**Exhibit 4.10**

 

**20 November 2002**

 

 

**CHINA UNICOM(BVI) LIMITED**

 

 

**CHINA UNICOMLIMITED**

 

 

**Conditional Sale and PurchaseAgreementrelating to the entire issued capital of UnicomNew Century (BVI) Limited**

 

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**THIS AGREEMENT** is made on 20 November 2002

 

**BETWEEN:**

 

(1)                                  **CHINAUNICOM (BVI) LIMITED** a company incorporated underthe laws of the British Virgin Islands whose registered office is at CraigmuirChambers, P.O. Box 71, Road Town, Tortola, British Virgin Islands (the ***Vendor***);

 

(2)                                  **CHINAUNICOM LIMITED** a company incorporated under thelaws of Hong Kong whose registered office is at 75th Floor, TheCenter, 99 Queen’s Road, Central, Hong Kong (the ***Purchaser***).

 

**WHEREAS:**

 

(A)                              As part of a series of restructurings, Unicom New CenturyTelecommunications Corporation Limited (the ***Target Company***) has acquired from UnicomGroup the mobile communications networks in each of Jilin, Heilongjiang,Jiangxi, Henan, Sichuan and Shaanxi provinces, Chongqing municipality and theGuangxi 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 UnicomGroup, acquired the Target Company Shares.

 

(C)                                Pursuant to that reorganisation agreement, UCBVI on-sold the TargetCompany 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 20November 2002 between the Vendor, UCBVI and Unicom Group (the ***Initial Acquisition***),the Vendor agreed to acquire from UCBVI the entire issued share capital of theTarget Holding Company.

 

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

 

(F)                                 Immediately prior to the signing of this Agreement, the corporatestructure of the parties to this Agreement in so far as it relates to theTarget 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 Purchaserfor the consideration and upon the terms and conditions set out in thisAgreement.

 

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

 

**IT IS AGREED**as follows:

 

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## **DEFINITIONS AND INTERPRETATION**

## ** **

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

 

## **SALE OF THE TARGET SHARES ANDPRICE**

## ** **

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

 

2.2                                 The total price payable on Completion by the Purchaser to the Vendorfor 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 beconditional upon the fulfilment to the reasonable satisfaction of the Purchaseror waiver of the following conditions:

 

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

 

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

 

(c)                                  there having been no material adverse change to the financialconditions, business operations or prospects of any of the Target GroupCompanies;

 

(d)                                 the delivery by or on behalf of the Vendor to the Purchaser ofcopies 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 ensurethat the Conditions Precedent set out in clauses 3.1(b), 3.1(c), 3.1(d) and3.1(e) are fulfilled to the satisfaction of the Purchaser as soon as reasonablypracticable and in any event by 30 June 2003.

 

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

 

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

 

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3.5                                 If any of the Conditions Precedent has not been fulfilled (orwaived) on or before the date specified in clauses 3.2 and 3.3 or suchother date as the parties to this Agreement may agree in writing, thisAgreement (other than clauses 1, 11 to 14, 16 to 22 and Schedule 1, whichshall continue to be in force) shall automatically terminate and no party shallhave any claim of any nature whatsoever against the other parties under thisAgreement (save in respect of its accrued rights arising from any prior breachof 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 theordinary and usual course and shall not make (or agree to make) any paymentother than routine payments in the ordinary and usual course of trading;

 

(b)                                 each Target Group Company shall take all reasonable steps topreserve 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 Target Group Company (including, without limitation, all statutory books,minute books, leases, contracts, supplier lists and customer lists) togetherwith the right to take copies;

 

(d)                                 no Target Group Company shall do, allow or procure any act oromission which would constitute or give rise to a breach of any Warranty as ifthe Warranties were to be repeated on or at any time before Completion byreference to 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 or other distribution shall be declared, paid or made byany Target Group Company;

 

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

 

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

 

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(i)                                     the amount of any Indebtedness owed by each Target Group Company orexisting as at the date of this Agreement shall not be increased or extendedand 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 GroupCompany which is inconsistent with the provisions of this Agreement or theconsummation of the transactions contemplated by this Agreement.

