Nepal - Kathmandu Tourism Project : Credit 0291 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 291 NEP Development Credit Agreement (Kathmandu Tourism Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 22, 1972 CONFORMED COPY CREDIT NUMBER 291 NEP Development Credit Agreement (Kathmandu Tourism Project) BETWEEN KINGDOM OF NEPAL AND INTERNATIONAL DEVELOPMENT ASSOCIATION DATED MARCH 22, 1972 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated March 22, 1972, between KINGDOM OF NEPAL (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated January 31, 1969, with the same force and effect as if they were fully set forth herein, subject, however, to the deletion of Sections 5.01, 6.02 (h) and 10.03 thereof and to the renumbering of Section 6.02 (i) into 6.02 (h) thereof (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "NIDC" means the Nepal Industrial Development Corporation, established by the Nepal Industrial Development Corporation Act, 1959; (b) "NIDC Arrangements" means the arrangements to be entered into between the Borrower and NIDC pursuant to Section 3.02 (a) of this Agreement; (c) "Annapurna" means the Hotel de l'Annapurna Pvt. Ltd., a company organized and existing under the Company Act, 1964, of Nepal; (d) "Annapurna Agreement" means the agreement to be entered into between NIDC, acting for and on behalf of the Borrower, and Annapurna pursuant to Section 3.02 (b) of this Agreement; (e) "Yak and Yeti" means the Yak and Yeti Pvt. Ltd., a corporation organized and existing under the Company Act, 1964, of Nepal; 4 (f) "Yak and Yeti Agreement" means the agreement to be entered into between NIDC, acting for and on behalf of the Borrower, and Yak and Yeti pursuant to Section 3.02 (b) of this Agreement; and (g) "NRs" means Nepalese Rupees. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to four million two hundred thousand dollars ($4,200,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule shall be amended from time to time, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Project described in Schedule 2 to this Agreement and to be financed under the Development Credit Agreement; provided, however, that, except as the Association shall otherwise agree, no withdrawal shall be made on account of expenditures in the territories of any country which is not a member of the Bank (other than Switzerland) or for goods produced in, or services supplied from, such territories. Section 2.03. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969 as revised in May 1971, and in accordance with, and subject to, the provisions set forth in Schedule 3 to this Agreement. Section 2.04. The Closing Date shall be September 30, 1975 or such other date as shall be agreed between the Borrower and the Association. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. 5 Section 2.06. Service charges shall be payable semi-annually on February I and August 1 in each year. Section 2.07. The Borrower shall repay the principal amount of the Credit withdrawn from the Credit Account in semi-annual installments payable on each February I and August 1, commencing August 1, 1982 and ending February 1, 2022, each installment to and including the installment payable on February 1, 1992 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.08. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.09. Except as the Borrower and the Association shall otherwise agree, NIDC is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. The Borrower shall exercise every right and recourse available to it to cause Annapurna to carry out and operate Part A of the Project and Yak and Yeti to carry out and operate Part B of the Project, with due diligence and efficiency and in conformity with sound engineering, financial and hotel management practices. Section 3.02. The Borrower shall: (a) enter into arrangements with NIDC satisfactory to the Association and incorporating provisions substantially similar to those set forth in Schedule 4 to this Agreement or otherwise acceptable to the Association, whereby NIDC will act for and on behalf of the Borrower in relending the proceeds of the Credit to Annapurna and Yak and Yeti; and (b) cause NIDC, acting for and on behalf of the Borrower, to enter into agreements with Annapurna and Yak and Yeti, respectively, for the relending to Annapurna of $2,880,000 equivalent of the proceeds of the Credit and to Yak and Yeti of $1,320,000 equivalent of the proceeds of the Credit, such agreements 6 to be satisfactory to the Association and to incorporate provisions substantially similar to those set forth in Schedule 5 to this Agreement or otherwise acceptable to the Association. Section 3.03. The Borrower shall exercise its rights under the NIDC Arrangements in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the NIDC Arrangements or any provision thereof. Section 3.04. The Borrower shall take and shall cause all its agencies to take all action which shall be necessary on their part to enable NIDC, Annapurna and Yak and Yeti to perform all of their obligations under the NIDC Arrangements, the Annapurna Agreement and the Yak and Yeti Agreement, respectively, and shall not take or permit to be taken any action which might interfere with such performance. ARTICLE IV Consultation, Information and Inspection Section 4.01. The Borrower and the Association shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Borrower and the Association shall from time to time, at the request of either party: (a) exchange views through their representatives with regard to the performance