Document:

Secondary Storage Agreement

 EXHIBIT 10.18 
  
 SECONDARY STORAGE AGREEMENT 
  

By and between Safti-Cell, Inc. (SCI), a Delaware Corporation, and CRYO-CELL International, Inc. (CCEL). Whereas CCEL is engaged in the field of
preservation of stem cells from newborn babies and preserves these stem cells in a primary location at Clearwater, Florida. 
  
 And, whereas SCI is building a state-of-the-art facility for secondary (back up) storage to protect the stem cells stored at the primary location above,

  
 And, whereas the parties are mutually interested in seeing
valuable stored specimens endangered by fire, earthquake or any natural or human made disaster, 
  
 And, whereas SCI is committed to building a state-of-the-art, fireproof, earthquake resistant facility for mutual consideration between the parties, it is
agreed and the receipt of $10.00 which is hereby acknowledged, it is agreed: 
  

	 	1.	 	CCEL will deliver a cryopreserved specimen to SCI for secondary (back up) storage. 

  

	 	2.	 	SCI agrees to maintain storage of delivered specimen in a cryogenic environment. 

  

	 	3.	 	Payments to SCI are in the following categories: 

  

	 	a)	 	If all clients are automatically billed for secondary storage or are provided secondary storage at no extra cost, SCI will store specimens at a cost of $10.00 (Ten Dollars) each.

  

	 	b)	 	If secondary storage is offered clients on an optional basis, then in addition to the $10.00, SCI would receive half of the overage over $20.00 for each annual fee.

  

	 	4.	 	In the event retrieval of a specimen is required the contracting parties will mutually agree to the price being charged SCI will first cover its actual cost in labor + 10% for
overhead and the parties will divide equally the retrieval fee. 

  

	 	5.	 	Transportation cost for the delivery of the back up specimen is the be borne entirely by the client and/or their insurance provider. 

  

	 	6.	 	The parties agree that if CCEL is sold or merged into any company, this contract must be included and accepted as a part of any agreement entered into between CCEL and a third
party. 

  

	 	7.	 	This Agreement is for a period of twenty (20) years during which CCEL will receive 2% equity of all SCI’s net profits from secondary storage regardless of source. This
Agreement will be extended for year periods with mutual consent between the parties. 

  
 Dated this 1st day of October 2001. 
  

	 SAFTI-CELL, INC.
	 	 	 	 	 	 CRYO-CELL INTERNATIONAL, INC.

							
	By:	 	 /s/    CHARLES NYBERG

	 	 	 	 	 	 	 	 By:
	 	 /s/    WANDA D. DEARTH

	 	 	Charles Nyberg	 	 	 	 	 	 	 	 	 	 Wanda D. Dearth,
 President<PAGE>

                                                                    Exhibit 4.16

PRIVATE & CONFIDENTIAL

Note: Confidential treatment has been requested for portions of this exhibit.
The copy filed herewith omits the information subject to the confidentiality
request. Omissions are designated as "***." A complete version of this exhibit
has been filed separately with the Securities and Exchange Commission

           THIS AGREEMENT is made as of the 28th day of February, 2003

                                PROJECT AGREEMENT

                     FOR THE FINANCING, DESIGN, CONSTRUCTION

                      AND OPERATION OF EAST RAIL EXTENSIONS

                                     between

           THE PERMANENT SECRETARY FOR THE ENVIRONMENT, TRANSPORT AND
                               WORKS (ENVIRONMENT)

                              for and on behalf of
            GOVERNMENT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION

                                       and

                       KOWLOON-CANTON RAILWAY CORPORATION

<PAGE>

                                TABLE OF CONTENTS

CLAUSE                                                                      PAGE

                                     PART I
                                 INTERPRETATION

1.   Interpretation .........................................................  2

                                     PART II
                        FINANCING OF EAST RAIL EXTENSIONS

2.   Financial Undertakings .................................................  7
3.   The Corporation's Funds ................................................  7
4.   Commercial Debt ........................................................  7
5.   Government Equity ......................................................  7

                                    PART III
                              PROPERTY DEVELOPMENTS

6.   Property Developments ..................................................  8
7.   Property Development Profits ...........................................  9
8.   Treatment of Profits ...................................................  9
9.   Management of Property Development Sites ............................... 10

                                     PART IV
                SCOPE OF WORKS, PLANNING, DESIGN AND CONSTRUCTION

10.  General ................................................................ 11
11.  Scope of Works ......................................................... 11
12.  Planning and Design .................................................... 13
13.  Corporation's Skill & Care Warranty .................................... 13
14.  Government's Obligation ................................................ 13
15.  Insurance .............................................................. 13
16.  Entrusted Works ........................................................ 15
17.  Construction Safety .................................................... 15
18.  Allowances for Future Extensions ....................................... 15

                                     PART V
                             PROGRAMME AND PROGRESS

19.  Baseline Programme ..................................................... 16

                                     PART VI
                            OPERATION AND MAINTENANCE

20.  Operation and Maintenance .............................................. 17

                                    PART VII
                                      LAND

21.  Land Acquisition ....................................................... 18
22.  Land for Railway Construction .......................................... 19
23.  Land for Operational Railway ........................................... 19
24.  Commercial Activities within East Rail Extensions Stations ............. 20

                                    PART VIII
                            ENVIRONMENTAL PROTECTION

25.  Environmental Protection ............................................... 22

                                     PART IX
                                    TRANSPORT

26.  Co-ordination and use of East Rail Extensions .......................... 23
27.  Transport Interchanges ................................................. 23

                                     PART X
                         PROJECT MONITORING AND ACCOUNTS

28.  Government Monitoring .................................................. 24
29.  Accounts, Records and Information ...................................... 24

                                     PART XI
                                  MISCELLANEOUS

30.  Utility Services ....................................................... 26
31.  The Ordinance .......................................................... 26
32.  Invalidity ............................................................. 26
33.  No Partnership ......................................................... 26
34.  Further Assurance ...................................................... 26
35.  Amendments ............................................................. 27
36.  Waiver ................................................................. 27
37.  Conflict ............................................................... 27
38.  Payments ............................................................... 27
39.  Confidentiality ........................................................ 28
40.  Notices ................................................................ 28
41.  Governing Law and Jurisdiction ......................................... 29
42.  Dispute Resolution ..................................................... 29

SIGNATURE PAGE .............................................................. 30

APPENDIX 1
     Scope of Works

APPENDIX 2
     Summary of the Baseline Programme

APPENDIX 3
     Capital Cost Estimate

<PAGE>

THIS AGREEMENT is made as of the 28th day of February, 2003

BETWEEN

(1)     THE PERMANENT SECRETARY FOR THE ENVIRONMENT, TRANSPORT AND WORKS
        (ENVIRONMENT) for and on behalf of GOVERNMENT OF THE HONG KONG SPECIAL
        ADMINISTRATIVE REGION ("Government"); and

(2)     KOWLOON-CANTON RAILWAY CORPORATION, a corporation established by
        statute, with its principal place of business at KCRC House, 9 Lok King
        Street, Fo Tan, New Territories, Hong Kong (the "Corporation").

WHEREAS

Government and the Corporation have agreed to enter into this Agreement to
provide for the financing, design, construction and operation of East Rail
Extensions and related services and facilities.

NOW IT IS HEREBY AGREED as follows:

                                       -1-

<PAGE>

                                     PART I
                                 INTERPRETATION

1.      INTERPRETATION

1.1     In this Agreement (including the Recitals and Appendices), except where
        the context otherwise requires, the following terms and expressions
        shall have the following meanings:-

        "Baseline Programme" means the programme defining the Scope of Works to
        be executed and the timing and sequence required to effect the
        completion of East Rail Extensions, as may be amended from time to time
        in accordance with the provisions of Clause 19.

        "Business Day" means a day (excluding Saturdays) on which the banks in
        Hong Kong are open for business.

        "Capital Cost" means the aggregate of the costs which are payable by the
        Corporation for feasibility studies, technical studies, land acquisition
        and related costs (including (i) any amount payable to Government as
        licence fees for the Works Areas, (ii) land premium appropriate for land
        required for railway use on the Tai Wai Maintenance Centre and (iii) all
        costs and amounts referred to in Clause 21), design, engineering,
        procurement, construction, testing, commissioning and completion of the
        Railway Construction Works and the Reprovisioning, Remedial and
        Improvement Works.

        "Capital Cost Estimate" means the estimate by the Corporation of the
        Capital Cost as set out in Appendix 3.

        "Commercial Operations" means the operation of any one of the East Rail
        Extensions on a revenue earning basis providing scheduled transport for
        the public as the context requires.

        "Construction Contract" means any contract entered into by the
        Corporation or by Government to give effect to the obligations of the
        parties in connection with the Scope of Works, including, for the
        avoidance of doubt, supply contracts for rolling stock and other items
        of moveable plant and equipment and testing and commissioning procedures
        in respect of the operation of East Rail Extensions, as the context
        requires.