 

4.2                                 Pending Completion, the Vendor shall procure that the Target GroupCompanies consult fully with the Purchaser in relation to any matters which mayhave a material effect upon the Target Group Companies.  Without the prior written consent of thePurchaser, the Target Group Companies shall not, and the Vendor shall ensurethat the Target 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 Target GroupCompany;

 

(b)                                 agree to any variation or termination of any existing contract towhich that Target Group Company is a party and which may have a material effectupon 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 businessor 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 ofbusiness.

 

## **COMPLETION**

## ** **

5.1                                 The sale and purchase of the Target Shares shall be completed at 75thFloor, The Centre, 99 Queen’s Road Central, Hong Kong on such date as may beagreed between the Vendor and the Purchaser following notification by thePurchaser 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 5shall take place on Completion.

 

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

 

(a)                                  duly executed transfers into the name of the Purchaser or itsnominee in respect of all of the Target Shares, together with the related sharecertificates;

 

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

 

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

 

(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 aduly appointed officer as true and correct) of:

 

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

 

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

 

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

 

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

 

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

 

5.3                                 The Vendor shall procure that resolutions of the board of directorsof the Target Holding Company are passed to approve the registration of thetransfers 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 thesum set out in clause 2.2 to be paid by electronic funds transfer (or suchother 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’sbank account, details of which shall be notified in writing to the Purchaser atleast two Business Days prior to Completion; and

 

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

 

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performanceby the Purchaser of its obligations under this Agreement, the Tax Indemnity andeach of the Connected Transactions to which it is a party.

 

Any paymentmade in accordance with clause 5.4(a) shall constitute a good discharge bythe Purchaser of its obligations under clause 2.2 and the Purchaser shallnot 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 obligationrequired to be performed by the Vendor pursuant to clauses 3.2, 5.2 and5.3, 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 theTarget Shares and may, in its absolute discretion, by written notice to theVendor:

 

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

 

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

 

(c)                                  elect to defer the Completion by not more than 90 days to such otherdate as it may specify in such notice, in which event the provisions of thisclause 5.5 shall apply, mutatis mutandis, if the Vendor fails or is unableto 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 useall reasonable endeavours to obtain the release of each Target Group Companyfrom any Intra-Group Guarantees to which it is a party and, pending suchrelease, to indemnify the relevant Target Group Company against all amountspaid by it to any third party pursuant to any such Intra-Group Guarantee inrespect of any liability of any Vendor Group Company (and all Costs incurred inconnection with such liability) whether arising before or after Completion.

 

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

 

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

 

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economicallyor otherwise in any manner whatsoever in any Competing Business during theRelevant Period.

 

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

 

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

 

(d)                                 The Vendor (acting for itself and each other member of the VendorGroup Companies) acknowledges and agrees that the duration, extent andapplication of the respective restrictions in clauses (a), (b) and (c) areno greater than is reasonable and necessary for the protection of the interestsof the Purchaser but that, if any such restriction shall be adjudged by anycourt of competent jurisdiction to be void or unenforceable but would be validif part of the wording thereof was deleted and/or the period thereof wasreduced and/or the area dealt with thereby was reduced, the said restrictionshall apply within the jurisdiction of that court with such modifications asmay be necessary to make it valid and effective.

 

## **WARRANTIES**

## ** **

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

 

7.2                                 The Vendor undertakes (without limiting any other rights of thePurchaser in any way including its rights to damages in respect of a claim forbreach of any Warranty on any other basis) that it shall pay in cash to thePurchaser (or, if so directed by the Purchaser, to the Target Group Company inquestion) (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 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                                 The Vendor agrees to waive the benefit of all rights (if any) whichthe Vendor may have against any Target Group Company, or any present or formerofficer or employee of any such company, on whom the Vendor may have relied inagreeing to

 

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any term ofthis Agreement and each of the Vendor undertakes not to make any claim inrespect 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 restrictedby reference to or inference from the terms of any other Warranty or any otherterm of this Agreement.

