Document:

Exhibit 10.2

AGREEMENT

This Agreement (this “Agreement”) dated
as of June 28, 2006, by and among InfraSource Services, Inc., a
Delaware corporation (the “Company”),
and the persons listed on signature page hereto.

WHEREAS, on the date hereof,
the Company is contemporaneously entering into a Second Amendment to
Registration Rights Agreement  (the “Registration Rights Amendment”) to
amend that certain Registration Rights Agreement dated as of April 20,
2004, as amended on December 7, 2005, by and among the Company and the
other parties thereto (as so amended prior to the date hereof, the “Original Registration Rights Agreement”),
whereby the Major Shareholders (as defined in the Registration Rights
Amendment) will have the right to have a registration statement filed for a New
Offering (as defined in the Registration Rights Amendment); and

WHEREAS, as a condition to
entering into the Registration Rights Amendment, the Company has requested that
the parties listed on the signature pages hereto, and the parties listed
on the signature page hereto have agreed to, enter into this Agreement.

NOW, THEREFORE, in
consideration of the foregoing, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:

Section 1.              Registration Timing.

Except
as otherwise approved by the Audit Committee of the Board of Directors of the
Company, the timing of activities leading to the New Offering, including any
filings with the Securities and Exchange Commission and the road show, shall be
managed by the Company on a schedule designed to enable the New Offering to be
conducted during the week of July 10, 2006 and priced on
or before August 1, 2006.

Section 2.              Underwriting Agreement.

The
Major Shareholders will make the same representations and indemnification
obligations regarding themselves and the Company in the underwriting agreement
to be executed in connection with the New Offering as they did in the
Underwriting Agreement, dated March 20, 2006, among the Company, the
selling stockholders named in Schedule 2 thereto, Lehman Brothers Inc. and
Credit Suisse Securities (USA) LLC; provided, however, that the Major
Shareholders shall have no obligation to indemnify the Company against any
loss, cost, liability or expense arising out of the New Offering (including
without limitation any disclosure related thereto or the results thereof).

Section 3.              Board of Directors.

Ian
Schapiro and Michael Harmon will work with the Company in good faith to
determine a mutually acceptable transition plan for their Board of Directors
and committee responsibilities.

 

Section 4.              Transaction Support.

The
Major Shareholders will continue to provide, as may be requested by the
Company, for fair, reasonable, and market consideration, support with regard to
any material transactions for which they are providing support to the Company
as of the date hereof. This support will be limited to those areas where one or
more of the Major Shareholders possesses proprietary knowledge regarding such
transaction which would make substitution by a third party service firm
impractical. The Major Shareholders shall provide such support as long as
either Ian Schapiro or Michael Harmon serves on the Company’s Board of
Directors or, if later, October 31, 2006. The Company and the Major
Shareholders shall work in good faith to agree on the transactions and areas of
support referenced in this Section 4 promptly after the date hereof. All
information developed in connection with such past and continuing support shall
be the property of the Company, shall be subject to the Nondisclosure
Agreements dated the date hereof between the Company and each of the Major
Shareholders (the “Nondisclosure Agreements”),
and shall be returned to the Company or destroyed by the Major Shareholders
upon completion of the work, except as set forth in the Nondisclosure
Agreements.

Section 5.              D&O Insurance.

The
Major Shareholders will use their reasonable best efforts to continue the
Company’s inclusion, for a period of two years following the closing of the New
Offering, in the group directors and officers’ insurance coverage sponsored by
the Major Shareholders; provided, however, that the Major Shareholders shall
not be required to pay any incremental costs to so continue the Company’s
inclusion or to incur or pay any additional costs or expenses.

Section 6.              Prohibited Activities.

6.1         Confidentiality.

Without limiting the generality of the Nondisclosure Agreements dated
the date hereof between the Company and each of the Major Shareholders, for a
period of 18 months following the closing of the New Offering, the Major
Shareholders will not disclose any non-public information relating to the
Company received by them or their representatives on the Company’s Board of
Directors to any third parties, including, without limitation, any portfolio
companies of the Major Shareholders, or use any such information in any manner
that would reasonably be expected to competitively disadvantage the Company.

6.2           Subsidiaries’ Business /
Nonsolicitation.

For
a period of two years following the closing of the New Offering, the Major
Shareholders will not (a) engage or invest in a business which is the same
as or substantially similar to the business conducted by Sunesys, Inc. or
Blair Park Services, Inc. or their respective subsidiaries as of the
closing of the New Offering, or (b) solicit for employment or engagement
any persons who were employees or independent contractors of the Company or any
of its subsidiaries as of the closing of the New Offering; provided, however,
that the foregoing shall not prohibit hiring of an individual responding to
general solicitations not specifically targeted at such individuals.

 2
 

 

6.3.          Acquisition Candidates.

For
a period of one year following the closing of the New Offering, the Major
Shareholders will not invest in any entity which the Company has identified to
the Major Shareholders prior to the closing of the New Offering as (a) an
entity with which the Company has engaged in acquisition discussions in the 12
months prior to the closing of the New Offering, or (b) a potential
acquisition target.

6.4.          Competition.

For
a period of one year following the closing of the New Offering, the Major
Shareholders will not acquire, or acquire a material interest in, any of the Company’s
primary competitors, as identified in writing by the Company to the Major
Shareholders, without consent of the Company.

6.5.          Acquisition Opportunities.

For
a period of one year following the closing of the New Offering, the Major
Shareholders will not acquire companies of potential common interest between
one or more of the Major Shareholders and the Company without providing the
opportunity for majority participation by the Company in any such acquisition.

Section 7.              
Miscellaneous.

7.1.         Effectiveness.
This Agreement shall be deemed effective as of the date first written above, as
if executed by all parties hereto on such date.

7.2.        Further Assurances.
Each party agrees that, from time to time upon the written request of the other
party, it will execute and deliver such further documents and do such other
acts and things as the other party may reasonably request to effect the
purposes of this Agreement.

7.3.         Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF NEW YORK, INCLUDING, WITHOUT LIMITATION, SECTIONS 5-1401
AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND NEW YORK CIVIL
PRACTICE LAWS AND RULES 327(b).

7.4.        Jurisdiction; Forum.
Each party hereto consents and submits to the jurisdiction of any state court
sitting in the County of New York or federal court sitting in the Southern
District of the State of New York in connection with any dispute arising out of
or relating to this Agreement. Each party hereto waives any objection to the
laying of venue in such courts and any claim that any such action has been
brought in an inconvenient forum. To the extent permitted by law, any judgment
in respect of a dispute arising out of or relating to this Agreement may be
enforced in any other jurisdiction within or outside the United States by suit
on the judgment, a certified copy of such judgment being conclusive evidence of
the fact and amount of such judgment.

 3
 

 

7.5.        Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability
of the offending term or provision in any other situation or in any other
jurisdiction.

7.6.        Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties; provided, however, that
no party shall assign or transfer its rights hereunder without the prior
written consent of the other parties.

7.7.        Injunctive Relief.
Without intending to limit the remedies available to the Company, damages at
law will be an insufficient remedy to the Company in the event that either of
the Major Shareholders violate any one or more of the terms set forth in Section 6
of this Agreement, and that the Company may apply for and obtain immediate
injunctive relief in any court of competent jurisdiction as set forth above in Section 7.4
or restrain the breach or threatened breach of, or otherwise to specifically
enforce, any of the agreements and covenants contained herein, without posting
bond. The Major Shareholders shall be responsible for payment of the Company’s
reasonable attorneys’ fees in the event the Company prevails in any action
against one or more of the Major Shareholders to enforce any one or more of the
terms set forth in Section 6 of this Agreement. The Company and the Major
Shareholders agree that the activities and investments of the Major
Shareholders shall only be restricted as set forth in Section 6 solely for
the respective time periods specified therein and upon the expiration of such
time periods, the activities and investments of the Major Shareholders shall
not be restricted under Section 6 in any way.

7.8.        Counterparts. This
Agreement may be executed in one or more counterparts, including by facsimile,
and all of such counterparts taken together shall constitute one and the same
instrument.

[the next page is the signature page]

 4
 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the date first above written.

	
  

  	
   

  	
  INFRASOURCE SERVICES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Terence R. Montgomery

  
	
   

  	
   

  	
  Name: 

  	
   

  	
  Terence R. Montgomery

  
	
   

  	
   

  	
  Title:

  	
   

  	
  CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OCM PRINCIPAL OPPORTUNITIES, FUND II, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Oaktree Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Michael P. Harmon

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Michael P. Harmon

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Adam Pierce

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Adam Pierce

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OCM/GFI POWER OPPORTUNITIES FUND, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  Oaktree Capital Management, LLC,

  
	
   

  	
   

  	
   

  	
   

  	
  its Co-General Partner,

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Michael P. Harmon

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Michael P. Harmon

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Managing Director

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Adam Pierce

  
	
   

  	
   

  	
  Name:

  	
   

  	
  Adam Pierce

  
	
   

  	
   

  	
  Title:

  	
   

  	
  Assistant Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Ian Schapiro

  	
   

  	
   

  
	
   

  	
   

  	
  Ian Schapiro, Individually
  (as to Section 3 only)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Michael Harmon

  	
   

  	
   

  
	
   

  	
   

  	
  Michael Harmon,
  Individually (as to Section 3 only)

  
							

 

 5Exhibit 4.35

 

20 JUNE 2006

 

 

CHINA UNICOM LIMITED

 

 

SK TELECOM CO., LTD.

 

 

 

 

SUBSCRIPTION AGREEMENT

relating to U.S.$1,000,000,000 Zero
Coupon

Convertible Bonds due 2009

convertible into ordinary shares of

CHINA UNICOM LIMITED

 

 

 

 

 

 

 

 

TABLE
OF CONTENTS

	
  Clause

  	
   

  	
   

  	
   

  	
  Page

  	
   

  
	
  1

  	
   

  	
  ISSUE AND
  SUBSCRIPTION OF THE BONDS

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  	
  1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  COVENANTS

  	
   

  	
  6

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  EXPENSES

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  CLOSING

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  CONDITIONS
  PRECEDENT

  	
   

  	
  8

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  INDEMNIFICATION

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  TERMINATION

  	
   

  	
  9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  SURVIVAL OF
  REPRESENTATIONS AND OBLIGATIONS

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  NOTICES

  	
   

  	
  10

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  GOVERNING LAW
  AND SUBMISSION TO JURISDICTION

  	
   

  	
  11

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  COUNTERPARTS

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  ASSIGNMENT

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  ENTIRE AGREEMENT

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  TIME OF THE
  ESSENCE

  	
   

  	
  12

  	
   

  
	
   

  	
   

  	
  SCHEDULE 1 FORM OF BOND CERTIFICATE

  	
   

  	
  15

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  FORM,
  DENOMINATION AND STATUS

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  NEGATIVE PLEDGE

  	
   

  	
  17

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  TITLE; TRANSFER
  OF BONDS; ISSUE OF CERTIFICATES

  	
   

  	
  19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  ZERO COUPON

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  PAYMENTS

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  CONVERSION

  	
   

  	
  21

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  COVENANTS IN
  RELATION TO THE CONVERSION RIGHT

  	
   

  	
  33

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  REPRESENTATIONS AND WARRANTIES OF THE BONDHOLDERS IN
  RELATION TO THE CONVERSION SHARES

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  REDEMPTION AND
  PURCHASE

  	
   

  	
  36

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  PRESCRIPTION

  	
   

  	
  39

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  EVENTS OF
  DEFAULT

  	
   

  	
  39

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  REPLACEMENT OF
  CERTIFICATES

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  NOTICES

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
  MODIFICATION AND
  WAIVER

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
  CURRENCY INDEMNITY

  	
   

  	
  41

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
  GOVERNING LAW

  	
   

  	
  42

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
  SUBMISSION TO
  JURISDICTION

  	
   

  	
  42

  	
   

  
	
   

  	
   

  	
  SCHEDULE 2 PART A CONVERSION MECHANICS

  	
   

  	
  43

  	
   

  
	
   

  	
   

  	
  PART B FORM OF LONG FORM CONVERSION
  NOTICE

  	
   

  	
  44

  	
   

  
	
   

  	
   

  	
  PART C
  FORM OF SHORT FORM CONVERSION NOTICE

  	
   

  	
  48

  	
   

  

 

 

This
SUBSCRIPTION AGREEMENT is made on 20 June 2006

BETWEEN

(1)           CHINA UNICOM LIMITED (the
“Company”); and

(2)           SK TELECOM CO., LTD.
(“SKT”).

The Company proposes to
issue to SKT an aggregate principal amount of U.S.$1,000,000,000 zero coupon convertible bonds due 2009 (the “Bonds”)
convertible into ordinary shares (“Shares”)
of HK$0.10 each in the capital of the Company to be listed on The Stock
Exchange of Hong Kong Limited (the “Stock
Exchange”) subject to the conditions herein. The Company’s ordinary
shares in issue (the “Issued Shares”)
are listed on the Stock Exchange.

Now it is hereby agreed
as follows:

1              Issue
and Subscription of the Bonds

Subject as provided herein, the Company agrees to issue the Bonds and
SKT hereby agrees to subscribe and pay for the principal amount of the Bonds,
on the terms set out in Schedule 1, at an issue price of 100 per cent. of
the principal amount of the Bonds (the “Issue
Price”) on 5 July 2006 or on such other date as the
Company and SKT may agree (the “Closing Date”),
which may not be later than 12 July 2006.

