong Kong Stock Exchange and any other stock exchanges or (ii) ChinaUnited Telecommunications Corporation ceases to be a controlling shareholder ofthe Purchaser or an associate of such controlling shareholder under the Rules Governingthe Listing of Securities on the Stock Exchange of Hong Kong Limited, whicheveris the earlier;

 

***securityinterest***meansany security interest of any nature whatsoever including, without limitation,any mortgage, charge, pledge, lien, assignment by way of security or otherencumbrance;

 

***Shares***means all the issued shares in thecapital of the Company;

 

***Subsidiary***means China Unicom USA Corporation, the details of which are set outin Part B of Schedule 2;

 

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

 

***TaxWarranties***means the representations and warranties set out in Part B of Schedule 3;

 

***Warranties***means the representations andwarranties set out in Schedule 3.

 

1.2                                 Inthis Agreement, unless the context otherwise requires:

 

(a)                                  the headings******areinserted for convenience only and shall not affect the construction of thisAgreement;

 

(b)                                 references to one gender include allgenders;

 

(c)                                  references to the singular shallinclude the plural and vice versa; and

 

11

----

 

(d)                                 any statement qualified by the expression ***tothe best knowledge of the Vendor***or ***sofar as the Vendor is aware***or any similar expression shall bedeemed to include an additional statement that it has been made after due andcareful enquiry.

 

12

----

 

**SCHEDULE 2**

**EACH GROUP COMPANY**

** **

**PART **A :DETAILS OF THE COMPANY

 
| 1.     | **Name:**                      | China Unicom  International Limited                                                                                                                                                                    |
|--------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | ** **                     |                                                                                                                                                                                                   |
| 2.     | **Date of Incorporation:**     | 24  May 2000                                                                                                                                                                                      |
|   | ** **                     |                                                                                                                                                                                                   |
| 3.     | **Place of Incorporation:**    | Hong Kong                                                                                                                                                                                              |
|   | ** **                     |                                                                                                                                                                                                   |
| 4.     | **Registered Number:**         | 717768                                                                                                                                                                                                 |
|   | ** **                     |                                                                                                                                                                                                   |
| 5.     | **Registered Office:**         | 25th  Floor,  One Peking Road, Tsim Sha Tsui,  Kowloon, Hong Kong                                                                                                                                      |
|   | ** **                     |                                                                                                                                                                                                   |
| 6.     | **Directors:**                 | Hong Ming  Dai Renfei                                                                                                                                                                                  |
|   | ** **                     |                                                                                                                                                                                                   |
| 7.     | **Secretary:**                 | Kwickserve  Limited                                                                                                                                                                                    |
|   | ** **                     |                                                                                                                                                                                                   |
| 8.     | **Authorised Capital:**        | HK$100,000  divided into 100,000 shares of HK$1.00 each                                                                                                                                                |
|   | ** **                     |                                                                                                                                                                                                   |
| 9.     | **Issued Capital:**            | 100,000  Shares                                                                                                                                                                                        |
|   | ** **                     |                                                                                                                                                                                                   |
| 10.    | **Registered Shareholders:**   | China Unicom  (Hong Kong) Group Limited: 99,999 Shares

 

China United  Telecommunications Corp (HK) Limited: 1 Share (held on trust for the benefit  of China Unicom (Hong Kong) Group Limited) |
|   | ** **                     |                                                                                                                                                                                                   |
| 11.    | **Accounting Reference Date:** | 31 December                                                                                                                                                                                            |
|   | ** **                     |                                                                                                                                                                                                   |
| 12.    | **Auditors:**                  | PricewaterhouseCoopers                                                                                                                                                                                 |
|   | ** **                     |                                                                                                                                                                                                   |
| 13.    | **Subsidiaries:**              | China Unicom USA Corporation                                                                                                                                                                           |
|   | ** **                     |                                                                                                                                                                                                   |
| 14.    | **Mortgages and Charges:**     | None                                                                                                                                                                                                   |

 

13

----

 