        "Construction Contractor" means any person which has entered into a
        Construction Contract with Government or the Corporation, as the case
        may be, or any successor to or replacement for such person.

        "Corporation" means the Kowloon-Canton Railway Corporation established
        under the Ordinance.

                                       -2-

<PAGE>

        "Defects Liability Period" means in relation to each Construction
        Contract, the period in respect thereof as specified in such
        Construction Contract entered into with the relevant Construction
        Contractor.

        "Dollars" and the sign "$" denote the lawful currency of Hong Kong.

        "East Rail" shall bear the meaning ascribed to the "Kowloon-Canton
        Railway" in the Ordinance.

        "East Rail Extensions" mean the new railways, or any one of them, to be
        constructed, tested, commissioned and operated by the Corporation (i)
        between Tai Wai and Wu Kai Sha in the north eastern area of the New
        Territories ("MOS Rail") (ii) the extension from Hung Hom to Tsim Sha
        Tsui East at the southern end of East Rail ("TST Extension") and (iii)
        between Sheung Shui and Lok Ma Chau ("Spur Line") including East Rail
        Extensions Stations and the Tai Wai Maintenance Centre, as and when each
        new railway is authorized in accordance with the provisions of the
        Railways Ordinance (Cap 519 of the Laws of Hong Kong).

        "East Rail Extensions Stations" means East Tsim Sha Tsui Station, Tai
        Wai Station, Che Kung Temple Station, Sha Tin Wai Station, City One
        Station, Shek Mun Station, Tai Shui Hang Station, Heng On Station, Ma On
        Shan Station, Wu Kai Sha Station, Kwu Tung Station enabling works and
        Lok Ma Chau Terminus.

        "East Rail Extensions Works" means the Railway Construction Works
        together with such additional provisions and works as are required to
        facilitate the proposed property developments, as detailed in Appendix
        1, all as may be amended from time to time in accordance with Clause
        11.5.

        "Entrusted Works" means any item of work which is to be constructed by
        the Corporation for and on behalf of Government or vice versa, and which
        is to be paid for by the party for whom the work is done.

        "Entrustment Agreement" means any agreement between Government and the
        Corporation, in respect of any Entrusted Works.

        "Entrustment Brief" means, in relation to each Entrustment Agreement,
        that part describing the full scope of the item(s) of the Entrusted
        Works to which such Entrustment Agreement relates.

        "Essential Public Infrastructure Works" means any item of work
        associated with East Rail Extensions described as such in Appendix 1, as
        may be amended or varied from time to time in accordance with Clause
        11.6, which is deemed or to be deemed by Government to be necessary to
        enable East Rail Extensions to be opened for Commercial Operations or
        has a significant interface with any item of Railway Construction Works,
        the design, construction and finishes of which are to be procured

                                       -3-

<PAGE>

        by the Corporation to the satisfaction of Government and following
        completion of which shall be handed over to Government, and which
        Government shall own, manage, maintain and control.

        "Hong Kong" means the Hong Kong Special Administrative Region of the
        People's Republic of China.

        "Light Rail" shall have the same meaning as "North-west Railway" in the
        Ordinance.

        "Memorandum of Agreement" means the memorandum of agreement dated 28
        September 1994, between Government and the Corporation in relation to
        certain aspects of the design, construction and operation of East Rail
        and Light Rail and any amended document in replacement of that
        Agreement.

        "Operating Date" means any of the dates on which any of the East Rail
        Extensions commences Commercial Operations as the context requires.

        "Ordinance" means the Kowloon-Canton Railway Corporation Ordinance (Cap.
        372 of the Laws of Hong Kong).

        "Proposed Development Sites" means the sites above or as the case may
        be, adjacent to Tai Wai Station, Tai Wai Maintenance Centre, Wu Kai Sha
        Station, Che Kung Temple Station, Fo Tan Station and Ho Tung Lau
        identified by the Corporation for property development.

        "Public Body" means any District Council, any bureau or department of
        Government, any undertaking by or of Government, the MTR Corporation
        Limited, the Housing Authority and any other public or statutory
        authority and any successor or replacement of such body.

        "Railway Construction Works" means the architectural, civil, structural,
        electrical and mechanical engineering works, trackwork,
        telecommunications and other communications systems, signalling and
        control systems, rolling stock and maintenance equipment necessary for
        the planning, design, construction, testing, commissioning and operation
        of East Rail Extensions, as the context requires. Including, without
        limitation the provisions and works set out in paragraph 1(A)1.2 in
        Appendix 1.

        "RDSCOM" means the Railway Development Steering Committee of Government.

        "Regulations" means the Kowloon-Canton Railway Corporation Regulations
        (Cap. 372 sub. leg. A of the Laws of Hong Kong).

        "Reprovisioning, Remedial and Improvement Works" means the removal and
        replacement, modification or improvement of existing facilities owned by
        Public Bodies or any person, body of persons, corporate or incorporate
        affected by, or required as a

                                       -4-

<PAGE>

        consequence of, the construction of East Rail Extensions, a
        non-exhaustive list of which is set out in Appendix 1, as may be amended
        or varied from time to time in accordance with Clause 11.7, and
        following completion of which shall be owned, managed, maintained and
        controlled by such person, body of persons, corporate or incorporate or
        Public Bodies as the case may be.

        "Scheduled Operating Date" means any of the dates on which any one of
        the East Rail Extensions is scheduled to commence Commercial Operations
        as set out in the Baseline Programme as the context requires.

        "Scope of Works" means the East Rail Extensions Works, the Essential
        Public Infrastructure Works and the Reprovisioning, Remedial and
        Improvement Works.

        "Sub-Contractor" means a sub-contractor of any tier employed in
        connection with the Scope of Works.

        "Tai Wai Maintenance Centre" means the maintenance centre to be located
        at Tai Wai for the purposes of carrying out all repair and maintenance
        functions (including, for the avoidance of doubt, the maintenance of all
        infrastructure, railway operating systems, plant and other
        railway-related assets, and the stabling of rolling stock) and other
        storage functions which are essential for the operation of the MOS Rail.

        "Works Areas" means land temporarily required by the Corporation or its
        consultants, agents or contractors to facilitate the construction of
        East Rail Extensions, as the context requires.

1.2     Any reference in this Agreement to:

        a "day" means a calendar day unless the context otherwise requires;

        "grant" shall, where the context so admits, be construed so as to
        include a grant of land by private treaty, a grant of land or of rights
        over land by way of vesting pursuant to Section 7A of the Ordinance, a
        modification of an existing private treaty grant, a surrender of an
        existing private treaty grant or vesting of land and a re-grant by way
        of private treaty in respect thereof;

        a "month" is a reference to a calendar month; and

        a "person" shall be construed as a reference to any person, firm,
        company, corporation or any association or partnership or joint venture
        (whether or not having separate legal personality) of two or more of the
        foregoing.

1.3     Where words and expressions appearing in this Agreement are defined in
        the Ordinance or the Regulations, they shall have the meanings assigned
        to them in the Ordinance or the Regulations unless otherwise stated.

                                       -5-

<PAGE>

1.4     Save where the contrary is indicated, any reference in this Agreement
        to:

        (i)     this Agreement or any other agreement or document shall be
                construed as a reference to this Agreement or, as the case may
                be, such other agreement or document as the same may have been,
                or may from time to time be, amended, varied, novated or
                supplemented and shall include any document which is
                supplemental to, is expressed to be collateral with or is
                entered into pursuant to or in accordance with the terms of this
                Agreement, or as the case may be, such other agreement or
                document;

        (ii)    a statute or statutory provision or subsidiary legislation shall
                be construed as a reference to the same as it may have been, or
                may from time to time be, amended, modified or re-enacted;

        (iii)   a statute shall include any and all subsidiary legislation made
                under such statute;

        (iv)    a "Recital", "Clause", "Part", "Appendix" or a "paragraph" is a
                reference to a Recital hereto, a Clause hereof, a Part hereof,
                an Appendix hereto or a paragraph in the Clause or Appendix in
                which it appears;

        (v)     the singular shall include the plural and vice versa, and

        (vi)    one gender shall include all genders.

1.5     Clause, Part and Appendix headings are for ease of reference only and do
        not affect the interpretation of this Agreement.

1.6     Terms defined in any Appendix to this Agreement and not otherwise
        defined herein shall bear the meaning ascribed to them in such Appendix.

                                       -6-

<PAGE>

                                     PART II
                        FINANCING OF EAST RAIL EXTENSIONS

2.      FINANCIAL UNDERTAKINGS

2.1     The Corporation shall bear and finance the full amount of the Capital
        Cost and shall from time to time, promptly upon demand of Government,
        reimburse Government with all costs referred to in Clause 21 which have
        been incurred.

2.2     The Capital Cost Estimate as at the date of this Agreement which is set
        out in Appendix 3 (as amended from time to time) is annexed hereto for
        illustrative purposes only and shall not be binding on either party.

