THIS
LETTER IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
If you are in doubt as to any
aspect of this letter or as to the action to be taken, you should consult a
licensed securities dealer or other registered institution in securities, a bank
manager, solicitor, professional accountant or other professional
adviser.
This
Option Proposal is only made to persons located in Hong Kong, the PRC or Japan.
If you are a citizen or resident or national of or located in a jurisdiction
outside Hong Kong, the PRC and Japan, you should inform yourself about and
observe any applicable legal or regulatory requirements. It is your
responsibility, if you wish to receive the Special Unicom Options to be granted
pursuant to the Option Proposal, to satisfy yourself as to the full observance
of the laws of the relevant jurisdiction in connection therewith, including the
obtaining of any governmental, exchange control or other consents which may be
required or the compliance with other necessary formalities or legal
requirements and the payment of any taxes due in respect of such
jurisdiction.
Unless
the context otherwise requires, all capitalised terms used in this letter have
the meanings set out in the scheme document dated 15 August 2008 (the “Scheme
Document”) jointly issued by Netcom and Unicom.
This
letter should be read in conjunction with the accompanying Scheme
Document.
The
Stock Exchange of Hong Kong Limited takes no responsibility for the contents of
this letter, makes no representation as to its accuracy or completeness and
expressly disclaims any liability whatsoever for any loss howsoever arising from
or in reliance upon the whole or any part of the contents of this
letter.
J.P.
MORGAN SECURITIES
(ASIA
PACIFIC) LIMITED
Financial
Adviser to China Unicom Limited
|
CHINA
INTERNATIONAL CAPITAL
CORPORATION
(HONG KONG) LIMITED
Lead
Financial Adviser to China Unicom
Limited
|
15
August 2008
To
the Netcom Optionholders
Dear
Sir or Madam,
OPTION
PROPOSAL
IN
RELATION TO
THE
PROPOSED MERGER OF CHINA UNICOM LIMITED AND
CHINA
NETCOM GROUP CORPORATION (HONG KONG) LIMITED
BY
WAY OF A SCHEME OF ARRANGEMENT OF
CHINA
NETCOM GROUP CORPORATION (HONG KONG) LIMITED
UNDER
SECTION 166 OF THE HONG KONG COMPANIES ORDINANCE
1. INTRODUCTION
On
2 June 2008, the boards of directors of Unicom and Netcom jointly announced that
Unicom had formally presented the Proposals to the board of directors of Netcom
(the “Netcom Board”) and requested the Netcom Board to put forward the Proposals
to the Netcom Shareholders for consideration of the merger of Unicom and Netcom
by way of a scheme of arrangement of Netcom under Section 166 of the Hong Kong
Companies Ordinance.
The
Proposals, which comprise the Share Proposal, the ADS Proposal and the Option
Proposal, involve the cancellation of all of the Scheme Shares (including the
Netcom Shares to be issued pursuant to the exercise of the outstanding Netcom
Options prior to 4:30 p.m. on Friday, 10 October 2008 (the “Options Exercise
Deadline”) and the Netcom Shares underlying the Netcom ADSs) and all of the
Netcom ADSs and the Netcom Options oustanding at the Scheme Record Time. Upon
the Scheme becoming effective, Netcom will become a wholly-owned subsidiary of
Unicom and the listings of the Netcom Shares and the Netcom ADSs on the Hong
Kong Stock Exchange and the New York Stock Exchange, respectively, will be
withdrawn.
On
behalf of Unicom, we are making the Option Proposal to the Netcom Optionholders,
subject to and conditional upon the Scheme becoming effective.
The
purpose of this letter is to set out the terms of the Option Proposal, the
details of the Special Purpose Unicom Share Option Scheme and the actions which
you may take in relation to your outstanding Netcom Options. You are advised to
also refer to the Scheme Document when considering the actions which you may
take in relation to your outstanding Netcom Options.
Your
attention is also drawn to the terms of the Netcom Share Option Scheme and, in
particular, Clauses 9 and 11 of the Netcom Share Option Scheme.
