Document:

Exhibit
4.12

 

(English
Translation)

 

 

Transfer
Agreement of

General
Service Agreement

 

 

between

 

China United Telecommunications Corporation Limited

 

and

 

Unicom
New Century Telecommunications Corporation Limited

 

 

November
20, 2002

 

 

Transfer Agreement
of General Service Agreement

 

This Agreement (the “Agreement) is entered into on
November 20, 2002, in Beijing, China, between

 

(1)                        Party
A: China United Telecommunications Co. Ltd (the “Unicom A-Share Company”)

Address: 9th
Floor, A 133, Xidanbeidajie, Xicheng District, Beijing

Legal
Representative: Mr. Yang Xianzu

 

(2)                        Party
B: Unicom New Century Telecommunications Corporation Limited (the “Unicom New
Century”)

Address: 9th
Floor, A 133, Xidanbeidajie, Xicheng District, Beijing

Legal
Representative: Mr. Yang Xianzu

 

Whereas:

 

(1)                        China
United Telecommunications Corporation (“Unicom Group”), a limited corporation
duly incorporated and validly existing under the laws of the People’s Republic
of China, is an integrated telecommunications business operator and the
controlling shareholder of Unicom A-Share Company;

 

(2)                        Unicom
A-Share Company, a limited corporation duly incorporated and validly existing
under the laws of the People’s Republic of China, has had its common stock
listed on the Shanghai Stock Exchange since October 9, 2002;

 

(3)                        Unicom
New Century, a limited corporation wholly owned by Unicom Group and a provider
of integrated telecommunications services established on July 16, 2002 after
the restructuring of Unicom Group, has been injected by Unicom Group with its
mobile telecommunications businesses and related assets, credits and
liabilities in the following nine provinces and municipalities: Sichuan,
Xinjiang, Chongqing, Shaanxi, Guangxi, Henan, Heilongjiang, Jilin and Jiangxi
(the “Nine Service Areas”);

 

(4)                        Unicom
Group and Unicom A-Share Company entered into a memorandum, dated August 12,
2002 (the “Memorandum on Connected Transactions”), regarding certain
transactions after the public offering of Unicom A-Share Company between Unicom
Group or its subsidiaries (excluding Unicom A-Share Company and any
subsidiaries controlled by it) and China Unicom Limited (the “Unicom Red-Chip
Company”), which is indirectly controlled by Unicom A-Share Company, or its
subsidiaries;

 

2

 

(5)                        Unicom
Group is contemplating on injecting all of its shares of Unicom New Century and
its other offshore interests (hereinafter collectively as "Target
Interests”) into Unicom Red-Chip Company through its wholly-owned overseas
subsidiary (the “Offshore Capital Injection Project”); and

 

(6)                        For
the purpose of the Offshore Capital Injection Project, Unicom Group, Unicom New
Century and Unicom A-Share Company entered into a General Service Agreement on
November 20, 2002.

 

NOW THEREFORE, For the
purpose of this Offshore Capital Injection Project, in accordance with the
transaction principles set forth in the Memorandum on Connected Transactions
and on the basis of equality and mutual benefit, both Parties hereby have
reached the following agreements after friendly consultations:

 

1.                             Provided
that the conditions under Article 6 herein are satisfied, Unicom A-Share
Company agrees to transfer immediately all of its rights and obligations under
the General Service Agreement and its Annexes to Unicom New Century. Unicom New
Century consequently agrees to accept all the rights and obligations of Unicom
A-Share Company under the General Service Agreement.

 

2.                             Once
Unicom A-Share Company transfers all of its rights and obligations under the
General Service Agreement to Unicom New Century, Unicom New Century shall
immediately assume all such rights and obligations and Unicom A-Share Company
shall immediately terminate all such rights and obligations.

 

3.                             Unicom
A-Share Company confirms that, pursuant to Article 6 of the General Service
Agreement, Unicom Group has given its irrevocable consent that Unicom A-Share
Company may transfer all of its rights and obligations under the General
Service Agreement to Unicom New Century or its subsidiaries or to Unicom
Red-Chip Company or any of its subsidiaries; no other or further consent by
Unicom Group shall be required for Unicom A-Share Company to transfer its
rights and obligations under the General Service Agreement to Unicom New
Century or its subsidiaries, or Unicom Red-Chip Company or its subsidiaries.

 

4.                             Each
Party warrants that it has the full right, power and authority to execute this
Agreement and to perform hereunder. Upon execution, this Agreement will
constitute legal, valid and binding obligations to each Party.

 

5.                             Unicom
New Century agrees to retain and perform, during the term of the General
Service Agreement, all the rights and obligations given to Unicom A-Share
Company in the past or in the future pursuant to the provisions and conditions
set forth in the General Service Agreement.

 

6.                             Effectiveness

 

This Agreement
shall become effective subject to the conditions as follows:

 

6.1                        Approval
from the Shareholders Meeting of Unicom Red-Chip Company to transfer of all of
the rights and obligations under the General Service

 

3

 

Agreement by Unicom A-Share Company to Unicom New Company pursuant to
applicable laws, regulations and listing rules; and

 

6.2                        The
requirements under Article 7 of the General Service Agreement are met.

 

6.3                        This
Agreement shall become effective on January 1, 2003, provided that the
requirements under Sections 6.1 and 6.2 herein are met.

 

7.                             Force
Majeure

 

In any force
majeure event that is unforeseeable and the consequences of which are
unavoidable or insurmountable and results in either Party’s failure to duly
perform its obligations hereunder, such Party shall promptly notify the other
Party of such situation and provide within 15 days any valid documents
evidencing the details and explaining the reasons for not being able to perform
all or part of its obligations hereunder or the reasons for any necessary
delays of such performance. Based on the impact of the force majeure event,
both Parties shall decide through negotiations to terminate, partially waive or
postpone such performance.

 

8.                             Confidentiality

 

Except to the
extent that disclosure is required by law or by the rules of the relevant
supervisory authorities, or for the purpose of submission to the Shanghai Stock
Exchange by Unicom A-Share Company or to the Hong Kong Stock Exchange by Unicom
Red-Chip Company, each Party, without the other party’s written consent, shall
not provide or disclose to any company, enterprise, organisation or person any
data and information relating to the other Party’s operations or businesses.

 

9.                             No
Waiver

 

Unless otherwise
required by law, any failure or delay in exercising any of its rights, powers
or privileges by one Party shall not be construed as a waiver of such rights,
powers or privileges. Any one time or partial exercise of such rights, powers
or privileges shall not affect any further or complete exercise of such rights,
powers or privileges.

 

10.                       Notices

 

Any notification
given in connection with this Agreement shall be in writing and shall be
delivered by one Party to the other Party by hand, fax or mail. Such a
notification by hand shall be deemed to have been duly given on the date of
delivery. Such a notification via fax shall be deemed to have been duly given
upon the completion of the fax transmission. Such a notification by mail shall
be deemed to have been duly given on the third working day (extended when there

 

4

 

is a public
holiday) after the postal date. Notifications become effective upon their
arrival.

 

Addresses of the
Parties hereto for receiving notifications are as follows:

 

	
  China United
  Telecommunications Corporation Limited

  
	
  Attention: Zhao Yi Lei

  
	
  Address: A133
  Xidanbeidajie, Suite 976, 9th Floor Xicheng District, Beijing,
  China

  
	
  Post Code: 100032

  

 

	
  Unicom New Century
  Telecommunications Corporation Limited

  
	
  Attention: Song Xiao Xi

  
	
  Address: A133
  Xidanbeidajie, Suite 1168, 11th Floor, Xicheng District,
  Beijing,China

  
	
  Postcode: 100032

  

 

11.                       Applicable
law

 

This Agreement is
under the jurisdiction of the laws of the People’s Republic of China and shall
be interpreted and executed in accordance with the laws of the People’s
Republic of China.