2              Representations
and Warranties

2.1          Representations and Warranties of the
Company

As conditions of the
agreement by SKT to subscribe and pay for the Bonds and in consideration
thereof, the Company represents and warrants and undertakes to SKT on the date
hereof, and shall be deemed to represent and warrant and undertake to SKT on
the Closing Date:

2.1.1                        Incorporation:
each of the Company and its Principal Subsidiaries (as defined in the
Conditions) is duly incorporated and validly existing under the relevant laws
of the place of incorporation, with full power and authority to own its
properties and to conduct its business as currently conducted and is not in
liquidation or receivership;

2.1.2                        Agreements:
this Agreement and the Bonds have been duly authorised, executed and delivered
by it and this Agreement constitutes, and the Bonds shall on issue constitute,
its valid and legally binding obligations enforceable in accordance with their
respective terms, and the performance by it of the obligations to be assumed by
it under this Agreement and the Bonds have been duly authorised by all
necessary corporate or other action (except in relation to the listing of the
Shares falling to be allotted and issued upon the exercise of the Conversion
Rights (the “Conversion Shares”)
on the Stock Exchange which will be obtained on or prior to the Closing Date);

2.1.3                        Authorisation:
it has the necessary power and authority to enter into this Agreement and issue
the Bonds;

2.1.4                     Authorised
Share Capital: the Company has sufficient authorised but unissued share
capital to satisfy the issue of such number of Conversion Shares as would be
required to be issued on conversion of all the Bonds at the initial conversion
price;

 1
 

 

2.1.5                     Conversion
Shares: the Conversion Shares, when issued and delivered in the manner
contemplated by the Bonds:

(i)                                   will be duly
and validly issued, fully-paid and non-assessable;

(ii)                                will rank pari passu and carry the same rights and
privileges in all respects as any other class of ordinary share capital of the
Company and shall be entitled to all dividends and other distributions
declared, paid or made thereon save as provided for in the Conditions; and

(iii)                             will be
freely transferable, free and clear of all liens, charges, encumbrances,
security interests or claims of third parties and will not be subject to calls
for further funds;

2.1.6        Pre-emptive
Rights and Options:

(i)                                   the issue of
the Conversion Shares will not be subject to any pre-emptive or similar rights;

(ii)                                except the
options outstanding under the Company’s publicly disclosed share option schemes,
there are no outstanding securities issued by the Company or its Principal
Subsidiaries convertible into or exchangeable for, or warrants, rights or
options, or agreements to grant warrants, rights or options, to purchase or to
subscribe for Shares from the Company or its Principal Subsidiaries;

(iii)                             other than:

(aa)                                 the issue of
the Bonds (and the Conversion Shares upon conversion of the Bonds);

(bb)                               any share
repurchase mandate approved by the shareholders of the Company; and

(cc)                                 any publicly
disclosed share option schemes,

there are no
arrangements approved by the Board of Directors of the Company or a general
meeting of shareholders of the Company providing for the issue or purchase of
Shares or the subscription for Shares; and

(iv)                            other than
the issue of the Bonds, no unissued share capital of the Company is under
option or agreed conditionally or unconditionally to be put under option except
pursuant to the Company’s publicly
disclosed share option schemes;

2.1.7                     Subsidiary
Holding: all the outstanding shares of capital stock or other equity or
cooperative interests of each Principal Subsidiary of the Company have been
duly and validly authorised and issued, are fully paid or contributed and are
owned directly or indirectly by the Company, free and clear of all liens,
charges, encumbrances, security interests, restrictions on voting or transfer
or claims of any third party;

2.1.8                     Listing
Rules: the Company is in
compliance with and will comply with all applicable laws and the applicable
requirements of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing
Rules”) with respect to the Shares and in particular the Company has
complied at all times with the disclosure requirements under the Listing Rules and
the Company will
comply with all applicable laws and the applicable requirements of the Stock
Exchange in connection with the issue of the Bonds and the Conversion Shares;

 2
 

 

2.1.9                     Financial
Statements: the consolidated financial statements of the Company and its
Subsidiaries taken as a whole (the “Consolidated  Group”) for the three years ended 31 December 2005 and
for the financial quarters ended 31 March 2005 and 31 March 2006,
in each case, publicly available on the date hereof were prepared in accordance
with the Hong Kong Financial Reporting Standards and the Hong Kong Accounting
Standards and present a true and fair view of the financial position of the Company
and of the Consolidated Group as at the dates, and the results of operations
and changes in financial position of the Company and of the Consolidated Group
for the periods in respect of which they have been prepared;

2.1.10                 Contingent
Liabilities: there are no material outstanding guarantees or contingent
payment obligations of the Company and its Principal Subsidiaries in respect of
indebtedness of third parties as disclosed in the financial statements referred
to in Clause 2.1.9; each of the Company and its Principal Subsidiaries is in
compliance with all of its obligations under any outstanding guarantees or
contingent payment obligations disclosed in such financial statements except
for any non-compliance which would not singly or in the aggregate, (i) have a material adverse
effect on the financial condition, prospects, results of operations, general
affairs or properties of the Company or the Consolidated Group, or (ii) materially
and adversely affect the ability of the Company to perform its obligations
under this Agreement or the Bonds, or (iii) otherwise be considered
material in the context of the issue of the Bonds (a “Material Adverse Effect”);

2.1.11                 Liquidity and
Capital Resources: other than as has previously been publicly disclosed,
neither the Company nor any of its Principal Subsidiaries has any material
relationships with unconsolidated entities that are contractually limited to
narrow activities that facilitate the transfer of or access to assets by the
Company or any of its Principal Subsidiaries, such as structured finance
entities and special purpose entities that are reasonably likely to have a
material effect on the liquidity of the Company or any of its Principal
Subsidiaries or the availability thereof or the requirements of the Company or
any of its Principal Subsidiaries for capital resources;

2.1.12                 Title: other
than as has previously been publicly disclosed, the Company and its Principal Subsidiaries have such title to
all properties and assets necessary to conduct the business now operated by
them in each case free from liens, encumbrances and title defects that would
adversely affect the value thereof or interfere with the use made or to be made
thereof by them such as to cause a Material Adverse Effect;

2.1.13                 Approvals: each of the Company and its Principal
Subsidiaries:

(i)                                     possesses
or has obtained all licenses, permits, concessions, certificates, consents,
orders, approvals and other authorisations (the “Authorisations”)
from, and has made all declarations and filings with, all national, state,
local and other governmental authorities (including foreign regulatory
agencies), all self-regulatory organisations and all courts and other
tribunals, domestic or foreign, necessary to own or lease, as the case may be,
and to operate its properties and to carry on its business as conducted as of
the date hereof;

(ii)                                  has
not received and does not expect to receive any notice of proceedings relating
to the revocation or modification of any such Authorisations; and

(iii)                               is in compliance with
such Authorisations and all laws and regulations relating to the conduct of its
business as conducted as of the date hereof,

 3
 

 

except (in each case of (i), (ii) and (iii) above) for any
non-compliance which would not singly or in the aggregate, have a Material
Adverse Effect;

2.1.14                 Payment of Taxes:
other than as has previously been publicly disclosed, the Company and its
Principal Subsidiaries have duly and timely filed all tax returns that are
required to be filed in all jurisdictions or have duly requested extensions
thereof and have paid all taxes required to be paid by any of them in all
jurisdictions and any related assessments, fines or penalties, except for any
such tax, assessment, fine or penalty that is being contested in good faith and
by appropriate proceedings or where the failure to file or make payment would
not, singly or in the aggregate, have a Material Adverse Effect;

2.1.15                 Intellectual
Property:

(i)                                  each of the
Company and its Principal Subsidiaries owns or possesses, has the right to use
pursuant to licence, sublicence, agreement, permission or otherwise, or can
acquire on reasonable terms, adequate patents, patent rights, licences,
inventions, copyrights, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, domain names, trade names or other
intellectual property (collectively, “Intellectual
Property”) necessary to carry on the business now operated by it in
each country in which it operates, and neither the Company nor any of its
Principal Subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict in any jurisdiction with asserted rights of others
with respect to any Intellectual Property or of any facts or circumstances
which would render any Intellectual Property invalid or inadequate to protect
the interest of the Company or any of its Principal Subsidiaries therein, and
which infringement or conflict (if the subject of any unfavourable decision,
ruling or finding) or invalidity or inadequacy, singly or in the aggregate,
would have a Material Adverse Effect;

(ii)                               each of the
Company and its Principal Subsidiaries is not infringing or in conflict with,
or using in violation of any applicable law or contractual or fiduciary
obligation binding upon any of the foregoing or any of its directors or
executive officers or any of its employees or agents except for any
infringement, conflict or violation which would not singly or in the aggregate,
have a Material Adverse Effect; and

(iii)                            each of the
Company and its Principal Subsidiaries has not received any notice of
infringement of, or conflict with, asserted rights of others with respect to
its Intellectual Property except for any infringement or conflict which would
not singly or in the aggregate, have a Material Adverse Effect;

2.1.16                 Information: all
information supplied or disclosed including, without limitation, the answers
and documents provided at due diligence meetings (and any new or additional
information serving to update or amend such information supplied or disclosed
by the Company to SKT or
the legal and other professional advisers to SKT) is, and all publicly
available information and records of the Company disclosed to the general
public pursuant to the Listing Rules was, when supplied or published, true
and accurate and not misleading in any material respect and all forecasts,
opinions and estimates relating to the Company and its Principal Subsidiaries so supplied or
disclosed have been made after due, careful and proper consideration, are based
on reasonable assumptions and represent reasonable and fair 

 

 4
 

expectations honestly held based on facts known to the Company and the
Company is not in possession of any material non-public information relating to
the Company or its business the release of which could materially affect the
trading price of the Shares and there is not in existence any material or
information relating to the Company or its Principal Subsidiaries which will be
required to be disclosed by the Company under the Listing Rules;

2.1.17                 Consents: all
consents, approvals, authorisations, orders, registrations or qualifications of
or with any governmental agency or body having jurisdiction over the Company
required to be obtained on the part of the Company for the execution and
delivery of this Agreement, the issue and delivery of the Bonds and the
Conversion Shares (except in relation to the listing of the Conversion Shares
on the Stock Exchange which will be obtained on or prior to, and will remain in
full force and effect on, the Closing Date) and the consummation of the other
transactions herein and therein contemplated have been obtained and are in full
force and effect and are not subject to any conditions which are required to be
satisfied prior to the date hereof and have not been satisfied;

2.1.18                 No conflict:
the execution and delivery by or on behalf of the Company of this Agreement,
the issue and delivery of the Bonds, the consummation of the transactions
herein and therein contemplated and compliance with the terms hereof and
thereof (i) do not conflict with or result in a breach of the memorandum
and articles of association of the Company or any existing applicable law,
rule, regulation, order or decree of any government, governmental body or court
having jurisdiction over the Company or any of its Principal Subsidiaries; and (ii) do
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any agreement or instrument to which the Company
is a party or by which any of its properties or assets are bound, which
conflict, breach or default could materially adversely affect the legality,
validity or enforceability of this Agreement and the Bonds or could materially
adversely affect the Company’s ability to perform its obligations hereunder and
thereunder or is otherwise material in the context of the issue and offering of
the Bonds;

2.1.19      Litigation: save as previously publicly
disclosed:

(i)                                     there
are no governmental or regulatory investigations nor any pending actions, suits
or proceedings against or affecting the Company or any of its Principal
Subsidiaries or any of their respective directors, officers, employees or
properties which if determined adversely to the Company or any of its Principal
Subsidiaries or any of their respective directors, officers or employers would
individually or in the aggregate have a Material Adverse Effect and so far as
the Company is aware, no such investigation, actions, suits or proceedings are
threatened or contemplated; and

(ii)                                  there
is no order, decree or judgment of any court or governmental agency or
regulatory body outstanding or anticipated against the Company or any Principal
Subsidiary which may have or has had a Material Adverse Effect;

2.1.20                 Events of Default:
no event has occurred or circumstance arisen which, had the Bonds already been
issued, might (whether or not with the giving of notice and/or the passage of
time and/or the fulfillment of any other requirement) constitute an event of
default under the Bonds;

2.1.21                 Absence of
Certain Changes: since 31 March 2006 with respect to the Company,
there has been no change which has a Material Adverse Effect. Neither the 

 

 5
 

Company nor any of its Principal Subsidiaries has taken any steps to
seek protection pursuant to any bankruptcy law;

2.1.22                 No Undisclosed
Events, Liabilities, Developments or Circumstances: no event, liability,
development or circumstance has occurred or exists which would have a Material
Adverse Effect; and

2.1.23                 Employee
Relations:  neither the Company nor
any of its Principal Subsidiaries is involved in any material union labour
dispute.

2.2          Representations
and Warranties of SKT

As conditions of the
agreement by the Company to issue the Bonds to SKT, SKT represents and warrants
and undertakes to the Company that:

2.2.1                        it has full power to enter into
and perform this Agreement and this Agreement will, when executed, constitute
its valid and legally binding obligations enforceable in accordance with its
terms;

2.2.2                        all governmental, regulatory
and other approvals, authorisations and consents and licences required to be
obtained by it in connection with the execution of this Agreement, the
performance of the obligations under this Agreement, the subscription of the
Bonds, the exercise of the Conversion Rights, and the transfer, delivery and
holding of the Conversion Shares have been obtained by the Company except for
any such approvals, authorisations, consents or licences which will prior to
the Closing Date be obtained and is, or will on the Closing Date be, in full
force and effects;

2.2.3                        it understands and acknowledges
that no action has been or will be taken in any jurisdiction that would permit
an offer and/or sale to the public of the Bonds or the Conversion Shares, or
possession or distribution of any offering or publicity material relating to
the Bonds in any jurisdiction, except for offers and sales of the Conversion
Shares on or through the Stock Exchange at any time after such issue. It agrees
that it will not, directly or indirectly, offer, sell or deliver any Bonds or
Conversion Shares or distribute or publish any prospectus, form of application,
offering circular, advertisement or other offering material in connection
therewith in any country or jurisdiction except under circumstances that will
result in compliance with any applicable law and regulations; and

2.2.4                        it is not a U.S. Person (as
defined in Rule 902 of Regulation S under the United States Securities Act
of 1933, as amended (the “Securities Act”))
and is acquiring the Bonds in an offshore transaction in reliance on Regulation
S under the Securities Act.

In this Agreement, “business day”
means a day on which the Stock Exchange is open for trading in Hong Kong (which
ends at 4.30pm (Hong Kong time)) and banks are generally open for business in
Seoul.

3              Covenants

3.1          Covenants of the Company

The Company agrees with
SKT that:

 6
 

 

3.1.1                        Warranties:
it shall notify SKT as soon as reasonably practicable and in any event within
five business days of any event or development making untrue, or any material
change affecting, any of its representations, warranties, undertakings,
agreements or indemnities herein at any time, in respect of the Bonds, prior to
payment being made on the Closing Date, and will take such steps as may be
reasonably requested by SKT to remedy the same, provided that SKT shall only
use such information from the Company to the extent permissible under the
Listing Rules and the applicable laws and regulations;

3.1.2                        Directed
selling efforts: neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf has engaged or will engage in any directed
selling efforts (as defined in Regulation S under the Securities Act) with
respect to the Bonds and none of such persons has taken, or will take, any
actions that would results in the sale of the Bonds to SKT under this Agreement
requiring registration under the Securities Act;

3.1.3                        Delivery:
it will make arrangements reasonably satisfactory to SKT to ensure that
certificates for the Bonds are printed and delivered from time to time to or to
the order of SKT as provided in this Agreement and the Terms and Conditions of
the Bonds;

3.1.4        Listing:

(a)                                     it
will use its best endeavours to obtain approval from the Stock Exchange of the
listing of the Conversion Shares upon issue; and

(b)                                    it
will use its best endeavours to maintain or procure the maintenance of listing
of all the issued and outstanding Shares (including, when issued, the
Conversion Shares) on the Stock Exchange; and

3.1.5                     Confidentiality:
the Company shall keep confidential the terms of this Agreement and the Bonds
and all discussions and negotiations relating thereto, and will not disclose
the same to any other person or entity without the prior written consent of
SKT, unless such disclosure is to its professional advisers, or such disclosure
is required by law, regulations, rules, codes or court order or any relevant
government or regulatory authority or the Listing Rules or otherwise by
the Stock Exchange, the New York Stock Exchange, the Securities and Exchange
Commission of the United States, or other regulatory authorities.

