Соглашение между Российской Федерацией и Международным банком реконструкции и развития (МБРР) о займе для финансирования проекта содействия реструктурированию предприятий (Loan Number 4184 RU) [англ.]

(Заключено в г. Вашингтоне 06.10.1997)

Loan number 4184 RU

LOAN AGREEMENT

(ENTERPRISE RESTRUCTURING SERVICES PROJECT) BETWEEN RUSSIAN FEDERATION AND INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

(Washington, 6.X.1997)

Agreement, dated October 6, 1997, between Russian Federation (the Borrower) and International Bank for Reconstruction and Development (the Bank).

Whereas (A) In order to encourage the economically efficient restructuring of privatized enterprises on the territory of the Borrower, the Government of the Borrower has adopted a program (the Enterprise Restructuring Program) designed to support the restructuring of such enterprises through the carrying out, by specific enterprises, of qualifying enterprise restructuring plans adopted by the enterprises for purposes consistent with the objectives of such program, and containing specific measures, including the measures described in Schedule 2 to this Agreement, to facilitate such restructuring;

(B) the Borrower, having satisfied itself as to the feasibility and priority of the Project described in Schedule 2 to this Agreement, has requested the Bank to assist in the financing of the Project;

(C) the Project will be carried out by the Borrower with the assistance of the Privatization Center (as hereinafter defined) in accordance with the provisions of the Implementation Agreement (as hereinafter defined) to be entered into between the Borrower and the Privatization Center, as provided in this Agreement; and

whereas the Bank has agreed, on the basis, inter alia, of the foregoing, to extend the Loan to the Borrower upon the terms and conditions set forth in this Agreement and in the Project Agreement of even date herewith between the Bank and the Privatization Center;

now therefore the parties hereto hereby agree as follows:

Section 1.01. The «General Conditions Applicable to Loan and Guarantee Agreements for Single Currency Loans» of the Bank, dated May 30, 1995 (the General Conditions) with the modifications set forth in Schedule 4 to this Agreement constitute an integral part of this Agreement.

Section 1.02. Unless the context otherwise requires, the several terms defined in the General Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings:

(a) «Bank-Guarantor» means a commercial bank guaranteeing a Sub-loan pursuant to the provisions of sub-paragraph 5 (c) of Part B of the Annex to Schedule 5 to this Agreement;

(b) «Beneficiary Enterprise» means an enterprise, qualifying under the appropriate guidelines established for such purposes, as referred to in paragraph B.2 of Schedule 5 to this Agreement, to which the Borrower proposes to make or has made a Sub-loan;

(c) «Enterprise Restructuring Services Credit Facility» means the facility established pursuant to Part A of the Project;

(d) «Evaluation Committee» means the committee referred to in paragraph A.2 of Schedule 5 to this Agreement;

(e) «Free-limit Sub-loan» means a Sub-loan (as so defined), which qualifies as a free-limit Sub-loan pursuant to the provisions of paragraph 1 (b) of Part A of the Annex to Schedule 5 to this Agreement;

(f) «Implementation Agreement» means the agreement governing the relationship between the Borrower and the Privatization Center, to be entered into between the MOF and the MOE (both as hereinafter defined), representing the Borrower, and the Privatization Center, which agreement shall have been concluded pursuant to Paragraph B.4 of Schedule 5 this Agreement, and such term shall include any amendments to such agreement as may be made from time to time;

(g) «LERC» means the Leontief Economic Research Center, a non-profit municipal organization organized and existing pursuant to Decision N. 30p of January 14, 1994, of the Property Committee of the Government of the City of St. Petersburg and registered in the records of the City of St. Petersburg under Registration N. 6424, dated February 17, 1994;

(h) «MOE» means the Borrower's Ministry of the Economy;

(i) «MOF» means the Borrower's Ministry of Finance;

(j) «Privatization Center» means the Russian Privatization Center, a state social foundation established by the Borrower pursuant to Decree No. 716 of the President of the Borrower of November 23, 1992 and the Founders' Agreement dated October 26, 1992;

(k) «Project Agreement,» means the agreement between the Bank and the Privatization Center of even date herewith, as the same may be amended from time to time, and such term includes all schedules and agreements supplemental to the Project Agreement;

(l) «Qualifying Expenditures» means expenditures made or incurred by a Beneficiary Enterprise in respect of consultants' services rendered pursuant to a Restructuring Services Contract under a Sub-loan approved in accordance with the criteria and procedures referred to in paragraph 2 of Part A of the Annex to Schedule 5 to this Agreement, subject to the applicable maximum amount of such expenditures which are eligible for financing in accordance with the provisions of paragraph 2 of Part B of such Annex;

(m) «Restructuring Services Contract» means the contract or other arrangements entered into between the Beneficiary Enterprise and any consultants providing for the rendering of specific enterprise restructuring services by such consultants in connection with a Sub-project;

(n) «Special Account» means the account referred to in Section 2.02 (b) of his Agreement;

(o) «Statutes» means the charter, statutes, articles of incorporation, founders' agreement, license, regulations, or special laws or decrees relating to the establishment, or governing the operations of LERC, or the Privatization Center, as the case may be;

(p) «Sub-loan» means a loan, made or proposed to be made by the Borrower, through the Privatization Center, out of the proceeds of the Loan, to a Beneficiary Enterprise for purposes of financing all or a portion of the costs required for the carrying out of a Sub-project;

(q) «Sub-loan Agreement» means the agreement entered into between the Borrower, through the Privatization Center, and a Beneficiary Enterprise, providing for a Sub-loan, as referred to in paragraph (c) of Section 3.02 of this Agreement; and

(r) «Sub-Project» means an enterprise restructuring project of a specific Beneficiary Enterprise qualifying under the Enterprise Restructuring Program and meeting the criteria applicable to the Project, which has been selected by the Privatization Center pursuant to the provisions of the Implementation Agreement and is proposed to be carried out by a Beneficiary Enterprise in whole or in part through the utilization of the proceeds of a Sub-loan.

Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions set forth or referred to in the Loan Agreement, an amount equal to eighty-five million dollars (85,000,000 USD).

Section 2.02. (a) The amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement for:

(i) amounts paid (or, if the Bank shall so agree, to be paid) by the Borrower on account of a withdrawal made by a Beneficiary Enterprise under a Sub-loan under Part A of the Project to meet the costs of Qualifying Expenditures reasonably incurred under a Sub-Project; and

(ii) expenditures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of the services required for Parts B, C and D of the Project and to be financed out of the proceeds of the Loan.

(b) The Borrower may, for the purposes of the Project, open and maintain in dollars a special deposit account in a commercial bank on terms and conditions satisfactory to the Bank, including appropriate protection against set-off, seizure or attachment. Deposits into, and payments out of, the Special Account shall be made in accordance with the provisions of Schedule 7 to this Agreement.

Section 2.03. The Closing Date shall be December 31, 2002, or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date.

Section 2.04. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one percent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time.

Section 2.05. (a) The Borrower shall pay interest on the principal amount of the Loan withdrawn and outstanding from time to time, at a rate for each Interest Period equal to LIBOR Base Rate plus LIBOR Total Spread.

(b) For the purposes of this Section:

(i) «Interest Period» means the initial period from and including the date of this Agreement to, but excluding, the first Interest Payment Date occurring thereafter, and after the initial period, each period from and including an Interest Payment Date to, but excluding the next following Interest Payment Date.

(ii) «Interest Payment Date» means any date specified in Section 2.06 of this Agreement.

(iii) «LIBOR Base Rate» means, for each Interest Period, the London interbank offered rate for six-month deposits in dollars for value the first day of such Interest Period (or, in the case of the initial Interest Period, for value the Interest Payment Date occurring on or next preceding the first day of such Interest Period), as reasonably determined by the Bank and expressed as a percentage per annum.

(iv) «LIBOR Total Spread» means, for each Interest Period:

(A) one-half of one percent (1/2 of 1%);

(B) minus (or plus) the weighted average margin, for such Interest Period, below (or above) the London interbank offered rates, or other reference rates, for six-month deposits, in respect of the Bank's outstanding borrowings or portions thereof allocated by the Bank to fund single currency loans or portions thereof made by it that include the Loan; as reasonably determined by the Bank and expressed as a percentage per annum.

(c) The Bank shall notify the Borrower of LIBOR Base Rate and LIBOR Total Spread for each Interest Period, promptly upon the determination thereof.

(d) Whenever, in light of changes in market practice affecting the determination of the interest rates referred to in this Section 2.05, the Bank determines that it is in the interest of its borrowers as a whole and of the Bank to apply a basis for determining the interest rates applicable to the Loan other than as provided in said Section, the Bank may modify the basis for determining the interest rates applicable to the Loan upon not less than six (6) months' notice to the Borrower of the new basis. The basis shall become effective on the expiry of the notice period unless the Borrower notifies the Bank during said period of its objection thereto, in which case said modification shall not apply to the Loan.

Section 2.06. Interest and other charges shall be payable March 5 and September 15 in each year.

Section 2.07. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement.

Section 3.01. The Borrower declares its commitment to the objectives of the Project as set forth in Schedule 2 to this Agreement, and, to this end, shall carry out the Project through the Privatization Center as set forth in Schedule 5 to this Agreement, all with due diligence and efficiency in accordance with sound economic standards and in conformity with appropriate administrative and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for purposes of the Project.

Section 3.02. Without limitation or restriction upon any of its other obligations under the Loan Agreement, the Borrower shall, for purposes of Part A of the Project:

(a) cause the Privatization Center to perform in accordance with the provisions of this Agreement, the Project Agreement, the Implementation Agreement and its Statutes, all the obligations and activities of the Privatization Center therein set forth relating to the Project; and take or cause to be taken all action, including the provision of funds, facilities, services and other resources, necessary or appropriate to enable the Privatization Center to perform such obligations; and not take or permit to be taken any action which would prevent or interfere with such performance (provided, however, that if any provision of the Implementation Agreement or the Statutes is inconsistent with a provision of this Agreement or the Project Agreement, the provision of the Loan Agreement or Project Agreement, as the case may be, shall govern);

(b) exercise its rights under the Implementation Agreement in such a manner as to protect the interests of the Borrower and the Bank, to comply with the provisions of this Agreement, and to accomplish the purposes of the Loan, and, except as the Bank shall otherwise agree, not assign, amend, abrogate or waive the Implementation Agreement or any provision thereof;

(c) relend to the Beneficiary Enterprises the equivalent of the proceeds of the Loan allocated from time to time to Category 1 of the table set forth in paragraph 1 of Schedule 1 to this Agreement, under agreements to be entered into between the Borrower (acting through the Privatization Center in accordance with the provisions of the Implementation Agreement) and each such Beneficiary Enterprise (the Sub-loan Agreements), under terms and conditions which shall include, without limitation, those set forth in the Annex to Schedule 5 of this Agreement;

(d) exercise its rights under the Sub-loan Agreements in such manner as to protect the interests of the Bank and the Borrower and to achieve the purposes of the Project; and except as the Bank shall otherwise agree, not assign, amend, abrogate or waive any Sub-loan Agreement or any provision thereof; and

(e) coordinate the overall execution of the Project and monitor the carrying out by the Beneficiary Enterprises of their respective obligations under the Sub-loan Agreements in accordance with policies and procedures satisfactory to the Bank.

