Page 1 AGREEMENT RELATED TO CREDIT NUMBER 2125 MAG Agreement for the Administration of Certain Funds to be made available by the ROYAL MINISTRY OF FOREIGN AFFAIRS OF THE KINGDOM OF NORWAY in Conjunction with the Environment Project in the DEMOCRATIC REPUBLIC OF MADAGASCAR Dated October 11, 1990 AGREEMENT RELATED TO CREDIT NUMBER 2125 MAG AGREEMENT AGREEMENT, dated October 11, 1990, between the ROYAL MINISTRY OF FOREIGN AFFAIRS OF THE KINGDOM OF NORWAY (Norway) and the INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) to provide for the administration, by the Association, of certain funds to be made available by Norway to the Democratic Republic of Madagascar (Madagascar). WHEREAS: (A) the agreement, dated October 2, 1986, between the Kingdom of Norway, the International Bank for Reconstruction and Development, and the International Development Association, provides the framework for cofinancing of development projects by the parties thereto; (B) Norway wishes to make available to Madagascar a grant not exceeding twenty-five million Norwegian Kroner (NOK 25,000,000) (the Grant) to assist Madagascar in financing part of the services required to carry out the Environment Project (the Project) described in Schedule 2 to the Development Credit Agreement (Credit No. 2125 MAG), dated May 1, 1990, between the Democratic Republic of Madagascar and the Association (the Development Credit Agreement); (C) Norway wishes that the proceeds of the Grant should be incremental to the Credit, extended for the same purposes by the Association pursuant to the Page 2 Development Credit Agreement; and WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to administer the Grant upon the terms and conditions hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Section 1.01. The Association, as Administrator on behalf of Norway, shall enter into such agreement or agreements with Madagascar, as it may deem appropriate but consistent with the terms and conditions of the Development Credit Agreement (excluding the debt service provisions thereof) for the purpose of assisting in the financing of the Project. Such agreements with Madagascar shall, inter alia, provide that: (a) the proceeds of the Grant may be withdrawn by Madagascar to finance part of the reasonable costs of goods and consultants' services required to carry out Parts A, B, and F.1 of the Project referred to in Schedule 2 of the Development Credit Agreement; and (b) the amounts to be withdrawn need not be repaid and shall bear no interest or other charges. A copy of each such agreement shall be furnished by the Association to Norway. Section 1.02. The Association, as Administrator on behalf of Norway, shall have the sole responsibility for the supervision of the Project. Section 1.03. The administration and enforcement of any provisions of any agreement entered into between Madagascar and the Association for the purposes of this Agreement shall be handled solely by the Association, and the Association specifically reserves the right, at its discretion and without notice to Norway, to exercise, refrain from exercising or waive any rights under such agreement or to modify any provision thereof, provided, however, that, before suspending the right of Madagascar to make withdrawals of funds under such agreement, the Association shall inform Norway and afford Norway a reasonable opportunity for consultation with the Association. Section 1.04. The Association shall exercise the same care in the discharge of its functions under this Agreement as it exercises with respect to the administration and management of its own affairs and shall have no further responsibility to Norway in respect thereof. ARTICLE II Section 2.01. (a) For the purpose of this Agreement, Norway shall, subject to parliamentary appropriations, deposit an amount of twenty five million Norwegian Kroner (NOK 25,000,000) into the "T" account with Norges Bank in the name of the Association (the T-Account). The grant funds may be commingled with other trust fund assets maintained in the T-account. The grant funds will be kept separate and apart from the funds of the Association. (b) Said amount shall be deposited in five tranches, each such tranche to be deposited not later than November 1 of each calendar year (CY) from CY 1990 through CY 1994 as follows: (i) three million one hundred thousand Norwegian Kroner (NOK 3,100,000) in CY 1990; Page 3 (ii) four million Norwegian Kroner (NOK 4,000,000) in CY 1991; (iii) six million three hundred thousand Norwegian Kroner (NOK 6,300,000) in CY 1992; (iv) six million six hundred thousand Norwegian Kroner (NOK 6,600,000) in CY 1993; and (v) five million Norwegian Kroner (NOK 5,000,000) in CY 1994. (c) It is understood that the amount of each such tranche is based on the planned implementation schedule for the Project and may, after consultations between Norway and the Association, be adjusted to reflect actual progress made in Project implementation. (d) The funds in the