 

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

 

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

 

## **LIMITATIONS ON CLAIMS**

## ** **

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

 

8.2                                 None of the limitations contained in clause 8.1 shall apply toany breach of any Warranty which (or the delay in discovery of which) is theconsequence of dishonest, deliberate or reckless mis-statement, concealment orother conduct by any Vendor Group Company or any officer or employee, or formerofficer 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 timeprior to Completion rescind this Agreement without liability on the part of thePurchaser:

 

(a)                                  if any fact, matter or event (whether existing or occurring on orbefore the date of this Agreement or arising or occurring afterwards) comes tothe 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 inclause 4); or

 

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

 

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

 

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

 

## **WITHHOLDING TAX AND GROSSING UP**

## ** **

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

 

10.2                           If any tax authority brings any sum paid by the Vendor under orpursuant to clauses 6.1 and 7 into charge to tax, then the Vendor shallpay such additional amount as will ensure that the total amount paid, less thetax chargeable on such amount, is equal to the amount that would otherwise bepayable under clauses 6.1 and 7.

 

## **ENTIRE AGREEMENT**

## ** **

11.                                 This Agreement and the Tax Indemnity constitute the entire agreementand understanding between the parties in connection with the sale and purchaseof the Target Shares.  This Agreementand the Tax Indemnity supersede all prior agreements or understandings inconnection with the subject matter hereof which shall cease to have any furtherforce or effect.  No party has enteredinto this Agreement in reliance upon any representation, warranty orundertaking which is not set out or referred to in this Agreement and the TaxIndemnity.

 

## **VARIATION**

## ** **

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

 

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

 

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## **ASSIGNMENT**

## ** **

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

 

## **ANNOUNCEMENTS**

## ** **

14.1                           Except as required by law or by any stock exchange or governmentalor other regulatory or supervisory body or authority of competent jurisdictionto whose rules the party making the announcement or disclosure is subject,whether or not having the force of law, no announcement or circular ordisclosure in connection with the existence or subject matter of this Agreementshall be made or issued by or on behalf of any of the Vendor Group Companieswithout the prior written approval of the Purchaser (such approval not to beunreasonably withheld or delayed), or by or on behalf of the Purchaser withoutthe prior written approval of the Vendor Group Companies (such approval not tobe unreasonably withheld or delayed).

 

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

 

## **COSTS**

## ** **

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

 

## **CONFIDENTIALITY**

## ** **

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

 

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

 

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

 

provided thatthe undertakings contained in this clause 16 shall not apply to anyinformation which is in or has entered the public domain otherwise than as aresult of an announcement or disclosure by the Vendor Group Companies in breachof clause 14 or by their respective directors, officers, employees, agents andprofessional and other advisers.

 

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

 

## **SEVERABILITY**

## ** **

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

 

## **COUNTERPARTS**

## ** **

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

 

## **WAIVER**

## ** **

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

 

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

 

## **FURTHER ASSURANCE**

## ** **

20.                                 The Vendor agrees to perform (or procure the performance of) allfurther acts and things, and execute and deliver (or procure the execution anddelivery of) such further documents, as may be required by law or as thePurchaser may reasonably require, whether on or after Completion, to implementand/or give effect to this Agreement and the transaction contemplated by it andfor 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 anyother party under, or in connection with, this Agreement shall be in writingand signed by or on behalf of the party giving it.  It shall be served by sending it by fax to the number set out inclause 21.2, or delivering it by hand, or sending it by pre-paid recordeddelivery or registered post, to the address set out in clause 21.2 and ineach case marked for the attention of the relevant party set out inclause 21.2 (or as otherwise notified from time to time in accordance withthe provisions of this clause 21). Any notice so served by hand, fax or post shall be deemed to have beenduly 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, at10a.m. on the fifth Business Day following the date of posting

 

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

 

References totime 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 ofclause 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                                                                   |

 

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

 

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

 

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

 

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

 

## **GOVERNING LAW, JURISDICTION ANDSERVICE OF PROCESS**

## ** **

22.1                           This Agreement and the relationship between the parties shall begoverned 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 exclusivejurisdiction to settle any disputes (including claims for set-off andcounterclaims) which may arise in connection with the creation, validity,effect, interpretation or performance of, or the legal relationshipsestablished by, this Agreement or otherwise arising in connection with thisAgreement, and for such purposes irrevocably submit to the jurisdiction of theHong Kong courts.