 

12.                       Dispute
Settlement

 

Both Parties shall
endeavour to resolve any dispute over the effectiveness, interpretation or
execution of this Agreement through friendly consultations. Should any dispute
remain unsettled for more than 30 days after its occurrence, either Party is
entitle to bring a lawsuit based on this Agreement to a competent PRC Court.

 

13.                       Miscellaneous

 

13.1                                     Based
on mutual consultations, both Parties can make modifications, revisions or
additions to this Agreement and Annexes hereto. No revision or addition shall
become effective until it is duly signed in writing and sealed by both Parties
or their authorized representatives.

 

13.2                                     This
Agreement is severable, that is, when any of the clauses in this Agreement or
the Annexes hereto is deemed as illegal or non-enforceable, the effectiveness
and enforcement of the other clauses contained herein shall by no means be
affected.

 

13.3                                     This
Agreement has six original copies with each having equal legal binding.

 

5

 

China United Telecommunications Corporation Limited (Corporate
Seal)

 

Legal Representative or
duly Authorized Representative: /s/ Wang Jian Zhou

 

 

Unicom New Century Telecommunications Corporation Limited
(Corporate Seal)

 

Legal Representative or
duly Authorized Representative: /s/ Tong Ji Lu

 

6Exhibit 4.13

 

20 November
2002

 

 

UNICOM NEW HORIZON MOBILE 

TELECOMMUNICATIONS COMPANY LIMITED

 

 

CHINA UNITED TELECOMMUNICATIONS
CORPORATION LIMITED

 

 

CHINA UNITED TELECOMMUNICATIONS
CORPORATION

 

 

 

 

Network
Capacity Lease Agreement

for Jilin, Heilongjiang, Jiangxi, Henan, Sichuan

and Shaanxi Provinces, Chongqing Municipality

and the Guangxi and Xinjiang 

autonomous regions

 

 

 

THIS AGREEMENT is made on 20 November 2002

 

BETWEEN:

 

(1)                                  UNICOM NEW HORIZON MOBILE TELECOMMUNICATIONS COMPANY LIMITED, a limited liability company
incorporated under the laws of the PRC whose registered office is at 6th Floor, Tower 3, Henderson Centre, 18 Jianguomen Nei
Dajie, Beijing, the PRC (Lessor);

 

(2)                                  CHINA UNITED TELECOMMUNICATIONS CORPORATION
LIMITED, a
limited liability company incorporated under the laws of the PRC whose office
is at 9th Floor, 133 Bei Dajie Jia, Xidan,
Xi Cheng District, Beijing, the PRC (Lessee);
and

 

(3)                                  CHINA UNITED TELECOMMUNICATIONS CORPORATION, a
company incorporated under the laws of the PRC whose registered office is at 12th Floor, Tower 1, Henderson Centre, 18 Jianguomen Nei
Dajie, Beijing, the PRC (Unicom Group).

 

WHEREAS:

 

(A)          Unicom Group has been approved by the PRC Government to
undertake telecommunications infrastructure development and operate a
nationwide CDMA network within the PRC.

 

(B)           The Lessor, a wholly-owned subsidiary of Unicom Group, is
a special purpose vehicle responsible for the procurement and construction of
the CDMA mobile telecommunications network for Unicom Group.

 

(C)           Construction of the first phase of the Network was
completed in December 2001.  After
completion of the initial acceptance procedures of the Network, the Lessor
entered into a lease with the Operating Entity (the Existing Lease)
pursuant to which the Operating Entity has been provided with capacity since 8
January 2002 to carry on the CDMA Business.

 

(D)          China Unicom has agreed with Unicom Group to acquire from
it the entire registered capital of the Operating Entity.

 

(E)           Following completion of the acquisition and with effect
from the Lease Effective Date, the Existing Lease will be terminated and
replaced by arrangements envisaged in this Agreement and the Transfer
Agreement.

 

(F)           In advance of the signing of the Transfer Agreement, the
Lessor and the Lessee agree to enter into this Agreement.

 

(G)           Unicom Group has agreed to guarantee the performance by
the Lessor of its obligations under this Agreement.

 

2

 

IT IS AGREED as follows:

 

INTERPRETATION

 

Definitions

 

1.1           In this Agreement (including the recitals) the following
words and expressions have the following respective meanings unless the context
otherwise requires:

 

Acquisition Agreement has the meaning given to it in the Waiver Application;

 

Additional Term has the meaning given to it in clause 4.2;

 

Additional Phase has the meaning given to it in clause 5.3;

 

Agreement means this agreement, including Schedule 1 to this
Agreement;

 

Associates has the meaning given to that term in the Listing Rules;

 

Business
Day
means any day on which banks in the PRC are open for the transaction of normal
banking business;

 

Capacity means capacity on the Network,
measured in terms of total number of Subscribers, including all Additional
Capacity to be delivered pursuant to clause 4.4;

 

CDMA means Code Division Multiple Access technology,
which is a digital transmission technology that accommodates higher throughput
by using various coding sequences to mix and separate voice and data signals
for wireless communication, and including all network re-configuration,
upgrades, enhancement or modifications to such technology from time to time
(including CDMA 2000 1x and CDMA 2000 3x, each of which is designed to increase
data transmission speed and improve quality of service operation over existing
network infrastructure);

 

CDMA Business means the CDMA mobile telecommunications business operated by the
Sub-lessee in the Listed Service Areas utilising the Network;

 

China Unicom means China Unicom Limited, a company incorporated under the
Companies Ordinance, Chapter 32 of the Laws of Hong Kong, with limited
liability whose shares are listed on the Stock Exchange and whose American
Depositary Shares are listed on the New York Stock Exchange;

 

Conditions means the conditions precedent set out in clause 3.1;

 

Equipment means all necessary hardware, software and accessories used or to
be used in constructing the Network, where applicable, in accordance with the
designs and specifications agreed between the Lessor and the Lessee;

 

Force
Majeure Event means in relation to the Lessee and the Lessor, matters beyond the
reasonable contemplation of that party, including, but not limited to, fire,
lightning, explosion, war, flood, earthquake, typhoon, and other natural
disasters,

 

3

 

national
emergency, civil disturbance, riot, terrorism, industrial disputes, weather of
exceptional severity, binding acts or omissions of any Government Entity;

 

Government
Entity
means:

 

(a)           any national government, political
subdivision thereof, or local jurisdiction therein;

 

(b)           any instrumentality, board,
commission, court, or agency of any thereof, however constituted; and

 

(c)                                  any association, organization, or institution of which any of the
above is a member or to whose jurisdiction any thereof is subject or in whose
activities any of the above is a participant;

 

Initial Term has the meaning given to it in clause 4.1;

 

Lease means the lease of Capacity by the Lessor to the Lessee pursuant to
this Agreement;

 

Lease Effective Date  has the meaning given to it in
clause 2.1;

 

Lease Fee means the amounts payable by the Lessee to the
Lessor pursuant to clause 5.1;

 

Lessor
Lien
means any Security Interest from time to time created
by or through the Lessor in connection with the financing of the Network
construction;

 

Listed Group means China Unicom and its subsidiaries from time to time, including
the Operating Entity being acquired;

 

Listed Service Areas means Jilin, Heilongjiang, Jiangxi, Henan, Sichuan and Shaanxi
provinces and Chongqing municipality and the Guangxi and Xinjiang autonomous
regions;

 

Listing Rules means the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited;

 

MII means the Ministry of Information Industry of the PRC;

 

