\DOCUMENi\i CREDIT NUMBER 2263 BD Development Credit Agreement (Liquefied Petroleum Gas Transport and Distribution Project) between PEOPLE'S REPUBLIC OF BANGIADESH and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated J7L , 1991 CREDIT NUMBER 2263 BD DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated I(AP, 1991, between PEOPLE'S REPUBLIC OF BANGLADESH (the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association). WHEREAS: (A) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Association to assist in the financing of the Project; (B) part of the Project will be carried out by Rupantarita Prakritik Gas Company Limited (RPGCL) with the Borrower's assis- tance and, as part of such assistance, the Borrower will make available to RPGCL part of the proceeds of the Credit as provided in this Agreement; (C) part of the Project will be carried out by Liquefied Petroleum Gas Limited (LPGL) with the Borrower's assistance and, as part of such assIstance, the Borrower will make available to LPGL part of the proceeds of the Credit as provided in this Agreement; (D) the Borrower intends to obtain from the Canadian International Development Agency (CIDA) a grant (the CIDA Grant) in an amount equivalent to $1,900,000 to assist in financing part of the Project on the terms and conditions set forth in an agreement (the CIDA Grant Agreement) to be entered into between the Borrower and CIDA; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions set forth in this Agreement, in the RPGCL Project Agreement of even date herewith between the Association and RPGCL, and in the LPGL Project Agreement of even date herewith between the Association and LPGL; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I General Conditions; Definitions Section 1.01. The "General Conditions Applicable to Development Credit Agreements" of the Association, dated January 1, 1985, with the last sentence of Section 3.02 deleted (the General Conditions) constitute an integral part of this Agreement. -2- Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "CNG" means compressed natural gas; (b) "Fiscal Year" means the Borrower, RPGCL and LPGL's fiscal years commencing on July 1 and ending on June 30; (c) "LPG" means liquefied petroleum gas; (d) "LPGL" means Liquefied Petroleum Gas Limited, a company established and operating under the Borrower's Companies Act of 1913; (e) "LPGL Project Agreement" means the agreement between the Association and Liquefied Petroleum Gas Limited (LPGL), of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the LPGL Project Agreement; (f) "LPGL Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and LPGL pursuant to Section 3.01 (c) of this Agreement, as the same may be amended from time to time, and such term includes any schedules to the LPGL Subsidiary Loan Agreement; (g) "NGL" means natural gas liquids; (h) "RPGCL" means Rupantarita Prakritik Gas Company Limited, a company established and operating under the Borrower's Companies Act of 1913; (i) "RPGCL Project Agreement" means the agreement between the Association and Rupantarita Prakritik Gas Company Limited (RPGCL), of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the RPGCL Project Agreement; (j) "RPGCL Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and RPGCL pursuant to Section 3.01 (b) of this Agreement, as the same may be amended from -3- time to time, and such term includes any schedules to the RPGCL Subsidiary Loan Agreement; and (k) "Special Account" means the account referred to in Section 2.02 (b) of this Agreement. ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions set forth or referred to in this Agreement, an amount in various currencies equivalent to forty nine million eight hundred thousand Special Drawing Rights (SDR 49,800,000). Section 2.02. (a) The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement for expenditures made (or, if the Association shall so agree, to be made) in respect of the rea- sonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit. (b) The Borrower shall, for the purposes of the Project, open and maintain in United States dollars a special deposit account in Bangladesh Bank on terms and conditions satisfactory to the Association. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 4 to this Agreement. Section 2.03. The Closing Date shall be June 30, 1996, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. (a) The Borrower shall pay to the Association a commitment charge on the principal amount of the Credit not withdrawn from time to time at a rate to be set by the Association as of June 30 of each year, but not to exceed the rate of one-half of one percent (1/2 of 1%) per annum. (b) The commitment charge shall accrue: (i) from the date sixty days after the date of this Agreement (the accrual date) to the respective dates on which amounts shall be withdrawn by the Borrower from the Credit Account or cancelled; and (ii) at the rate set as of the June 30 immediately preceding the accrual date or at -4- such other rates as may be set from time to time thereafter pursuant to paragraph (a) above. The rate set as of June 30 in each year shall be applied from the next payment date in that year specified in Section 2.06 of this Agreement. (c) The commitment charge shall be paid: (i) at such places as the Association shall reasonably request; (ii) without restrictions of any kind imposed by, or in the territory of, the Borrower; and (iii) in the currency specified in this Agreement for the purposes of Section 4.02 of the General Conditions or in such other eligible currency or currencies as may from time to time be designated or selected pursuant to the provisions of that Section. Section 2.05. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.06. Commitment charges and service charges shall be payable semi-annually on March 15 and September 15 in each year. Section 2.07. (a) Subject to paragraphs (b) and (c) below, the Borrower shall repay the principal amount of the Credit in semi- annual installments payable on each March 15 and September 15 commencing September 15, 2001 and ending March 15, 2031. Each installment to and including the installment payable on March 15, 2011 shall be one percent (1%) of such principal amount, and each installment thereafter shall be two percent (2%) of such principal amount. (b) Whenever (i) the Borrower's gross national product per capita, as determined by the Association, shall have exceeded $790 in constant 1985 dollars for five consecutive years and (ii) the Bank shall consider the Borrower creditworthy for Bank lending, the Association may, subsequent to the review and approval thereof by the Executive Directors of the Association and after due consideration by them of the development of the Borrower's economy, modify the terms of repayment of installments under paragraph (a) above by requiring the Borrower to repay twice the amount of each such installment not yet due until the principal amount of the Credit shall have been repaid. If so requested by the Borrower, the Association may revise such modification to include, in lieu of some or all of the increase in the amounts of such installments, the payment of interest at an annual rate agreed with the Association on the principal amount of the Credit withdrawn and outstanding from -5- time to time, provided that, in the judgment of the Association, such revision shall not change the grant element obtained under the above-mentioned repayment modification. (c) If, at any time after a modification of terms pursuant to paragraph (b) above, the Association determines that the Borrower's economic condition has deteriorated significantly, the Association may, if so requested by the Borrower, further modify the terms of repayment to conform to the schedule of installments as provided in paragraph (a) above. 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. ARTICLE III Execution of the Project Section 3.01. (a) The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, without any limitation or restriction upon any of its other obligations under this Agreement, shall cause RPGCL and LPGL to perform in accordance with the provisions of the RPGCL and LPGL Project Agreements, respectively, all the obligations of RPGCL and LPGL therein set forth, shall take and cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable RPGCL and LPGL to perform such obligations, and shall not take or permit to be taken any action which would prevent or interfere with such performance. (b) The Borrower shall relend part of the proceeds of the Credit to RPGCL under a subsidiary loan agreement to be entered into between.the Borrower and RPGCL, under terms and conditions which shall have been approved by the Association which shall include the following: (i) interest on the Subsidiary Loan shall be payable at the rate of 10% per annum; (ii) the Subsidiary Loan shall be repaid over a period of fifteen years, including a grace period of five years; and (iii) the foreign exchange risk shall be borne by RPGCL. (c) The Borrower shall relend part of the proceeds of the Credit to LPGL under a subsidiary loan agreement to be entered into between the Borrower and LPGL, under terms and conditions which shall have been approved by the Association which shall include the -6- folowing: (i) interest on the Subsidiary Loan shall be payable at the rate of 10% per annum; (ii) the Subsidiary Loan shall be repaid over a period of fifteen years, including a grace period of five years; and (iii) the foreign exchange risk shall be borne by LPGL. (d) The Borrower shall exercise its rights under the RPGCL and LPGL Subsidiary Loan Agreements 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 RPGCL and LPGL Subsidiary Loan Agreements or any provision thereof. Section 3.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 3.03. The Borrower and the Association hereby agree that the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) shall be carried out by RPGCL and LPGL pursuant to Section 2.03 of the RPGCL and LPGL Project Agreements, respectively. Section 3.04. Without any limitation or restriction upon Section 3.01 of this Agreement, the Borrower shall: (a) review annually, but not later than March 31 in each year, commencing March 31, 1992, the transfer and retail prices of LPG, and, thereafter, make any adjustments to such prices, in a manner satisfactory to the Association, to comply with the financial viability objectives referred to in Section 3.06 of this Agreement, and with the economic efficiency criteria agreed with the Association; and (b) by June 30, 1994, cause the transfer price of LPG from LPG producers to LPG bottlers to be uniform throughout Bangladesh. Section 3.05. Without any limitation or restriction upon Section 3.01 of this Agreement, the Borrower shall finance, as the Borrower's equity contribution to RPGCL, all future CNG feasibility and pilot projects carried out by RPGCL on behalf of the Borrower. -7- Section 3.06. Without any limitation or restriction upon Section 3.01 of this Agreement, the Borrower shall: (a) price NGL products so as to enable RPGCL to earn revenues from the sale of NGL products sufficient to cover its operating expenses, debt service, additional working capital requirements, and contribution to investments of not less than 35%; and (b) price LPG so as to enable LPGL to earn revenues from the sale of LPG sufficient to cover its operating expenses, debt service, additional working capital requirements, and a contribution to investments of not less than 35%. ARTICLE IV Financial Covenants Section 4.01. (a) For all expenditures with respect to which withdrawals from the Credit Account were made on the basis of statements of expenditures, the Borrower shall: (i) maintain or cause to be maintained in accordance with sound accounting practices, records and accounts reflecting such expenditures; (ii) ensure