2.3     Government shall co-operate fully with the Corporation in respect of all
        the Corporation's reasonable requirements for information and assistance
        of a non-financial nature, so as to enable the Corporation to finance
        the completion of East Rail Extensions.

3.      THE CORPORATION'S FUNDS

3.1     The Corporation shall apply its internal funds towards meeting the
        Capital Cost.

3.2     Government shall procure that any approval by the Financial Secretary
        which is required to be given to the Corporation in relation to the
        application of its profits to finance East Rail Extensions be so given.

4.      COMMERCIAL DEBT

4.1     The Corporation shall, when it thinks fit after the execution of this
        Agreement, raise, and shall thereafter maintain, commercial financing to
        finance the balance of the total cost of works required to complete East
        Rail Extensions and commence Commercial Operations which exceeds the
        aggregate of (i) its internal funds referred to in Clause 3.1 and (ii)
        the total equity contributions made by Government in accordance with
        Clause 5.

5.      GOVERNMENT EQUITY

5.1     The Corporation pursuant to a notice in writing dated 2 March 2001 by
        the Financial Secretary given under the Ordinance to the Corporation to
        make an allotment, allotted a total of 80,000 shares of par value
        $100,000 each to Government at par on 9 March 2001.

5.2     Each share allotted to Government pursuant to Clause 5.1 has been so
        allotted and paid up as to $100,000.

                                       -7-

<PAGE>

                                    PART III
                              PROPERTY DEVELOPMENTS

6.      PROPERTY DEVELOPMENTS

6.1     Subject to the approval of the Chief Executive in Council or the
        Director of Lands and, where appropriate, the Town Planning Board, the
        Corporation shall be permitted to undertake commercial and/or
        residential property developments to be specified at the Proposed
        Development Sites. The land required for such property development shall
        be granted to the Corporation by private treaty, subject to the
        following conditions:

        (i)     the development shall be discussed with the Corporation and
                shall be in such form as may be prescribed by Government and,
                where appropriate, the Town Planning Board;

        (ii)    the development shall be subject to a grant by private treaty
                for a term of 50 years in a form and containing such conditions
                as may be prescribed by Government;

        (iii)   subject to Clause 6.4, the Corporation shall pay a premium to
                Government to be assessed by the Director of Lands at full
                market value as at the date of such grant in respect of each
                such development;

        (iv)    the Corporation shall pay an annual rent from the date of the
                grant by private treaty equivalent to three per cent (3%) of the
                rateable value from time to time of the lot the subject of such
                grant; and

        (v)     any other terms and conditions as the Director of Lands may
                impose.

The proposed possession dates for such developments shall be agreed as soon as
practicable.

6.2     Government and the Corporation agree that the costs relating to the
        design, construction and completion of the property developments
        referred to in Clause 6.1 will be the responsibility of the Corporation
        save as otherwise agreed between Government and the Corporation. The
        Corporation shall in addition be responsible for the payment of any
        premium assessed in accordance with this Clause 6.

6.3     Subject to Clause 6.1(ii), Government and the Corporation shall use
        their respective reasonable endeavours to agree the terms and conditions
        of the grants by private treaty (including the land premium) for each
        Proposed Development Site with a view to the Corporation commencing the
        property development thereon on the proposed development possession
        dates to be agreed pursuant to Clause 6.1. There shall be one grant by
        private treaty only for each Proposed Development Site, notwithstanding
        that the property development thereon may take place in phases and the
        premium therefore

                                       -8-

<PAGE>

        may be payable in portions in accordance with Clause 6.4.

6.4     In respect of a grant by private treaty in relation to any of the
        Proposed Development Sites where it is agreed that property development
        will take place in phases, Government and the Corporation agree that a
        premium shall be payable by the Corporation pursuant to such grant in
        respect of each such phase. The premium relating to the first phase of
        each such development shall be assessed on the basis referred to in
        Clause 6.1(iii) and the premium relating to each further phase shall be
        assessed by reference to the current full market valuation of the
        relevant phase at the date for payment of such premium stipulated in the
        relevant grant by private treaty in respect of such Proposed Development
        Site.

6.5     Without prejudice to any other provision of this Agreement, Government
        shall use its reasonable endeavours to assist with the procuring of all
        necessary licences, consents and other permissions and approvals
        including, without limitation, planning approvals, required for or in
        connection with the design, construction, completion and pre-sale of the
        proposed developments referred to in Clause 6.1.

7.      PROPERTY DEVELOPMENT PROFITS

7.1     Property development profits of each development whether in cash or in
        kind shall be deemed to be the Corporation's share of the net profit as
        defined in the joint venture agreement pertaining thereto.

7.2     Property development profits of a development whether in cash or in kind
        not the subject of a joint venture shall be deemed to be the profit
        realised net of any premium paid and development costs including
        consultation and legal fees.

7.3     Without prejudice to the provisions of clause 29.3, the Corporation
        shall also maintain such accounts as would permit verification of the
        figures at the end of each financial year in relation to each of the
        developments on the Proposed Development Sites until the sum referred to
        in clause 8.1 (a) has been applied as therein stated or such other date
        as the parties agree.

8.      TREATMENT OF PROFITS

8.1     Government and the Corporation agree that all property development
        profits which accrue to the Corporation in respect to the property
        developments at the Proposed Development Sites shall be applied in the
        following manner :

        (a)     a sum of *** to support the Corporation's financial position.

        (b)     any sum in excess of (a) above to be distributed to Government
                in full by means of extraordinary dividends, unless it is
                required to finance other railway projects.

*** Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

                                       -9-

<PAGE>

9.      MANAGEMENT OF PROPERTY DEVELOPMENT SITES

9.1     The terms and conditions of the grant by private treaty of each of the
        Proposed Development Sites shall provide for the Corporation to manage
        and maintain the completed developments subject to a deed of mutual
        covenant incorporating a management agreement to be approved by the
        Director of Lands specifying the responsibilities of the Corporation and
        subject to the Building Management Ordinance (Cap.344 of the Laws of
        Hong Kong).

                                      -10-

<PAGE>

                                    PART IV
                SCOPE OF WORKS, PLANNING, DESIGN AND CONSTRUCTION

10.     GENERAL

10.1    The design, construction, completion, testing, commissioning, operation
        and maintenance of East Rail Extensions shall reflect the Corporation's
        responsibilities and duties under the Ordinance and this Agreement.

11.     SCOPE OF WORKS

11.1    The Corporation shall carry out the design, construction, completion,
        testing and commissioning of the East Rail Extensions Works and shall
        bring into operation, operate and maintain East Rail Extensions in
        accordance with this Agreement and the Memorandum of Agreement.

11.2    The Corporation shall, to the satisfaction of Government, design,
        construct and complete the Essential Public Infrastructure Works at
        Government's cost, subject to the necessary approvals having been
        obtained in accordance with the specifications and/or standards and
        payment methods agreed with Government prior to commencement. For the
        avoidance of doubt, the Public Transport Interchanges for the MOS Rail
        are subject to the terms and Technical Schedules in the relevant grants
        by private treaty governing the specifications and/or standards as well
        as ceiling cost. The Corporation shall complete the Public Transport
        Interchanges, make them fit for occupation and operation for public use
        on or before the date of the respective Operating Dates.

11.3    The Corporation shall, to the satisfaction of Government or, as
        appropriate, the relevant Public Body or private owner, design,
        construct and complete the Reprovisioning, Remedial and Improvement
        Works at the Corporation's cost in accordance with specifications and/or
        standards agreed with Government or the relevant Public Body or private
        owner, prior to the commencement of the construction of Reprovisioning,
        Remedial and Improvement Works.

11.4    The Corporation shall, for the Defects Liability Periods specified in
        the Construction Contracts in respect of the Essential Public
        Infrastructure Works and the Reprovisioning, Remedial and Improvement
        Works, remedy any defects of the relevant Construction Contractor. Prior
        to the expiry of each Defects Liability Period in respect of the
        aforesaid Construction Contracts, the Corporation will procure that the
        relevant Construction Contractor gives a direct collateral warranty to
        Government, upon reasonable terms and conditions satisfactory to, and
        agreed with, Government (such agreement not to be unreasonably
        withheld), on the relevant works from the date of expiry of such Defects
        Liability Period. The Corporation will also procure that all design
        consultants employed or engaged in connection with the design of any
        part of the Essential Public Infrastructure Works and the
        Reprovisioning, Remedial and Improvement Works give a direct collateral
        warranty to Government, upon terms and

                                      -11-

<PAGE>

        conditions reasonably satisfactory to Government, in respect of the
        relevant designs.

11.5    Government and the Corporation agree that, subject to Clauses 11.6 and
        11.7, the Scope of Works may only be amended in writing signed by both
        parties.

11.6    Government shall consult and agree with the Corporation in relation to
        any amendment or variation which Government intends to be required to be
        made to the Essential Public Infrastructure Works in accordance with the
        relevant Entrustment Agreement.