 

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

 

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

 

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##### **SCHEDULE 1**

##### ** **

###### **DEFINITIONSAND INTERPRETATION**

###### ** **

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

 

***A Share Company***means China United Telecommunications Corporation Limited;

 

***Accounts*** means inrelation to the Target Company:

 

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

 

(b)                                 the combined audited statements of income, owner’s equity and cashflows of the Target Company for the financial period ended on the relevantAccounts Date,

 

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

 

***Accounts Date*** means 31December 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 generallyopen for the transaction of normal banking business;

 

***Claim*** means any claim forbreach of a Warranty;

 

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

 

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

 

***Completion*** meanscompletion of the sale and purchase of the Target Shares under this Agreement;

 

***Conditions Precedent***means the conditions specified in clause 3.1;

 

***Connected Transactions***meansthose transactions effected pursuant to the operating agreements in the agreedforms as listed in Appendix 1;

 

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

 

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

 

15

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***holding company*** shall beconstrued in accordance with section 2 of the Companies Ordinance;

 

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

 

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

 

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

 

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

 

***Intra-Group Loans***meansall debts outstanding between any Target Group Company and any Vendor GroupCompany;

 

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

 

***Last Accounts Date*** means30 June 2002;

 

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

 

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

 

***PRC*** means the People’sRepublic of China;

 

***Properties*** means the propertiescurrently owned by the Target Company;

 

***Regulatory Approvals***means the approvals, consents and authorisations from all relevant regulatoryauthorities in the PRC (including the State Council, the State Development andPlanning Commission, the Ministry of Information Industry, the Ministry ofForeign Trade and Economic Cooperation, the Ministry of Finance and the ChinaSecurities Regulatory Commission), Hong Kong (including the

 

16

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TelecommunicationsAuthority) and the United States of America (including the FederalCommunications Commission) being those necessary to effect the transactionscontemplated by this Agreement;

 

***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 of thePurchaser cease to be listed and traded on the New York Stock Exchange, HongKong Stock Exchange and any other stock exchanges or (ii) Unicom Group ceasesto be a controlling shareholder of the Purchaser or an associate of suchcontrolling shareholder under the Rules Governing the Listing of Securities onthe Stock Exchange of Hong Kong Limited, whichever is the earlier;

 

***Reorganisation*** means theacquisitions and transfers described in Recitals (A) to (C);

 

***Restructuring Agreements***means the agreements listed in Appendix 2;

 

***RMB*** means Renminbi, thelawful currency of the PRC;

 

***Schedules*** means Schedules1, 2 and 3 to this Agreement and ***Schedule*** shall be construed accordingly;

 

***security interest*** meansany security interest of any nature whatsoever including, without limitation,any mortgage, charge, pledge, lien, assignment by way of security or otherencumbrance, options, equities, claims or other third party rights (including rightsof pre-emption) of any nature whatsoever, together with all rights attaching tothem;

 

***subsidiary*** and ***subsidiaries*** shall beconstrued 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 ofwhich are set out in Part C of Schedule 2;

 

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

 

***Target Group Companies***meansthe Target Holding Company and/or the Target Company;

 

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

 

***Tax Warranties*** means thewarranties set out in paragraphs 1.1 to 1.9 in Part B ofSchedule 3;

 

***Unicom Group***means China United Telecommunications Corporation;

 

***Vendor Group Company***meansUnicom Group, any subsidiary from time to time of Unicom Group (but excludingthe Purchaser, the subsidiaries of the Purchaser from time to time and theTarget Group Companies); and