2. TERMS
OF THE OPTION PROPOSAL
Pursuant
to the Option Proposal, which is conditional upon the Scheme becoming effective,
Unicom will grant you Special Unicom Options in consideration for the
cancellation of the outstanding Netcom Options held by you at the Scheme Record
Time (whether vested or not). To the extent that you do not exercise your
outstanding Netcom Options prior to the Options Exercise Deadline, your Netcom
Options that remain outstanding at the Scheme Record Time (whether vested or
not) will, subject to the Scheme becoming effective, be cancelled by the Netcom
Board and you will automatically be granted Special Unicom Options in
consideration for the cancellation of your outstanding Netcom
Options.
The
number of Special Unicom Options that will be granted to you and the exercise
price of a Special Unicom Option will be determined in accordance with the
formula set out below:
Number
of Special Unicom Options = A x BExercise price of each Special Unicom Option =
C / A
where:
A is the Share Exchange Ratio
of 1.508 Unicom Shares for every Scheme Share cancelled under the
Scheme;
B is the number of outstanding
Netcom Options held by you at the Scheme Record Time; and
C is the exercise price of an
outstanding Netcom Option held by you at the Scheme Record Time,
provided
that fractions of Special Unicom Options will not be granted to
you.
Based
on the formula set out above, the exercise prices of the Special Unicom Options
to be granted in consideration for the cancellation of your outstanding Netcom
Options are as follows:
Date
of Grant of
Outstanding
Netcom Options
|
Exercise
Price of
Outstanding
Netcom Options
|
Exercise
Price of
Special
Unicom Options
to
be Granted
|
|
|
|
22
October 2004
|
HK$8.40
|
HK$5.57
|
6
December 2005
|
HK$12.45
|
HK$8.26
|
The
above formula ensures that the value of the Special Unicom Options received by
you is equivalent to the “See-Through Price” of your outstanding Netcom Options,
that is, the value determined by deducting the exercise price of the relevant
Netcom Option from the value of HK$27.87 of a Scheme Share under the Share
Proposal, being the closing price of each Netcom Share of HK$27.05 on the Hong
Kong Stock Exchange on the Last Trading Date plus a 3% premium over such closing
price.
The
Special Unicom Options will be granted by Unicom pursuant to the Special Purpose
Unicom Share Option Scheme, which is proposed to be adopted by Unicom at the
Unicom EGM. The terms of the Special Purpose Unicom Share Option Scheme will be
substantially the same as the terms of the Netcom Share Option Scheme. Please
refer to paragraph 3 headed “Terms of the Special Purpose Unicom Share Option
Scheme” below for further details of the Special Purpose Unicom Share Option
Scheme.
The
Option Proposal is conditional upon the Scheme becoming effective. The
conditions of the Scheme are set out in paragraph 4 headed “Conditions of the
Proposals and the Scheme” in the Explanatory Statement in the Scheme Document.
You are also advised to refer to paragraph 18 headed “Registration and Despatch
of Unicom Share Certificates, Unicom ADSs and Option Grant Letters”, paragraph
20 headed “Overseas Netcom Shareholders, Netcom ADS Holders and Netcom
Optionholders” and paragraph 22 headed “Taxation” in the Explanatory Statement
in the Scheme Document.
Your
attention is drawn to the letter from the Independent Board Committee to the
Disinterested Netcom Shareholders, the Netcom ADS Holders and the Netcom
Optionholders and the letter from Rothschild, the independent financial adviser
to the Independent Board Committee, set out in the Scheme Document which contain
the recommendations of the Independent Board Committee and Rothschild,
respectively, in relation to the Option Proposal.
3. TERMS
OF THE SPECIAL PURPOSE UNICOM SHARE OPTION SCHEME
The
terms of the Special Purpose Unicom Share Option Scheme will be substantially
the same as the terms of the Netcom Share Option Scheme, save for the
following:
|
(a)
|
the
exercise price of a Special Unicom Option granted will be such price as
will result in the value of the Special Unicom Options received by the
Netcom Optionholders being equivalent to the See-Through Price;
and
|
|
(b)
|
other
than the Special Unicom Options to be granted pursuant to the Option
Proposal, no further Special Unicom Options will be granted under the
Special Purpose Unicom Share Option
Scheme.
|
A
summary of the principal terms of the Special Purpose Unicom Share Option Scheme
is set out in the Appendix to this letter.
