LoanAgrement NRCP

8/8/2019 LoanAgrement NRCP

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Draft for Loan Negotiations(12 April 2010)

LOAN NUMBER ____-SRI(SF)

LOAN AGREEMENT(Special Operations)

(Northern Road Connectivity Project)

between

DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA

and

ASIAN DEVELOPMENT BANK

DATED ________________

LAS:SRI 42254





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(a) "CBSL" means Central Bank of Sri Lanka established pursuant to the

Borrower's Monetary Law Act No. 58 of 1949;

(b) "CEA" means the Central Environment Authority of the Borrower, orany successor thereto;

(c) "Consulting Guidelines" means the Guidelines on the Use ofConsultants by Asian Development Bank and its Borrowers (2007, as amended from time totime);

(d) "Consulting Services" means the services to be financed out of theproceeds of the Loan as described in paragraph 2 of Schedule 1 to this Loan Agreement, butexcluding any services provided in relation to Goods and Works;

(e) "EMP" means the environmental management plan prepared for theProject and set out in the IEE;

(f) "ESD" means the Environmental and Social Division of RDA, or anysuccessor thereto;

(g) "Fiscal Year" means the fiscal year of the Borrower, being the periodfrom 1 January to 31 December of a calendar year;

(h) “Goods” means equipment and materials to be financed out of theproceeds of the Loan, including related services such as transportation, insurance, installation,commissioning, training, and initial maintenance, but excluding Consulting Services;

(i) "IEE" means the initial environmental examination report prepared forthe Project by the Borrower and approved by ADB;

(j) "Loan Disbursement Handbook" means ADB’s Loan DisbursementHandbook (2007, as amended from time to time);

(k) "MLGPC" means the Ministry of Local Government and ProvincialCouncils of the Borrower, or any successor thereto;

(l) "MOFP" means the Ministry of Finance and Planning of the Borrower,or any successor thereto;

(m) "MOHRD" means the Ministry of Highways and Road Development ofthe Borrower, or any successor thereto;

(n) "NPC" means the Northern Provincial Council of the Borrower, or anysuccessor thereto;

(o) "NPC Project Agreement" means the Project Agreement of even dateherewith between ADB and NPC;

(p) "NPRDD" means Northern Provincial Road Development Departmentof NPC, or any successor thereto;



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(q) "PAM" means the project administration manual for the Project dated

[____] and agreed between the Borrower and ADB, as updated from time to time inaccordance with the respective administrative procedures of the Borrower and ADB;

(r) “Procurement Guidelines” means ADB’s Procurement Guidelines

(2007, as amended from time to time);

(s) “Procurement Plan” means the procurement plan for the Project dated[____] and agreed between the Borrower and ADB, as updated from time to time inaccordance with the Procurement Guidelines, the Consulting Guidelines, and otherarrangements agreed with ADB;

(t) "Project Executing Agencies" means, for the purposes and within themeaning of the Loan Regulations, MOHRD, which is responsible for the carrying out part A ofthe Project and MLGPC, which is responsible for the carrying out parts B and C of the Project,or any successor thereto acceptable to ADB;

(u) "Project facilities" means NPRDD's office and the roads and otherinfrastructure improved, upgraded and/or rehabilitated under the Project;

(v) "Project Implementing Agencies" means RDA, which is responsible forimplementing part A of the Project and NPRDD, which is responsible for implementing parts Band C of the Project, or any successor thereto acceptable to ADB;

(w) "RDA" means Road Development Authority established pursuant to theRoad Development Authority Act of 1981, or any successor thereto;

(x) "RDA Project Agreement" means the Project Agreement of even dateherewith between AND and RDA;

(y) "Resettlement Framework" means the resettlement frameworkprepared for the Project by the Borrower and approved by ADB;

(z) "RP" means resettlement plan; and

(aa) “Works” means construction or civil works to be financed out ofthe proceeds of the Loan, including services such as drilling or mapping, and project relatedservices that are provided as part of a single responsibility or turnkey contract, but excludingConsulting Services.

ARTICLE II

The Loan

Section 2.01. ADB agrees to lend to the Borrower from ADB's SpecialFunds resources an amount in various currencies equivalent to [_______________] SpecialDrawing Rights (SDR [$24,400,000]).



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Section 2.02. (a) The Borrower shall pay to ADB an interest chargeat the rate of 1% per annum during the grace period, and 1.5% per annum thereafter on theamount of the Loan withdrawn from the Loan Account and outstanding from time to time.

(b) The term "grace period" as used in paragraph (a) of this Section meansthe period prior to the first Principal Payment Date in accordance with the amortization

schedule set forth in Schedule 2 to this Loan Agreement.

Section 2.03. The interest charge and any other charge on the Loanshall be payable semiannually on [ ] and [ ] in each year.

Section 2.04. The Borrower shall repay the principal amount of theLoan withdrawn from the Loan Account in accordance with the amortization schedule set forthin Schedule 2 to this Loan Agreement.