Network means the CDMA mobile telecommunications network, infrastructure or
Equipment, constructed or acquired by or on behalf of the Lessor in the Listed
Service Areas, including all additional CDMA networks, infrastructure and
Equipment (whether they be comprised in the same Phase of construction or
otherwise) constructed or acquired after the date of this Agreement in the
Listed Service Areas;

 

Network Construction Cost in relation to each Phase of the Network, the total amount of all
payments, costs, expenses and amounts paid or incurred by the Lessor that are
directly attributable to the construction of that Phase, including
construction, installation and Equipment procurement costs and expenses, survey
and design costs, investment in technology, software and other intangible
assets, insurance premiums

 

4

 

and
capitalised interest on loans in respect of the construction period of that
Phase, any taxes levied or paid in respect of the procurement of Equipment and
the construction of that Phase of the Network, including import taxes and
customs duties and all costs incurred in relation to any network
re-configuration, upgrade, enhancement or modifications to the technology in
respect of that Phase, all such payments, costs, expenses and amounts having
been verified and confirmed by certified public accountants in accordance with
PRC accounting principles and standards as capital in nature and being able to
satisfy the accounting definition of fixed assets of the Lessor in its
accounts;

 

Operating Entity means Unicom New Century Telecommunications
Corporation Limited;

 

Phase means a fixed amount of constructed Capacity on the Network, as
stated in clause 4.12 (in respect of Phase 1) or agreed by the Lessor and
Lessee pursuant to clause 4.13 (in respect of any Additional Phase);

 

PRC means the People’s Republic of China (excluding, for the purposes
of this Agreement, the Hong Kong Special Administrative Region, Macau Special
Administrative Region and Taiwan);

 

Prospective Connected Transactions has the meaning given to it in the Waiver Application;

 

Purchase Option has the meaning given to it in clause 13.1;

 

Purchase Price has the meaning given to it in clause 13.2;

 

Quarter means a period of three calendar months, with the first quarter
commencing on the Lease Effective Date;

 

RMB means Renminbi, the lawful currency of the PRC;

 

Security
Interest
means any mortgage, charge, pledge, lien, encumbrance, assignment,
hypothecation, right of set-off or any other agreement or arrangement having
the effect of conferring security;

 

Shanghai Stock Exchange means the Shanghai Stock Exchange of the PRC;

 

Subscriber means a unit of capacity on the Network, as further described in
clauses 4.14 and 4.15;

 

Subsidiary means any company:

 

(a)           of which another controls the
composition of the board of directors of the company; or

 

(b)                                 of which another has direct or indirect control or owns directly or
indirectly more than 50 per cent. of the voting share capital; and

 

Term means the Initial Term and all Additional Terms.

 

5

 

Transfer Agreement means the Network Capacity Lease Agreement
entered into between the Lessee and the Operating Entity on the date of this
Agreement;

 

UNC Services Agreement has the meaning given to it in the Waiver Application; and

 

Waiver Application means China Unicom
Limited’s draft connected transaction waiver application to the Hong Kong Stock
Exchange dated 19 November 2002.

 

1.2           In
this Agreement and the Schedules unless the context requires:

 

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

 

(b)           references to one gender include all
genders;

 

(c)           references to parties are to the
parties to this Agreement;

 

(d)           references to clauses and schedules are to
clauses of and schedules to this Agreement; and

 

(e)           words and phrases indicating the
singular shall, where the context so admits, include the plural and vice versa.

 

1.3           Schedule 1 to this Agreement forms
part of this Agreement.

 

LEASE
OF NETWORK CAPACITY

 

2.1           Subject to satisfaction of the
Conditions, the Lessor agrees to lease Capacity to the Lessee on the terms set
out herein, with effect from such date as the Lessor and the Lessee may agree
following fulfilment (or waivers) of the Conditions (the Lease Effective Date).

 

2.2           The Lessor agrees that, following the
completion of the Transfer Agreement, the Operating Entity shall be permitted
to use and operate the Network on an exclusive basis to provide CDMA services,
including basic voice services, mobile data services and value added mobile
services, under applicable PRC laws and regulations, in the Listed Service
Areas.

 

2.3           In consideration of the satisfactory
performance by the Lessor of its obligations under this Agreement, the Lessee
shall pay the Lease Fee in accordance with clause 5.

 

CONDITIONS

 

3.1           The Lease shall not be effective and
binding on the parties unless the following conditions have been fulfilled:

 

(a)                                  the passing of resolutions by the shareholders of the Lessee
approving this Agreement and the UNC Services Agreement at an extraordinary
general meeting of the Lessee convened for such purpose;

 

6

 

(b)                                 the passing of resolutions by the shareholders (other than Unicom
Group and its Associates, who shall abstain from voting) of China Unicom
Limited approving the Acquisition Agreement and the Prospective Connected
Transactions at an extraordinary general meeting of China Unicom Limited convened
for such purpose; and

 

(c)           all other conditions precedent
contained in the Transfer Agreement having been fulfilled or waived.

 

3.2           In the event that the Conditions have
not been satisfied by 30 June 2003 or such later date as the parties may agree
in writing, all rights, obligations and liabilities of each party hereto shall
be of no further effect and no party shall have any claim against any other and
this Agreement shall be void and of no further effect.

 

TERM
AND CAPACITY

 

Term

 

4.1           The Lessee shall initially lease
Capacity for a period of one year from the Lease Effective Date (the Initial Term).

 

4.2           The Lease shall be renewable for
further one year periods (each an Additional Term) at the option of the Lessee
by giving not less than 180 days’ prior written notice to the Lessor.

 

Initial
Capacity Commitment

 

4.3           During the Initial Term, the Lessee
shall lease the following total amounts of Capacity:

 

	
  First
  Quarter

  	
  -

  	
  such
  Capacity as is notified to the Lessor by not later than 15 December 2002

  
	
   

  	
   

  	
   

  
	
  Second
  Quarter

  	
  -

  	
  such
  Capacity as is notified to the Lessor by not later than the last day of the
  first Quarter

  
	
   

  	
   

  	
   

  
	
  Third
  Quarter

  	
  -

  	
  such
  Capacity as is notified to the Lessor by not later than the last day of the
  second Quarter

  
	
   

  	
   

  	
   

  
	
  Fourth
  Quarter

  	
  -

  	
  such
  Capacity as is notified to the Lessor by not later than the last day of the
  third Quarter

  

 

Additional
Capacity

 

4.4           In addition to its Capacity
commitment in respect of the Initial Term, subject to giving not less than 180
days’ prior written notice to the Lessor, the Lessee may lease such additional
Capacity as it may require during the Term (Additional Capacity).  Such notice shall specify the total amount
of Additional Capacity required, the date by which the Additional Capacity is
required to be delivered, and other requirements and details in relation to the
Additional Capacity.

 

7

 

4.5           Subject to clause 4.6, the Lessor
shall ensure that all Capacity which the Lessee has committed to lease or
requested pursuant to clause 4.3 or clause 4.4 is supplied by the due date of
delivery of the Capacity (the Capacity Delivery Date) and otherwise in accordance with
the notification provided by the Lessee under clause 4.4. In addition, the
Lessor shall also use best endeavours to provide all such further Capacity as
the Lessee may from time to time request on less than 180 days’ notice, either
by supplying existing surplus Capacity, or through additional or accelerated
expansion of the Network in the Listed Service Areas or by other appropriate
means.

 

4.6           Unless otherwise agreed between the
Lessor and the Lessee, the Lessor shall not be obliged to deliver any
Additional Capacity if to do so would require the Lessor to expand the Network
beyond Phase 1 (as described in clause 4.12). 
However, if the Lessor agrees to provide any such Additional Capacity,
the provisions of this Agreement (including the determination of Network
Construction Cost and the Lease Fee) shall apply equally in relation to all
such Additional Capacity which the Lessor has agreed to provide.

