Page 1 CONFORMED COPY DUTCH GRANT RELATED TO LOAN NUMBER 3318 PAK (Microenterprise Project) among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT as Administrator of Grant Funds provided by the MINISTER FOR DEVELOPMENT COOPERATION OF THE NETHERLANDS and AGA KHAN RURAL SUPPORT PROGRAM and ORANGI PILOT PROJECT SOCIETY and BASIC URBAN SERVICES FOR KATCHI ABADIS and ALFALAH DEVELOPMENT INSTITUTE Dated June 28, 1991 DUTCH GRANT RELATED TO LOAN NUMBER 3318 PAK PROJECT AGREEMENT AGREEMENT, dated June 28, 1991, among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) acting as Administrator (the Administrator) of grant funds provided by the MINISTER FOR DEVELOPMENT COOPERATION OF THE NETHERLANDS (the Minister) and AGA KHAN RURAL SUPPORT PROGRAM (AKRSP), ORANGI PILOT PROJECT SOCIETY (OPP), BASIC URBAN SERVICES FOR KATCHI ABADIS (BUSTI) and ALFALAH DEVELOPMENT INSTITUTE (ADI). WHEREAS (A) by the Dutch Grant Agreement of even date herewith between the Islamic Republic of Pakistan (the Recipient) and the Administrator, the Administrator has agreed to make available to the Recipient an amount of four million eight hundred thousand Dutch Guilders (Dfls 4,800,000), on the terms and conditions set forth Page 2 in the Dutch Grant Agreement, but only on condition that AKRSP, OPP, BUSTI and ADI (collectively, the Participat- ing Non-Governmental Organizations or PNGOs) agree to undertake such obligations toward the Administrator as are set forth in this Agreement; (B) by subsidiary grant agreements to be entered into between the Recipient and each of the PNGOs, a part of the proceeds of the grant provided for under the Dutch Grant Agreement will be made available to PNGOs on the terms and conditions set forth in said Subsidiary Grant Agreements; and WHEREAS PNGOs, in consideration of the Administrato- r's entering into the Dutch Grant Agreement with the Recipient, 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 Dutch Grant Agreement, the Preamble to this Agreement, the Loan Agreement (as so defined) and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. PNGOs declare their commitment to the objectives of the Project as set forth in Schedule 1 to the Loan Agreement, and, to this end, shall carry out Parts A (2), B.1 and B.2 (b) of the Project with due diligence and efficiency and in conformity with appropri- ate administrative, financial, engineering and social welfare practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Parts A (2), B.1 and B.2 (b) of the Project. Section 2.02. (a) PNGOs undertake that, unless the Administrator shall otherwise agree, Sub-loans will be made by them under Part A (2) of the Project, in accor- dance with the procedures and on the terms and conditions set forth or referred to in Section I of Schedule 3 to the Dutch Grant Agreement. (b) PNGOs shall exercise their rights in relation to each Investment Project financed by them in such manner as to: (i) protect the interests of the Adminis- trator and PNGOs; (ii) comply with their obligations under this Agreement and the Subsidiary Grant Agreements; and (iii) achieve the purposes of Part A (2) of the Project. Section 2.03. Except as the Administrator shall otherwise agree, procurement of the goods and consultant- s' services required for Parts B.1 and B.2 (b) of the Project and to be financed out of the proceeds of the Grant shall be governed by the provisions of Schedule 3 to the Dutch Grant Agreement. Section 2.04. PNGOs 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 Page 3 and reports, maintenance and land acquisition, respec- tively) in respect of the Project Agreement and Parts B.1 and B.2 (b) of the Project. Section 2.05. PNGOs shall duly perform all their obligations under the Subsidiary Grant Agreements. Except as the Administrator shall otherwise agree, PNGOs shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Grant Agreements or any provisions thereof. Section 2.06. (a) PNGOs shall, at the request of the Administrator, exchange views with the Administrator with regard to progress of their activities under Parts A (2), B.1 and B.2 (b) of the Project, the performance of their obligations under this Agreement and under the Subsidiary Grant Agreements, and other matters relating to the purposes of the Grant. (b) PNGOs shall promptly inform the Administrator of any condition which interferes or threatens to interfere with the progress of their activities under Parts A (2), B.1 and B.2 (b) of the Project, the accom- plishment of the purposes of the Grant, or the perfor- mance by PNGOs of their obligations under this Agreement and under the Subsidiary Grant Agreements. ARTICLE III Management and Operations of PNGOs Section 3.01. PNGOs shall carry on their operations and