3.2          Covenant of SKT

SKT agrees with the Company that SKT shall keep confidential the terms
of this Agreement and the Bonds and all discussions and negotiations relating
thereto, and will not disclose the same to any other person or entity without
the prior written consent of the Company, unless such disclosure is to its
professional advisers, or such disclosure is required by law, regulations,
rules, codes or court order or any relevant government or regulatory authority
or the Listing Rules or otherwise by the Stock Exchange, the New York
Stock Exchange, the Securities and Exchange Commission of the United States, or
other regulatory authorities.

3.3          Covenant relating to transfer

The Company and
SKT agree and covenant with each other that at any time after 5 July 2007,
SKT may invite
(an “invitation”) the Company to offer to acquire some or
all of the Bonds registered in SKT’s
name.

 7
 

 

If within 10 days
of the invitation, either (i) the Company does not make an offer to SKT to
acquire such Bonds or (ii) the highest offer price (the “Company Offer Price”) at which the Company
offers to SKT to acquire such Bonds is not acceptable to SKT, SKT may then
freely assign or transfer any of such Bonds to any third party (a “third party purchaser”) provided that any
such assignment or transfer to a third party purchaser shall not be at a price
which is lower than or equal to the Company Offer Price.

If within 10 days of the invitation, the Company makes an offer to SKT
to redeem such Bonds at an offer price which is acceptable to SKT, the
acquisition of such Bonds by the Company shall be completed within 30 days
after the date of acceptance by SKT of the offer.

4              Expenses

4.1                            Expenses:
Each of the Company and SKT shall bear its own costs and expenses in connection
with negotiations, preparation, execution and carrying into effect of this
Agreement, the Bonds and all other documents relating hereto and thereto.

4.2                            Taxes:
SKT shall bear any documentary, stamp or similar transfer tax as well as any
other transfer expenses, on the initial subscription and the delivery of the
Bonds in accordance with the terms of this Agreement, or on the execution and
delivery of this Agreement, which is or may be required to be paid under the
laws of any jurisdiction.

5              Closing

5.1                            On or before 5p.m. (Hong
Kong time) on the Closing Date, SKT shall pay or cause to be paid to the
Company the aggregate subscription funds in respect of the Bonds (being an
amount of U.S.$1,000,000,000 in same day settlement funds for value on the
Closing Date) to the Company’s U.S.$ bank account at China Construction Bank
Corporation Hong Kong Branch (account number 671-00762-2-302
; for the account of: China Unicom Limited) or such other U.S.$ bank account as
shall have been notified by the Company to SKT no later than three days prior
to the Closing Date. Against payment of the aggregate subscription funds in
respect of the Bonds, the Company will procure entry in the Company’s register
of Bondholders of the name of SKT to be the holder of the Bonds and there shall
be delivered to or to the order of SKT (i) a certificate, duly executed,
representing the aggregate principal amount of the Bonds and substantially in
the form set out in Schedule 1 with such changes as may be approved by SKT and
the Company in writing and (ii) a certified true copy by an authorised
signatory of the Company of the Company’s register of Bondholders as at the
Closing Date.

6              Conditions
Precedent

6.1                            The obligation of SKT to
subscribe and pay for the Bonds is subject to satisfaction or waiver of the
following conditions precedent:

6.1.1                        Compliance:
up to and on the Closing Date (i) all the representations and warranties
of the Company set forth herein shall be accurate and correct in all material
respects at, and as if made on, the Closing Date (with reference to the
circumstances then subsisting); and (ii) the Company shall have performed
all of its undertakings or obligations hereunder to be performed on or before
the Closing Date;

6.1.2                        Certificate:
there shall have been delivered to SKT a certificate, dated as of the Closing
Date, of a duly authorised officer of the Company, to the effect of the matters
set out in paragraph 6.1.1 above;

 8
 

 

6.1.3                        Legal
opinion: on or prior to the Closing Date there shall be delivered to SKT in
a form reasonably satisfactory to SKT an opinion, dated the Closing Date, of
Freshfields Bruckhaus Deringer, legal advisors to the Company as to Hong Kong
law, and

6.1.4                        Listing
Approval: on or prior to the Closing Date:

(i)                                     the
Company shall have obtained from the Stock Exchange listing approval in
relation to the Conversion Shares (as defined in the Conditions); and

(ii)                                  SKT
shall have made a foreign exchange report to the Bank of Korea (having used
best endeavours so to report).

Subject to paragraph 6.2, if any of the conditions set forth in this
paragraph 6.1 is not satisfied on or before the Closing Date, the parties
hereto shall be released and discharged from their respective obligations
hereunder (except for the respective obligations of the parties hereto pursuant
to paragraph 7).

6.2                            Waiver:
SKT may at its discretion waive compliance with the whole or any part of this
paragraph 6.

7              Indemnification

7.1                            Indemnity:
Each of the Company and SKT (in such capacity, each an “indemnifier”) undertakes with the other
that it shall hold the other and its directors, officers and employees (each an
“indemnified party”) fully and
effectually indemnified from and against any and all losses, liabilities,
costs, claims, charges, actions, proceedings, damages, expenses or demands
which they (or any of them) may incur or which may be made against them (or any
of them) as a result of or arising out of, or in relation to, any
misrepresentation or alleged misrepresentation or any breach or alleged breach
of any of the aforesaid representations, warranties or undertakings of or by it
contained in this Agreement. Such indemnity shall extend to include all charges
and expenses which any of the indemnified parties may pay or incur in
investigating, disputing or defending any claim or action or other proceedings
in respect of which the relevant indemnifier is or may be liable to indemnify
under this paragraph 7.1 and all charges and expenses that are the subject of
this indemnity shall be reimbursed by the relevant indemnifier on demand from
the relevant indemnified party.

7.2                            Conduct
of Defence: If any action, proceeding, claim or demand shall be brought or
asserted against an indemnified party or any of them in respect of which the
relevant indemnifier is or may be liable to indemnify as herein provided, any
such indemnified party shall promptly notify such indemnifier in writing, and
shall employ such legal advisers as such indemnified party may select. The
relevant indemnifier shall not be liable in respect of any settlement of any
such action effected without its consent, which consent shall not be
unreasonably withheld or delayed.

8              Termination

8.1                            SKT’s
ability to terminate: Notwithstanding anything herein contained, SKT may,
by giving two business days’ notice in writing to the Company but upon prior
consultation with the Company, terminate this Agreement at any time before the
time on the Closing Date when payment would otherwise be due under
paragraph 5 above, in any of the following circumstances:

 9
 

 

8.1.1                        if there is any material breach
of, or any event rendering untrue or incorrect in any material respect, any of
the warranties and representations contained in paragraph 2.1 or any material
failure to perform any of the Company’s undertakings or agreements in this
Agreement; or

8.1.2                        if any of the conditions
precedent specified in paragraph 6 has not been satisfied or waived by SKT; or

8.1.3        if:

(i)                                  an
Event of Default (as defined in Schedule 1), or an event that with the giving
of notice or the passing of time would constitute an Event of Default, has
occurred; or

(ii)                               there
shall have been a suspension of trading of the Shares by the Stock Exchange for
five consecutive business days occurring after the date hereof.

8.2                            Consequences
of termination: Upon such notice being given, this Agreement shall
terminate and be of no further effect and no party shall be under any liability
to any other in respect of this Agreement, except that each of the Company and
SKT shall remain liable for any antecedent breaches of the provisions hereof
and the respective obligations of the parties in relation to paragraph 7 which
would have continued had the arrangements for the purchase and sale of the
Bonds been completed, shall continue.

9              Survival
of Representations and Obligations

The respective indemnities, agreements,
representations, warranties and other statements of each of the Company and SKT
as set forth in this Agreement or made by or on behalf of it pursuant to this
Agreement shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any indemnified party and shall survive delivery of and payment for the
Bonds so long as any Bond is outstanding.

10           Notices

Any notification given pursuant to this Agreement
shall be given by letter (to be dispatched by express courier), facsimile or
telephone, in the case of notification to:

the Company to:

China Unicom
Limited

75th Floor, 

The Centre,

99 Queen’s Road Central, 

Central, 

Hong Kong

Fax number:                         +852 2121 3232

Telephone number:              +852 2121
3220

Attention:                             Karry
Chu

with a copy to:

 10
 

 

Fax number:                         +852 2121 3241

Telephone number:              +852 2121
3247

Attention:                             Janice
Hsu

SKT to:

11 Euljiro 2-ga

Jung-gu

Seoul 100-999, Korea

Fax number:                         +82
2 6100 7926

Telephone number:              +82 2 6100
7200

Attention:                             Chief
of Division
                                             New/Global
Business Strategy Division

with a copy to:

11 Euljiro 2-ga

Jung-gu

Seoul 100-999, Korea

Fax number:                         +82
2 6100 7966

Telephone number:              +82 2 6100
3500

Attention:                             General
Counsel
                                              Corporate
Legal Office

Any such communication shall take effect, in the case
of a letter sent by express courier, at the time of delivery and in the case of
facsimile, at the time of despatch (provided that the sender retains a
mechanical or electronically generated confirmation of the successful
transmission of such facsimile), and in the case of telephone, when made.
Telephone communications shall be confirmed by letter or facsimile as soon as
reasonably practicable in any event within two business days thereafter.

11           Governing
Law and Submission to Jurisdiction

11.1                     Governing Law:
This Agreement is governed by and construed in accordance with Hong Kong law.

11.2                     Submission to
Jurisdiction: In relation to any legal action or proceedings arising out of
or in connection with this Agreement (“Proceedings”)
the parties hereto irrevocably submit to the non-exclusive jurisdiction of the
Courts of Hong Kong and waive any objection to Proceedings in such courts
whether on the grounds that the proceedings have been brought in an
inconvenient forum or otherwise. This submission shall not affect the right of
any of the parties hereto to take Proceedings in any other court of competent
jurisdiction nor shall the taking of Proceedings in any court of competent
jurisdiction preclude it from taking Proceedings in any other court of
competent jurisdiction (whether concurrently or not).

 11
 

 

12           Counterparts

This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original of which when taken together shall constitute one of the original
document.

13           Assignment

The benefit of this Agreement may not be assigned by
any party hereto without the prior written consent of the other party hereto.

14           Entire
Agreement

This Agreement and the Schedules hereto constitute the
entire agreement between the parties hereto with respect to the subject matter
of this Agreement and supersedes all and any previous agreements, arrangements
or understandings between the parties hereto. No variation of this Agreement shall
be effective unless made in writing and agreed by all of the parties hereto.

15           Time
of the Essence

Any time, date or period mentioned in this Agreement
may be extended by mutual agreement between the Company and SKT but as regards
any time, date or period originally fixed or any date or period so extended as
aforesaid, time shall be of the essence.

 12
 

In
witness whereof this Agreement has been
entered into the day and year first above written.

CHINA
UNICOM LIMITED

By: /s/ Chang
Xiaobing

 13
 

SK
TELECOM CO., LTD.

By: /s/ Shin Bae Kim

 14
 

 

SCHEDULE 1

FORM OF BOND CERTIFICATE

	
  Amount

  	
   

  	
  Certificate No.

  
	
   

  	
   

  	
   

  
	
  U.S.$1,000,000,000

  	
   

  	
  0001

  

 

CHINA UNICOM LIMITED

(a company
incorporated in Hong Kong with limited liability)

U.S.$1,000,000,000 Zero Coupon Convertible Bonds due 2009

CHINA
UNICOM LIMITED (the “Company”) hereby
CERTIFIES that SK TELECOM CO., LTD. is,
at the date hereof, entered in the Company’s register of Bondholders as the
holder of the Zero Coupon Convertible Bonds due 2009 (the “Bonds”) in the principal amount of
U.S.$1,000,000,000 (United States Dollar One Billion Only). For value received,
the Company promises to pay the person who appears at the relevant time on the
register of Bondholders as holder of the Bonds in respect of which this
Certificate is issued such amount or amounts as shall become due in respect of
such Bonds in accordance with and otherwise to comply with the Terms and
Conditions of the Bonds attached thereto (the “Conditions”).

This Bonds in respect of
which this Certificate is issued are convertible into ordinary shares with a
par value of HK$0.10 each of the Company in accordance with and subject to the
Conditions.

This Certificate is
evidence of entitlement only. Title to the Bonds passes only on due
registration in the register of Bondholders and only the duly registered holder
is entitled to payments on the Bonds in respect of which this Certificate is
issued.

The Bonds have not been
and will not be registered under the United States Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder, as in
effect from time to time (the “Securities Act”),
any state securities laws of the United States, or the securities law of any
other jurisdiction, and may not be offered, sold, pledged or otherwise
transferred in the absence of such registration except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and any state securities laws of the states of the United States
and other jurisdictions and the respective rules and regulations
thereunder.

In
witness whereof the
Company has caused this Certificate to be signed manually or by facsimile on its behalf by one of its authorised signatories.

CHINA
UNICOM LIMITED

By:

Authorised Signatory:

Issued in Hong Kong as
of [•] July 2006.

 15
 

 

Form of Transfer

FOR VALUE RECEIVED the
undersigned hereby transfers to

....................................................................

....................................................................

(which [is/is not] an
Affiliate (as such term is defined in the Conditions) of the transferor

[delete as applicable])

(PLEASE PRINT OR
TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

U.S.$[·] (United States Dollar
[                          ])
principal amount of the Bonds in respect of which this Certificate is issued,
and all rights in respect thereof.

All payments in respect
of the Bonds hereby transferred are to be made (unless otherwise instructed by
the transferee) to the following account:

Name of bank:

U.S.$ account number:

For the account of:

Dated:

Certifying Signature:

Name:

Notes:

(a)                                  A
representative of the holder of the Bonds should state the capacity in which he
signs, e.g. executor.

(b)                                 The
signature of the persons effecting a transfer shall conform to any list of duly
authorised specimen signatures supplied to the Company by the registered holder
or be certified by a notary public or in such other manner as the Company may
require.

(c)           This form of transfer should be dated
as of the date it is deposited with the Company.

 16
 

Terms
and Conditions of the Bonds

The
following terms and conditions, subject to completion and amendment, will be
attached to the Certificates representing the Bonds:

The issue of the U.S.$1,000,000,000 aggregate principal amount of Zero Coupon Convertible Bonds due 2009 (the “Bonds”) by CHINA UNICOM LIMITED (the “Company”)
was authorised by a resolution of the board of directors of the Company passed
on 20 June 2006 and pursuant to a subscription agreement dated
20 June 2006 (the “Subscription
Agreement”) entered into between the Company and SK TELECOM CO.,
LTD. (“SKT”). The Bonds are issued
by the Company on 5 July 2006. In these Conditions, expressions not
otherwise defined herein shall have the meanings defined in the Subscription
Agreement.

