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CONFORMED COPY CREDIT NUMBER 3251 CHA Public Disclosure Authorized Development Credit Agreement (Sichuan Urban Environment Project) between PEOPLE’S REPUBLIC OF CHINA Public Disclosure Authorized and INTERNATIONAL DEVELOPMENT ASSOCIATION Date January 9, 2001 CREDIT NUMBER 3251 CHA Public Disclosure Authorized DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated January 9, 2001, between PEOPLE’S REPUBLIC OF CHINA (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) the Borrower has also requested the International Bank for Reconstruction and Development (the Bank) to provide additional assistance towards the financing of the Project and by an agreement of even date herewith between the Borrower and the Bank (the Loan Agreement), the Bank is agreeing to provide such assistance in an aggregate principal amount equal to one hundred million Dollars ($100,000,000) (the Loan); Public Disclosure Authorized (C) the Borrower and the Association intend, to the extent practicable, that the proceeds of the Credit be disbursed on account of expenditures in respect of the Project before disbursements of the proceeds of the Loan provided for in this Agreement are made; (D) the Project will be carried out by Sichuan Province (Sichuan) with the Borrower’s assistance, and as part of such assistance, the Borrower will make available to Sichuan the proceeds of the Credit as provided in this Agreement and the proceeds of the Loan as provided in the Loan Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith among the Association, the Bank and Sichuan; NOW THEREFORE the parties hereto hereby agree as follows; ARTICLE I General Conditions; Definitions Section 1.01. The “General Conditions Applicable to Development Credit Agreements” of the Association, dated January 1, 1985 (as amended through December 2, 1997), with the modifications set forth below (the General Conditions) constitute an integral part of this Agreement: (a) A new paragraph (12) is added to Section 2.01 to read as set forth below, and the existing paragraphs (12) through (14) of said Section are accordingly renumbered as paragraphs (13) through (15): “12. ‘Participating Country’ means any country that the Association determines meets the requirements set forth in Section 10 of Resolution No. 183 of the Board of Governors of the Association, adopted on June 26, 1996; and ‘Participating Countries’ means, collectively, all such countries.” (b) The second sentence of Section 5.01 is modified to read: “Except as the Borrower and the Association shall otherwise agree, no withdrawals shall be made: (a) on account of expenditures in the territories of any country which is not a Participating Country or for goods produced in, or services supplied from, such territories; or (b) for the purpose of any payment to persons or entities, or for any import of goods, if such payment or import, to the knowledge of the Association, is prohibited by a decision of the United Nations Security Council taken under Chapter VII of the Charter of the United Nations.” Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) “Affected Persons” means persons who on account of the execution of the Project had or would have their: (a) standard of living adversely affected; or (b) right, title or interest in any house, land (including premises, agricultural and grazing land) or any other fixed or movable asset acquired or possessed, temporarily or permanently; or (c) business, occupation, work or place of residence or habitat adversely affected, and “Affected Person” means any of the Affected Persons. (b) “Category” means a category of items set forth in the table in paragraph 1 of Schedule 1 to this Agreement. (c) “Chengdu” means Chengdu municipality in Sichuan, and any successor thereto. (d) “Chengdu Drainage Company” means the Chengdu Drainage Company, Ltd., a state-owned limited liability company established and operating pursuant to its Charter of July, 1998, which was approved on August 6, 1998, by Chengdu Municipal Construction Commission; and to Business License No. 5101001800031, dated August 6, 1998, issued by Chengdu Industrial and Commercial Administration Bureau, and any successor thereto. (e) “Deyang” means Deyang municipality in Sichuan, and any successor thereto. (f) “Deyang Sewage Treatment Corporation” means Deyang Qing Yuan Sewage Treatment Company, Ltd., a limited liability company established and operating pursuant