Page  1
CONFORMED COPY
TF024100
CBP Project Agreement
(Microenterprise Project)
between
INTERNATIONAL DEVELOPMENT ASSOCIATION
and
COMMERCIAL BANK OF PALESTINE
Dated April 14, 1997
TF024100
CBP PROJECT AGREEMENT
AGREEMENT, dated April 14, 1997 between the INTERNATIONAL DEVELOPMENT 
ASSOCIATION, acting as administrator of the Trust Fund for Gaza and West Bank 
established on October 19, 1993 by Resolution No. 93-11 and IDA 93-7, as amended by 
Resolution No. 95-6 and IDA 95-3, of the Executive Directors of the International Bank 
for Reconstruction and Development and the International Development Association (the 
Administrator) and COMMERCIAL BANK OF PALESTINE (CBP).
WHEREAS (A) by the Trust Fund Credit Agreement of even date herewith between the 
Palestine Liberation Organization (the Borrower) and the Administrator, the 
Administrator has agreed to lend to the Borrower an amount in various currencies 
equivalent to five million dollars ($5,000,000) on the terms and conditions set forth 
in the Trust Fund Credit Agreement, but only on condition that CBP agree to undertake 
such obligations toward the Administrator as are set forth in this Agreement; and
(B)
by a subsidiary loan agreement to be entered into between the Palestinian 
Authority (on behalf of the Borrower) and CBP, a portion of the proceeds of the credit 
provided for under the Trust Fund Credit Agreement will be made available to CBP on 
terms and conditions set forth in said Subsidiary Loan Agreement; and
WHEREAS CBP, in consideration of the Administrator's entering into the Trust 
Fund Credit Agreement with the Borrower, has agreed to undertake the obligations set 
Page  2
forth in this Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
ARTICLE I
Definitions
Section 1.01. Unless the context otherwise requires, the several terms defined 
in the Trust Fund Credit Agreement and in the General Conditions (as this term is 
defined in Section 1.01 of the Trust Fund Credit Agreement) have the respective 
meanings therein set forth.
ARTICLE II
Execution of the Project;
Management and Operations of CBP
Section 2.01. CBP declares its commitment to the objectives of the Project as 
set forth in Schedule 2 to the Trust Fund Credit Agreement, and, to this end, shall 
carry out Parts A (ii) and B (ii) of the Project and conduct its operations and 
affairs in accordance with sound financial standards and practices, with qualified and 
experienced management and in accordance with its Respective Charter and Respective 
Statement of Policy.
Section 2.02. (a) CBP undertakes that, unless the Administrator shall otherwise 
agree Sub-loans will be made in accordance with the procedures and on the terms and 
conditions set forth or referred to in Schedule 1 to this Agreement.
(b)
CBP shall exercise its rights in relation to each Investment Project in 
such manner as to: (i) protect the interests of the Administrator and of CBP; (ii) 
comply with its obligations under this Agreement and the Subsidiary Loan Agreement; 
and (iii) achieve the purposes of Parts A (ii) and B (ii) of the Project.
Section 2.03. (a) CBP shall carry out the obligations set forth in Sections 
9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to 
insurance, use of goods and services, plans and schedules, records and reports and 
maintenance) in respect of the Project Agreement and Parts A (ii) and B (ii) of the 
Project.
(b)
Without limitation upon the provisions of paragraph (a) of this Section, 
CBP shall: (i) prepare, on the basis of guidelines acceptable to the Administrator, 
and furnish to the Administrator not later than six (6) months after the Closing Date 
or such later date as may be agreed for this purpose between the Administrator and 
CBP, a plan for the achievement of the objectives of Parts A (ii) and B (ii) of the 
Project; and (ii) afford the Administrator a reasonable opportunity to exchange views 
with CBP on said plan.
Section 2.04. CBP shall duly perform all its obligations under the Subsidiary 
Loan Agreement. Except as the Administrator shall otherwise agree, CBP shall not take 
or concur in any action which would have the effect of assigning, amending, abrogating 
or waiving the Subsidiary Loan Agreement or any provision thereof.
