Page 1 CONFORMED COPY LOAN NUMBER 3618 MOR Project Agreement (Land Development Project for Low-Income Families - Kingdom) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and NATIONAL EQUIPMENT AND CONSTRUCTION COMPANY Dated June 14, 1993 LOAN NUMBER 3618 MOR PROJECT AGREEMENT AGREEMENT, dated June 14, 1993, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and NATIONAL EQUIPMENT AND CONSTRUCTION COMPANY (SNEC). WHEREAS (A) by the Loan Agreement of even date herewith between Kingdom of Morocco (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to sixty-six million dollars ($66,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that SNEC agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by a subsidiary loan agreement (the Subsidiary Loan Agreement) to be entered into between the Borrower and SNEC, a portion of the proceeds of the loan provided for under the Loan Agreement will be relent to SNEC on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS SNEC, 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; Page 2 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 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) SNEC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall carry out Part A of the Project (i) with due diligence and efficiency, (ii) in conformity with appropriate administrative, financial, engineering, urban planning and technical practices and (iii) in accordance with appropriate safety, health and environmental standards satisfactory to the Bank, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part A of the Project. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Bank and SNEC shall otherwise agree, SNEC shall carry out Part A of the Project in accordance with the Implementation Program set forth in the Schedule to this Agreement. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods, works and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 6 to the Loan Agreement. Section 2.03. SNEC shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 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 Project Agreement and Part A of the Project. Section 2.04. SNEC shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, SNEC 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. Section 2.05. (a) SNEC shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part A of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) SNEC shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accomplishment of the purposes of the Loan, or the performance by SNEC of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SNEC Section 3.01. SNEC shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering and urban planning standards and practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Page 3 Section 3.02. SNEC shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and technical practices. Section 3.03. SNEC shall take out and maintain with responsible insurers, or make other provision satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) SNEC shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SNEC 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 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 Fiscal 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 4.02. (a) Except as the Bank shall otherwise agree, SNEC shall: (i) earn an annual return on equity of not less than 1% for Fiscal Year 1993, not less than 2% for Fiscal Year 1994, not less than 3% for Fiscal Year 1995 and not less than 4% for each Fiscal Year thereafter; (ii) maintain, for each Fiscal Year, a ratio of net income to profit of not less than 10%; (iii) maintain a ratio of total wage expenses to profit not higher than 50% for each of Fiscal Year 1993, Fiscal Year 1994 and Fiscal Year 1995, not higher than 40% for Fiscal Year 1996 and not higher than 30% for each Fiscal Year thereafter; (iv) maintain a ratio of total operating expenses to profit not higher than 80% for Fiscal Year 1993, not higher than 70% for Fiscal Year 1994, not higher than 60% for Fiscal Year 1995 and not higher than 50% for each Fiscal Year thereafter; and (v) charge prices for the sales of sites developed, and of housing constructed, by SNEC in a given operation at levels such that the total price Page 4 charged for all said sites and housing shall be equivalent to not less than the sum of (A) total construction expenditures for said operation plus (B) a management fee for SNEC equivalent to not less than 7% of total construction expenditures for said operation plus (C) 3% of the total cost of sales for said operation. (b) Before June 30 in each of its Fiscal Years, SNEC shall, on the basis of forecasts prepared by SNEC and satisfactory to the Bank, review whether it would meet the requirements set forth in paragraph (a) of this Section in respect of such year and the next following Fiscal Year and shall furnish to the Bank the results of such review upon its completion. (c) If any such review shows that SNEC would not meet the requirements set forth in paragraph (a) of this Section for SNEC's Fiscal Years covered by such review, SNEC shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its prices) in order to meet such requirements. (d) For the purposes of this Section: (i) The annual return on equity shall be calculated by dividing SNEC's net income for the Fiscal Year in question by one half of the sum of SNEC's equity at the beginning and at the end of that Fiscal Year; (ii) The term "net income" means profit less