**PART **B :DETAILS OF THE SUBSIDIARY

 
| 1.     | **Name:**                       | China Unicom  USA Corporation (before conversion into a corporation, China Unicom USA LLC) |
|--------|---------------------------------|--------------------------------------------------------------------------------------------|
|   | ** **                      |                                                                                       |
| 2.     | **Date of Incorporation:**      | 24 May 2002 (conversion effective on 17 April 2003)                              |
|   | ** **                      |                                                                                       |
| 3.     | **Place of Incorporation:**     | California,  USA                                                                           |
|   | ** **                      |                                                                                       |
| 4.     | **Registered Number:**          | 2507822                                                                                    |
|   | ** **                      |                                                                                       |
| 5.     | **Principal Executive Office:** | 624 South Grand Avenue                                                                     |
|   |                            | Suite 900                                                                             |
|   |                            | Los Angeles CA90017                                                                        |
|   |                            | USA                                                                                        |
|   |                            |                                                                                       |
| 6.     | **Directors:**                  | Hong Ming (President) /Xiao  Jingming (Vice President)                                     |
|   | ** **                      |                                                                                       |
| 7.     | **Share capital:**              | Authorised number of shares: 10,000, of which 100 shares have been  issued for US$10,000   |
|   | ** **                      |                                                                                       |
| 8.     | **Registered Shareholders:**    | China Unicom International Limited                                                         |
|   | ** **                      |                                                                                       |
| 9.     | **Accounting Reference Date:**  | 31 December                                                                                |
|   | ** **                      |                                                                                       |
| 10.    | **Auditors:**                   | K T Leung, a California CPA                                                                |
|   | ** **                      |                                                                                       |
| 11.    | **Subsidiaries:**               | None                                                                                       |
|   | ** **                      |                                                                                       |
| 12.    | **Mortgages and Charges:**      | None                                                                                       |

 

14

----

 

**SCHEDULE 3**

**THE WARRANTIES**

** **

**PART **A : GENERAL

** **

**1.**                                      EXHIBITS

** **

1.1                                 Eachof the following Exhibits delivered by the Vendor to the Purchaser accuratelysets out the information required to be provided in that Exhibit and isnot misleading:

 

**Exhibit A – Accounts:**  The Accounts of each of thelast three (3) financial years (or, in the case of the Subsidiary, for theperiod since its incorporation) ended on the Accounts Date and the ManagementAccounts for the period from 1 January 2004 to the Management AccountsDate.

 

**Exhibit B****– Licences: **A list of all licences,permissions, authorisations and consents referred to in Warranty 5.1, copies ofwhich have been provided to the Purchaser.

 

**Exhibit C – Employees:**A list of employees of each Group Company as at the ManagementAccounts Date.

 

**Exhibit D****– Insurances:** Asummary of all policies of insurance of each Group Company referred to inWarranty 6.4, copies of which have been provided to the Purchaser.

 

**Exhibit E****– Material Contracts:**A list of all agreements of the kinds described in Warranty 8.1 to which anyGroup Company is a party, copies of which have been provided to the Purchaser.

 

**Exhibit F****– Intellectual Property:**A list, including details, of the Business IP.

 

**Exhibit G****– List of Properties:**A list, including brief details, of the Leased Properties occupied by eachGroup Company.

 

**Exhibit H – List ofLitigations**: A list, including briefdetails, of litigations, arbitrations or administrative proceedings to whichany Group Company is a party.

 

**2.**                                      THE VENDOR AND THE GROUP

** **

2.1                                 **Authorisations**

 

The Vendor hasobtained all corporate authorisations and all other applicable governmental,statutory, regulatory or other consents, licences, authorisations, waivers orexemptions required to empower it to enter into and perform its obligationsunder this Agreement.

 

15

----

 

2.2                                 **The Company and the Shares**

 

(a)                                  Allof the Shares are fully-paid or properly credited as fully-paid and the Vendoror its nominee is the sole legal and beneficial owner of them free from allsecurity interests, options, equities, claims or other third party rights(including rights of pre-emption) of any nature whatsoever.

 

(b)                                 Theinformation in respect of the Company set out in Part Aof Schedule 2 is true and accurate.

 

2.3                                 **The Subsidiary**

 

(a)                                  TheCompany is the sole legal and beneficial owner of all of the issued sharecapital of the Subsidiary, free from all security interests, options, equities,claims or other third party rights (including rights of pre-emption) of anynature whatsoever.

 

(b)                                 Theinformation in respect of the Subsidiary set out in Part B of Schedule 2is true and accurate.

 

2.4                                 **Other Interests**

 

No Group Company owns or has any interest ofany nature whatsoever in any shares, debentures or other securities issued byany undertaking other than the Subsidiary.

 

**3.**                                      FINANCIAL MATTERS

** **

3.1                                 **The Accounts**

 

(a)                                  TheAccounts give a true and fair view of the state of affairs of each GroupCompany as at the Accounts Date and of the results thereof for the financialyear ended on the Accounts Date.