Section 2.05. (a) CBP shall, at the request of the Administrator, exchange views 
with the Administrator with regard to the progress of the Parts A (ii) and B (ii) of 
the Project, the performance of its obligations under this Agreement and under the 
Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit.
(b)
CBP shall promptly inform the Administrator of any condition which 
interferes or threatens to interfere with the progress of Parts A (ii) and B (ii) of 
the Project, the accomplishment of the purposes of the Credit, or the performance by 
CBP of its obligations under this Agreement and under the Subsidiary Loan Agreement.
ARTICLE III
Financial Covenants
Page  3
Section 3.01. (a) CBP shall maintain procedures and records adequate to monitor 
and record the progress of Parts A (ii) and B (ii) of the Project and of each 
Investment 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 and financial condition of CBP.
(b)
CBP shall, in respect of Parts A (ii) and B (ii) of the Project: (i) have 
its records, accounts and financial statements (balance sheets, statements of income 
and expenses and related statements), including those for its respective Special 
Account, for each fiscal year audited, in accordance with appropriate auditing 
principles consistently applied, by independent auditors acceptable to the 
Administrator; (ii) furnish to the Administrator, as soon as available but in any case 
not later than six (6) months after the end of each such year: (A) certified copies of 
its financial statements for such year as so audited; and (B) the report of such audit 
by said auditors, of such scope and in such detail as the Administrator shall have 
reasonably requested; and (iii) furnish to the Administrator such other information 
concerning said records, accounts and financial statements as well as the audit 
thereof as the Administrator shall from time to time reasonably request.
(c)
For all expenditures with respect to which withdrawals of the proceeds of 
the Credit allocated from time to time to Category (2), set forth in the table in 
paragraph 1 of Schedule 1 to the Trust Fund Credit Agreement, were made on the basis 
of statements of expenditure, CBP shall: (i) maintain, or cause to be maintained, in 
accordance with paragraph (a) of this Section, records and accounts reflecting such 
expenditures; (ii) retain, until at least one (1) year after the Administrator has 
received the audit report for the fiscal year in which the last withdrawal from the 
Credit Account was made, all records (contracts, orders, invoices, bills, receipts and 
other documents) evidencing such expenditures; (iii) enable the Administrator’s 
representatives to examine such records; and (iv) ensure that such records and 
accounts are dealt with in the annual audit referred to in paragraph (b) of this 
Section and that the report of such audit contains a separate opinion by said auditors 
as to whether the statements of expenditures 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.
ARTICLE IV
Effective Date; Termination
Cancellation and Suspension
Section 4.01. This Agreement shall come into force and effect on the date upon 
which the Trust Fund Credit Agreement becomes effective.
Section 4.02. (a) This Agreement and all obligations of the Administrator and of 
CBP thereunder shall terminate on the earlier of the following two dates:
(i)
the date on which the Trust Fund Credit Agreement shall terminate; 
or
(ii)
a date twenty (20) years after the date of this Agreement.
(b)
If the Trust Fund Credit Agreement terminates before the date specified 
in paragraph (a) (ii) of this Section, the Administrator shall promptly notify CBP of 
this event.
Section 4.03. All the provisions of this Agreement shall continue in full force 
and effect notwithstanding any cancellation or suspension under the General 
Conditions.
ARTICLE V
Miscellaneous Provisions
Section 5.01. Any notice or request required or permitted to be given or made 
under this Agreement and any agreement between the parties contemplated by this 
Agreement shall be in writing. Such notice or request shall be deemed to have been 
duly given or made when it shall be delivered by hand or by mail, telegram, cable, 
Page  4
telex or radiogram to the party to which it is required or permitted to be given or 
made at such party's address hereinafter specified or at such other addresses as such 
party shall have designated by notice to the party giving such notice or making such 
request.  The addresses so specified are:
For the Administrator:
International Development Association
1818 H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
INDEVAS
248423 (MCI) or
Washington, D.C.