that all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures are retained until at least one year after the Association has received the audit report for the fiscal year in which the last withdrawal from the Credit Account was made; and (iii) enable the Association's representatives to examine such records. (b) The Borrower shall: (i) have the records and accounts referred to in paragraph (a) (i) of this Section and those for the Special Account for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; -8- (ii) furnish to the Association as soon as available, but in any case not later than nine months after the end of each such year the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested, including a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals; and (iii) furnish to the Association such other information concerning said records and accounts and the audit thereof as the Association shall from time to time reasonably request. ARTICLE V Remedies of the Association Section 5.01. Pursuant to Section 6.02 (h) of the General Conditions, the following additional events are specified: (a) RPGCL shall have failed to perform any of its obligations under the RPGCL Project Agreement; (b) LPGL shall have failed to perform any of its obligations under the LPGL Project Agreement; (c) as a result of events which have occurred after the date of this Agreement, an extraordinary situation shall have arisen which shall make it improbable that RPGCL or LPGL will be able to perform their obligations under the RPGCL and LPGL Project Agreements, respectively; (d) the Articles of Association of RPGCL as amended as of October 23, 1990, shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of RPGCL to perform any of its obligations under the RPGCL Project Agreement; -9- (e) the Articles of Association of LPGL dated March 3, 1983, shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of LPGL to perform any of its obligations under the LPGL Project Agreement; (f) the Borrower or any other authority having juris- diction shall have taken any action for the dissolution or disestablishment of RPGCL or of LPGL or for the suspension of their operations; and (g) the CIDA Grant Agreement shall have failed to become effective by December 31, 1991, or such later date as the Association may agree; provided, however, that the provisions of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement; and (h) (i) Subject to subparagraph (ii) of this paragraph, the right of the Borrower to withdraw the proceeds of any grant made to the Borrower for the financing of the Project shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the agreement providing therefor. (ii) Subparagraph (i) of this paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (A) such suspension, cancellation or ter.-ination is not caused by the failure of the Borrower to perform any of its obligations under such agreement; and (B) adequate funds for the Project are available to the Borrower from other sources on terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. Pursuant to Section 7.01 (d) of the General Conditions, the following additional events are specified: (a) any event specified in paragraphs (a) and (b) of Section 5.01 of this Agreement shall occur and shall continue for a period - 10 - of sixty days after notice thereof shall have been given by the Association to the Borrower; (b) any event specified in paragraphs (d), (e), (f) and (g) of Section 5.01 of this Agreement shall occur; and (c) the event specified in paragraph (h) (i) of Section 5.01 of this Agreement shall occur, subject to the proviso of paragraph (h) (ii) of that Section. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Cradit Agreement within the meaning of Section 12.01 (b) of the GenerA Conditions: (a) the RPGCL Subsidiary Loan Agreement has been executed on behalf of the Borrower and RPGCL; (b) the LPGL Subsidiary Loan Agreement has been executed on behalf of the Borrower and LPGL; (c) the Project Proforma for carrying out the Project has been approved by the Borrower; (d) the contracts required for the construction of the LPG recovery facilities have been awarded in a manner satisfactory to the Association; and (e) the consultants required under Parts A.4 and B.4 of the Project have been employed. Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the RPGCL and LPGL Project Agreements have been duly authorized or ratified by RPGCL and LPGL, respectively, and are legally binding upon RPGCL and LPGL, respectively, in accordance with their terms; and - 11 - (b) that the RPGCL and LPGL Subsidiary Loan Agreements have been duly authorized or ratified by the Borrower and RPGCL and LPGL, respectively, and are legally binding upon the Borrower and RPGCL and LPGL, respectively, in accordance with their terms. Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The provisions of paragraph (b) of Section 5.02 of this Agreement shall cease and determine on the date on which this Agreement shall terminate or on the date twenty years after the date of this Agreement, whichever shall be the earlier. ARTICLE VII Representatives of the Borrower; Addresses Section 7.01. The Secretary or the Additional Secretary or any Joint Secretary, Deputy Secretary or Assistant Secretary of the Economic Relations Division of the Ministry of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Economic Relations Division Ministry of Finance Government of the People's Republic of Bangladesh Dhaka, Bangladesh Cable address: Telex: BAHIRSAMPAD 642226 SETU BJ Dhaka 672796 SETU BJ - 12 - 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) 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. PEOPLE'S REPUBLIC OF BANGLADESH By Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Ac t Regional Vice President Asia - 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 the amounts of the Credit to each Category and the percentage of expenditures