OFFICIAL DOCUMENTS CREDIT NUMBER 4965-MG Agreement providing for the Amendment and Restatement of the Financing Agreement (Additional Financing for Third Environmental Program Support Project) between REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated 26 FEV 2014 ,2014 CREDIT NUMBER 4965-MG AGREEMENT PROVIDING FOR THE AMENDMENT AND RESTATEMENT OF THE FINANCING AGREEMENT AGREEMENT, dated 2 - R L uQ-mr2014, entered into between REPUBLIC OF MADAGASCAR ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association"). The Recipient and the Association hereby agree as follows: ARTICLE I - AMENDMENT AND RESTATEMENT 1.01. The Financing Agreement is hereby amended and restated so as to read as set forth in the Annex hereto. ARTICLE II - ENTRY INTO FORCE 2.01. This Agreement shall come into force as of February 4, 2014, on the date of its signature by the authorized representatives of both parties. 2.02 This Agreement and all obligations of the parties under it shall terminate if it has not entered into effect by the date ninety (90) days after the date of this Agreement, unless the Association, after consideration of the reasons for the delay, establishes a later date for the purpose of this Section. The Association shall promptly notify the Recipient of such later date. -2- AGREED at F A c ,' - . cjx u ,as of the day and year first above written. REPUBLIC OF MADAGASCAR L stre p NA C, dri Budget Authorized Representative Q ina RASOLOELISON INTERNATIONAL DEVELOPMENT ASSOCIATION By:AuTthzOe RcAereyes enta Authorized Representative -3- ANNEX CREDIT NUMBER 4965-MG Financing Agreement (RESTATED) (Additional Financing for Third Environmental Program Support Project) between REPUBLIC OF MADAGASCAR and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated October 12, 2011 -4- CREDIT NUMBER 4965-MG FINANCING AGREEMENT AGREEMENT dated October 12, 2011, entered into between REPUBLIC OF MADAGASCAR ("Recipient") and INTERNATIONAL DEVELOPMENT ASSOCIATION ("Association") for the purpose of providing additional financing for activities related to the Original Project (as defined in the Appendix to this Agreement). The Recipient and the Association hereby agree as follows: ARTICLE I - GENERAL CONDITIONS; DEFINITIONS 1.01. The General Conditions (as defined in the Appendix to this Agreement) constitute an integral part of this Agreement. 1.02. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the General Conditions or this Agreement. 1.03. The Original Financing Agreement is amended as set out in Section II of the Appendix to this Agreement. 1.04. Italicized terms used in this Agreement to denote place names and locations shall be deemed to denote place names and locations in the Recipient's territory. ARTICLE II - FINANCING 2.01. The Association agrees to extend to the Recipient, on the terms and conditions set forth or referred to in this Agreement a credit in an amount equivalent to twenty-six million Special Drawing Rights (SDR 26,000,000) (variously, "Credit" and "Financing") to assist in financing the project described in Schedule I to this Agreement ("Project"). 2.02. The Recipient may withdraw the proceeds of the Financing in accordance with Section IV of Schedule 2 to this Agreement. The Recipient's Representative for purposes of taking any action required or permitted to be taken pursuant to this Section is the Secretary-General of the Ministry of Finance and Budget. 2.03. The Maximum Commitment Charge Rate payable by the Recipient on the Unwithdrawn Financing Balance shall be one-half of one percent (1/2 of 1%) per annum. 2.04. The Service Charge payable by the Recipient on the Withdrawn Credit Balance shall be equal to three-fourths of one percent (3/4 of 1%) per annum. -5- 2.05. The Payment Dates are March 15 and September 15 in each year. 2.06. The principal amount of the Credit shall be repaid in accordance with the repayment schedule set forth in Schedule 3 to this Agreement. 2.07. The Payment Currency is USD. ARTICLE III - PROJECT 3.01. The Recipient declares its commitment to the objective of the Project and the Program. To this end, the Recipient shall: (a) carry out Permitted Law Enforcement Activities under Part A. 1 of the Project, as well as Parts A.4, C.3 and D of the Project, through PCU; (b) cause MNP and the Foundation to carry out Parts A.3, A.5 and C.2, and Part C.1, of the Project, respectively; and (c) cause Parts A. I (except Permitted Law Enforcement Activities), A.2 and B of the Project to be carried out jointly by MNP and PCU, in accordance with this Agreement, the provisions of Article IV of the General Conditions, the Project Agreements and the Subsidiary Agreements. 3.02. Without limitation upon the provisions of Section 3.01 of this Agreement, and except as the Recipient and the Association shall otherwise agree, the Recipient shall ensure that the Project is carried out in accordance with the provisions of Schedule 2 to this Agreement. ARTICLE IV - REMEDIES OF THE ASSOCIATION 4.01. The Additional Events of Suspension consist of the following: (a) A Project Implementing Entity's Legislation has been amended, suspended, abrogated, repealed or waived so as to affect materially and adversely the ability of the Project Implementing Entity to perform any of its obligations under the Project Agreement. (b) A situation has arisen which makes it improbable that the Program or a significant part thereof will be carried out. (c) (i) As a result of the Recipient's failure to apply sound social, environmental and ecological standards and practices in relation to any of its Protected Areas, a situation has arisen which interferes with the sustainable management and operation of such Protected Areas, raises major reputational risks or otherwise compromises the likelihood of success in the achievement of the objective of the Project; and (ii) the Recipient has failed, within a 30-day period after notice thereof has been given to it by the Association, to remedy or otherwise account for such failure. -6- (d) The Recipient has repealed, waived, suspended or set aside, or otherwise failed to enforce Decree 2010-141 prohibiting the cutting, extraction or export of rosewood and ebony, or any provisions thereof. (e) The Recipient shall have failed to execute, prior to December 31, 2011, an administrative order or other instrument purporting to delegate authority to NGOs to manage Eligible N-PAs or, having executed such administrative order or other instrument, allowed or permitted it to lapse, terminate or expire, or to cease to have effect, without alternative arrangements, acceptable to the Association, having been made to provide for the delegated management of Eligible N-PAs. (f) The Recipient shall have amended, suspended, abrogated, repealed, supplemented, replaced or waived its legal framework so as to render it in contradiction with the Recipient's international obligations with respect to rosewood and ebony and with respect to the law of the sea. (g) The Recipient shall have amended a Memorandum of Understanding entered in compliance with Section I.G.3(b) of Schedule 2 to this Agreement, in a manner which does not permit the Recipient to comply with its obligations under this Agreement or which is not acceptable to the Association. 