Section 2.05. The currency of repayment of the principal of the Loanand the currency of payment of the interest charge for the purposes of Sections 4.03(a) and4.04 of the Loan Regulations shall be [Euro/Japanese Yen/British Pound/Dollar].

ARTICLE III

Use of Proceeds of the Loan

Section 3.01. The Borrower shall make a portion of the proceeds of theLoan available to NPC and NPRDD upon terms and conditions satisfactory to ADB and shallcause NPC and NPRDD to apply such proceeds to the financing of expenditures on parts Band C of the Project in accordance with the provisions of this Loan Agreement and the NPCProject Agreement.

Section 3.02. The proceeds of the Loan shall be allocated andwithdrawn in accordance with the provisions of Schedule 3 to this Loan Agreement, as suchSchedule may be amended from time to time by agreement between the Borrower and ADB.

Section 3.03. Except as ADB may otherwise agree, the Borrower shallprocure or cause to be procured items of expenditure in accordance with the applicableprovisions of Schedule 4 to this Loan Agreement.

Section 3.04 Withdrawals from the Loan Account in respect of shall bemade only on account of expenditures relating to:

(a) Goods which are produced in and supplied from and services which are

supplied from such member countries of ADB as shall have beenspecified by ADB from time to time as eligible sources for procurement;and

(b) Goods, Works and Consulting Services which meet such other eligibilityrequirements as shall have been specified by ADB from time to time.



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Section 3.05. The Loan Closing Date for the purposes of Section 8.02of the Loan Regulations shall be 30 December 2015 or such other date as may from time totime be agreed between the Borrower and ADB.

ARTICLE IV

Particular Covenants

Section 4.01. In the carrying out of the Project and operation of theProject facilities, the Borrower shall perform, or cause NPC to perform, all obligations set forthin Schedule 5 to this Loan Agreement.

Section 4.02. The Borrower shall enable ADB's representatives toinspect the Project, the Goods and Works, and any relevant records and documents.

Section 4.03. (a) The Borrower shall (i) maintain, or cause to bemaintained, separate accounts for the Project; (ii) have such accounts and related financial

statements audited annually, in accordance with appropriate auditing standards consistentlyapplied, by independent auditors whose qualifications, experience and terms of reference areacceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6months after the end of each related fiscal year, certified copies of such audited accounts andfinancial statements and the report of the auditors relating thereto (including the auditors'opinion on the use of the Loan proceeds and compliance with the financial covenants of thisLoan Agreement as well as on the use of the procedures for imprest account and statement ofexpenditures), all in the English language; and (iv) furnish to ADB such other informationconcerning such accounts and financial statements and the audit thereof as ADB shall fromtime to time reasonably request.

(b) The Borrower shall enable ADB, upon ADB's request, to discuss the

Borrower's financial statements for the Project and its financial affairs related to the Projectfrom time to time with the auditors appointed by the Borrower pursuant to Section 4.02(a)hereabove, and shall authorize and require any representative of such auditors to participate inany such discussions requested by ADB, provided that any such discussion shall be conductedonly in the presence of an authorized officer of the Borrower unless the Borrower shallotherwise agree.

Section 4.04. The Borrower shall take all actions which shall benecessary on its part to enable the NPC to perform its obligations under the NPC ProjectAgreement, and shall not take or permit any action which would interfere with the performanceof such obligations.

ARTICLE V

Suspension and Cancellation

Section 5.1. The following is specified as an additional event forsuspension of the right of the Borrower to make withdrawals from the Loan Account for thepurposes of Section 8.01 (m) of the Loan Regulations: NPC and/or NPRDD have failed toperform any obligation under the NPC Project Agreement.



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Section 5.02. The following is specified as an additional event for

acceleration of maturity of the Loan for the purposes of Section 8.07(d) of the LoanRegulations: the event specified in Section 5.01 of this Loan Agreement has occurred.

ARTICLE VI

Effectiveness

Section 6.1. The following are specified as additional conditions to theeffectiveness of this Loan Agreement for the purpose of Section 9.01 (f) of the LoanRegulations:

(a) the Ordinary Operations Loan Agreement shall have been authorized orratified by all necessary governmental action and duly executed and delivered on behalf of theBorrower, and all conditions precedent to its effectiveness (other than a condition requiring the

effectiveness of this Loan Agreement) shall have been fulfilled;

(b) the RDA Project Agreement has been duly authorized or ratified by, andexecuted and delivered on behalf of RDA, and is legally binding upon RDA in accordance withits terms; and

(c) the NPC Project Agreement has been duly authorized or ratified by, andexecuted and delivered on behalf of NPC, and is legally binding upon NPC in accordance withits terms.

Section 6.02. A date 90 days after the date of this Loan Agreement isspecified for the effectiveness of this Loan Agreement for the purposes of Section 9.04 of the

Loan Regulations.

ARTICLE VII

Miscellaneous

Section 7.01. The Secretary of MOFP of the Borrower is designated asrepresentative of the Borrower for the purposes of Section 11.02 of the Loan Regulations.

