Page 1 CONFORMED COPY CREDIT NUMBER 3776-PAK GRANT NUMBER H044-PAK Project Agreement (HIV/AIDS Prevention Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and PROVINCE OF BALOCHISTAN and NORTH WEST FRONTIER PROVINCE and PROVINCE OF PUNJAB and PROVINCE OF SINDH and AZAD JAMMU AND KASHMIR Dated October 9, 2003 Page 2 CREDIT NUMBER 3776-PAK GRANT NUMBER H044-PAK PROJECT AGREEMENT AGREEMENT, dated October 9, 2003, among INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and PROVINCE OF BALOCHISTAN acting by its Governor (Balochistan) and NORTH WEST FRONTIER PROVINCE acting by its Governor (NWFP) and PROVINCE OF PUNJAB acting by its Governor (Punjab) and PROVINCE OF SINDH acting by its Governor (Sindh) and AZAD JAMMU AND KASHMIR acting by its President (AJK). WHEREAS (A) by the Financing Agreement of even date herewith between the Islamic Republic of Pakistan (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty-six million nine hundred thousand Special Drawing Rights (SDR 26,900,000), on the terms and conditions set forth in the Financing Agreement, but only on condition that Balochistan, NWFP, Punjab and Sindh (the Provinces) and AJK agree to undertake such obligations toward the Association as are set forth in this Agreement; and WHEREAS the Provinces and AJK, in consideration of the Association’s entering into the Financing Agreement with the Borrower, have 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 Financing Agreement, the Preamble to this 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. (a) The Provinces and AJK declare their commitment to the objectives of the Project as set forth in Schedule 2 to the Financing Agreement, and, to this end, shall carry out their activities under the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, medical and public health Page 3 - 2 - 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 the Provinces and AJK shall otherwise agree, the Provinces and AJK shall each carry out their activities under the Project in accordance with the Implementation Program set forth in Schedule 4 to the Financing Agreement and their respective PIPs. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and consultants’ services required for the Project and to be financed out of the proceeds of the Credit and the Grant shall be governed by the provisions of Schedule 3 to the Financing Agreement. Section 2.03. (a) The Provinces and AJK shall each 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 Project Agreement and their activities under the Project. (b) For the purposes of Section 9.06 of the General Conditions and without limitation thereto, the Provinces and AJK shall each: (i) prepare, on the basis of guidelines acceptable to the Association and furnish to the Association not later than six (6) months before the Closing Date or such later date as may be agreed for this purpose between the Association and the Provinces and AJK a plan designed to ensure the sustainability of their activities under the Project; and (ii) afford the Association a reasonable opportunity to exchange views with each of the Provinces and AJK on said plan. Section 2.04. (a) The Provinces and AJK shall each, at the request of the Association, exchange views with the Association with regard to the progress of their activities under the Project, the performance of their obligations under this Agreement, and other matters relating to the purposes of the Financing. (b) The Provinces and AJK shall each promptly inform the Association of any condition which interferes or threatens to interfere with the progress of their activities under the Project, the accomplishment of the purposes of the Financing or the performance by the Provinces and AJK of their obligations under this Agreement. Page 4 - 3 - ARTICLE III Financial Covenants Section 3.01. (a) The Provinces and AJK shall each 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 the operations, resources and expenditures related to its activities under the Project. (b) The Provinces and AJK shall each: (i) have the records, accounts and financial statements referred to in paragraph (a) of this Section for each fiscal year audited, in accordance with auditing standards acceptable to the Association, 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 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 3.02. Without limitation upon their progress reporting obligations set out in paragraph 1 (b) of Schedule 4 to the Financing Agreement, the Provinces and AJK shall each prepare and furnish to the Association quarterly financial monitoring reports, in form and substance satisfactory to the Association, each of which: (i) sets forth sources and uses of funds for their activities under the Project, both cumulatively and for the period covered by said report, showing separately funds provided under the Credit, the Grant and explains variances between the actual and planned uses of such funds; Page 5 - 4 - (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 for their activities under the Project, as at the end of the period covered by said report. (b) The first FMR shall be furnished by each of the Provinces and AJK to the Association not later than forty-five (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 by each of the Provinces and AJK under the Project through the end of such first calendar quarter; thereafter, each such FMR shall be furnished to the Association not later than forty-five (45) days after each subsequent calendar quarter, and shall cover such calendar quarter. ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Financing Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of the Provinces and AJK thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Financing Agreement shall terminate in accordance with its terms; or (ii) the date twenty (20) years after the date of this Agreement. (b) If the Financing Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify the Provinces and AJK of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions applicable to the Financing Agreement. Page 6 - 5 - ARTICLE V Miscellaneous Provisions Section 5.01. 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 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. 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) For Balochistan: Planning and Development Department Government of Balochistan Quetta, Pakistan Cable address: Telex: Facsimile: DEVELOPMENT 7875MLNSE PK 92-81-9202419 Quetta 92-81-9204382 Pakistan Page 7 - 6 - For NWFP: Planning and Development Department Government of NWFP Peshawar, Pakistan Cable address: Telex: Facsimile: DEVELOPMENT 952-52371 92-91-9210354 Peshawar 92-91-9210379 Pakistan For Punjab: Planning and Development Board Government of Punjab Lahore, Pakistan Cable address: Telex: Facsimile: DEVELOPMENT 82-04-4868 92-42-9210110 Lahore 92-42-9210477 Pakistan For Sindh: Planning and Development Department Government of Sindh Karachi, Pakistan Cable address: Telex: Facsimile: DEVELOPMENT 952-23950 92-21-9211922 Karachi 92-21-9211275 Pakistan Page 8 - 7 - For AJK: Planning and Development Department Government of AJK Muzaffarabad, Pakistan Facsimile: 92-58810-32512 92-58810-3109 Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of Balochistan, NWFP, Punjab, Sindh and AJK, or by Balochistan, NWFP, Punjab, Sindh and AJK on behalf of the Borrower under the Financing Agreement, may be taken or executed by the Additional Chief Secretary (Development), in the case of each of Balochistan, NWFP and Sindh, by the Chairman, Planning and Development Board, in the case of Punjab, and by the Additional Chief Secretary, Planning and Development Department, in the case of AJK, or such other person or persons as they shall designate in writing, and they shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. Page 9 - 8 - IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, have caused this Agreement to be signed in their respective names in Islamabad, Pakistan, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Abid Hasan Acting Country Director, Pakistan PROVINCE OF BALOCHISTAN By /s/ Nadir Ali Authorized Representative NORTH WEST FRONTIER PROVINCE By /s/ Ihsan-ul-Haq Authorized Representative PROVINCE OF PUNJAB By /s/ Shahid Rashid Authorized Representative Page 10 - 9 - PROVINCE OF SINDH By /s/ Ashiq Hussain Memon Authorized Representative AZAD JAMMU AND KASHMIR By /s/ Abdul Qadir Usmani Authorized Representative