Unicom
applied to the Hong Kong Stock Exchange for, and the Hong Kong Stock Exchange
has granted, a waiver from strict compliance with the requirement of Rule
17.03(9) of the Listing Rules so that the exercise price of the Special Unicom
Options granted under the Special Purpose Unicom Share Option Scheme will be the
price described in paragraph 2 headed “Terms of the Option Proposal” above
instead of a price to be determined by reference to the closing price or the
five day average closing price of a Unicom Share prior to the date of grant of
the Special Unicom Options as required by Rule 17.03(9) of the Listing Rules.
The reasons for the waiver application are that (i) the Option Proposal ensures
that the Netcom Optionholders will receive a consideration for their outstanding
Netcom Options which is comparable to the consideration which the Scheme
Shareholders will receive for the cancellation of their Scheme Shares, (ii) the
Option Proposal is a unique case and strict compliance with the requirement of
Rule 17.03(9) of the Listing Rules would be unfair and impractical and (iii) the
Option Proposal would also ensure that the Netcom Optionholders are incentivised
to remain in the employment of the Enlarged Group following the completion of
the Scheme.
Save
for the waiver from strict compliance with the requirement of Rule 17.03(9) of
the Listing Rules, the Special Purpose Unicom Share Option Scheme will comply
with the requirements of Chapter 17 of the Listing Rules.
The
adoption of the Special Purpose Unicom Share Option Scheme by Unicom is subject
to the satisfaction of the following conditions:
|
(a)
|
the
approval of the Unicom Shareholders having been obtained at the Unicom EGM
for the adoption of the Special Purpose Unicom Share Option
Scheme;
|
|
(b)
|
the
Hong Kong Stock Exchange having granted its approval for the listing of,
and permission to deal in, the Unicom Shares to be issued upon the
exercise of the Special Unicom Options;
and
|
|
(c)
|
the
Scheme becoming effective.
|
An
application will be made to the Hong Kong Stock Exchange for the listing of, and
permission to deal in, the Unicom Shares to be issued upon the exercise of the
Special Unicom Options.
Subject
to the satisfaction of the conditions referred to above, the Special Purpose
Unicom Share Option Scheme will become effective on the Effective
Date.
Assuming
that the Scheme becomes effective on 15 October 2008, the letter granting you
Special Unicom Options pursuant to the Option Proposal is expected to be
despatched to you on or before 25 October 2008.
4. COURSES
OF ACTION AVAILABLE TO NETCOM OPTIONHOLDERS
In
summary, the choices available to you in respect of your outstanding Netcom
Options are as follows:
(1)
|
If you wish to receive Special
Unicom Options in respect of your outstanding Netcom Options at the Scheme
Record Time, you do not need to do anything. Your outstanding
Netcom Options at the Scheme Record Time (whether vested or not) will,
subject to the Scheme becoming effective, be cancelled by the Netcom Board
pursuant to Clause 11 of the Netcom Share Option Scheme and, in
consideration for the cancellation of your outstanding Netcom Options at
the Scheme Record Time, Unicom will grant to you Special Unicom Options.
The number of Special Unicom Options that will be granted to you and the
exercise price of such Special Unicom Options will be determined in
accordance with the formula set out in paragraph 2 headed “Terms of the
Option Proposal” above. If the Scheme becomes effective, you will receive
an Option Grant Letter and an accompanying form of acknowledgement which
you should sign and return to Unicom by no later than 30 November 2008 to
confirm the receipt and acceptance of the Special Unicom Options granted
to you and your agreement to be bound by the terms of the Special Purpose
Unicom Share Option Scheme and the Option Grant
Letter.
|
(2)
|
You may exercise all or any of
your outstanding and vested Netcom Options prior to the Options Exercise
Deadline. The Netcom Shares issued to you prior to or at the Scheme
Record Time pursuant to the exercise of your outstanding and vested Netcom
Options will constitute Scheme Shares and you will be eligible to receive
the consideration for the cancellation of your Scheme Shares under the
Scheme, that is:
|
For
every Scheme Share
cancelled ........................................................................
1.508 new Unicom Shares
Therefore,
if you wish to become eligible to participate in the Scheme as a holder of
Scheme Shares, you must exercise your outstanding Netcom Options which have
vested in accordance with the terms of the Netcom Share Option Scheme and prior
to the Options Exercise Deadline.