 

(b)                                 Withoutlimiting the generality of paragraph (a);

 

(i)                                     theAccounts of each Group Company either make full provision for or, disclose allliabilities (whether actual, contingent or disputed and including financiallease commitments and pension liabilities), all outstanding capital commitmentsand all bad or doubtful debts of the relevant Group Company as at the AccountsDate, in each case in accordance with generally accepted accounting principles;

 

(ii)                                  theAccounts of each Group Company for each of the last three (3) financialyears (or in the case of the Subsidiary, for the period since itsincorporation) ended on the Accounts Date were prepared under the historicalconvention, complied with the requirements of all relevant laws then in forceand with all statements of standard accounting practice (or financial reportingstandards) and generally accepted accounting principles then in force; and

 

16

----

 

(iii)                               theresults shown by the Accounts of each Group Company for each of the last three (3) financialyears (or in the case of the Subsidiary, for the period since itsincorporation) ended on the Accounts Date were not (except as thereindisclosed) affected by any extraordinary or exceptional item or by any otherfactor rendering such results for all or any of such periods unusually high orlow.

 

3.2                                 **Management Accounts**

 

(a)                                  TheManagement Accounts of each Group Company were properly prepared in a mannerconsistent with that adopted in the preparation of its management accounts forall periods ended during the twelve (12) months prior to the ManagementAccounts Date.

 

(b)                                 Havingregard to the purpose for which such Management Accounts were prepared, theyare not misleading in any material respect and neither materially over-statethe value of the assets nor materially under-state the liabilities of any GroupCompany as at the dates to which they were drawn up and do not materially over-statethe profits of any Group Company in respect of the periods to which theyrelate.

 

3.3                                 **Position since Accounts Date**

 

(a)                                  Sincethe Accounts Date there has been no material adverse change in the financial ortrading position or in the prospects of any Group Company and no event, fact ormatter has occurred which is likely to give rise to any such change.

 

(b)                                 Sincethe Accounts Date:

 

(i)                                     thebusiness of each Group Company has been carried on in the ordinary and usualcourse and no Group Company has made or agreed to make any payment other thanroutine payments in the ordinary and usual course of trading;

 

(ii)                                  no dividend or other distribution hasbeen declared, paid or made by any Group Company (except for any dividendsprovided for in the Accounts);

 

(iii)                               no share or loan capital has beenallotted or issued or agreed to be allotted or issued by any Group Company;

 

(iv)                              there has been no material change inthe level of borrowing or in the working capital requirements of the Company;

 

(v)                                 nocontract, liability or commitment (whether in respect of capital expenditure orotherwise) has been entered into by any Group Company which is of a long termor unusual nature or which involved or could involve an obligation of amaterial nature or magnitude;

 

17

----

 

(vi)                              no Group Companyhas (whether in the ordinary and usual course of business or otherwise)acquired or disposed of, or agreed to acquire or dispose of:

 

(A)                              any business or any asset having avalue in excess of HK$7,000,000 on an individual basis; or

 

(B)                                businesses (each having a value inexcess of HK$1,000,000 on an individual basis) and assets (each having avalue in excess of HK$1,000,000 on an individual basis) having acombined value in excess of HK$13,000,000;

 

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

 

(viii)                        no Group Company has repaid anyborrowing or indebtedness in advance of its stated maturity.

 

3.4                                 **Past Transactions in accordance withapplicable laws**

 

During theperiod in which it has been a subsidiary of the Vendor, all transactionsundertaken by each Group Company have been carried out in accordance with allapplicable laws and regulations.  No suchtransaction constituted a transfer at an undervalue,or an unlawful distribution, or unlawful financial assistance under theCompanies Ordinance by or to any Group Company. At no time during such period have the net assets of any Group Companybeen less than the aggregate amount of its share capital and undistributablereserves.

 

3.5                                 **Accounting and other records**

 

The statutorybooks, books of account and other records of each Group Company are up-to-dateand have been maintained in accordance with all applicable laws and generallyaccepted accounting practices on a proper and consistent basis and comprisecomplete and accurate records of all information required to be recorded.

 

**4.**                                      DEBT POSITION

** **

4.1                                 **Debts owed to the Group**

 

There are no debts owing to any Group Companyother than trade debts incurred in the ordinary and usual course of businessand bad or doubtful debts for which specific provision has been made in theAccounts or the Management Accounts.

 

18

----

 

4.2                                 **Debts owed by the Group**

 

(a)                                  NoGroup Company has outstanding any borrowing or indebtedness in the nature ofborrowing (including, without limitation, any indebtedness for moneys borrowedor raised under any acceptance credit, bond, note, bill of exchange orcommercial paper, finance lease, hire purchase agreement, trade bills (otherthan those on terms normally obtained), forward sale or purchase agreement orconditional sale agreement or other transaction having the commercial effect ofa borrowing).