Section 3.03. Without limitation upon the provisions of Sections 3.01 and 3.02 of this Agreement, and except as the Borrower and the Bank shall otherwise agree, the Borrower shall carry out, or cause to be carried out, the Project in accordance with the Implementation Program set forth in Schedule 5 to this Agreement.

Section 3.04. Except as the Bank shall otherwise agree, procurement of the consultants' services required for Parts B, C and D of the Project and to be financed out of the proceeds of the Loan shall be governed by the provisions of Schedule 6 to this Agreement.

Section 4.01. The Borrower shall maintain or cause to be maintained procedures and records adequate to monitor and record the progress of the Project and of each Sub-Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained sound accounting practices the operations, resources and expenditures of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof.

Section 4.02. (a) The Borrower shall:

(i) have the records referred to in Section 4.01 of this Agreement, its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and records and accounts for the Special Account for each fiscal year audited in accordance with sound 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 year, (A) certified copies of said 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 and the audit thereof as the Bank shall from time to time reasonably request.

(b) For all expenditures with respect to which withdrawals from the Loan Account were made on the basis of statements of expenditure, the Borrower shall:

(i) maintain, or cause to be maintained, in accordance with Section 4.01 of this Agreement, records and accounts reflecting such expenditures;

(ii) retain, or cause to be retained until at least one year after the Bank has received the audit report for the fiscal year in which the last withdrawal from the Loan Account was made, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures;

(iii) enable the Bank's representatives to examine such records; and

(iv) ensure that such records and accounts are included in the annual audit referred to in paragraph (a) of this Section and that the report of such audit contains a separate opinion by said auditors as to whether the statements of expenditure submitted during such fiscal year, together with the procedures and internal controls involved in their preparation, can be relied upon to support the related withdrawals.

Section 4.03. Except as the Bank shall otherwise agree, the Borrower shall, in respect of any payment of interest and repayments of principal to be made by the Beneficiary Enterprises under their respective Sub-loans:

(a) open, by the date on which it shall receive the first such payment or repayment, and thereafter maintain, in a bank acceptable to the Bank, a separate account, on terms and conditions satisfactory to the Bank; and

(b) upon receipt of each such payment or repayment, credit the same to said separate account. All amounts to be so credited shall be utilized, to the extent that are not yet required to meet the Borrower's payment or repayment obligations under this Agreement, exclusively to finance other enterprise restructuring service contracts on similar terms and conditions as those applicable to the Sub-loans so repaid and credited to the said separate account.

Section 5.01. Pursuant to Section 6.02 (1) of the General Conditions, the following additional events are specified:

(a) The Enterprise Restructuring Program shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Borrower to carry out the Project or to perform any of its obligations under this Agreement.

(b) The Privatization Center shall have failed to perform any of its obligations under the Project Agreement or the Implementation Agreement.

(c) As a result of events which have occurred after the date of the Loan Agreement, an extraordinary situation shall have arisen which shall make it improbable that the Privatization Center will be able to perform its obligations under the Project Agreement or the Implementation Agreement.

(d) The Statutes of the Privatization Center shall have been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Privatization Center to perform any of its obligations under the Project Agreement or the Implementation Agreement.

(e) The Borrower or any other authority having jurisdiction shall have taken any action for the dissolution or disestablishment of the Privatization Center or for the suspension of its operations.

(f) The Privatization Center shall have become insolvent, or any action or proceeding shall have been taken by the Privatization Center or by others acting under official claim of right or having a cause of action against the Privatization Center, whereby any of the assets of the Privatization Center shall or may be distributed among its creditors or in accordance with legislation of the Borrower pertaining to instances of insolvency.

(g) The Privatization Center shall have taken any of the actions specified in Section 4.03 (a) to (f) of the Project Agreement, so as to affect materially and adversely the operations or the financial condition of the Privatization Center or its ability to carry out the Project or perform any of its obligations under the Project Agreement or the Implementation Agreement.

Section 5.02. Pursuant to Section 7.01 (h) of the General Conditions, the following additional events are specified:

(a) Any event specified in paragraph (b) of Section 5.01 of this Agreement shall occur and shall continue for a period of sixty (60) days after notice thereof shall have been given by the Bank to the Borrower.

(b) Any event specified in paragraphs (d), (e), (f), or (g), of Section 5.01 of this Agreement shall occur.

Section 6.01. The following events are specified as additional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions:

(a) the Implementation Agreement has been concluded between the Borrower and the Privatization Center;

(b) the Evaluation Committee has been established with terms of reference and operating procedures acceptable to the Bank; and

(c) the roster of consultants, рrе-qualified pursuant to paragraph 1 of Part C of Schedule 6 to this Agreement, has been established acceptable to the Bank.

Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank:

(a) that the Project Agreement has been duly authorized or ratified by the Privatization Center and is legally binding upon the Privatization Center in accordance with its terms; and

(b) that the Implementation Agreement has been duly authorized by the Borrower and the Privatization Center, respectively, and is legally binding upon the Borrower and the Privatization Center, respectively, in accordance with its terms.

Section 6.03. The date ninety (90) days after the date of this Agreement is hereby specified for the purposes of Section 12.04 of the General Conditions.

Section 7.01. The Minister of Finance of the Borrower or the Deputy Minister of Finance responsible for international economic affairs is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions.

Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions:

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: 248423 (MCI) or
        INTBAFRAD                                64145 (MCI)

    Washington, D.C.

    For the Borrower:
    Ministry of Finance
    103097 Moscow
    Ilyinka Street, 9
    Russian Federation
                                      Telex: 112008

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.

SCHEDULE 1

WITHDRAWAL OF THE PROCEEDS OF THE LOAN

1. The table below sets forth the Categories of items to be financed out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expenditures for items so to be financed in each Category:

2. For the purposes of this Schedule:

(a) the term «foreign expenditures» means expenditures in the currency of any country other than that of the Borrower for goods or services supplied from the territory of any country other than that of the Borrower;

(b) the term «local expenditures» means expenditures in the currency of the Borrower for goods or services supplied from the territory of the Borrower; and

(c) the term «Incremental Operating Expenses» means Project-related operating costs and expenses, including incremental staffing costs, rental, communications, utilities, office equipment and supplies, travel and subsistence allowance, interpretation and translation, audit, and such other incremental office operational costs and expenses as may be agreed by the Bank.

3. Notwithstanding the provisions of paragraph 1 above, no withdrawals shall be made:

(a) in respect of a Sub-loan unless the Sub-loan has been made in accordance with the procedures and on the terms and conditions set forth or referred to in the Annex to Schedule 5 to this Agreement;

(b) in respect of payments made for expenditures prior to the date of this Agreement; and

(c) in respect of payments made for expenditures under Category (4) of this Schedule for any year during the implementation of the Project, prior to the adoption by the Privatization Center of the annual operational budget for project implementation, as described in Section 4.02 of the Project Agreement for the year concerned, satisfactory to the Bank.

4. The Bank may require withdrawals from the Loan Account to be made on the basis of statements of expenditure for: (a) Incremental Operating Expenses of the Privatization Center; and (b) expenditures for enterprise restructuring services under Sub-projects under Part A of the Project, under contracts not exceeding 300,000 USD equivalent, under such terms and conditions as the Bank shall specify by notice to the Borrower.

SCHEDULE 2

DESCRIPTION OF THE PROJECT

The objectives of the Project are:

(i) to assist in financing the provision of such business advisory and managerial consultant services to private enterprises in the Russian Federation as will contribute to the improvement of the economic viability and efficiency of the selected enterprises and the economic and social development of the country; and

(ii) to facilitate the further development of the quality and the competitiveness of the financial and management consulting industry in the Russian Federation.

The Project consists of the following Parts, subject to such modifications thereof as the Bank and the Borrower may agree upon from time to time to achieve such objectives.

Enterprise Restructuring Services Credit Facility

1. The provision of Sub-loans by the MOF, through the Privatization Center, for the financing of specific enterprise restructuring services to selected private enterprises which are engaged in specific enterprise restructuring projects.

2. Evaluation of the outcomes and impacts of the enterprise restructuring projects carried out pursuant to paragraph 1 of Part A hereof.

Marketing Information Improvement

Development, maintenance and updating by the Privatization Center of a database of consulting firms offering various restructuring services to enterprises, the promotion of equal opportunity for participation in the Enterprise Restructuring Program by identified local consulting firms having the appropriate expertise and skills, and the provision of access to information about such consulting firms to private enterprises.

Restructuring Promotion

The provision of marketing and public relations services (including workshops, training and broad public awareness campaign) to the potential Beneficiary Enterprises, local consulting firms, enterprise shareholders and affiliates, and interested groups, under the general coordination of the Privatization Center, to help promote the Enterprise Restructuring Program and to strengthen the linkages between the banks, investors, enterprises, consultants and other market agents in the area of the restructuring services support.

Provision of technical assistance, consisting of managerial, advisory and technical services, to the Privatization Center to strengthen the capacity of the Privatization Center to implement the Project.

The Project is expected to be completed by June 30, 2002.

SCHEDULE 3

AMORTIZATION SCHEDULE

<*> The figures in this column represent the amount in dollars to be repaid, except as provided in Section 4.04 (d) of the General Conditions.

SCHEDULE 4

MODIFICATIONS OF GENERAL CONDITIONS

For the purposes of this Agreement, the provisions of the General Conditions are modified as follows:

Section 6.03 is modified to read:

«Section 6.03. Cancellation by the Bank. If (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty (30) days, or (b) at any time, the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project's costs to be financed out of the proceeds of the Loan, or (c) at any time the Bank determines, with respect to any contract to be financed out of the proceeds of the Loan, that corrupt or fraudulent practices were engaged in by representatives of the Borrower or of a beneficiary of the Loan during the procurement or the execution of such contract, without the Borrower having taken timely and appropriate actions satisfactory to the Bank to remedy the situation, and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (d) at any time, the Bank determines that the procurement of any contract to be financed out of the proceeds of the Loan is inconsistent with the procedures set forth or referred to in the Loan Agreement and establishes the amount of expenditures in respect of such contract which would otherwise have been eligible for financing out of the proceeds of the Loan, or (e) after the Closing Date, an amount of the Loan shall remain unwithdrawn from the Loan Account, or (f) by the date specified in paragraph 3 (c) of Part A of the Annex to Schedule 5 to the Loan Agreement, the Bank shall, in respect of any portion of the Loan: (i) have received no applications or requests under subparagraphs (a) or (b) of said paragraph 3; or (ii) have denied any such applications or requests, the Bank may, by notice to the Borrower, terminate the right of the Borrower to submit such applications or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice, such amount or portion of the Loan shall be cancelled.»