1              Form,
Denomination and Status

The Bonds are issued in registered form, serially
numbered, in the denomination of U.S.$1,000 each. A certificate (“Certificate”) will be issued by execution
in manual or facsimile form by a duly authorised officer of the Company to each
Bondholder in respect of its registered holding of any Bond. The Bonds
constitute direct, unconditional, unsubordinated and unsecured obligations of
the Company, ranking pari passu and
rateably without any preference among themselves, and, subject as mentioned
above and with the exception of obligations in respect of national and local
taxes and for certain other statutory exceptions, equally with all other
unsecured obligations (other than subordinated obligations, if any) of the
Company from time to time outstanding.

2              Negative
Pledge

So long as any of the Bonds remains outstanding (as
defined below), the Company will not, and will procure that its Principal
Subsidiaries will not, create or have outstanding any mortgage, charge, pledge
or other security interest upon the whole or any part of its property or
assets, present or future, in order to secure, for the benefit of holders
thereof, any existing or future bond issue (or to secure for the benefit of
holders thereof any guarantee or indemnity or other like obligation in respect
thereof) without in any such case at the same time according to the Bonds,
either the same security as is created or is outstanding in respect of such
bond issue (or such guarantee or indemnity or other like obligation in respect
thereof) or such other security or guarantee as is not materially less
beneficial to the Bondholders or as the Bondholders holding 75 per cent. of the
outstanding principal amount of Bonds shall approve.

As used in this Condition 2, “bond issue” means any issue of bonds,
debentures, notes or other similar securities of the Company or any other
person. The indebtedness constituted by loan agreements from lenders not
involving the issue of securities shall not be treated as within the definition
of “bond issue”.

For the purpose of these Conditions, in relation to
the Bonds, “outstanding” Bonds
refers to all the Bonds issued other than:

(a)                                those
which have been redeemed or in respect of which Conversion Rights (as defined
in Condition 6(a)(i)) have been exercised and which have been cancelled in
accordance with these Conditions;

(b)                               those
in respect of which the date for redemption in accordance with these Conditions
has occurred and the redemption moneys have been duly paid to the relevant
Bondholders or on their behalf;

 17
 

 

(c)                                those
mutilated or defaced Bonds which have been surrendered in exchange for
replacement Bonds pursuant to Condition 13; or

(d)                             (for
the purpose only of determining how many Bonds are outstanding and without
prejudice to their status for any other purpose) those Bonds alleged to have
been lost, stolen or destroyed and in respect of which replacement Bonds have
been issued pursuant to Condition 13.

In these
Conditions:

(a)                                     any reference to a “subsidiary”
or “Subsidiary” of the Company is
to a company the financial statements of which are or should be, in accordance
with applicable law, the Hong Kong Financial Reporting Standards and the
Hong Kong Accounting Standards, consolidated
with those of the Company; and

(b)                                    any reference to “Principal Subsidiary” means any Subsidiary
of the Company:

(i)                                     whose
gross revenues or (in the case of a Subsidiary which itself has subsidiaries)
consolidated gross revenues, as shown by its latest audited income statement
are at least ten per cent. of the consolidated gross revenues as shown by the
latest published audited consolidated income statement of the Company and its
Subsidiaries; or

(ii)                                  whose
gross assets or (in the case of a Subsidiary which itself has subsidiaries) gross
consolidated assets, as shown by its latest audited balance sheet are at least
ten per cent. of the amount of the consolidated gross assets of the Company and
its Subsidiaries as shown by the latest published audited consolidated balance
sheet of the Company and its Subsidiaries as being represented by the
investment of the Company in each Subsidiary whose accounts are not
consolidated with the consolidated audited accounts of the Company and after
adjustment for minority interest,

provided that, in relation
to paragraphs (i) and (ii) above:

(aa)                            in the
case of a corporation or other business entity becoming a Subsidiary after the
end of the financial period to which the latest consolidated audited accounts
of the Company relate, the reference to the then latest consolidated audited
accounts of the Company for the purposes of the calculation above shall, until
consolidated audited accounts of the Company for the financial period in which
the relevant corporation or other business entity becomes a Subsidiary are
published, be deemed to be a reference to the then latest consolidated audited
accounts of the Company adjusted to consolidate the latest audited accounts
(consolidated in the case of a Subsidiary which itself has Subsidiaries) of
such Subsidiary in such accounts;

(bb)                          if at
any relevant time in relation to the Company or any Subsidiary which itself has
Subsidiaries no consolidated accounts are prepared and audited, total assets of
the Company and/or any such Subsidiary shall be determined on the basis of pro
forma consolidated accounts prepared for this purpose by the Company;

(cc)                            if at
any relevant time in relation to any Subsidiary, no accounts are audited, its
total assets (consolidated, if appropriate) shall be determined on the basis

 18
 

of pro forma accounts
(consolidated, if appropriate) of the relevant Subsidiary prepared for this
purpose by the Company; and

(dd)                          if
the accounts of any Subsidiary (not being a Subsidiary referred to in proviso
(aa) above) are not consolidated with those of the Company, then the
determination of whether or not such subsidiary is a Principal Subsidiary shall
be based on a pro forma consolidation of its accounts (consolidated, if
appropriate) with the consolidated accounts (determined on the basis of the
foregoing) of the Company; or

(iii)                               to which is transferred
the whole or substantially the whole of the assets of a Subsidiary which
immediately prior to such transfer was a Principal Subsidiary, provided that
the Principal Subsidiary which so transfers shall forthwith upon such transfer
cease to be a Principal Subsidiary and the Subsidiary to which the assets are
so transferred shall cease to be a Principal Subsidiary at the date on which
the first published audited accounts (consolidated, if appropriate), of the Company
prepared as of a date later than such transfer are issued but so that such
transferor Subsidiary or such transferee Subsidiary may be a Principal
Subsidiary of the Company on or at any time after the date on which such
audited financial statements have been published by virtue of the provisions of
sub-paragraph (i) or (ii) above or before, on or at any time after
such date by virtue of the provisions of this sub-paragraph (iii).

3              Title;
Transfer of Bonds; Issue of Certificates

(a)                     Title and
Transfers

Title to the Bonds
passes only by transfer and registration in the Company’s register of
Bondholders (the “Register”). The
holder of any Bond will (except as otherwise required by law) be treated as its
absolute owner for all purposes (whether or not it is overdue and regardless of
any notice of ownership, trust or any interest in it or any writing on, or the
theft or loss of, the Certificate issued in respect of it) and no person will
be liable for so treating the holder. In these Conditions, “Bondholder” and (in relation to a Bond) “holder” means the person in whose name a
Bond is registered on the Register.

A Bond may,
subject to Conditions 3(d) and (e) below, be transferred by
depositing the Certificate issued in respect of that Bond, with the form of
transfer on the back duly completed and signed, at the principal place of
business (or other office notified to Bondholders in accordance with Condition
13) of the Company which shall be in Hong Kong (the “Designated Office”).

Upon receipt by
the Company of the Certificate issued in respect of a Bond with the form of
transfer on the back duly completed and signed, the Company shall forthwith
make a notation on the Register to the effect that the Bond is registered in
the name of the transferee specified in such form of transfer.

The Company shall
at all times maintain the Register and make it available for inspection by the
Bondholders upon reasonable notice and upon payment of a reasonable fee. Each
Bondholder shall be entitled to be issued with one Certificate only in respect
of its entire holding of Bonds.

 19
 

 

(b)                    Delivery of new certificates

Each new
Certificate to be issued upon a transfer of Bonds will (following execution in
manual or facsimile form by a duly authorised officer of the Company), within
three business days of receipt by the Company of the duly completed form of
transfer, be made available for collection at the Designated Office or (at the
election of the Bondholders) sent at the expense of the Company by
courier (if the address of the transferee is in Hong Kong) or by express mail
(if the transferee’s address is outside Hong Kong) at the risk of the holder
entitled to the Bonds to the address specified in the form of transfer.

For the purposes
of these Conditions (unless otherwise defined), “business day”
shall mean a day (which ends at 4:30 pm (Hong Kong time)) on which the Stock
Exchange is open for trading in Hong Kong.

Where only part of
a principal amount of the Bonds (being that of one or more Bonds) in respect of
which a Certificate is issued is to be transferred or converted, a new
Certificate in respect of the Bonds not so transferred or converted will,
within five business days of delivery of the original Certificate to the
Company, be made available for collection at the Designated Office or at the
election of the Bondholder, be sent at the expense of the Company by courier
(if the address of the transferee is in Hong Kong) or by express mail (if the
transferee’s address is outside Hong Kong) at the risk of the holder entitled
to the Bonds to the address specified in the form of transfer or Conversion
Notice, as the case may be.

(c)                     Formalities free of charge

Registration of a
transfer of Bonds will be effected without charge by or on behalf of the
Company, but upon payment (or the giving of such indemnity as the Company may
reasonably require) in respect of any tax or other governmental charges which
may be imposed on the Company in relation to such transfer.

(d)                    Closed periods

No Bondholder may
require the transfer of a Bond to be registered (i) during the period of
fifteen (15) business days ending on the due date for any payment of principal
on the Bonds, or (ii) after the Certificate in respect of such Bond has
been deposited for conversion pursuant to Condition 6.

(e)                     Restriction
against transfer

Prior to 5 July 2007,
a Bondholder may not assign or transfer any of the Bonds registered in its name
to any third party other than an Affiliate (provided that such persons may only
remain the holders of the Bond, for so long as they remain to be an Affiliate).

At any time after
5 July 2007 or
on the occurrence of a Relevant Event (as defined in Condition 9 below),
a Bondholder may freely assign or transfer any of the Bonds registered in its
name to any third party (a “prospective
purchaser”) provided that no assignment or transfer may be made to a
person who is (i) a fixed line or
mobile telecommunications operator in the People’s Republic of China (a “competitor
operator”) or (ii) an Affiliate of a competitor operator.

For the purpose of
this Condition 3:

 20
 

 

an “Affiliate” with respect to any person, means any person
directly or indirectly through one or more intermediaries, Controlling,
Controlled by or is under common Control with that person; and

“Control, Controlled or Controlling” with
respect to any person means having the ability to direct the management and
affairs of such person, whether through the ownership of voting securities or
by contract, and such ability shall be deemed to exist when any person holds a
majority of the outstanding voting securities, or the economic rights and
benefits of such person.

4              Zero
Coupon

The Bonds do not bear interest.

5              Payments

(a)                     Payments in
respect of principal (which term shall include any premium that is also payable
as relevant) will be made to the registered Bondholder by a U.S. Dollar cheque
drawn on, or by transfer to a U.S. Dollar account maintained by the payee with,
a bank in New York City (details of which shall have been notified to the
Company by the Bondholders at least three business days prior to the date of
payment), subject in all cases to any fiscal or other laws and regulations
applicable thereto, but without prejudice to the provisions of
Condition 10. Cheques will be mailed to the address of the Bondholder
appearing on the Register at the risk of the Bondholder. The Certificates shall
be surrendered to the Company within 30 days of the payment of the principal at
maturity.

(b)                    Where payment
is to be made by transfer to a U.S. Dollar account, payment instructions (for
value the due date or, if that is not a bank business day (as defined below),
for value the first following day which is a bank business day) will be
initiated and, where payment is to be made by cheque, the cheque will be mailed
on the bank business day preceding the due date for payment.

(c)                     If the due
date for payment of any amount of principal in respect of any Bond is not a
bank business day, then the holder thereof shall not be entitled to payment of
the amount due until the next following bank business day and no further
interest or other payment will be made as a consequence of the due date not
being a bank business day. In these Conditions, “bank business day” means any day on which banks are open for
business in New York City and Hong Kong.

6              Conversion

(a)                      (i)                The
right of a Bondholder to convert any Bond hereunder is hereinafter called the “Conversion Right”. Subject to and upon
compliance with the provisions of these Conditions, any Bond may be converted
into duly authorised, validly issued, fully-paid and unencumbered Shares, at
the option of the holder thereof, at any time from and including the first
anniversary after the Closing Date (the “Conversion
Commencement Date”) up to the close of business in Hong Kong on the
day falling seven days prior to the Maturity Date (as defined in Condition 9
below) (such period, the “Conversion Period”),
provided that Bondholders may only exercise the Conversion Rights on each
occasion that they wish to exercise the Conversion Right, with respect to an
aggregate principal amount of Bonds being U.S.$50,000,000 and an integral
multiple of U.S.$1,000 thereafter 

 21
 

 

(if applicable),
provided further that this restriction does not apply to any conversion by a
Bondholder of the entire amount of its holding of Bonds.

The number of Shares to be issued on conversion of a
Bond shall be determined by multiplying the principal amount of a Bond by the
exchange rate of U.S.$1.00 to HK$7.7648 (being the rate for the purchase of
Hong Kong dollars with U.S. dollars reported by Reuters on page ”HKDFIX” at 11:15 am (Hong Kong time) on the
day immediately preceding the date hereof) and divided by the applicable
Conversion Price, determined as hereinafter provided, in effect on the
Conversion Date (as hereinafter defined).

(ii)                                  Fractions
of a Share will not be issued on conversion and no adjustment or cash payment
will be made in respect thereof.

(iii)                               The
price at which each Share shall be issued upon conversion (the “Conversion  Price”) shall initially be HK$8.63 (the “Fixed Conversion
Price”), subject to adjustment in the manner provided in Condition
6(c), PROVIDED THAT the Conversion Price shall not under any circumstances be
less than the par value of the Shares on the Conversion Date (currently at
HK$0.10) unless permitted by law and in compliance with the Rules Governing
the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

If the number of
Shares to be delivered to a converting Bondholder in respect of one or more
Bonds being converted is not equal to a board lot of such Shares on the Stock
Exchange, the Company shall deliver such number of Shares as is equal to a
board lot or an integral multiple thereof and pay the Current Market Price (as
defined in Condition 6(d)) of the balance of the Shares as defined in
Condition 6(b) that would otherwise have been delivered.

(b)                    As used in
this Condition 6, the expression “Shares”
means (i) shares of the class of share capital of the Company which is
designated as ordinary shares of HK$0.10 each in the capital of the Company,
together with shares of any class or classes resulting from any Stock Split,
consolidation or re-classification thereof, which have no preference in respect
of dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, and (ii) fully-paid
and unencumbered shares of any other class or classes of the share capital of
the Company which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution
or winding-up of the Company and which have the same nominal value as the
Shares; and the expression “Stock Split”
means any kind of stock split in relation to the Shares, including a bonus
share distribution, a stock dividend or a sub-division of Shares.