total operating expenses; (iii) The term "profit" means total revenues less total cost of sales for all operations; (iv) The term "total revenues" means revenues from all sources; (v) The term "total cost of sales" means total construction expenditures plus total management fees referred to in sub-paragraph (a) (v) of this Section; (vi) The term "total construction expenditures" means all expenditures related to construction of housing and development of sites, including expenditures related to the acquisition of land, development of infrastructure, construction of housing, taxes and duties, and interest and other charges on debt; (vii) The term "total operating expenses" means all expenses related to operations, including administration, adequate maintenance, taxes and payments in lieu of taxes, and provision for depreciation on a basis acceptable to the Bank, but excluding interest and other charges on debt; (viii) The term "equity" means the sum of the total unimpaired paid-up capital, retained earnings, reserves not allocated to cover specific liabilities and FNAET Advances; (ix) The term "FNAET Advances" means an amount equal to DH 230,000,000 made available by the Borrower to SNEC pursuant to an Agreement (Convention) dated November 27, 1987 between the Borrower and SNEC for the purpose of completing the activities financed under the National Fund for the Purchase and Development of Land (Fonds Page 5 National pour l'Achat et l'Equipement de Terrain or FNAET); (x) The term "total wage expenses" means all wages, salaries, benefits expenses and other expenses related to the administration of personnel; and (xi) Whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Bank. 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. (a) This Agreement and all obligations of the Bank and of SNEC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Loan Agreement shall terminate in accordance with its terms; or (ii) the date ten years after the date of this Agreement. (b) If the Loan Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Bank shall promptly notify SNEC of this event. 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, 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 248423 (RCA) Washington, D.C. 82987 (FTCC) 64145 (WUI) or 197688 (TRT) For SNEC: Page 6 Societe Nationale d'Equipement et de Construction Angle rue Youssef Ibn Tachfine et Rue Moulay Ali Cherif Rabat Morocco Telex: 32744 M 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 SNEC may be taken or executed by the Director General of SNEC or such other person or persons as said Director General shall designate in writing, and SNEC 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 Rabat, Kingdom of Morocco, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Harinder Kohli Acting Regional Vice President Middle East and North Africa NATIONAL EQUIPMENT AND CONSTRUCTION COMPANY By /s/ Abderrahmane Bouftas Authorized Representative SCHEDULE Implementation Program The provisions of this Schedule shall apply for the purposes of Section 2.01 (b) of this Agreement. A. Part A (1) of the Project 1. A specific development project referred to in Part A (1) of the Project shall qualify as a Sub-project eligible for financing under the Loan only if: (a) SNEC has demonstrated, on the basis of an appraisal, carried out in accordance with guidelines satisfactory to the Bank that: (i) it has acquired, or is in the process of acquiring the land on which the specific development project is to be carried out; (ii) the specific development project is technically feasible and economically, financially and commercially viable; (iii) (A) at least 50% of the land to be developed under the specific development project is Page 7 marketable; and (B) at least 60% of the marketable land to be developed thereunder is to be sold to families: (1) whose total monthly income is less than DH 3,000 (in constant 1993 Dirhams); (2) who own no dwelling other than the one to be constructed on said land; and (3) who have undertaken to utilize the dwelling to be constructed on said land as their principal residence; and (iv) (A) the specific development project has been designed in accordance with appropriate health, safety and environmental standards satisfactory to the Bank, and (B) without limitation on the foregoing, if any of the sites to be developed under the specific development project are to be allocated to residents of shanty-towns, a resettlement plan for said residents has been developed by the Borrower in accordance with the provisions of sub-paragraph 3 (b) of Part B of Schedule 5 to the Loan Agreement; and (b) the Bank has notified SNEC of the Bank's approval of the specific development project. 2. SNEC shall take all action required on its part to ensure that the allocation of all plots to residents of shanty-towns under each Sub-project referred to in sub-paragraph 1 (a) (iv) (B) of this Part, and the resettlement of said residents shall be carried out in conformity with the Housing Sector Development Program and the additional policies and guidelines referred to in sub-paragraph 3 (b) (i) of Part B of Schedule 5 to the Loan Agreement, on the basis of the resettlement plan referred to in sub-paragraph 1 (a) (iv) (B) of this Part. B. Part A (2) of the Project 1. In order to strengthen SNEC's operational capabilities, SNEC shall employ and at all times maintain on its staff at least 70 qualified and experienced persons with technical, managerial and legal skills.