of their respective obligations under the Development Credit Agreement, the performance by NIDC, Annapurna and Yak and Yeti of their obligations under the NIDC Arrangements, Annapurna Agreement and Yak and Yeti Agreement, respectively, and other matters relating to the purposes of the Credit; and (b) furnish to the other all such information as it shall reasonably request with regard to the general status of the Credit. On the part of the Borrower, such information shall include information with respect to financial and economic conditions in the territories of the Borrower, including its balance of payments, and the external debt of the Borrower, of its political subdivisions, if any, and of any agency of the Borrower or of any such political subdivision. Section 4.02. The Borrower and the Association shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the 7 accomplishment of the purposes of the Credit, the maintenance of the service thereof, the performance by either of them of its obligations under the Development Credit Agreement or the performance by NIDC, Annapurna or Yak and Yeti of their obligations under the NIDC Arrangements, the Annapurna Agreement and the Yak and Yeti Agreement, respectively. Section 4.03. The Borrower shall afford all reasonable opportunity for accredited representatives of the Association to visit any part of the territories of the Borrower for purposes related to the Credit. ARTICLE V Taxes and Restrictions Section 5.01. The principal of, and service charges on, the Credit shall be paid without deduction for, and free from, any taxes imposed under the laws of the Borrower or laws in effect in its territories. Section 5.02. The Development Credit Agreement shall be free from any taxes on or in connection with the execution, delivery or registration thereof, imposed under the laws of the Borrower or laws in effect in its territories. Section 5.03. The payment of the principal of, and service charges on, the Credit shall be free from all restrictions, regulations, controls and moratoria of any nature imposed under the laws of the Borrower or laws in effect in its territories. ARTICLE VI Remedies of the Association Section 6.01. If any event specified in Section 7.01 of the General Conditions shall occur and shall continue for the period, if any, therein set forth, then at any subsequent time during the continuance thereof, the Association, at its option, may by notice to the Borrower declare the principal of the Credit then outstanding to be due and payable immediately together with the service charges thereon and upon any such declaration such principal and service charges shall become due and payable immediately, anything to the contrary in the Development Credit Agreement notwithstanding. Section 6.02. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified: 8 (a) A default shall occur in the performance by Annapurna of any of its obligations under the Annapurna Agreement or by Yak and Yeti of any of its obligations under the Yak and Yeti Agreement. (b) A default shall occur in the performance of any obligation under any of the undertakings referred to in paragraph 18 of Schedule 5 to this Agreement. (c) A default shall occur in the performance by NIDC of any of its obligations under the NIDC Arrangements. ARTICLE VII Effective Date; Termination Section 7.01. The following event is specified as an additional condition to the effectiveness of the Development Credit Agreement within the meaning of Section 10.01 (b) of the General Conditions, namely, that the NIDC Arrangements have been entered into, and their execution and delivery on behalf of the respective parties have been duly authorized or ratified by all necessary governmental and corporate action. Section 7.02. The following is specified as an additional matter, within the meaning of Section 10.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association, namely, that the NIDC Arrangements have been duly authorized or ratified by, and executed and delivered on behalf of, the respective parties, and constitute a valid and binding obligation of the respective parties thereto in accordance with its terms. Section 7.03. The Development Credit Agreement shall not in any event come into force and effect in respect of any part of the Credit until the Association shall have dispatched to the Borrower notice of its acceptance of the (i) evidence provided for in Sections 10.01 and 10.02 of the General Conditions and (ii) the evidence and opinions provided for in Section 7.04 of this Agreement or Section 7.05 of this Agreement, or both, as the case may be. Section 7.04. Except as the Borrower and the Association shall otherwise agree and subject to Section 10.01 of the General Conditions, the Development Credit Agreement shall come into force and effect in respect of that part of the Credit to be made available for Part A of the Project when: (a) Evidence satisfactory to the Association shall have been furnished to the Association that: 9 (i) the Annapurna Agreement has been entered into, and its execution and delivery on behalf of the respective parties have been duly authorized or ratified by all necessary governmental and corporate action; (ii) all indebtedness of Annapurna to its shareholders for money borrowed shall have been discharged through the conversion of such indebtedness into eo%ity shares of Annapurna; and (iii) the undertakings, in form and substance satisfactory to the Association, referred to in paragraph 18 of Schedule 5 to this Agreement and relating to Annapurna shall