for items so to be financed in each Category: Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (1) Civil works, and 100% of foreign transport, erection expenditures and and commissioning 75% of local of equipment for: expenditures (a) Part A.1, A.2 230,000 and A.3 of the Project (b) Part B.1 530,000 and B.3 of the Project (2) Equipment (includ- 100% of foreign ing installation), expenditures, and materials 100% of local for: expenditures (ex-factory (a) Part A.1, A.2 16,280,000 cost) and 75% and A.3 of of local the Project expenditures for other items (b) Part B.1, 22,200,000 procured locally B.2 and B.3 of the Project - 14 - Amount of the Credit Allocated % of (Expressed in Expenditures Category SDR Equivalent) to be Financed (3) Consultants' 100% services and training for: (a) Part A.4 and 3,410,000 A.5 of the Project (b) Part B.4, B.5, 2,970,000 B.6(ii) and (iii), and B.7 of the Project (4) Unallocated 4,180,000 TOTAL 49,800,000 2. For the purposes of this Schedule: (a) the term "foreign expenditures" means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower; and (b) the term "local expenditures" means expenditures in the currency of the Borrower or for goods or services supplied from the territory of the Borrower. 3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made in respect of payments made for expenditures prior to the date of this Agreement, except that withdrawals, in an aggregate amount not to exceed SDR 3,700,000 may be made in respect of Categories (2) and (3) on account of payments made for expenditures before that date but after Janu- ary 1, 1991. - 15 - SCHEDULE 2 Description of the Project The objective of the Project is to assist the Borrower in carrying out an economic and least-cost household and commercial energy supply strategy through the substitution of liquefied petroleum gas for imported kerosene, fuelwood and other commercial fuels. The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Association may agree upon from time to time to achieve such objectives: Part A: RPGCL 1. Construction of storage facilities for LPG and condensates at the Ashuganj NGL fractionation plant, and acquisition of related equipment and spare parts. 2. Carrying out of directional drilling works for about four river crossings for the pipeline referred to in Part A.3 of the Project. 3. Construction of a LPG pipeline of about 165 kilometers from Ashuganj to Elenga. 4. Provision of infrastructure design and construction supervision services under Part A.1, A.2 and A.3 of the Project. 5. Training of RPGCL staff in management and operation of NGL facilities. 6. Carrying out of the following studies: (i) an environmental and operational safety assessment of petroleum operations covered by the Bangladesh Oil, Gas, and Mineral Corporation, including NGL processing; (ii) a feasibility study for incremental NGL processing, transportation and distribution; and - 16 - (iii) a technical, economic and financial assessment of compressed natural gas development options, and preparation of the commercialization strategy. Part B: LPGL 1. Construction of a LPG bottling plant and storage facilities for LPG at Elenga; construction of a LPG bottling plant and storage facilities for LPG and condensates at Kailashtila; and acquisition of related equipment and spare parts. 2. Acquisition of about 350,000 LPG cylinders, valves and regulators for the bottling plant at Elenga; and acquisition of about 60,000 LPG cylinders, valves and regulators for the bottling plant at Kailashtila. 3. Rehabilitation of the LPG bottling plant at Chittagong, and acquisition of related equipment and spare parts. 4. Provision of infrastructure design and construction supervision services under Part B.1 and B.3 of the Project. 5. Training of LPGL staff in the management and operation of LPG facilities. 6. Carrying out of the following studies: (i) an environmental and operational safety assessment of petroleum operations covered by the Bangladesh Petroleum Corporation, including refining; (ii) a detailed LPG market development plan; and (iii) a technical assessment of cracking surplus naphtha to produce LPG. - 17 - 7. Establishment of a program to (i) enhance the role of women in the retail distribution of LPG cylinders and stoves, and (ii) train LPG sales agents in the development and promotion of energy- efficient cooking stoves. The Project is expected to be completed by December 31, 1995. - 18 - SCHEDULE 3 Procurement and Consultants' Services Section I. Procurement of Goods and Works Part A: International Competitive Bidding 1. Except as provided in Part D hereof, goods and works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in Sections I and II of the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines). 2. Bidders for goods and works for Part A.3 of the Project shall be prequalified as provided in paragraph 2.10 of the Guidelines. Part B: Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A.1 hereof, goods manufactured in Bangladesh may be granted a margin of preference in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraphs 1 through 4 of Appendix 2 thereto. Part C: Preference for Domestic Contractors In the procurement of works for Part A.3 of the Project in accordance with the procedures described in Part A.1 hereof, the Borrower may grant a margin of preference to domestic contractors in accordance with, and subject to, the provisions of paragraphs 2.55 and 2.56 of the Guidelines and paragraph 5 of Appendix 2 thereto. Part D: Other Procurement Procedures 1. Equipment and materials for Parts A.1, A.2, A.3, B.1, B.2 and B.3 of the Project, estimated to cost the equivalent of $1,000,000 or less per contract, up to an aggregate amount equivalent to $3,000,000, may be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids obtained from at least three qualified suppliers eligible under the Guidelines and in accordance with procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55, 2.56.thereof). - 19 2. Equipment and materials for Parts A.1, A.2, A.3, B.1, B.2 and B.3 of the Project, estimated to cost the equivalent of $200,000 or less per contract, up to an aggregate amount equivalent to $1,000,000, may be procured under contracts awarded on the basis of comparison of price quotations obtained from at least three suppliers eligible under the Guidelines, in accordance with procedures acceptable to the Association. 