4.02. The Co-financing Deadline for the effectiveness of the Co-financing Agreement for the NGO Financing is September 30, 2013. ARTICLE V -EFFECTIVENESS; TERMINATION 5.01. The Additional Conditions of Effectiveness consist of the following: (a) Each of the Subsidiary Agreements has been executed on behalf of the Recipient and the respective Project Implementing Entity. (b) The GEF Grant Agreement has been executed and delivered and all conditions precedent to its effectiveness or to the right of the Recipient to make withdrawals under it (other than the effectiveness of this Agreement) have been fulfilled. (c) The PSC and PCU have been duly established, and the Project Implementation Plan prepared and adopted by the Recipient. 5.02. The Additional Legal Matter consists of the following, namely, that each of the Subsidiary Agreements has been duly authorized or ratified by the Recipient and the respective Project Implementing Entity, and is legally binding upon the Recipient and the Project Implementing Entity in accordance with its terms. -7- 5.03. The Effectiveness Deadline is the date ninety (90) days after the date of this Agreement. ARTICLE VI - REPRESENTATIVE; ADDRESSES 6.01. Except as provided in Section 2.02 of this Agreement, the Recipient's Representative is Recipient's Minister of Finance. 6.02. The Recipient's Address is: Ministry of Finance and Budget B.P. 61 Antananarivo 101 Madagascar Cable address: Facsimile: MFB (261) 20 22 34530 Antananarivo 6.03. The Association's Address is: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable: Telex: Facsimile: INDEVAS 248423 (MCI) 1-202-477-6391 Washington, D.C. AGREED at Antananarivo, Republic of Madagascar, as of the day and year first above written. REPUBLIC OF MADAGASCAR By /s/ Hery Rajaonarimampianina Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Jamal Saghir Authorized Representative -8- SCHEDULE 1 Project Description The objective of the Project is to enhance the protection and sustainable management of selected protected areas ("Selected PAs"). The Project consists of the following parts: Part A: Protected Area and Landscape Management 1. Provision of technical advisory services, goods and equipment, and other forms of material support (including provision of radar satellite information), to strengthen biodiversity conservation, and facilitate park surveillance and management, of Selected PAs, as well as civilian (non-military) coastal surveillance and Permitted Law Enforcement Activities, including patrol of protected areas and coastal areas, monitoring of the state of ecosystem health and priority species, maintenance of conservation and ecotourism infrastructure and equipment, updating and strengthening of surveillance plans, community surveillance activities, annual aerial surveillance, equipment purchase and maintenance, and liaison and awareness raising activities with local communities, as well as assistance to strengthen procedures for dealing with infractions. 2. Implementation of a program of construction and maintenance of infrastructure, including: (a) updating of technical manuals for the construction and maintenance of conservation infrastructure; (b) based on a review of the specific needs of each Protected Area, construction and periodic maintenance of required conservation infrastructure, including guard stations, control barriers, transect creation, boundary markers and firebreaks, and (c) where appropriate, establishment of maintenance contracts with local community surveillance committees. 3. Implementation of a program of renewal of conservation and management equipment of Eligible MNP-PAs. 4. Implementation of strategic landscape management activities, in the MaMaBay pilot landscape, including: (a) creation of a database and mapping of ecosystem and natural resource baselines; -9- (b) consolidation and operationalization of a landscape-wide stakeholder platform to guide strategic activities; (c) creation of civil society natural resource watchdog groups with capacity to undertake ecological monitoring, using a simple monitoring and reporting framework to facilitate transmission and dissemination of monitoring results to a wide audience; and (d) evaluation of the climate change effect on the marine and terrestrial environment of the landscape, with recommendations for Protected Area network and landscape management, and training for national climate scientists and ecologists to enable them to carry out monitoring and updates of such evaluation. 5. Provision of technical advisory services and material assistance as needed to conduct an evaluation of the organization of MNP and propose an action plan for organization reform. Part B: Local Community Support and Development 1 . Provision of technical advisory services, and other forms of material support, to support: (a) monitoring and evaluation of pre-existing Safeguard Instruments developed and adopted under the Original Project; (b) [intentionally omittedj (c) development and implementation of PFAPs for Makira and CAZ, respectively; and (d) development of national standards for social safeguard development and implementation, using a participatory and collaborative process to maximize stakeholder ownership of outcomes. 