 

4.7           Subject to clause 4.6, if at any time
any event occurs or circumstances arise which may delay the delivery of any
Capacity on the scheduled Capacity Delivery Date, then the Lessor shall, as
soon as practicable (and in any event within five Business Days of the Lessor
becoming aware of the event or circumstances in question), notify the Lessee of
that fact in writing. Such notification shall set out:

 

(a)                                  the nature of the event or circumstances and whether they have
arisen as a result of any of the causes set out in clause 4.9;

 

(b)                                 a description of the steps, if any, which the Lessor has identified
are necessary to rectify the matter and bring the Capacity into operational
service on the relevant Capacity Delivery Date or as soon as practicable
thereafter; and

 

(c)                                  the likely effect of the event or circumstances on the achievability
of the Capacity Delivery Date.

 

4.8           Following receipt by the Lessee of
any notification pursuant to clause 4.7, the Lessee and the Lessor shall
discuss in good faith:

 

(a)           actions which can be taken to rectify
the matter; and

 

(b)           any proposed change to the relevant
Capacity Delivery Date.

 

4.9           Notwithstanding the foregoing, if any
event or circumstance notified by the Lessor to the Lessee under clause 4.7 is,
or arises as a result of, one or more of the following:

 

(a)           a Force Majeure Event;

 

(b)                                 any material breach by the Lessee of any of its material obligations
under this Agreement which prevents the Lessor from performing the relevant
obligation under this Agreement; or

 

8

 

(c)                                  compliance with any applicable law, the mandatory requirements of
any Government Entity or any other applicable statutory regulations;

 

then, save to
the extent that the event arose (in the case of an event under clause 4.9(c)
only) as a result of any breach of this Agreement by the Lessor, the Lessor
shall have no liability to the extent the delay arises from such events,
whether under clause 4.10 or otherwise, to provide any Delay Discount (as
defined below), or pay any damages or other compensation to the Lessee as a
result of the Capacity not being ready for service by the Capacity Delivery
Date as a result of such events and that Capacity Delivery Date shall be
extended to the earliest practicable date on which the Lessee requires, and the
Lessor is able, to make available the Capacity in light of the relevant event.

 

Consequences
of failure to achieve Capacity Delivery Dates

 

4.10         Subject to clauses 4.6 and 4.9, if any
Capacity is not ready for operational service by the relevant Capacity Delivery
Date, then the Lessor shall provide the Lessee with a discount (a Delay Discount),
calculated as follows:

 

	
  Delay
  Discount

  	
  =

  	
  Daily Lease
  Fee of relevant delayed Capacity x period of delay (number of days)

  

 

The Delay
Discount shall be credited against next Lease Fee payment to be made by the
Lessee (or caused to be made by the Lessee) to the Lessor.

 

Reduction
of Capacity

 

4.11         The Lessee may not reduce the amount of
Capacity leased by it hereunder during the Initial Term. However, subject to
providing not less than 180 days’ prior written notice to the Lessor, or with
the prior written consent of the Lessor, the Lessee may reduce the amount of
Capacity leased with effect from the commencement of any Additional Term,
provided that the Lessee must lease all Capacity which it has requested or
otherwise committed to lease for at least one year following the date of
delivery or renewal of the lease of such Capacity (as the case may be). Any
reduction in the total amount of leased Capacity shall be effected in reverse
of the order in which Capacity was originally delivered and leased hereunder,
such that Capacity last delivered prior to the request for reduction shall be
reduced first.

 

Network
Capacity

 

4.12         The Lessor represents to the Lessee
that Phase 1 of the Network has a total Capacity of approximately 4.04 million
Subscribers.

 

4.13         Subject to clause 4.6, the Lessor and
Lessee shall, based on the Lessee’s requests for Additional Capacity from time
to time, agree the total amount of Capacity to be constructed for each
Additional Phase.

 

9

 

Subscriber
Capacity

 

4.14         All Phase 1 Capacity leased hereunder
shall be calculated based on a nominal value of 0.015 Erlang per Subscriber
during peak periods.

 

4.15         The parties may, in light of actual
usage patterns and other relevant factors, agree to vary the nominal value per
Subscriber in respect of Capacity constructed during any Additional Phase.

 

Spectrum

 

4.16         The Lessor shall, based on the amount
of all committed Capacity and any Additional Capacity requested under clause
4.4, provide or procure that the Lessee is provided with all necessary spectrum
for the operation and expansion of the CDMA Business.

 

Network
Upgrade

 

4.17         Unless otherwise agreed between the
Lessor and the Lessee, the Lessor shall not be obliged to re-configure,
upgrade, enhance or otherwise modify the Network.  However, if the Lessor agrees to do so, clauses 4.4 to 4.10 and
clause 7 shall apply mutatis mutandis
in relation to all such re-configurations, upgrades, enhancement and
modifications which the Lessor has agreed to provide.

 

LEASE
FEE

 

5.1           The Lease Fee shall be determined so
as to enable the Lessor to recover the Network Construction Cost within seven
years, together with an internal rate of return on its investment of 8%.  The Lease Fee shall be calculated by
applying the formula set out in Schedule 1, subject to adjustment in accordance
with clause 5.3. For the purposes of this clause 5 and Schedule 1, the Lease
Fee shall include the lease fees paid or payable by the Operating Entity to the
Lessor under the Existing Lease.

 

5.2           The parties agree that, by applying
the formula set out in Schedule 1, the current estimate of the Lease Fee per
Subscriber for all Phase 1 Capacity, subject to clause 5.3, is RMB61.4 per
Quarter.

 

5.3           The Lessor and the Lessee shall
procure that, as soon as reasonably practicable following final acceptance of
each Phase of the Network constructed after Phase 1 (each an Additional Phase), a
firm of auditors jointly selected by the Lessor and Lessee is appointed to
perform procedures agreed upon with the Lessor and Lessee to verify the final
Network Construction Cost in respect of such Additional Phase. The Lessor shall
provide the Lessee and the firm of auditors so appointed with certified copies
or originals of all such supporting invoices and receipts and other documentary
evidence and information as the Lessee or such auditors may require in order to
verify the Network Construction Cost in respect of any Additional Phase of the
Network. The auditors’ fees for carrying out the aforesaid procedures shall be
borne by the Lessor and the Lessee in equal shares.

 

5.4           In the event that the final Network
Construction Cost calculated under clause 5.3 in respect of an Additional Phase
differs from the Network Construction Cost calculated at the time of initial
acceptance of such Additional Phase by more than

 

10

 

1.0%, the
final Network Construction Cost shall be substituted for the initial Network
Construction Cost used in calculating the Lease Fee by applying the formula
contained in Schedule 1, and any adjustment in such Lease Fee shall apply from
the commencement of the applicable Term. 
Subject to the foregoing, subsequent quarterly payments of the Lease Fee
shall be increased or decreased as appropriate to reflect the adjustment to the
Lease Fee pursuant to this clause 5.4.

 

5.5           The Lease Fee in respect of each
Additional Phase of the Network shall, subject to clauses 5.3 and 5.4, be
calculated by applying the formula set out in Schedule 1 and agreed by the
Lessor and the Lessee as soon as reasonably practicable following initial acceptance
and delivery of each such Additional Phase and shall apply to all Capacity
leased from that Phase.

 

PAYMENT

 

6.1           Subject to clauses 6.2 and 7.3, the
Lease Fee shall, based on the actual amount of Capacity (in terms of volume and
number of days) leased by the Lessee during each Quarter, be paid (or caused to
be paid) quarterly in arrears by the Lessee to the Lessor within 30 days
following the end of each Quarter during the Term.  The total Lease Fee payable by the Lessee in respect of a Quarter
shall be calculated by applying the formula set out in Schedule 1. If new
Capacity is delivered into service after the Lease Effective Date, all Lease
Fees in respect thereof will be payable commencing from the date such Capacity
is delivered and ready for use, and the first payment, covering the period from
the date the Capacity is delivered and ready for use to the beginning of the
next Quarter, shall be payable in arrears within 30 days following the end of
the Quarter in which it is delivered.

