Mongolia - Transport Rehabilitation Project : Credit 2615 - Project Agreement - 1 - Conformed

CREDIT NUMBER 2615 MOG Project Agreement (Transport Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and MONGOL BANK Dated 1 -' , 1994 CREDIT NUMBER 2615 MOG PROJECT AGREEMET AGREEMENT, dated I Ilk t , 1994, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and MONGOL BANK (MB). 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 MB and MR agree to undertake such obligations toward the Association as are set forth in this Agreement and the MR Project Agreement respectively; (B) by a Subsidiary Credit Agreement to be entered into between the Borrower and ME, a portion of the proceeds of the credit provided for under the Development Credit Agreement will be relent to MB on the terms and conditions set forth in said Subsidiary Credit Agreement; and WHEREAS MB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the cbligations 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) have the respective meanings therein set forth and the following additional terms have the following meanings: a. "Eligible Beneficiary" means individually a transport entity selected pursuant to paragraph 2 in Part A of the Schedule to this Agreement. b. "Financing Agreements" means collectively the financing agreements entered or to be entered into between MB and the PCBs pursuant to paragraph 3 in Part A of the Schedule to this Agreement, as the same may be amended - 2 - from time to time, and such term includes any schedules to the Financing Agreements; "Financing Agreement" means any of the Financing Agreements; and "Financing" means the financing made available under the Financing Agreement. c. "Subproject" or "Subprojects" means a specific subproject or subprojects to be carried out by an Eligible Beneficiary or Eligible Beneficiaries under Part C.1 of the Project. d. "Subsidiary Credit Agreement" means the subsidiary credit agreement entered or to be entered into between the Borrower and MB 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. e. "Subsidiary Financing Agreements" means collectively the subsidiary financing agreements entered or to be entered into between the PCBs and Eligible Beneficiaries pursuant to paragraph 5 in Part B of the Schedule to this Agreement, as the same may be amended from time to time, and such term includes any schedules to the Subsidiary Financing Agreements; "Subsidiary Financing Agreement" means any of the Subsidiary Financing Agreements; and "Subsidiary Financing" means the subsidiary financing made available under the Subsidiary Financing Agreement. ARTICLE II Execution of the Project Section 2.01. (a) MB declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under the Development Credit Agreement, shall cause PCBs to cause Eligible Beneficiaries to carry out Part C.1 of the Project with due diligence and efficiency and in conformity with appropriate administrative, and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part C.1 of the Project. - 3 - (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and MB shall otherwise agree, MB shall cause PCBs to cause Eligible Beneficiaries to carry out Part C.1 of the Project in accordance with the Implementation Program set forth in the Schedule to this Agreement. Section 2.02. (a) MB undertakes that, unless the Association shall otherwise agree, Financing will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Part A of the Schedule to this Agreement. (b) MB shall exercise its rights in relation to each Financing in such manner as to: (i) protect the interests of the Association and of MB; (ii) comply with its obligations under this Agreement and the Subsidiary Credit Agreement; and (iii) achieve the purposes of the Project. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part C.1 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 2.04. MB 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. Section 2.05. MB shall duly perform all its obligations under the Subsidiary Credit Agreement. Except as the Association shall otherwise agree, MB 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 2.06. (a) MB shall, at the request of the Association, exchange views with the Association with regard to the progress of Part C.1 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) MB shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part C.1 of the Project, the accomplishment of the purposes of the - 4 - Credit, or the performance by MB of its obligations under this Agreement and under the Subsidiary Credit Agreement. ARTICLE III Financial Covenants Section 3.01. (a) MB shall maintain procedures and records adequate to monitor and record the progress of the Project and of each Subproject (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. (b) MB 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 IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of MB 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 MB of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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: -6- 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 MB: Central Bank of Mongolia (Mongol Bank) Commercial Street 6 Ulaanbaatar Mongolia Cable address: Telex: MONGOLBANK 79333 Ulaanbaatar Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of MB may be taken or executed by its Governor or such other person or persons as the Governor shall designate in writing, and MB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. -7- 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 S . Regional Vice President East Asia and Pacific MONGOL BANK By Representative Authorized Representative - 8 - SCHEDULE Implementation Program Part A: Financing 1. MB shall, in consultation with the Borrower and the Association, select commercial banks for participation in the financing of Part C.1 of the Project in accordance with criteria agreed with the Association. 2. MB shall cause PCBs to, select transport entities for implementation of Part C.1 of the Project in accordance with criteria agreed with the Association. 