2. Provision of technical advisory services and training, goods and equipment, and other forms of material support, to support: (a) improvement of local community involvement in Eligible MNP-PA management and associated economic and social development, through development of a site-specific strategy for each Protected Area, taking into account the local characteristics and community/Protected Area relations, and creation or strengthening of CLPs; (b) strengthening of the role and capacities of COSAPs in each Eligible MNP-PA to advise MNP in the field of management decisions and -10- annual work plans, liaise with the administration and the local population, and serve as a federating body of CLPs; (c) development of a management transfer strategy for Eligible N-PAs, and establishment and implementation of management transfer contracts in both Eligible N-PAs and Eligible MNP-PAs, including management evaluation and contract renewal, consolidation of existing transfers, capacity building and strengthening, and financing of income-generating Subprojects; (d) retrospective social evaluations of some 19 mature Protected Areas, whose creation predates the adoption of modem social safeguards requirements, in order to assess what, if any, social mitigation compensation measures were put in place at the time of their creation, and determine whether and, if so, what additional measures are required to support local communities, promote sustainable park management, dispose of pre-existing community complaints and improve relations with local communities; and (e) development of community based tourism activities in the Selected PAs, including establishment and reinforcement of the community-based management organizations, participatory establishment of work plans, training of participants, subsidization of infrastructure construction and equipment, preparation of financial business plans, creation of local ecotourism circuits, and marketing and promotion of the community lodges. Part C: Sustainable Financing Mechanisms for Protected Areas 1 . Implementation of a program of activities to support and strengthen the Foundation, through: (a) a capital contribution to the endowment fund of the Foundation, to be used to generate revenues to contribute to the recurrent costs of Selected PAs; and (b) provision of technical advisory services, and other forms of material assistance, to support: (i) strengthening of the Foundation's capacity for secured capital placement in order to facilitate secured, high performance and transparent capital placement, and ensure that capital value is conserved, and that reasonable revenues are generated for Protected Area management; -11- (ii) development of detailed utilization guidelines and procedures governing the use of revenues generated by contributions to the endowment fund by the Association under the Original Financing and GEF under the GEF Grant Agreement; (iii) strengthening of the management capacities of the Foundation, through implementation of the integrated management system, purchase of office materials and equipment, and extension of the Foundation's office; and (iv) development of options to secure additional capital through a further request for funds for the endowment fund of the Foundation from GEF under the biodiversity focal. area. 2. Provision of technical advisory services, and other forms of material assistance, to support: (a) (i) elaboration of ecotourism development business plans for Selected PAs with high or emerging potential for ecotourism development, giving details of measures to optimize generation and use of ecotourism revenues and create sustainable financing sources, and clarify the improvements needed on the legal framework; (ii) carrying out of upgrading or construction works in relevant sites and areas; (iii) establishment of maintenance contracts with community park committees, where appropriate; (iv) provision of training; and (v) development and distribution of promotional and marketing materials; and (b) design and implementation of pilot PPP approaches, including: (i) development of an appropriate legal, regulatory, contractual and institutional framework for eco-tourism PPPs; (ii) investment facilitation activities in select pilot projects; (iii) resumption of processing of high- end concessions for international investors; and (iv) capacity building and monitoring activities. 3. Provision of technical advisory services, and other forms of material assistance, to support: (a) a program of activities designed to enhance the Recipient's readiness to access the international carbon market, with particular attention to its readiness to benefit from future avoided deforestation performance payment mechanisms, including an external - but inclusive and participatory - evaluation of the existing framework and development of options for future consideration and adoption, technical studies on historic and future causes and trends in deforestation and degradation, -12- carbon governance and sharing of associated revenues, and generation of carbon stock baselines in pilot sites; and (b) implementation of pilot activities under Wealth Accounting and Valuation of Ecosystem Services ("WAVES") global partnership, including collection and evaluation of existing data on ecosystem services provided by Selected PAs, development and application of methodologies to improve valuation of such ecosystem services; evaluation of the capacity of Protected Area ecosystem services to contribute to sustainable financing of the Protected Area network; inclusion of ecosystem service and protected area values into the system of national accounts as part of a process to develop 'green' national accounts; identification of potential policy entry points for improved consideration of Protected Area ecosystem services and values in decision making; and capacity building activities with stakeholders in the environment, statistical and economic sectors. Part D: Project Management, Implementation, Monitoring and Evaluation 1 . Provision of technical advisory services and financing of operating costs to support and strengthen the capacity of the PCU to coordinate the implementation and monitoring and evaluation, of the Project, and ensure compliance with fiduciary and safeguard requirements. 