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1. BASIC PRINCIPLES1.1 For the Project Designing, Construction and IT services provided by Netcom Group to CNC Chinaunder this Agreement, Netcom Group reserves the right to collect reasonable service fees under theterms of this Agreement. CNC China shall make the payment for the services rendered.1.2 The terms of Project Designing, Construction and IT services offered by Netcom Group underthis Agreement shall not be worse than any other third party offering the same or similar services.1.3 If Netcom Group fails to provide or fully provide the agreed Project Designing, Constructionand IT services due to reasons other than its own fault, Netcom Group shall promptly inform CNCChina in writing, and shall use its best endeavors to assist CNC China to find the same or similarservices through other means.1.4 The agreed Project Designing, Construction and IT services provided by Netcom Group to CNCChina shall fully comply with the purposes agreed upon under this Agreement and the standards setby the State.1.5 In the event of any breach of provision by either Party under this Agreement that leads toany damage suffered by the other Party, the Party in default shall be liable for all immediate andfull damages for breaching this Agreement.1.6 Both Parties shall provide all reasonable and essential assistance to the other Party for thepurpose of fulfilling the obligations set out in this Agreement.2. BASIC CONTENTS OF PROJECT DESIGNING, CONSTRUCTION AND IT SERVICES2.1 Project Designing, Construction and IT services to be provided to CNC China by Netcom Groupunder this Agreement mainly consist of:(1) Project Designing, including:Planning & designing, project survey, communication circuitry works (including plumbing works,optical fiber cables, cable works, overhead pole and route works), communication equipment works(including telephone exchange, transmission works, data and multimedia works, communication powersource and air conditioning works, microwave communication works, systematic technical supportworks, etc.), and enterprise communication works;(2) Project Construction, including:Communication equipments, communication lines, communication power supply (including special airconditioning system for communication projects), communication pipeline, technical business supportsystem;(3) Project Supervision.2.2 IT services to be provided to CNC China by Netcom Group under this Agreement include: officeautomation, software testing, network upgrading, R&D of new services, development of supportsystem, etc.3. PRICING PRINCIPLE3.1 Except for the cases specified in Clause 3.2 of this section, all price and/or chargingstandard under the Agreement shall be determined with the reference to the market price. The“market price” means the rate
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determined by the business operator and attained through market competition. The market rate shallbe determined by the following order: (1) the rate charged by any independent third party providingthe same kind of services in the same or surrounding area under normal situation; or (2) the ratecharged by any independent third party providing the same kind of services within the PRC undernormal situation.3.2 Both Parties have agreed that when the value of any project designing or project supervisionservices exceeds RMB five hundred thousand (500,000), or when the value of any project constructionservices exceeds RMB two million (2,000,000), then the price to be determined by invitation fortenders will be used as the basis of pricing. In addition, in regard to the pricing and/or chargingstandard of other services under this Agreement, the price determined by invitation for tenders(i.e.: the price that is determined by the way of open invitation of bidding in accordance with theLaw of the People’s Republic of China on Bid Invitation and Bidding and other regulations andrules) will be used as the basis of pricing.In the above said bid invitation, there should be at least three (3) or more service providerspresent in the bidding, and Netcom Group shall not be given any preferential treatment by CNCChina, and CNC China will be entitled to select any independent third party to provide relatedservices to it; however, on the premise that it is not prohibited by laws and regulations of thePRC, if the terms and conditions provided by Netcom Group are at least equally favorable as thatprovided by an independent third party for the same services, then CNC China may select NetcomGroup as the successful bidder.If Netcom Group is chosen as the successful bidder, the Parties shall sign specific documents forexecution, which state clearly specific services required by CNC China at that time, the bindingprinciples within this Agreement, as well as the terms and conditions for the performance of thesaid services.3.3 The specific amount of service charge agreed upon under this Agreement shall from time totime be calculated by the accounting principles applicable in the PRC (if applicable).3.4 Both Parties shall, before December 31 of every calendar year, conduct a review on the priceof every item of services and facility stated in this Agreement for the next accounting year (ifnecessary).4. PAYMENT OF SERVICE CHARGE4.1 CNC China shall, based on the provisions of this Agreement, any supplementary agreement ofthis Agreement (if any), and in specific execution documents, pay Netcom Group or its trusteeservice charge in consideration for the service provided by Netcom Group or its trustee.4.2 If CNC China fails to pay on time the said service charge agreed upon under the provisions ofthis Agreement, any supplementary agreement of this Agreement (if any), and the specific executiondocuments, CNC China shall, for each 1 day (calendar day, and the same applies below) late, pay alate charge penalty of 0.05% of the outstanding balance to Netcom Group; and after 60 days of latepayment, Netcom Group is entitled to notify CNC China the termination of services; if CNC Chinastill fails to pay for the outstanding balance upon 30 days after receiving the written notice toterminate services, Netcom Group shall be entitled to terminate the services immediately. Thesuspension or termination of such services shall not in any way prejudice or affect the rights andobligations under this Agreement prior to such event.5. RIGHTS AND OBLIGATIONS OF BOTH PARTIES5.1 Rights and obligations for CNC China5.1.1 Rights for CNC China(1) CNC China (including its subsidiary, divisions, and other controlled units) has the right toreceive the agreed services provided by Netcom Group;
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(2) The auditor of the Listed Company has the right to inspect and examine the accounting booksof Netcom Group and its connected persons in relation to the connected transactions under thisAgreement..5.1.2 Obligations for CNC China(1) Guarantee and/or procure its subsidiaries, branches and all other controlled units toenter into specific execution documents with Netcom Group and its subsidiaries, branches orcontrolled units in relation to this Agreement and/or any supplementary agreement of this Agreement(if any);(2) Coordinate with all relating matters with regard to the abovementioned specific executiondocuments;(3) Pay the service charge as stated in this Agreement and all other specific executiondocuments;(4) Guarantee to pay for any damage suffered by Netcom Group or counter Party of specificexecution documents that is caused by the breach of CNC China of any provisions in this Agreementand specific execution documents.5.2 Rights and obligations of Netcom Group5.2.1 Rights of Netcom Group(1) Netcom Group is entitled to the service charge agreed upon under this Agreement;(2) Right to provide the same or similar services to a third party, on the condition that NetcomGroup continues to provide the same services agreed upon under this Agreement.5.2.2 Obligations of Netcom Group(1) Guarantee and/or prompt its subsidiaries, branches and all other controlled units to enterinto specific execution documents with CNC China and its subsidiaries, branches or its othercontrolled units in relation to this Agreement and/or any supplementary agreement of this Agreement(if any);(2) Provide the services and monitor the services provided by its subsidiaries, branches andother controlled units at a good quality according to the provisions of this Agreement;(3) Coordinate with all relating matters with regard to the abovementioned specific executiondocuments;(4) Guarantee to pay for any damage suffered by Party A or counter Party of specific executiondocuments that is caused by the breach of Party B of any provisions in this Agreement and all otherspecific execution documents;(5) Agree to provide the auditor of Listed Company the accounting books of Netcom Group and itsconnected persons in relation to the connections transactions under this Agreement.5.3 It is agreed that both Parties will take further actions to ensure the realization of theprinciples and provisions in this Agreement. It is further agreed that both Parties will ensurethat, CNC China, being a subsidiary of the Listing Company, shall comply with the Listing Rules ofthe Hong Kong Stock Exchange for connected transactions.6. PREFERENTIAL RIGHT
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6.1 Unless otherwise specified, for the same services, if an independent third party cannot offerbetter conditions and terms to CNC China than Netcom Group, CNC China have preferential right touse the services from Netcom Group;6.2 Netcom Group undertakes to CNC China that Netcom Group shall not offer the same or similarservices stated under this Agreement to a third party at terms more favorable than those offered toCNC China;6.3 Netcom Group has the right to provide the same or similar services to a third party, on thecondition that Netcom Group continues to provide the same services agreed upon under thisAgreement.7. TERM7.1 This Agreement shall come into effect once signed by the legal representatives or authorizedrepresentatives of both Parties and affixed with their official seals. This Agreement shall beeffective from January 1, 2008 to December 31, 2010. If CNC China wishes to renew this Agreementand notifies Netcom Group with 3 month’s notice, this Agreement shall be renewed automatically foranother 3 years on the same terms. There is no limit on the number of renewal.8. REPRESENTATIONS, WARRANTIES, AND