 

6.2           The Lessor shall send an invoice to
the Lessee within two days following the end of each Quarter during the Term in
respect of all Capacity leased during such Quarter.  Such invoice shall contain details of all Capacity leased during
the relevant Quarter, as well as the Lessor’s calculation, by applying the
formula set out in Schedule 1, of the total Lease Fee payable by the Lessee for
such Quarter.

 

6.3           Unless otherwise agreed in writing
between the Lessor and the Lessee, all Lease Fee payments shall be made in Renminbi.

 

6.4           All sums payable to the Lessor under
this Agreement shall be made in immediately available funds by electronic funds
transfer to such account as the Lessor shall by not less than seven days’ prior
written notice notify to the Lessee.

 

6.5           The Lessor may charge interest on any
outstanding sum payable to the Lessor hereunder from the due date to the date
of receipt of payment in full by the Lessor, at the daily compound rate of
0.01%.

 

PROCUREMENT
AND CONSTRUCTION OF THE NETWORK

 

7.1           The Lessor shall procure the Network
and shall finance the procurement of all Equipment. Except for Phase 1 and
Phase 2 of the Network, the Lessor shall invite the Lessee to participate in
all negotiations with Equipment suppliers, and the Lessee

 

11

 

shall be
entitled to approve all Equipment purchases and sign all Equipment purchase
contracts.

 

7.2           The Lessor shall ensure that the
Network is constructed in accordance with the detailed design standards,
specifications and timetable agreed in writing between the Lessor and
Lessee.  Subject to clause 4.6, the
Lessor and Lessee shall, within 60 days following the issue by the Lessee of a
request for Additional Capacity under clause 4.4, agree in writing the detailed
design standards, specifications and construction timetable for any required
expansion of the Network to meet such Additional Capacity requirements.

 

7.3           Subject to complying with its
obligations under clause 7.2, the Lessor shall use its best endeavours to ensure
that the Equipment is procured and the Network constructed for the lowest
achievable cost, and shall comply with any requirement of the Lessee that the
purchase of the Equipment be undertaken in a manner which is tax efficient for
the Lessee.

 

ACCEPTANCE
AND TESTING OF THE NETWORK

 

8.1           In relation to each Additional Phase
of the Network, authorised representatives of the Lessor and the Lessee shall
attend the initial acceptance and the final acceptance arranged by the
Equipment suppliers in accordance with the Equipment supply and installation
services contracts, which shall incorporate the acceptance regulations of the
Lessor. Representatives of the Lessor and the Lessee shall effect initial and
final acceptance of each Additional Phase by execution and delivery to the
Equipment suppliers of an initial acceptance document and a final acceptance
document, respectively.  The Lessee may
elect to be represented or accompanied by authorised representatives of the
Operating Entity.

 

OPERATION,
MANAGEMENT AND REVENUE

 

9.1           On the day of signing by the
authorised representatives of the Lessor and the Lessee of an initial
acceptance document relating to a particular Additional Phase of the Network,
that Phase shall be formally delivered to the Operating Entity for operation,
management and maintenance.

 

9.2           All operating revenue, including
airtime charges, monthly subscription fees, interconnection charges, income
from sales of UIM cards and handsets and other income generated from or in
connection with the operation of the Network shall be collected by and belong
to the Operating Entity.

 

9.3           All costs of operating and managing
the Network shall be borne by the Operating Entity.

 

RISK
AND TITLE

 

10.1          The parties agree that title to all
parts of the Network procured, acquired or otherwise funded by the Lessor will
remain vested in the Lessor until the Network is transferred to the Lessee
pursuant to clause 13.

 

12

 

10.2         As between the Lessor and the Lessee,
during the period of construction of each Additional Phase of the Network, the
Lessor shall bear all risks of loss, theft, damage and destruction of or to the
Network. Thereafter and until the expiry of the Term, the Lessor shall bear all
risks of physical loss, damage and destruction of or to the Network caused by a
Force Majeure Event, and the Lessee shall be responsible for all losses and
damage resulting from the Operating Entity’s operation of the Network.

 

RESPONSIBILITIES
OF THE PARTIES

 

Lessor’s
Responsibilities

 

11.1         Without limiting the Lessor’s other
obligations hereunder, the Lessor’s responsibilities are:

 

(a)                                  to obtain and maintain all necessary government and other approvals,
authorisations, licences and other documents necessary or desirable for the
construction, operation, maintenance and upgrading of the Network;

 

(b)                                 to obtain all PRC approvals and permits for the import of all
equipment and technology, other supplies and installation services required for
the construction and operation of the Network, and to use best endeavours to
obtain and maintain favourable customs duties;

 

(c)                                  to obtain all necessary funding for the construction and expansion
of the Network in accordance with the Lessee’s requirements;

 

(d)                                 to ensure that each Additional Phase of the Network is constructed
in accordance with construction timetable agreed by the Lessor and Lessee;

 

(e)           to handle all arrangements in
relation to the importation of the Equipment;

 

(f)                                    to ensure that the Capacity leased is delivered to the Lessee before
the relevant Capacity Delivery Date;

 

(g)                                 to use best endeavours to ensure that the Network is constructed for
the lowest cost achievable based on the technical specifications and subject to
prevailing economic circumstances, provided that the Network quality standards
shall meet the standards agreed by the Lessor and Lessee;

 

(h)                                 upon request by the Lessee to upgrade the software or hardware of
the Network, to use best endeavours to satisfy the request as soon as possible;

 

(i)                                     to make available to the Lessee during the Term the benefit of all
manufacturer’s warranties in relation to the Equipment and other product
support;

 

(j)                                     unless agreed in writing with the Lessee and Unicom Group and save
as contemplated by the Transfer Agreement, not to lease or sell any part of the
Network to any third party, or permit any third party to use or operate the
Network in any manner to provide telecommunications services;

 

13

 

(k)                                  without the prior written consent of the Lessee, not to use or
operate the Network in any manner to provide telecommunications services, or to
compete in any other manner with the Listed Group; and

 

(l)                                     in the event of a breakdown of any part of the Network, to provide
the Lessee all necessary cooperation, including liasing with Equipment
suppliers and coordinating relevant parties.

 

Lessee’s
Responsibilities

 

11.2         Without limiting the Lessee’s other
obligations hereunder, the Lessee’s responsibilities are:

 

(a)                                  to promptly notify the Lessor of any event of loss or any event
which is likely to result in an insurance notification claim;

 

(b)                                 to provide the Lessor with such information concerning the
condition, use and operation of the Network as the Lessor may from time to time
reasonably request;

 

(c)                                  to permit the Lessor’s representatives to inspect the Network during
normal working hours, upon reasonable notice;

 

(d)                                 to be responsible for the maintenance and safety of the Network and
maintenance of all databases in relation to the Network;

 

(e)                                  to permit the Lessor to use such of its premises as are reasonably
required by the Lessor for the purpose of complying with its obligations under
this Agreement;

 

(f)                                    to refrain from subleasing any part of the Network or assign its
rights under the lease to any party other than the Operating Entity or another
member of the Listed Group; and

 

(g)                                 in accordance with market requirements and subscriber demand, to use
all reasonable efforts to promote and advertise the CDMA Business in the Listed
Service Areas.

