Panama Law No.5

Legislative Assembly
Panama Law No. 5
(January 16, 1997)
"Whereby the contract between the State and the Panama Ports Company, S.A. corporation is approved, for the development, construction, operation, administration and management of the port terminals for containers, RO-RO, passengers, bulk cargo and general cargo in the ports of Balboa and Cristobal"

THE LEGISLATIVE ASSEMBLY DECREES
Article I. Approve in its entirety the contract for development, construction, operation, administration and management of the terminals for containers, ro-ro, passengers, bulk cargo and general cargo in the Ports of Balboa and cristobal, between THE STATE and PANAMA PORTS COMPANY, S.A., the text of which reads as follows:

CONTRACT
Between the undersigned, namely, Raul Arango Gasteazoro, Minister of Commerce and Industries, acting in representation of the Republic of Panama, duly authorized to act in this matter by Resolution No. 237 of the Council of the Cabinet on November 27, 1996, who herein after shall be designated as THE STATE, on the one hand, and on the other, Paul R.C. Rickmers and Enrique A. Jimenez, Jr., acting jointly in their capacity of General Manager and Representative respectively, of the Panama Ports Company, S.A. corporation, constituted and existing in accordance with the laws of the Republic of Panama, registered in File 319669, Roll 50940, Image 0002, of the Microfilm Section (Mercantile) of the Public Registry of the Republic of Panama, duly authorized to act in this matter by Resolution of the Board of Directors of said corporation on November 21, 1996, who herein after shall be designated as THE COMPANY, have agreed to enter into this Concession and Investment Contract, herein after designated as THE CONTRACT, in accordance with the following CLAUSES

1. LEGAL BASIS OF THE CONTRACT
Paragraph 3 of article 195 of the Political Constitution of the Republic of Panama, whereby authority is granted to Council of the Cabinet to agree to contracts such as the one granting this concession. Article 153 of the Political Constitution of the Republic of Panama, whereby the Legislative Assembly is authorized to approve this Concession Contract.

2: GENERAL CONDITIONS

2.1 Concessions by THE STATE
In accordance with the terms of this contract, THE STATE grants in concession to THE COMPANY, the development, construction, operation, administration and management of the terminals for containers, roro, passengers, bulk cargo and general cargo, and their respective infrastructures and installation, in the ports of Balboa and Cristobal, the infrastructures, installation, facilties and physical areas of which are described in detail in Annex I, which forms an integral part of this contract (which herein after shall be referred to, for purposes of this contract, as "The Existing Port", said reference to include all the areas, facilities and installation detailed in Annex I). The parties to this contract have agreed that all the annexes form an integral part of the contract.

Further, THE STATE hereby grants an Option (the Option) to THE COMPANY, in the same terms and conditions of this contract, for the development, construction, operation, administration of those areas of land, facilities and installations known as Diablo and Telfers Island, also detailed in Annex I, which are part of this contract (which herein after shall be referred to, for purposes of this contract, as "The Future Extension", which together with the "Existing Port" shall herein after be referred to, for purposes of this contract, as: "The Ports". THE COMPANY has the right to exercise the Option at any time during the first fifteen (15) years of this contract, from its effective date, by means of written notification to that effect to

THE STATE.
No additional payment will be made for the granting of the Option or for the legal exercise of the same, nor will additional payment be made for the Future Extension. It is understood that, at all times, THE STATE shall consult with THE COMPANY before granting any concession in the Future Extension and shall obtain approval for any concession, and said approval may only be objected to by THE COMPANY if the latter determines that said concessions represent activities similar to those granted by means of this contract (including, but not limited to, the handling of cargo, transportation, container cargo stations and any other facilities associated with the general operation of a port). In addition, the respective concession contracts shall include as a limitation, the right and obligation by THE STATE to terminate them as soon as reasonably practical to do so and without additional cost to THE COMPANY, based on the right of THE COMPANY to exercise the Option for use of the Future Extension, in accordance with this contract. THE STATE, shall compensate and shall continue to compensate THE COMPANY against any and all claims made against THE COMPANY, if such exist; whether it be by the parties to said concession or by third parties who may be affected by the termination of said concessions.

During the life of this contract and its extension, THE COMPANY shall have the exclusive right to develop, construct, operate, administer and manage The Ports, in accordance with the provisions of this contract. THE COMPANY may carry out its operations, transactions, negotiations, and activities in general, be they local or international, with any person or public, provate or mixed entity. Similarly, THE COMPANY may utilize the services of the contractors it considers necessary for the development, construction, operation, administration and management of The Ports. For the development of its activities, THE COMPANY may transport and handle all classes of merchandise, products, sub-products, raw material and any type of legal articles, and shall have the right to improve and continue developing, from time to time, the facilities and installation in The Ports during the life of the concession and extension of this contract. In addition, THE COMPANY shall have the right to conduct all the business and activities that, from time to time, may be incidental and/or related to the development, management, administration and operation of the Ports.

It is agreed that during a period of three (3) years beginning on the effective date of this contract, THE STATE shall not grant the right to operate cargo handling in the area of the piers (quayside), (including general cargo, containers, passengers, bulk cargo and ro-ro, but excluding warehousing activities and the supply of fuel), at the Rodman Naval Station, to any person, entity or unforeseen party (herein after referred to generally as "third parties"), without first granting THE COMPANY the first option to accept or reject the operation of that business in the Rodman Naval Station, under the same terms and conditions, or under terms and conditions that are no less favorable than those offered by said third party or parties (whichever is the case). Upon receipt by THE STATE of the terms and conditions of the offer to operate the referenced business by a third party, said terms and conditions being considered acceptable by THE STATE. THE STATE shall provide THE COMPANY with said terms and conditions of the offer received and the latter shall have thirty (30) calendar days to consider them.

If THE COMPANY makes an offer to THE STATE under the same terms and conditions, or under terms and conditions that are no less favorable than those presented by the third party, THE STATE shall grant THE COMPANY the concession to operate the business. If THE COMPANY does not make an offer with the thirty (30) calendar day period, THE STATE may grant that concession to that third party under terms and conditions that are no more favorable than those submitted by THE COMPANY for its consideration.

