Conformed Copy - TF022002 - Montreal Protocol Ozone Depleting Substances Phase Out Project - Amendment 1

Page 1 March 18, 1997 Minister Liu Zhongli Ministry of Finance Sanlihe Beijing 100820 People's Republic of China OTF Grant No. TF 022002 Montreal Protocol Ozone Depleting Substances Phase Out Project Amendment of Trust Fund Grant Agreement Dear Minister Liu: We refer to the above cited Ozone Projects Trust Fund Grant Agreement entered into between the People's Republic of China (the "Recipient") and the International Bank for Reconstruction and Development acting as Trustee of the Ozone Projects Trust Fund (the "Trustee"), dated June 29, 1995 (the "Grant Agreement") providing a grant to meet the reasonable costs of goods and services required for carrying out the People's Republic of China's Program for phasing out the use of Ozone Depleting Substances (ODS) in its territory and to the Recipient's request by telex of January 8, 1997 to open a new Special Account as well as increase the Authorized Allocation in the existing Special Account with China Investment Bank to seven million dollars (USD7,000,000). We are pleased to inform you that the Bank agrees to the Recipient's request to amend Article II Section 2.02(b) and Schedules l and 5 of the Grant Agreement to read, respectively, as follows: "ARTICLE II The OTF Grant Section 2.02 (b) The Recipient may, for the purposes of the project, open and maintain in dollars two special deposit accounts, one in the China Investment Bank (CIB) and the other with another financial institution as determined in the Implementation Agreement between MOF and NEPA, respectively, on the terms and conditions, satisfactory to the Trustee, including appropriate protection against set off, seizure or attachment. Deposits into, and payments out of, the Special Accounts shall be made in accordance with the provisions of Schedule 5 to this Agreement. SCHEDULE 1 Withdrawal of the Proceeds of the OTF Grant 1. The table below sets forth the Categories of items to be financed out of the proceeds of the OTF Grant, the allocation of the amounts of the OTF Grant to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the OTF Grant Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Subprojects under Part A 77,300,000 of the Project: CIB (a) Goods 100% of foreign expenditures, 100% of local expenditures (ex- factory cost) and 75% of local expenditures for Page 2 other items procured locally (b) Consultants' services 100% and training (2) Parts B.1 and B.2 of the Project 100,000 (3) Agency Fees and charges 2,700,000 100% (4) Unallocated - 0 - (5) Subprojects under Part A 10,000,000 of the Project: Other Finan- cial Institution (a) Goods 100% of foreign expenditures, 100% of local expenditures (ex- factor cost), and 75% of local expenditures for other items procured locally (b) Consultants' Services 100% and training TOTAL 90,100,000 2. For the purposes of this Schedule the term "Agency Fees and Charges" means the fees and charges to be paid to CIB, the other financial institution and NEPA respectively in accordance with paragraph 5 of Schedule 4 to this Agreement. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures: (a) prior to the date of this Agreement, except that withdrawals, in an aggregate amount not exceeding the equivalent of $18,000,000, may be made in respect of Category 1 on account of payments made for expenditures before that date but after June 30, 1992; and (b) under Categories 1 and 5, unless the Subproject, in respect of which disbursement is sought, has been approved by the Trustee and the Executive Committee and the Subgrant Agreement, in respect of such Subproject, has been entered into between the Recipient, represented by CIB or the other financial institution, as the case may be, and the. concerned Subproject Beneficiary in accordance with the provisions of paragraph 2 of Schedule 4 to this Agreement. SCHEDULE 5 Special Accounts 1. For the purposes of this Schedule: (a) The term "Eligible Categories" means Categories (1), (2), (3) and (5) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) The term "Eligible Expenditures" means expenditures in respect of the reasonable costs of goods and services required for the Project and to be financed out of the proceeds of the OTF Grant allocated from time to time to the Eligible Categories in accordance with the provisions of Schedule 1 to this Agreement; and (c) The Term "Authorized Allocations" means amounts equivalent to seven million dollars ($7,000,000) in respect of the CIB Special Account; and three million dollars ($3,000,000) in respect of the Special Account with the other financial institution, respectively, to be withdrawn from the OTF Grant Account and deposited into the Special Accounts pursuant to Article II Section 2.02(b) of this Agreement and paragraph 3 (a) of this Schedule, provided, however, that unless the Trustee shall Page 3 otherwise agree, the initial authorized Allocation for the Special Account with the other financial institution shall be limited to an amount equivalent to $1 million until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered. into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of $10,000,000. 2. Payments out of the Special Accounts shall be made exclusively for Eligible Expenditures in accordance with the provisions of this Schedule. 