 

Unicom
Group’s Responsibilities

 

11.3         Without limiting Unicom Group’s other
obligations hereunder, Unicom Group’s responsibilities are:

 

(a)                                  to obtain and maintain all necessary government and other approvals,
authorisations, licences and other documents necessary or desirable for the
construction, operation, maintenance and upgrading of the Network; and

 

(b)                                 to establish and maintain roaming and interconnection arrangements
with other telecommunications operators.

 

14

 

REPRESENTATIONS
AND WARRANTIES

 

Representations
and Warranties of the Lessee

 

12.1         The Lessee represents and warrants to the Lessor that:

 

(a)                                  Status:  It is
a limited liability company duly incorporated and validly existing under the
laws of the PRC and has the corporate power to own its assets and carry on its
business as it is being conducted;

 

(b)                                 Power and authority: It
has the corporate power to enter into and perform, and has taken all necessary
corporate action to authorise the entry into, performance and delivery of, this
Agreement and the transactions contemplated by this Agreement;

 

(c)                                  Legal validity: This Agreement has
been duly authorised, executed and delivered by the Lessee, and this Agreement
constitutes legal, valid and binding obligations of the Lessee, enforceable in
accordance with its terms;

 

(d)                                 Non-conflict: The entry into and
performance by the Lessee of, and the transactions contemplated by, this
Agreement do not and will not (i) conflict with the constitutional documents of
the Lessee; or (ii) conflict with or result in default under any document which
is binding upon the Lessee or any of its assets nor result in the creation of
any Security Interest over any of its assets;

 

(e)                                  Authorisation: All
authorisations, consents, registrations and notifications required by the
Lessee in connection with the entry into, performance, validity and
enforceability of, this Agreement and the transactions contemplated by this
Agreement, have been obtained or effected (as appropriate) and are in full
force and effect;

 

(f)                                    No Immunity: The Lessee is
subject to civil commercial law with respect to its obligations under this
Agreement; and neither Lessee nor any of its assets is entitled to any right of
immunity, and the entry into and performance of this Agreement by the Lessee
constitute private and commercial acts; and

 

(g)                                 Litigation: No litigation,
arbitration or administrative proceedings are pending or threatened against
Lessee which, if adversely determined, would have a material adverse effect
upon the Lessee’s financial condition or business or its ability to perform its
obligations under this Agreement.

 

Representations
and Warranties of the Lessor and Unicom Group

 

12.2         Each of the Lessor and Unicom Group jointly and severally
represents and warrants to the Lessee that:

 

(a)                                  Status: The Lessor is a company duly incorporated and
validly existing under the laws of the PRC and has the corporate power to own
its assets and carry on its business as it is now being conducted;

 

15

 

(b)                                 Power and authority: The Lessor has the
corporate power to enter into and perform, and has taken all necessary
corporate action to authorise the entry into, performance and delivery of, this
Agreement and the transactions contemplated by this Agreement;

 

(c)                                  Legal validity: This Agreement
constitutes the Lessor’s legal, valid and binding obligation;

 

(d)                                 Non-conflict: The entry into and
performance by the Lessor of, and the transactions contemplated by, this Agreement
do not and will not conflict with: (i) any laws binding on the Lessor; or (ii)
the constitutional documents of the Lessor; or (iii) any document which is
binding upon the Lessor or any of its assets;

 

(e)                                  Authorisation: So far as concerns
the obligations of the Lessor, all authorisations, consents, registrations and
notifications required under the laws of the PRC in connection with the entry
into, performance, validity and enforceability of, and the transactions
contemplated by, this Agreement by the Lessor have been obtained or effected
(as appropriate) and are in full force and effect;

 

(f)                                    No breach: The use of the
Network by the Operating Entity in accordance with this Agreement will not
cause the Operating Entity to breach any law, regulation, direction,
permission, waiver, consent, registration, approval or other authorisation; and

 

(g)                                 No Immunity: The Lessor
is subject to civil commercial law with respect to its obligations under this
Agreement; and neither the Lessor nor any of its assets is entitled to any
right of immunity, and the entry into and performance of this Agreement by the
Lessor constitute private and commercial acts.

 

Representations
and Warranties of Unicom Group

 

12.3         Unicom Group also represents and warrants to the Lessee
that:

 

(a)                                  Status: Unicom Group is a company duly incorporated
and validly existing under the laws of the PRC and has the corporate power to
own its assets and carry on its business as it is now being conducted;

 

(b)                                 Power and authority: Unicom Group has
the corporate power to enter into and perform, and has taken all necessary
corporate action to authorise the entry into, performance and delivery of, this
Agreement and the transactions contemplated by this Agreement;

 

(c)                                  Legal validity: This Agreement
constitutes Unicom Group’s legal, valid and binding obligation;

 

(d)                                 Non-conflict: The entry into and
performance by Unicom Group of, and the transactions contemplated by, this
Agreement do not and will not conflict with: (i) any laws binding on Unicom
Group; or (ii) the constitutional

 

16

 

documents
of Unicom Group; or (iii) any document which is binding upon Unicom Group or
any of its assets;

 

(e)                                  Authorisation: So far as concerns
the obligations of Unicom Group, all authorisations, consents, registrations
and notifications required under the laws of the PRC in connection with the
entry into, performance, validity and enforceability of, and the transactions
contemplated by, this Agreement by Unicom Group have been obtained or effected
(as appropriate) and are in full force and effect;

 

(f)                                    CDMA Licence: Unicom
Group’s CDMA licence (Licence No. [2001] Yi Zi No. 01) issued by the MII dated
1 August 2001 is in full force and effect and there are no circumstances which
indicate that such licence will or is likely to be revoked, in whole or in
part. In accordance with applicable PRC laws and regulations, Unicom Group is
permitted to authorise the Lessee to provide CDMA mobile telecommunications
services by using the Network;

 

(g)                                 No Immunity: Unicom Group is
subject to civil commercial law with respect to its obligations under this
Agreement; and neither Unicom Group nor any of its assets is entitled to any
right of immunity, and the entry into and performance of this Agreement by
Unicom Group constitute private and commercial acts.

 

PURCHASE
OPTION

 

13.1         The Lessor hereby grants the Lessee an
option to purchase the Network (the Purchase Option).

 

13.2         The Purchase Option may be exercised at
any time during the Term and within one year thereafter by the Lessee giving
notice in writing (a Purchase
Option Notice) to the Lessor. The acquisition price of the
Network shall be negotiated between the Lessor and the Lessee based on the
appraised value of the Network determined in accordance with applicable PRC
laws and regulations, and taking into account prevailing market conditions and
other relevant factors, provided that the acquisition price will not be greater
than such price as would, after taking into account all Lease Fee payments made
by the Lessee to the Lessor and deducting all Delay Discounts due to the Lessee
under clause 4.10, enable the Lessor to recover the Network Construction Cost,
together with an internal rate of return on its investment of 8% (the Purchase Price).

 

13.3         The purchase of the Network by the
Lessee under this clause 13 shall be carried out in accordance with the
relevant provisions of the Shanghai Stock Exchange listing rules and all
applicable PRC laws and regulations (or the Listing Rules and all applicable
Hong Kong laws after completion of the Transfer Agreement).

 

13.4         As soon as practicable following the
issue of a Purchase Option Notice, the Lessor and Lessee shall negotiate in
good faith and execute an agreement in relation to the sale and purchase of the
Network.  The agreement shall reflect
the terms referred to in this clause 13, as well as such other terms as the
Lessor and the Lessee

 

17

 

shall agree.
In the agreement, the Lessor shall provide such representations and warranties
as are reasonably requested by the Lessee in relation to the Network and other
related matters.

 

13.5         The Network shall be sold free from all
Security Interests and with all rights attached to it at the date of completion
of the sale and purchase of the Network.