11.7    Subject to Clause 11.8, Government shall consult the Corporation in
        relation to any amendment or addition which Government intends to be
        required to be made to the Reprovisioning, Remedial and Improvement
        Works. In the event that the Corporation does not agree with any
        amendment or addition proposed by Government, it shall notify Government
        promptly (and, in any event, within twenty one days of receipt of the
        notification from Government and, in the absence of any such
        notification within such timeframe, the Corporation shall implement such
        amendment or addition required by Government in accordance with its
        obligations under Clause 11.3) in writing of the difference and the
        reasons for such difference and Government and the Corporation shall use
        their respective best endeavours to reach agreement as soon as
        practicable thereafter. Failing agreement within twenty-one days of such
        notification of difference, the Corporation shall implement such
        amendment or addition required by Government in accordance with its
        obligations under Clause 11.3.

11.8    In the event that the Corporation considers that any amendment to the
        Reprovisioning, Remedial and Improvement Works required by Government to
        be implemented pursuant to Clause 11.7 will entail the amendment of any
        Construction Contract that has been executed in respect of such
        Reprovisioning, Remedial and Improvement Works and will result in the
        Corporation incurring additional costs payable to the relevant
        Construction Contractor, the Corporation shall advise Government
        promptly. The Corporation shall submit, as soon as is practicable, in
        writing to Government for its consideration a claim setting out the
        additional costs which it considers will be incurred together with all
        relevant and supporting details as may reasonably be required by
        Government to enable Government to make a proper assessment of such
        claim. Within sixty days after receipt by Government of such claim
        together with all such relevant and supporting details as may reasonably
        be required by Government, Government shall notify the Corporation in
        writing whether or not the claim is accepted, and whether such
        acceptance is whole or in part. Government shall certify the amount of
        costs so accepted. Upon receipt of such certification, the Corporation
        shall then be entitled to submit the relevant invoices (up to the amount
        so certified) in respect of such amendment of the relevant Construction
        Contract to Government. Failing notification of acceptance of such claim
        within 90 days of submission of relevant supporting details, or where
        only partial acceptance has been notified, the Corporation shall be
        entitled to notify a dispute in relation to the matter. In the event of
        any dispute as to the amount of such additional costs, Government and
        the Corporation shall use their respective best endeavours to reach
        agreement as soon as practicable thereafter. Failing agreement within
        twenty-one days

                                      -12-

<PAGE>

        of such notification given by one party to another, the dispute shall be
        settled in accordance with Clause 42.

11.9    The Corporation shall not, without the prior written consent of
        Government, amend or agree to amend in any material manner any
        Construction Contract executed pursuant to the agreement between
        Government and the Corporation in respect of any Reprovisioning,
        Remedial and Improvement Works. Any additional costs which result from
        any amendment to any Construction Contract in respect of any
        Reprovisioning, Remedial and Improvement Works which derives from a
        change to such works proposed by the Corporation shall be borne by the
        Corporation.

12.     PLANNING AND DESIGN

        The design of East Rail Extensions shall be based upon the Corporation's
        forecast of patronage of, and demand for, East Rail Extensions. The
        Corporation undertakes that, in the course of such forecasting, it will
        consult and liaise with Government with the intention of agreeing with
        Government a set of parameters of such forecasting of patronage of, and
        demand for, East Rail Extensions.

13.     CORPORATION'S SKILL & CARE WARRANTY

        The Corporation warrants that the Essential Public Infrastructure Works
        and the Reprovisioning, Remedial and Improvement Works shall be
        designed, constructed and completed with the skill and care to be
        expected from, and shall be designed, constructed and completed by
        utilising such equipment and materials to be expected by, a professional
        design engineer and a competent and workmanlike construction contractor
        and to the standards as may be agreed between Government and the
        Corporation.

14.     GOVERNMENT'S OBLIGATION

14.1    Government shall, to the extent necessary to enable the Corporation to
        carry out the planning, design and construction of East Rail Extensions,
        carry out the activities and tasks which it has undertaken pursuant to
        this Agreement with expedition, and complete such activities and tasks
        in a timely manner so as to meet the Corporation's programme objectives.

14.2    Government shall take all reasonable steps to do all things necessary so
        that by the date the Spur Line commences Commercial Operations, all
        appropriate cross-boundary services and facilities provided by
        Government, including immigration clearance facilities are in a state of
        readiness to process passengers crossing the boundary in both
        directions.

15.     INSURANCE

15.1    The Corporation will effect and maintain at its own cost and expense
        with reputable

                                      -13-

<PAGE>

        insurers or will procure from all Construction Contractors and
        Sub-Contractors employed or engaged in connection with any part of the
        Scope of Works contractors' all risks insurances, third party liability
        insurance and such other insurances as may be required by law from time
        to time. Contractors' all risks insurance, third party liability
        insurance and such other insurances effected and maintained by the
        Corporation in accordance with this Clause shall in each case be for the
        benefit and in the joint names of the Corporation as owner, Government
        and all Construction Contractors of any tier and Sub-Contractors. In the
        case of Entrusted Works, the provision of insurance shall be subject to
        the Entrustment Agreement.

15.2    The Corporation shall at its own cost and expense procure that
        Construction Contractors and Sub-Contractors which have a significant
        design responsibility in the execution of their relevant Construction
        Contracts, and all design consultants employed or engaged in connection
        with the design of any part of the Scope of Works, effect and maintain
        with reputable insurers professional indemnity insurance for a period of
        six years from the respective Operating Dates. Provided that, to the
        extent that at any time of placement or renewal in the international
        insurance market thereof such professional indemnity insurance is not
        available at commercially reasonable rates, the Corporation may notify
        Government and shall agree with Government alternative requirements in
        place of the foregoing requirements of this Clause.

15.3    The Corporation shall use all reasonable endeavours to ensure that no
        actions shall be taken or omitted or suffer anything to be done or
        omitted by it or its Construction Contractors, Sub-Contractors of any
        tier or agents as a result of which any insurance policy or part thereof
        effected in accordance with this Clause may be avoided, forfeited,
        revoked or withdrawn.

                                      -14-

<PAGE>

16.     ENTRUSTED WORKS

16.1    The respective rights and obligations of the Corporation and Government
        in relation to the Entrusted Works shall be governed by a separate
        Entrustment Agreement. For the avoidance of doubt, an Entrustment
        Agreement has already been executed between the Corporation and
        Government on the Essential Public Infrastructure Works listed in
        Appendix 1.

16.2    For the avoidance of doubt, the proposed Public Transport Interchanges
        for MOS Rail are subject to the grants by private treaty for the
        proposed development sites at Tai Wai Station and Wu Kai Sha Station.

17.     CONSTRUCTION SAFETY

        The Corporation shall, in the execution of all works undertaken by it
        under this Agreement, give safety considerations the highest priority.
        Pursuant thereto, the Corporation shall procure that safety plans and
        safety audits procedures are incorporated in all of its Construction
        Contracts and shall include in any report to be provided to the
        committee referred to in Clause 28 all details of such safety measures
        employed and their ongoing implementation.

18.     ALLOWANCES FOR FUTURE EXTENSIONS

        The Corporation shall, in the design and construction of East Rail
        Extensions, make such allowance as is set out in the Scope of Works to
        provide for future railway extensions.

                                      -15-

<PAGE>

                                     PART V
                             PROGRAMME AND PROGRESS

19.     BASELINE PROGRAMME

19.1    The Corporation shall prepare the Baseline Programme to demonstrate how,
        the Corporation proposes to execute the East Rail Extensions which are
        included in the Scope of Works up to the last of the Scheduled Operating
        Dates.

19.2    Government shall use reasonable endeavours to make land available to the
        Corporation for the implementation of East Rail Extensions, and notify
        the Corporation as soon as is practicable of any change to the timing of
        the availability of such land. The Corporation shall use reasonable
        endeavours to minimise the effects of any such change upon the Baseline
        Programme, and prepare revisions to the Baseline Programme which shall
        be agreed with Government (such agreement not to be unreasonably
        withheld).

19.3    The Corporation shall review the Baseline Programme annually and,
        without prejudice to Clause 19.2, incorporate into the Baseline
        Programme any changes in the Scope of Works and any changes to the
        programme and timing of the East Rail Extensions each of which has been
        previously agreed with Government, such agreement of Government not to
        be unreasonably withheld.

19.4    The Corporation shall prepare and produce the Baseline Programme to a
        level of detail agreed with Government using agreed programming logic
        and computer software specified by the Corporation such that Government
        may at all times readily monitor the Corporation's progress of the Scope
        of Works against the Baseline Programme.

19.5    The Corporation shall use its best endeavours to complete the Scope of
        Works in accordance with the programme timing set out in the Baseline
        Programme so as to enable East Rail Extensions to commence Commercial
        Operations on or before the relevant Scheduled Operating Dates.

19.6    Without prejudice to the foregoing provisions of this Clause 19, a
        summary of the Baseline Programme as at the date of this Agreement is
        set out in Appendix 2 and may be amended from time to time pursuant to
        revisions to the Baseline Programme under the foregoing provisions of
        this Clause.