to its charter of February, 1999, which was approved in March, 1999 by Deyang Construction Commission; and to Business License No. 20512328-2, dated April 29, 1999, issued by Deyang Industrial and Commercial Administration Bureau, and any successor thereto. (g) “Environmental Assessment” means the Sichuan Urban Environment Project Environmental Assessment of Parts A, B and D of the Project, dated December 1998, which includes environmental mitigation measures and the administrative and monitoring arrangements to ensure the implementation of such measures. (h) “Guanghan” means Guanghan municipality in Sichuan, and any successor thereto. (i) “Industrial Pollution Control Action Plan” means the action plan dated March 22, 1999, setting forth activities to be carried out by Sichuan to control and minimize wastewater pollution in the Min and Tuo River Basins. (j) “Leshan” means Leshan municipality in Sichuan. (k) “Leshan Environmental Sanitation Management Bureau” and “LESMB” means the bureau responsible for environmental sanitation management in Leshan. (l) “Leshan Water Supply General Company” means Leshan Water Supply General Company, a state-owned enterprise established and operating pursuant to its Charter, which was approved on December 12, 1986, by Leshan Construction Commission; and to Business License No. 20695038-6, dated April 22, 1996, issued by Leshan Industrial and Commercial Administration Bureau, and any successor thereto. (m) “Leshan Wastewater Treatment Company” means Leshan Wastewater Treatment Company, Ltd., a state-owned limited liability company established and operating pursuant to its Charter of April 13, 1998, which was approved on April 13, 1998, by Leshan Construction Commission; and to Business License No. 20696835-9, dated July 15, 1998, issued by Leshan Industrial and Commercial Administration Bureau, and any successor thereto. (n) “Loan Agreement” means the agreement of even date herewith between the Borrower and the Bank for the Project, as such agreement may be amended from time to time; and such term includes the “General Conditions applicable to Loan and Guarantee Agreements for Single Currency Loans” of the Bank, dated May 30, 1995 (as amended through December 2, 1997), as applied to such agreement, and all schedules and agreements supplemental to the Loan Agreement. (o) “Luzhou” means Luzhou municipality in Sichuan, and any successor thereto. (p) “Luzhou Water Supply Company” means Luzhou Water Supply Company, a state-owned enterprise established and operating in accordance with its charter of March 28, 1998, which was approved on April 18, 1998, by Luzhou Municipal Construction Committee; and to Business License No. 20470299-5, dated March 31, 1998, issued by Luzhou Industrial and Commercial Administration Bureau, and any successor thereto. (q) “PMO” means the project management office maintained pursuant to the provisions of paragraph 1(a)(i) of Schedule 2 to the Project Agreement. (r) “Project Agreement” means the agreement among the Association, the Bank and Sichuan of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement. (s) “Project Municipalities” means, collectively, Chengdu, Deyang, Guanghan, Leshan and Luzhou, and “Project Municipality” means, individually, any of the Project Municipalities. (t) “Project Municipality’s Respective Part of the Project” means for: (i) Chengdu: Parts E and F of the Project; (ii) Deyang: Parts C(1), C(2), E and F of the Project; (iii) Guanghan: Part D(2) of the Project; (iv) Leshan: Parts A(4), C(1), C(2), C(3), C(4), D(1), E and F of the Project; and (v) Luzhou: Parts C(1), C(2), C(3), C(4), E and F of the Project. (u) “Resettlement Action Plan” means the Sichuan Urban Environment Project Resettlement Action Plan or SUEP RAP, dated April 1999, which sets out the procedures governing land acquisition, resettlement and compensation for Affected Persons for Parts A and B of the Project, as well as monitoring and reporting arrangements to ensure compliance with said plan, as such SUEP RAP may be revised from time to time in agreement with the Association. (v) “Special Account” means the account referred to in Section 2.02(b) of this Agreement. (w) “Sichuan” means the Borrower’s Sichuan Province, and any successor thereto. (x) “Subsidiary Loan Agreements” means, collectively, the agreements to be entered into between each of the Project Municipalities (excluding Guanghan) and its Utility Company pursuant to paragraph 7 of Schedule 2 to