have been entered into by the respective shareholders of Annapurna; (b) An opinion or opinions satisfactory to the Association of counsel acceptable to the Association shall have been furnished to the Association showing that: (i) the Annapurna Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the respective parties and constitutes a valid and binding obligation of the respective parties thereto in accordance with its terms; (ii) the undertakings referred to in paragraph (a) (iii) above constitute valid and binding obligations of the respective shareholders; and (iii) Annapurna is duly organized and existing under the laws of Nepal and has full power to own the properties and to carry on the business which it owns and carries on and proposes to own and carry on for the purpose of Part A of the Project; that all governmental acts, consents and approvals necessary therefor have been duly and validly performed or given; and that all land and interests in land necessary therefor have been duly ol-,ined. (c) The Association dispatches to the Borrower notice of its acceptance of the evidence and opinions referred to in paragraphs (a) and (b) above. Section 7.05. Except as the Borrower and the Association shall otherwise agree and subject to Section 10.01 of the General Conditions, the Development Credit Agreement shall come into force and effect in respect of that part of the Credit to be made available for Part B of the Project when: 10 (a) Evidence satisfactory to the Association shall have been furnished to the Association that: (i) the Yak and Yeti Agreement has been entered into, and its execution and delivery on behalf of the respective parties have been duly authorized or ratified by all necessary governmental and corporate action; (ii) all indebtedness of Yak and Yeti to its shareholders for money borrowed shall have been discharged through the conversion of such indebtedness into equity shares of Yak and Yeti; (iii) the undertakings, in form and substance satisfactory to the Association, referred to in paragraph 18 of Schedule 5 to this Agreement and relating to Yak and Yeti, shall have been entered into by the shareholders of Yak and Yeti; and (iv) arrangements satisfactory to the Association shall have been made for the acquisition by Yak and Yeti of the land or interests in land required for an access road to the proposed site of Part B of the Project; (b) An opinion or opinions satisfactory to the Association of counsel acceptable to the Association shall have been furnished to the Association showing that: (i) the Yak and Yeti Agreement has been duly authorized or ratified by, and executed and delivered on behalf of, the respective parties, and constitutes a valid and binding obligation of the respective parties thereto in accordance with its terms; (ii) the undertakings referred to in paragraph (a) (iii) above constitute valid and binding obligations of the respective shareholders; and (iii) Yak and Yeti is duly organized and existing under the laws of Nepal and has full power to own the properties and to carry on the business which it owns and carries on and proposes to own and carry on for the purpose of Part B of the Project; that all governmental acts, consents and approvals necessary therefor have been duly and validly performed or given; and that all land and interests in land necessary therefor have been duly obtained. (c) The Association dispatches to the Borrower notice of its acceptance of the evidence and opinions referred to in paragraphs (a) and (b) above. Section 7.06. The date August 1, 1972 is hereby specified for the purposes of Section 10.04 of the General Conditions. Section 7.07. Notwithstanding Section 7.06 of this Agreement, if by August 1, 1972 there shall be a portion of the Credit in respect of which the Development Credit Agreement shall not have come into force and effect, then all obligations of the parties hereunder with respect to such portion of the Credit shall terminate and such portion of the Credit shall be deemed to be cancelled pursuant to Article VI of the General Conditions, unless the Association, after consideration of the reasons for the delay, establishes a later date for the purposes of this Section. If the Associationr -stablishes a later date for the purposes of this Section, it shall promptly noti'y ie Borrower of such later date. Section 7.08. The obligations of the Borrower under Section 3.01 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date 24 years after the date of this Agreement, whichever shall be the earlier. ARTICLE VIII Representative of the Borrower; Addresses Section 8.01. The Secretary to the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 9.03 of the General Conditions. Section 8.02. The following addresses are specified for the purposes of Section 9.01 of the General Conditions: For the Borrower: Secretary to the Ministry of Finance Singha Durbar Kathmandu, Nepal 12 Cable address: Artha Kathmandu For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Indevas Washington, D.C. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. KINGDOM OF NEPAL By /s / Kul Shekhar Sharma Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / J. Burke Knapp Vice President 13 SCHEDULE 1 Withdrawal of the Proceeds of the Credit 1. The table below sets forth the categories of items to be financed out of the proceeds of the Credit, the allocation of amounts of the Credit to each category and the percentage of eligible expenditures so to be financed in each category: Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed I. Civil Works for 2,100,000 70% of total ex- Part A of the penditures (rep- Project resenting the estimated for- eign exchange component) II. Equipment and Fur- 640,000 100% of total niture for Part A expenditures of the Project III. Professional Ser- 140,000 100% of foreign vices, Technical expenditures Assistance and Pre- opening Expenses for Part A of the Project IV. Civil Works for 1,000,000 70% of total ex- Part B of the penditures (rep- Project resenting the estimated for- eign exchange component) V. Equipment and Fur- 250,000 100% of total niture for Part B expenditures of the Project 14 Amount of the Credit Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed VI. Professional Ser- 70,000 100% of foreign vices and Pre- expenditures opening Expenses for Part B of the Project TOTAL 4,200,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures for goods produced in, or services supplied from, the territories, and in the currency, of any country other than the Borrower; and (b) the term "total expenditures" means the aggregate of foreign expenditures and of expenditures for goods produced in, or services supplied from, the territories of the Borrower. 3. Notwithstanding the provisions of paragraph I above, no withdrawals shall be made in respect of: (a) expenditures prior to the date of this Agreement, except that withdrawals may be made in respect of Category III on account of expenditures incurred after January 1, 1972, in an aggregate amount not exceeding $45,000 qnivalent; (b) expenditures in respect of equipment and furniture included in (ategories I and V exceeding (i) in the case of imported equipment and furniture, the c.i.f. cost of such equipment at the Borrower's point of entry and (ii) in the case of equipment and furniture, produced in the territories of the Borrower, the 0x-factory cost of such equipment; and (c) payments for taxes imposed under the laws of the Borrower or laws in effect in its territories on goods or services, or on the importation, manufacture, 15 procurement or supply thereof. To the extent that the amount represented by the percentage set forth in the third column of the table in paragraph I above in respect of any Category would exceed the amount payable net of all such taxes, such percentage shall be reduced to ensure that no proceeds of the Credit will be withdrawn on account of payments for such taxes. 4. Notwithstanding the allocation of an amount of the Credit set forth in the second column of the table in paragraph 1 above, if the Association shall have reasonably determined that the procurement of any item in any Category is inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, no expenditures for such item shall be financed out of the proceeds of the Credit, and the Association may, without in any way restricting or limiting any other right, power or remedy of the Association under the Development Credit Agreement, by notice to the Borrower, cancel such amount of the Credit as, in the Association's reasonable opinion, represents the amount of such expenditures which would otherwise have been eligible for financing out of the proceeds of the Credit. 16 SCHEDULE 2 Description of the Project The Project consists of the following Parts: A. The existing Hotel de l'Annapurna in Kathmandu will be expanded to provide a total of approximately 240 double rooms, as well as improved mechanical systems and additional eating, service and recreational facilities. Approximately 80 of the existing rooms will be remodelled and refurbished. B. A new hotel in Kathmandu, expected to be called the Yak and Yeti Hotel, will be constructed, equipped and furnished, providing approximately 25 single rooms, 85 double rooms and 6 suites, as well as eating, service and recreational facilities. Existing facilities will be improved, and an access road will be constructed. The Project is expected to be completed by the end of 1974. 17 SCHEDULE 3 Procurement 1. The procurement of goods and services for Part A of the Project will be carried out by Annapurna and for Part B of the Project by Yak and Yeti. Documentation required under this Schedule 3 will be furnished to the Association through NIDC. 2. With respect to any contract for civil works or for furniture and equipment estimated to cost the equivalent of $50,000 or more: (a) Bidders for civil works contracts will be prequalified in accordance with paragraph 1.3 of the Guidelines referred to in Section 2.03 of this Agreement. (b) As to bidders for civil works contracts, the Association shall, before qualification is invited, be informed in detail of the procedure to be followed and such modifications shall be introduced i id procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished to the Association for its comments before the applicants are notified, and such additions or deletions from the said list shall be made as the Association shall reasonably request. (c) Before bids are invited, the Association shall be furnished, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and such modifications in the said documents or procedure shall be made as the Association shall reasonably request. Any further modification to the bidding documents shall require the Association's concurrence before it is issued to the prospective bidders. (d) After bids have been received and evaluated and before a final decision on the award is made, the Association shall be informed of the name of the bidder to whom it is intended to award the contract and shall be furnished, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the recommendations for award of the consultants to the company. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.03 of this Agreement, promptly inform NIDC and the company making the award and state the reasons for such determination. 18 (e) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (f) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 3. With respect to any other contract for furniture and equipment, the Association shall be furnished, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, with two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.03 of this Agreement, promptly inform NIDC and the company making the award and state the reasons for such determination. 4. For the purpose of evaluating bids for furniture and equipment included in Categories II and V of the table set out in paragraph I of Schedule I to this Agreement, bid prices shall be determined and compared in accordance with the following rules: (a) the term "Local Bid" means a bid submitted by a manufacturer established in the territories of the Borrower for goods manufactured or processed to a substantial extent (as reasonably determined by the Association) in such territories; any other bid shall be deemed to be a "Foreign Bid"; (b) the bid price under a Local Bid shall be the sum of the following amounts: (i) the ex-factory price of such goods; and (ii) inland freight, insurance and other costs of delivery of such goods to the place of their use or installation; (c) for the purpose of comparing any Foreign Bid with any Local Bid, the bid price under a Foreign Bid shall be the sum of the following amounts: (i) the c.i.f. price of such goods; 19 (ii) the amount of any taxes on the importation of such goods into the territories of the Borrower which generally apply to non-exempt importers, or 15% of the amount specified in (i) above, whichever shall be the lower; and (iii) inland freight, insurance and other costs of delivery of such goods to the place of their use or installation. 20 SCHEDULE 4 Provisions to be Included in the NIDC Arrangements The NIDC Arrangements between the Borrower and NIDC shall include provisions substantially as follows: 1. NIDC shall act for and on behalf of the Borrower in relending the proceeds of the Credit to Annapurna and Yak and Yeti to be applied to the carrying out of the Project. 2. For this purpose NIDC shall enter into agreements with Annapurna and Yak and Yeti incorporating provisions substantially similar to those set forth in Schedule 5 to this Agreement. 3. NIDC shall (a) administer the loans to Annapurna and Yak and Yeti with due diligence and efficiency and in conformity with sound financial practices and (b) exercise its rights under the Annapurna Agreement and the Yak and Yeti Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit. 4. Except as the Borrower and the Association shall otherwise agree, NIDC shall not assign, amend, abrogate or waive the Annapurna Agreement or the Yak and Yeti Agreement or any provision of either. 5. Upon receiving payments of principal, ifterest or other charges pursuant to the Annapurna Agreement and the Yak and Yeti Agreement, NIDC shall, subject to the provisions of paragraph 7 below, promptly pay over to the Borrower the entire amounts of such payments received. 6. NIDC shall obtain and administer the mortgages referred to in paragraph 19 of Schedule 5 to this Agreement for and on behalf of the Borrower. 7. As a service charge for the services to be rendered by NIDC under the NIDC Arrangements, the Borrower shall pay to NIDC in NRs the equivalent of $20,000 annually for the four-year period following the date of the conclusion of the NIDC Arrangements and the equivalent of $4,000 annually thereafter until the termination of the NIDC Arrangements. Such service charge shall be accrued until NIDC begins to receive interest payments on the loans under the Annapurna Agreement and the Yak and Yeti Agreement. Thereafter NIDC shall retain from 21 interest payments to be transmitted to the Borrower amounts due NIDC on account of service charge. 8. (a) NIDC shall maintain records adequate to reflect in accordance with sound accounting practices all financial transactions of NIDC with respect to the loans made under the Annapurna Agreement and the Yak and Yeti Agreement and shall enable the representatives of the Borrower and the Association to inspect such records. (b) NIDC shall furnish to the Borrower and the Association all such information as the Borrower and the Association shall reasonably request concerning the status of the loans made under the Annapurna Agreement and the Yak and Yeti Agreement and the performance by NIDC of its obligations under the NIDC Arrangements. 9. NIDC and the Borrower shall cooperate fully to assure that the purposes of the NIDC Arrangements will be accomplished. They shall from time to time exchange views through their representatives and with the Association's representatives with regard to matters relating to the purposes of the NIDC Arrangements. NIDC shall promptly inform the Borrower and the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the NIDC Arrangements or the performance by NIDC of its obligations under the NIDC Arrangements. 