 64145 (MCI)
For CBP:
The Commercial Bank of Palestine P.L.C.
P.O. Box 1799
Ramallah, West Bank
Section 5.02. Any action required or permitted to be taken, and any documents 
required or permitted to be executed, under this Agreement on behalf of CBP may be 
taken or executed by its General Manager, or by such other person or persons as the 
General Manager shall designate in writing, and the General Manager shall furnish to 
the Administrator sufficient evidence of the authority and the authenticated specimen 
signature of each such person.
Section 5.03. This Agreement may be executed in several counterparts, each of 
which shall be an original, and all collectively but one instrument. \0c
IN WITNESS 
WHEREOF, the parties hereto, acting through their duly authorized representatives, 
have caused this Agreement to be signed in their respective names in Al Ram, West Bank 
and Gaza, as of the day and year first above written.
INTERNATIONAL DEVELOPMENT ASSOCIATION
By /s/ Odin K. Knudsen
Vice President 
Middle East and North Africa Region
COMMERCIAL BANK OF PALESTINE
By /s/ Halid Ghabeish 
Authorized Representative 
SCHEDULE 1
Implementation Program
1.
CBP shall make Sub-loans to Microenterprises for Investment Projects pursuant to 
its Respective Statement of Policy on the basis of criteria and in accordance with 
procedures acceptable to the Administrator, including that:
(a)
each Sub-loan shall be made only to a Microenterprise which shall have 
established to the satisfaction of CBP that: (i) it is creditworthy; and (ii) it has 
Page  5
the ability to carry out the Investment Project in an efficient manner; and
(b)
 each Sub-loan shall be made only for an Investment Project which CBP has 
determined to be feasible and in accordance with the relevant safety, health and 
environment rules and regulations applicable in the West Bank and Gaza. 
2.
Any Sub-loan shall have a maturity of more than one (1) month, but less than 
five (5) years, and shall be made on such other terms and conditions, including those 
relating to interest rates and other charges determined in accordance with CBP’s 
lending policies and practices.
3.
CBP shall ensure that:
(a)
individual Sub-loans shall not exceed the equivalent of $30,000 each; and
(b)
at least 20% of the proceeds of  the Credit allocated from time to time 
to Category (2), set forth in the table in paragraph 1 of Schedule 1 to the Trust Fund 
Credit Agreement, shall be used for extending Sub-loans in an amount of $10,000 
equivalent or less.
4.
Sub-Loans shall be made on terms whereby CBP shall obtain, by written contract 
with the Microenterprise or by other appropriate legal means, rights adequate to 
protect its interests and those of the Administrator, including, the right to:
(a)
require the Microenterprise to carry out and operate the Investment 
Project with due diligence and efficiency and in accordance with sound technical, 
financial and managerial standards and to maintain adequate records;
(b)
require that: (i) the goods and services to be financed out of the 
proceeds of the Credit shall be purchased at a reasonable price, account being taken 
also of other relevant factors such as time of delivery and efficiency and reliability 
of the goods and availability of maintenance facilities and spare parts therefor, and, 
in the case of services, of their quality and the competence of the parties rendering 
them; and (ii) such goods and services shall be used exclusively in the carrying out 
of the Investment Project;
(c)
inspect, by itself or jointly with representatives of the Administrator 
if the Administrator shall so request, such goods, plants and construction included in 
the Investment Project, the operation thereof, and any relevant records and documents;
(d)
obtain all such information as the Administrator shall reasonably request 
relating to the foregoing and to the administration, operations and financial 
condition of the Microenterprise and to the benefits to be derived from the Investment 
Project; and 
(e)
suspend or terminate the right of the Microenterprise to the use of the 
proceeds of the Credit upon failure by such Microenterprise to perform its obligations 
under its contract with CBP.
SCHEDULE 2 
Special Account
1.