Any
of your Netcom Options that remain outstanding at the Scheme Record Time
(whether vested or not) will, subject to the Scheme becoming effective, be
cancelled by the Netcom Board pursuant to Clause 11 of the Netcom Share Option
Scheme and, in consideration for the cancellation of your outstanding Netcom
Options at the Scheme Record Time, Unicom will grant to you Special Unicom
Options. The number of Special Unicom Options that will be granted to you and
the exercise price of such Special Unicom Options will be determined in
accordance with the formula set out in paragraph 2 headed “Terms of the Option
Proposal” above. If the Scheme becomes effective, you will receive an Option
Grant Letter and an accompanying form of acknowledgement which you should sign
and return to Unicom by no later than 30 November 2008 to confirm the receipt
and acceptance of the Special Unicom Options granted to you and your agreement
to be bound by the terms of the Special Purpose Unicom Share Option Scheme and
the Option Grant Letter.
Each
outstanding Netcom Option you hold is independent and you should make a separate
decision for each such Netcom Option.
For
further details, please refer to the remaining sections of this letter, the
Scheme Document and the Netcom Share Option Scheme.
5. IF
THE SCHEME DOES NOT BECOME EFFECTIVE
If
the Scheme does not become effective, the Option Proposal will lapse
and:
|
(a)
|
to
the extent you have any outstanding Netcom Options which have not been
exercised, such Netcom Options will remain unaffected and will be
exercisable in accordance with the terms of the Netcom Share Option
Scheme; and
|
|
(b)
|
any
Netcom Shares allotted and issued to you pursuant to your exercise of any
of your outstanding Netcom Options prior to the Scheme Record Time will
not be cancelled.
|
6. OUTSTANDING
NETCOM OPTIONS HELD AS AT THE LATEST PRACTICABLE DATE
Information
on the outstanding Netcom Options held by you as at the Latest Practicable Date
is available from the Company Secretary of Netcom. If you exercise any of your
outstanding Netcom Options after the Latest Practicable Date, the Option
Proposal will only be in respect of your outstanding Netcom Options at the
Scheme Record Time.
7. LAPSED
NETCOM OPTIONS
You
should note that nothing in this letter or the Scheme Document serves to extend
the life of a Netcom Option which lapses, will lapse or has already lapsed under
the terms of the Netcom Share Option Scheme.
8. INDEPENDENT
FINANCIAL ADVICE
The
information provided in this letter is intended to give you factual details on
which to base your decision as to the action you wish to take.
If
you are in doubt as to any aspect of this letter or as to the action to be
taken, you should consult a licensed securities dealer or other registered
institution in securities, a bank manager, solicitor, professional accountant or
other professional adviser.
9. GENERAL
|
(1)
|
All
communications, notices, letters of grant and other documents of any
nature to be delivered by or sent to or from you will be delivered by or
sent to or from you at your own risk and neither Unicom nor Netcom accepts
any liability for any loss or any other liabilities whatsoever which may
arise as a result.
|
|
(2)
|
The
Option Proposal is governed by, and construed in accordance with, the laws
of Hong Kong.
|
|
(3)
|
The
English language text of this letter shall prevail over the Chinese
language text in the event of any
inconsistency.
|
Yours
faithfully
For
and on behalf of
China International Capital
Corporation
(Hong
Kong) Limited
|
Yours
faithfully
For
and on behalf of
J.P. Morgan Securities (Asia
Pacific) Limited
|
Massey
Li Susan Hong
Managing
Director
|
Charles
Li
Managing
Director
|
APPENDIX |
SUMMARY
OF THE PRINCIPAL TERMS OF
|
|
THE
SPECIAL PURPOSE UNICOM SHARE OPTION
SCHEME
|
The
following is a summary of the principal terms of the Special Purpose Unicom
Share Option Scheme.
1. Purpose
of the Special Purpose Unicom Share Option Scheme
The
Special Purpose Unicom Share Option Scheme is proposed to be adopted by Unicom
in connection with the Proposals and provides Unicom with a means to incentivise
and retain the Netcom Optionholders, who are middle to senior management staff
of the Netcom Group, and to encourage them to diligently achieve an enhancement
in the value of Unicom.
2. Eligible
Participants
Only
Netcom Optionholders who hold Netcom Options at the Scheme Record Time (whether
vested or not) (the “Eligible Participants”) shall be entitled to be granted
Special Unicom Options.