                                      -16-

<PAGE>

                                    PART VI
                            OPERATION AND MAINTENANCE

20.     OPERATION AND MAINTENANCE

20.1    Government and the Corporation agree that East Rail Extensions will be
        owned and operated by the Corporation for its own account from the
        respective Operating Dates until the end of the period referred to in
        Clause 23.1(ii), in accordance with the Ordinance, the Memorandum of
        Agreement and this Agreement.

20.2    Government and the Corporation shall make such amendments to the
        Memorandum of Agreement as may be necessary in order to take into
        consideration the East Rail Extensions.

                                      -17-

<PAGE>

                                    PART VII
                                      LAND

21.     LAND ACQUISITION

21.1    The Corporation shall bear all land acquisition and clearance costs as
        well as the related costs, of whatsoever nature and howsoever caused,
        arising from the implementation of East Rail Extensions Works and
        Reprovisioning, Remedial and Improvement Works including, but not
        limited to, the costs and amounts referred to in Clauses 21.2, 21.3,
        21.4 and 21.5.

21.2    The Corporation acknowledges and agrees that compensation for land
        resumed for the purpose of the East Rail Extensions Works and
        Reprovisioning, Remedial and Improvement Works will, where appropriate,
        be assessed in accordance with the relevant zonal rate prevailing at the
        time of reversion fixed by Government. Government reserves the right to
        make whatever changes it deems necessary to the zonal rates or zonal
        boundaries or to all or any other form of ex-gratia allowances payable
        on resumption and clearance, and to their respective application to East
        Rail Extensions Works and Reprovisioning, Remedial and Improvement Works
        and shall inform the Corporation of any such changes thereto.

21.3    The Corporation shall bear all costs, expenses and other amounts that
        have been, are now or may from time to time be incurred or paid by the
        Lands Department pursuant to the involvement of the Lands Department in
        connection with the implementation of East Rail Extensions Works and
        Reprovisioning, Remedial and Improvement Works and all property
        development proposed to be undertaken by the Corporation at the Proposed
        Development Sites. These costs include, but are not limited to, staff
        costs, accommodation, equipment, office rent, departmental expenses and
        administrative overheads as determined in accordance with the guidelines
        set out in the costing manual issued by the Treasury a copy of which
        being made available to the Corporation. The Corporation may seek
        justification from Government with regard to such costs prior to
        settlement.

21.4    The Corporation shall bear the costs of, and carry out, all demolition
        and clearance and disposal of buildings and structures and the
        excavation and disposal of all unsuitable materials which are necessary
        in order to implement East Rail Extensions Works and Reprovisioning,
        Remedial and Improvement Works and the Government shall bear the costs
        of all demolition and clearance and disposal of buildings and structures
        and the excavation and disposal of all unsuitable materials for the site
        area for the construction of Essential Public Infrastructure Works.

21.5    The Corporation shall bear the costs of and, where appropriate, shall
        carry out all procedures and works of whatsoever nature required by
        Government as a result of land resumption and clearance involving
        compensation on the basis of village removal terms.

                                      -18-

<PAGE>

21.6    Government shall use reasonable endeavours to notify as soon as is
        practicable the Corporation of any amendment or change in connection
        with the cost of making land available.

22.     LAND FOR RAILWAY CONSTRUCTION

        Subject to such terms and conditions and, in such form, as may be
        prescribed by Government, the Corporation may occupy land required for
        the purpose of the construction of East Rail Extensions Works and
        Reprovisioning, Remedial and Improvement Works. Such occupation may
        include but shall not be limited to the taking over of such land and the
        responsibility for the maintenance and security thereof during the
        period such land is required for the purpose of the East Rail Extensions
        Works and Reprovisioning, Remedial and Improvement Works. Land no longer
        required for the East Rail Extensions Works or for the operational
        purposes of the railway shall be handed back to Government.

23.     LAND FOR OPERATIONAL RAILWAY

23.1    Subject to:

        (i)     the approval of the Chief Executive in Council or where
                appropriate, the Director of Lands, the Government shall,
                (except for the land required for the Tai Wai Maintenance
                Centre) in respect of land at the Proposed Development Sites
                that is also required for the operational purposes of East Rail
                and East Rail Extensions issue grants by private treaty of 50
                years to the Corporation; and

        (ii)    the provisions of the Ordinance, Government shall save in the
                case of Tai Wai Maintenance Centre vest in the Corporation all
                other land or such other interests or rights in respect of land
                as are required for the operational purposes of East Rail
                Extensions in accordance with the provisions of the Ordinance
                for a term of 50 years from the dates of vesting.

23.2    The Corporation shall pay an annual rent in respect of the land or, as
        the case may be, interests or rights in respect of land referred to in
        Clause 23.1(ii) from the date of vesting of such land or, as the case
        may be, such other interests or rights in respect of land or the
        relevant Operating Date, whichever is the earlier, equivalent to three
        per cent. (3%) of the rateable value from time to time of such land or,
        as the case may be, interests or rights in respect of land. Provided
        that nothing herein shall preclude the Commissioner for Rating and
        Valuation from choosing an alternative method in assessing East Rail (of
        which East Rail Extensions form part) for rating and Government rent
        purposes in which event such alternative method will prevail.

23.3    The Corporation shall, subject to the approval of the Chief Executive in
        Council, be granted by private treaty a site for Tai Wai Maintenance
        Centre, subject to the following conditions:

                                      -19-

<PAGE>

        (i)     the description of the use of such site shall be as agreed
                between Government and the Corporation;

        (ii)    such grant by private treaty shall be for a term of 50 years and
                shall be in a form and shall contain such conditions as may be
                prescribed by Government;

        (iii)   the Corporation shall pay to Government the greater of:

                (a)     a premium assessed by the Director of Lands on the basis
                        of the full industrial value of the site as at the date
                        of grant of such site save that where the actual plot
                        ratio is less than one, such assessment shall be on the
                        basis that the plot ratio is deemed to be equal to one;
                        or

                (b)     an amount determined by Government to be equal to the
                        costs of making the site available to the Corporation,
                        where such costs shall include, but not be limited to,
                        the costs and amounts referred to in Clause 21
                        (disregarding for this purpose the costs, expenses and
                        other amounts referred to in Clause 21.3) and the cost
                        of those Reprovisioning, Remedial and Improvement Works
                        which Government has determined are required to be
                        undertaken in order to make such site available to the
                        Corporation for the purposes of such grant,

                Provided that the amount payable by the Corporation in respect
                of such grant by private treaty shall take into account, and be
                net of, any and all such costs and amounts referred to in (b)
                above that have been paid by the Corporation in respect of
                Clause 21 and such Reprovisioning, Remedial and Improvement
                Works;

        (iv)    the Corporation shall pay an annual rent from the date of the
                grant by private treaty equivalent to three per cent. (3%) of
                the rateable value from time to time of the lot which is subject
                of such land grant; and

        (v)     any other terms and conditions as the Director of Lands may
                impose.

24.     COMMERCIAL ACTIVITIES WITHIN EAST RAIL EXTENSIONS STATIONS

24.1    The Corporation shall be permitted to carry out commercial activities on
        East Rail Extensions railway premises in accordance with the powers
        conferred upon it by the Ordinance.

24.2    A station terminal building will be constructed by the Corporation at
        its own expense at Lok Ma Chau upon the vesting of which in the
        Corporation, a nil premium will be payable. The Corporation agrees that
        the Government shall be entitled to occupy, free of rental but subject
        to management, maintenance and other related charges to be

                                      -20-

<PAGE>

        agreed, such portion of the station terminal building as shall be agreed
        between the Corporation and Government from time to time for the purpose
        of providing Government services which shall include but shall not
        necessarily be confined to the Police, the Customs and Excise Department
        and the Immigration Department.

                                      -21-

<PAGE>

                                    PART VIII
                            ENVIRONMENTAL PROTECTION

25.     ENVIRONMENTAL PROTECTION

25.1.1  In this Clause, the "Rail Area" means all the land and other interests
        or rights whether vested in, or granted by private treaty grants to, the
        Corporation pursuant to Clause 23 (excluding all property developments
        in respect thereof referred to in Clauses 6 and 23.3).

25.1.2  The Corporation shall, at its own cost, carry out environmental impact
        assessment studies relating to the design, construction, operation and
        maintenance of East Rail Extensions (and where necessary in respect of
        areas outside the Rail Area provided that such areas are contiguous to
        and need to be considered environmentally as part of the Rail Area when
        conducting an environmental study), in accordance with all statutory
        requirements.

25.2    The Corporation shall implement all mitigation measures, environmental
        monitoring and audit programmes and all Environmental Impact Assessment
        Report recommendations pursuant to approved Environmental Impact
        Assessment Reports in accordance with all Environmental Permits and
        other statutory requirements in force from time to time including
        without limitation all environmental legislation and related technical
        memoranda in force from time to time in Hong Kong.