Section 7.02. The following addresses are specified for the purposes of

Section 11.01 of the Loan Regulations:

For the Borrower

External Resources DepartmentMinistry of Finance and PlanningColombo 1Sri Lanka



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cc.: Deputy Secretary to the TreasuryDirector General, External Resources Department

Facsimile Numbers:

(94-11) 2549-828

(94-11) 2447-633

For ADB

Asian Development BankP.O. Box 7890980 Manila, Philippines

Facsimile Numbers:

(632) 636-2444

(632) 636-2340.

IN WITNESS WHEREOF the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Loan Agreement to be signed intheir respective names as of the day and year first above written and to be delivered at theprincipal office of ADB.

DEMOCRATIC SOCIALIST REPUBLICOF SRI LANKA

By ____________________________ [Name and Designation]


By ____________________________ [Name and Designation]



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SCHEDULE 1

Description of the Project

1. The objective of the Project is to improve road connectivity within the northern provinceand between the northern province and the southern region of Sri Lanka.

2. The Project shall comprise:

A. Rehabilitation and Improvement

Rehabilitation and improvement of about 170 km of national highways in thenorthern and north-central provinces.

B. Rehabilitation and Replacement

Rehabilitation of about 140 km of provincial roads and rehabilitation and/orreplacement of selected bridges in the northern province.

C. Rehabilitation of NPRDD's Office

Rehabilitation and improvement of NPRDD's office.

Consulting Services will be provided to support the implementation of the Project.

3. The Project is expected to be completed by 30 June 2015.



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SCHEDULE 2

Amortization Schedule(Northern Road Connectivity Project)

Date Payment Due Payment of Principal(expressed in Special

Drawing Rights)



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SCHEDULE 3

Allocation and Withdrawal of Loan Proceeds

General

1. The table attached to this Schedule sets forth the Categories of items ofexpenditure to be financed out of the proceeds of the Loan and the allocation of amounts ofthe Loan to each such Category (“Table”). (Reference to "Category" in this Schedule is to aCategory or Categories of the Table.)

Percentages of ADB Financing

2. Except as ADB may otherwise agree, each item of expenditure shall befinanced out of the proceeds of the Loan on the basis of the percentages set forth in theTable.

Interest Charge

3. The amount allocated to Category 4 is for financing the interest charge on theLoan during the implementation period of the Project.

Reallocation

4. Notwithstanding the allocation of Loan proceeds and the withdrawalpercentages set forth in the Table,

(a) if the amount of the Loan allocated to any Category appears to beinsufficient to finance all agreed expenditures in that Category, ADB may, in consultation withthe Borrower, (i) reallocate to such Category, to the extent required to meet the estimated

shortfall, amounts of the Loan which have been allocated to another Category but, in theopinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocationcannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable tosuch expenditures in order that further withdrawals under such Category may continue untilall expenditures thereunder shall have been made; and

(b) if the amount of the Loan allocated to any Category appears to exceedall agreed expenditures in that Category, ADB may, in consultation with the Borrower,reallocate such excess amount to any other Category.

Disbursement Procedures

5. Except as ADB may otherwise agree, the Loan proceeds shall be disbursed inaccordance with the Loan Disbursement Handbook.



Schedule 2

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Imprest Account and Statement of Expenditures

6.

(a) Except as ADB may otherwise agree, the Borrower shall establish, andcause to be established, immediately after the Effective Date, (i) a first generation imprest

account at CBSL, and (ii) two second generation imprest accounts, one for MLGPC and onefor NPRDD, at a state owned bank (collectively, imprest accounts). The imprest accountsshall be established, managed, replenished and liquidated in accordance with the LoanDisbursement Handbook and detailed arrangements agreed upon between the Borrower andADB. The currency of the first generation imprest account shall be [Dollar] and the currencyof the second generation imprest accounts shall be [Sri Lanka rupee]. The aggregate amountto be deposited into the imprest accounts shall not exceed the lower of (i) the estimatedexpenditure to be financed from the imprest accounts for the first 6 months of Projectimplementation, or (ii) the equivalent of 10% of the Loan amount.

(b) The statement of expenditures procedure may be used forreimbursement of eligible expenditures and to liquidate advances provided into the imprestaccounts, in accordance with Loan Disbursement Handbook and detailed arrangementsagreed upon between the Borrower and ADB. Any individual payment to be reimbursed shallnot exceed the equivalent of $100,000.



12Attachment to Schedule 3

TABLE

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS


CATEGORY ADB FINANCING

Amount Allocated[SDR/$]Number Item

Category Subcategory

Percentage andBasis for Withdrawal

from the Loan Account

1 Works – ProvincialRoads

19,080,000 89 percent of total expenditureclaimed

2 Equipment 200,00089 percent of total expenditureclaimed

3 Project Management 600,000

3A Project CoordinationUnit

200,000 100 percent of total expenditureclaimed*

3B Northern province 400,000100 percent of total expenditureclaimed*

4 Interest Charge 880,000100 percent of amount due

5 Unallocated 3,640,000

Total 24,400,000* Exclusive of taxes and duties imposed within the territory of the Borrower.