 

(b)                                 NoGroup Company has received any notice to repay under any agreement relating toany borrowing or indebtedness in the nature of borrowing which is repayable ondemand.

 

**5.**                                      REGULATORY MATTERS

** **

5.1                                 **Licences**

 

(a)                                  EachGroup Company has obtained all licences, permissions, authorisations andconsents required for carrying on its business effectively in the places and inthe manner in which such business is now carried on and a list of all suchlicences, permissions, authorisations and consents is set out in Exhibit B.

 

(b)                                 Thelicences, permissions, authorisations and consents referred to inparagraph 5.1(a) are in full force and effect, are not limited induration or subject to any unusual or onerous conditions and have been compliedwith in all material respects.

 

(c)                                  NoGroup Company is in breach of any terms or conditions attaching to any of thelicences, permissions, authorisations and consents referred to inparagraph 5.1(a).

 

(d)                                 Tothe best knowledge of the Vendor, there are no circumstances which indicatethat any of the licences, permissions, authorisations or consents referred toin paragraph 5.1(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 ofthe acquisition of the Shares by the Purchaser or otherwise).

 

5.2                                 **Compliance with Laws**

 

(a)                                  EachGroup Company has conducted its business and corporate affairs in accordancewith its Memorandum and Articles of Association or equivalent and with allapplicable laws and regulations of Hong Kong, the PRC or any otherjurisdiction.

 

(b)                                 Thereis no violation by any Group Company of, or default with respect to, anystatute, regulation, order, decree or judgment of any court or any governmentalor regulatory authority of Hong Kong, the PRC or any other jurisdiction.

 

19

----

 

**6.**                                      THE GROUP’S ASSETS

** **

6.1                                 **Ownership**

 

(a)                                  Allthe assets included in the Accounts or acquired since the Accounts Date (otherthan assets sold in the ordinary course of business) are the absolute propertyof the relevant Group Company.  Thoseassets are not the subject of any security interest or any assignment, equity,option, right of pre-emption, royalty, factoring arrangement, leasing or hiringagreement, 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 createor enter into any of the foregoing).

 

6.2                                 **Possession and Third Party Facilities**

 

(a)                                  Allof the assets owned by each Group Company, or in respect of which any GroupCompany has a right of use, are in the possession or under the control of thatGroup Company.

 

(b)                                 Whereany assets are used but not owned by any Group Company or any facilities orservices are provided to any Group Company by any third party, there has notoccurred any event of default or any other event or circumstance which mayentitle any third party to terminate any agreement or licence in respect of theprovision of such facilities or services (or any event or circumstance whichwith the giving of notice and/or the lapse of time and/or a relevantdetermination would constitute such an event or circumstance).

 

6.3                                 **Adequacy of Assets**

 

(a)                                  Theassets of each Group Company and the facilities and services to which eachGroup Company has a contractual right include all rights, properties, assets,facilities and services desirable for the carrying on of the business of thatGroup Company in the manner in which it is presently carried on.

 

(b)                                 NoGroup Company depends in any material respect upon the use of assets owned by,or facilities and services provided by, the Vendor.

 

6.4                                 **Insurances**

 

(a)                                  Thereis set out in Exhibit D a summary of the insurances maintained by orcovering the Group.  Such insurances arein full force and effect and, to the best knowledge of the Vendor, there are nocircumstances which might lead to any liability under such insurance beingavoided by the insurers or the premiums being increased and Completion will nothave the effect of terminating, or entitling any insurer to terminate, coverunder any such insurance.

 

20

----

 

(b)                                 Noclaim is outstanding by any Group Company under any such policy of insuranceand, to the best knowledge of the Vendor, there are nocircumstances likely to give rise to such a claim.

 

**7.**                                      INTELLECTUAL PROPERTY AND INFORMATIONTECHNOLOGY

** **

7.1                                 **Business IP**

 

(a)                                  Exhibit Fcontains a complete and accurate list of the Business IP.  The owner or applicant for each IntellectualProperty Right specified in Exhibit F is correctly stated.

 

(b)                                 Eitherof the Group Companies owns all of the rights and interests in, and has titleto, the Business IP.  The Business IP isvalid and subsisting.

 

(c)                                  Eitherof the Group Companies is the registered proprietor of the registrations andapplications included in the Business IP, and the registrations andapplications are not subject to, or likely to be subject to, amendment,challenge, removal or surrender.  Thereis nothing which might prevent the applications from being granted.