2. Carrying out of studies on the legal status of precious wood stocks, inventory and disposal options; preparation and implementation of an action plan for the securing and disposal of seized stockpiles, including the organization of sales. -13- SCHEDULE 2 Project Execution Section I. Implementation Arrangements A. Subsidiary Agreements and Other Implementation Support Contracts 1. (a) To facilitate the carrying out of MNP's Respective Parts of the Project, the Recipient shall make part of the proceeds of the Financing available to MNP on a non-reimbursable basis under a subsidiary agreement between the Recipient and MNP ("MNP Subsidiary Agreement"), under terms and conditions approved by the Association, which shall include those listed in paragraph 3 of this Section. (b) To facilitate the carrying out of the Foundation's Respective Parts of the Project, the Recipient shall make part of the proceeds of the Financing available to the Foundation on a non-reimbursable basis under a subsidiary agreement between the Recipient and the Foundation ("FPAB Subsidiary Agreement"), under terms and conditions approved by the Association, which shall include those listed in paragraph 3 of this Section. 2. To facilitate the carrying out of the Project in Eligible N-PAs, the Recipient shall make part of the proceeds of the Financing available to each of the NGOs on a non-reimbursable basis under a delegated management contract (Convention de Maitrise d'Ouvrage D Igud) between the Recipient and the NGO ("Delegated Management Contract"), vesting responsibility in the NGO for the management of the corresponding parts of the Project, under terms and conditions approved by the Association, which shall include those listed in paragraph 3 of this Section. 3. Pursuant to each Subsidiary Agreement or Delegated Management Contract, the Recipient shall secure the right to require the Project Implementing Entity or NGO, as the case may be, to: (a) carry out its Respective Parts of the Project with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Association, including in accordance with the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Recipient; (b) provide, promptly as needed, the resources required for the purpose; (c) procure the goods, works and services to be financed out of the Financing in accordance with the provisions of this Agreement; -14- (d) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the Association, the progress of its Respective Parts of the Project and the achievement of the objective of the Project; (e) (i) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Association, both in a manner adequate to reflect the operations, resources and expenditures related to its Respective Parts of the Project; and (ii) at the Association's or the Recipient's request, have such financial statements audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association, and promptly furnish the statements as so audited to the Recipient and the Association; (f) enable the Recipient and the Association to inspect its Respective Parts of the Project, their operation and any relevant records and documents; and (g) prepare and furnish to the Recipient and the Association all such information as the Recipient or the Association shall reasonably request relating to the foregoing. 4. The Recipient shall exercise its rights under each Subsidiary Agreement or Delegated Management Contract in such manner as to protect the interests of the Recipient and the Association and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, the Recipient shall not assign, amend, abrogate or waive any of the Subsidiary Agreements or Delegated Management Contracts, or any of their provisions. 5. Nothwithstanding paragraph 2 above, pending execution of the administrative order or other instrument referred to in Section 4.01(e) of this Agreement, the Recipient may, with the Association's prior agreement, in lieu of a Delegated Management Contract, enter into a service contract ("Service Contract") with the NGO, on terms and conditions acceptable to the Association, for the implementation of activities pertaining to one or more Eligible N-PAs, with residual responsibility for fiduciary oversight continuing to vest in the PCU. 6. For purposes of this Part, the term "Respective Parts of the Project" means, in relation to an NGO under a Delegated Management Contract, the components of the Project which are the subject matter of the Delegated Management Contract. -15- B. Anti-Corruption The Recipient shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines. C. Grants 1. For purposes of Subprojects under the Project, the Grantor shall extend grants ("Grants") to Beneficiaries to support the preparation and implementation of activities related to the Subprojects, in accordance with eligibility criteria and procedures acceptable to the Association, and set forth in the Project Implementation Plan. 2. The Grantor shall make each Grant under a Grant Agreement with the respective Beneficiary on terms and conditions approved by the Association, which shall include the following: (a) The Grant shall be: (i) denominated.and repayable in local currency; and (ii) provided to the Beneficiary on a non-reimbursable basis. (b) The Grantor shall obtain rights adequate to protect its interests and those of the Association, including the right to: (i) suspend or terminate the right of the Beneficiary to use the proceeds of the Grant, or obtain a refund of all or any part of the amount of the Grant then withdrawn, upon the Beneficiary's failure to perform any of its obligations under the Grant Agreement; and (ii) require each Beneficiary to: (A) carry out its Subproject with due diligence and efficiency and in accordance with sound technical, economic, financial, managerial, environmental and social standards and practices satisfactory to the Association, including in accordance with the provisions of the Anti-Corruption Guidelines applicable to recipients of loan proceeds other than the Recipient; (B) provide, promptly as needed, the resources required for the purpose; -16- (C) procure the goods, works and services to be financed out of the Grant in accordance with the provisions of this Agreement; (D) maintain policies and procedures adequate to enable it to monitor and evaluate in accordance with indicators acceptable to the Association, the progress of the Subproject and the achievement of its objectives; (E) (1) maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Association, both in a manner adequate to reflect the operations, resources and expenditures related to the Subproject; and (2) at the Recipient's, the Association's or the Grantor's request, have such financial statements audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association, and promptly furnish the statements as so audited to the Grantor, the Recipient and the Association; (F) enable the Grantor, the Recipient and the Association to inspect the Subproject, its operation and any relevant records and documents; and (G) prepare and furnish to the Grantor, the Recipient and the Association all such information as the Grantor, the Recipient or the Association shall reasonably request relating to the foregoing. 