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SCHEDULE 4

Procurement of Goods, Works and Consulting Services

General

1. The procurement of Goods, Works and Consulting Services shall be subject toand governed by the Procurement Guidelines, and the Consulting Guidelines, respectively.

2. All terms used and not otherwise defined in this Loan Agreement have themeanings provided in the Procurement Guidelines and/or the Consulting Guidelines, asapplicable.

Procurement of Goods and Works

3. Except as ADB may otherwise agree, Goods and Works shall only be procuredon the basis of the methods of procurement set forth below:

(a) International Competitive Bidding;(b) National Competitive Bidding; and(c) Shopping.

4. The methods of procurement are subject to, among other things, the detailedarrangements and threshold values set forth in the Procurement Plan. The Borrower mayonly modify the methods of procurement or threshold values with the prior agreement ofADB, and modifications must be set out in updates to the Procurement Plan.

Domestic Preference

5. The Borrower may grant a margin of preference in the evaluation of bids underinternational competitive bidding in accordance with paragraphs 2.55(a) and 2.56 of theProcurement Guidelines for domestically manufactured Goods.

National Competitive Bidding

6. The Borrower and ADB shall ensure that, prior to the commencement of anyprocurement activity under national competitive bidding, the Borrower’s national competitivebidding procedures are consistent with the Procurement Guidelines. Any modifications orclarifications to such procedures agreed between the Borrower and ADB shall be set out inthe Procurement Plan. Any subsequent change to the agreed modifications and clarificationsshall become effective only after approval of such change by the Borrower and ADB.

Consulting Services

7. Except as ADB may otherwise agree, the Borrower shall apply quality- andcost-based selection for selecting and engaging consulting services.



Schedule 4

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Industrial or Intellectual Property Rights

8. (a) The Borrower shall ensure that all Goods and Works procured (including

without limitation all computer hardware, software and systems, whether separately procuredor incorporated within other goods and services procured) do not violate or infringe anyindustrial property or intellectual property right or claim of any third party.

(b) The Borrower shall ensure that all contracts for the procurement of Goodsand Works contain appropriate representations, warranties and, if appropriate, indemnitiesfrom the contractor or supplier with respect to the matters referred to in subparagraph (a) ofthis paragraph.

9. The Borrower shall ensure that all ADB-financed contracts with consultantscontain appropriate representations, warranties and, if appropriate, indemnities from theconsultants to ensure that the consulting services provided do not violate or infringe any

industrial property or intellectual property right or claim of any third party.

ADB’s Review of Procurement Decisions

10. Contracts procured under international competitive bidding procedures andcontracts for Consulting Services shall be subject to prior review by ADB, unless otherwiseagreed between the Borrower and ADB and set forth in the Procurement Plan.



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SCHEDULE 5

Execution of Project and Operationof Project Facilities; Financial Matters

Implementation Arrangements

1. The Borrower, the Project Executing Agencies, NPC and the ProjectImplementing Agencies shall ensure that the Project is implemented in accordance with thedetailed arrangements set forth in the PAM. Any subsequent change to the PAM shallbecome effective only after approval of such change by the Borrower and ADB. In the eventof any discrepancy between the PAM and this Loan Agreement, the provisions of this LoanAgreement shall prevail.

Counterpart Funds

2. The Borrower shall provide counterpart funds for Project implementation on

time. MOHRD and MLGPC, respectively, shall make timely submission of annual budgetaryappropriation request to MOFP and MOFP shall ensure prompt disbursement of appropriatedfunds during each year of Project implementation.

Resources

3. The Borrower, through MOHRD and NPC, shall provide RDA and NPRDDadequate staff, resources, and facilities to implement the Project.

Operation & Maintenance

4. The Borrower shall ensure that:

(i) RDA and NPC, through NPRDD, maintain the Project roads and thatproper technical supervision and adequate routine funds are provided;

(ii) NPC, through NPRDD, prepares annual road maintenance managementsystem prepared throughout Project period and after the Project iscompleted;

(iii) within 24 months after the Effective Date, NPC shall establish andimplement a vehicle registration system, which shall include vehiclelicense fees mechanism, in the Northern Province;

(iv) by midterm review NPC shall have committed at least 50% of the revenuefrom the vehicle license fees towards routine maintenance of the roads inthe Northern Province; and

(v) the funds required for the maintenance and rehabilitation of the nationalroads are allocated annually and release on a timely basis.



Schedule 5

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Project Website

b. Within 3 months of Effective Date, MOHRD and NPC, through NPRDD,respectively, shall create a Project website to disclose information about various matters on

the Project, including procurement. With regard to procurement, the website shall includeinformation on the list of participating bidders, name of the winning bidder, basic details onbidding procedures adopted amount of contract awarded, and the list of goods/servicesprocured. These Project websites shall have links to show both components of the Project.