 

(d)                                 Nocompulsory licences, licences of right or anything similar have been, or arelikely to be, granted for the Business IP.

 

(e)                                  Allapplication, filing, registration, renewal and other fees for the Business IPhave been paid.

 

(f)                                    Thereare no licences of Intellectual Property Rights granted to the Group or grantedby the Group to third parties.

 

7.2                                 **No Infringement by Group**

 

(a)                                  Noneof the operations of the Group infringes, or is likely to infringe, theIntellectual Property Rights of a third party.

 

(b)                                 Noclaim has been made by a third party which alleges that the operations of theGroup infringe, or are likely to infringe, the Intellectual Property Rights ofa third party or which otherwise disputes the right of a Group Company to usethe Intellectual Property Rights owned or used by the Group.  The Vendor is not aware of any circumstanceslikely to give rise to a claim.

 

7.3                                 **No Infringement by Third Parties**

 

(a)                                  Nothird party is infringing, or is likely to infringe, the Intellectual PropertyRights owned or used by the Group.

 

(b)                                 Noclaim has been made by the Group which alleges that a third party isinfringing, or is likely to infringe, the Intellectual Property Rights owned orused by the Group or which otherwise disputes the right of a third party to usethe Intellectual Property Rights owned or used by the third party.  The Vendor is not aware of any circumstanceslikely to give rise to a claim.

 

21

----

 

(c)                                  NoGroup Company has acquiesced in the unauthorised use by a third party of theIntellectual Property Rights owned or used by the Group.

 

(d)                                 Therehave been no acts or omissions which would prejudice the rights of thePurchaser to enforce the Intellectual Property Rights owned or used by theGroup.  In particular, transactionsrelating to them have been registered promptly, and within applicable timelimits.

 

7.4                                 **Confidential Information**

 

(a)                                  Confidentialinformation of the Group, or which has been used by the Group, has been keptconfidential and has not been disclosed to third parties except in the ordinarycourse of business.

 

(b)                                 Noneof the operations of the Group involves the unauthorised use of confidentialinformation disclosed in circumstances which might entitle a third party tomake a claim against a Group Company.

 

(c)                                  Exceptfor agreements entered into in the ordinary course of business, the Group isnot subject to any obligation which restricts the free use or disclosure ofconfidential information used by the Group.

 

7.5                                 **Adequacy of Intellectual Property Rights**

 

The Groupowns, or has licensed to it, all Intellectual Property Rights which arerequired to carry on the Group’s business as it is presently carried on, and inaccordance with the current documented plans of the Vendor for the Group’sbusiness.

 

**8.**                                      CONTRACTUAL MATTERS

** **

8.1                                 **Material Contracts**

 

Other than asset out in Exhibit E, there is not outstanding any agreement orarrangement to which either of the Group Companies is a party:

 

(a)                                  which, by virtue of the acquisitionof the Shares by the Purchaser or other performance of the terms of thisAgreement, will result in:

 

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

 

(ii)                                  anyGroup Company being in default under any such agreement or arrangement orlosing any benefit, right or licence which it currently enjoys or in aliability or obligation of any Group Company being created or increased;

 

(b)                                 which was entered into otherwise thanby way of bargain at arm’s length;

 

22

----

 

(c)                                  whichrequires (or confers any right to require) the allotment or issue of anyshares, debentures or other securities of any Group Company now or at any timein the future;

 

(d)                                 which establishes any joint venture,consortium, partnership or profit (or loss) sharing agreement or arrangement;

 

(e)                                  which involves or is likely toinvolve obligations or restrictions of the Company of an unusual or exceptionalnature or not in the ordinary and usual course of business;

 

(f)                                    which establishes any materialagency, distributorship, marketing, purchasing, manufacturing or licensingagreement or arrangement;

 

(g)                                 which is any other agreement orarrangement having or likely to have a material effect on the financial ortrading position or prospects of any Group Company.

 

8.2                                 **Defaults**

 

(a)                                  NoGroup Company is in default under any agreement to which it is a party and, to thebest knowledge of the Vendor, there are no circumstances likely to give rise tosuch a default.

 

(b)                                 Tothe best knowledge of the Vendor, no party with whom any Group Company hasentered into any agreement or arrangement is in default under it and there areno circumstances likely to give rise to such a default.

 

**9.**                                      LITIGATION AND INVESTIGATIONS

** **

9.1                                 **Litigation**

 

(a)                                  Saveas disclosed in Exhibit H, no Group Company is a plaintiff or defendant inor otherwise a party to any litigation, arbitration or administrativeproceedings which are in progress or threatened or pending by or against orconcerning any Group Company or any of its assets.  No governmental or official investigation orinquiry concerning any Group Company is in progress or pending.