(i)                                     To
exercise the Conversion Right attached to any Bond, the holder thereof shall,
on a business day, send by facsimile to the Designated Office at the holder’s
own expense a completed notice of conversion in the short form as set out in
Schedule 2 (Part C) to the Subscription Agreement (the “short form Conversion Notice”), and then
deliver or mail to the Designated Office an original completed and signed
Conversion Notice in duplicate in the long form as set out in Schedule 2 (Part B)
to the Subscription Agreement (the “long form
Conversion Notice”) together with the relevant Certificates by 4:30
pm on the business day

 

 22
 

following the
Conversion Date (as defined below). The Company shall acknowledge receipt of
the short form Conversion Notice by facsimile to the sender of the short form
Conversion Notice by 4:30 pm (Hong Kong time) on the business day following the
Conversion Date. Failure of the Company to deliver such an acknowledgement
shall not affect the validity of the short form Conversion Notice provided that
the relevant Bondholder shall retain a mechanical or electronically generated
confirmation of the successful transmission of such fax.

As conditions
precedent to conversion the Bondholder must pay to the Company (or make
arrangements satisfactory to the Company for the payment of) all stamp, issue,
registration or other similar taxes and duties (if any) arising on conversion
in Hong Kong or payable in any jurisdiction consequent upon the issue of Shares
or delivery of the certificate(s) therefor to a place outside Hong Kong or
to the order of a person other than the converting Bondholder. Except as
aforesaid, the Company will pay the expenses arising on the issue of Shares on
conversion of the Bonds.

Unless otherwise
agreed between the Company and the relevant Bondholder which exercises the
right of conversion attaching to the Bonds, all Shares issued upon the exercise
of the Conversion Rights (the “Conversion
Shares”) will be allotted on the Hong Kong branch register of
members of the Company.

The date on which
the faxed short form Conversion Notice is received by the Company (as evidenced
by the transmission report of the Bondholder’s facsimile machine) (or the next
business day if the short form Conversion Notice is received by the Company
after 4:30 pm Hong Kong time) is herein referred to as the “Conversion
Date” applicable to such Bond. The date on which any Certificate and
the original, signed long form Conversion Notice is received by the Company, or
on which all conditions precedent to the conversion thereof are fulfilled,
whichever shall be later, is herein referred to as the “Delivery Date” applicable to such Bond. The
Company shall deliver an allotment advice and (if applicable) instructions to
issue shares certificate(s) in respect of the Conversion Shares to its
share registrar and transfer agent in Hong Kong by 4:30 pm (Hong Kong time) on
the second business day immediately after the Delivery Date. A short form
Conversion Notice or long form Conversion Notice once deposited shall not be
withdrawn without the consent in writing of the Company.

(ii)                                  The
Company shall, as soon as practicable, and in any event within ten business
days after the relevant Delivery Date, deliver or cause to be delivered to the
order of the person named for that purpose in the relevant Conversion Notice a
certificate or certificates for the relevant Shares registered in the name of
the Bondholder (or as designated by the Bondholder in the relevant Conversion
Notice) or Central Clearing and Settlement System account credit instructions,
together with any such other securities, property or cash required to be
delivered on conversion and such assignments and other documents (if any) as
may be required by law to effect the transfer thereof.

If the Conversion
Date in relation to any Bond shall be on or after the record date for any
issue, distribution, grant, offer or other event as gives rise to the
adjustment of the Fixed Conversion Price pursuant to Condition 6(c), but before
the relevant adjustment becomes effective under the relevant Condition, upon
the relevant adjustment becoming effective the Company shall procure the issue
to the converting Bondholder (or in accordance with the instructions contained
in the Conversion Notice (subject to applicable exchange control or other laws
or other regulations)), such additional number of Shares as, together with the
Shares issued or to be issued on conversion of the relevant Bond, is equal to
the number 

 23
 

 

of Shares which
would have been required to be issued on conversion of such Bond if the
relevant adjustment to the Fixed Conversion Price had been made and become
effective on or immediately after the relevant record date.

The person or
persons designated in the Conversion Notice will become the holder of record of
the number of Shares issuable upon conversion with effect from the date he is
or they are registered as such in the Company’s register of members (the “Registration Date”). The Shares issued upon
conversion of the Bonds will be fully paid and will in all respects rank pari
passu with the Shares in issue on the relevant Registration Date. Save as set
out in these Conditions, a holder of Shares issued on conversion of Bonds shall
not be entitled to any rights the record date for which precedes the relevant
Registration Date.

If the record date
for the payment of any dividend or other distribution in respect of the Shares
is on or after the Conversion Date in respect of any Bond, but before the
Registration Date (disregarding any retroactive adjustment of the Conversion
Price referred to in this sub-paragraph (ii) prior to the time such
retroactive adjustment shall have become effective), the Company will pay to
the converting Bondholder or his designee an amount (the “Equivalent Amount”) in US dollars equal to
the Fair Market Value (as defined below) (converted into US dollars at the rate
for the purchase of Hong Kong dollars with US dollars reported by Reuters on page ”HKDFIX”) of any such dividend or other distribution to which
he would have been entitled had he on that record date been such a shareholder
of record and will make the payment at the same time as it makes payment of the
dividend or other distribution, or as soon as practicable thereafter, but, in
any event, not later than seven days thereafter. The Equivalent Amount shall be
paid by means of a US dollar cheque drawn on a bank in New York City and sent
to the address specified in the relevant Conversion Notice.

(c)                     The Fixed
Conversion Price will be subject to adjustment in the following events as set
out in this Condition 6(c):

(i)                                     Consolidation,
Subdivision or Reclassification: If and whenever there shall be an
alteration to the nominal value of the Shares as a result of consolidation,
subdivision or reclassification, the Fixed Conversion Price shall be adjusted
by multiplying the Fixed Conversion Price in force immediately before such
alteration by the following fraction:

	
  

  	
  A

  	
  

  
	
   

  	
  B

  	
   

  

 

Where:

A                                      is
the nominal amount of one Share immediately after such alteration; and

B                                        is
the nominal amount of one Share immediately before such alteration.

Such adjustment shall become effective on the date the
alteration takes effect.

(ii)                                  Capitalisation of Profits or Reserves:

(aa)                            If and whenever the Company shall issue any
Shares credited as fully paid to the holders of Shares (“Shareholders”) by way of capitalisation of
profits or reserves (including any share premium 

 24
 

                                                account)
including, Shares paid up out of distributable profits or reserves and/or share
premium account issued (except any Scrip Dividend) and which would not have
constituted a Distribution, the Fixed Conversion Price shall be adjusted by
multiplying the Fixed Conversion Price in force immediately before such issue
by the following fraction:

	
  

  	
  A

  	
  

  
	
   

  	
  B

  	
   

  

 

Where:

A              is the aggregate
nominal amount of the issued Shares immediately before such issue; and

B                is the aggregate
nominal amount of the issued Shares immediately after such issue.

(bb)          In the case of an issue of Shares by way
of a Scrip Dividend where the Current Market Price of such Shares exceeds 105
per cent. of the amount of the Relevant Cash Dividend or the relevant part
thereof and which would not have constituted a Distribution, the Fixed
Conversion Price shall be adjusted by multiplying the Fixed Conversion Price in
force immediately before the issue of such Shares by the following fraction:

	
  

  	
  A + B

  	
  

  
	
   

  	
  A + C

  	
   

  

 

Where:

A              is the aggregate
nominal amount of the issued Shares immediately before such issue;

B                is the aggregate
nominal amount of Shares issued by way of such Scrip Dividend multiplied by a
fraction of which (i) the numerator is the amount of the whole, or the
relevant part, of the Relevant Cash Dividend and (ii) the denominator is
the Current Market Price of the Shares issued by way of Scrip Dividend in
respect of each existing Share in lieu of the whole, or the relevant part, of
the Relevant Cash Dividend; and

C                is the aggregate
nominal amount of Shares issued by way of such Scrip Dividend;

or
by making such other adjustment as an Independent Investment Bank shall certify
to the Bondholders is fair and reasonable.

Such
adjustment shall become effective on the date of issue of such Shares or if a
record date is fixed therefor, immediately after such record date.

(iii)              Distributions:

(aa)            Subject to Condition 6(c)(iii)(bb), if
and whenever the Company shall pay or make any Distribution to the Shareholders
(except to the extent that the Fixed Conversion Price falls to be adjusted
under Condition 6(c)(ii) above), the Fixed Conversion Price shall be
adjusted by multiplying the Fixed Conversion Price in force immediately before
such Distribution by the following fraction:

 25
 

 

	
  

  	
  A – B

  	
  

  
	
   

  	
  A

  	
   

  

 

Where:

A              is the Current
Market Price of one Share on the last Trading Day preceding the date on which
the Distribution is publicly announced; and

B                is the Fair Market
Value on the date of such announcement of the portion of the Distribution
attributable to one Share.

Such
adjustment shall become effective on the date that such Distribution is
actually made or, if later, the first date upon which the Fair Market Value of
the Distribution is capable of being determined as provided in these
Conditions.

(bb)          If and whenever the Company shall pay or
make any Distribution in cash only to the Shareholders, the Fixed Conversion
Price shall be adjusted by multiplying the Fixed Conversion Price in force
immediately before such Distribution by the following fraction:

	
  

  	
  A – B

  	
  

  
	
   

  	
  A

  	
   

  

 

Where:

A              is the Current
Market Price of one Share on the record date for the determination of
Shareholders entitled to receive such Distribution in cash; and

B                is the amount of
cash so distributed attributable to one Share.

Such
adjustment shall become effective on the record date for the determination of
Shareholders entitled to receive such Distribution in cash.

(iv)                              Rights Issues of Shares or Options over Shares: If
and whenever the Company shall issue Shares to all or substantially all Shareholders
as a class by way of rights, or issue or grant to all or substantially all
Shareholders as a class by way of rights, of options, warrants or other rights
to subscribe for or purchase or otherwise acquire any Shares, in each case at
less than 95 per cent. of the Current Market Price per Share on the last
Trading Day preceding the date of the announcement of the terms of the issue or
grant, the Fixed Conversion Price shall be adjusted by multiplying the Fixed
Conversion Price in force immediately before such issue or grant by the
following fraction:

	
  

  	
  A + B

  	
  

  
	
   

  	
  A + C

  	
   

  

 

Where:

A              is the number of
Shares in issue immediately before such announcement;

B                is the number of
Shares which the aggregate amount (if any) payable for the Shares issued by way
of rights or for the options or warrants or other rights issued by way of
rights and for the total number of Shares 

 26
 

comprised therein would subscribe for or purchase or
otherwise acquire at such Current Market Price per Share; and

C                is
the aggregate number of Shares issued or, as the case may be, comprised in the
issue or grant.

Such
adjustment shall become effective on the first date on which the Shares are
traded ex-rights, ex-options, ex-warrants (as the case may be) on the relevant
Stock Exchange.

(v)                                 Rights Issues of Other Securities: If and
whenever the Company shall issue any securities (other than Shares or options,
warrants or other rights to subscribe for or purchase Shares) to all or
substantially all Shareholders as a class by way of rights or grant to all or
substantially all Shareholders as a class by way of rights, of options,
warrants or other rights to subscribe for or purchase any securities (other
than Shares or options, warrants or other rights to subscribe or purchase
Shares), the Fixed Conversion Price shall be adjusted by multiplying the Fixed
Conversion Price in force immediately before such issue or grant by the
following fraction:

	
  

  	
  A – B

  	
  

  
	
   

  	
  A

  	
   

  

 

Where:

A              is the Current
Market Price of one Share on the last Trading Day preceding the date on which
such issue or grant is publicly announced; and

B                is the Fair Market
Value on the date of such announcement of the portion of the rights
attributable to one Share.

Such
adjustment shall become effective on the first date on which the Shares are
traded ex-rights, ex-options or ex-warrants (as the case may be) on the
relevant Stock Exchange.

(vi)                              Issues at less than Current Market Price:
If and whenever the Company shall issue (otherwise than as mentioned in
Condition 6(c)(iv) above) any Shares (other than Shares issued on the
exercise of Conversion Rights or on the exercise of any other rights of
conversion into, or exchange or subscription for, Shares) or the issue or grant
(otherwise than as mentioned in Condition 6(c)(iv) above) of options,
warrants or other rights to subscribe or purchase Shares in each case at a
price per Share which is less than 95 per cent. of the Current Market Price on
the last Trading Day preceding the date of announcement of the terms of such
issue or grant, the Fixed Conversion Price shall be adjusted by multiplying the
Fixed Conversion Price in force immediately before such issue by the following
fraction:

	
  

  	
  A + B

  	
  

  
	
   

  	
  C

  	
   

  

 

Where:

A              is the number of
Shares in issue immediately before the issue of such additional Shares or the
grant of such options, warrants or other rights to subscribe for or purchase
any Shares;

 27
 

 

B                is the number of
Shares which the aggregate consideration receivable for the issue of such
additional Shares would purchase at such Current Market Price per Share; and

C                is the number of
Shares in issue immediately after the issue of such additional Shares.

References
to additional Shares in the above formula shall, in the case of an issue by the
Company of options, warrants or other rights to subscribe or purchase Shares,
mean such Shares to be issued, or otherwise made available, assuming that such
options, warrants or other rights are exercised in full at the initial exercise
price (if applicable) on the date of issue or grant of such options, warrants
or other rights.

Such
adjustment shall become effective on the date of issue of such additional
Shares or, as the case may be, the issue of such options, warrants or other
rights.

(vii)                           Other Issues at less than Current Market Price:
Save in the case of an issue of securities arising from a conversion or
exchange of other securities in accordance with the terms applicable to such
securities themselves falling within this Condition 6(c)(vii), if and whenever
the Company or any of its Subsidiaries (otherwise than as mentioned in
Conditions 6(c)(iv), 6(c)(v) or 6(c)(vi)), or (at the direction or request
of or pursuant to any arrangements with the Company or any of its Subsidiaries)
any other company, person or entity shall issue any securities (other than the
Bonds) which by their terms of issue carry rights of conversion into, or
exchange or subscription for, Shares to be issued by the Company on conversion,
exchange or subscription at a consideration per Share which is less than 95 per
cent. of the Current Market Price on the last Trading Day preceding the date of
announcement of the terms of issue of such securities, the Fixed Conversion
Price shall be adjusted by multiplying the Fixed Conversion Price in force
immediately before such issue by the following fraction:

	
  

  	
  A + B

  	
  

  
	
   

  	
  A + C

  	
   

  

 

Where:

A              is the number of
Shares in issue immediately before such issue;

B                is the number of
Shares which the aggregate consideration (if any) receivable by the Company for
the Shares to be issued, or otherwise made available, on conversion or exchange
or on exercise of the right of subscription attached to such securities would
purchase at such Current Market Price per Share; and

C                is the maximum
number of Shares to be issued on conversion or exchange of such securities or
on the exercise of such rights of subscription attached thereto at the initial
conversion, exchange or subscription price or rate.