Grievance Redress Mechanism

c. Within 6 months of Effective Date, MOHRD and NPC, through NPRDD,respectively, shall prepare a Grievance Redress Mechanism, acceptable to ADB, andestablish a task force at the RDA for MOHRD and at the NPC to receive and resolvecomplaints/grievances or act upon reports from stakeholders on misuse of funds and otherirregularities, including grievances due to resettlement and environmental issues. The task

force shall (i) make public the existence of this Grievance Redress Mechanism, through apublic awareness campaign, (ii) review and address grievances of stakeholders of theProject, in relation to either the Project, any of the service providers, or any personresponsible for carrying out any aspect of the Project; and (iii) proactively and constructivelyrespond to them.

Labor

d. The Borrower, MOHRD and NPC, through NPRDD, shall ensure that civilworks contractors engaged under the Project (i) provide for equal pay to men and women forequal work and make prompt payment of wages; (ii) provide safe working conditions andwater and sanitation facilities for male and female workers; (iii) do not violate any prohibitions

against child labor under the Borrower’s laws and international treaty obligations; and (iv)require the contractor to include information on the risk of transmission of sexually-transmitted diseases, including HIV/AIDS, in health and safety programs for all constructionworkers employed under the Project. Specific provisions to this effect shall be included inbidding documents and civil works contracts, and compliance shall be monitored by MOHRDand NPC, respectively.

Environment

e. The Borrower, MOHRD and NPC, through NPRDD, shall ensure that theProject shall be carried out in accordance with the IEE and the EMPs prepared under theProject, and shall comply with the Borrower’s environmental laws and regulations and ADB’s

Safeguard Policy Statement (2009). If there is any discrepancy between the Borrower’s lawsand regulations, and ADB's Safeguard Policy Statement (2009), the ADB’s Safeguard PolicyStatement (2009) shall prevail. MOHRD and MLGPC shall implement the environmentalmitigation and management measures, and other recommendations specified in EMPs tominimize any adverse environmental impacts arising from the implementation of the Project.The requirements of the EMPs and of the conditional clearance provided by the CEA shall beincorporated in the bidding documents and included as part of the works contract documents.MOHRD, through RDA, is responsible for ensuring compliance by the contractors withrequirements of the EMPs for national roads. The ESD under the RDA, shall monitor



Schedule 5

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environmental compliance by the contractors. With respect to provincial roads, NPC shall beresponsible for ensuring the implementation of the respective EMPs.

Resettlement

f. Although no involuntary resettlement is envisaged, MOHRDand NPC, through NPRDD, shall ensure that if land acquisition is unavoidable, which mayaffect some properties such as boundary walls, business establishments, crops and trees,home gardens, or other resettlement impacts, a RP shall prepared in accordance with theagreed Resettlement Framework and ADB's Safeguard Policy Statement (2009). Approvalfrom the Borrower and ADB shall have to be obtained prior to any commencement ofconstruction in the concerned area. RDA shall be responsible for the preparation andimplementation of RPs for national highway roads component and the NPC shall beresponsible for the provincial roads component.

g. In addition, in the event land acquisition is unavoidable, the

Borrower, through RDA and NPRDD, shall ensure that Works contractors shall not be issuednotices to commence for any part of a section of a road involving land acquisition andresettlement, to begin construction work unless the Recipient has (a) satisfactorilycompleted, in accordance with the approved RP, compensation payment and relocation tonew sites; (b) ensured that rehabilitation assistance is in place; and (c) the area required forcivil works is free of all encumbrances



Draft for Loan Negotiations(12 April 2010)

__________________________________________________________________________

LOAN NUMBER ______-SRI

LOAN AGREEMENT(Ordinary Operations)


between

DEMOCRATIC SOCIALIST REPUBLIC OF SRI LANKA

and


DATED ________________

LAL:SRI 42254



LOAN AGREEMENT(Ordinary Operations)

LOAN AGREEMENT dated ______________ between DEMOCRATICSOCIALIST REPUBLIC OF SRI LANKA ("Borrower") and ASIAN DEVELOPMENT BANK

("ADB").

WHEREAS

(A) the Borrower has applied to ADB for a loan for the purposes of theProject described in Schedule 1 to the Special Operations Loan Agreement referred to inrecital (B) below;

(B) by an agreement of even date herewith between the Borrower andADB (the Special Operations Loan Agreement), ADB has agreed to lend to the Borrowerfrom ADB's Special Funds resources an amount in various currencies equivalent to

_____[$24,400,000]____________ Special Drawing Rights (SDR_____) for the purposes of

the Project (Special Operation Loan);

(C) part A of the Project will be carried out by MOHRD and RDA and partsB and C of the Project, will be carried out by MLGPC, NPC and NPRDD, and for thispurposes the Borrower will make available to RDA a portion of the proceeds of the OrdinaryOperation Loan and to NPC a portion of the proceeds of the Special Operation Loan uponterms and conditions satisfactory to ADB; and