conduct their affairs in accordance with sound administrative, financial and social welfare practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. PNGOs shall at all times operate and maintain their 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 social welfare practices. Section 3.03. PNGOs shall take out and maintain with responsible insurers, or make other provision satisfacto- ry to the Administrator for, insurance against such risks and in such amounts as shall be consistent with appropri- ate practice. ARTICLE IV Financial and Other Covenants Section 4.01. (a) PNGOs shall maintain procedures and records adequate to monitor and record the progress their activities under Parts A (2), B.1 and B.2 (b) of the Project and of each Investment Project financed by them (including the costs and the benefits to be derived from it), and to reflect in accordance with sound accounting practices their operations and financial condition. (b) PNGOs shall: (i) have the records referred to in Section 4.01 (a) of this Agreement, their ac- counts including those for their Special Accounts and financial statements (bal- ance sheets, statements of income and expenses and related statements) for each Page 4 fiscal year audited, in accordance with appropriate auditing principles consis- tently applied, by independent auditors acceptable to the Administrator; (ii) furnish to the Administrator as soon as available, but in any case not later than six months after the end of each such year: (A) certified copies of their fi- nancial 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 Administrator shall have reasonably requested; and (iii) furnish to the Administrator such other information concerning said records, accounts and financial statements as well as the audit thereof, as the Administrator shall from time to time reasonably re- quest. Section 4.02. PNGOs shall, not later than sixty (60) days after the end of each semester, beginning with the semester ending June 30, 1991, furnish to the Administra- tor reports, in form and substance satisfactory to the Administrator, on the state of disbursements, collections and arrears under their credit operations. 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 Dutch Grant Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Administrator and of PNGOs thereunder shall terminate on the date on which the Dutch Grant Agreement shall terminate in accordance with its terms, and the Adminis- trator shall promptly notify PNGOs 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 Condi- tions. 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 Administrator: International Bank for Reconstruction and Development 1818 H Street, N.W. Page 5 Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For AKRSP: The Aga Khan Rural Support Program 543 Shahrah-e-Quaide Azam Jutial, Gilgit Pakistan Cable address: AGAFOUND Gilgit For OPP: Orangi Pilot Project Society 1-D, 26 Daulat House Orangi Town Karachi-41, Pakistan For BUSTI: Basic Urban Services for Katchi Abadis 155-C, KDA-1 Extension Karachi Pakistan For ADI: Alfalah Development Institute P.O. Box 5141 Model Town Lahore - 54700 Pakistan Telex: 92-42-854816 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 PNGOs, or by PNGOs on behalf of the Administrator under the Dutch Grant Agreement, may be taken or executed by their Chief Executive Officers or such other person or persons as the Chief Executive Officers shall designate in writing, and the Chief Executive Officers shall furnish to the Administrator 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. Section 6.04. In accordance with the arrangements referred to in the Preamble to the Dutch Grant Agreement between the Minister and the Administrator, the rights and obligations of the Administrator under this Agreement may be transferred to the Minister. PNGOs accept and agree that, upon notice by the Administrator to PNGOs to that effect, the Minister shall, ipso facto, from the date specified in such notice, be substituted in all rights and obligations of the Administrator under this Agreement as if the Minister had been an original party to this Agreement, without any further action or formali- Page 6 ty required on the part of any party, and from such date the Administrator shall cease to have any rights or obligations as a party under this Agreement. 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT as Administrator of the Grant By /s/ M. H. Wiehen Acting Regional Vice President Europe, Middle East and North Africa AGA KHAN RURAL SUPPORT PROGRAM By /s/ I. N. Ali Authorized Representative ORANGI PILOT PROJECT SOCIETY BASIC URBAN SERVICES FOR KATCHI ABADIS ALFALAH DEVELOPMENT INSTITUTE By /s/ A. Farooq Authorized Representative