Page 1 CONFORMED CREDIT NUMBER 3741 ZA GRANT NUMBER H026 ZA ECZ Project Agreement (Copperbelt Environment Project ) between INTERNATIONAL DEVELOPMENT ASSOCIATION and ENVIRONMENTAL COUNCIL OF ZAMBIA Dated April 14, 2003 Page 2 CREDIT NUMBER 3741 ZA GRANT NUMBER H026 ZA PROJECT AGREEMENT AGREEMENT, dated April 14, 2003, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and ENVIRONMENTAL COUNCIL OF ZAMBIA (ECZ). WHEREAS (A) by the Development Financing Agreement of even date herewith between Republic of Zambia (the Borrower) and the Association, the Association has agreed to make available to the Borrower: (a) an amount in various currencies equivalent to fourteen million one hundred thousand Special Drawing Rights (SDR 14,100,000) (the Credit); and (b) an amount in various currencies equivalent to fifteen million five hundred thousand Special Drawing Rights (SDR 15,500,000) (the Grant), on the terms and conditions set forth in the Development Financing Agreement, but only on conditions that ECZ agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary agreement (the ECZ Subsidiary Agreement) to be entered into between the Borrower and ECZ, part of the proceeds of the Financing provided for under the Development Financing Agreement will be made available to ECZ on the terms and conditions set forth in said Subsidiary Agreement; and WHEREAS ECZ, in consideration of the Association’s entering into the Development Financing 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 Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Financing Agreement, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. Page 3 - 2 - ARTICLE II Execution of the Project Section 2.01. (a) ECZ declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Financing Agreement, and, to this end, shall carry out Part B of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and environmental practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Association and ECZ shall otherwise agree, ECZ shall carry out Part B of the Project in accordance with the Implementation Program set forth in the Schedule to this Agreement. Section 2.02. 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 Financing shall be governed by the provisions of Schedule 3 to the Development Financing Agreement. Section 2.03. ECZ shall carry out 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) in respect of the ECZ Project Agreement. Section 2.04. ECZ shall duly perform all its obligations under the ECZ Subsidiary Agreement. Except as the Association shall otherwise agree, ECZ shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the ECZ Subsidiary Agreement or any provision thereof. Section 2.05. (a) ECZ shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B of the Project, the performance of its obligations under this Agreement and under the ECZ Subsidiary Agreement, and other matters relating to the purposes of the Financing. (b) ECZ shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Financing, or the performance by ECZ of its obligations under this Agreement and under the ECZ Subsidiary Agreement. Page 4 - 3 - ARTICLE III Management and Operations of ECZ Section 3.01. (a) ECZ shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and technical practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. (b) ECZ shall ensure that the qualifications and terms and conditions of employment of the Director shall, at all times during the implementation of the project remain acceptable to the Association. Section 3.02. ECZ shall at all times operate and maintain its facilities, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, managerial, environmental and ecological practices. Section 3.03. ECZ shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) ECZ shall establish by Effective Date and thereafter maintain a financial management system, including records and accounts, and prepare financial statements, all in accordance with accounting standards acceptable to the Association, consistently applied, adequate to reflect its operations and financial condition and to register separately the operations, resources and expenditures related to Part B of the Project. (b) ECZ 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 auditing standards acceptable to the Association, consistently applied, by independent auditors acceptable to the Association; Page 5 - 4 - (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 the financial statements referred to in paragraph (a) of this Section, for such year as so audited, and (B) an opinion on such statements and 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 such records, accounts and financial statements, and the audit thereof, and concerning said auditors, as the Association may from time to time reasonably request. Section 4.02 . (a) Without limitation upon the provisions of paragraphs 5 and 6 under Part B of the Schedule to this Agreement, ECZ shall prepare and furnish to the Association a financial monitoring report, in form and substance satisfactory to the Association, which: (i) sets forth sources and uses of funds for the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Financing, and explains variances between the actual and planned uses of such funds; (ii) describes physical progress in Project implementation, both cumulatively and for the period covered by said report, and explains variances between the actual and planned Project implementation; and (iii) sets forth the status of procurement under the Project, as at the end of the period covered by said report. (b) The first FMR shall be furnished to the Association not later than 45 days after the end of the first calendar quarter after the Effective Date, and shall cover the period from the incurrence of the first expenditure under the Project through the end of such first calendar quarter; thereafter, each FMR shall be furnished to the Association not later than 45 days after each subsequent calendar quarter, and shall cover such calendar quarter. Page 6 - 5 - 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 Development Financing Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of ECZ thereunder shall terminate on the date on which the Development Financing Agreement shall terminate in accordance with its terms, and the Association shall promptly notify ECZ thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any 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, telex or facsimile 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. Deliveries made by facsimile transmission shall also be confirmed by mail. 