Such adjustment shall become effective on the date of
issue of such securities

(viii)                        Modification
of Rights of Conversion etc.: If and whenever there shall be any
modification of the rights of conversion, exchange or subscription attaching to
any such securities as are mentioned in Condition 6(c)(vii) (other than in
accordance with the terms of such securities) so that the consideration per 

 

 28
 

                                                Share
(for the number of Shares available on conversion, exchange or subscription
following the modification) is less than 95 per cent. of the Current Market
Price on the last Trading Day preceding the date of announcement of the
proposals for such modification, the Fixed Conversion Price shall be adjusted
by multiplying the Fixed Conversion Price in force immediately before such
modification by the following fraction:

	
  

  	
  A + B

  	
  

  
	
   

  	
  A + C

  	
   

  

 

Where:

A              is the number of
Shares in issue immediately before such modification;

B                is the number of
Shares which the aggregate consideration (if any) receivable by the Company for
the Shares to be issued, or otherwise made available, on conversion or exchange
or on exercise of the right of subscription attached to the securities, in each
case so modified, would purchase at such Current Market Price per Share or, if
lower, the existing conversion, exchange or subscription price of such
securities; and

C                is the maximum
number of Shares to be issued, or otherwise made available, on conversion or
exchange of such securities or on the exercise of such rights of subscription
attached thereto at the modified conversion, exchange or subscription price or
rate but giving credit in such manner as an Independent Investment Bank,
consider appropriate (if at all) for any previous adjustment under this
Condition 6(c)(viii) or Condition 6(c)(vii).

Such
adjustment shall become effective on the date of modification of the rights of
conversion, exchange or subscription attaching to such securities.

(ix)                                Other
Offers to Shareholders: If and whenever the Company or any of its
Subsidiaries or (at the direction or request of or pursuant to any arrangements
with the Company or any of its Subsidiaries) any other company, person or
entity issues, sells or distributes any securities in connection with which
offer the Shareholders generally are entitled to participate in arrangements whereby
such securities may be acquired by them (except where the Fixed Conversion
Price falls to be adjusted under Condition 6(c)(iv), Condition 6(c)(v),
Condition 6(c)(vi) or Condition 6(c)(vii)), the Fixed Conversion Price
shall be adjusted by multiplying the Fixed Conversion Price in force
immediately before such issue by the following fraction:

	
  

  	
  A – B

  	
  

  
	
   

  	
  A

  	
   

  

 

Where:

A              is
the Current Market Price of one Share on the last Trading Day preceding the
date on which such issue is publicly announced; and

B                is
the Fair Market Value on the date of such announcement of the portion of the
rights attributable to one Share.

Such
adjustment shall become effective on the date of issue of the securities.

(x)                                   Other Events: If the Company or any
Bondholder determines that an adjustment should be made to the Fixed Conversion
Price as a result of one or more events or circumstances not referred to in
this Condition 6, the

 29
 

                                                Company
shall, at its own expense, consult an Independent Investment Bank (acting as
expert), to determine as soon as practicable what adjustment (if any) to the
Fixed Conversion Price is fair and reasonable to take account thereof, if the
adjustment would result in a reduction in the Fixed Conversion Price, and the
date on which such adjustment should take effect and upon such determination by
the Independent Investment Bank such adjustment (if any) shall be made and
shall take effect in accordance with such determination, provided that where
the circumstances giving rise to any adjustment pursuant to this Condition 6
have already resulted or will result in an adjustment to the Fixed Conversion
Price or where the circumstances giving rise to any adjustment arise by virtue
of circumstances which have already given rise or will give rise to an
adjustment to the Fixed Conversion Price, such modification (if any) shall be
made to the operation of the provisions of this Condition 6 as may be advised
by the Independent Investment Bank to be in their opinion appropriate to give
the intended result.

(xi)                                Calculation
of Consideration Receivable: For the purpose of any calculation of the
consideration receivable pursuant to Conditions 6(c)(vi), 6(c)(vii) and
6(c)(viii):

(aa)                            Issue of Shares for Cash: the
aggregate consideration receivable for Shares issued for cash shall be the
amount of such cash provided that in no case shall any deduction be made for
any commission or any expenses paid or incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;

(bb)                          Issue of Shares on Conversion or Exercise of Securities: (1) the
aggregate consideration receivable for the Shares to be issued on the
conversion or exchange of any securities shall be deemed to be the consideration
received or receivable by the Company for any such securities and (2) the
aggregate consideration receivable for the Shares to be issued on the exercise
of rights of subscription attached to any securities shall be deemed to be that
part (which may be the whole) of the consideration received or receivable by
the Company for such securities which is attributed by the Company to such
rights of subscription or, if no part of such consideration is so attributed,
the Fair Market Value of such rights of subscription as at the date of the
announcement of the terms of issue of such securities as determined in good
faith by an Independent Investment Bank, plus in the case of each of (1) and
(2) above, the additional minimum consideration (if any) to be received by
the Company on the conversion or exchange of such securities, or on the
exercise of such rights of subscription (the consideration in all such cases to
be determined subject to the proviso in Condition 6(c)(xi)(aa)) and (3) the
consideration per Share receivable by the Company on the conversion or exchange
of, or on the exercise of such rights of subscription attached to, such
securities shall be the aggregate consideration referred to in (1) or (2) above
(as the case may be) converted into Hong Kong dollars if such consideration is
expressed in a currency other than Hong Kong dollars at such rate of exchange
as may be determined in good faith by an Independent Investment Bank to be the
spot rate ruling at the close of business on the date of announcement of the
terms of issue of such securities, divided by the number of Shares to be issued
on such

 30
 

conversion
or exchange or exercise at the initial conversion, exchange or subscription
price or rate.

(xii)                             More
than One Event in Quick Succession: Where more than one event which gives
or may give rise to an adjustment to the Fixed Conversion Price occurs within
such a short period of time that in the opinion of an Independent Investment
Bank, the foregoing provisions would need to be operated subject to some modification
in order to give the intended result, such modification shall be made to the
operation of the foregoing provisions as may be advised by such Independent
Investment Bank to be in its opinion appropriate for that purpose to give such
intended result.

(xiii)                          Employee
Share Schemes: No adjustment will be made to the Fixed Conversion Price
when Shares or other securities (including rights or options) are issued,
offered or granted to employees (including directors) of the Company or any of
its Subsidiaries pursuant to any employee share scheme (and which employee
share scheme is in compliance with the Listing Rules).

(xiv)                         Investment Banks’ Certificate Conclusive:
If any doubt shall arise as to the appropriate adjustment to the Fixed
Conversion Price a certificate or report of an Independent Investment Bank
shall be conclusive and binding on all concerned save in the case of manifest
error.

(xv)                            Rounding and Minor Adjustments: On any
adjustment, the resultant Fixed Conversion Price, if not an integral multiple
of one Hong Kong cent, shall be rounded down to the nearest Hong Kong cent. No
adjustment shall be made to the Fixed Conversion Price if such adjustment
(rounded down if applicable) would be less than one per cent. of the Fixed
Conversion Price then in effect. Any adjustment not required to be made, and
any amount by which the Fixed Conversion Price has not been rounded down, shall
be carried forward and taken into account in any subsequent adjustment. Notice
of any adjustments shall be given to Bondholders in accordance with Condition
13 as soon as practicable after their determination.

(xvi)                         No Discount to Par Value: The Fixed
Conversion Price may not be reduced so that, on conversion of the Bonds, Shares
would fall to be issued at a discount to their nominal value or would require
Shares to be issued in any other circumstances not permitted by applicable law.

(xvii)                      Selection of Investment Bank: If the
Company fails to select an Independent Investment Bank when required for the
purposes of this Condition 6, the Bondholders may by a bondholders’ resolution
select such bank (as the case may require) at the expense of the Company.

(xviii)                   Post-Record
Date Adjustments: If the Conversion Date in relation to any Bond shall be
after the record date for any such issue, distribution or grant as is mentioned
in Conditions 6(c)(ii) to 6(c)(v) and 6(c)(ix), or any such issue as
is mentioned in Conditions 6(c)(vi) and 6(c)(vii) which is made to
the Shareholders or any of them, but before the relevant adjustment becomes
effective under Condition 6(c), the Company shall (conditional on such
adjustment becoming effective) procure that there be issued to the converting
Bondholder or in accordance with the instructions contained in the Conversion
Notice (subject to applicable exchange control or other laws or other
regulations) such additional number of Shares as, together with the Shares
issued or to be issued on conversion of the relevant Bond, is equal to the
number of Shares which would have been required to be issued on

 31
 

                                                conversion
of such Bond if the relevant adjustment (more particularly referred to in the
said Conditions above) to the Fixed Conversion Price had in fact been made and
become effective immediately after the relevant record date. Such additional
Shares will be allotted as at, and within one month after, the relevant
Conversion Date or, if the adjustment results from the issue of Shares, the
date of issue of Shares. Certificates for such Shares will be despatched within
such period of one month.

(xix)                           No Upward Adjustments: No adjustment
involving an increase in the Fixed Conversion Price will be made, except in the
case of a consolidation of the Shares as referred to in Condition 6(c)(i) above.

(d)            For the purposes of these Conditions:

“Closing Price” for the Shares for any
Trading Day shall be the price published in the Daily Quotation Sheet published
by the Stock Exchange for such day;

“Current Market Price” means, in respect of
a Share at a particular date, the average of the Closing Prices for one Share
(being a Share carrying full entitlement to dividend) for the five consecutive
Trading Days ending on the Trading Day immediately preceding such date,
provided that if at any time during the said five Trading Day period the Shares
shall have been quoted ex-dividend and during some other part of that period
the Shares shall have been quoted cum-dividend then:

(i)            if the Shares to be issued in such
circumstances do not rank for the dividend in question, the quotations on the
dates on which the Shares shall have been quoted cum-dividend shall for the
purpose of this definition be deemed to be the amount thereof reduced by an
amount equal to the amount of that dividend per Share; or

(ii)           if the Shares to be issued in such
circumstances rank for the dividend in question, the quotations on the dates on
which the Shares shall have been quoted ex-dividend shall for the purpose of
this definition be deemed to be the amount thereof increased by such similar
amount;

and
provided further that if the Shares on each of the said five Trading Days have
been quoted cum-dividend in respect of a dividend which has been declared or
announced but the Shares to be issued do not rank for that dividend, the
quotations on each of such dates shall for the purpose of this definition be
deemed to be the amount thereof reduced by an amount equal to the amount of
that dividend per Share;

“Distribution” means: any distribution of
assets (whether in cash or in specie) by the Company for any financial period
(whenever paid or made and however described) (and for these purposes a
distribution of assets in specie includes without limitation an issue of Shares
or other securities credited as fully or partly paid (other than Shares
credited as fully paid to the extent an adjustment to the Fixed Conversion
Price is made in respect thereof under Condition 6(c)(ii)(aa)) by way of
capitalisation of reserves and including any Scrip Dividend to the extent of
the Relevant Cash Dividend) unless

(aa)                            (and to the extent that)  it does
not, when taken together with the aggregated of the Fair Market Value of any
other distribution or dividend previously made or paid in respect of the same
current or previously financial period, exceed five per cent. of the Closing
Price on the date of announcement of the dividend or distribution; or

(bb)                          it comprises a purchase or redemption of Shares by or on behalf of the
Company (or a purchase of Shares by or on behalf of a Subsidiary of the

 32
 

                                                Company), where the weighted average price (before expenses) on any one
day in respect of such purchases does not exceed the Current Market Price of
the Shares as published in the Daily Quotation Sheet of the Stock Exchange by
more than five per cent. either (1) on that date, or (2) where an
announcement has been made of the intention to purchase Shares at some future
date at a specified price, on the Trading Day immediately preceding the date of
such announcement and, if in the case of either (1) or (2), the relevant
day is not a Trading Day, the immediately preceding Trading Day.

In
making any such calculation, such adjustments (if any) shall be made as the
Company may consider appropriate to reflect:

(i)                                     any consolidation or subdivision of the Shares,

(ii)                                  issues of Shares by way of capitalisation of profits or reserves, or any
like or similar event; or

(iii)                               the modification of any rights to dividends of Shares;

“Fair Market Value” means, with respect to
any assets, security, option, warrants or other right on any date, the fair
market value of that asset, security, option, warrant or other right as
determined by an Independent Investment Bank, provided that:

(i)                                     the fair market value of a cash dividend paid or to be paid per Share
shall be the amount of such cash dividend per Share determined as at the date
of announcement of such dividend;

(ii)                                  where options, warrants or other rights are publicly traded in a market
of adequate liquidity (as determined by such investment banks) the fair market
value of such options, warrants or other rights shall equal the arithmetic mean
of the daily closing prices of such options, warrants or other rights during
the period of five trading days on the relevant market commencing on the first
such trading day such options, warrants or other rights are publicly traded;

“Independent Investment Bank” means an
independent investment bank of international repute (acting as expert) selected
by the Company;

“Relevant Cash Dividend” means any cash
dividend specifically declared by the Company;

“Scrip Dividend” means any Shares issued in
lieu of the whole or any part of any Relevant Cash Dividend being a dividend
which the Shareholders concerned would or could otherwise have received and
which would not have constituted a Distribution (and for the avoidance of doubt
to the extent that no adjustment is to be made under Condition 6(c)(iii) in
respect of the amount by which the Current Market Price of the Shares exceeds
the Relevant Cash Dividend or part thereof); and

“Trading Day” means a day when the Stock
Exchange is open for dealing business, provided that if no Closing Price is
reported for one or more consecutive dealing days such day or days will be
disregarded in any relevant calculation and shall be deemed not have existed
when ascertaining any period of dealing days.