SCHEDULE 5

IMPLEMENTATION PROGRAM

The provisions of this Schedule shall apply for the purposes of Section 3.03 of this Agreement:

A. Overall Coordination and Management of the Project

1. The MOE shall be responsible for coordinating and monitoring the overall implementation of the Project in accordance with the objectives of the Enterprise Restructuring Program.

2. The Borrower shall establish an interagency Evaluation Committee to advise and assist on various matters related to the Sub-projects under Part A of the Project. The Evaluation Committee shall have a composition and terms of reference acceptable to the Bank.

3. The MOF, in agreement with the MOE, shall, not later than November 30 of each year during the implementation of the Project, approve the annual operational budget for Project implementation prepared by the Privatization Center.

4. The Borrower shall:

(a) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordance with indicators acceptable to the Bank, the carrying out of the Project and the achievement of the objectives thereof;

(b) prepare, under terms of reference satisfactory to the Bank, and furnish to the Bank, on or about February 28, 1999, a report integrating the results of the monitoring and evaluation activities performed pursuant to subparagraph (a) of this paragraph, on the progress achieved in the carrying out of the Project during the period preceding the date of said report and setting out the measures recommended to ensure the efficient carrying out of the Project and the achievement of the objectives thereof during the period following such date; and

(c) review with the Bank, by April 30, 1999, or such later date as the Bank shall request, the report referred to in subparagraph (b) of this paragraph, and, thereafter, take all measures required to ensure the efficient completion of the Project and the achievement of the objectives thereof, based on the conclusions and recommendations of the said report and the Bank's views on the matter.

В. Implementation of Enterprise Restructuring Services Credit Facility

1. Responsibility for overall management of Part A of the Project, shall be vested with the MOE and MOF.

2. The eligibility of Beneficiary Enterprises shall be determined in accordance with guidelines promulgated by MOE and MOF, acceptable to the Bank.

3. The MOF shall be the lender of record in respect of Sub-loans made to Beneficiary Enterprises, acting through the Privatization Center, pursuant to the provisions of the Implementation Agreement.

4. Responsibility for specific administrative and supervision functions relating to the Enterprise Restructuring Services Credit Facility, including specific matters relating to the coordination and support of Sub-project preparation, the administration of Sub-loans, procurement, disbursements, financial and other reporting and auditing, shall be delegated to the Privatization Center pursuant to the provisions of an agreement (the Implementation Agreement) to be entered into between the MOF and MOE on the one hand, and the Privatization Center on the other, satisfactory to the Bank.

5. The Borrower, through the Privatization Center, shall select the commercial bank in which the Special Account is to be opened and shall require it to perform such other specific operational responsibilities under the Project as it deems fit.

6. Except as may be otherwise agreed between the Borrower and the Bank, applications by Beneficiary Enterprises for Sub-loans under Part A of the Project shall be subject to approval by the Evaluation Committee, in accordance with financial guidelines and criteria specified for such purpose and acceptable to the Bank.

7. Procedures for the accounting of obligations under Sub-loans, and for the transfers to, and receipt of payment from, the respective Beneficiary' Enterprises, as well as for the remittance of amounts due on such Sub-loans to the MOF, shall be established by MOF using practices and arrangements satisfactory to the Bank, including, inter alia, arrangements whereby such payments may be carried out under the administration of the respective Bank-Guarantors under terms and conditions acceptable to the Bank.

8. Evaluation of the outcomes and impact of the enterprise restructuring Sub-projects shall be provided by LERC or other entity selected or designated by the Borrower and acceptable to the Bank.

C. Implementation of Parts B and C of the Project

Specific programs and activities shall be carried out in accordance with a budget, schedule and work plan satisfactory to the Bank.

ENTERPRISE RESTRUCTURING SERVICES CREDIT FACILITY: ELIGIBILITY, APPROVAL PROCEDURES AND TERMS AND CONDITIONS OF SUB-LOANS

and Approval Procedures

1. No expenditures for enterprise restructuring services under any Sub-Project shall be eligible for financing out of the proceeds of the Loan unless the Sub-loan for such Sub-project:

(a) shall have been approved by the Bank and such expenditures shall have been made not earlier than ninety (90) days prior to the date on which the Bank shall have received the application and information required under this Annex to Schedule 5 in respect of such Sub-loan; or

(b) shall be a free-limit Sub-loan (as hereinafter defined) for which the Bank has authorized withdrawals from the Loan Account and such expenditures shall have been made not earlier than ninety (90) days prior to the date on which the Bank shall have received the request and information required under sub-paragraph 3 (a) of this Section in respect of such free-limit Sub-loan. For the purposes of this Agreement, a «free-limit Sub-loan» shall be any Sub-loan, other than the first five such Sub-loans, and other than any Sub-loan to a Beneficiary Enterprise in an amount exceeding the sum of $600,000 USD equivalent (when added to all other free-limit Sub-loans financed or proposed to be financed out of the proceeds of the Loan to the same Beneficiary Enterprise), the foregoing amount being subject to change from time to time as determined by the Bank.