T-Account shall be freely exchangeable by the Association with other currencies as may facilitate their administration. Section 2.02. The Association shall disburse from the T-Account such amounts as from time to time shall be needed to meet the reasonable costs of goods financed, or to be financed, pursuant to Section 1.01 of this Agreement. Such disbursement shall be effected on the basis of withdrawal applications for eligible expenditures submitted by Madagascar to the Association in accordance with the Association's normal procedures for withdrawal of proceeds of credits made by the Association. Section 2.03. In order to assist in the defrayment of the costs of administration and other expenses incurred by the Association under this Agreement, the Association may invest and reinvest the funds in the T- account pending their disbursement to Madagascar, and may retain for its own account, the income from any such investment or reinvestment. Section 2.04. The recruitment of consultants and the procurement of goods shall be in accordance with Schedule 5 of the Development Credit Agreement. ARTICLE III Section 3.01. (a) The Association shall: (i) maintain separate records and accounts in respect of the funds in the T-Account disbursed by the Association pursuant to the provisions of this Agreement; and (ii) semiannually, promptly after the end of each calendar year and after June 30, furnish to Norway a statement of account on such records and accounts. (b) Promptly after all funds made available under this Agreement have been disbursed from the T-Account to Madagascar, or upon termination of this Agreement, the Association shall cause such records and accounts to be audited and certified by the Association's external auditors and shall furnish the report of such audit by said auditors to Norway. ARTICLE IV Section 4.01. Norway and the Association shall consult from time to time at the request of each other on all matters arising out of this Agreement. Page 4 Section 4.02. The Association shall keep Norway informed of the progress of the Project. To that end, the Association shall furnish to Norway all relevant progress, performance and assessment reports relating to the Project. Section 4.03. The Association shall info= Norway of any forthcoming major missions and meetings in connection with the Project and shall afford representatives of Norway the opportunity to participate in such missions and meetings. Section 4.04. The Association shall inform Norway of any proposed significant modification to the Development Credit Agreement and shall afford Norway a reasonable opportunity to exchange views with the Association before effecting any such modification. ARTICLE V Section 5.01. This Agreement shall become effective as of the date first above written and, subject to the provisions of this Article, shall continue in effect until all funds made available under this Agreement have been disbursed from the T-Account to Madagascar. Section 5.02. If at any time it appears to either party that the purposes of this Agreement can no longer effectively or appropriately be carried out, this Agreement may be terminated at the initiative of such party on ninety (90) days notice in writing. Section 5.03. Upon termination of this Agreement, unless the parties agree on another course of action, any agreement or portion thereof entered into by the Association, as Administrator on behalf of Norway, shall be transferred to Norway, and any funds or other property of Norway held hereunder by the Association shall be returned to Norway, and the Association's administration shall be considered terminated. Section 5.04. Promptly after all funds made available under this Agreement have been disbursed from the T-Account to Madagascar, or upon termination of this Agreement, the Association shall furnish to Norway a final report and a financial statement on the funds disbursed by the Association from the T-Account pursuant to the provisions of this Agreement, together with the auditors' report referred to in Section 3.01 (b) of this Agreement. ARTICLE VI Section 6.01. This Agreement may be amended only by written agreement of the parties hereto. Section 6.02. 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, mail, telegram, cable or telex 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 addresses as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For Norway: The Royal Ministry of Foreign Affairs P.O. Box 8114, Oslo Dep. Page 5 0032 Oslo 1 Norway Cable address: Telex: NOREG-N 74256 NORED-N Oslo 71004 NOREG-N For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address Telex: INDEVAS 197688 (TRT) Washington, D.C. 248423 (RCA) or 64145 (WUI) 82987 (FTCC) IN WITNESS WHEREOF, the undersigned duly authorized thereto, have signed this Agreement. ROYAL MINISTRY OF FOREIGN AFFAIRS OF THE KINGDOM OF NORWAY By /s/ Kjeld Vibe Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ F.J. Aguirre-Sacasa Acting Regional Vice President Africa