10. The NIDC Arrangements shall enter into force and effect upon the entry into force and effect of the Development Credit Agreement in respect of any part of the Credit and shall terminate when all amounts payable on account of principal, interest and other charges in respect of the loans made pursuant to the Annapurna Agreement and the Yak and Yeti Agreement have been paid. 22 SCHEDULE 5 Provisions to be Included in the Annapurna Agreement and the Yak and Yeti Agreement The Annapurna Agreement between NIDC, acting for and on behalf of the Borrower, and Annapurna and the Yak and Yeti Agreement between NIDC, acting for and on behalf of the Borrower, and Yak and Yeti shall include provisions substantially as follows. For the purposes of this Schedule the term "Company" refers to Annapurna or Yak and Yeti, and the term "Company Loan Agreement" refers to the Annapurna Agreement or the Yak and Yeti Agreement, as the case may be. 1. NIDC, acting for and on behalf of the Borrower, will lend to the Company (a) amounts denominated in various currencies not to exceed in the aggregate the equivalent of $2,880,000 in the case of Annapurna and $1,320,000 in the case of Yak and Yeti corresponding to the amounts and currencies actually disbursed from time to time in respect of withdrawals from the Credit Account on account of expenditures for the part of the Project to be carried out by the Company and (b) amounts in NRs not to exceed the equivalent of $400,000 in the case of Annapurna and $180,000 in the case of Yak and Yeti to be applied against interest and other charges on the Loan coming due through, in the case of Annapurna, March 31, 1975, and in the case of Yak and Yeti, December 31, 1974. The amounts to be lent to the Company under this paragraph, in the aggregate not to exceed the equivalent of $3,280,000 in the case of Annapurna and $1,500,000 in the case of Yak and Yeti, are referred to in this Schedule as the "Loan". 2. (a) Amounts of the Loan referred to in paragraph I (a) above shall be deemed to be drawn down by the Company on the date and in the amount and currency or currencies actually disbursed in respect of the corresponding withdrawal by the Borrower from the Credit Account on account of expenditures for the part of the Project to be carried out by the Company. Amounts of the Loan referred to in paragraph 1 (b) above shall be deemed to be drawn down by the Company on the dates the amounts are applied against amounts of interest and other charges coming due on the Loan. (b) NIDC will effect disbursements of the Loan to the Company by applying to the Association on behalf of the Borrower for withdrawals from the Credit Account. The Company will furnish to NIDC all documentation required by NIDC to make applications to the Association for such withdrawals. 23 (c) With respect to any withdrawal from the Credit Account by the Borrower on account of amounts paid by the Company, NIDC will, pursuant to Section 5.07 of the General Conditions, instruct the Association where to make payment of such withdrawal for the account of the Company. 3. The Company shall pay a commitment charge at the rate of one-quarter of one per cent (1/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Such commitment charge shall (i) accrue from the date when the Company Loan Agreement enters into effect to the respective dates on which amounts shall be deemed drawn down by the Company or shall be cancelled, (ii) be paid in NRs equivalent, at the date of payment, to the amount of commitment charge due as determined in dollars, and (iii) be computed on the basis of a 365-day year. 4. The Company shall pay interest on the principal amount of the Loan deemed drawn down and outstanding from time to time at the rate of seven and one-half per cent (7-1/2%) per annum. Interest shall accrue from the respective dates on which amounts shall be deemeL. so drawn down and shall be computed on the basis of a 365-day year. Interest shall be paid in NRs in an amount equivalent, at the date of payment, to the amounts of interest due as determined in various currencies in relation to the principal amount of each currency deemed drawn down. 5. Interest and other charges shall be payable semi-annually. 6. The Company shall pay to, or on behalf of, the Borrower any charge payable by the Borrower to the Association for any special commitment entered into by the Association pursuant to Section 5.02 of the General Conditions at the request of the Company. 7. The Company shall repay the principal amount of the Loan in semi-annual installments commencing approximately four years after the date of the Company Loan Agreement and continuing over the following twenty years. The semi-annual installments of principal shall be calculated so as to produce approximately equal semi-annual payments of principal and interest combined. The actual amortization schedule shall be agreed between NIDC and the Company. The Company shall have the option of prepaying the Loan, in whole or in part from time to time, without payment of premium or penalty. The principal of the Loan shall be repayable in Rupees equivalent (determined as of the date, or the respective dates, of repayment) to the amounts of the several currencies deemed withdrawn from the Loan Account. 