 

(b)                                 TheVendor is not aware of any circumstances which are likely to give rise to anysuch proceeding, investigation or inquiry as is referred to inparagraph (a).

 

**10.**                               DIRECTORS AND EMPLOYEES

** **

10.1                           **Employees**

 

Exhibit Csets out or refers to a list of all employees of each Group Company as at theManagement Accounts Date.

 

23

----

 

10.2                           **Agreements**

 

There is notin existence any written or unwritten contract of employment with a director oran employee of any Group Company (or any, contract for services with anyperson) which cannot be terminated by three (3) months’ notice or lesswithout giving rise to a claim for damages or compensation (other than astatutory redundancy payment or statutory compensation for unfair dismissal).

 

10.3                           **Compliance**

 

Each GroupCompany has in relation to each of its employees (and so far as relevant toeach of its former employees) complied in all material respects with allstatutes, regulations, codes of conduct, collective agreements, terms andconditions of employment, orders and awards relevant to their terms andconditions of service or to the relations between it and its employees (orformer employees, as the case may be).

 

10.4                           **Disputes**

 

No dispute hasarisen between any Group Company and a material number or category of itsemployees and there are no present circumstances which are likely to give riseto any such dispute.

 

10.5                           **Incentive Schemes**

 

Other thandiscretionary bonus and sales commissions, no Group Company has (nor is anyGroup Company proposing to introduce) any share incentive scheme, share optionscheme or profit sharing or other such incentive scheme for all or any of itsdirectors or employees.

 

10.6                           **Payments on Termination**

 

(a)                                  Exceptto the extent (if any) to which provision or allowance has been made in theAccounts no outstanding liability has been incurred by any Group Company forbreach of any contract of employment or for services or redundancy payments,protective awards, compensation for wrongful dismissal or unfair dismissal orfor failure to comply with any order for the reinstatement or re-engagement ofany employee or for any other liability accruing from the termination of anycontract of employment or for services.

 

(b)                                 Nogratuitous payment has been made or benefit given (or promised to be made orgiven) by any Group Company in connection with the actual or proposedtermination or suspension of employment or variation of any contract ofemployment of any present or former director or employee.

 

24

----

 

**11.**                               INSOLVENCY ETC.

** **

11.1                           No orderhas been made, petition presented or meeting convened for the purpose ofconsidering a resolution for the winding up of any Group Company or for theappointment of any provisional liquidator. No steps have been taken by any person with a view to the appointment ofan administrator (whether out of court or otherwise), and no administrationorder has been made, in relation to any Group Company.  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 Group Company.

 

11.2                           Nodistress, distraint, charging order, garnishee order, execution or otherprocess has been levied or applied for in respect of the whole or any part ofany of the property, assets and/or undertaking of any Group Company.

 

25

----

 

**PART **B :  TAX WARRANTIES

** **

**1.**                                      DEFINITIONS

** **

In this Part B of Schedule 3 thefollowing expressions shall have the following meanings:

 

***event***includes (withoutlimitation) the death or the winding up or dissolution of any person, and anyact, transaction or omission whatsoever, and any reference to an eventoccurring on or before a particular date shall include events which for taxpurposes are deemed to have, or are treated or regarded as having, occurred onor before that date;

 

***relief***includes, unless the context otherwise requires, any allowance,credit, deduction, exemption or set-off in respect of any tax or relevant tothe computation of any income, profits or gains for the purposes of any tax, orany repayment of or saving of tax (including any repayment supplement orinterest in respect of tax), and:

 

(a)                                  any reference tothe ***use*** or ***setoff*** of relief shall be construed accordingly and shall includeuse or set off in part; and

 

(b)                                 any reference tothe ***loss*** of a relief shall include theabsence, non-existence or cancellation of any such relief, or to such reliefbeing available only in a reduced amount;

 

***tax*** includes, withoutlimitation, (a) taxes on income, profits and gains, and (b) all othertaxes, levies, duties, imposts, charges and withholdings of any nature,including any excise, property, sales, transfer, franchise and payroll taxesand any national insurance or social security contributions, and any paymentwhatsoever which the relevant person may be or become bound to make to anyperson as a result of the discharge by that person of any tax which therelevant person has failed to discharge, together with all penalties,additions, charges and interest relating to any of the foregoing or to any lateor incorrect return in respect of any of them, and regardless of whether suchtaxes, levies, duties, imposts, charges, withholdings, penalties, additions andinterest are chargeable directly or primarily against or attributable directlyor primarily to the relevant person or any other person and of whether anyamount in respect of them is recoverable from any other person; and

 

***tax******authority***means anytaxing or other authority (whether within or outside the Hong Kong) competentto impose any tax liability.