(D) ADB has agreed to make a loan to the Borrower from ADB's ordinarycapital resources upon the terms and conditions set forth herein and in the RDA ProjectAgreement;

NOW THEREFORE the parties hereto agree as follows:

ARTICLE I

Loan Regulations; Definitions

Section 1.01. All the provisions of the Ordinary Operations LoanRegulations Applicable to LIBOR-Based Loans Made from ADB's Ordinary CapitalResources, dated 1 July 2001, are hereby made applicable to this Loan Agreement with the

same force and effect as if they were fully set forth herein, subject, however, to the followingmodifications thereof ("Loan Regulations"):

(a) Section 2.01(50) is deleted and the following is substituted therefor:

"Project Agreements" means the NPC Project Agreement and the RDAProject Agreement."

(b) Section 3.03 is deleted and the following is substituted therefor:





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Loans and the Fixed Spread applicable to the outstanding Loan(expressed as a percentage per annum), by (ii) the principalamount of the outstanding Loan on which the Borrower shallpay interest for all interest periods commencing on and afterthe effective date of the higher Fixed Spread that will beapplied to new Loans.

(b) Following any announcement by ADB that itsFunding Cost Margin calculations with respect to any LoanCurrency (or Approved Currency) in any Semester resulted inADB incurring additional costs, the Borrower shall pay ADB aSurcharge. The amount of the Surcharge shall be determinedby multiplying (i) the Funding Cost Margin (expressed as apercentage per annum) by (ii) the principal amount of the Loanon which the Borrower shall pay interest for the Interest Periodcommencing immediately after the Semester for which theFunding Cost Margin was calculated. ADB shall add theamount of the Surcharge to the interest payable by the

Borrower for the Interest Period commencing immediately afterthe Semester for which the Funding Cost Margin wascalculated.

(a) Section 1.02. Wherever used in this LoanAgreement, the several terms defined in the Loan Regulations and in Section 1.02 of theSpecial Operations Loan Agreement have the respective meanings therein set-forth.

ARTICLE II

The Loan

Section 2.01. (a) ADB agrees to lend to the Borrower from ADB'sordinary capital resources an amount of one hundred thirty million Dollar ($130,000,000) assuch amount may be converted from time to time through a Currency Conversion inaccordance with the provisions of Section 2.06 of this Loan Agreement.

(b) The Loan has a principal repayment period of 20 years, and a graceperiod as defined in paragraph (c) of this Section.

(c) The term “grace period” as used in paragraph (b) of this Section

means the period prior to the first Principal Payment Date in accordance with theamortization schedule set forth in Schedule 2 to this Loan Agreement.

Section 2.02. The Borrower shall pay to ADB interest on the principalamount of the Loan withdrawn and outstanding from time to time at a rate for each InterestPeriod equal to the sum of LIBOR and 0.60% as provided by Section 3.02 of the LoanRegulations, less a credit of 0.40% as provided by Section 3.03 of the Loan Regulations.



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Section 2.03. The Borrower shall pay a commitment charge of 0.15%per annum. Such charge shall accrue on the full amount of the Loan (less amountswithdrawn from time to time), commencing 60 days after the date of this Loan Agreement.

Section 2.04. Interest and other charges on the Loan shall be payablesemiannually on [ ] and [ ] in each year.

Section 2.05. The Borrower shall repay the principal amount of theLoan withdrawn from the Loan Account in accordance with the provisions of Schedule 2 tothis Loan Agreement.

Section 2.06. (a) The Borrower may at any time request any ofthe following Conversions of the terms of the Loan in order to facilitate prudent debtmanagement:

(i) a change of the Loan Currency of all or any portion of theprincipal amount of the Loan, whether withdrawn andoutstanding or unwithdrawn, to an Approved Currency;

(ii) a change of the interest rate basis applicable to all or anyportion of the principal amount of the Loan withdrawn andoutstanding from a Floating Rate to a Fixed Rate, or vice versa;and

(iii) the setting of limits on the Floating Rate applicable to all or anyportion of the principal amount of the Loan withdrawn andoutstanding by the establishment of an Interest Rate Cap orInterest Rate Collar on said Floating Rate.

(b) Any conversion requested pursuant to paragraph (a) of this Section

that is accepted by ADB shall be considered a "Conversion", as defined in Section 2.01(6) ofthe Loan Regulations, and shall be effected in accordance with the provisions of Article V ofthe Loan Regulations and the Conversion Guidelines.

ARTICLE III

Use of Proceeds of the Loan

Section 3.01. The Borrower shall make the proceeds of the Loan available toRDA upon terms and conditions satisfactory to ADB and shall cause RDA to apply such

proceeds to the financing of expenditures on part A of the Project in accordance with theprovisions of this Loan Agreement and the RDA Project Agreement.

Section 3.02. The proceeds of the Loan shall be allocated andwithdrawn in accordance with the provisions of Schedule 2 to this Loan Agreement, as suchSchedule may be amended from time to time by agreement between the Borrower and ADB.