From the effective date of this contract, The Existing Port and Future Extension, as defined in this contract and detailed in the description and maps contained in Annex I to this contract, with the exception of any public access routes, shall comprise a Bonded Area which will enjoy all the fiscal and custom benefits in accordance with the laws of the Republic of Panama.

It is agreed that THE COMPANY shall have the right to fence in, at any time, and entirely at its discretion, the area referred to herein as the Bonded Area. THE STATE shall ensure that all government entities comply with the obligations stipulated in this contract, including those that in the future may be provided by any public service or activity as a result of privatization.

2.2 Concessions previously granted by the National Port Authority THE COMPANY shall take charge of all of the concessions granted by the National Port Authority that are not retained by said government institutions in The Existing Port. In Annex III of this contract are listed the concessions received by THE COMPANY and those concessions retained by the National Port Authority within the Existing Port. THE STATE guarantees to THE COMPANY the utilization of all the land and sea concessions located with The Existing Port, designated in Annex I. The National Port Authority shall maintain the utilization of the concessions located within the Future Extension, until such time as THE COMPANY requests said extension or part of it for its operations.

It is understood between THE STATE and THE COMPANY, that THE COMPANY shall receive all income arising from those concessions within the Existing Port that are retained by THE COMPANY.

In addition, THE STATE shall transfer and turn over to THE COMPANY, in accordance with agreement between the parties, by means of a separate document signed by THE COMPANY and the Director General of the National Port Authority, duly authorized by the Executive Committee of that Institution, the moneys corresponding to the income arising from those concession retained by THE STATE (including any concessions for maritime service) and from those that THE STATE may later grant or review, the infrastructure and installations of which THE COMPANY is responsible for maintaining, and from those concessions that restrict in any way the use of The Existing Port by THE COMPANY.

The amounts agreed to, corresponding to the incomes, shall be transferred and turned over by THE STATE to THE COMPANY, during the life of this contract and its extension, regardless of any changes in the terms of said concessions or identity of the concessionnaires.

THE STATE has provided THE COMPANY in Annex V, of all the pertinent information and documentation regarding the responsibilities and obligations, if such exist, that THE COMPANY shall assume for the concessions that THE COMPANY shall retain entirety, that it is incorrect, or that it does not reflect a correct and adequate perception of the financial and commercial position of said concessions, any costs, losses, or responsibilities subsequently incurred by THE COMPANY, determined in conjunction with THE STATE, shall be reimbursed by THE STATE to THE COMPANY. In this regard, THE COMPANY shall submit to the National Port Authority a written request for payment. If THE STATE has not paid THE COMPANY the corresponding amounts within ninety (90) calendar days beginning on the date the National Port Authority receives said request for payment, THE COMPANY shall have the right to deduct the amount for said costs, losses or obligations from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any pending balance after said deduction shall be deducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause 2.3.1 of this contract until such time as THE COMPANY recovers all of the costs, losses or obligations.

In the event this contract is terminated for any reason, THE STATE shall pay THE COMPANY any remaining balance related to said costs, losses or obligations within thirty (30) calendar days from the date of said termination.

2.3 Payments by THE COMPANY By virtue of the granting of the concession established by this contract, THE COMPANY agrees to pay THE STATE to the order of The National Treasury through the Ministry of Finance, the following amounts, following a transition grace period of three months, beginning on the effective date of this contract, herein after referred to as the "First Payment Date", said grace period to be used by THE COMPANY to become familiar with the operation of The Ports: 2.3.1 Fixed Annual Fee

An annual fee in the amount of TWENTY TWO MILLION TWO HUNDRED THOUSAND BALBOAS (B/.22,200,000.00) payable in equal monthly payments at the end of the month, the first payment of which shall be due one month after the First Payment Date.

The parties agree that beginning on the sixth year from the First Payment Due Date and subsequently during the life of this contract and its extension, at the beginning of each consecutive five-year period, the annual fee which is the subject of this clause will be revised based on the average of the consumer price index of the preceding five years, published by the Comptroller General of the Republic of Panama, up to a maximum adjustment of ten percent (10%) over the amount of the last annual fee paid. This revision shall establish the amount of the fixed annual fee payable during the following five years.

2.3.2 Variable Annual Fee
A variable amount corresponding to ten percent (10%) of the gross income from all of the sources of income derived from activities carried out by THE COMPANY in The Ports, which will be calculated and paid on a monthly basis within two months following its due date, the first payment due two months after the First Payment Date.

2.4 Participation by THE STATE as a Stockholder in THE COMPANY
When the contract becomes effective, THE STATE shall receive from THE COMPANY, In the name of the Minister of Finance, fully paid shares equivalent to ten percent (10%) of the capital of THE COMPANY. The participation referred to in this clause shall be subject to the following terms:

a. THE STATE shall have the right to select a member of the Board of Directors of THE COMPANY, said designation to be made by the Executive Branch of the Government.

b. THE STATE shall be exempt from any obligation for contributions and payments in the event of increases in capital and/or for any other reason.

c. In the event of increases in capital, THE COMPANY shall make the necessary adjustments in order to maintain the ten percent (10%) participation of THE STATE in THE COMPANY.

d. The participation of a stockholder that THE STATE will receive may not be ceded, transferred or be subject to any tax.

2.5 Plans for Investment and Development by THE COMPANY
THE COMPANY shall provide THE STATE with its plan for development for The Existing Port, indicating the investments to be made and the respective amounts, as evidence of the expenditures and investments to be made.

In this regard, THE COMPANY agrees to invest in The Ports (to include self financing, financing through debts with third parties, financial leasing, operational leasing or any other source of credit that can be obtained for the purpose of investment, excluding operation and maintenance costs of THE COMPANY) during the first five (5) years from the effective date of this contract, an amount totaling no less than FIFTY MILLION BALBOAS (B/.50,000,000.00), to be invested directly or indirectly through its subsidiaries or affiliates or any other investor or investors or through external financing through banks or other
financial institutions. Said investment shall include the following:

a. Investment to condition the Port of Balboa for access by Panamax type vessels.

b. The repair of the cranes in the port of Cristobal to eturn them to their normal level of operation, in accordance with the manufacturer's specifications. All the container cranes shall have sufficient support equipment in order to have the capacity to perform at least twenty five (25) container movements per hour/crane.

c. THE COMPANY shall provide the additional equipment that may be necessary in accordance with the development program of The Ports.

d. Develop directly, indirectly, or through third parties, a passenger terminal for cruise ships in The Ports.