3. The Grantor shall exercise its rights under each Grant Agreement in such manner as to protect the interests of the Recipient, the Association and the Grantor, and to accomplish the purposes of the Financing. Except as the Association shall otherwise agree, neither the Grantor nor the Recipient shall assign, amend, abrogate or waive any Grant Agreement or any of its provisions. 4. For purposes of this Part, "Grantor" means a Project Implementing Entity or NGO empowered to provide Grants under a Subsidiary Agreement, Delegated Management Contract or Service Contract, as the case may be. -17- D. Institutional Provisions 1. The Recipient shall establish and thereafter maintain: (a) a Project Steering Committee ("PSC"), whose mandate, terms of reference and composition shall be acceptable to the Association, to be responsible for general oversight, and monitoring and supervision, of the Project, including coordination among entities and agencies involved in the Project, as well as coordination with other related donor-funded programs; and (b) a Project Coordination Unit ("PCU") to be headed by the Project Coordinator, and whose mandate, terms of reference and composition shall be acceptable to the Association, to be responsible for coordination of implementation and monitoring of the Project, and reporting on the results thereof, including: (i) preparation of work plans and budgets, procurement plans, and progress reports; (ii) financial management and reporting; (iii) management of procurement, communications and information sharing functions; and (iv) acting as secretariat to the PSC. 2. The Recipient shall ensure that: (a) subject to the overall authority and oversight functions of the Project Steering Committee, the Project Coordinator shall be responsible for day-to-day coordination, and-monitoring and evaluation, of the Project; (b) the Project Coordinator shall be assisted by a team of key personnel consisting of natural resource management, procurement, financial management, and monitoring and evaluation, specialists, and internal auditors, along with other technical and support staff as needed and in adequate numbers, all of whom shall be suitably qualified and experienced; and (c) the positions of Project Coordinator and other key personnel referred to in this paragraph shall be kept filled at all times by persons having qualifications and experience acceptable to the Association. E. Implementation Obligations 1. (a) The Recipient shall prepare and adopt a Project Implementation Plan acceptable to the Association ("Project Implementation Plan"), giving details of guidelines and procedures agreed with the Association for the implementation, supervision, and monitoring and evaluation, of the Project, including: (i) institutional and staffing arrangements; -18- (ii) reporting requirements as set forth in Section II.A of this Schedule; (iii) details of the performance indicators agreed with the Association for purposes of the Project; (iv) financial management and audit procedures referred to in Section II.B of this Schedule, and set forth in the Financial Management Manual; (v) procurement procedures as set forth in Section III of this Schedule; (vi) details of the Safeguards Instruments, along with particulars of the procedural and institutional measures required to implement them; and (vii) details of eligibility criteria and procedures for the provision of Grants to Beneficiaries. (b) The Recipient shall implement the Project in accordance with the Project Implementation Plan; provided, however, that, in case of any discrepancies between the provisions of the Project Implementation Plan and those of this Agreement, the provisions of this Agreement shall prevail. (c) Except as the Association shall otherwise agree, the Recipient shall not amend or waive any provision of the Project Implementation Plan if, in the opinion of the Association, such amendment or waiver may materially and adversely affect the implementation of the Project. 2. The Recipient shall: (a) not later than fifteen (15) months after the Effective date, in conjunction with the Association and other interested parties, undertake a midterm review of the Project ("Midterm Review"), during which they shall exchange views with one another on the progress of the Project, having regard to performance indicators agreed with the Association and set forth in the Project Implementation Plan, and the performance by the Recipient of its obligations under this Agreement; (b) not later than one month prior to the Midterm Review, furnish to the Association, for comments, a report, in such detail as the Association shall reasonably request, on the progress of the Project, and giving details of the various matters to be discussed at such review; and -19- (c) following the Midterm Review, act promptly and diligently in order to take any corrective action deemed necessary to remedy any shortcoming noted in the implementation of the Project, or to implement such other measures as may be required in furtherance of the objective of the Project or otherwise agreed upon between the parties. F. Safeguards 1 . The Recipient shall ensure that the Project shall be implemented in accordance with the Safeguard Instruments. 2. Where required in terms of the PF or ESMF, as the case may be, for the purposes of any component or subcomponent of the Project, the Recipient shall proceed to have a PFAP or EMP, as the case may be: (a) prepared in accordance with the PF or ESMF, as the case may be; (b) submitted to the Association for review and approval, and for public consultations as required, and (c) thereafter, adopted on a timely basis for the purposes of implementation of the corresponding component or subcomponent of the Project. 