Page 1 CONFORMED COPY LOAN NUMBER 3039 MA (Sabah Land Settlement and Environmental Management Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and FEDERAL LAND DEVELOPMENT AUTHORITY Dated July 18, 1989 LOAN NUMBER 3039 MA PROJECT AGREEMENT AGREEMENT, dated July 18, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and FEDERAL LAND DEVELOPMENT AUTHORITY (FELDA). WHEREAS by the Loan Agreement of even date herewith between Malaysia (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to seventy-one million five hundred thousand dollars ($71,500,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that FELDA agree to undertake such obligations toward the Bank as are set forth in this Agreement; and WHEREAS FELDA, 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; NOW THEREFORE the parties hereto hereby agree as follows: Page 2 ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Loan Agreement, the Preamble to this 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) FELDA 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 with due diligence and efficiency and in conformity with appro- priate administrative, financial, engineering, agricultural 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 Bank and FELDA shall otherwise agree, FELDA 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 the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 4 to the Loan Agreement. Section 2.03. FELDA 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. FELDA shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, FELDA 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) FELDA shall, at the request of the Bank, exchange views with the Bank with regard to progress 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) FELDA shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by FELDA of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of FELDA Section 3.01. FELDA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, engineering, agricultural and environmental practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. FELDA 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 Page 3 renewals thereof, all in accordance with sound engineering, financial and management practices. Section 3.03. FELDA 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) FELDA shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) FELDA shall: (i) have its records, accounts and financial statements (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 nine months after the end of each such 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. 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.O2. This Agreement and all obligations of the Bank and of FELDA thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify FELDA 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, 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: Page 4 International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For FELDA: The Federal Land Development Authority Jalan Maktab Kuala Lumpur Malaysia Cable address: Telex: FELDA MA 32159 Kuala Lumpur 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 FELDA may be taken or executed by the Director General or such other person or persons as the Director General shall designate in writing, and FELDA 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 the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Attila Karaosmanoglu Regional Vice President Asia FEDERAL LAND DEVELOPMENT AUTHORITY By /s/ Albert S. Talalla Authorized Representative SCHEDULE Implementation Program Without any limitation or restriction upon any of its obliga- tions under this Agreement, FELDA shall implement Part A of the Project, and to that end FELDA shall take all necessary action including: Page 5 (a) by June 30, 1989 and by June 30 of each year thereafter, review with the Bank the progress of settler emplacement in the Sahabat Settlement Area and, if necessary, adjust the pace of implementation of Part A of the Project; (b) after commissioning of the palm oil mill constructed under the Project, transfer such mill to the FELDA Mills Corporation in accordance with arrangements satisfactory to the Bank; (c) ensure that land development in the Dent Peninsula shall, in respect of land clearing, watershed and wildlife protec- tion, be carried out in accordance with the Environmental Management Plan; and (d) establish by September 30, 1989 and thereafter maintain an Environmental Coordination Unit with responsibilities, resources and staffing satisfactory to the Bank.