 

26

----

 

**2.**                                      GENERAL/COMPLIANCE

** **

2.1                                 **Last Accounts**

 

Allliabilities, whether actual, deferred, contingent or disputed, of each GroupCompany for tax measured by reference to income, profits or gains earned,accrued or received on or before the Accounts Date or arising in respect of anevent occurring or deemed to occur on or before the Accounts Date are fullyprovided for or (as appropriate) disclosed in the Accounts.  All other warranties relating to specific taxmatters set out in this Schedule are made without prejudice to thegenerality of this paragraph.

 

2.2                                 **Position since Accounts Date**

 

Since the AccountsDate:

 

(a)                                  noGroup Company has been involved in any transaction which has given or may giverise to a liability to tax on any Group Company (or would have given or mightgive rise to such a liability but for the availability of any relief) other thantax in respect of normal trading income or receipts of the Group Companyconcerned arising from transactions entered into by it in the ordinary courseof business;

 

(b)                                 nopayment has been made by any Group Company which will not be deductible for thepurposes of corporation tax (or any corresponding tax on profits in anyrelevant foreign jurisdiction), either in computing the profits of that GroupCompany or in computing the corporation tax or corresponding tax chargeable onit;

 

(c)                                  nodisposal has taken place or other event occurred which has or may have theeffect of crystallising a liability to tax which, if such disposal or event hadbeen planned or predicted at the Accounts Date, should have been reflected inthe provision for deferred tax contained in the Accounts; and

 

(d)                                 no event has occurred which has ormay have the effect of prejudicing any relief taken into account in computingor eliminating the provision for deferred tax contained in the Accounts.

 

2.3                                 **Continuing commitments**

 

All sums payableunder any obligation incurred by any Group Company prior to Completion andwhich will continue to bind any Group Company after Completion have been andwill continue to be deductible for the purposes of corporation tax (or anycorresponding tax on profits in any relevant foreign jurisdiction), either incomputing the profits of any Group Company or in computing the corporation taxor corresponding tax chargeable on it.

 

27

----

 

2.4                                 **Returns etc.**

 

Each GroupCompany has duly, and within any appropriate time limits, made all returns,given all notices and supplied all other information required to be supplied toall relevant tax authorities and has maintained all records required to bemaintained for tax purposes; all such information was and remains complete andaccurate in all material respects and all such returns and notices were andremain complete and accurate in all material respects and were made on theproper basis and do not, and so far as the Vendor is aware are not likely to,reveal any transactions which may be the subject of any dispute with, or anyenquiry raised by, any tax authority.

 

2.5                                 **Disputes, investigations**

 

No GroupCompany is involved in any current dispute with any tax authority or is or hasin the last six years been the subject of any investigation, enquiry, audit ornon-routine visit by any tax authority. So far as the Vendor is aware in relation to each Group Company there isno planned investigation, enquiry, audit or non-routine visit by any taxauthority and there are no facts which might cause such an investigation,enquiry, audit or non-routine visit to be instituted.

 

2.6                                 **Penalties, interest**

 

Within thepast six years, no Group Company nor any director or officer of any GroupCompany (in his capacity as such) has paid or become liable to pay, and thereare no circumstances by reason of which it or they may become liable to pay toany tax authority, any penalty, fine, surcharge or interest in respect of tax(including in respect of any failure to make any return, give any notice orsupply any information to any relevant tax authority, or any failure to keep orpreserve any records or to pay tax on the due date for payment).

 

2.7                                 **Consents, clearances**

 

No transactionin respect of which any consent or clearance was required or sought from anytax authority has been entered into or carried out by any Group Company withoutsuch consent or clearance having first been properly obtained and allinformation supplied to any tax authority or other appropriate authority inconnection with any such consent or clearance fully and accurately disclosedall facts and circumstances material to the giving of such consent orclearance.  Any transaction for whichsuch consent or clearance was obtained has been carried out only in accordancewith the terms of such consent or clearance and the application on which theconsent or clearance was based and at a time when such consent or clearance wasvalid and effective.  No facts orcircumstances have arisen since any such consent or clearance was obtainedwhich would cause the consent or clearance to become invalid or ineffective.