2.6 Workers

2.6.1 Termination of Employment by THE STATE

a. Prior to the effective date of this contract, THE STATE, shall terminate the employment of all employees of the National Port Authority in The Existing Port and of the personnel in the Central Office of the National Port Authority, who are directly involved in the operation of The Existing Port and whose services are not required by the National Port Authority in the future. For purposes of this contract, all of these workers shall herein after be referred to as "The Workers".

b. Upon approval of this contract by the Legislative Assembly, THE STATE, through the National Port Authority, shall be obligated to pay The Workers compensation in the amounts agreed upon, and shall be authorized to execute the respective payments of each of those workers with funds advanced by THE COMPANY as a loan, in accordance with clause 2.6.2 in the manner and terms established in this contract and those additional state funds that may be necessary in order to execute the payments of that compensation by THE STATE.

c. Once The Workers have been compensated in accordance with the preceding paragraph and clause 2.6.2, all individual and collective relations between The Workers and the STATE shall be terminated, including the internal relations existing with the National Port Authority.

d. THE COMPANY shall not be obligated to initiate any relationship with the current unions of the ports of Balboa and Cristobal, or with their representatives. It is accepted, however, that the employees of THE COMPANY will be entirely free to unionize.

In matters pertaining to the work force, the granting of this concession does not constitute or result in the substitution of the employer.

e. THE COMPANY shall not be obligated to enter into labor agreements during the first two years of operation.

f. Inasmuch as THE COMPANY will develop a professional relationship with its employees to include training and productivity incentive programs, upon publication of this contract in the Official Gazette, following its approval by the Legislative Assembly, Decree No. 20 of September 1980 establishing the minimum wage in the areas of Ancon and Cristobal; laws 39 and 40 of 1979 and all other provisions that regulate labor relations in the Ports of Cristobal and Balboa shall be abolished. THE STATE and THE COMPANY shall negotiate in order to submit to the Legislative Assembly modifications to Law 34 of 1979, in order to incorporate appropriate requirements for the efficient port operation.

g. THE STATE is responsible for the continued operation of The Existing Port up to the effective date of the contract, which means that the employees of The Existing Port that are necessary shall continue working for the Government up to that time in order to guarantee the efficient continuity of operation.

2.6.2 Loans by THE COMPANY
THE COMPANY agrees to advance to THE STATE, upon publication of this contract in the Official Gazette, an interest-free loan in an amount of up to THIRTY MILLION BALBOAS (B/S30,000,000.00), to be used exclusively towards payment of the compensations of The Workers. Said amount shall be deposited by THE COMPANY in an Escrow Account in the National Bank of Panama, subject to the condition that said money be utilized exclusively to compensate The Workers, according to the compensation calculations prepared on a case by case basis by the National Port Authority, with the approval of the Ministry of Labor and Social Welfare and THE COMPANY.

The compensation calculations and the approval by the Ministry of Labor and Social Welfare and THE COMPANY shall be accomplished prior to publication of this contract in the Official Gazette.

The funds corresponding to the liquidation shall be distributed to The Workers directly by the National Bank of Panama prior to the effective date of this contract, without any administrative cost to THE COMPANY, after receiving from the National Port Authority the compensation calculations for each of The Workers and a list duly endorsed and approved by the Comptroller General of the Republic, that includes all of The Workers and the amount of compensation due each one. THE COMPANY shall have the right to supervise the process of distributing the compensation to The Workers by the National Bank of Panama, either directly or through a designated agent.

THE STATE shall provide THE COMPANY with evidence signed by each of The Workers reflecting receipt of the liquidation of the previous employment.

The income derived as interest from said account up to the time of the final payment, shall revert to THE COMPANY. Said interest and the balance of the loan that is not distributed shall be returned to THE COMPANY, no later than the fifth day from the effective date of this contract.

The parties agree that, if THE STATE pays The Workers the total amount of the compensation prior to the date of publication of this contract in the Official Gazette, THE COMPANY shall be obligated to deposit the amount of the loan of up to Thirty Million Balboas (B/.30,000,000.00) in the referenced escrow account. Instead, THE COMPANY willl advance the loan of up to Thirty Million Balboas (B/.30,000,000.00) directly to THE STATE, to the order of the National Treasury, through the National Port Authority, following publication of this contract in the Official Gazette and after receipt by THE COMPANY of written evidence that the corresponding payments of full and final compensation have been received The Workers based on their previous employment.

The parties agree that, for purpose of reimbursing THE COMPANY the amount advanced as a loan, the latter may deduct from those payments to be made to THE STATE, equal monthly sums for a period of seven (7) years from the date of publication of this contract in the Official Gazette.

2.6.3 Training Program
THE COMPANY commits itself to establish a training program for those employees identified by THE COMPANY as necessary for the operation of The Existing Port.

2.7 Acquisition of Equipment
THE COMPANY is committed to purchase from THE STATE, free from taxes, debts and/or fees and paid in full, all of the equipment existing in The Existing Port, for the total amount of TEN MILLION BALBOAS (B/.10,000,000.00) to be paid on the day this contract enters into effect. This equipment is listed in Annex
II, which is an integral part of this contract.

In the event THE COMPANY incurs losses, damages or expenses as a result of any existing obligation, lien or debt related to the equipment, as determined by THE COMPANY in consultation with THE STATE, the latter shall reimburse THE COMPANY the corresponding amounts for said losses, damages or expenses. In this regard, THE COMPANY shall provide the National Port Authority a written request for payment. If THE STATE does not pay THE COMPANY the corresponding amounts within ninety (90) calendar days from the date of receipt the request for payment by the National Port Authority, THE COMPANY shall have the right to deduct the amount for said losses, damages or expenses from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any pending balance after said deduction shall be deducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause 2.3.1 of this contract until THE COMPANY recovers all of the corresponding loss, damage of expense.