Section 3.03. Except as ADB may otherwise agree, the Borrowershall procure or cause to be procured items of expenditure in accordance with the provisions



5

of Schedule 4 to the Special Operations Loan Agreement, as applicable. ADB may refuse tofinance a contract where any such item has not been procured under proceduressubstantially in accordance with those agreed between the Borrower and ADB or where theterms and conditions of the contract are not satisfactory to ADB.

Section 3.04. Except as ADB may otherwise agree, the Borrower

shall cause all items of expenditure financed out of the proceeds of the Loan to be usedexclusively in the carrying out of part A of the Project.

Section 3.05. The Loan Closing Date for withdrawals from the Loan Accountfor the purposes of Section 9.02 of the Loan Regulations shall be 30 December 2015 or suchother date as may from time to time be agreed between the Borrower and ADB.

ARTICLE IV

Particular Covenants

Section 4.01. (a) The Borrower shall cause MOHRD andRDA to carry out the Project with due diligence and efficiency and in conformity with soundapplicable technical, financial, business, and development practices.

(b) In the carrying out of the Project and operation of the Project facilities,the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5to the Special Operations Loan Agreement.

Section 4.02. The Borrower shall make available to MOHRD andRDA, promptly as needed, and on terms and conditions acceptable to ADB the funds,facilities, services, land and other resources, as required, in addition to the proceeds of the

Loan, for the carrying out of the Project.

Section 4.03. The Borrower shall ensure that the activities of its departmentsand agencies with respect to the carrying out of the Project and operation of the Projectfacilities are conducted and coordinated in accordance with sound administrative policies andprocedures.

Section 4.04 The Borrower shall enable ADB's representatives toinspect the Project, the Goods and Works, and any relevant records and documents.

Section 4.05. (a) The Borrower shall (i) maintain, or cause to bemaintained, separate accounts for the Project; (ii) have such accounts and related financial

statements audited annually, in accordance with appropriate auditing standards consistentlyapplied, by independent auditors whose qualifications, experience and terms of reference areacceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than6 months after the end of each related fiscal year, certified copies of such audited accountsand financial statements and the report of the auditors relating thereto (including the auditors'opinion on the use of the Loan proceeds and compliance with the financial covenants of thisLoan Agreement as well as on the use of the procedures for imprest account and statementof expenditures), all in the English language; and (iv) furnish to ADB such other information





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(c) the RDA Project Agreement has been duly authorized or ratified by,and executed and delivered on behalf of RDA, and is legally binding upon RDA inaccordance with its terms.

Section 6.02. A date 90 days after the date of this Loan Agreement isspecified for the effectiveness of this Loan Agreement for the purposes of Section 10.04 of

the Loan Regulations.

ARTICLE VII

Miscellaneous

Section 7.01. The Secretary of MOFP of the Borrower is designatedas representative of the Borrower for the purposes of Section 12.02 of the Loan Regulations.

Section 7.02. The following addresses are specified for the purposesof Section 12.01 of the Loan Regulations:

For the Borrower

External Resources DepartmentMinistry of Finance and PlanningColombo 1Sri Lanka

cc.: Deputy Secretary to the TreasuryDirector General, Department of External Resources

Facsimile Numbers:

(94-11) 2449-823(94-11) 2447-633

For ADB

Asian Development BankP.O. Box 7890980 Manila, Philippines

Facsimile Numbers:

(632) 636-2444(632) 636-2340.



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IN WITNESS WHEREOF the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Loan Agreement to be signed intheir respective names as of the day and year first above written and to be delivered at theprincipal office of ADB.

DEMOCRATIC SOCIALIST REPUBLICOF SRI LANKA

By __________________________ [Name and designation]


By __________________________ [Name and designation]





Schedule 1

10

2. If the proceeds of the Loan shall not have been fully withdrawn as of the firstPrincipal Payment Date, the principal amount of the Loan repayable by the Borrower on eachPrincipal Payment Date shall be determined as follows:

(a) To the extent that any proceeds of the Loan shall have been withdrawnas of the first Principal Payment Date, the Borrower shall repay the amount withdrawn andoutstanding as of such date in accordance with paragraph 1 of this Schedule.

(b) Any withdrawal made after the first Principal Payment Date shall berepaid on each Principal Payment Date falling after the date of such withdrawal in amountsdetermined by ADB by multiplying the amount of each such withdrawal by a fraction, thenumerator of which shall be the original Installment Share specified in the table in paragraph1 of this Schedule for said Principal Payment Date (the Original Installment Share) and thedenominator of which shall be the sum of all remaining Original Installment Shares forPrincipal Payment Dates falling on or after such date, such repayment amounts to beadjusted, as necessary, to deduct any amounts referred to in paragraph 4 of this Schedule,

to which a Currency Conversion applies.