For the purposes of this Schedule:
(a)
the term “eligible Category” means Category (2) set forth in the table in 
paragraph 1 of Schedule 1 to the Trust Fund Credit Agreement;
(b)
the term “eligible expenditures” means payments made by CBP on account of 
payments made by a Microenterprise under a Sub-loan to meet the reasonable cost of 
goods and services required for Investment Projects and to be financed out of the 
proceeds of the Credit allocated from time to time to the eligible Category in 
accordance with the provisions of Schedule 1 to the Trust Fund Credit Agreement; and
(c)
the term “Authorized Allocation” means an amount equivalent to $100,000 
to be withdrawn from the Credit Account and deposited into the Special Account 
pursuant to paragraph 3 (a) of this Schedule. 
Page  6
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 Administrator 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, CBP shall, on behalf of the 
Borrower, furnish to the Administrator 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 Administrator 
shall, on behalf of the Borrower, withdraw from the Credit Account and deposit into 
the Special Account such amount or amounts as CBP shall have requested.
(b)
(i)
For replenishment of the Special Account, CBP shall furnish to the 
Administrator requests for deposits into the Special 
Account at such intervals 
as the Administrator shall specify.
(ii)
Prior to or at the time of each such request, CBP shall furnish to 
the 
Administrator 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 
Administrator shall, 
on behalf of the Borrower, withdraw from the Credit 
Account and 
deposit into the Special Account such amount as CBP 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 Administrator from the Credit Account 
under 
the eligible Category, and in the equivalent amounts, as shall 
have been 
justified by said documents and other evidence. 
4.
For each payment made by CBP out of the Special Account, CBP shall, at such time 
as the Administrator shall reasonably request, furnish to the Administrator 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 
Administrator shall not be required to make further deposits into the Special Account:
(a)
if, at any time, the Administrator shall have determined that all further 
withdrawals should be made directly from the Credit Account in accordance with the 
provisions of Article V of the General Conditions and paragraph (a) of Section 2.02 of 
the Trust Fund Credit Agreement;
(b)
if CBP shall have failed to furnish to the Administrator, within the 
period of time specified in Section 3.01 (b) (ii) of this Agreement, any of the audit 
reports required to be furnished to the Administrator pursuant to said Section in 
respect of the audit of the records and accounts for the Special Account;
(c)
if, at any time, the Administrator 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 Credit Account pursuant to the provisions of Section 6.02 of the 
General Conditions; or
(d)
once the total unwithdrawn amount of the Credit allocated to the eligible 
Category, minus the total amount of all outstanding special commitments entered into 
by the Administrator pursuant to Section 5.02 of the General Conditions with respect 
to Investment Projects financed through Sub-loans made by CBP, shall equal the 
equivalent of twice the amount of the Authorized Allocation. Thereafter, withdrawal 
from the Credit Account of the remaining unwithdrawn amount of the Credit allocated to 
the eligible Category shall follow such procedures as the Administrator shall specify 
by notice to CBP. Such further withdrawals shall be made only after and to the extent 
that the Administrator 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.
Page  7
6.
(a)
If the Administrator 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 Administrator, CBP shall, promptly upon notice from the 
Administrator: (A) provide such additional evidence as the Administrator may request; 
or (B) deposit into the Special Account (or, if the Administrator shall so request, 
refund to the Administrator) an amount equal to the amount of such payment or the 
portion thereof not so eligible or justified. Unless the Administrator shall otherwise 
agree, no further deposit by the Administrator into the Special Account shall be made 
until  CBP  has provided such evidence or made such deposit or refund, as the case may 
be.
(b)
If the Administrator 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, CBP shall, promptly upon notice from the Administrator, refund 
to the Administrator such outstanding amount.
(c)
CBP may, upon notice to the Administrator, refund to the Administrator 
all or any portion of the funds on deposit in the Special Account.
(d)
Refunds to the Administrator made pursuant to paragraphs 6 (a), (b) and 
(c) of this Schedule shall be credited to the Credit Account for subsequent withdrawal 
or for cancellation in accordance with the relevant provisions of this Agreement, 
including the General Conditions.