 

INSURANCE

 

14.1         During the construction period of each
Additional Phase of the Network, the Lessor shall fully and continuously
maintain insurance over the Network. The relevant insurance premiums shall be
paid by the Lessor and form part of the Network Construction Cost.  Such insurance policies shall name the
Lessor as the beneficiary.  Following
receipt by the Lessor of any proceeds of such insurance, the Lessor shall apply
all the proceeds to repair the Network.

 

14.2         After each Phase of the Network has
been constructed and made available to the Lessee, insurance of that Phase of
the Network shall be effected and maintained fully and continuously valid by or
on behalf of the Lessee on such terms and with such qualified insurance company
as agreed by the Lessor and the Lessee. 
The relevant insurance premiums, which form part of the cost of
operating the Network, shall be paid by or on behalf of the Lessee.  The Lessor and the Lessee shall be named as
joint beneficiaries under all such insurance policies.

 

14.3         The proceeds of any insurance taken out
over the Network shall be applied in repairing or replacing the part of the
Network that has been damaged or lost. 
If the costs of such repair or replacement exceed the amount of relevant
proceeds of insurance, the excess shall be paid by the Lessor and shall form
part of the Network Construction Cost in case the damage or loss occurs during
the construction period, and shall be paid by or on behalf of the Lessee and form
part of the operating cost of the Network in case the damage or loss occurs
during the operating period.

 

14.4         In the event of loss of, or damage to,
the Network, the Lessor and Lessee shall agree upon the detailed steps which
can be taken to repair or replace the Network so as to overcome, rectify and
minimise such loss or damage.

 

NETWORK
MAINTENANCE

 

15.1         The Lessee shall at all times during the Term:

 

(a)                                  take all necessary or desirable steps to safeguard all parts of the
Network and keep the Network in good repair and condition, subject to fair wear
and tear; and

 

(b)                                 maintain the Network in accordance with the generally accepted best
practice of other mobile telecommunications operators in the PRC.

 

15.2         The Lessee shall bear all costs, fees
and expenses in complying with its obligations under clause 15.1.

 

18

 

15.3         The Lessee shall permit the Lessor’s
representatives to inspect the Network during normal business hours, upon
reasonable notice, for the purpose of ascertaining whether the Lessee is in
compliance with its obligations under clause 15.1.

 

GUARANTEE
AND INDEMNITY

 

16.1         In consideration of the Lessee entering
into this Agreement, Unicom Group unconditionally and irrevocably guarantees
the due and punctual performance by the Lessor of its obligations under this
Agreement. If and each time the Lessor fails for any reason to perform or
observe its obligations under this Agreement, Unicom Group shall forthwith upon
demand unconditionally perform (or procure the performance of) the obligation
in relation to which such failure has occurred in the manner prescribed in this
Agreement and so that the same benefits shall be received by the Lessee as
would have been so received if such obligation had been duly performed and/or
observed by the Lessor.

 

16.2         Unicom Group agrees to indemnify the
Lessee on demand for any loss or damage suffered by any member of the Listed
Group as a result of any defect in any of the Equipment or any loss or damage
caused by any negligence, default, act or omission of the Lessor or Unicom
Group under this Agreement or in connection with the Network. The aggregate
liability of Unicom Group for any claim shall not exceed the total amount of
Lease Fee payments made by the Lessee to the Lessor and the total Purchase
Price paid by the Lessee for the Network.

 

CONFIDENTIALITY

 

17.1         At all times during the Term, each
party shall, and shall procure that their respective directors, officers,
employees and agents shall, keep confidential and shall not, without the prior
written consent of the other parties, disclose to any third party this
Agreement or any of the terms of this Agreement or any documents or materials
supplied by or on behalf of either party in connection with this Agreement,
save that any such party shall be entitled upon giving notice to the other
parties to make such disclosure:

 

(a)                                  in connection with any proceedings arising out of or in connection
with this Agreement to the extent that any party may consider necessary to
protect its interests; or

 

(b)                                 if required to do so by an order of a court of competent
jurisdiction whether in pursuance of any procedure for discovering documents or
otherwise or pursuant to any law or any regulation of any stock exchange or
securities regulatory authority; or

 

(c)           to its auditors or legal advisors or
other professional advisers; or

 

(d)           by the Lessor or the Lessee to any
bank or any other financier or prospective financier; or

 

(e)           if required to do so by any
applicable law or in order for such party to comply with its obligations under
this Agreement.

 

19

 

17.2         Nothing in clause 17.1 shall prevent
the Lessee from disclosing information, documents or other materials in
connection with the Lease to the Operating Entity.

 

FORCE
MAJEURE

 

18.1         If the Lessee or Lessor (the Affected Party) is prevented, hindered
or delayed from or in performing any of its obligations under this Agreement by
a Force Majeure Event:

 

(a)                                  the Affected Party’s obligations under this Agreement are suspended
from notification of the event in accordance with clause 18.1(b) while the
Force Majeure Event continues but only to the extent that it is so prevented,
hindered or delayed;

 

(b)                                 immediately after the occurrence of the Force Majeure Event the
Affected Party shall promptly notify the other parties in writing of the Force
Majeure Event, the time and date on which the Force Majeure Event started and
the effects of the Force Majeure Event on its ability to perform its obligations
under this Agreement;

 

(c)                                  the Affected Party shall take all reasonable endeavours to mitigate
the effects of the Force Majeure Event on the performance of its obligations
under this Agreement; and

 

(d)                                 immediately after the end of the Force Majeure Event, the Affected
Party shall notify the other parties in writing that the Force Majeure Event
has ended, the duration of the Force Majeure Event, and shall resume
performance of its obligations under this Agreement.

 

TERMINATION

 

19.1         The Lessee may terminate this Agreement
by not less than 180 days’ prior written notice, such termination to take
effect from the end of any Additional Term. The Lessor may not terminate this
Agreement except in accordance with this clause 19.1 or clause 19.2.

 

19.2         Without prejudice to any other rights
or remedies they may have (either under this Agreement or at law), the Lessor
or the Lessee may terminate this Agreement if the other (or, in the case of the
Lessee, Unicom Group) commits any continuing or material breach of any of the
provisions of this Agreement (save for any breach which is caused by the party
seeking to rely on it) and, in the case of such a breach which is capable of
remedy, fails to remedy the same within 90 days after receipt of a written
notice giving full particulars of the breach and requiring it to be remedied.

 

19.3         For the purpose of clause 19.2, a
breach shall be considered capable of remedy if the party in breach can comply
with the provision in question in all respects other than as to the time of
performance (provided that time of performance is not of the essence).

 

20

 

19.4         The rights to terminate this Agreement
given by this clause 19 shall not prejudice any other right or remedy of
any party in respect of the breach concerned (if any) or any other breach.

 

19.5         Upon the termination of this Agreement
for any reason, subject as otherwise provided in this Agreement and to any
rights or obligations which have accrued prior to termination, no party shall
have any further obligation to the others under this Agreement.

 

19.6         Notwithstanding clause 19.1, this
Agreement may terminate at any time with the written agreement of the parties.

 

Redelivery

 

19.7         Subject to clause 13, the Lessee shall
redeliver the Network to the Lessor within 90 days following the termination of
the Lease.  At the time of such
redelivery:

 

(a)           the Network shall be free and clear
of all Security Interests (other than Lessor Liens);

 

(b)                                 all maintenance to the Network due for performance during the Term
shall have been completed in accordance with clause 15, with all deferred
maintenance items completed; and

 

(c)                                  all damage to the Network shall have been permanently repaired and
certified in accordance with the requirements of the relevant Equipment
manufacturer.

