Conformed Copy - C2615 - Transport Rehabilitation Project - Project Agreement 1

Page 1 CONFORMED COPY CREDIT NUMBER 2615 MOG Project Agreement (Transport Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and MONGOLIAN RAILWAYS Dated June 13, 1994 CREDIT NUMBER 2615 MOG PROJECT AGREEMENT AGREEMENT, dated June 13, 1994, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and MONGOLIAN RAILWAYS (MR). WHEREAS (A) by the Development Credit Agreement of even date herewith between Mongolia (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty-one million six hundred thousand Special Drawing Rights (SDR 21,600,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that MR and MB agree to undertake such obligations toward the Association as are set forth in this Agreement and the MB Project Agreement respectively; (B) by a Subsidiary Credit Agreement to be entered into between the Page 2 Borrower and MR, a portion of the proceeds of the credit provided for under the Development Credit Agreement will be relent to MR on the terms and conditions set forth in said Subsidiary Credit Agreement; and WHEREAS MR, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined therein) have the respective meanings therein set forth and the following additional term has the following meaning: (a) "Subsidiary Credit Agreement" means the subsidiary credit agreement entered or to be entered into between the Borrower and MR pursuant to Section 3.01 (c) of the Development Credit Agreement, as the same may be amended from time to time, and such term includes any schedules to the Subsidiary Credit Agreement. ARTICLE II Execution of the Project Section 2.01. MR declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, shall carry out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.03. MR shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, and 9.07 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, and maintenance respectively) in respect of this Agreement and Part A of the Project. Section 2.04. MR shall duly perform all its obligations under the Subsidiary Credit Agreement. Except as the Association shall otherwise agree, MR shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Credit Agreement or any provision thereof. Section 2.05. (a) MR shall, at the request of the Association, exchange views with the Association with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Credit Agreement, and other matters relating to the purposes of the Credit. (b) MR shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Credit, or the performance by MR of its obligations under this Agreement and under the Subsidiary Credit Agreement. Section 2.06. MR shall: (a) by June 30 every year commencing in 1995, furnish to the Association a maintenance program for traction and rolling stock, and tracks including: (i) actual maintenance expenses for the preceding four years and estimated maintenance needs for the current and Page 3 following four years, and (ii) funding sources for the implementation of maintenance in the following two years; and (b) in consultation with the Borrower and the Association, adjust tariffs, as appropriate, to meet its maintenance funding need for traction and rolling stock, and tracks. Section 2.07. MR shall, jointly with the Borrower: (a) complete the railway action plan under Part A.4 of the Project in accordance with a time- table, agreed with the Association; and (b) upon completion of the said plan, carry out the same in a manner satisfactory to the Association. Section 2.08. MR shall, jointly with the Borrower: (a) undertake and, by April, 1996, complete the studies under Part A.4 of the Project in accordance with terms of reference satisfactory to the Association, and (b) take appropriate steps to implement the recommendations of the said studies taking into account the views thereon of the Association. ARTICLE III Management and Operations of MR Section 3.01. MR shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. MR shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and administrative practices. Section 3.03. MR shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) MR shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) MR shall: (i) have its records, accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Page 4 Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of MR thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify MR of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 248423 (RCA), Washington, D.C. 82987 (FTCC), 64145 (WUI) or 197688 (TRT) For MR: Mongolian Railways P.O. Box 376 Ulaanbaatar 210628 Mongolia Cable address: Telex: MONGOL RAILWAY 20987 Ulaanbaatar Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of MR may be taken or executed by its Chairman or such other person or persons as the Chairman shall designate in writing, and MR shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Page 5 Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Gautam S. Kaji Regional Vice President East Asia and Pacific MONGOLIAN RAILWAYS By /s/ Ts. Gombosuren Authorized Representative