 

17

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***Warranties*** means therepresentations 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 predecessorentity or person carrying on the business of such Target Company, whetherbefore or after the Reorganisation;

 

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

 

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

 

(d)                                 any reference to an ***enactment***or statutory provision is a reference to it asit may have been, or may from time to time be, amended, modified, consolidatedor 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 statementthat it has been made after due and careful enquiry and shall be deemed also toinclude 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 relevantdocument agreed between the parties and for the purpose of identificationinitialled by each of them or on their behalf (in each case with suchamendments 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 orany other legal concept shall, in respect of any jurisdiction other than HongKong, be deemed to include the legal concept which most nearly approximates inthat jurisdiction to the Hong Kong legal term.

 

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

 

18

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##### ** **

##### **SCHEDULE 2**

##### ** **

###### **CORPORATESTRUCTURE PRIOR TO COMPLETION**

###### ** **

PART A

 

Corporate Structure

 

 

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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                                                                                      |

 

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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                                                                                                                                                                                                                                                                                               |

 

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**SCHEDULE 3**

##### ** **

###### **THEWARRANTIES**

###### ** **

Part A: General

 

**INFORMATION**

 

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

 

1.2                                 Save as already disclosed in writing to the Purchaser, there are noother facts or matters which might reasonably be expected to have a materialadverse effect on the financial or trading position or prospects of any TargetGroup Company.

 

CORPORATE MATTERS

 

**The Target Group Companies**

 

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

 

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

 

(c)                                  The Target Holding Company has been duly incorporated and is validlyexisting under the laws of the BVI, with legal right, power and authority(corporate and other) to own, use, lease and operate its properties and conductits business in the manner presently conducted, and is duly qualified totransact business in any jurisdiction in which it owns or leases properties orconducts any business and such qualification is required, or is subject to nomaterial liability or disability by reason of the failure to be so qualified inany such jurisdiction; the Memorandum of Association and Articles of Associationof the Target Holding Company comply with the requirements of applicable BVIlaw and are in full force and effect.

 

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

 

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

 

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

 

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complywith 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 bodyhaving jurisdiction over it or any of its properties in each jurisdiction in whichthe ownership or lease of property by it or the conduct of its businessrequires such qualification and has the legal right and authority to own, use,lease and operate its assets and to conduct its business in the mannerpresently conducted.

 

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

 

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

 

**The Vendor**

 

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

 

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

 

2.7                                 All regulatory, corporate and other approvals (including RegulatoryApprovals and shareholder approvals) and authorisations required by theWarrantor for the execution and delivery of this Agreement and any agreement orinstrument contemplated hereby, the performance of the terms hereof and thereofand the sale of the Target Shares have been obtained, are unconditional and arein full force and effect.

 

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

 

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

 

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

 

FINANCIAL MATTERS

 

**Accounts**

 

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

 

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

 

(i)                                     the Accounts of the Target Company either make full provision for ordisclose all liabilities (whether actual, contingent or disputed and includingfinancial lease commitments and pension liabilities), all outstanding capitalcommitments and all bad or doubtful debts of the Target Company as at theAccounts Dates, in each case in accordance with applicable accountingprinciples;

 

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

 

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

 

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

 

(v)                                 the results shown by the Accounts of the Target Company for each ofthe periods ended on the Accounts Dates were not (except as therein disclosed)affected by any extraordinary or exceptional item or by any other factorrendering 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 itsrepresentatives and advisers is misleading in any material respect normaterially over-state the value of the assets nor materially under-state theliabilities of the Target Company as at the dates to which they were drawn upand do not materially over-state the profits of the Target Company in respectof the periods to which they relate.