2. Any Sub-loan proposed to be made for the financing of a Sub-project shall be eligible for financing out of the Enterprise Restructuring Services Credit Facility described under Part A of the Project only upon selection, appraisal, and credit application processing of the Beneficiary Enterprise and the proposed Sub-project in accordance with such specific criteria and procedures applicable to such credit facility, as shall have been established by the Borrower for such purpose, satisfactory to the Bank, which shall include without limitation, the selection and appraisal criteria and procedures set forth or referred to in paragraph 4 of this Part A of this Schedule.

3. (a) When presenting a Sub-loan (other than a free-limit Sub-loan) to the Bank for approval, the Privatization Center shall furnish to the Bank the application of the Beneficiary Enterprises concerned, in form satisfactory to the Bank, together with:

(i) a description of the Beneficiary Enterprise and the proposed Sub-project, including a description of the enterprise restructuring services proposed to be financed out of the proceeds of the Sub-loan and the specific terms by which the costs of such services are to be determined;

(ii) the draft Sub-loan Agreement containing the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan,;

(iii) the appraisal report and recommendation of the Privatization Center concerning the Sub-project; and

(iv) the decision of the Evaluation Committee concerning the Sub-loan; and (v) such other information as the Bank shall reasonably request.

(b) For authorization to make withdrawals from the Loan Account in respect of a free-limit Sub-loan, the Privatization Center shall furnish to the Bank:

(i) the appraisal report and its recommendation concerning the Sub-project; and

(ii) the decision of the Evaluation Committee concerning the Sub-loan.

(c) Applications and requests made pursuant to the provisions of subparagraphs (a) and (b) of this paragraph shall be presented to the Bank on or before June 30, 2002.

4. In addition to the procedures set forth in paragraphs 1 through 3 of Part A of this Annex to Schedule 5, the following procedures shall be followed in connection with the selection and appraisal of Beneficiary Enterprises:

(a) The prospective Beneficiary Enterprise shall first prepare an application in form satisfactory to the Privatization Center, together with a description of the proposed enterprise restructuring plan, in accordance with guidelines satisfactory to the Borrower and the Bank.

(b) The Privatization Center shall appraise the proposed Sub-project, and the Evaluation Committee shall review each such Sub-loan, on the basis of the evaluation criteria developed for such purposes by the Privatization Center and approved by the Borrower, satisfactory to the Bank.

(c) Until at least five Sub-loans shall have been made to Beneficiary Enterprises, and thereafter, in the case of Sub-loans proposed to be made in an amount greater than 600,000 USD, the Privatization Center shall ensure that each qualifying Sub-Project for which a Sub-loan is proposed to be made is submitted in advance to the Bank for approval, such approval to be based on a review and appraisal of the proposed Sub-project in such manner and of such scope as the Bank shall determine to be reasonably necessary. The Privatization Center may enter into the Sub-loan Agreement with the Beneficiary Enterprise after the Bank has expressed its concurrence with respect to the financing of the Sub-project.

(d) Once the first five Sub-loans shall have been made to Beneficiary Enterprises, and unless otherwise specified by the Bank, the Privatization Center shall, in the case of a free-limit Sub-loan, enter into the respective Sub-loan Agreement with the Beneficiary Enterprise within a reasonable period following the decision of the Evaluation Committee to approve the Sub-loan therefor. Authorization to withdraw from the Loan Account shall be deemed to have been given once the Evaluation Committee decision is made, and the Privatization Center shall be required to submit for the Bank's authorization, on an ex-post basis, only the information referred to in sub-paragraph 3 (b) of this Part A of this Annex.

(e) The Sub-loan Agreement with the Beneficiary Enterprise shall give the MOF legal rights adequate to protect the interests of the Bank and the Borrower, and shall contain, inter alia, the terms and conditions enumerated in Part B of this Annex to Schedule 5.

1. The principal amount of each Sub-loan made out of the proceeds of the Loan allocated from time to time to Category (1) of the table set forth in paragraph 1 of Schedule 1 to this Agreement shall:

(a) be denominated in Dollars; and

(b) be equivalent, in Dollars as of the date or respective dates of withdrawal from the Loan Account or payment out of the respective Special Account, of the value of the currency or currencies so withdrawn or paid out on account of the Qualifying Expenditures made or incurred by the Beneficiary Enterprise for the enterprise restructuring services rendered under the Sub-project, to the extent that such amounts are eligible for financing out of the proceeds of the Sub-loan in accordance with the provisions of paragraph 2 of this Part B of this Annex to Schedule 5.

2. The maximum amount of any Sub-loan shall be determined by the Evaluation Committee in accordance with the particular enterprise financing plan submitted as part of each Beneficiary Enterprise's Sub-loan application. Such amount many not exceed the equivalent of the contract amount payable in respect of expenditures made or incurred for consultants' services under the Restructuring Services Contract for the Sub-project concerned, less any amount payable by the Beneficiary Enterprise on account of taxes for such services; provided, however, that the amount of expenditures to be financed under a Sub-loan shall not in any event exceed eighty-five percent (85%) of the total costs of such Sub-project.

3. Each Sub-loan shall be charged interest, on the principal amount thereof withdrawn and outstanding from time to time, at the rate determined as the sum of an index rate (representing the rate determined pursuant to Section 2.05 of the Loan Agreement), plus a margin of two percent (2%).