7              Covenants
in Relation to the Conversion Right

(a)                     The Company
hereby covenants with and undertakes to the Bondholders that, so long as any of
the Bonds are outstanding, it will:

 33
 

(i)                                             Availability of Shares: keep available,
free from pre-emptive or other rights, out of its authorised but unissued
Shares such number of Shares as would be required to be issued on conversion of
all the Bonds from time to time remaining outstanding and to satisfy in full
all other rights of conversion into or exchange or subscription for Shares and
shall ensure that all Shares delivered on conversion of Bonds will be duly and
validly issued as fully-paid and non-assessable;

(ii)                                          Limited Issues of Shares: not issue or pay
up any securities, by way of capitalisation of profits or reserves unless, in
any such case, it gives rise (or would, if the adjustment would be one per
cent. or more of the Fixed Conversion Price then in effect, otherwise give
rise) to an adjustment of the Fixed Conversion Price, provided that the Company
may issue or pay up any security by way of capitalisation of profits or
reserves (a) by the issue of fully paid Shares to the Shareholders and
other persons entitled to them, (b) by the issue of Shares paid up in full
out of profits or reserves in accordance with applicable law and issued in lieu
of a cash dividend or (c) by the issue of fully paid equity share capital
(other than Shares) to the holders of equity share capital of the same class
and other persons entitled thereto, subject in each case to the provisions of
Condition 6(c). For the avoidance of doubt, nothing in this Condition 7(a)(ii) shall
prevent the issue of any equity share capital by the Company pursuant to an
employee share scheme;

(iii)                                       Limited Modification of Rights: not modify
the rights attaching to the Shares with respect to voting, dividends or
liquidation nor issue any other class of ordinary share capital carrying any
rights which are more favourable than the rights attaching to Shares but so
that nothing in this Condition 7(a)(iii) shall prevent (a) the issue
of equity share capital to employees (including directors) of the Company or
any of its Subsidiaries or associated companies by virtue of their office or
employment pursuant to an employee share scheme, (b) a consolidation or
subdivision of the Shares or the conversion of any Shares into stock or vice
versa, (c) a modification to the rights attaching to the Shares which is
not, in the opinion of an Independent Investment Bank, materially prejudicial
to the interests of the Bondholders, (d) the conversion of Shares into, or
the issue of any Shares in, uncertificated form (or the conversion of Shares in
uncertificated form to certificated form) or the amendment of the Articles of
Association of the Company to enable title to securities of the Company
(including Shares) to be evidenced and transferred without a written instrument
or any other alteration to the Memorandum and Articles of Association of the
Company made in connection with the matters described in this Condition 7(a)(iii) or
which are supplemental or incidental to any of the foregoing (including
amendments made to enable or facilitate procedures relating to such matters and
amendments dealing with the rights and obligations of holders of securities
(including Shares) dealt with under such procedures) or (e) any issue of
equity share capital which results (or would, if the adjustment would be one
per cent. or more of the Fixed Conversion Price then in effect, otherwise
result) in an adjustment of the Fixed Conversion Price;

(iv)                                      Limited Grant of Rights: procure that no
securities (whether issued by the Company or any of its Subsidiaries) issued
without rights to convert into or exchange or subscribe for Shares shall
subsequently be granted such rights at a consideration per Share which is less
than the Current Market Price per Share at close of business on the Trading Day
last preceding the date of the 

 34
 

                                                        announcement
of the proposed inclusion of such rights unless the same gives rise (or would,
if the adjustment would be one per cent. or more of the Fixed Conversion Price
then in effect, give rise) to an adjustment of the Fixed Conversion Price and
that at no time shall there be in issue Shares of differing par values;

(v)                                         Restricted Action: not make any issue,
grant or distribution or take any other action the effect of which would be to
reduce the Fixed Conversion Price below the par value of the Shares;

(vi)                                      Directors’ Certificate: if an event
happens as a result of which the Fixed Conversion Price may be adjusted
pursuant to these Conditions, subject to Condition 6(c)(xii), as soon as
practicable send the Bondholders a certificate signed by a director or authorised officer of the
Company on behalf of the Company setting out particulars of the event, whether
an adjustment to the Fixed Conversion Price falls to be made and, if so, the
adjusted Fixed Conversion Price and the date on which such adjustment takes
effect, whether an amount falls to be carried forward pursuant to Condition
6(c)(xv) and if so the amount to be carried forward and in any case setting out
such other information as the Bondholders may reasonably require;

(vii)                                   Extend Offer: if an offer is made to all
(or as nearly as may be practicable all) Shareholders, or all (or as nearly as
may be practicable all) such Shareholders other than the offeror and/or any
associate or associates of the offeror to acquire all or a majority of the
issued equity share capital of the Company, or if any person proposes a scheme
with regard to such acquisition, give notice of such offer or scheme to the
Bondholders at the same time as any notice thereof is sent to its Shareholders
(or as soon as practicable thereafter) stating that details concerning such
offer or scheme and, where such an offer or scheme has been recommended by the
Board of Directors of the Company or where such an offer has become or been
declared unconditional in all respects, use its reasonable endeavours to
procure that a like offer or scheme is extended to the Bondholders and the
holders of any Shares issued during the period of the offer or scheme arising
out of Conversion Rights;

(viii)                                No Reduction of Issued Share Capital: not
make any reduction of its ordinary share capital or any uncalled liability in
respect thereof or of any share premium account or capital redemption reserve
fund (except, in each case, as permitted by law or by means of a purchase or
reduction of the share capital of the Company permitted by Condition 6(c) or
where the reduction has resulted in an adjustment to the Fixed Conversion Price
under Condition 6(c));

(ix)                                        Closing of Register: unless so required by
applicable law or regulation or in order to establish a dividend or other
rights attaching to the Shares or entitlements of the Shareholders, not close
its register of Shareholders or take any other action which prevents the
transfer of its Shares generally and ensure that the Bonds may be converted
legally and the Shares issued on conversion may (subject to any limitation
imposed by law) be transferred (as between transferor and transferee although
not as against the Company) at all times while the register is closed or such
other action is effective, nor take any action which prevents the conversion of
the Bonds or the issue of Shares in respect of them;

 35
 

(x)                                           Listing of Shares: use its best efforts to
(a) maintain a listing for all the issued Shares on the Stock Exchange, (b) obtain
and maintain a listing for all the Shares issued on exercise of the Conversion
Rights attached to the Bonds on the Stock Exchange;

(xi)                                        Expenses: pay the expenses of the issue
of, and all expenses of obtaining and maintaining a listing for, Shares arising
on conversion of the Bonds.

For the above purposes, “equity share
capital” means the share capital of a company excluding any part of
that capital which, neither as respects dividends nor as respects capital,
carries any right to participate beyond a specified amount in a distribution.

(b)                              The
forms of the Conversion Notice shall be submitted to, and be issued in a form
set out in Schedule 2, Parts B and C of the Subscription Agreement. The Company
shall from time to time make available sufficient numbers of such notices to
the Bondholders.

8                             Representations and Warranties of
the Bondholders in Relation to the Conversion Shares

The Bondholders hereby agree and acknowledge with, and represent and warrant
to, the Company that:

(a)                            the
Conversion Shares will not be registered under the Securities Act and may not
be offered, sold, pledged or otherwise pledged within the United States or to
any United States person except pursuant to an effective registration statement
under the Securities Act or pursuant to an exemption from, or in a transaction
not subject to,  registration
requirements of the Securities Act;

(b)                           none of
the Bondholders is a U.S. Person (as defined in Rule 902 of Regulation S
under the Securities Act) and is acquiring the Conversion Shares in an offshore
transaction in reliance on Regulation S under the Securities Act;

(c)                            the
Bondholders will not, at any time during the period of 40 days after the date
of issuance of the Conversion Shares, offer or sell any of the Conversion
Shares to or for the benefit or account of a U.S. person (as defined in Rule 902
of Regulation S under the Securities Act);

(d)                             no
action has been or shall be taken in any jurisdiction by any of the Bondholders
that would permit a public offering of the Bonds or Conversion Shares in any
country or jurisdiction where action for that purpose is required;

(e)                              each
of the Bondholders will comply with all applicable laws and regulations in each
jurisdiction in which it, directly or indirectly, subscribes, offers, sells or
delivers the Bonds and the Conversion Shares; and

(f)                                the
Bondholders will not, at any time after the date of issuance of the Conversion
Shares, sell or otherwise transfer or dispose of any Conversion Shares as
represents more than 2 per cent. of the share capital of the Company in
any calendar quarter, except for any placing of Shares which is reported as a
cross trade to the Stock Exchange.

9          Redemption and Purchase

(a)                               Maturity

 36
 

Unless previously
redeemed, converted or purchased and cancelled as herein provided, the Company
will redeem all the outstanding Bonds at 104.26% of their principal amount on 5 July 2009 (the “Maturity Date”).

(b)                              Redemption for Delisting, Change
of Control, etc

Following
the occurrence of a Relevant Event (as defined below), the holder of each Bond
will have the right at such holder’s option, to require the Company to redeem
all or some only of that holder’s Bonds on the Relevant Event Redemption Date
(as defined below) at their Early Redemption Amount. To exercise such right,
the holder of the relevant Bond must complete, sign and deposit at the
Designated Office a duly completed and signed notice of redemption (the “Relevant Event Redemption Notice”) together
with the Certificate evidencing the Bonds to be redeemed by not later than 60
days following a Relevant Event, or, if later, 60 days following the date upon
which notice thereof is given to Bondholders by the Company in accordance with
Condition 13. The “Relevant Event Redemption
Date” shall be the 14th day after the expiry of such period
of 60 days as referred to above.

A
Relevant Event Redemption Notice, once delivered, shall be irrevocable and the
Company shall redeem the Bonds the subject of Relevant Event Redemption Notices
delivered as aforesaid on the Relevant Event Redemption Date.

The
Company shall give notice to Bondholders in accordance with Condition 13 by not
later than 14 days following the first day on which it becomes aware of the
occurrence of a Relevant Event, which notice shall specify the procedure for
exercise by holders of their rights to require redemption of the Bonds pursuant
to this Condition and shall give brief details of the Relevant Event.

For the purposes of these Conditions:

a “Ceasing of Business” occurs when the
Company or its Principal Subsidiaries ceases or threatens to cease to carry on
all or part of its business or operations (except in the case of Principal
Subsidiaries, whereby the undertaking and assets of such Principal Subsidiaries
are transferred to or otherwise vested in the Company or another of its
subsidiaries) which could have a Material Effect;

a “Change of Control” occurs when China United
Telecommunications Corporation ceases to Control the Company;

“Control” means the right to appoint and/or
remove all or the majority of the members of the Company’s board of directors,
whether obtained directly or indirectly, and whether obtained by ownership of
share capital, the possession of voting rights, contract or otherwise;

“Early Redemption Amount” of a Bond, for
each U.S.$1,000 principal amount of the Bonds, is determined so that it
represents for the Bondholder a gross yield of 1.4 per cent. per
annum, calculated on an annual basis.

The applicable
Early Redemption Amount for each U.S.$1,000 principal amount of Bonds is
calculated in accordance with the following formula, rounded (if necessary) to
two decimal places with 0.005 being rounded upwards (provided that if the date
fixed for redemption is the Annual Date (as set out below), such Early
Redemption Amount shall be as set out in the table below in respect of such
Annual Date):

 37
 

Early Redemption Amount = Previous Redemption Amount x
(1 + r) d/p

Previous
Redemption Amount = the Early Redemption Amount for each US$1,000 principal amount
of the Bonds on the Annual Date immediately preceding the date fixed for
redemption as set out below (or if the Bonds are to be redeemed prior to
5 July 2007, US$1,000):

	
  Annual Date

  	
   

  	
  Previous Redemption 

  Amount (U.S.$)

  	
   

  
	
  2007

  	
   

  	
  1,014.00

  	
   

  
	
  2008

  	
   

  	
  1,028.20

  	
   

  

 

r =               1.4  per cent.
expressed as a fraction.

d =              number of days from and including
the immediately preceding Annual Date (or if the Bonds are to be redeemed on or
before 5 July 2007, from and including the Closing Date) to, but
excluding, the date fixed for redemption, calculated on the basis of a 360-day
year consisting of 12 months of 30 days each and, in the case of an incomplete
month, the number of days elapsed.

p =             360;

“Material Asset Transfer” occurs when the
Company or any of its Principal Subsidiaries (whether by a single transaction
or a number of related or unrelated transactions and whether at one time or
over a period of time) sells, transfers, leases out, lends or otherwise
disposes of (whether outright, by a sale-and-purchase or sale-and-leaseback
arrangement, or otherwise, but excluding a transaction in the ordinary course
of trading) (each a “Transfer”)
any part of its assets to any other person (including (in the case of the
Company) to any of its subsidiaries, but excluding (in the case of a
subsidiary) to the Company or another subsidiary) which, either alone or when
aggregated with all other Transfers required to be taken into account under
this Condition, could have a Material Effect;

“Material Effect”
means:

(i)                                              (in the case
of the Company and its Principal Subsidiaries) any asset, business or
undertaking (a) the value of
which (aggregated if required) amounts to 15 per cent. or more of the
consolidated gross assets of the Company and its subsidiaries as shown by the
latest published audited consolidated balance sheet of the Company or (b) which
(aggregated if required) contributes to 15 per cent. or more of the
consolidated revenue of the Company and its subsidiaries as shown by the latest
published audited consolidated income statement of the Company; or

(ii)                                           a material
adverse effect on or material adverse change in:

(a)                                  the ability
of the Company to perform and comply with its obligations under the Bonds; or

(b)                                 the
validity, legality or enforceability of, or the rights or remedies of the
Company under, the Bonds.

a “Relevant Event” occurs when:

(i)                                     the Shares cease to be listed or admitted to trading
on the Stock Exchange; or

 38
 

(ii)                                there is a Change of Control; or

(iii)                             there is a Material Asset Transfer; or

(iv)                           there is a Ceasing of Business; or

(v)                              it is or
will become unlawful for the Company to perform or comply with any
one or more of its obligations under any of the Bonds; or

(vi)                           the
obligations of the Company under the Bonds are or become unenforceable.

(c)                               Put Option

On
5 July 2008 (the “Put Option Date”),
each Bondholder will have the right at such holder’s option, to require the
Company to redeem all or some only of the Bonds of such holder on the Put
Option Date at 102.82 per cent. of their principal amount. To exercise
such right, the holder of the relevant Bond must deliver its notice of
redemption (“Put Exercise Notice”) together with the Certificate evidencing the
Bonds to be redeemed not later than 40 days prior to the Put Option Date.

A Put Exercise
Notice, once delivered, shall be irrevocable (and may not be withdrawn unless
the Company consents to such withdrawal) and the Company shall redeem the Bonds
the subject of Put Exercise Notices delivered as aforesaid on the Put Option
Date.

(d)                              Cancellation

All Bonds which
are redeemed or converted will forthwith be cancelled by the Company and may
not be reissued or resold.

10       Prescription

Claims in respect of principal will become void unless
made within the period of 10 years from the due date for the payment thereof.