 

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**Position since Last Accounts Date**

 

3.3(a)                   Since the Last Accounts Date and compared to the Last Accounts, therehas 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 extentgenerally all companies carrying on similar businesses) in the prospects of theTarget Company and no event, fact or matter has occurred which is likely togive 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 theordinary and usual course and the Target Company has not made or agreed to makeany payment other than routine payments in the ordinary and usual course oftrading;

 

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

 

(iii)                               there has been no material change in the level of borrowing or inthe working capital requirements of the Target Company (except for changes ofnot more than 10% arising from expenditure of a capital nature which has beenbudgeted or otherwise provided for in the Target Company’s approved businessplan);

 

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

 

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

 

(vi)                              save as provided in the Restructuring Agreements, the Target Companyhas not (whether in the ordinary and usual course of business or otherwise)acquired or disposed of, or agreed to acquire or dispose of, any materialbusiness 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 itpays less than the book value of its debt and no material debt owing to theTarget Company has been deferred, subordinated or written off or has proved toany extent irrecoverable;

 

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

 

25

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attributable to employment and employeebenefits of the Target Company;

 

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

 

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

 

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

 

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

 

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

 

**Working Capital**

 

3.4                                 Having regard to existing bank and other financial facilities, theTarget Company has sufficient working capital available to it as at the date ofthis Agreement to enable it to continue to carry on its business in its presentform and at its present level of turnover and for the purpose of performing inaccordance with their terms all orders, projects and other obligations anddischarging all liabilities which ought properly to be discharged during theperiod 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 allapplicable laws and generally accepted accounting practices on a proper andconsistent basis;

 

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

 

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

 

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

 

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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 ofbusiness which do not exceed RMB600 million in aggregate for the Target Companyas a whole.

 

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

 

**Debts owed by the Target Company**

 

4.2(a)                   The Target Company does not have outstanding any borrowing orindebtedness in the nature of borrowing (including, without limitation, anyindebtedness for moneys borrowed or raised under any acceptance credit, bond,note, bill of exchange or commercial paper, finance lease, hire purchaseagreement, trade bills (other than those on terms normally obtained), forwardsale or purchase agreement or conditional sale agreement or other transactionhaving 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 donot exceed RMB22 billion in aggregate for the Target Company as a whole).

 

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

 

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

 

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REGULATORY MATTERS

 

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

 

(b)                                 The licences, permissions, authorisations and consents referred toin 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 andhave been (or will by Completion have been) complied with in all respects.

 

(c)                                  To the best knowledge of the Vendor, there are no circumstanceswhich indicate that any of the licences, permissions, authorisations orconsents referred to in paragraph (a) will or are likely to be revoked ornot renewed, in whole or in part, in the ordinary course of events (whether asa result of the acquisition of the Target Shares by the Purchaser, theRestructuring or otherwise).

 

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

 

(b)                                 The Target Company is not in default of any order, decree orjudgment of any court or any governmental or regulatory authority (whether ofthe 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 theReorganisation comprise all the assets necessary for the carrying on of thebusiness carried on by the Target Company in the manner it is presentlyconducted and the liabilities assumed by the Target Company pursuant to theReorganisation represent the only liabilities of the Target Company and arefully, fairly and accurately provided for in the Accounts.

 

6.2                                 The events and transactions contemplated by the Reorganisation donot contravene any provision of applicable law, rule or regulation and do notcontravene the Articles of Association or the business licence of the TargetCompany or contravene the terms or provisions of, or constitute a defaultunder, any indenture, mortgage, deed of trust, loan agreement, note, lease orother agreement or instrument binding upon the Target Company that, singly orin the aggregate, is material to the Target Company, or any judgement, rule orregulation, order or decree of any governmental body, agency or court havingjurisdiction over the Target Company and will not result in the creation orimposition of any lien, charge, encumbrance or other restriction upon anyassets 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 andqualifications required in

 

28

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the PRC inconnection with the events and transactions contemplated by the Reorganisationhave been (or will by Completion have been) made or unconditionally obtained inwriting (including, without limitation, all PRC Regulatory Approvals andshareholders’ approval), and no such consent, approval, authorisation, order,registration or qualification has been withdrawn or is subject to any conditionprecedent which has not been fulfilled or performed.