4. Sub-loans shall be repayable over a term of up to four years, including one year of grace, in Dollars or ruble equivalent valued at the applicable market rate of exchange, established by the Central Bank of the Borrower for interbank transactions at the time of the respective due date of each such repayment.

5. Sub-loans shall be made on terms whereby the Borrower shall obtain, by written contract with the Beneficiary Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank and the Borrower, including, the right to:

(a) require the Beneficiary Enterprise to carry out the Sub-Project with due diligence and efficiency and in accordance with sound technical, financial, managerial and environmental standards and practices, and to maintain adequate records;

(b) require that:

(i) the consultants' services to be financed out of the proceeds of the Sub-loan shall be procured at a reasonable price and, in the case of contracts exceeding the amount of 300,000 USD, on the basis of comparison of at least two proposals from consultants pre-qualified in accordance with the provisions of Part C of Schedule 6 to this Agreement; and

(ii) such services shall be used exclusively in the carrying out of the Sub-Project;

(c) require the Beneficiary Enterprise candidate to provide, at the time of submitting its Sub-project proposal, confirmation of a bank guarantee, from a commercial bank acceptable to the MOF, in an amount adequate to cover the obligations of the Beneficiary Enterprise to the MOF, for at least fifty percent (50%) of the risk of loss at maturity of the Sub-loan amount and interest payments thereon, or other similar securing instrument acceptable to the MOF as the lender;

(d) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, the sites included in the Sub-Project, the operation thereof, and any relevant records and documents;

(e) obtain all such information as the Bank or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Beneficiary Enterprise and to the benefits to be derived from the Sub-Project; and

(f) suspend or terminate the right of the Beneficiary Enterprise to the use of the proceeds of the Loan upon failure by such Beneficiary Enterprise to perform its obligations under the Sub-loan Agreement.

SCHEDULE 6

General

Consultants' services shall be procured in accordance with the provisions of the Introduction and Section IV of the «Guidelines: Selection and Employment of Consultants by World Bank Borrower» published by the Bank in January 1997 (the Consultant Guidelines) and the following provisions of this Schedule.

Quality- and Cost-based Selection

Except as otherwise provided in Part C of this Schedule, consultants' services shall be procured under contracts awarded in accordance with the provisions of Section II of the Consultant Guidelines, paragraph 3 of Appendix 1 thereto, Appendix 2 thereto, and the provisions of paragraphs 3.13 through 3.18 thereof applicable to quality- and cost-based selection of consultants.

Other Procedures for the Selection of Consultants

1. Selection of Consultants to Provide Enterprise Restructuring Services under Part A of the Project

With respect to the provision of consulting services to Beneficiary Enterprises under Part A of the Project, a two-stage selection process shall be followed:

(a) first, a roster of eligible consultants, proposing to offer services in connection with the enterprise restructuring Sub-projects, shall be pre-qualified by the Borrower through the Privatization Center according to criteria and procedures developed by the Privatization Center for such purpose, acceptable to the Bank; and

(b) consultants for individual enterprise restructuring Sub-projects may be selected either:

(i) by the Beneficiary Enterprise from the roster of pre-qualified consultants developed by the Privatization Center, in accordance with commercial practices acceptable to the Bank; or

(ii) by the Privatization Center in accordance with procedures acceptable to the Bank.

2. Individual Consultants

Services for project management functions of the Privatization Center under Parts В and D of the Project shall be procured under contracts awarded to individual consultants in accordance with the provisions of paragraphs 5.1 through 5.3 of the Consultant Guidelines.

3. Single Source Selection

Services for the evaluation of the outcomes and impact of the enterprise restructuring Sub-projects under Part A.2 of the Project, up to an aggregate amount not to exceed 770,000 USD equivalent, may, with the Bank's prior agreement, be procured in accordance with the provisions of paragraphs 3.8 and 3.11 of the Consultant Guidelines.

1. Prior Review of Contracts for Enterprise Restructuring Services under Part A of the Project

With respect to the first five contracts for enterprise restructuring services under Part A of the Project and, thereafter, each such contract estimated to cost the equivalent of 600,000 USD or more, the procedures set forth in paragraphs 1, 2 (other than the third subparagraph of paragraph 2 (a)) and 5 of Appendix 1 to the Consultant Guidelines shall apply.

2. Prior Review in Other Cases

Prior review shall also apply to:

(a) the evaluation reports for pre-qualification of consulting firms to enter the roster referred to in sub-paragraph (1)(a) of Part C of this Schedule;

(b) the terms of reference, the budget, the short lists, the evaluation reports and the contracts for consultants proposed to be selected for Parts B and C of the Project;

(c) the terms of reference, the budget and the contract with LERC for Part A.2 of the Project; and

(d) the terms of reference, the budget, the evaluation reports and the contracts with the two long-term consultants for project management functions of the Privatization Center to be selected pursuant to the provisions of paragraph C.2 of this Schedule.

3. Post Review

With respect to each contract not governed by paragraph 1 of this Part D, the procedures set forth in paragraph 4 of Appendix 1 to the Guidelines shall apply.