3. Maximum
Number of Unicom Shares
The
total number of Special Unicom Options to be granted by Unicom to all Eligible
Participants under the Special Purpose Unicom Share Option Scheme shall be equal
to the product of (a) the Share Exchange Ratio and (b) the number of Netcom
Options outstanding as at the Scheme Record Time. The maximum number of Unicom
Shares which may be issued upon the exercise of all Special Unicom Options to be
granted under the Special Purpose Unicom Share Option Scheme and any other share
option schemes of Unicom must not in aggregate exceed 10% of the issued share
capital of Unicom as at the date of approval of the Special Purpose Unicom Share
Option Scheme.
4. Maximum
Entitlement of Each Eligible Participant
The
number of Special Unicom Options which shall be granted to an Eligible
Participant shall not exceed such number of Special Unicom Options determined in
accordance with the formula set out in paragraph 5(b) below.
5. Grant
of Special Unicom Options
|
(a)
|
The
board of directors of Unicom (the “Unicom Board”) shall grant the Special
Unicom Options to the Eligible Participants no later than 10 days after
the Effective Date.
|
|
(b)
|
The
number of Special Unicom Options to be granted by the Unicom Board to an
Eligible Participant and the exercise price of such Special Unicom Options
shall be determined in accordance with the following
formula:
|
Number
of Special Unicom Options = A x B
Exercise
price of each Special Unicom Option = C / A
where:
A is the Share Exchange
Ratio;
B is the number of outstanding
Netcom Options held by an Eligible Participant at the Scheme Record Time;
and
C is the exercise price of an
outstanding Netcom Option held by an Eligible Participant at the Scheme Record
Time,
provided
that fractions of Special Unicom Options will not be granted to any Eligible
Participant.
Based
on the formula set out above, the exercise price of a Special Purpose 2004
Unicom Option (as defined below) is HK$5.57 and the exercise price of a Special
Purpose 2005 Unicom Option (as defined below) is HK$8.26.
(c) No
amount is payable on acceptance of the grant of a Special Unicom
Option.
6. Exercise
of Special Unicom Options
|
(a)
|
The
Special Unicom Options may only be exercised in accordance with the
vesting schedules referred to in paragraphs 6(b) and 6(c)
below.
|
|
(b)
|
Special
Unicom Options granted to Eligible Participants in respect of the Netcom
Options granted to them on 22 October 2004 (the “2004 Netcom Options”) and
held by them as at the Scheme Record Time (the “Special Purpose 2004
Unicom Options”) shall be effective from the Effective Date until 16
November 2010. Any Special Purpose 2004 Unicom Option not exercised by 16
November 2010 shall lapse automatically. The Special Purpose 2004 Unicom
Options shall only be exercised in batches in accordance with the vesting
schedule below. The maximum number of Special Purpose 2004 Unicom Options
that can be exercised at each tier shall not exceed the limits set out
below:
|
|
(i)
|
100%
of the Special Purpose 2004 Unicom Options granted in respect of the
outstanding 2004 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 17 May 2006 to 16 November
2010 may be exercised at any time from the Effective Date to 16 November
2010 (the “First Tier”);
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|
(ii)
|
100%
of the Special Purpose 2004 Unicom Options granted in respect of the
outstanding 2004 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 17 May 2007 to 16 November
2010 may be exercised at any time from the Effective Date to 16 November
2010 (the “Second Tier”);
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|
(iii)
|
100%
of the Special Purpose 2004 Unicom Options granted in respect of the
outstanding 2004 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 17 May 2008 to 16 November
2010 may be exercised at any time from the Effective Date to 16 November
2010 (the “Third Tier”); and
|
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(iv)
|
100%
of the Special Purpose 2004 Unicom Options granted in respect of the
outstanding 2004 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 17 May 2009 to 16 November
2010 may be exercised at any time from 17 May 2009 to 16 November 2010
(the “Fourth Tier”).