                                      -22-

<PAGE>

                                     PART IX
                                    TRANSPORT

26.     CO-ORDINATION AND USE OF EAST RAIL EXTENSIONS

        Government shall, in accordance with its declared policy, encourage use
        of East Rail Extensions and shall take all reasonable action related to
        such usage to ensure appropriate co-ordination between the various
        transport modes. Government acknowledges the importance of easy access
        to East Rail Extensions Stations and agrees to use reasonable endeavours
        to plan its road and highway systems and traffic engineering schemes to
        facilitate reasonable access by the public to East Rail Extensions
        Stations.

27.     TRANSPORT INTERCHANGES

27.1    The Corporation shall consult and liaise with all relevant transport
        operators and Government to establish the function, capacity, layout and
        details of passenger interchange facilities including, without
        limitation, public transport interchanges to be designed and constructed
        as Essential Public Infrastructure Works by the Corporation at East Rail
        Extensions Stations to be specified.

27.2    Subject to clause 27.3, the pedestrian interchange subways including
        subways underneath Mody Road, Blenheim Avenue and Middle Road for the
        purposes, inter alia, of allowing pedestrians from Tsim Sha Tsui and
        East Tsim Sha Tsui to have access to the East Tsim Sha Tsui station
        ("pedestrian interchange subways"), shall be managed, operated and
        maintained by the Corporation at a cost to be agreed by Government. The
        Corporation shall establish operation and emergency procedures for the
        pedestrian interchange subways. The Corporation shall consult and obtain
        agreement from the relevant Government Departments and MTR Corporation
        Limited on the details of the procedures.

27.3    In the event that mutual agreement on the management, operation and
        maintenance of the pedestrian interchange subways and the cost thereof
        has not been reached between Government and the Corporation by 28
        February 2003, Government shall be at liberty by notice in writing to
        entrust such management, operation and maintenance to a third party or
        to manage, operate and maintain the pedestrian interchange subways
        itself.

                                      -23-

<PAGE>

                                     PART X
                         PROJECT MONITORING AND ACCOUNTS

28.     GOVERNMENT MONITORING

28.1    The Corporation agrees to provide to Government on a monthly basis a
        report on (i) the engineering progress against programme; and, (ii) the
        cost of the Scope of Works against budget.

28.2    The Secretary for the Environment, Transport and Works may from time to
        time appoint a committee to monitor:-

        (i)     the design, construction, completion and financing of East Rail
                Extensions;

        (ii)    the progress of the design, construction and completion of East
                Rail Extensions according to the Baseline Programme; and

        (iii)   the project costs according to the Capital Cost Estimate.

28.3    The Secretary for the Environment, Transport and Works shall decide the
        membership and terms of reference of such committee. The Corporation
        shall co-operate with Government in all aspects of the monitoring of the
        design, construction, completion, financing, programme and cost controls
        of East Rail Extensions.

29.     ACCOUNTS, RECORDS AND INFORMATION

29.1    The Corporation shall keep proper books and accounts, records and
        information for the purposes of the design, construction, completion,
        financing and operation of East Rail Extensions and shall provide such
        accounts, records and information to Government forthwith upon request
        by Government.

29.2    The books and accounts shall include such details as may be necessary to
        enable the Corporation to furnish the information to Government pursuant
        to Clause 28 above.

29.3    For the period commencing on the date hereof and ending on the last of
        the relevant Operating Dates, the Corporation shall prepare its annual
        report and maintain its accounts such that the separate costs of
        designing, constructing and financing East Rail Extensions may be
        readily identified. Government may request the Corporation to deliver to
        Government such financial statements, for such periods of time to be
        specified, which shall have been audited by a certified public
        accountant or a public accountant registered under the Professional
        Accountants Ordinance (Cap. 50 of the Laws of Hong Kong).

                                      -24-

<PAGE>

29.4    The Corporation shall deliver to Government such other information which
        Government may reasonably require relating to any financial statements
        delivered pursuant to Clause 29.3.

                                      -25-

<PAGE>

                                     PART XI
                                  MISCELLANEOUS

30.     UTILITY SERVICES

        The Corporation agrees that Government shall not be liable to the
        Corporation for any failure of whatsoever nature to perform or
        inadequate or delayed performance by the owner of any gas, electricity,
        water or telecommunication service apparatus situated on any unleased
        Government land of any works required to be carried out by such owner
        pursuant to a notice given to such owner by the Secretary for the
        Environment, Transport and Works under Section 25(1) of the Railways
        Ordinance (Cap. 519 of the Laws of Hong Kong).

31.     THE ORDINANCE

31.1    The Ordinance shall not be, or be deemed to be, amended or revoked in
        any respect by the provisions of this Agreement.

31.2    The Corporation shall comply with the provisions of the Ordinance
        notwithstanding anything to the contrary in this Agreement. Nothing in
        this Agreement shall oblige the Corporation to conduct its business in
        any manner or do any thing which is incompatible with the provisions of
        the Ordinance.

32.     INVALIDITY

        If at any time any provision or part of this Agreement is or becomes
        illegal, invalid or unenforceable in any respect under the law of any
        jurisdiction, such illegality, invalidity or unenforceability shall not
        affect or impair the legality, validity or enforceability in that
        jurisdiction of any other part of that provision or any other provision
        of this Agreement or, in any other jurisdiction, of that provision or
        part thereof or any other provision of this Agreement.

33.     NO PARTNERSHIP

        Nothing in this Agreement and no action taken by the parties pursuant to
        this Agreement shall constitute, or be deemed to constitute, the parties
        a partnership, association, joint venture or other co-operative entity.

34.     FURTHER ASSURANCE

        Each of the parties agrees that it shall, from time to time on being
        required to do so by the other party, now or at any time during the
        subsistence of this Agreement, do or procure the doing of all such acts
        and/or execute or procure the execution of all such documents in a form
        satisfactory to that other party as reasonably considered necessary by
        it for giving full effect to and the full benefit of the rights, powers
        and remedies

                                      -26-

<PAGE>

        conferred by this Agreement.

35.     AMENDMENTS

        Save as otherwise expressly provided in this Agreement, no provision of
        this Agreement may be amended, waived, discharged or terminated other
        than (in each case) by an instrument in writing signed by or on behalf
        of each of the parties hereto.

36.     WAIVER

        No failure to exercise, nor any delay in exercising, on the part of any
        party hereto, any right or remedy hereunder shall operate as a waiver
        thereof, nor shall any single or partial exercise of any right or remedy
        prevent any further or other exercise thereof or the exercise of any
        other right or remedy. The rights and remedies herein provided are
        cumulative and not exclusive of any rights and remedies provided by law.

37.     CONFLICT

37.1    In the event of any conflict between the provisions of this Agreement
        and the Appendices hereto, the provisions of this Agreement shall
        prevail.

37.2    In the event of any conflict between the provisions of this Agreement
        and any Entrustment Agreement made between Government and the
        Corporation on or before the date of this Agreement or any grants by the
        Government, the provisions of the Entrustment Agreement or grants shall
        prevail.

37.3    In the event of any conflict between the provisions of this Agreement
        and the Ordinance, the provisions of the Ordinance shall prevail.

38.     PAYMENTS

38.1    Any and all payments to be made by Government or the Corporation to the
        other under this Agreement shall be made in Dollars in such manner as
        specified in this Agreement or as may be otherwise agreed between
        Government and the Corporation from time to time.

38.2    Subject to the foregoing provisions of this Agreement, if any sum would
        otherwise become due for payment on a day which is not a Business Day,
        such sum shall become due on the next succeeding Business Day.

38.3    In the event of failure by either Government or the Corporation to pay
        any sum on the date on which such sum is expressed to be due hereunder,
        (whether legally or formally demanded or not), the defaulting party
        shall unless otherwise agreed, without prejudice to any remedies
        available to the other party hereunder or at law, or in equity, pay to
        the other party interest on such sum from the date of such failure up to
        the date of actual

                                      -27-

<PAGE>

        payment (as well after as before judgement) calculated at the rate per
        annum equal to one (1) per cent. over the best lending rate for Dollars
        quoted from time to time by The Hongkong and Shanghai Banking
        Corporation Limited or such other bank as may be agreed from time to
        time between Government and the Corporation.

38.4    Except as may be otherwise expressly provided herein, every sum payable
        by Government or the Corporation to the other shall be paid in full
        without set-off, counterclaim, condition or qualification of any nature
        and without any deduction or withholding for or on account of any taxes,
        levies, imposts, duties, charges or fees of any nature including,
        without limitation, by any provision of the Ordinance.

39.     CONFIDENTIALITY

39.1    Each of Government and the Corporation shall not, without obtaining the
        other party's prior consent, disclose any information of a confidential
        nature.

39.2    If it is uncertain as to whether any information could be disclosed,
        such information should only be disclosed after consultation with the
        other party.