3. Withdrawals made within two calendar months prior to any Principal PaymentDate shall, for the purposes solely of calculating the principal amounts payable on anyPrincipal Payment Date, be treated as withdrawn and outstanding on the second PrincipalPayment Date following the date of withdrawal and shall be repayable on each PrincipalPayment Date commencing with the second Principal Payment Date following the date ofwithdrawal.

4. Notwithstanding the provisions of paragraphs 1 and 2 of this Schedule, upon aCurrency Conversion of all or any portion of the withdrawn principal amount of the Loan to anApproved Currency, the amount so converted in said Approved Currency that shall be

repayable on any Principal Payment Date occurring during the Conversion Period, shall bedetermined by ADB by multiplying such amount in its currency of denomination immediatelyprior to said Conversion by either: (i) the exchange rate that reflects the amounts of principalin said Approved Currency payable by ADB under the Currency Hedge Transaction relatingto said Conversion; or (ii) if ADB so determines in accordance with the ConversionGuidelines, the exchange rate component of the Screen Rate.

5. If the principal amount of the Loan withdrawn and outstanding from time totime shall be denominated in more than one Loan Currency, the provisions of this Scheduleshall apply separately to the amount denominated in each Loan Currency, so as to produce aseparate amortization schedule for each such amount.



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SCHEDULE 2

Allocation and Withdrawal of Loan Proceeds

General

1. The table attached to this Schedule sets forth the Categories of items ofexpenditure to be financed out of the proceeds of the Loan and the allocation of amounts ofthe Loan to each such Category ("Table"). (Reference to "Category" or "Categories" in thisSchedule is to a Category or Categories of the Table).

Percentages of ADB Financing

2. Except as ADB may otherwise agree, each item of expenditure shall befinanced out of the proceeds of the Loan on the basis of the percentages set forth in theTable.

Interest and Commitment Charge

3. The amount allocated to Category 4 is for financing interest and commitmentcharge on the Loan during the implementation period of the Project. ADB shall be entitled towithdraw from the Loan Account and pay to itself, on behalf of the Borrower, the amountsrequired to meet payments, when due, of such interest and commitment charge.

Reallocation

4. Notwithstanding the allocation of Loan proceeds and the withdrawalpercentages set forth in the Table,

(a) if the amount of the Loan allocated to any Category appears to beinsufficient to finance all agreed expenditures in that Category, ADB may, in consultation withthe Borrower, (i) reallocate to such Category, to the extent required to meet the estimatedshortfall, amounts of the Loan which have been allocated to another Category but, in theopinion of ADB, are not needed to meet other expenditures, and (ii) if such reallocationcannot fully meet the estimated shortfall, reduce the withdrawal percentage applicable tosuch expenditures in order that further withdrawals under such Category may continue untilall expenditures thereunder shall have been made; and

(b) if the amount of the Loan allocated to any Category appears to exceedall agreed expenditures in that Category, ADB may, in consultation with the Borrower,reallocate such excess amount to any other Category.

Disbursement Procedures

5. Except as ADB may otherwise agree, the Loan proceeds shall be disbursed inaccordance with the Loan Disbursement Handbook.



Schedule 2

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Imprest Accounts and Statement of Expenditures

6. (a) Except as ADB may otherwise agree, the Borrower shall establish, andcause to be established, immediately after the Effective Date, (i) a first generation imprestaccount at CBSL, and (ii) a second generation imprest account for RDA at a state owned

bank (collectively, imprest accounts). The imprest accounts shall be established, managed,replenished and liquidated in accordance with ADB's Loan Disbursement Handbook, anddetailed arrangements agreed upon between the Borrower and ADB. The currency of thefirst generation imprest account shall be the [Dollar], and the currency of the secondgeneration imprest account shall be [Sri Lanka rupee]. The aggregate amount to bedeposited into the imprest accounts shall not exceed the lower of (i) the estimatedexpenditure to be financed from the imprest accounts for the first 6 months of Projectimplementation, or (ii) the equivalent of 10% of the Loan amount.

(b) The statement of expenditures procedure may be used forreimbursement of eligible expenditures and to liquidate advances provided into the imprestaccounts, in accordance with the Loan Disbursement Handbook and detailed arrangements

agreed upon between the Borrower and ADB. Any individual payment to be reimbursed orliquidated under the statement of expenditures procedure shall not exceed the equivalent of$100,000.



13Attachment to Schedule 2

TABLE

ALLOCATION AND WITHDRAWAL OF LOAN PROCEEDS


CATEGORY ADB FINANCING BASIS

Total Amount Allocatedfor ADB Financing

Percentage of ADB Financingfrom the

Loan Account

[$]

Number Item

Category

1 Works – National Roads 103,230,00089 percent of total expenditureclaimed

2 Consulting Services 5,800,000100 percent of total expenditureclaimed*

3Project Management – Road DevelopmentAuthority

200,000 100 percent of total expenditureclaimed*

4Interest andCommitment Charge 3,880,000

100 percent of amounts due

5 Unallocated 16,890,000

Total 130,000,000

* Exclusive of taxes and duties imposed within the territory of the Borrower.

LoanAgrement NRCP

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