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(c)
|
Options
granted to Eligible Participants in respect of the 2005 Netcom Options
granted to them on 6 December 2005 (the “2005 Netcom Options”) and held by
them as at the Scheme Record Time (the “Special Purpose 2005 Unicom
Options”) shall be effective from the Effective Date until 5 December
2011. Any Special Purpose 2005 Unicom Option not exercised by 5 December
2011 shall lapse automatically. The Special Purpose 2005 Unicom Options
shall only be exercised in batches in accordance with the vesting schedule
below. The maximum number of Special Purpose 2005 Unicom Options that can
be exercised at each tier shall not exceed the limits set out
below:
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|
(i)
|
100%
of the Special Purpose 2005 Unicom Options granted in respect of the
outstanding 2005 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 6 December 2007 to 5
December 2011 may be exercised at any time from the Effective Date to 5
December 2011 (the “First Tier”);
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|
(ii)
|
100%
of the Special Purpose 2005 Unicom Options granted in respect of the
outstanding 2005 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 6 December 2008 to 5
December 2011 may be exercised at any time from 6 December 2008 to 5
December 2011 (the “Second Tier”);
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(iii)
|
100%
of the Special Purpose 2005 Unicom Options granted in respect of the
outstanding 2005 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 6 December 2009 to 5
December 2011 may be exercised at any time from 6 December 2009 to 5
December 2011 (the “Third Tier”);
and
|
|
(iv)
|
100%
of the Special Purpose 2005 Unicom Options granted in respect of the
outstanding 2005 Netcom Options held by the Eligible Participants at the
Scheme Record Time which are exercisable from 6 December 2010 to 5
December 2011 may be exercised at any time from 6 December 2010 to 5
December 2011 (the “Fourth Tier”).
|
7. Performance
Targets
|
(a)
|
The
exercise of a portion of the Special Unicom Options of the Eligible
Participants (excluding Eligible Participants who were senior management
and directors of Netcom prior to the Effective Date) exercisable at each
tier pursuant to the vesting schedule referred to in paragraph 6 above
(the “Adjustable Options”) shall be subject to the results of the
performance review of the grantee in respect of the year immediately
preceding the commencement of the relevant tier as measured against
Unicom’s performance review plan. Part or all of the Adjustable Options
shall be subject to cancellation depending upon the results of the
performance review. The Adjustable Options shall be determined by Unicom
with reference to the number of Special Unicom Options exercisable at each
tier, the expected yield of each Special Unicom Option and the difference
between the average price of the Unicom Shares in the year immediately
preceding the commencement of the relevant tier and the exercise price of
the Special Unicom Options.
|
|
(b)
|
In
the event that the grantee is to be demoted, his unvested Special Unicom
Options pursuant to the vesting schedule will be reduced to reflect his
new position and the reduced Special Unicom Options will automatically
lapse.
|
8. Ranking
of Unicom Shares
The
Unicom Shares allotted and issued upon the exercise of a Special Unicom Option
will rank pari passu in all respects with the Unicom Shares in issue on the date
on which the Special Unicom Option is duly exercised (the “Exercise Date”),
other than the rights and benefits attached to the Unicom Shares prior to the
Exercise Date.
9. Rights
Attaching to Special Unicom Options
Special
Unicom Options which are outstanding shall not be entitled to any dividend and
voting rights.
10. Adjustments
to the Exercise Price and the Number of Unicom Shares Subject to the Special
Unicom Options
In
the event of a capitalisation issue, rights issue, sub-division or consolidation
of Unicom Shares or reduction of capital, the Unicom Board has the right to make
corresponding alterations to the number of Unicom Shares involved in the Special
Unicom Options granted under the Special Purpose Unicom Share Option Scheme and
the exercise price, provided that the proportion of the total number of Unicom
Shares involved in the Special Purpose Unicom Share Option Scheme to the total
number of issued Unicom Shares shall remain unchanged. Such adjustments shall
give the Eligible Participants the same proportion of the issued share capital
to which they would have been entitled prior to such alteration, and no
adjustment shall be made the effect of which would be to enable Unicom Shares to
be issued at less than its nominal value.
11. Rights
on Cessation of Employment
|
(a)
|
If
the grantee of a Special Unicom Option ceases to be an employee because of
misconduct or criminal conviction, all the Special Unicom Options granted
(irrespective of whether such Special Unicom Options are exercisable in
accordance with the relevant vesting schedule) (the “Effective Options”)
not yet exercised shall lapse on the date of cessation of his employment
and such Effective Options shall in no circumstances be
exercisable.
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(b)
|
If
the grantee of a Special Unicom Option is transferred internally to Unicom
Parent and its controlled entities, Netcom Parent and its controlled
entities, or Unicom and its subsidiaries, the grantee shall be entitled to
exercise the Special Unicom Options in accordance with the vesting
schedule and the Special Purpose Unicom Share Option
Scheme.
