Conformed Copy - L3851 - Pre-Export Guarantee Facility Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3851 MD Project Agreement (Pre-Export Guarantee Facility Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and GUARANTEE ADMINISTRATION UNIT Dated April 19, 1995 LOAN NUMBER 3851 MD PROJECT AGREEMENT AGREEMENT, dated April 19, 1995, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and GUARANTEE ADMINISTRATION UNIT (the GAU). WHEREAS by the Loan Agreement of even date herewith between the Republic of Moldova (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to thirty million dollars ($30,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the GAU agree to undertake such obligations toward the Bank as are set forth in this Agreement; and WHEREAS the GAU, in consideration of the Bank's entering into the Loan 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 Page 2 Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) The GAU declares its commitment to the objectives of the Project as set forth in Section 3.01 of the Loan Agreement, and, to this end, shall carry out 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 the Project. (b) For the purposes of the carrying out of the Project, the GAU shall: (i) enter into an agreement with the Agent Bank (the Agency Agreement), whereby the GAU shall delegate to the Agent Bank the issuance of Letters of Guarantee and the making of Payments under Guarantee Contracts, such agreement to contain terms and conditions satisfactory to the Bank, including (except as the Bank shall otherwise agree) those set forth or referred to in Schedule 1 to this Agreement; (ii) enter into contracts with Guarantee Holders (the Guarantee Contracts), such contracts to contain terms and conditions substantially similar to those of the Framework Guarantee Contract; and (iii) duly comply with all its obligations under the Agency Agreement and the Guarantee Contracts. (c) Without limitation upon the provisions of paragraphs (a) and (b) of this Section and except as the Borrower, the Bank and the GAU shall otherwise agree, the GAU shall carry out the Project in accordance with the Implementation Program set forth in Schedule 2 to this Agreement. Section 2.02. (a) The GAU shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement, the Agency Agreement and the Guarantee Contracts and other matters relating to the purposes of the Loan. (b) The GAU shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by the GAU of its obligations under this Agreement, the Agency Agreement and the Guarantee Contracts. Section 2.03. The GAU shall: (a) on the first day following each six-month period after the Effective Date, furnish to the Bank a report, in such detail as the Bank shall request, on the Guarantee Contracts issued and, if applicable, the Payments made during such period; and (b) promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between the Bank, the Borrower and the GAU, prepare and furnish to the Bank a report, of such scope and detail as the Bank shall reasonably Page 3 request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by the Bank, the Borrower and the GAU of their respective obligations under the Loan Agreement and the Project Agreement, respectively, and the accomplishment of the purposes of the Loan. ARTICLE III Management and Operations of the GAU Section 3.01. (a) The GAU shall carry on its operations and conduct its affairs in accordance with sound administrative and financial practices and the provisions of the Operating Manual, under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. (b) Unless the Bank shall otherwise agree, the GAU shall not amend or otherwise alter the Operating Manual or any provision thereof. ARTICLE IV Financial Covenants Section 4.01. (a) The GAU shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition, including records and separate accounts for the Project. (b) The GAU shall: (i) have the records referred to in Section 4.01 of this Agreement, its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and records and accounts for the Guarantee Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of said 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements and the audit thereof, as the Bank shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of the GAU hereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify the GAU thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any Page 4 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For the GAU: Ministry of Economy Paita Marii Adunerii Nationale, 1 277033 Chisinau Republic of Moldova Telex: 163171 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 the GAU, or by the GAU on behalf of the Borrower under the Loan Agreement, may be taken or executed by the general manager of the GAU or such other person or persons as the general manager of the GAU shall designate in writing, and the general manager of the GAU shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT Page 5 By /s/ Kermal Dervis Acting Regional Vice President Europe and Central Asia GUARANTEE ADMINISTRATION UNIT By /s/ Nicholay Tau Authorized Representative SCHEDULE 1 