 

28

----

 

2.8                                 **Special arrangements**

 

No taxauthority has operated or agreed to operate any special arrangement (being anarrangement which is not based on relevant legislation or any publishedpractice) in relation to any Group Company’s affairs.

 

2.9                                 **Withholdings**

 

Each GroupCompany has made all deductions and retentions of or on account of tax as itwas or is obliged or entitled to make and all such payments of or on account oftax as should have been made to any tax authority in respect of such deductionsor retentions.

 

**3.**                                      EMPLOYEES

** **

All amountspayable to any tax authority in respect of any employee (including any taxdeductible from any amounts paid to an employee, and any national insurance,social fund or similar contributions required to be made in respect ofemployees) due and payable by any Group Company up to the date hereof have beenduly paid and each Group Company has made all such deductions and retentions asshould have been made under applicable laws or regulations.

 

**4.**                                      COMPANY RESIDENCE/PERMANENTESTABLISHMENT

** **

4.1                                 EachGroup Company is and has at all times been resident for tax purposes in itsplace of incorporation and is not and has not at any time been treated asresident in any other jurisdiction for any tax purpose (including any doubletaxation arrangement).  No Group Companyis subject to tax in any jurisdiction other than its place of incorporation byvirtue of having a permanent establishment or other place of business in thatjurisdiction.

 

4.2                                 NoGroup Company is liable for any tax as the agent of any other person orbusiness or constitutes a permanent establishment of any other person, businessor enterprise for any tax purpose.

 

**5.**                                      STAMP DUTY/CAPITAL DUTY

** **

5.1                                 Alldocuments in the possession or under the control of each Group Company or tothe production of which any Group Company is entitled which establish or arenecessary to establish the title of any Group Company to any asset, or byvirtue of which any Group Company has any right, have been duly stamped and anyapplicable stamp duties or similar duties or charges in respect of suchdocuments have been duly accounted for and paid.

 

5.2                                 Allduties, fees and penalties payable in respect of the capital of each GroupCompany (including any premium over nominal value at which any share wasissued) have been duly accounted for and paid, and there are no circumstancesunder which any relief obtained against payment of any such amount could bewithdrawn.

 

29

----

 

**PART **C :  PROPERTY WARRANTIES

** **

**1.**                                      GENERAL

** **

1.1                                 TheLeased Properties comprise all the land and premises owned, rented, occupied orotherwise used by any Group Company or in which any Group Company has any rightand interest.

 

1.2                                 Allthe estate, interest, right and title of the group companies in, under, over orin respect of any land or premises and the information set out in Exhibit Gis true, accurate and complete.

 

**2.**                                      OWNED PROPERTIES

** **

2.1                                 Thereare no properties owned by the Group.

 

**3.**                                      LEASED PROPERTIES

** **

3.1                                 Alist of all tenancy agreements or leases entered into by the Group Companies inrespect of the Leased Properties has been disclosed in Exhibit G and theinformation set out therein is true, accurate and complete.

 

3.2                                 TheGroup Companies have paid the rent, rates and all other charges for which thetenant is responsible under the tenancy agreements or leases of the LeasedProperties up to the last payment date and have observed and performed thecovenants on the part of the tenant and the conditions contained in the tenancyagreements or leases and all such tenancies or leases are valid, binding and infull force.

 

3.3                                 Allleasing permits, licences, consents and approvals required from any governmentauthorities, landlords, superior landlords and mortgagees (where necessary) inrespect of any of the tenancies or leases of the Leased Properties have beenobtained and the covenants on the part of the landlord and/or the tenantcontained in such permits, licences, consents and approvals (if any) have beenduly performed and observed.

 

3.4                                 Nonotice affecting any of the Leased Properties or their use has been given orserved by any government authority or any other authority or person or body andthere are no circumstances which are likely to result in the forfeiture of anyof the tenancies or leases in respect of the Leased Properties.

 

3.5                                 Exceptin respect of the lease of Shop No. 5, Ground Floor, Pakpolee CommercialCentre, No. 1A, Sai Yeung Choi Street South, Kowloon which is beingrenewed, no rent is currently under review.

 

30

----

 
| **SIGNED**by:                 | /s/ Zhao Le |   |   |
|-------------------------------|-------------|--------|--------|
| for and on behalf of          |        |
| **CHINA UNICOM (HONG  KONG)** |        |
| **GROUP LIMITED**             |        |

 

 
| **SIGNED** by:           | /s/ Wang Jianzhou |   |   |
|--------------------------|-------------------|--------|--------|
| for and on behalf of     |              |
| **CHINA UNICOM LIMITED** |              |

 

31

----