3. Without limitation upon its other reporting obligations under this Agreement, the Recipient shall regularly collect, compile and submit to the Association on a semiannual basis reports in form and substance satisfactory to the Association on the status of compliance with the Safeguard Instruments, giving details of: (a) measures taken in furtherance of such Safeguard Instruments; (b) conditions, if any, which interfere or threaten to interfere with the smooth implementation of such Safeguard Instruments; and (c) remedial measures taken or required to be taken to address such conditions. G. Permitted Law Enforcement Activities 1 . Definition. As part of its activities under Part A. 1 of the Project, the Recipient shall, no later than April 15, 2014, carry out, directly or through its agents empowered under the Recipient's forest-natural resources protection legal framework, whether those agents are civilians,, non-civilians or a combination of both, forest-natural resources monitoring, control, surveillance and enforcement activities to support the implementation of the Recipient's forest-natural resources protection laws in -20- accordance with internationally recognized due legal process standards, and implemented in accordance with the provision of this Section I.G of Schedule 2 to this Agreement ("Permitted Law Enforcement Activities"). 2. Eligibility. (a) Goods, works, services and operating costs financed by the Association for forest-natural resources protection law enforcement shall be used for the sole purpose of enforcing the forest-natural resources protection laws and regulations and shall not be used for any military purpose, for any criminal investigation, prosecution or proceedings, or for enforcement of other (non-forest-natural resources protection) laws, unless specifically designated through an amendment to this Agreement. (b) In case the Association agrees (through an amendment to this Agreement) to the financing of non-forest-natural resources protection but related activities in accordance with paragraph (a) immediately above, the Recipient shall ensure that the agency responsible for the implementation of such non-forest-natural resources protection activities shall maintain accounts in a manner acceptable to the Association, which demonstrate in a manner acceptable to the Association, that the resources for the financing of the non-forest-natural resources protection tasks are independent from the funding provided by the Association. The Association, including its representatives and auditors, shall have access to such accounts. (c) Where a forest-natural resources protection priority mission is re-tasked for non-forest-natural resources protection authorized pursuant to an amendment to this Agreement in accordance with paragraph (a) immediately above, if any, the authorized forest-natural resources protection officer (referred to in paragraph 3(e) immediately below) shall record the change and duration of the change, and the responsible agency shall ensure that corresponding changes to the Association's support are taken into account and shall maintain a record of such changes in accordance with the Association's rules (including auditing rules). 3. Terms and Conditions. Prior to incurring expenditures to be financed from the funds of the Financing, for the carrying out of maritime and aerial forest-natural resources protection surveillance and enforcement missions as part of the Permitted Law Enforcement Activities, the Recipient shall enter into detailed protocols prepared in accordance with terms of reference satisfactory to the Association to ensure, inter alia, that: -21- (a) The mission shall be a forest-natural resources protection-priority mission and the mission task shall be duly recorded and documented prior to and subsequent to the mission; (b) Memoranda of understanding in a form and substance acceptable to the Association shall be concluded between the agencies involved in the surveillance operations, including both government agencies and any civilian contractor involved; (c) The Project's accounts, as well as those of the entities involved in the surveillance operations, shall be maintained in a manner acceptable to the Association and enabling effective and verifiable compliance with the provisions of this Section I.G. (d) The mission shall be conducted by personnel who have been properly trained in the operation of any equipment used in the surveillance patrol. The personnel and platforms (patrol vessels or aircraft) used in such patrols may be armed if done (in the views of the Association) in compliance with the international laws and best practices, and provided, however, that the procurement of arms and ammunitions shall not be financed by the Association. The funds of the Financing shall not be used to train any personnel officers in the use of arms. (e) The mission shall be under the control of an authorized civilian (non- military) forest-natural resources protection officer, but subject to the overarching authority of the master of the vessel, in particular with respect to safety and emergency response. 4. Covenant. Throughout the implementation of the Permitted Law Enforcement Activities, as well as throughout any law enforcement activities carried out in furtherance thereof, the Recipient shall maintain and comply with a legal framework fully consistent with the United Nations Convention Law of the Sea Treaty (UNCLOS), and in particular (without limitation) its article 73, whereby any foreign vessels and crews detained in the exclusive economic zone will be immediately released upon posting a reasonable bond , and the flag state of the vessels is immediately notified. Section II. Project Monitoring. Reporting and Evaluation A. Project Reports The Recipient shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 4.08 of the General -22- Conditions, and on the basis of indicators acceptable to the Association and set forth in the Project Implementation Plan. Each Project Report shall cover the period of one calendar quarter, and shall be furnished to the Association not later than one month after the end of the period covered by such report. B. Financial Management, Financial Reports and Audits 1. The Recipient shall maintain or cause to be maintained a financial management system in accordance with the provisions of Section 4.09 of the General Conditions. 