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Question on "UP"ing

So here is what I gather, please tell me if I am wrong.

I will use an Ali Baba as my example.

I have a Ali Baba Tulwar. If I use this combination in my cube...
1 Lum Rune + 1 Pul Rune + 1 Perfect Emerald + Exceptional Unique Weapon
I will get a Ali Baba that is a Hydra Edge. The sword will keep all the same attributes, now just do damage that a Hydra Edge would do.


I have my Ali Baba socketed with 2xIst. Will I lose those in the process of upping?