24 8. The Company shall: (a) carry out Part A of the Project in the case of Annapurna, Part B in the case of Yak and Yeti, with due diligence and efficiency in conformity with sound engineering, financial and hotel practices; (b) in carrying out its part of the Project, employ. consultants and contractors acceptable to NIDC and the Association upon terms and conditions satisfactory to NIDC and the Association; (c) carry out the construction works for its part of the Project in accordance only with final drawings acceptable to NIDC and the Association; (d) furnish to NIDC and the Association for their approval, promptly upon its preparation, the master list of furniture and equipment for its part of the Project, and any material modifications thereof or additions thereto; (e) employ a project manager acceptable to NIDC and the Association to supervise the carrying out of its part of the Project; (f) procure the goods and services to be financed out of the proceeds of the Loan in accordance with the procedures set forth or referred to in Section 2.03 of and Schedule 3 to this Agreement; and submit all documentation required under such Schedule 3 and relating to procurement of such goods and services to NIDC for its approval and submission to the Association; (g) insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by the Company to replace or repair such goods; (h) except as NIDC and the Association shall otherwise agree, cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Company's part of the Project; (i) furnish to NIDC and the Association promptly upon their preparation, the plans, reports, specifications, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as NIDC and the Association shall reasonably request; and 25 (j) (i) maintain records adequate to record the progress of its part of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Loan, and to disclose the use thereof in its part of the Project; (ii) enable the representatives of NIDC and the Association to inspect its part of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) furnish to NIDC and the Association all such information as NIDC and the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. 9. The Company shall (i) maintain records adequate to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of the Company, (ii) enable the representatives of NIDC and the Association to inspect the plants, sites, works, properties and equipment of the Company not included in the Project and any relevant records and documents, and (iii) furnish to NIDC and the Association all such information as NIDC and the Association shall reasonably request concerning the administration, financial condition and operations of the Company. 10. The Company shall (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal 4 year audited, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to NIDC and te Association; (ii) furnish to NIDC and the Association as soon as available, but in any case not later than six months after thO 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 NIDC and the Association shall have reasonably requested; and (iii) furnish to NIDC and the Association such other information concerning the accounts and financial statements of the Company and the audit thereof as NIDC or the Association shall from time to time reasonably request. 11. The Company shall take out and maintain with responsible insurers, or make other provisions satisfactory to NIDC and the Association for, insurance against such risks and in such amounts as shall be consistent with sound practice. 12. (a) The Company shall at all times take all action necessary to maintain its corporate existence and right to carry on operations and shall, except as NIDC and the Association may otherwise agree, take all action necessary to acquire and to retain such land, interests in land and properties and to acquire, to maintain and to renew such licenses, consents, franchises, or other rights, as may be necessary 26 or useful for the construction and operation of its part of the Project and the conduct of its business. (b) The Company shall carry on its operations and conduct its affairs in accordance with sound business, hotel and financial practices, shall employ qualified and experienced management acceptable to the Association and NIDC and shall operate, maintain, renew and repair its buildings, equipment, furniture and property as required in accordance with sound engineering and hotel practices. 13. Except as NIDC shall otherwise agree, the Company shall not: (i) amend its Memorandum and Articles of Association; (ii) create, acquire or have any subsidiaries; or (iii) sell, lease, transfer, or otherwise dispose of any of its properties or assets which shall be required for the efficient carrying on of its business. 14. Except as NIDC shall otherwise agree, the Company shall not make expenditures, or commitments for expenditures, for fixed or capital assets (including investments in or loans to other business entities), except: (a) Throughout the period of construction of its part of the Project, those required for the carrying out of its part of the Project; (b) After the completion of construction of its part of the Project: (i) those required for repair, maintenance, or replacement of assets and (ii) in any fiscal year other expenditures and commitments to make expenditures not exceeding in the aggregate the equivalent of $50,000; and (c) Investments in short-term marketable securities solely for the purpose of temporarily employing its idle funds. 15. Except as NIDC shall otherwise agree, the Company shall not incur, assume, guarantee or permit to exist any debt for money borrowed except: (i) the Loan; and (ii) debt which matures within one year of its incurrence or on demand and which is incurred in the ordinary course of business. 