3. Proprietary items under the Project may be procured through direct contracting with the suppliers or manufacturers thereof under procedures acceptable to the Association, such procedures to include prior approval by the Association of the list of items to be so procured. Part E: Review by the Association of Procurement Decisions 1. Review of prequalification: With respect to the prequalification of bidders as provided in Part A.2 hereof, the procedures set forth in paragraph 1 of Appendix 1 to the Guidelines shall apply. 2. Review of invitations to bid and of proposed awards and final contracts: (a) With respect to each contract for civil works and goods estimated to cost the equivalent of more than $500,000, the procedures set forth in paragraphs 2 and 4 of * Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Assoctiation pursuant to said paragraph 2 (d) shall be furnished to the Association prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association pursuant to said paragraph 3 shall be - 20 - furnished to the Association as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 4 to this Agreement. (c) The provisions of the preceding subparagraph (b) shall not apply to contracts on account of which the Association has authorized withdrawals on the basis of statements of expenditure. 3. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix I to the Guidelines. Section II. Employment of Consultants In order to assist RPGCL in carrying out Part A.4 and A.5 of the Project, and LPGL in carrying out Part B.4, B.5, B.6 (ii) and (iii), and B.7 of the Project, RPGCL and LPGL shall employ con- sultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. - 21 - SCHEDULE 4 Special Account 1. For the purposes of this Schedule: (a) the term "eligible Categories" means Categories (1), (2) and (3) set forth in the table in paragraph 1 of Schedule 1 to this Agreement; (b) the term "eligible vtpenditures" means expenditures in respect of the reasonable cost of goods and services required for the Project and to be financed out of the proceeds of the Credit 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 Allocation" means an amount equivalent to $ 3,000,000 to be withdrawn from the Credit Account and deposited in the Special Account pursuant to paragraph 3 (a) of this Schedule. 2. Payments out of the Special Account shall be made exclu- sively for eligible expenditures in accordance with the provisions of this Schedule. 3. After the Association has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows: (a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Association a request or requests for a deposit or deposits which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit in the Special Account such amount or amounts as the Borrower shall have requested. (b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Association requests for deposits into the Special Account at such intervals as the Association shall specify. - 22 - (ii) Prior to or at the time of each such request, the Borrower shall furnish to the Association 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 Association shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Association from the Credit 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 Borrower out of the Special Account, the Borrower shall, at such time as the Association shall reasonably request, furnish to the Association such documents and other evidence showing that such payment was made exclusively for eligible expenditures. 5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Association shall not be required to make further deposits into the Special Account: (a) if, at any time, the Association shall have determined that all further withdrawals should be made by the Borrower directly from the Credit 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) once the total unwithdrawn amount of the Credit allocated to the eligible Categories, less the amount of any outstanding special commitment entered into by the Association 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 Allocation. Thereafter, withdrawal from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to the eligible Categories shall follow such procedures as the Association shall - 23 - specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Association shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures. 6. (a) If the Association shall have determined at any time that any payment out of the Special Account: (i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; (ii) was not justified by the evidence furnished to the Association, the Borrower shall, promptly upon notice from the Association: (A) provide such additional evidence as the Association may request; or (B) deposit into the Special Account (or, if the Association shall so request, refund to the Association) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Association shall otherwise agree, no further deposit by the Association into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be. (b) If the Association shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Association, refund to the Association such outstanding amount. (c) The Borrower may, upon notice to the Association, refund to the Association all or any portion of the funds on deposit in the Special Account. (d) Refunds to the Association made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the International Development Association. FOR SECRETARY