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: Telex: Facsimile: INDEVAS 248423 (MCI) or (202) 477-6391 Washington, D.C. 64145 (MCI) Page 7 - 6 - For ECZ: Environmental Council of Zambia, Church and Suez Roads, P O Box 35131, Lusaka, Zambia Facsimile: (260 1) 254164 (260 1) 254164 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 ECZ, may be taken or executed by the Director or such other person or persons as the Director shall designate in writing, and ECZ shall furnish to the Association 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 DEVELOPMENT ASSOCIATION By /s/ Emmanuel Kasonde Regional Vice President Africa ENVIRONMENTAL COUNCIL OF ZAMBIA By Emmanuel Kasonde Authorized Representative Page 8 - 7 - SCHEDULE Implementation Program Part A : General 1. Except as the Association shall otherwise agree, ECZ shall: (a) implement Part B of the Project in accordance with the Project Implementation Manual and in full compliance with the Borrower’s environmental legislation and regulations; and (b) not amend, waive, permit to be amended or waived, the Project Implementation Manual or any provision thereof, in a manner which, in the opinion of the Association, may materially and adversely affect the implementation of the Project or the achievement of the objectives thereof. 2. ECZ shall carry out Part B of the Project through its technical secretariat and under the overall guidance of the ECZ Board. 3. ECZ shall not later than July 1, 2003, appoint and maintain with adequate remuneration within its budget, the Council Secretary, a procurement officer and a financial management officer, all with qualifications and terms of reference satisfactory to the Association. 4. Inter-Agency Regulatory Committee (a) ECZ shall, by January 1, 2004, establish and maintain an Interagency Regulatory Committee, which shall be comprised of the Borrower’s authorizing agencies responsible for regulation of relevant sectors, and with remuneration, functions and terms of reference satisfactory to the Association. (b) ECZ shall coordinate all matters and views raised by the delegated authorizing agencies in relation to regulation of environment sector through the Interagency Regulatory Committee. (c) ECZ shall, for each year of project implementation, furnish to the Association annual reports on IRC activities by the end of the first quarter of the following year. Part B : Monitoring and Reporting 5. ECZ shall: Page 9 - 8 - (a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators satisfactory to the Association, set forth in Schedule 7 to the Development Financing Agreement, the carrying out of Part B of the Project and the achievement of the objectives thereof, with particular emphasis on levels of compliance with environmental regulations by the mining industry; (b) prepare, under terms of reference satisfactory to the Association, and furnish to the Association, on or about April 1 of each year, a report integrating the results of the monitoring and evaluation activities performed pursuant to paragraph (a) of this Section, on the progress achieved in the carrying out of Part B of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; (c) prepare under terms of reference satisfactory to the Association, and furnish to the Association, on or about February 1, May 1, August 1 and November 1, a quarterly report, which shall cover salient aspects of Part B of the Project, including: (i) progress made in meeting the objectives of the Project; and (ii) overall performance by ECZ of Part B of the Project; (d) review with the Association, by May 1, or such later date as the Association shall request, the report referred to in paragraph (b) of this Section, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said repor t and the Association’s views on the matter; (e) for each year of project implementation, prepare and furnish to the Association, by November 15 of each year, for review and comment, a consolidated work plan and budget for all activities and sources of funds for the following year; and (f) for each year of project implementation, furnish to the Association for review and comment, a consolidated progress report for all activities and sources of funds by not later than July 1 of the following year. 6. Midterm Review (a) ECZ shall not later than August 31, 2005, carry out jointly with the Association and the Borrower a midterm review, which shall cover among other things: (i) the performance by ECZ in carrying out Part B of the Project; Page 10 - 9 - (ii) progress in me eting the Project’s objectives; and (iii) overall Project performance as measured against the performance indicators referred to in paragraph 5 (a) under Part B of the Schedule to this Agreement. (b) ECZ shall thereafter with the Assistance of the Borrower, act promptly and diligently in order to take, any corrective action deemed necessary to remedy any shortcoming identified in the implementation of the Project, or to implement, such measures as may have been agreed between ECZ, the Borrower and the Association in furtherance of the objectives of the Project.