UNDERTAKINGSEach Party represents warrants and undertakes to the other Party that:(1) It is an independent legal person existing in accordance with the laws of PRC, and have thepower and authority (including but not limited to any approval, consents or permission granted bythe government departments to enter into and perform this Agreement);(2) No provision in this Agreement violates the constitutive documents or the laws andregulations of PRC;(3) It will use its best endeavors to take all necessary and procure appropriate or advantageousmeasures to perform its obligations under this Agreement and to make this Agreement effective inaccordance with the laws and regulations of the PRC and the terms of this Agreement.9. FORCE MAJEURE9.1 In the event of Force Majeure that causes both Parties or either Party to fail completely orpartially in performing the obligations under this Agreement, that said Party is not liable forbreach of agreement. However, in the event of such an incident, the affected Party shall inform theother Party by written notice within fifteen (15) days after the said incident and provide relevantproof and evidence to the other Party. At the same time, the affected Party shall use its bestendeavors to minimize the damage caused by the Force Majeure event. The affected Party or bothParties shall resume its obligations under this Agreement within a reasonable time once the ForceMajeure event has ended.9.2 Force Majeure in this Agreement means all objective situations that are unforeseeable,unavoidable and that cannot be overcome.10. CONFIDENTIALITY10.1 Unless with written approval by the other Party, neither Party can announce nor supply orreveal to any third party any information regarding this Agreement or the business information ofthe other Party, with the exception of requests by the legal or governmental departments or anyother relevant securities regulatory authorities or for the purpose of the Listing Company seekinglisting (and remain as one).
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11. TRANSFER OF RIGHTS AND OBLIGATIONS11.1 Without the written approval of the other Party, neither Party may transfer any single rightand obligation as agreed upon under this Agreement.12. NON-WAIVER12.1 Unless otherwise specified by law, the failure or delay of exercising the right, power orprivilege as endowed by this Agreement on the part of any Party cannot be deemed as the waiver ofsuch rights, power or privileges. Besides, the partial exercise of such rights, power or privilegesshould not hinder the exercise of such rights, power or privileges of this Party in the future.13. NOTICES13.1 All notices required to be delivered pursuant to this Agreement shall be in writing, anddelivered to the address as stated at the beginning part of this Agreement, or to addresses orfacsimile numbers designated by one Party to the other Party in writing from time to time.13.2 Any notice shall be delivered either by hand, registered mail, or facsimile. Any notice shallbe deemed to have been delivered at the time of actual receipt if delivered by hand; on the date ofreturn receipt if delivered by registered mail; and at the time of transmission if delivered byfacsimile.14. GOVERNING LAWS14.1 This Agreement shall be governed, interpreted and implemented in accordance with laws of thePRC.15 DISPUTES RESOLUTIONS15.1 In case of disputes as to the power, interpretation or implementation of this Agreement, bothParties shall seek to settle the matters of dispute by friendly negotiation. If the matters ofdispute cannot be settled by negotiation within thirty (30) days from the day the matters ofdispute arise, either Party has the right to resort to litigation at the people’s court which hasjurisdiction over such Party.16. MISCELLANEOUS16.1 Without written confirmation from both Parties, no Party can change or amend this Agreement.Upon the agreement of both Parties, both Parties can amend this Agreement or enter intosupplementary agreement to this Agreement. The amendments or supplementary agreements of thisAgreement shall come into effect once signed by the legal representatives or authorizedrepresentatives of both Parties and affixed with their official seals.16.2 This Agreement is severable, that is, if any provision of this Agreement is held to be void,illegal, void or unenforceable at any time, the effectiveness and performance of other provisionsof this Agreement shall not be affected.16.3 This Agreement shall be governed and interpreted in accordance with the laws of PRC.16.4 This Agreement is made into two (2) duplicate originals. Each Party holds one (1) copy, andeach copy shall have the same legal binding effect.IN WITNESS WHEREOF, the legal representatives or authorized representatives of both Parties heretohave executed this Agreement as of the date and venue first written above.
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Signature page:**CHINA NETCOM (GROUP) COMPANY LIMITED (SEAL)**     By:  /s/ Zuo Xunsheng    Legal Representative or Authorized Representative  **CHINA NETWORKS COMMUNICATIONS GROUP CORPORATION (SEAL)**     By:  /s/ Zuo Xunsheng    Legal Representative or Authorized Representative   
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