In the event said losses, damages or expenses are the result of liens or debts on the equipment, THE COMPANY and THE STATE shall resolve their differences by means of a friendly agreement. If the parties do not reach an agreement within fifteen (15) calendar days from the first written notification to THE STATE, the parties are hereby obligated to submit their difference to arbitration in accordance with clause 3.4 of this contract.

In the event of termination of this contract for whatever reason, THE STATE shall pay THE COMPANY any pending amount with respect to said losses, damages, and expenses within thirty (30) calendar days from the date of the termination.

2.8 Authority for the Transfer of Rights
THE COMPANY may cede or transfer all or part of the rights and obligations arising from this concession contract or from the activities derived from said contract, as log as it is to Panamanian corporations of foreign corporations duly registered to conduct business in the Republic of Panama.

When the ceding or transfer is made in favor of a subsidiary or affiliate of THE COMPANY, a written communication of said action from THE COMPANY to THE STATE will suffice.

When the ceding or transfer is made in favor of a third party that is not a subsidiary or affiliate of THE COMPANY, prior written authorization shall be required by the Council of the Cabinet, which may not be denied without reasonable justification.

The ceding, transfer or subcontracting of this contract shall not generate any type of tax, right, contribution, fee or payment to THE STATE.

For purposes of this contract, included as subsidiary or affiliate corporations of THE COMPANY, without limitations, are those that, although maintaining their individuality, are involved within The Ports in the same activities as THE COMPANY or in complementary activities related to the operation of The Ports.

2.9 Duration of the Concession
This contract shall have a duration of twenty five (25) years from the its effective date. The parties agree that this Contract shall be extended automatically for an additional period of twenty five (25) years under the same terms and conditions, as long as THE COMPANY has complied with its basic obligations as stipulated in this contract.

2.10 Rights of THE COMPANY
Without prejudice to the general concession rights hereby granted, and for the purpose of facilitating the execution of this contract, THE STATE grants THE COMPANY, its subsidiaries, affiliates and concessionaires all the rights inherent in and in support of the port operations in The Ports, including but not limited to, the following rights:

a. To carry out the improvements to The Ports in accordance with the provisions of this contract, including the design, engineering, studies, analysis, evaluation, construction, development, administration and management of same, either directly or through local or international contractors.

b. To transport by any means in, from or to the territory of the Republic of Panama, containers, cargo, products, merchandise and any other legal products.

c. The right to have and operate, under separate concession by the National Port Authority, tug boats and work boats, vessel repair service and piloting service.

d. To store containers and cargo and operate container cargo stations, container repair facilities, installation and other marine equipment and any other related services for the purpose of this contract.

e. To construct, operate, administer, manage, control, subcontract and dispose at its own discretion, within The Ports, in consultation with THE STATE, of all roadways and facilities and railroad infrastructures (without competing with the operator of the railroad between the ports of Balboa and Cristobal), including the right of THE COMPANY to redesignate Diablo Road as a private service road instead of a public street, and the right to divert that road at the expense of THE COMPANY, as well as the right to divert Gaillard Avenue (a public thoroughfare) at the expense of THE COMPANY, if it becomes necessary for the efficient operation of the Port of Balboa, said cost to be determined by THE
COMPANY and subject to prior approval by THE STATE. THE STATE shall reimburse THE COMPANY for the referenced costs. In this regard, THE COMPANY shall submit to the national Port Authority a written request for payment. If THE STATE does not pay THE COMPANY the corresponding amounts within ninety (90) calendar days from the date of receipt by the National Port Authority of the referenced request for payment, THE COMPANY shall have the right to deduct the amount for said cost from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any pending balance after said deduction shall be deducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause 2.3.1 of this contract, until said cost is recovered by THE COMPANY.

THE COMPANY shall enter into operational agreements with the operator of the railroad, under terms acceptable to THE COMPANY, concerning the access to the round house in the Port of Balboa and to any pull-off lines in the Port of Cristobal, in order to ensure the continuous and effect operation of The
Ports

f. To operate the installations and facilities of The Ports

g. To continue with the current practice that allows any vessel in the port of Cristobal to maintain a transit reservation in the transit itinerary of the Panama Canal

h. To enter into contract with third parties for the transportation, cargo and container handling and for any other legal service or activity

i. To provide services to third parties and to charge fees, prices and tariffs that THE COMPANY may establish

j. To utilize at its own discretion, but subject to the supervision of THE STATE, the piers and other facilities that THE COMPANY may construct in relation to the activities envisioned in the contract

k. To utilize for the construction and operation of The Ports, without cost to THE COMPANY, all of the materials found in The Ports, such as dirt, gravel, sand, rock and other materials. In the event that the materials are located in adjacent areas controlled by THE STATE, its agencies, municipalities of other government entities, their use shall be approved for use by THE COMPANY by the pertinent entity as a cost no greater than required from any other user

l. The right to use, without cost to THE COMPANY, water from natural sources for the execution of the activities of THE COMPANY related to this contract

m. The right to use in The Ports, at any time, electricity, gas or other alternative energy sources, as well as communication systems at the regular rates or a preferential rates applicable in Panama to large industrial users. In spite of the foregoing, THE COMPANY shall have the right to establish and operate its
own energy sources and communication systems

n. To remove earth, rocks, vegetation in general and other obstacles that interfere with the execution of its activities, in accordance with the governing regulations and after obtaining the necessary permits. Said permits shall be issued by THE STATE, in accordance with the request made by THE COMPANY. To dredge, fill or reinforce the coastal areas assigned to THE COMPANY and their entrances and, with the approval by THE STATE, dispose of the waste material at sea in the most convenient locations and at the least cost to THE COMPANY, taking into account environmental considerations.

o. To request and obtain from THE STATE, its agencies or other entities, all of the licenses, permits, and authorizations needed for the development and adequate operation of The Ports. In this regard, THE COMPANY shall comply with the same requirements that are generally needed for obtaining said licenses and authorizations and THE COMPANY will not be required to comply with greater requirements, or to obtain other licenses, permits, approvals or authorizations that are not generally applicable in the Republic of Panama,

p. To operate, administer, manage, transport, own, ship, supply, acquire, sell, repair, dig, dredge, fill, reinforce and carry out all other activities necessary for the adequate administration and exploitation of The Ports either directly or through contractors.

q. To obtain income for services charged for by THE COMPANY, some of which are listed in Annex IV by way of example. Said listing is in no way to be considered as a limitation.

r. To fix and charge at its discretion the tariffs, fees and payment that it considers convenient for all of the operation and activities of THE COMPANY in The Ports, such as, but not limited to, the handling, transportation, transshipment of all types of cargo and providing any services performed, furnished or executed by THE COMPANY, its affiliates, subsidiaries or subcontractors. The tariffs shall be established on a non-discriminatory commercial basis.

