Conformed Copy - L3006 CN - Ningbo and Shanghai Ports Project - Project Agreement 2

Page 1 CONFORMED COPY LOAN NUMBER 3006-1 CHA (Ningbo and Shanghai Ports Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SHANGHAI HARBOR BUREAU Dated February 13, 1989 SHANGHAI PROJECT AGREEMENT AGREEMENT, dated Febraury 13, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and SHANGHAI HARBOR BUREAU (SHB). WHEREAS: (A) by the Loan Agreement of even date herewith between People's Republic of China (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to seventy-six million four hundred thousand dollars ($76,400,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that SHB agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and SHB, forty-six million four hundred thousand dollars ($46,400,000) out of the proceeds of the loan Page 2 provided for under the Loan Agreement, will be made available to SHB on the terms and conditions set forth in the SHB Subsidiary Loan Agreement; and WHEREAS SHB, in consideration of the Bank's entering into the Loan Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. SHB declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out Part B of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and port engineering and operating practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Bank shall otherwise agree, pro- curement of the goods, works and consultants' services required for Part B of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.03. SHB shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the SHB Project Agreement. Section 2.04. SHB shall duly perform all its obligations under the SHB Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, SHB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the SHB Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) SHB shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement and under the SHB Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) SHB shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of its part of the Loan, or the performance by SHB of its obligations under this Agreement and under the SHB Subsidiary Loan Agreement. Section 2.06. SHB shall review and update its master plan under Part B.8 of the Project in accordance with terms of reference agreed with the Bank. Page 3 Section 2.07. SHB shall implement the measures included in the Action Plan under Part B.9 of the Project in accordance with terms of reference agreed with the Bank. ARTICLE III Management and Operations of SHB Section 3.01. SHB shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and port practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SHB shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and port practices. Section 3.03. SHB shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.04. Except as the Bank shall otherwise agree, the term "SHB" shall include all enterprises and units which are under the control of SHB. ARTICLE IV Financial Covenants Section 4.01. (a) SHB shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SHB shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of its financial statements for such year as so audited, and (B) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, SHB shall from time to time take, or cause to be taken, all such measures (including, without limitation, adjustments of the levels of its tariffs as determined by the Borrower) as shall be required to produce, for each of its fiscal years after its fiscal year ending on December 31, 1988, total revenues equivalent to not less than the sum of (i) its total operating expenses, and (ii) the Page 4 amount by which its financial obligations exceed the provision for depreciation and any other non-cash operating expenses. (b) For the purposes of this Section: (i) The term "total revenues" means the sum of revenues from all sources related to port operations and net non-operating income. (ii) The term "total operating expenses" means the sum of all expenses related to port operations, including maintenance, administration, and depreciation. (iii) The term "financial obligations" means interest and other charges on debt, repayment of loans (including sinking fund payments, if any), all taxes or payments in lieu of taxes, allocations to special funds and other cash distributions of surplus, and any other cash outflows (other than capital expenditures) related to port operations. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.O2. This Agreement and all obligations of the Bank and of SHB thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify SHB thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) Page 5 For SHB: Shanghai Harbour Bureau 13 Zhongshan Road (E.1) Shanghai China Cable address: Telex: 3966 33023 SHACO CN Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SHB, or by SHB on behalf of the Borrower under the Loan Agreement, may be taken or executed by SHB's Director or such other person or persons as SHB's Director shall designate in writing, and SHB shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ A. Karaosmanoglu Regional Vice President Asia SHANGHAI HARBOR BUREAU By /s/ Han Xu Authorized Representative