40.     NOTICES

40.1    Any notices, certificates or other communications to Government in
        connection with this Agreement shall be sent to the Secretary for the
        Environment, Transport and Works at Murray Building, Garden Road,
        Central, Hong Kong (facsimile number: 2868 5261), or such other address
        or fax number, or to such other person, as may be notified by Government
        to the Corporation in accordance with the provisions of this Clause.

40.2    Any notices, certificates or other communications to the Corporation in
        connection with this Agreement shall be sent to it at KCRC House, No. 9,
        Lok King Street, Fo Tan, Shatin, New Territories and marked for the
        attention of the Company Secretary and General Counsel (facsimile
        number: 2688 0185), or such other address or fax number, as may be
        notified by the Corporation to Government in accordance with the
        provisions of this Clause.

40.3    All notices shall be in writing. Any notice delivered personally shall
        be deemed to have been given at the time of such delivery. Any notice
        sent by facsimile transmission shall be effective only on receipt. Any
        notice sent by post shall be deemed to have been given on the third
        Business Day after posting if correctly addressed and sent by prepaid
        surface mail within Hong Kong.

40.4    The English language is the ruling language of this Agreement and all
        correspondence, drawings, dates, certificates, information and notices
        delivered hereunder shall be in the English language.

                                      -28-

<PAGE>

41.     GOVERNING LAW AND JURISDICTION

41.1    This Agreement shall be governed by and construed in accordance with the
        laws of Hong Kong.

41.2    The parties agree that any separate agreement entered into between them
        referred to or contemplated by this Agreement shall be governed by and
        construed in accordance with the laws of Hong Kong.

42.     DISPUTE RESOLUTION

42.1    Any disputes or differences between Government and the Corporation
        occurring during the design, construction or commissioning of East Rail
        Extensions or arising under or in connection with this Agreement may be
        referred to a sub-committee of RDSCOM.

42.2    In the event that such conflict cannot be resolved between Government
        and the Corporation in conjunction with such sub-committee of RDSCOM,
        then the conflict shall be referred to RDSCOM for determination and both
        parties shall be given adequate opportunity to make representations to
        RDSCOM in writing and/or by personal attendance prior to RDSCOM making
        its determination.

42.3    The rights and remedies herein provided are cumulative and not exclusive
        of any rights or remedies provided by law.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed the day and year first above written.

                                      -29-

<PAGE>

                                 SIGNATURE PAGE

GOVERNMENT

SIGNED, SEALED and DELIVERED        )
by THE PERMANENT SECRETARY FOR THE  )
ENVIRONMENT, TRANSPORT AND WORKS    )
(ENVIRONMENT)                       )   [Signature]
for and on behalf of                )
GOVERNMENT OF HONG KONG             )
SPECIAL ADMINISTRATIVE REGION       )
in the presence of:-                )

/s/ William Shiu
----------------------
Witness   William Shiu

THE CORPORATION

The Seal of the KOWLOON-CANTON RAILWAY CORPORATION
is hereunto affixed by authority of the Managing Board;
and signed by

[SEAL]

/s/ K.Y. Yeung                      /s/ D.A. Fleming
------------------------            ---------------------
Authorised Signature                Authorised Signature
     K.Y. Yeung                        D.A. Fleming
Chief Executive Officer             Company Secretary

In the presence of

/s/ Flora Chan                      /s/ Esther Lo
------------------------            ---------------------
Witness    Flora Chan               Witness    Esther Lo

                                      -30-

<PAGE>

                                   Appendix I
                                 SCOPE OF WORKS

1.      EAST RAIL EXTENSIONS WORKS
        (subject to Clause 11.5)

        The East Rail Extensions Works include the following:

        (A)     RAILWAY CONSTRUCTION WORKS

        1.1     All railway works including architectural, civil, structural,
                electrical and mechanical engineering works, permanent way and
                traction power, signalling and control systems,
                telecommunications and other communication systems, automatic
                revenue collection systems, rolling stock and maintenance
                equipment necessary for the planning, design, construction,
                testing and commissioning and operation of East Rail Extensions,
                a twin track electrified railway in three separate sections,
                together totalling approximately 20 kilometres and comprising
                the following stations, depots, facilities and line sections.

        1.1.1   Spur Line

        .       Lok Ma Chau Terminus (including cross boundary facilities)
        .       Railway sections and infrastructure between Sheung Shui Station
                and Lok Ma Chau Terminus
        .       Overrun tracks beyond Lok Ma Chau Terminus
        .       Improvement to Sheung Shui Station
        .       Kwu Tung Station enabling works

        1.1.2   MOS Rail

        .       Tai Wai Maintenance Centre
        .       Tai Wai Station
        .       Che Kung Temple Station
        .       Sha Tin Wai Station
        .       City One Station
        .       Shek Mun Station
        .       Tai Shui Hang Station
        .       Heng On Station
        .       Ma On Shan Station
        .       Wu Kai Sha Station
        .       Railway sections and infrastructure between Wu Kai Sha Station
                and Tai Wai Station
        .       Overrun tracks from Tai Wai Station to Hin Keng and beyond Wu
                Kai Sha Station

        1.1.3   TST Extension

        .       East Tsim Sha Tsui Station
        .       Homantin High Voltage Depot
        .       Railway sections and infrastructure between Hung Hom Station and
                East Tsim Sha Tsui Station
        .       Overrun tunnels at East Tsim Sha Tsui
        .       Hung Hom Station modification

                                      -31-

<PAGE>

        .       Pumphouse (railway facilities) at the Tsim Sha Tsui Promenade

        1.2     Provisions and works to facilitate the following:

        a)      the integration of East Rail Extensions and East Rail at Sheung
                Shui Station, Tai Wai Station and Hung Hom Station.

        b)      the integration of East Tsim Sha Tsui Station with the KCR/MTR
                Interchange subway along Mody Road and Blenheim Avenue, and the
                subway along Middle Road.

        c)      the integration of Lok Ma Chau Terminus with the LMC Passenger
                Link Bridge linking to the Huanggang Station in Shenzhen.

        d)      the future possible extension of the East Rail Extensions
                including:

                (i)     future possible immediate station at Kwu Tung on Spur
                        Line, and future possible connection to the Northern
                        Link;

                (ii)    future 8-car train operation on MOS Rail and future
                        possible extension of MOS Rail to urban area; and

                (iii)   future possible connection to the Kowloon Southern Link.

        (B)     PROPOSED DEVELOPMENT ENABLING WORKS

        1.3     Provisions and works to facilitate the proposed developments
                integrated with the East Rail Extensions Stations and Tai Wai
                Maintenance Centre.

2.      REPROVISIONING, REMEDIAL AND IMPROVEMENT WORKS
        (subject to Clause 11.7)

        (A)     SPUR LINE

        A2.1    Modification of walkway and associated staircases at the south
                of Sheung Shui Station.

        A2.2    Reprovisioning of cycle park near Sheung Shui Station.

        A2.3    Modification of San Wan Road.

        A2.4    Water mains diversion near Choi Fat Street.

        A2.5    Reprovisioning of Choi Fat Street car park.

        A2.6    Reprovisioning of San Wan Road footbridge.

        A2.7    Widening of access road to serve emergency vehicle
                access/assembly area along River Sutlej (Shek Sheung River).

                                      -32-

<PAGE>

        A2.8    Provision of road lay-bys at maintenance access road and
                associated work along River Beas (Sheung Yue River).

        A2.9    Reprovisioning of footpath, road access and drainage channel
                near Kwu Tung Station.

        A2.10   Reprovisioning of footpath, road access and drainage channel
                near the cut-and-cover tunnel section at Chau Tau

        A2.11   Reprovisioning of vehicular access across the drainage channel
                north of Castle Peak Road at Chau Tau.

        A2.12   Reprovisioning of Lok Ma Chau Road from Castle Peak Road to near
                the junction with Chau Tau village access road.

        A2.13   Reprovisioning of police check point at Lok Ma Chau Road.

        A2.14   Drainage channel diversion and box culvert modification at Lok
                Ma Chau Terminus.

        A2.15   Reprovisioning of access, drainage, water mains, fences, gates
                and other affected facilities of affected occupiers of land as
                required.

        A2.16   Reprovisioning of access, drainage, water mains, traffic signs
                and street lighting and other government facilities affected.

        (B)     MOS RAIL

        B2.1    Modification of the unnamed street next to Hin Tin Public
                Swimming Pool and road junction of Tin Sam Street and Che Kung
                Miu Road to serve Tai Wai Maintenance Centre.

        B2.2    Diversion of culvert, sewer and water mains within the boundary
                of Tai Wai Maintenance Centre.

        B2.3    Reprovisioning of cycle parking facilities near the corner of
                Chik Wan Street and south of the existing Tai Wai Station.

        B2.4    Modification to footpaths and cycle tracks at Mei Tin Road
                between Che Kung Miu Road and Chik Wan Street; and at the
                northern side of Che Kung Miu Road between Tin Sam Street and
                Chui Tin Street.