THE COMPANY may establish reductions in the tariffs based on volume discounts or in accordance with applicable commerical practices for this type of activity.

s. To store in The Ports or in adjacent areas, the offloaded containers when the need for space so requires, subject to compliance with the current legal provisions and those that may be established in the future.

t. To rent buildings, installations and land to third parties in The Ports.

u. To subcontract all of its rights and activities granted by this concession contract, without the need for approval by THE STATE.

v. To establish and vary the size of the work force and the labor practices in accordance with the Labor Code in order to ensure the efficient and competitive operation of THE COMPANY.

w. To renegotiate the commercial and legal terms of those concessions previously granted by the National Port Authority in the Existing Port, that have been retained by THE COMPANY and that are detailed in Annex III of this contract.

2.11 Obligations of THE COMPANY
The obligations of THE COMPANY in accordance with this contract are the following.

a. Initiate and carry out the modernization of the Existing Port in the first year of administration, from the effective date of the contract, subject to the submission of a program which must be approved by the National Port Authority and which may not be disapproved without reasonable justification. The approval and/or comments shall be made by THE STATE within thirty (30) calendar days from the date of submission of any plan by THE COMPANY.

b. Allow third parties to use The Existing Port, in accordance with the standards and regulations of THE COMPANY. THE COMPANY may charge the fees it deems convenient on a commercial basis. However, when it concerns a concession previously granted by the National Port Authority for assistance or service to vessels, THE COMPANY shall determine if a fee is applicable for the additional services it may provide.

c. Apply for and obtain the necessary permits from national or municipal authorities regarding the construction of civil works in The Ports and payment of the corresponding rights, which shall be those customary for obtaining such permits.

d. Allow the use of the installations in The Existing Port by vessels of the United States Army in accordance with the provisions of The Panama Canal Treaty until the expiration of said treaty at the beginning of the year 2,000, and by those vessels covered by technical assistance and cooperation international agreements (as detailed in Annex VII) as long as said use does not interfere with daily operation of the business of THE COMPANY in The Existing Port. It is understood that these vessels shall be exempt from the payment of berthing and demurrage fees in The Existing Port, but THE COMPANY shall have the right to charge for the services provided at the same commercial rates applied by THE COMPANY to its clients.

e. Carry out corrective, maintenance and repair projects; or at the option of THE COMPANY, replace any facility or installation if considered convenient for technical and/or economic reasons. Said maintenance includes dredging projects to be conducted by THE COMPANY in the marine area of The Existing Port and the marine access to the Panama Canal, as detailed in Annex I, that will allow THE COMPANY to charge fees for moorage and anchorage.

f. Maintain The Ports operating in good operating and utilization condition.

g. THE COMPANY shall guarantee compliance of its obligations in accordance with this contract, by means of a performance bond in favor of THE STATE in the amount of five hundred thousand Balboas (B/.500,000.00) to be issued by a first class financial institution chosen by THE COMPANY, subject to prior approval by THE STATE.

2.23 Obligations of THE STATE
THE STATE shall have the following obligations:

a. Guarantee THE COMPANY'S use and full and peaceful possession of The Ports, including, but not limited to, the right to use on a priority basis all the piers in The Existing Port (including those piers granted to third parties by means of other concessions, such as Astilleros Braswell International, S.A., and Atlantic Pacific, S.A.)and the right to utilize the Albrook area assigned to THE COMPANY within The Existing Port. It is understood by the parties that any development in other areas of Albrook shall not affect the efficient operation of THE COMPANY. If such development affects the efficient operation of The Ports, THE COMPANY shall have the right to quantify the costs caused by such disturbance, subject to consultation with THE STATE. THE STATE shall reimburse THE COMPANY for the amounts corresponding to the referenced costs. In this regard, THE COMPANY shall submit to the National Port Authority a written request for payment. IF THE STATE does not pay THE COMPANY the corresponding amounts within ninety (90) calendar days from the date of receipt by the National Port Authority of the referenced request for payment, THE COMPANY shall have the right to deduct the amount for said cost from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any remaining balance after said deduction shall be ducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause 2.3.1 of this contract.

b. Expeditiously issue THE COMPANY any permit, license or authorization, through the corresponding agencies of the Government of Panama, that may be required in order to exercise the rights granted to THE COMPANY under this contract for the operation of The Ports. This issuance shall be made if THE COMPANY complies with the documentation normally required for these processes, including the issuance of visas and work permits for personnel of THE COMPANY arriving in Panama.

c. Provide in The Ports, when necessary, such services as marine traffic control, health and quarantine, customs, immigration and other public services. THE COMPANY will pay the cost of salaries for the personnel required to offer these public services, and said personnel shall be employed subject to prior consultation and approval by THE COMPANY with respect to the number of personnel and the mount of their salaries. It is understood that such officials shall be employees of THE STATE and under no condition shall be considered as employees of THE COMPANY.

d. Not grant any new concession in The Existing Port, from the date of publication of this contract in the Official Gazette, without consulting with and obtaining prior authorization from THE COMPANY. It is understood that the National Port Authority may renew or grant new concessions regarding those retained by THE STATE in The Existing Port. However, it is agreed that for the concessionaire proposed in each specific case THE COMPANY and the National Port Authority shall reach an operational agreement prior to contracting those concessions, which will govern the operating relationship between
the parties.

e. Allow access to The Existing Port, without restrictions, by employees of THE COMPANY from the moment this contract is published in the Official Gazette. Physically vacate, prior to the effective date of this contract, all of the government offices in The Existing Port. It is understood that any public services that needs to be provided in accordance with clause 2.12c can be relocated with The Existing Port at the discretion of THE COMPANY.