2. Without limitation on the provisions of Part A of this Section, the Recipient shall prepare and furnish to the Association, not later than forty-five (45) days after the end of each calendar quarter, interim unaudited financial reports for the Project covering the quarter, in form and substance satisfactory to the Association. 3. The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 4.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one Fiscal Year. The audited Financial Statements for each such period shall be furnished to the Association not later than six (6) months after the end of such period. 4. The Recipient shall, not later than three (3) months after the Effective Date: (a) recruit an additional internal auditor, having the requisite qualifications and experience, to add to CELCO's internal audit staff complement and, in so doing, reinforce its internal audit capability; and (b) adopt revised terms of reference, acceptable to the Association, for the recruitment of the auditors referred to in Section 4.09(b) of the General Conditions. Section III. Procurement A. General 1. Goods and Works. All goods and works required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Section I of the Procurement Guidelines, and with the provisions of this Section. 2. Consultants' Services. All consultants' services required for the Project and to be financed out of the proceeds of the Financing shall be procured in accordance with the requirements set forth or referred to in Sections I and IV of the Consultant Guidelines, and with the provisions of this Section. -23- 3. Definitions. The capitalized terms used below in this Section to describe particular procurement methods or methods of review by the Association of particular contracts, refer to the corresponding method described in the Procurement Guidelines, or Consultant Guidelines, as the case may be. B. Particular Methods of Procurement of Goods and Works I. International Competitive Bidding. Except as otherwise provided in paragraph 2 below, goods shall be procured under contracts awarded on the basis of International Competitive Bidding. 2. Other Methods of Procurement of Goods and Works. The following table specifies the methods of procurement, other than International Competitive Bidding, which may be used for goods and works. The Procurement Plan shall specify the circumstances under which such methods may be used: Procurement Method (a) National Competitive Bidding (b) Shopping (c) Procurement from UN Agencies C. Particular Methods of Procurement of Consultants' Services 1. Quality- and Cost-based Selection. Except as otherwise provided in paragraph 2 below, consultants' services shall be procured under contracts awarded on the basis of Quality and Cost-based Selection. 2. Other Methods of Procurement of Consultants' Services. The following table specifies methods of procurement, other than Quality and Cost-based Selection, which may be used for consultants' services. The Procurement Plan shall specify the circumstances under which such methods may be used. Procurement Method (a) Selection Based on the Consultants' Qualifications (b) Single-source Selection (c) Least-Cost Selection (d) Selection of Individual Consultants -24- D. Review by the Association of Procurement Decisions The Procurement Plan shall set forth those contracts which shall be subject to the Association's Prior Review. All other contracts shall be subject to Post Review by the Association. Section IV. Withdrawal of the Proceeds of the Financing A. General 1. The Recipient may withdraw the proceeds of the Financing in accordance with the provisions of Article II of the General Conditions, this Section, and such additional instructions as the Association shall specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the Association and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the table in paragraph 2 below. 2. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Financing ("Category"), the allocations of the amounts of the Financing to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Percentage of Amount of the Expenditures to be Credit Allocated Financed Category (expressed in SDR) (inclusive of Taxes) (1) Works 3,900,000 100 % (2) Goods 2,100,00 100 % (3) Consultants' services 15,550,000 100 % and Training (4) Operating Costs 1,950,000 100% (5) Grants 2,500,000 100 % of amounts of Grants provided (6) Unallocated 0 TOTAL AMOUNT 26,000,000 -25- B. Withdrawal Conditions; Withdrawal Period . 1 Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) for payments made prior to the date of this Agreement; or (b) under Categories (1)(a) and (3)(a), in relation to any NGO under a Delegated Management Contract or Service Contract, unless the Delegated Management Contract or Service Contract, as the case may be, has been concluded on terms and conditions acceptable to the Association. 2. The Closing Date is December 31, 2014. Section V. Annual Work Plans, Training and Workshops 1. (a) Except as provided in paragraph (b) below, the Recipient shall, not later than September 30 in each Fiscal Year, prepare and furnish to the Association, for review and approval, a proposed Annual Work Plan and Budget for the forthcoming Fiscal Year, and proceed thereafter to implement such Annual Work Plan and Budget, as approved by the Association. (b) The first Annual Work Plan and Budget required under the Project shall be furnished not later than one month after the Effective Date. 2. For purposes of any proposal for training or workshops to be included under an Annual Work Plan and Budget, the Recipient shall ensure that each such proposal shall include: (a) details of: (i) the objective and content of the training or workshop envisaged; (ii) the selection method of institutions or individuals conducting such training or workshop; (iii) the expected duration and an estimate of the cost of the training or workshop; and (iv) the candidates selected to attend the training or workshop; and (b) an undertaking on the part of such candidates to submit a brief report indicating what skills have been acquired and how these skills will contribute to enhance their performance or otherwise contribute to the attainment of the objective of the Project. -26- SCHEDULE 3 Repayment Schedule Principal Amount of the Credit Date Payment Due repayable (expressed as a percentage)* On each March 15 and September 15: commencing September 15, 2021, to and including 1% March 15, 2031 commencing September 15, 2031, to and including 2% March 15, 2051 * The percentages represent the percentage of the principal amount of the Credit to be repaid, except as the Association may otherwise specify pursuant to Section 3.03 (b) of the General Conditions. -27- APPENDIX Section I. Definitions 1. "Anti-Corruption Guidelines" means the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006 and revised in January 2011. 