CONFORMED COPY CREDIT NUMBER 384 MLI Project Agreement (Second Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND REGIE DU CHEMIN DE FER DU MALI DATED MAY 23, 1973 CONFORMED COPY CREDIT NUMBER 384 MLI Project Agreement (Second Railway Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND REGIE DU CHEMIN DE FER DU MALI DATED MAY 23, 1973 PROJECT AGREEMENT AGREEMENT, dated May 23, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and the REGIE DU CHEMIN DE FER DU MALI (hereinafter called the R6gie). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Mali (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to six million seven hundred thousand dollars ($6,700,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that the R6gie agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a Subsidiary Loan Agreement to be entered into between the Borrower and the R6gie, the proceeds of the Credit provided for under the Development Credit Agreement will be made available to the R6gie; and WHEREAS the R6gie, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. The Rdgie shall carry out the Project, described in Schedule 2 to the Development Credit Agreement, with due diligence and efficiency and 4 in conformity with appropriate administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 2.02. In order to assist the R6gie in planning, statistics and data, accounting services, storekeeping and personnel management, under Part C of the Project, the Rdgie shall employ management consultants acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.03. In carrying out any works included in Part A of the Project not to be done by the Rdgie itself, the R6gie shall employ contractors acceptable to the Association upon terms and conditions satisfactory to the Association. Section 2.04. Except as 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 April 1972, and revised in October 1972, and in accordance with, and subject to, the provisions set forth in the Schedule to this Agreement. Section 2.05. (a) The R6gie undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds :f the Credit relent to it by the Borrower 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 R6gie to replace or repair such goods. (b) Except as the Association may otherwise agree, the R6gie shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.06. (a) The R6gie shall furnish to the Association promptly upon their preparation, the plans, specifications, contract documents and work and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The R6gie shall: (i) maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) without limitation upon the provisions 5 of Section 5.03 of this Agreement, enable the Association's representatives to examine the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. Section 2.07. The R6gie shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, the R6gie shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of the R6gie Section 3.01. The R6gie shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate administrative, financial, engineering and railway practices and under the supervision of qualified and experienced management assisted by qualified and experienced staff in adequate numbers. Section 3.02. The Rdgie shall at all times operate and maintain the Railways and promptly make all necessary renewals and repairs, all in accordance with appropriate engineering and railway practices. Section 3.03. The R6gie shall take out and maintain with responsible insurers or make other provision satisfactory to the Association for insurance against such risks and in such amount as shall be consistent with sound practice. Section 3.04. The R6gie shall take such action as shall be reasonable in the circumstances to facilitate railway operations between the territories of the Borrower and the territories of the Republic of Senegal, in accordance with the International Traffic Agreement, the Customs Agreement and the Railway Convention. Section 3.05. Unless the Association shall otherwise agree and except for miscellaneous items of small equipment not exceeding in value a total of $150,000 equivalent in any one year, the R6gie shall limit its investments to those included in the Project, until its completion. 6 ARTICLE IV Financial Covenants Section 4.01. The R6gie shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. The R6gie shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with sound 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 the accounts and financial statements of the R6gie and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. Except as the Association shall otherwise agree, the R6gie shall not incur any debt unless the amount of its net cash revenue for its fiscal year next preceding the date of such incurrence or for a later twelve-month period ended prior to the date of such incurrence, whichever amount is the greater, shall be not less than 1.25 times the maximum debt service :-*quirements for any succeeding fiscal year on all its debt including the debt to be incurred. For the purposes of this Section: (a) "debt" means all debt, except debt incurred in the ordinary course of business and maturing by its terms on demand or less than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred (i) under a loan contract or agreement, on the date and to the extent it is drawn down and outstanding pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the underlying debt is outstanding; (c) the term "net cash revenue" means gross operating revenue from all sources, adjusted to take account of the R6gie's tariffs in effect at the time of the incurrence of debt even though they were not in effect during the entire fiscal r 7 year or twelve-month period to which such revenue relates, less all operating expenses, including adequate maintenance, taxes, if any, and administrative expenses, but before provision for depreciation and debt service requirements; (d) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; and (e) whenever in connection with this Section it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other currency is obtainable by the R6gie, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at the rate of exchange that will be reasonably determined by the Association. Section 4.04. (a) Except as the Association and the R6gie shall otherwise agree, the R6gie shall from time to time take all such steps (including, but without limitation, adjustment of its tariffs) as shall be required to provide revenue sufficient to enable the R6gie to meet out of internally-generated resources all of its administrative and operating expenses (including adequate provision for * depreciation), taxes, if any, and interest and other charges on debt as well as a reasonable portion of the cost of its capital investments including replacement of assets; provided, however, that the R6gie shall earn an annual return on the average current net value of its fixed assets in operation of at least 2% over its fiscal year 1974 and 1975, 3% over 1976, to reach 3.5% over fiscal year 1977. (b) For the purposes of this Section: (i) The annual rate of return shall be calculated in respect of each fiscal year by dividing the Rdgie's net operating income accrued over such year from the Rgie's services, as numerator, by the average of the current net values of the fixed assets in operation at the beginning and at the end of such year, as denominator. (ii) The term "current net value of fixed assets in operation" shall mean the gross book value of such assets, less the amount of accumulated depreciation, as valued from time to time in accordance with sound and consistently maintained methods of valuation acceptable to the Association. (iii) The term "net operating income" shall mean the difference between: 8 (A) all gross operating revenues accruing from the R6gie's services; and (B) all the R6gie's administrative and operating expenses (including adequate provision for depreciation) and taxes, if any, but excluding interest and other charges on debt. (c) Without limiting the generality of the foregoing, the R6gie shall as of January 1, 1974 revise its tariffs by an average calculated to produce an increase in revenue of 8%, on the basis of the simplified tariff system recommended as a result of the recently updated consultants' cost study. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and the R6gie shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and the R6gie shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of the R6gie and other matters relating to the purpose of the Credit. Section 5.02. The Association and the Rdgie shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and the R6gie of their respective obligations under the Subsidiary Loan Agreement. Section 5.03. The R6gie shall enable the Association's representatives to examine the Railways and all plants, sites, works, properties and equipment of the R6gie and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. 9 Section 6.02. (a) This Agreement and all obligations of the Association and of the Rdgie 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) a date twenty-six 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 the R6gie of this event. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. 10 For the R6gie: R6gie du Chemin de Fer du Mali Bamako Mali Cable address: FERMALI Bamako Mali Section 7.02. (a) Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of the R6gie or under the Development Credit Agreement by the Rdgie on behalf of the Borrower, may be taken or executed by the Director of the R6gie or such other person or persons as the R6gie shall designate in writing. (b) The R6gie shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will act under paragraph (a) of this Section. Section 7.03. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Roger Chaufournier Regional Vice President Western Africa REGIE DU CHEMIN DE FER DU MALI By /s/ Seydou Traor6 Authorized Representative * 11 SCHEDULE Procurement 1. With respect to any contract estimated to cost the equivalent of $30,000 or more: (a) Before bids are invited, the R6gie shall furnish to the Association, 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 shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documcnts shall require the Association's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, the R6gie shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, together with the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or referred to in Section 2.04 of this Agreement, promptly inform the R6gie and the Borrower, state the reasons for such determination and advise the R6gie of any cancellation pursuant to the provisions of paragraph 3(c) of Schedule I to the Development Credit Agreement. (c) The terms and conditions of the contract shall not, without the Association's concurrence, materially differ from those on which bids were asked. (d) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. 2. With respect to any contract under $30,000 equivalent, the Regie shall furnish to the Association, promptly after its execution and prior to the delivery to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract. is