 

6.4                                 There are no legal or government proceedings pending against theTarget Company in the PRC challenging the effectiveness or validity of theevents and transactions contemplated by the Reorganisation and, to the bestknowledge of the Vendor, no such proceedings are threatened or contemplated byany governmental agencies in the PRC or elsewhere.

 

**Ownership**

 

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

 

(b)                                 Each of the assets included in the Last Accounts of the TargetCompany or acquired by it since the Last Accounts Date (other than assetsdisposed of in the ordinary course of business and pursuant to theReorganisation) 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, factoringarrangement, leasing or hiring agreement, hire purchase agreement, conditionalsale or credit sale agreement, agreement for payment on deferred terms or anysimilar agreement or arrangement (or any agreement or obligation, including aconditional obligation, to create or enter into any of the foregoing).

 

**Possession and Third PartyFacilities**

 

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

 

(b)                                 Where any assets are used but not owned by the Target Company or anyfacilities 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 circumstancewhich may entitle any third party to terminate any agreement or licence inrespect of the provision of such facilities or services (or any event orcircumstance which with the giving of notice and/or the lapse of time and/or arelevant 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 towhich the Target Company has a contractual right include all rights,properties, assets,

 

29

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facilitiesand services necessary or desirable for the carrying on of the business of theTarget Company in the manner in which it is currently carried on.

 

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

 

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

 

**Condition**

 

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

 

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

 

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

 

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

 

**Insurances**

 

6.9(a)                   The business, undertakings, properties and other assets of theTarget Company are adequately insured against such risks as are normallyinsured by persons carrying on similar businesses in the PRC as those carriedon by the Target Company and such insurances include all the insurances whichthe Target Company is required under the terms of any leases or any contractsin respect of any of its properties to undertake and such insurances are infull force and effect and there are no circumstances which could render any ofsuch 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 policyof insurance and, to the best knowledge of the Vendor, there are nocircumstances 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 IntellectualProperty Rights registered or sought to be registered in any jurisdiction whichare held or beneficially owned by the Target Company.

 

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

 

**Infringement**

 

7.2(a)                   None of the operations of the Target Company infringe, or are likelyto infringe, any rights held by any third party or involve the unauthorised useof confidential information disclosed to the Target Company (or any VendorGroup Company) in circumstances which might entitle a third party to make aclaim against the Target Company.

 

(b)                                 No claim has been made by any third party which alleges anyinfringing act or process which would fall within paragraph (a) above orwhich otherwise disputes the right of the Target Company to use anyIntellectual Property Rights relating to its business and the Vendor is notaware of any circumstances (including any act or omission to act) likely togive rise to such a claim.

 

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

 

**Intellectual Property Licences**

 

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

 

**Loss of Rights**

 

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

 

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**Records and Software**

 

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

 

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

 

CONTRACTUAL MATTERS

 

**Material Contracts**

 

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

 

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

 

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

 

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

 

(b)                                 to which any Vendor Group Company is a party or in which any VendorGroup Company or any connected person (as defined under the Rules Governing theListing of Securities on The Stock Exchange of Hong Kong Limited) is interestedor 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 andon commercial terms;

 

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

 

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

 

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

 

(f)                                    which, upon completion by the Target Company of its work or theperformance of its other obligations under it, is likely to result in a lossfor the Target Company which is not fully provided for in its Last Accounts orwhich either is not expected to make a normal profit margin or involves anabnormal 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 aparty;

 

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

 

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

 

(j)                                     which establishes any material agency, distributorship, marketing,purchasing, manufacturing or licensing agreement or arrangement to which theTarget 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 flooragreement or other exchange or rate protection transaction or combinationthereof or any option with respect to any such transaction or any other similartransaction to which the Target Company is a party;

 

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

 

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

 

**Defaults**

 

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

 

(b)                                 No party with whom the Target Company has entered into any agreementor arrangement is in default under such agreement or arrangement and there areno 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 theordinary course of business, the Target Company is not a plaintiff or defendantin or otherwise a party to any litigation, arbitration or administrativeproceedings which are in progress or threatened or pending by or against orconcerning the Target Company or any of its assets.