        B2.5    Modification to bus bays at Mei Tin Road and Che Kung Miu Road.

        B2.6    Modification to footbridge ramp of the Che Kung Miu Road
                roundabout footbridge network adjacent to the existing PTI at
                Tai Wai.

        B2.7    Realignment of footpath and cycle track alongside the Shing Mun
                River promenade between Tai Wai Station and Che Kung Temple
                Station.

        B2.8    Reprovisioning of bus bay near Che Kung Temple Station.

                                      -33-

<PAGE>

        B2.9    Modification to the existing subway ramps and the associated
                footpath at both sides of Che Kung Miu Road near road junction
                of Lion Rock Tunnel Road and Che Kung Miu Road.

        B2.10   Modification to road junction at Lion Rock Tunnel Road and Che
                Kung Miu Road.

        B2.11   Temporary and permanent reprovisioning of facilities at Tsang
                Tai Uk Recreation Ground.

        B2.12   Temporary and permanent reprovisioning of ball courts and lorry
                parking spaces at Pok Hong Estate.

        B2.13   Modification to southern footpaths, provision of pedestrian
                crossing facilities and temporary and permanent reprovisioning
                of bus terminus facilities and taxi stand at Yat Tai Street.

        B2.14   Modification to road junction at Sha Kok Street and Shui Chuen
                Au Street.

        B2.15   Reprovisioning of bus bay at Sha Tin Wai Road.

        B2.16   Reprovisioning of facilities at Kong Pui Street Rest Garden.

        B2.17   Modification to public transport terminus adjacent to Prince of
                Wales Hospital.

        B2.18   Provision of lay-by and associated modification to footpath, and
                cycle track and bus stop near City One Station.

        B2.19   Reprovisioning of footpath/road linking Tak Po Street and Chap
                Wai Kon Street near City One Station.

        B2.20   Modification to roads in Shek Mun Area.

        B2.21   Modification to sign gantries at Tate's Cairn Highway and Ma On
                Shan Road.

        B2.22   Reprovisioning of drainage, water mains, traffic signs and
                street lighting and other government facilities affected.

        B2.23   Modification to parapets along both edges of vehicular bridges
                crossing the railway at high level at Shek Mun Interchange, Ma
                On Shan Road and Tate's Cairn Highway Interchange.

        B2.24   Modification to Sunshine City Plaza and Ma On Shan Plaza for
                constructing a proposed footbridge link from Ma On Shan Station
                to the two developments.

        B2.25   Modification to southern road junction of Sha On Street to serve
                Wu Kai Sha Station.

        B2.26   Provision of lay-by at Hang Kin Street.

        B2.27   Modification to public transport terminus adjacent to Tai Wai
                Station.

        B2.28   Modification to car park near Wong Uk Village.

                                      -34-

<PAGE>

        (C)     TST EXTENSION

        C2.1    Reprovisioning of part of the footbridge across Salisbury Road
                (opposite Shangri-La Hotel).

        C2.2    Reprovisioning of Salisbury Road Westbound in front of
                International Mail Centre (IMC); and provision of new access to
                the IMC and KCRC Freight Yard.

        C2.3    Modification of IMC compound including two-level parking and
                other affected facilities.

        C2.4    Modification of Cross Harbour Tunnel structure.

        C2.5    Reprovisioning of drainage, water mains, military cable, traffic
                signs and street lighting and other government facilities
                affected.

        C2.6    Road reinstatement at Salisbury Road, Chatham Road, Hong Chong
                Road, Science Museum Road, Mody Road, Mody Lane and Middle Road.

        C2.7    Alteration of part of the Hung Hom Bypass structures.

        C2.8    Reprovisioning of Leisure and Cultural Services Department
                facilities at Signal Hill Garden, Middle Road Children's
                Playground, Wing On Plaza Garden, Tsim Sha Tsui East Promenade,
                and Centenary Garden.

        C2.9    Reprovisioning of the sign gantry foundation near chainage 600.

        C2.10   Reprovisioning of subway across Chatham Road South at Wing On
                Plaza Garden.

        C2.11   Modification of Hong Kong Coliseum Podium structure.

        C2.12   Reprovisioning of elevated walkway between Hong Kong Coliseum
                Podium and International Mail Centre.

        C2.13   Reprovisioning of access from Cross Harbour Tunnel (CHT)
                Administration Building to Salisbury Road, and the access from
                Salisbury Road to the CHT Ventilation Building.

        C2.14   Reinstatement of seawall along Tsim Sha Tsui Promenade.

3.      ESSENTIAL PUBLIC INFRASTRUCTURE WORKS
        (as more particularly described in the relevant Entrustment Agreement)

        (A)     SPUR LINE

        A3.1    Widening of Lok Ma Chau Road, from EVA Chainage 220 to Chainage
                870, and associated works to serve Government facilities in the
                Lok Ma Chau Terminus.

        A3.2    Widening of existing access road between Lok Ma Chau Road and
                Lok Ma Chau

                                      -35-

<PAGE>

                Control Point, from EVA Chainage 870 to Chainage 1140, and
                associated works to serve Government facilities in the Lok Ma
                Chau Terminus.

        A3.3    Construction of access road between existing access road near
                Lok Ma Chau Control Point and Boundary Patrol Road, from EVA
                Chainage 1140 to Chainage 1990, and associated works to serve
                Government facilities in the Lok Ma Chau Terminus.

        A3.4    Widening of Boundary Patrol Road at Lok Ma Chau Terminus, from
                EVA Chainage 1990 to Chainage 2695, and associated works to
                serve Government facilities in the Lok Ma Chau Terminus.

        A3.5    Provision of drop-arm barriers, floodlights and associated works
                for the Police Check Point.

        A3.6    Provision of fixed fitting-out works for Government office
                accommodation and telecommunications systems and equipment
                required by Government Departments.

        A3.7    Provision of counters including government signage for
                Immigration and Customs and Excise but exclude computer and
                specialised equipment.

        A3.8    Construction of part of the LMC Passenger Link Bridge connecting
                to the Lok Ma Chau Terminus.

        A3.9    Provision of all building services (including E&M and
                travellators, but excluding air-conditioning) for HKSAR's
                portion of the LMC Passenger Link Bridge.

        A3.10   Provision of air-conditioning for HKSAR's portion of the LMC
                Passenger Link Bridge.

        (B)     MOS RAIL

        B3.1    Subway connection underneath the existing Tai Wai Station
                between Tsuen Nam Road and the unpaid area of the new Tai Wai
                Station concourse.

        B3.2    Subway and ramp connection at Che Kung Temple Station adjacent
                to Che Kung Miu Road.

        B3.3    Footbridge link across Chap Wai Kon Street to City One Station.

        B3.4    Subway connection to Tai Shui Hang Station across Hang Tai Road,
                Ma On Shan Road and Hang Tak Street.

        B3.5    Subway connection to Heng On Station across Sai Sha Road.

        B3.6    Public Transport Interchange at Tai Wai Station.

        B3.7    Public Transport Interchange at Wu Kai Sha Station.

                                      -36-

<PAGE>

        (C)     TST EXTENSION

        C3.1    KCR/MTR Interchange Subway along Mody Road and Blenheim Avenue
                with extension across Chatham Road South to East Tsim Sha Tsui.

        C3.2    A subway from East Tsim Sha Tsui Station along Middle Road and
                across Nathan Road.

                                      -37-

<PAGE>

                                                                      Appendix 2

                       KOWLOON CANTON RAILWAY CORPORATION
                              EAST RAIL EXTENSIONS
                        SUMMARY OF THE BASELINE PROGRAMME

[Graph of Kowloon Canton Railway Corporation - East Rail Extensions Summary of
the Baseline Programme]

                                      -38-

<PAGE>

                                   Appendix 3
                              CAPITAL COST ESTIMATE

<TABLE>
<CAPTION>
                                                                          Estimated Cost
                                                                           $ Millions
                                                                        (Money of the Day)
<S>                                                                                 <C>
Capital Cost Estimate

East Tsim Sha Tsui Station and tunnels from Hung Hom to Tsim Sha Tsui                  ***
Hung Hom Station modifications and Homantin Sub-station                                ***

Tai Wai to Wu Kai Sha stations, alignment and associated works                         ***
Tai Wai Station                                                                        ***
Tai Wai Maintenance Centre                                                             ***

Lok Ma Chau alignment and associated works                                             ***
Lok Ma Chau Station and associated works                                               ***
Improvement to Sheung Shui Station and associated works                                ***

Rolling stock                                                                          ***
Other costs (pre-operating and other consultants)                                      ***
Contingency                                                                            ***
                                                                        ------------------
Sub-Total Capital Cost Estimate                                                        ***

Reprovisioning, Remedial and Improvement Works                                         ***

Land acquisition and related costs                                                     ***
                                                                        ------------------
TOTAL CAPITAL COST ESTIMATE                                                         24,202
                                                                        ------------------
</TABLE>

*** Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

                                      -39-

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