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(c)
|
If
the grantee of a Special Unicom Option is transferred out of Unicom with
Unicom’s consent (for reason other than paragraph 11(b) above), the
grantee may, at any time within 90 days of the date of the cessation of
his employment, exercise the Special Unicom Options which are exercisable
as at the date of the cessation of his employment as well as the Special
Unicom Options which are exercisable at the tier immediately following the
tier that applies to the grantee at the date of cessation of his
employment. Any such Special Unicom Options which are not exercised within
the 90-day period shall lapse automatically. All the Special Unicom
Options exercisable at later tiers shall lapse
automatically.
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(d)
|
If
the grantee of a Special Unicom Option retires, the grantee may, at any
time within 90 days of the date of his retirement, exercise the Effective
Options which have not yet been exercised. Any such Effective Options
which are not exercised within the 90-day period shall lapse
automatically.
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(e)
|
If
the grantee of a Special Unicom Option ceases to be an employee for any
reason other than death, loss of capacity or any of the reasons as
referred to under paragraphs 11(a), 11(b), 11(c) or 11(d) above and for
reason of his resignation, all of his Effective Options not yet exercised
shall lapse on the date of cessation of his
employment.
|
12. Rights
on Death
If
the grantee of a Special Unicom Option dies and none of the grounds for
cessation of employment as referred to in paragraph 11(a) above has occurred,
Effective Options granted (but not yet exercised) shall be vested in the
grantee’s estate and the grantee’s personal representatives or authorised
persons shall be entitled to exercise such Effective Options within 90 days of
the date of the grantee’s death. Any such Effective Options which are not
exercised within the 90-day period shall lapse automatically.
13. Rights
on Loss of Capacity
The
guardian of the grantee of a Special Unicom Option or authorised persons may, at
any time during the period within 90 days of the date of the loss of capacity of
such grantee, exercise the Effective Options granted to such grantee but not yet
exercised as at the date of the loss of capacity of such grantee. Any such
Effective Options which are not exercised within the 90-day period shall lapse
automatically.
14. Rights
on Change of Control
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(a)
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If,
following the Effective Date and the issue of Unicom Shares pursuant to
the Scheme, (i) any person, entity or organisation acquires or becomes the
holder of 30% or more of the Unicom Shares in issue or the voting rights
attached to Unicom’s issued securities (or such percentage of voting
rights as may be prescribed under the Takeovers Code to trigger a
mandatory general offer requirement), (ii) Unicom is a party to any
material reorganisation, merger or acquisition which has been unanimously
approved by the Unicom Shareholders or (iii) Unicom is liquidated or
reorganised (each a “change of control”), the Effective Options which are
held by the grantee but outstanding shall become immediately exercisable
for a period of 12 months from the date on which the change of control
occurs.
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(b)
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The
following circumstances shall not be regarded as a change of control for
the purpose of paragraph 14(a)(i)
above:
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(i)
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the
acquiring person(s), entity(ies) or organisation(s) is/are connected with
Unicom within the definition of the Hong Kong Companies
Ordinance;
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(ii)
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the
Unicom Shares or the voting rights (as the case may be) are acquired by
Unicom; and
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(iii)
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the
Unicom Shares or the voting rights (as the case may be) are acquired by
the employee share option scheme established or supervised by Unicom (or
by the related trust funds).
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15. Cancellation
of Special Unicom Options
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(a)
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The
Unicom Board may resolve to cancel any Special Unicom Options granted but
not yet exercised.
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(b)
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Lapsed
Special Unicom Options shall be automatically cancelled on the date of
lapse.
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(c)
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The
increase in the number of Special Unicom Options exercisable by a grantee
as a result of another tier of the vesting schedule applying (for example,
(A) when the First Tier applies, the Special Unicom Options exercisable at
the First Tier shall be deemed as the increase in the number of Special
Unicom Options exercisable by the grantee and (B) when the Second Tier
applies, the Special Unicom Options exercisable at the Second Tier shall
be the increase in the number of Special Unicom Options exercisable by the
grantee) shall be subject to cancellation upon the happening of any of the
following events:
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(i)
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the
annual performance review of Unicom for the year preceding the
commencement of the relevant tier shows that Unicom is unable to meet the
performance review targets;
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(ii)
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the
issuance of a negative opinion by Unicom’s accountants or Unicom’s
accountants being unable to issue an opinion on the financial reports in
respect of the year preceding the commencement of the relevant tier;
or
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(iii)
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where
the Supervisory Panel or the audit authorities for State-owned enterprises
of the State Council have raised material objections to the results or the
annual report of Unicom in respect of the year preceding the commencement
of the relevant tier.