11       Events of Default

If any of the following
events (each, an “Event of Default”)
occurs:

(a)                               there
is default by the Company in the payment of the principal in respect of the
Bonds or any of them when and as the same ought to be paid and such default is
not remedied by the Company within five business days; or

(b)                              there
is default by the Company in (i) its obligation to deliver Shares as and
when the Shares are required to be delivered following conversion of the Bonds,
or (ii) the performance or observance of any covenant, condition,
provision or obligation contained in the Bonds and on its part to be performed
or observed (other than the covenant to pay the principal in respect of any of
the Bonds) and such default continues for the period of, in the case of (i) five
business days and in the case of (ii) 30 days next following the service
by any Bondholder on the Company of notice requiring the same to be remedied;
or

(c)                               any
other bonds, debentures, notes or other instruments of indebtedness or any
other loan indebtedness having an aggregate outstanding amount of at least
U.S.$15,000,000

 39
 

                                             or
the equivalent in any other currency or currencies (hereinafter collectively
called “Indebtedness”) of the
Company or any Principal Subsidiaries is declared or capable of being declared
to be prematurely repayable following a default in respect of the terms thereof
which shall not have been remedied, or steps are taken to enforce any security
therefor, or the Company or any Principal Subsidiaries defaults in the
repayment of any such Indebtedness at the maturity thereof or at the expiration
of any applicable grace period therefor or any guarantee of or indemnity in
respect of any Indebtedness of others having an aggregate outstanding amount of
at least U.S.$15,000,000 given
by the Company or any Principal Subsidiaries shall not be honoured when due and
called upon; or

(d)                              a
resolution is passed or an order of a court of competent jurisdiction is made
that the Company or any Principal Subsidiaries be wound up or dissolved
otherwise than for the purposes of or pursuant to a consolidation,
amalgamation, merger, reconstruction or reorganisation the terms of which have
previously been approved in writing by Bondholders holding 51 per cent. of the outstanding
principal amount of Bonds or which is approved by the shareholders of the
Company or any Principal Subsidiaries, as the case may be, and upon which the
continuing corporation effectively assumes the entire obligations of the
Company or any Principal Subsidiaries, as the case may be, under the Bonds; or

(e)                               an
encumbrancer takes possession or a receiver is appointed of the whole or a
material part of the assets or undertaking of the Company or any Principal
Subsidiaries; or

(f)                                 (i) the
Company or any Principal Subsidiaries without any lawful cause stops payment
(within the meaning of any applicable bankruptcy law) or is unable to pay its
debts as and when they fall due or (ii) the Company or any Principal
Subsidiaries (otherwise than for the purposes of such a consolidation,
amalgamation, merger, reconstruction or reorganisation as is referred to in
paragraph (d) or (e) above) ceases or through an official action of
the Board of Directors of the Company or any Principal Subsidiaries threatens
to cease to carry on business; or

(g)                              proceedings
shall have been initiated against the Company or any Principal Subsidiaries
under any applicable bankruptcy, reorganisation or insolvency law and such
proceedings have not been discharged or stayed within a period of 30 days; or

(h)                              the
Company or any Principal Subsidiaries shall initiate or consent to proceedings
seeking with respect to itself adjudication of bankruptcy or a decree of
commencement of composition or reorganisation or other similar procedures or
the appointment of an administrator or other similar official under any
applicable bankruptcy, reorganisation or insolvency law or make a general
assignment for the benefit of, or enter into any composition with, its
creditors; or

(i)                                  a
distress, execution or seizure before judgment is levied or enforced upon or
sued out against a part of the property of the Company or any Principal
Subsidiaries, which is material in its effect upon the operations of either the
Company or any Principal Subsidiaries and is not discharged within 30 days
thereof; or

(j)                                  any
event occurs which under the law of any relevant jurisdiction has an
analogous effect to any of the events, referred to in any of the foregoing
paragraphs.

then any Bondholder may,
by notice in writing given to the Company at the Designated Office by the
holder, declare the relevant Bond immediately due and payable, whereupon such
Bond

 40
 

shall become immediately
due and payable without further formality at the Early Redemption Amount.

12       Replacement of Certificates

Should any Certificate be lost, stolen, destroyed,
mutilated or defaced, it may be replaced by the Company, upon payment by the
claimant of the expenses incurred in connection therewith and on such terms as
to evidence and indemnity (which shall require, inter alia, that, if the allegedly lost, stolen or destroyed
Certificate is subsequently deposited for conversion into Shares, or if such
Certificate is subsequently surrendered for redemption or is subsequently
repurchased by the Company, there shall be paid to the Company on demand the
principal amount of such Bonds represented by such Certificate) as the Company
may reasonably require. Mutilated or defaced Certificates must be surrendered
before replacements will be issued.

13       Notices

(a)                                     All
notices to the Bondholders will be valid if sent to them by express courier or
by facsimile at their respective addresses or facsimile numbers (as
appropriate) in the Company’s Register. Such notices shall be deemed to have
been given to Bondholders in the case of express courier, at the time of
delivery, and in the case of facsimile, at the time of despatch (provided that
the Company retains a mechanical or electronically generated confirmation of
the successful transmission of such facsimile). The Company shall give notice
to Bondholders in accordance with this Condition 13 of any change in the
Designated Office.

(b)                                    Every
Bondholder shall register with the Company an address in Hong Kong and
facsimile number to which notices can be sent and if any Bondholder shall fail
to do so, notice may be given to such Bondholder by sending the same in any of
the manners hereinbefore mentioned to its last known place of business or
facsimile number or, if there be none, by posting up the same for three days at
the Designated Office for the time being of the Company.

14       Modification and Waiver

Any
modification by the Company of the Bonds (including these Conditions) or any
waiver or authorisation of any breach or proposed breach by the Company of the
Bonds requires the written approval of holders of 51 per cent. of the aggregate
principal amount of Bonds then outstanding.

15    
Currency Indemnity

(a)                        Currency of Account and Payment: US
dollars (the “Contractual Currency”)
is the sole currency of account and payment for all sums payable by the Company
under or in connection with the Bonds, including damages.

(b)                       Extent of discharge: An amount received or
recovered in a currency other than the Contractual Currency (whether as a
result of, or of the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up or dissolution of the Company or otherwise), by
any Bondholder in respect of any sum expressed to be due to it from the Company
will only discharge the Company to the extent of the Contractual Currency amount
which the recipient is able to purchase with the amount so received or
recovered in that other currency on the date of that receipt or recovery (or,
if it is not

 41
 

                                      practicable
to make that purchase on that date, on the first date on which it is practicable
to do so).

(c)                        Indemnity: If that Contractual Currency
amount is less than the Contractual Currency amount expressed to be due to the
recipient under the Bonds, the Company will indemnify it against any loss
sustained by it as a result. In any event, the Company will indemnify the
recipient against the cost of making any such purchase.

(d)                       Indemnity separate: The indemnities in
this Condition 15 constitute separate and independent obligations from the
other obligations under the Bonds, will give rise to a separate and independent
cause of action, will apply irrespective of any indulgence granted by any
Bondholder and will continue in full force and effect despite any judgment,
order, claim or proof for a liquidated amount in respect of any sum due the Bonds
or any other judgment or order.

16       Governing Law

The Bonds are governed by, and shall be construed in
accordance with Hong Kong law.

17       Submission to Jurisdiction

In relation to any legal action or proceedings arising
out of or in connection with the Bonds (“Proceedings”),
the Company irrevocably submits to the non-exclusive jurisdiction of the courts
of Hong Kong and waives any objection to Proceedings in such courts whether on
the grounds that the Proceedings have been brought in an inconvenient forum or
otherwise. This submission is made for the benefit of the Bondholders and shall
not affect the right of any of them to take Proceedings in any other court of
competent jurisdiction nor shall the taking of Proceedings in any court of
competent jurisdiction preclude any of them from taking Proceedings in any
other court of competent jurisdiction (whether concurrently or not). Nothing in
these presents shall affect the right to serve process in any other manner
permitted by law.

 42
 

SCHEDULE 2

PART A

CONVERSION MECHANICS

Terms used herein are as
defined in the terms and conditions of the Bonds (the “Conditions”). This schedule is subject to
the more detailed provisions of the Conditions.

	
  Action

  	
   

  	
  Timing(1)

  	
   

  	
  Responsibility

  
	
  1.

  	
   

  	
  Bondholder exercises Conversion Right by sending a
  facsimile to the Designated Office in Hong Kong of a completed short form
  Conversion Notice

  	
   

  	
  Conversion Date(2)

  	
   

  	
  Bondholder

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Company to acknowledge receipt of short form
  Conversion Notice by sending a facsimile to sender of short form Conversion
  Notice

  	
   

  	
  By 4:30 p.m. on the business day following the
  Conversion Date

  	
   

  	
  Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Long form Conversion Notice and relevant Bond
  Certificates delivered to Designated Office

  	
   

  	
  By 4:30 p.m. on the business day following the
  Conversion Date

  	
   

  	
  Bondholder

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Company to deliver the allotment advice or
  instructions to issue the Conversion Shares to its share registrars and
  transfer agent in Hong Kong

  	
   

  	
  By 4:30 p.m. on the business day following the
  Delivery Date

  	
   

  	
  Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Company to deliver or cause to be delivered
  certificate for Shares or Central Clearing of Settlement System Account
  Credit instructions

  	
   

  	
  By 4:30 p.m. within ten business days following
  the Delivery Date

  	
   

  	
  Company/

  Share Transfer

  Agent

  

(1)                                  All
times stated are Hong Kong time.

(2)                                  If
the Conversion Notice is received after 4:30 p.m. the Conversion Notice is
deemed to be received on the next succeeding Business Day.

 

 43
 

PART B

FORM OF LONG FORM CONVERSION NOTICE

CHINA UNICOM LIMITED

U.S.$1,000,000,000 Zero Coupon Convertible Bonds due 2009

CONVERSION NOTICE

(To be completed in duplicate)

(Please read the notes
overleaf before completing this Notice.)

Name:..................................................................

Date:...................................................................

Address:...............................................................

Signature:.............................................................

To: China Unicom Limited
(the “Company”)

I/We, by or on behalf of
the holder or beneficial owner of the Bonds (the “Bonds”) specified below, hereby elect to convert such Bonds
into ordinary shares of the Company (the “Shares”)
in accordance with Condition 6 of the terms and conditions of the Bonds.

1.         Total principal amount and certificate
numbers of Bonds to be converted:

Total principal
amount(3):................................................................................................

Total number of
Bonds:............................................................................................

Certificate
numbers of
Bonds:....................................................................................

N.B.                   If necessary, the certificate numbers of Bonds
attached need not be in consecutive serial number.

2.         Total number of Shares to be exchanged:

Principal of
Bonds delivered x Exchange Rate ÷ Fixed Conversion Price =

 

(3)                                  This
must be, in respect of each exercise, an U.S.$50,000,000 and an integral
multiple of U.S.1,000 thereafter (if applicable) unless it is an exercise by a Bondholder in respect of its entire
holding.

 44
 

3.                               Name(s), address(es) and signature(s) of person(s) in
whose name(s) the Shares required to be delivered on conversion are to be
registered:-

Name:..............................................................................

Address:..........................................................................

.........................................................................................

.........................................................................................

Signature:.........................................................................

4.                               (A)     the
relevant number of Shares be issued in the name(s) of the person(s) whose
name(s) stand(s) on the Register as the Bondholder(s) represented
by this Certificate and the certificate for such Shares be delivered to the
address of the following participant of the Central Clearing and Settlement
System (“CCASS”) operated by the
Hong Kong Securities Clearing Company Limited:

                                                   Participation
I.D. of the designated CCASS participant;

                                                   CCASS
participant’s contact person;

                                                   CCASS
participant’s contact telephone number and fax number;

                                                   CCASS
participant’s address for delivery of share certificates

                                        OR

                                        (B)      I/We
hereby request that the certificates for the Shares (or other securities)
required to be delivered upon conversion be despatched (at my/our risk and
expense) to the person whose name and address is given below and in the manner
specified below:

Name:..............................................................................

Address:..........................................................................

.........................................................................................

.........................................................................................

Manner of despatch (if
other 

than by ordinary mail):....................................................

5.                               I/We hereby request that any cash amount (or property)
required to be delivered upon conversion be despatched (at my/our risk and
expense) to the person whose name and address is given below and in the manner
specified below:

Name:.............................................................................

Address:.........................................................................

.......................................................................................

.......................................................................................

U.S. Dollar bank account details:..........................

..................................................................

..................................................................

6.                               The Certificates representing the Bonds converted
hereby accompany this Conversion Notice.

 45
 

7.                               I/We hereby declare that all approvals, consents and
authorisations (if any) required by the laws of to which I am / we are subject
and to be obtained by me/us prior to the said conversion have been obtained and
are in full force and effect and that any applicable condition thereto has been
complied with by me/us.

8.                               The Company has notified the Bondholders that the Company’s
register of shareholders will be closed on the following dates:

.......................................................................................

.......................................................................................

Notes:

(i)                             This Conversion Notice will be void unless the
introductory details, Sections 1, 2, 3 and (if applicable) 4 are completed.

(ii)                          Your attention is drawn to Condition 6(b)(i) of
the Bonds with respect to the conditions precedent which must be fulfilled before
the Bonds specified above will be treated as effectively eligible for
conversion.

(iii)                       Despatch of share certificates or other securities or
property will be made at the risk and expense of the converting Bondholder and
the converting Bondholder will be required to prepay the expenses of, and
submit any necessary documents required in order to effect, despatch in the
manner specified.

(iv)                      If an adjustment contemplated by the terms and
conditions of the Bonds is required in respect of a conversion of Bonds where
additional Shares are to be issued, certificates for the additional Shares
deliverable pursuant to such adjustment (together with any other securities,
property or cash) will be delivered or despatched in the same manner as the
Shares, other securities, property and cash previously issued pursuant to the
relevant Conversion Notice.

.............................

For Company’s use only:-

1                                          (A) Bonds conversion identification
reference:.............................

(B) Conversion
Date:...........................................................................

(C) Delivery
Date: ...........................................................................

2                                          (A) Aggregate principal amount of Bonds in
respect of which Certificates have been deposited for
conversion:........................................................................

(B) Conversion
Price on Conversion Date:..........................................

(C) Number of
Shares issuable:...........................................................

(disregard fractions)

3                                          (If applicable) amount of cash payment due to
converting Bondholder under

Condition 6(b)(ii):.....................................................................................

 46
 

Note: The Company must
complete items 1, 2 and (if applicable) 3.

 47
 

PART C

FORM OF SHORT FORM CONVERSION NOTICE

CHINA UNICOM LIMITED

U.S.$1,000,000,000 Zero Coupon Convertible Bonds due 2009

CONVERSION NOTICE

(To be sent by
facsimile only)

Name:...................................................................

Date:..................................................................

Address:..............................................................

To: China Unicom Limited
(the “Company”)

I/We, by or on behalf of
the holder or beneficial owner of the Bonds (the “Bonds”) specified below, hereby elect to convert such Bonds
into ordinary shares of the Company (the “Shares”)
in accordance with Condition 6 of the terms and conditions of the Bonds.

	
  Total principal amount:

  	
   

  	
  (A)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total number of Bonds:

  	
   

  	
  (B)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Certificate numbers of Bonds:

  	
   

  	
  (C)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total number of Shares to be issued:

  	
   

  	
  (D)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name of the person in whose name the Shares required
  to be

  delivered on conversion are to be registered:

  	
   

  	
  (E)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CCASS Settlement or Name and address of the
  custodian in

  Hong Kong to whom certificates for Shares and any cash

  amount shall be delivered:

  	
   

  	
  (F)

  	
   

  

 

Regards,

________________________________________________

Signatures

 48

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