f. (Non-existent)

g. Physically vacate and turn over to THE COMPANY at the end of the Panama Canal treaties, or prior to that date, the areas, facilities and installations currently occupied with The Ports by the Panama Canal Commission and the Government of the United States, which once vacated shall constitute assets of The Ports, at no cost to THE COMPANY or to the National Port Authority. It is understood that this obligation shall be complied with even if said areas, facilities and installations are occupied by the Panama Canal Commission or by any other person or government entity, inasmuch as it is the obligation of THE STATE to turn over such areas, facilities and installations to THE COMPANY.

h. Coordinate through the Ports and Railroad Committee, prior to the termination of the Panama Canal Treaties, the termination of the rights of the Panama Canal Commission and of the United States regarding the use of the areas and installations in The Ports or surrounding areas, that have been granted in concession to THE COMPANY in accordance with this contract, specifically including the right of THE COMPANY to utilize buildings No. 2A, 3, 4, 5, 8, 8A, 10, 28 and 44B, as detailed in Annex IX, located in The Existing Port and which are necessary for THE COMPANY to develop its cargo handling operation. Any relocation cost incurred by THE COMPANY shall be coordinated beforehand with the Ports and Railroad Committee. THE STATE shall reimburse THE COMPANY the amount corresponding to said cost. In that regard, THE COMPANY shall submit to the National Port Authority a written request for payment. If THE STATE does not pay THE COMPANY the corresponding amount within ninety (90) calendar days from the date of receipt by the National Port Authority of the referenced request for payment, THE COMPANY shall have the right to deduct the amount for said cost from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any remaining balance after said deduction shall be deducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause 2.3.1 of this contract.

i. At the choice of the clients of THE COMPANY and on a non-discriminatory basis, guarantee the services of any pilots authorized by the National Port Authority or those designated by the Panama Canal Commission or its successors after termination of the Panama Canal Treaties, and provide such piloting services in accordance with the established rules. Said rules shall require that a pilot board the vessel with 30 minutes after being advised of the requirement for the service. However, said rules may be modified from time to time to adapt them to commercial practices. If the levels of service are not provided, the clients of THE COMPANY have the right to contract directly the pilots they consider necessary to provide the service.

j. Coordinate with the Panama Canal Commission or with any other entity, until the termination of the Panama Canal Treaties, the service of pilots in The Ports and ensure that such services are provided in accordance with the established rules. Said rules shall require that a pilot board a vessel within 30 minutes after being advised of the need for the service. However, said rules may be modified from time to time to adapt them to commercial practices. If said levels of service are not provided, THE COMPANY may request THE STATE to provide, and THE STATE shall provide to the Canal Commission, or the successor agency, sufficient additional pilots in order to permit the institution to provide an efficient service at a reasonable cost.

k. Allow THE COMPANY and its foreign employees to freely convert their income at any time to any foreign denomination and to transfer abroad said income without any restrictions, taxes or fees. THE COMPANY may also maintain bank accounts in Panama or abroad in foreign denominations for the purpose of meeting its obligations.

l. THE STATE shall be the only one responsible for the payment to thrd parties of those compensations and/or charges resulting from the termination of any concession that THE COMPANY receives from the national Port Authority within The Ports and/or for the relocation or vacating of buildings and lands as a result of said termination. The parties to this contract agree that THE COMPANY shall advance the payment of any compensation or indemnity and/or charges to said third parties, in consultation with THE STATE. THE STATE shall reimburse THE COMPANY the corresponding amount for referenced payment. In that regard, THE COMPANY shall submit to the National Port Authority a written request for payment. If THE STATE does not pay THE COMPANY the corresponding amount within ninety (90) calendar days from the date of receipt by the National Port Authority of the referenced request for payment, THE COMPANY shall have the right to deduct the amount for said payment from the variable annual fee payable to THE STATE in accordance with clause 2.3.2 of this contract and any remaining balance after said deduction shall be deducted by THE COMPANY from the fixed annual fee payable to THE STATE in accordance with clause

2.3.1 of this contract.
m. On the assumption that THE STATE does not arrive at an agreement with The Workers regarding the payment of compensation to be canceled prior to the effective date of this contract, according to clause 2.6.1, THE STATE shall guarantee THE COMPANY the possession and peaceful use of The Ports beginning on the effective date of this contract, in order to permit the effective and competitive operation of The Ports. On this assumption, and not withstanding the provision of clause 2.6.2, the loan referred to in said clause

2.6.2 shall be maintained in the escrow account for a maximum period of one year from the effective date of this contract. If after that time has elapsed THE STATE has not arrived at an agreement with The Workers and, therefore, has not utilized the loan to pay the compensations, THE COMPANY shall have the right to withdraw the loan from the escrow account and thereby receive the entire amount of the loan in addition to all of the interests generated in the referenced account.

n. Issue the pertinent documents THE COMPANY that allow the exploitation of the concessions, rights and privileges granted by virtue of this contract, complying at all times with the applicable legal and administrative regulations, in order that THE COMPANY may properly conduct its activities and exercise its rights without interference or impediment that could affect the full enjoyment of its rights. Carry out the necessary administrative and legal procedures in order to transfer THE COMPANY, prior to the effective date of this contract, all the concessions to be retained by the latter in accordance with clause 2.2 of this contract.

o. Respond within thirty (30) calendar days to any consultation or request for approval by THE COMPANY. Failure to receive a response within this time period will be understood to mean that THE STATE has granted its approval as requested.

2.13 Matters Related to the Environment
THE COMPANY agrees to ensure the adequate protection of the environment in the activities of THE COMPANY in The Ports, complying with the current legal and regulatory provisions in the Republic of Panama, or with those provisions that may be promulgated in the future regarding the environment, and in accordance with the approved international standards on this subject. This obligation includes the contractors that work for THE COMPANY, but not to third parties.

With the exception of those damages already caused and the existing contamination, that includes but is not limited to those determined in the study on the environmental contamination contracted by THE COMPANY, included in Annex VI of this contract, and the study on the environment provided by THE STATE, included in Annex VII, THE COMPANY shall be responsible and will establish a bond in favor of THE STATE in the amount of five hundred thousand Balboas (B/.500,000.00) to cover the costs for damages to the environment and contamination caused by THE COMPANY. This amount does not imply a limit in the responsibility for the damages caused by THE COMPANY. This bond shall be established prior to the effective date of this contract.