Agency Agreement Except as the Bank shall otherwise agree, the Agency Agreement shall provide, in a manner satisfactory to the Bank, that the Agent Bank shall have, inter alia, the following duties and responsibilities: (a) to issue a Letter of Guarantee upon issuance of a Guarantee Contract by the GAU; (b) to make Payments to the Guarantee Holders upon presentation of documentary evidence in a form specified, that the GAU has admitted liability in the amount of the Payment in question or an arbitration award was rendered against the GAU in the amount of the Payment in question; in making the Payment, the Agent Bank will use either: (i) funds transferred for this purpose into a specified account by the Borrower, or (ii) if such funds are not deposited by the Borrower within 10 days of issuance of either the admission of liability by the GAU or the arbitration award against the GAU, the amount deposited for this purpose into the Guarantee Account by the Bank; (c) to ensure that the aggregate amount of Guarantee Contracts outstanding at any time shall not exceed the amount of the Loan available at that time; and (d) to report to the Bank on a monthly basis on the Letters of Guarantee issued during the preceding month. SCHEDULE 2 Implementation Program For the purpose of carrying out the Project, the GAU shall: (a) review applications for Guarantee Contracts to verify that each transaction proposed to be covered by the Guarantee Contract meets the following criteria: (i) it does not involve Inputs which are intended for a military or paramilitary purpose or for luxury consumption or are included in the following SITC groups or subgroups, or any successor groups or subgroups under future revisions to the SITC, as designated by the Bank by notice to the Borrower and the GAU: Group Sub-group Description of Items 112 - Alcoholic beverages Page 6 121 - Tobacco, unmanufactured, tobacco refuse 122 - Tobacco, manufactured (whether or not containing tobacco sub- stitutes) 525 - Radioactive and associated materials 667 - Pearls, precious and semi- precious stones, unworked or worked 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), non-irradiated for nuclear reactors 728.43 - Tobacco processing machinery 897 897.3 Jewelry of gold, silver or platinum group metals (except watches and watch cases) and goldsmiths' or silversmiths' wares (including set gems) 971 - Gold, non-monetary (excluding gold ores and concentrates) (ii) it does not involve Outputs which are intended for a military or paramilitary purpose or are included in the following SITC groups or subgroups, or any successor groups or subgroups under future revisions to the SITC, as designated by the Bank by notice to the Borrower and the GAU; Group Sub-group Description of Items 121 - Tobacco, unmanufactured, tobacco refuse 122 - Tobacco, manufactured (whether or not containing tobacco sub- stitutes) 525 - Radioactive and associated materials 718 718.7 Nuclear reactors, and parts thereof, fuel elements (cartridges), non- irradiated for nuclear reactors (iii) it complies with the environmental standards satisfactory to the Bank, which are set forth in the Operating Manual; (iv) it serves a productive purpose by virtue of financing Inputs to be used for production of exports by industrial or agricultural enterprises in the territory of the Borrower or for enhancing the production capacity of such enterprises; (v) its maturity is consistent with the production cycle or repayment capacity of the enterprise Page 7 in the territory of the Borrower which receives the Inputs; and (vi) its value is not less than $25,000 equivalent. (b) ensure prior to issuing a Guarantee Contract to a given Guarantee Holder that the amount of such Guarantee Contract shall not exceed the sum of $4,000,000 equivalent when added to any other outstanding Guarantee Contracts with such Guarantee Holder; (c) verify with the Agent Bank prior to issuing a Guarantee Contract that the amount of Guarantee Contracts outstanding does not exceed the amount of the Loan available at any given time; (d) unless the Bank directs otherwise by notice to the Borrower and the GAU, submit to the Bank for prior review and approval each application approved by the GAU for a proposed Guarantee Contract together with the GAU's evaluation of such application based on criteria set forth in paragraph (a) of this Schedule 2 to the Project Agreement; (e) issue Guarantee Contracts, upon approval of the Bank and confirmation from the Agent Bank; (f) notify the Agent Bank with respect to each Guarantee Contract issued or cancelled; (g) notify the Borrower of any notice of alleged Loss filed by the Guarantee Holder and investigate within 30 days of filing of such notice whether the events giving rise to the alleged Loss can be remedied; (h) within 30 days of filing of a claim by a Guarantee Holder, determine whether Payment is due and notify the Guarantee Holder, the Agent Bank and the Borrower of the determination made; and (i) maintain copies of and retain for at least one year after the Closing Date, all Guarantee Contracts issued and all records relating to each such Guarantee Contract.