 

NOTICES

 

20.1         Any notice to be given pursuant to this
Agreement shall be in writing and signed by (or on behalf of) the person giving
it.  It shall be served by sending it by
fax, or delivering it by hand, or sending it by prepaid recorded delivery,
special delivery or registered post, to the address or fax number set out in
clause 20.2 and in each case marked for the attention of the relevant party (or
to such other address or fax number as shall have been duly notified in
accordance with this clause).  Any
notice so served by hand, fax or post shall be deemed to have been duly given:

 

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

 

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

 

(c)                                  in the case of prepaid recorded delivery, special delivery or
registered post, at 9 a.m. on the second Business Day following the date of
posting

 

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

 

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

 

21

 

20.2         The addresses and fax numbers of the
parties for the purpose of clause 20.1 are as follows:

 

	
  Lessor

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  6th
  Floor, Tower 3, Henderson Centre, 18 Jianguomen Nei Dajie, Beijing, 100005,
  PRC

  
	
   

  	
   

  
	
  Fax:

  	
  +86 10 6522
  7281

  
	
   

  	
   

  
	
  For the
  attention of:

  	
  Wang Ying
  Pei

  
	
   

  	
   

  
	
  Lessee

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  9th
  Floor, 133 Bei Dajie Jia, Xidan, Xi Cheng District, Beijing, the PRC

  
	
   

  	
   

  
	
  Fax:

  	
  +86 10 6650
  4066

  
	
   

  	
   

  
	
  For the
  attention of:

  	
  The
  Directors

  
	
   

  	
   

  
	
  Unicom Group

  	
   

  
	
   

  	
   

  
	
  Address:

  	
  12th
  Floor, Tower 1, Henderson Centre, 18 Jianguomen Nei Dajie, Beijing, 100005,
  PRC

  
	
   

  	
   

  
	
  Fax:

  	
  +86 10 6611
  4366

  
	
   

  	
   

  
	
  For the
  attention of:

  	
  Li Zhang
  Ting

  

 

20.3         A party may notify the other parties of
a change to its name, relevant addressee, address or fax number for the
purposes of this clause 20, provided that such notice shall only be
effective on:

 

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

 

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

 

ASSIGNMENT
AND SUB-CONTRACTING

 

21.1         The rights or benefits under this
Agreement may not be assigned (nor may any cause of action arising in
connection with any of them be assigned) by the Lessor or Unicom Group or their
respective successor in title without the prior written consent the
Lessee.  Each of the Lessor and Unicom
Group irrevocably agrees that the Lessee may transfer or sub-contract any of
its rights and obligations under this Agreement to the Operating Entity or
another member of the Listed Group.

 

22

 

21.2         The Lessor may, with the Lessee’s prior
written consent, sub-contract any of its obligations under this Agreement provided
that the Lessor procures that the sub-contractor complies with the Lessor’s
obligations under this Agreement as if it were a party to this Agreement in
place of the Lessor. Nothing in this clause 21 will relieve the Lessor of any
of its liabilities or obligations under this Agreement.

 

SEVERABILITY

 

22.1         If any provision of this Agreement is
held to be invalid or unenforceable, then such provision shall (so far as it is
invalid or unenforceable) be given no effect and shall be deemed not to be
included in this Agreement but without invalidating any of the remaining
provisions of this Agreement.

 

FURTHER
ASSURANCE

 

23.1         Each party agrees to perform (or
procure the performance of) all further acts and things, and execute and
deliver (or procure the execution and delivery of) such further documents, as
may be required by law or as the other parties may reasonably require to
implement and/or give effect to this Agreement and the transactions
contemplated by it.

 

COSTS

 

24.1         Subject to clause 24.2, each of the
parties shall pay its own costs and expenses (including legal costs) incurred
in connection with the negotiation, preparation and implementation of this
Agreement.

 

24.2         Any stamp duty or other duties payable
in connection with this Agreement, and matters contemplated hereunder shall be
borne by the Lessor and the Lessee in equal shares.

 

WAIVERS
AND VARIATIONS

 

25.1         No failure or delay on the part of any
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof nor shall any single or partial exercise of any right, power or
remedy preclude any further exercise thereof or the exercise of any other
right, power or remedy. No waiver shall be effective unless expressed in
writing signed for or on behalf of the party granting it.

 

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

 

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

 

23

 

ENTIRE
AGREEMENT

 

26.1         This Agreement constitutes the entire
agreement between the parties in respect of the subject matter of this
Agreement.

 

GOVERNING
LAW; SETTLEMENT OF DISPUTES

 

27.1         This Agreement and the relationship
between the parties shall be governed by, and interpreted in accordance with,
PRC law.

 

27.2         The parties agree to use their best
efforts to settle all disputes, controversies or conflicts arising from or in
connection with this Agreement through friendly negotiation and consultation.

 

27.3         Each of the parties agree that the
courts of the PRC are to have exclusive jurisdiction to settle any disputes
which may arise in connection with this Agreement.

 

27.4         Each party agrees to waive and not to
claim any immunity from any proceedings and legal actions and from all forms of
execution to which it or its property is now or hereafter becomes entitled
under the laws of any jurisdiction.

 

27.5         During the arbitration or court
proceedings, the parties shall continue to perform their respective obligations
under this Agreement except for the part in dispute which is being referred to
arbitration or court proceedings.

 

LANGUAGE

 

28.1         This Agreement shall be written in a
Chinese version and an English version in two originals each. If there exists
any dispute between the parties as to the interpretation of the two versions,
then the two versions shall be read in conjunction to determine the parties’
intention at the time of signing. If the parties’ real intention still cannot
be ascertained by such reading, the Chinese version shall prevail.

 

IN WITNESS whereof the parties hereto have executed this
Agreement on the date shown at the beginning of this Agreement.

 

24

 

SIGNED on behalf of Unicom New Horizon

Mobile Telecommunications Company Limited

 

 

	
  By:

  	
  /s/ Wang Ying Wei

  	
   

  
	
   

  
	
  Name:

  	
  Wang Ying Wei

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  

 

 

SIGNED on behalf of China United

Telecommunications Corporation Limited

 

 

	
  By:

  	
  /s/ Wang Jian Zhou

  	
   

  
	
   

  
	
  Name:

  	
  Wang Jian Zhou

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  

 

 

SIGNED on behalf of China United

Telecommunications Corporation

 

 

	
  By:

  	
  /s/ Yang Xian Zu

  	
   

  
	
   

  
	
  Name:

  	
  Yang Xian Zu

  	
   

  
	
   

  
	
  Title:

  	
   

  	
   

  

 

25

 

SCHEDULE 1

 

 

Quarterly
Lease Fee Payment Calculation Formula

 

The total
quarterly Lease Fee payable in respect of any Phase of the Network shall be
calculated as follows:

 

 

Where:

 

Q = Quarterly
Lease Fee payment

 

Pi = Lease Fee
per Subscriber per Quarter in Phase i of the Network

 

Mij = Total
Capacity leased during the Quarter in a particular Term j and constructed as
part of Phase i

 

dj = Number of
days in a particular Term j in a Quarter for which Capacity is leased

 

D = Total
number of days during the Quarter

 

i = Natural
numbers denoting the Phase number of the Network

 

j = Natural
numbers denoting the Term in which the Capacity is leased

 

The quarterly
Lease Fee per Subscriber for a particular Phase shall be calculated as follows:

 

	
  

  	
  =Ci x 4.6441%

  

 

Where:

 

Ci = Network
Construction Cost per Subscriber for Phase i

 

n = Number of
Quarters during seven years, being n = 4 x 7 = 28

 

R = Quarterly
return on investment: based on an annual return of 8%, R = (1+8%)(1/4)
= 1.9427%

 

In respect of
Phase 1, the recoupment period of seven years specified in clause 5.1
shall be deemed to commence from 8 January 2002.

 

26

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