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16.
Period of the Special Purpose Unicom Share Option Scheme
Unless
the Unicom Board terminates the Special Purpose Unicom Share Option Scheme in
accordance with its power under the terms of the Special Purpose Unicom Share
Option Scheme, the Special Purpose Unicom Share Option Scheme will remain in
effect during the period commencing on the Effective Date and ending on 30
September 2014 (inclusive), being the date falling 10 years after the date on
which the Netcom Share Option Scheme was adopted, and will automatically
terminate upon the expiration of such period.
17. Termination
of the Special Purpose Unicom Share Option Scheme
The
Unicom Board may at any time terminate the Special Purpose Unicom Share Option
Scheme, and in such event the Special Unicom Options granted under the Special
Purpose Uniom Share Option Scheme (to the extent not already exercised) may
still be exercised pursuant to the rules of the Special Purpose Unicom Share
Option Scheme or may be cancelled by the Unicom Board pursuant to paragraph
15(a) above.
18. Rights
are Personal to the Grantee
A
Special Unicom Option is personal to the grantee and neither the Special Unicom
Option nor any relevant rights may be transferred, assigned or otherwise
disposed of by the grantee to any other person, except for the transmission of a
Special Unicom Option on the death of a grantee to his personal representatives
or authorised persons. Any breach of the foregoing by a grantee shall entitle
Unicom to cancel any Special Unicom Option granted to such grantee to the extent
not already exercised.
19. Lapse
of a Special Unicom Option
A
Special Unicom Option shall lapse automatically (to the extent not already
exercised) on the earliest of:
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(a)
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the
expiry of the period referred to in paragraph 6(b) or 6(c) above (as the
case may be);
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(b)
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the
occurrence of the event referred to in paragraph 7(b)
above;
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(c)
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the
expiry of any of the periods or dates referred to in paragraphs 11, 12, 13
and 14(a) above;
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(d)
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the
date on which the Unicom Board resolves to cancel the Special Unicom
Option granted pursuant to paragraph 15(a) above;
and
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(e)
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the
date on which the Unicom Board exercises Unicom’s right to cancel the
Special Unicom Option by reason of a breach of paragraph 18 above in
respect of that or any other Special Unicom
Option.
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20. Amendments
to the Special Purpose Unicom Share Option Scheme
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(a)
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The
Unicom Board may amend any of the provisions of the Special Purpose Unicom
Share Option Scheme and the terms of the Special Unicom Options (including
amendments in order to comply with changes in legal or regulatory
requirements) at any time.
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(b)
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Any
alterations to the matters set out in the Listing Rules which are to the
advantage of grantees of Special Unicom Options shall only be made with
the approval of Unicom Shareholders in general
meeting.
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(c)
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Any
alterations to the terms and conditions of the Special Purpose Unicom
Share Option Scheme which are of a material nature shall be approved by
the Unicom Shareholders in general meeting, except where the alterations
take effect automatically under the existing terms of the Special Purpose
Unicom Share Option Scheme.
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(d)
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Any
change to the authority of the Unicom Board in relation to alteration of
the terms of the Special Purpose Unicom Share Option Scheme shall be
approved by the Unicom Shareholders in general
meeting.
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(e)
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The
amended Special Purpose Unicom Share Option Scheme and the terms thereof
shall comply with the relevant requirements of the Listing
Rules.
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21. General
(a)
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The
Special Purpose Unicom Share Option Scheme shall become effective on the
Effective Date.
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(b)
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The
Special Purpose Unicom Share Option Scheme shall be administered and
interpreted by the Remuneration Committee of Unicom subject to the Listing
Rules. The Human Resources Department of Unicom shall be responsible for
the implementation of the Special Purpose Unicom Share Option Scheme, and
the formulation of the implementation rules of each grant which shall be
put forward to the Unicom Board for
approval.
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(c)
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The
Special Purpose Unicom Share Option Scheme and all Special Unicom Options
granted shall be governed by, and construed in accordance with, Hong Kong
law.
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