SCHEDULE 7

SPECIAL ACCOUNT

For the purposes of this Schedule:

(a) the term «eligible Categories» means Categories (1) through (4) set forth in the table in paragraph 1 of Schedule 1 to this Agreement;

(b) the term «eligible expenditures» means expenditures incurred in respect of enterprise restructuring services under Sub-Projects; and expenditures in respect of the reasonable costs incurred for Incremental Operating Expenses and consultants' services under Parts B, C and D of the Project and to be financed out of the proceeds of the Loan allocated from time to time to the eligible Categories in accordance with the provisions of Schedule 1 to this Agreement, provided, however, that notwithstanding the provisions of paragraph 1 (b) of Part A of the Annex to Schedule 5 to this Agreement, payments for expenditures to be financed out of the proceeds of free-limit Sub-loans may be made out of the Special Account before the Bank shall have authorized withdrawals from the Loan Account in respect thereof. Such expenditures, however, shall qualify as eligible expenditures only if the Bank shall subsequently authorize such withdrawals; and

(c) the term «Authorized Allocation» means an amount equivalent to 3,000,000 USD to be withdrawn from the Loan Account and deposited into the Special Account pursuant to paragraph 3 (a) of this Schedule, provided, however, that unless the Bank shall otherwise agree, the Authorized Allocation shall be limited to an amount equivalent to 1,500,000 USD until the aggregate amount of withdrawals from the Loan Account plus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions shall be equal to or exceed the equivalent of 10,000,000 USD.

2. Payments out of the Special Account shall be made exclusively for eligible expenditures in accordance with the provisions of this Schedule.

3. After the Bank has received evidence satisfactory to it that the Special Account has been duly opened, withdrawals of the Authorized Allocation and subsequent withdrawals to replenish the Special Account shall be made as follows:

(a) For withdrawals of the Authorized Allocation, the Borrower shall furnish to the Bank a request or requests for deposit into the Special Account of an amount or amounts which do not exceed the aggregate amount of the Authorized Allocation. On the basis of such request or requests, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount or amounts as the Borrower shall have requested.

b) (i) For replenishment of the Special Account, the Borrower shall furnish to the Bank requests for deposits into the Special Account at such intervals as the Bank shall specify.

(ii) Prior to or at the time of each such request, the Borrower shall furnish to the Bank the documents and other evidence required pursuant to paragraph 4 of this Schedule for the payment or payments in respect of which replenishment is requested. On the basis of each such request, the Bank shall, on behalf of the Borrower, withdraw from the Loan Account and deposit into the Special Account such amount as the Borrower shall have requested and as shall have been shown by said documents and other evidence to have been paid out of the Special Account for eligible expenditures. All such deposits shall be withdrawn by the Bank from the Loan Account under the respective eligible Categories, and in the respective equivalent amounts, as shall have been justified by said documents and other evidence.

4. For each payment made by the Borrower out of the Special Account, the Borrower shall, at such time as the Bank shall reasonably request, furnish to the Bank such documents and other evidence showing that such payment was made exclusively for eligible expenditures.

5. Notwithstanding the provisions of paragraph 3 of this Schedule, the Bank shall not be required to make further deposits into the Special Account:

(a) if, at any time, the Bank shall have determined that all further withdrawals should be made by the Borrower directly from the Loan Account in accordance with the provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of this Agreement;

(b) if the Borrower shall have failed to furnish to the Bank, within the period of time specified in Section 4.01 (b)(ii) of this Agreement, any of the audit reports required to be furnished to the Bank pursuant to said Section in respect of the audit of the records and accounts for the Special Account;

(c) if, at any time, the Bank shall have notified the Borrower of its intention to suspend in whole or in part the right of the Borrower to make withdrawals from the Loan Account pursuant to the provisions of Section 6.02 of the General Conditions; or

(d) once the total unwithdrawn amount of the Loan allocated to the eligible Categories, minus the total amount of all outstanding special commitments entered into by the Bank pursuant to Section 5.02 of the General Conditions with respect to the Project, shall equal the equivalent of twice the amount of the Authorized Allocation.

Thereafter, withdrawal from the Loan Account of the remaining unwithdrawn amount of the Loan allocated to the eligible Categories shall follow such procedures as the Bank shall specify by notice to the Borrower. Such further withdrawals shall be made only after and to the extent that the Bank shall have been satisfied that all such amounts remaining on deposit in the Special Account as of the date of such notice will be utilized in making payments for eligible expenditures.

6. (a) If the Bank shall have determined at any time that any payment out of the Special Account:

(i) was made for an expenditure or in an amount not eligible pursuant to paragraph 2 of this Schedule; or

(ii) was not justified by the evidence furnished to the Bank, the Borrower shall, promptly upon notice from the Bank:

(A) provide such additional evidence as the Bank may request; or

(B) deposit into the Special Account (or, if the Bank shall so request, refund to the Bank) an amount equal to the amount of such payment or the portion thereof not so eligible or justified. Unless the Bank shall otherwise agree, no further deposit by the Bank into the Special Account shall be made until the Borrower has provided such evidence or made such deposit or refund, as the case may be.

(b) If the Bank shall have determined at any time that any amount outstanding in the Special Account will not be required to cover further payments for eligible expenditures, the Borrower shall, promptly upon notice from the Bank, refund to the Bank such outstanding amount.

(c) The Borrower may, upon notice to the Bank, refund to the Bank all or any portion of the funds on deposit in the Special Account.

(d) Refunds to the Bank made pursuant to paragraphs 6 (a), (b) and (c) of this Schedule shall be credited to the Loan Account for subsequent withdrawal or for cancellation in accordance with the relevant provisions of this Agreement, including the General Conditions.