2.14 Termination of this Contract
All the installations and facilities existing within the Existing Port are for the exclusive use of THE COMPANY and all the new infrastructures, improvements and restorations in The Existing Port, as well as the future piers, buildings, parks, and other infrastructures constructed in The Ports in accordance with this contract (herein after referred to "Civil Installations"), shall be the property of and for the exclusive use by THE COMPANY, as stipulated in this contract.

The termination of this contract for any reasons shall not affect any rights or responsibilities of the contracting parties originating or established prior to the termination date of this contract.

2.14.1 Termination as a Result of Expiration
Upon expiration of the life of this contract, including its extension in accordance with clause 2.9 of this contract, all of the Civil Installations shall become the property of THE STATE. THE COMPANY shall have the right to remove from The Ports the equipment, machinery and other goods and chattels that are its property, in the areas controlled or acquired by THE STATE. Said removal shall be subject to the option of THE STATE to acquire this property through purchase for a fair market value in accordance with the appraisal by an independent international accounting firm.

Nine months prior to the expiration date of this contract, THE COMPANY shall provide THE STATE with a list of all of the commercial and labor related obligations in effect up to that date. THE STATE shall notify THE COMPANY within the following three months, which obligations it will assume and will continue after termination of the concession. Those obligations that THE STATE will not assume shall be terminated by THE COMPANY on the last day of the concession or of an extension thereof.

2.14.2 Termination of the Contract by THE COMPANY

a. This contract may be terminated by THE COMPANY as a result of failure by THE STATE to comply with any of its substantial obligations acquired through this Contract.

b. This Contract may be terminated by THE COMPANY without incurring in any responsibility or sanction by means of notification to THE STATE with sixty (60) calendar days of advance notice, whenever any social and/or economic change occurs in Panama as a result of direct or indirect actions or omissions by the government of Panama that THE COMPANY can justify as having materially affected the continuous and successful development, construction, operation, administration or management of The Ports, or when any of the accidental situations or acts of force majeure indicated further on, persist for at least thirty (30) calendar days. Upon termination of this contract by THE COMPANY in accordance with parts a. or b. of this clause 2.14.2, THE STATE shall assume the control, operation and administration of The Ports and shall have the following obligations.

(i) To pay THE COMPANY the value of the Civil Installations in accordance with their fair market value, in accordance with the appraisal by an independent international accounting firm. This will not apply in the event the termination of the contract is due to a force majeure or accident beyond the control of THE STATE.

(ii) To pay THE COMPANY the fair market value, in accordance with the appraisal by an independent international accounting firm, for the machinery, equipment and other goods and chattels located in The Ports, minus any debts for pending loans obtained for financing; or allow THE COMPANY, at its discretion, to remove the machinery, equipment and other goods and chattels. It is understood that for purposes of this termination, THE STATE shall assume any obligations arising from this concession, except those obligations resulting from any outside financing obtained by THE COMPANY to finance its requirements for working capital.

2.14.3 Termination of the Contract by THE STATE
THE STATE may terminate this contract if THE COMPANY fails to comply with the substantial obligations acquired through this contract, or in the event that any of the following administrative causes for termination occur, as specified in article 104 of Law 56 of 1995 currently in effect:

a. The bankruptcy or meeting of creditors of THE COMPANY, or because THE COMPANY is in a status of suspension or discontinuation of payments without the formal declaration of bankruptcy;

b. The dissolution of THE COMPANY by an individual, or by any of the corporations that comprise a association, unless the other members of the consortium or association can comply with the contract. Under these assumptions, then, THE STATE through the Executive Branch may administratively declare that THE COMPANY has lost all of its privileges and concession that have been granted under this contract, unless THE COMPANY can prove that the non-compliance resulted from a force majeure, accident or non-compliance by THE STATE.

In the case of a justifiable excuse, THE STATE shall so declare and shall grant THE COMPANY new time periods that are reasonable. In the case of an unjustifiable default or substantial non-compliance by THE COMPANY, THE STATE, through the Executive Branch shall issue a written notice. Should that occur, THE COMPANY shall have sixty (60) calendar days from the date of receipt of the notification to remedy the non-compliance or default, without prejudice of the right to defend itself against charges brought against it, through the arbitration process.

Upon termination of this contract by THE STATE based on clause 2.14.3, THE STATE shall assume the control, operation and administration of The Ports, subject to the following:

(i) THE COMPANY shall have the right to remove from The Ports, the machinery, equipment and other goods and chattels located in The Ports, minus any debts resulting from pending loans obtained for its financing. This removal is subject to the option by THE STATE to acquire the property through purchase at a fair market value in accordance with an appraisal by an independent international accounting firm. It is understood that for purposes of this termination, THE STATE shall assume any obligations arising from this concession, except those obligations resulting from any outside financing obtained by THE COMPANY to finance its requirements for working capital.

2.14.4 Termination for Reasons of Force Majeure or Accident
For purposes of this contract, force majeure or accidental situations shall be those events or conditions over which THE COMPANY has not been able to exercise a reasonable control and because of its nature, delays, restricts or impedes the appropriate compliance by THE COMPANY of the obligations it has contracted by virtue of this contract.

For purposes of this contract, accidental situations shall include the following events, among others: epidemics, earthquakes, land slides or displacements of other materials, storms, flooding, other adverse climatic conditions or any other event or act, whether or not of the type indicated, over which THE COMPANY is not able to exercise a reasonable control, and because of its nature, delays, restricts or impedes THE COMPANY in the proper compliance of its obligations.

For purposes of this contract, cases of force majeure shall include, among others, the following events: wars, revolutions, insurrections, civil disturbances, blockades, embargoes, strikes, restrictions or limitations of materials necessary for the construction and operation of The Ports, closures, riots, explosings, orders or instructions by any legal or de facto government, and any other causes, whether or not of the type indicated, over which THE COMPANY is not able to exercise reasonable control and because of its nature, delays, restricts or impedes THE COMPANY in the proper compliance of its obligations.