3. MB shall onlend the proceeds of the Subsidiary Credit to PCBs under Financing Agreements to be entered into between MB and PCBs, under terms and conditions satisfactory to the Association including the following: (a) the term of each Financing shall not exceed one year; (b) interest on the principal amount of each Financing withdrawn and outstanding from time to time shall be payable at a rate which is one percentage point lower than the monthy base rate (being the rate equal to the average quoted rate of the five largest commercial banks (in terms of capital structure) in Mongolia on their two-month Tugriks time deposits for the two months preceding the issuance of the special time deposit from MB to the commercial banks) ; (c) commitment charge on the principal amount of each Financing not withdrawn from time to time shall be payable at a rate equal to the rate set by the Association in accordance with Section 2.04 of the Development Credit Agreement; (d) the foreign exchange risk on each Financing shall be borne by the concerned PCBs; (e) PCBs will provide Subsidiary Financing to Eligible Beneficiaries in accordance with the procedures and on terms and conditions set forth in Part B hereof; (f) procurement of the goods and services required for Part C.1 of the Project and to be financed out of the proceeds of the Credit will be governed by the provisions of Schedule 3 to the Development Credit Agreement; (g) PCBs will 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 Part C.1 of the Project; (h) PCBs will not, except as the Association may otherwise agree, take or concur in any action -9- which would have the effect of assigning, amending, abrogating or waiving their respective Financing Agreement or any provision thereof; (i) PCBs will, at the request of the Association, exchange views with the Association with regard to the progress of Part C.1 of the Project, the performance of their respective obligations under the Financing Agreement, and othei matters relating to the purposes of the Credit; and (j) all the other obligations of MB under the MB Project Agreement shall, mutatis mutandis, apply to PCBs in carrying out their respective Financing Agreement. 4. MB shall exercise its rights under the Financing Agreements in such manner as to protect the interests of MB, the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Borrower and the Association shall otherwise agree, MB shall not assign, amend, abrogate or waive the Financing Agreements or any provision thereof. Part B: Subsidiary Financing and Subprojects 5. To enable Eligible Beneficiaries to carry out the Subprojects, PCBs shall provide the proceeds of their Financing to Eligible Beneficiaries under Subsidiary Financing Agreements to be entered into between the PCBs and Eligible Beneficiaries, under terms and conditions satisfactory to the Association including the following: (a) the term of each Subsidiary Financing shall not exceed one year; (b) interest on the principal amount of each Subsidiary Financing withdrawn and outstanding from time to time shall be payable at a rate not exceeding the loan rate (being the rate applicable to short term (less than one year) commercial loans to private business units as published in MB's monthly Statistical Bulletin) applicable for the month prior to the date of the Financing; (c) the Eligible Beneficiaries shall carry out the Subprojects with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and maintain adequate records; (d) the goods and services to be financed out of the proceeds of the Credit shall be procured in accordance with the provisions of Schedule 3 to the Development Credit Agreement and such goods shall be used exclusively in carrying out of the Subprojects; (e) PCBs shall inspect, individually or jointly with representatives of the Association, if the Association so requests, such goods included in the Subprojects, and any relevant records and documents; (f) the Eligible Beneficiaries shall take out and - 10 _ maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice and, without any limitation upon the foregoing, such insurance will cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installa- tion, and any indemnity thereunder to be made payable in a currency freely usable by the Eligible Beneficiary to replace or repair such goods; (g) PCBs shall obtain all such information as the Association or MB may reasonably request relating to the foregoing and to the administration, operations and financial condition of the Eligible Beneficiaries and to the benefits to be derived from the Subprojects; and (h) PCBs shall suspend or terminate the right of an Eligible Beneficiary to the use of the proceeds of the Credit upon failure by such Eligible Beneficiary to perform its obligations under its Subsidiary Financing Agreement. 6. No expenditures for goods and services required for a Subproject shall be eligible for financing out of the proceeds of a Subsidiary Financing unless the Subsidiary Financing shall have been approved by MB. 7. When presenting a Subsidiary Financing to MB for approval, the concerned PCB shall furnish to MB an application, in form satisfactory to the Association, together with (i) a description of the Eligible Beneficiary and a description of the proposed Subproject and expenditures proposed to be financed out of the proceeds of the Credit; (ii). the proposed terms and conditions of the Subsidiary Financing including the schedule of amortization of the Subsidiary Financing; and (iii) such other information as the Association or MB shall reasonably request including evidence, satisfactory to the Association or MB, regarding the proposed sale of the rehabilitated truck(s) to private persons/entities. 8. Applications made pursuant to the provisions of paragraph 7 above shall be presented to MB on or before November 30, 1997. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of, the original in the archives of' the International Bank for Reconstruction and Development and the International Dev'elopnent Association. FOR SECRETARY