 

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

 

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

 

DIRECTORS AND EMPLOYEES

 

**Employees**

 

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

 

**Compliance**

 

10.2                           The Target Company has in relation to each of its employees (and sofar as relevant to each of its former employees) complied in all materialrespects with all statutes, regulations, codes of conduct, collectiveagreements, terms and conditions of employment, orders and awards relevant totheir 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 tointroduce) any share incentive scheme, share option scheme or profit sharingscheme 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 hasbeen made in the Last Accounts of the Target Company:

 

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

 

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liabilityaccruing 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 theReorganisation or the acquisition of the Target Shares by the Purchaser orother performance of the terms of this Agreement and the RestructuringAgreements;

 

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

 

INSOLVENCY ETC.

 

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

 

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

 

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

 

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Part B: Tax and Property Warranties

 

TAX

 

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

 

1.2                                 The Target Company has complied in all material respects with allstatutory provisions, rules, regulations, orders and directions concerningprofits or corporate tax, value-added tax, business tax and stamp duty in theirrespective 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 therelevant legislation whether expressly provided for in the relevant legislationor operated by way of extra statutory concession or otherwise) in relation tothe 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 besupplied to all relevant tax authorities. All such information was when provided and remain complete and accurate andall such returns and notices were when provided and remain complete andaccurate and were made on a proper basis.

 

1.5                                 The Target Company has not received any notice or allegation fromany tax authorities that it has not complied with any relevant legalrequirement relating to registration or notification for taxation purposes andthe Target Company is not involved in any dispute or investigation with any taxauthority and there are no facts or matters which it reasonably believes willcause any such dispute or investigation or any liability for taxation (presentor future).

 

1.6                                 The Target Company:

 

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

 

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

 

(c)                                  has made all deductions and withholdings in respect or on account oftaxation which it is required or entitled by any relevant legislation to makefrom any payments made by it including, without limitation, interest annuitiesor other annual payments, royalties, rent, remuneration payable to employees orsub-contractors or payments to a non-resident and where appropriate the TargetCompany has accounted in full to the relevant fiscal authority for any taxationso deducted or withheld; and

 

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

 

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

 

1.8                                 All remuneration, compensation payments, payments on retirement orremoval from an office or employment and other sums paid or payable toemployees or officers or former employees or officers of the Target Company andall interest, annuities, royalties, rent and other annual payments paid orpayable 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 thebasis of the taxation legislation in force at the date hereof) be deductiblefor incomes tax purposes either in computing the profits of the Target Companyor as a charge on the income of the Target Company.

 

1.9                                 The Target Company has made or caused to be made the returns whichought to be made by or in respect of the Target Company for any taxationpurposes 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 andunder 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 allsecurity interests except for those which do not materially affect the value ofsuch property and do not interfere with the use made and proposed to be made ofsuch property by the Target Company.

 

2.2                                 Each Leased Property held under lease by the Target Company is heldby it under valid and enforceable leases in full force and effect with suchexceptions as are not material and do not interfere with the use made andproposed to be made of such property and buildings by the Target Company and nomaterial default (or event which with notice or lapse of time, or both, wouldconstitute such a default) by the Target Company has occurred and is continuingunder any of such leases.

 

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

 

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##### ** **

##### **APPENDIX 1**

##### ** **

###### **ConnectedTransactions**

###### ** **

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

 

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

 

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#####  

##### **APPENDIX 2**

##### ** **

###### **TheRestructuring Agreements**

###### ** **

1.                                       Reorganisation Agreement dated 18 November 2002 pursuant to whichUnicom New Century Telecommunications Corporation acquired from Unicom Groupits 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 TelecommunicationsCorporation the registered capital of Unicom New Century TelecommunicationsCorporation; and (b) Unicom New Century (BVI) Limited acquired from UnicomCentenarian (BVI) Limited the registered capital of Unicom New CenturyTelecommunications Corporation.

 

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

 

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##### ** **

##### **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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