It is understood that neither of the parties may claim as a force majeure, its own actions or omissions, or those of its agencies or branches.

If the execution of any activity that should be carried out by virtue of this contract, is delayed or impeded because of an accidental situation or force majeure, then the stipulated time frame for its execution, as well as the duration of this contract, shall be extended by the same amount of time as the delay, and THE COMPANY shall have the right to suspend all the payments to THE STATE until the delay is over, without prejudice to THE COMPANY exercising its right to terminate the contract in accordance with clause 2.142b.

The party that is unable to comply with its obligations because of an accidental situation or force majeure, shall notify the other party in writing as soon as possible, specifying the causes, and both parties agree to do everything that is reasonably possible to end the causes; without this meaning, however, that either of the parties shall be obligated to resolve any controversies with third parties, except under conditions that are acceptable to the affected party or in accordance with a final decision by an arbitration, judicial or administrative authority with jurisdiction to resolve said controversies.

2.14.5 Recovery of the Loan in the Event of an Early Termination
THE STATE is obligated to pay THE COMPANY the pending balance of the loan referred to in clause 2.6.2 within thirty (30) calendar days following the date of termination of this contract, in the event the contract is terminated for any reason before the seventh (7th) year of the reimbursement period referred to in said clause.

3. ADDITIONAL CLAUSES

3.1 Fiscal Exonerations
THE STATE grants THE COMPANY, its subisdiaries, affiliates and concessionaires, during the life of this contract and its extension, the following exonerations, rights and privileges.

a. Exoneration from all importation taxes, contributions, fees or duties on all equipment, including but not limited to: machinery, raw materials, fuel and lubricants, cranes, vehicles, appliances, supplies, parts, boats, and containers, to be used in the development, construction, operation, management and maintenance of The Ports. It is understood by THE COMPANY that the items exonerated shall remain within The Ports, except for those used for transportation, and they may not be sold or transferred within the Republic of Panama, without prior written authorization by THE STATE, unless the respective tax is paid, calculated based on the net book value of the item at the time of the sale or transfer. However, except for the fuel and lubricants, said items may be exported without any kind of tax and without the need for prior approval.

b. Exonertion from income tax on income THE COMPANY, its subsidiaries, affiliates and concessionaires earn from all the activities carried out, such as storage and handling, handling of loose cargo resulting from the transshipment or international transit of such cargo and containers, as well as from industrial and manufacturing activitues that may be established in The Ports for purposes of exporting its products. (These last two activities should not impede the principal objective of this contract, which is to provide an efficient port service.) These examples are only illustrative and in no way imply a limitation to this exoneration.

c. Exoneration from taxes on the transfer of goods. (ITBM) on equipment, machinery, materials, raw materials, cranes, vehicles, appliances, parts, boats and containers to be used in the construction, cooperation and maintenance of The Ports, and on those items that THE COMPANY needs for the development of its activities within The Ports in accordance with the provisions of this contract. This exonertion includes the financial leasing by THE COMPANY of any equipment or other movable equipment.

d. Exoneration from all taxes on dividends resulting from the activities provided for in the contract.

e. Exoneration, within The Ports, from the payment of the fee for containers, stowage, unloading, handling, manipulation and demorrage.

f. Exonertion from property tax.

g. Exoneration from the tax on commercial or industrial license.

h. Exoneration from the tax of shipments or transfers abroad by reason of payment of commissions,
royalties or for any other reason related to the activities covered by this contract.

i. Exoneration from the payment of the tax on fiscal stamps to be paid by this contract for the amount in excess of one hundred thousand Balboas (B/.1000,000.00)

j. Exoneration from tax, fee and duties for the so called "Servicio de Vigilancia Especial".

k. Exoneration from all taxes, fees, duties, payments, withholding or other charges of a similar nature made to foreign persons or entities that grant financing for the development, administration and construction of The Ports, the supply and installation of equipment, the financial leasing of equipment necessary for the development of the activities of The Ports, with respect to interests, commissions, royalties and other financial charges paid by THE COMPANY, its subsidiaries, affiliates, concessionaires and subcontractors. Such financing will not be subject to the provision of article 2 of Law 4 of 1935.

It is understood that THE COMPANY, its affiliates, subsidiaries, concessionaires, subcontractors or stockholders shall not be subject to any tax, charge, fee, duty or contribution on the income or profits generated outside of the Republic of Panama, or on property located outside of the Republic of Panama.

In addition, THE STATE guarantees THE COMPANY, its subsidiaries, affiliates and concessionaires that it will not impose any taxes that may apply exclusively to activities related with The Ports.

l. Representation
For purposes of this contract, THE STATE shall be represented by the Ministry of Commerce and Industries, through the National Port Authority, as the executing entity, which shall also be responsible for granting permits and authorizations required by this contract, and exercising the oversight and compliance by THE COMPANY.

All notifications to be made concerning this contract, unless the parties agree otherwise, shall be in writing and made through personal delivery or forwarded by telex or telefax, to the addresses of the parties, as follows:

EXECUTING UNIT NATIONAL PORT AUTHORITY
Address: Via Espana, Dorchester Bldg. 3rd floor
Panama City, Republic of Panama
Telex: 2765 PG
Telefax: (507) 269-6992
Attention: Director General
Legal Counsel
THE COMPANY: PANAMA PORTS COMPANY, S.A.
Address: 47st Bella Vista, House No. 27
Panama City, Republic of Panama
c.c. HUTCHISON INTERNATIONAL PORT
HOLDINGS LIMITED
Address: Container Port Road South Kwai Cung
New Territories, Hong Kong
Telephone: (852) 8125-7888
Telefax: (852) 8121-0555
Attention: Administrative Director
Company Secretary
c.c. CONSOLIDATED PORTS (UK)
Address: Tomline House
Port of Felixstowe
Suffolk IP 118SY
United Kingdom
Attention: Secretary of the Company
c.c. HUTCHISON INTERNATIONAL PORT
HOLDINGS LTD
Address: Hutchison House
22/F, Harcourt Road
Hong King
Telephone: (852) 2523-0161
Telefax: (852) 2810-0705
Attention: Managing Director
Secretary of the Company