27 16. Except as the Association and NIDC shall otherwise agree, the Company shall not declare or pay any dividends, or make any other distributions with respect to its capital shares, or, directly or indirectly, redeem, purchase or otherwise acquire for a consideration, any of its capital shares, except that the Company may: (i) declare and pay dividends, or make other distributions, payable solely in capital shares of the Company; and (ii) if the Company is not in default under the Company Loan Agreement, declare and pay dividends out of, but not in excess of, its cumulative net earnings after the date of the Company Loan Agreement; provided, however, that the Company shall not with respect to any financial year declare or pay dividends exceeding in the aggregate 80% of the net earnings of the Company for that financial year. 17. Except as the Association and NIDC shall otherwise agree, and subject to the provisions of paragraph 16 above, the Company shall not in any financial year pay dividends exceeding in the aggregate 20o of the par value of the capital shares with respect to which such dividends are paid, unless the Company shall * simultaneously prepay a portion of the then outstanding principal amount of the Loan equal to the amount of dividends paid in excess of such 20% of such par value. 18. (a) The Company shall obtain from each of its shareholders an undertaking in favor of the Company, NIDC and the Association severally, and satisfactory in form and substance to the Association and NIDC, setting forth the obligation of the respective shareholder to: (i) make payments to the Company for a specified number of additional capital shares of the Company in accordance with a specified time schedule; and (ii) subscribe and pay for capital shares of the Company, in addition to those provided for in subparagraph (i) above, as and when necessary to provide to the Company the shareholder's proportionate share (the proportion his shareholdings bear to the total outstanding shares of the Company) of any additional funds required by the Company to carry out its part of the Project. 28 (b) The Company shall cause to be furnished to NIDC: (i) opinions of counsel satisfactory to the Association and NIDC concluding that each of the undertakings referred to in subparagraph (a) above constitutes a valid and binding obligation of the respective shareholder; and (ii) evidence of other arrangements, satisfactory in form and substance to the Association and NIDC, to assure the performance by the shareholders of their obligations under the undertakings referred to in subparagraph (a) above. (c) The Company shall exercise its rights under the undertakings referred to in subparagraph (a). above in such manner as to protect the interests of the Company, NIDC and the Association and to accomplish the purposes of the Loan. (d) Notwithstanding the provisions of paragraphs 16 and 17 above, the Company shall not declare or pay any dividend if at the time of such declaration or payment any of the shareholders of the Company is in default of any obligation under the respective shareholder's undertaking. 19. The Company shall execute, deliver and register, and shall maintain in effect, instruments, in form and substance satisfactory to NIDC, as required to establish as security for the principal of, and interest and other charges on, the Loan, a first specific mortgage upon the properties, buildings and equipment of the Company. 20. (a) The Company and NIDC shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, each of them shall furnish to the other all such information as it shall reasonably request with regard to the general status of the Loan. (b) The Company and NIDC shall from time to time exchange views through their representatives, and with the representatives of the Association, with regard to matters relating to the purposes of the Loan and the maintenance of the service thereof. The Company shall promptly inform NIDC and the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan, the maintenance of the service thereof or the performance by the Company of its obligations under the Company Loan Agreement. 29 21. If the right of the Borrower under the Development Credit Agreement to make withdrawals from the Credit Account shall have been suspended or terminated, regardless of the reason therefor, then the right of the Company to make drawings under the Loan shall likewise and simultaneously be suspended for the same period, or terminated, as the case may be. 22. Notwithstanding paragraph 7 above, upon the occurrence of any of the following events, NIDC, at its option, but only with the consent of the Association, may by notice to the Company declare the principal of the Loan then outstanding to be due and payable immediately, and upon any such declaration such principal shall become due and payable immediately: (a) if the Company defaults for a period of thirty days in the payment of any interest or in the repayment of any installment of principal falling due under the Company Loan Agreement; (b) if the Company defaults in the performance of any other covenant or agreement on its part under the Company Loan Agreement and such default continues for a period of sixty days afterpnotice thereof has been given by NIDC to the Company; or (c) if any shareholder of the Company defaults in the performance of any of such shareholder's obligations under the undertaking referred to in paragraph 18 above and such default continues for a period of sixty days after notice thereof has been given by NIDC to the Company. 23. The Company Loan Agreement shall enter into force and effect upon the entry into force and effect of the Development Credit Agreement in respect of the relevant part of the Credit and shall terminate when all amounts payable on account of principal, interest and other charges in respect of the Loan have been paid.