3. After the Trustee has received evidence satisfactory to it that the Special Accounts have been duly opened or continued, as the case may be, withdrawals of the Authorized Allocations and subsequent withdrawals to replenish the Special Accounts shall be made as follows: (a) For withdrawals of the Authorized Allocations, the Recipient shall furnish to the Trustee requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocations. On the basis of such requests, the Trustee, shall, on behalf of the Recipient, withdraw from the OTF Grant Account and deposit in the Special Accounts such amount or amounts as the Recipient shall have requested. (b) (i) For replenishment of any of the Special Accounts, the Recipient shall furnish to the Trustee requests for deposits into such Special Account at such intervals as the Trustee shall specify. (ii) Prior to or at the time of each such request, the Recipient shall furnish to the Trustee the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Trustee shall, on behalf of the Recipient, withdraw from the OTF Grant Account and deposit into the Special Accounts such amount or amounts as the Recipient shall have requested and shall have been shown by said documents and other evidence, to have been paid out of such Special Account for Eligible Expenditures. All such deposits shall be withdrawn by the Trustee from the OTF Grant Account under the respective Eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence. 4. For each payment made by the Recipient out of the Special Accounts, the Recipient shall, at such time as the Trustee shall reasonably request, furnish to the Trustee such documents and other evidence showing that such payments were made exclusively for Eligible Expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Trustee shall not be required to make further deposits into the Special Accounts: (a) If, at any time, the Trustee shall have determined that all further withdrawals should be made by the Recipient directly from the OTF Grant Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement; or (b) If the Recipient shall have failed to furnish to the Trustee, within the period of time specified in Section 4.01 (b)(ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for such Special Account; (c) If, at any time, the Trustee shall have notified the Recipient of its intention to suspend in whole or in part the right of the Recipient to make withdrawals from the Grant Account pursuant to the provisions of Section 1.01 (a) of the General Conditions; or (d) Once the total unwithdrawn amount of the OTF Grant allocated to the Eligible Categories, less the amount of any outstanding special commitment entered into by the Trustee pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocations. Thereafter, withdrawal from the OTF Grant Account of the remaining unwithdrawn amount of the OTF Grant allocated to the Eligible Categories shall follow such procedures as the Trustee shall specify by notice to the Recipient. Such further withdrawals shall Page 4 be made only after and to the extent that the Trustee shall have been satisfied that all such amounts remaining on deposit in such Special Account as of the date of such notice will be utilized in making payments for Eligible Expenditures. 6. (a) If the Trustee shall have determined at any time that any payment out of the Special Accounts: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or (ii) was not justified by the evidence furnished to the Trustee; The Recipient shall, promptly upon notice from the Trustee: (A) provide such additional evidence as the Trustee may request; or (B) deposit into the Special Account or Special Accounts, as the case may be, (or, if the Trustee shall so request, refund to the Trustee) an amount equal to the amount of such payment or the portion thereof not so eligible as specified. Unless the Trustee shall otherwise agree, no further deposit by the Trustee into the Special Accounts shall be made until the Recipient has provided such evidence or made such deposit or refund, as the case may be. (b) If the Trustee shall have determined at any time that any amounts outstanding in any of the Special Accounts will not be required to cover further payments for Eligible Expenditures, the Recipient shall, promptly upon notice from the Trustee, refund to the Trustee such outstanding amounts. (c) The Recipient may, upon notice to the Trustee, refund to the Trustee all or any portion of the funds on deposit in the Special Accounts. (d) Refunds to the Trustee made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credits to the OTF Grant Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions." Kindly confirm your agreement, as the duly authorized representative of the Recipient to the foregoing amendments by countersigning and duly dating the form of confirmation set forth hereinbelow, and returning one fully executed original of this amendment letter to us at your earliest convenience and retaining one original of the letter for your records. Upon receipt by the Bank of the copy of this letter Agreement countersigned by you, this Letter Agreement will become effective as of the date of countersignature. Sincerely, By /s/ Nicholas Hope Director China and Monglolia Department East Asia and Pacific Region AGREED AND CONFIRMED: THE PEOPLE'S REPUBLIC OF CHINA By /s/ Authorized Representative Date: March 18, 1997 Page 5