2. "Beneficiary" means the beneficiary of a Grant and party to a Grant Agreement. 3. "Category" means a category set forth in the table in Section IV of Schedule 2 to this Agreement. 4. "CI" means Conservation International. 5. "CLP" means Comiti Local du Parc, a local PA committee. 6. "Co-financier(s)" means: (a) International Bank for Reconstruction and Development ("World Bank") acting as an implementing agency of the GEF, and (b) NGOs. 7. "Co-financing" means: (a) the GEF Grant, and (b) NGO Financing. 8. "Co-financing Agreement" means an agreement between the Recipient and a Co- financier providing for the Co-financing. 9. "Consultant Guidelines" means the "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" published by the Bank in January 2011. 10. "COSAP" means "Comiti de Soutien aux Aires Protigies" a committee established to allow stakeholders' participation in Protected Area management. 11. "Delegated Management Contract" means the contract referred to in Section I.A.2 of Schedule 2 to this Agreement, as such contract may be amended from time to time, and such term includes all schedules to the Delegated Management Contract. 12. "Displaced Persons" means one or more persons who, on account of the execution of the Project, have experienced or would experience direct economic and social impacts caused by: (a) the involuntary taking of land, resulting in: (i) relocation or loss of shelter; (ii) loss of assets or access to assets; or (iii) loss of income sources or means of livelihood, whether or not such person must move to another location; or (b) the involuntary restriction of access to legally designated parks and protected areas, resulting in adverse impacts on the livelihood of such person. -28- 13. "Eligible MNP-PA" means any one or more of the 30 MNP-PAs or so deemed eligible to derive benefits under the Project and listed in the Project Implementation Plan. 14. "Eligible N-PA" means any one or more of the following N-PAs: Masoala, Makira and Baie d'Antongil ("MaMaBay"), Corridor Forestier de Fandriana- Vondrozo ("COFAV") and Corridor Forestier de Ankeniheny-Zahamena ("CAZ"). 15. "Environmental and Social Management Framework" or "ESMF" means the Recipient's Environmental and Social Management Framework, dated November 24, 2003, giving details of the policies and procedures designed to maximize the benefits of the Project, eliminate, offset or mitigate any adverse environmental impacts, or reduce such impacts to acceptable levels, as such ESMF may be amended from time to time, subject to compliance with the same approval formalities as applied to the adoption of the ESMF. 16. "Environmental Management Plan" or "EMP" means an Environmental Management Plan, acceptable to the Association and deemed consistent with the ESMF, and adopted for the purposes of a specific component or subcomponent of the Project, giving details of specific actions and measures required to give effect to the ESMF, along with the procedural and institutional measures needed to implement such actions and measures, as such EMP may be amended from time to time, subject to compliance with the same approval formalities as applied to the adoption of the EMP. 17. "Financial Management Manual" means a stand-alone chapter of the Project Implementation Plan, giving details of the financial management and audit procedures applicable to the Project. 18. "Fiscal Year" or "FY" means the Recipient's fiscal year commencing on January I and ending on December 31 of the same year. 19. "Foundation" or "FPAB" means the Foundation for Protected Areas and Biodiversity, a public benefit foundation established pursuant to the Recipient's law governing foundations (Law No 2004-014, dated July 2004), to support biodiversity conservation in Madagascar through the promotion and funding of the expansion, creation and protection of Protected Areas. 20. "FPAB Subsidiary Agreement" means* the agreement referred to in Section I.A. 1 (b) of Schedule 2 to this Agreement, pursuant to which the Recipient shall make part of the proceeds of the Financing available to the Foundation. 21. "GEF" means Global Environment Facility. -29- 22. "GEF Grant" means an amount of $10 million to be provided by the World Bank to assist in financing the Project. 23. "GEF Grant Agreement" means the agreement between the Recipient and the Co-financier providing for GEF Grant. 24. "General Conditions" means the "International Development Association General Conditions for Credits and Grants", dated July 31, 2010. 25. "Grant" means a grant extended, or to be extended, out of the proceeds of the Financing to finance a Subproject. 26. "Grant Agreement" means an agreement entered, or to be entered, into for the purpose of extending a Grant to finance a Subproject. 27. "IPDP" means the Indigenous Peoples Development Plan for the Mikea Forest Protected Area, dated October 7, 2010, and deemed acceptable to the Association, giving details of mechanisms designed to guarantee the full, prior and informed participation of the local population of the Mikea forest in the design and implementation of the Project, and to ensure that the local population is both shielded from any adverse effects and able to derive appropriate culturally-compatible social and economic benefits therefrom, along with the procedural and institutional measures required to implement such mechanisms, as such IPDP may be amended from time to time, subject to compliance with the same approval formalities as applied to the adoption of the IPDP. 28. "MNP" means Madagascar National Parks, a public enterprise established and operating under the laws of the Recipient for the control and management of Protected Areas. 29. "MNP Subsidiary Agreement" means the agreement referred to in Section l.A.1 (a) of Schedule 2 to this Agreement, pursuant to which the Recipient shall make part of the proceeds of the Financing available to MNP. 30. "NGO" means any one or more of CI, WCS and WWF. 31. "NGO Financing" means an aggregate amount of $2.7 million equivalent to be contributed by NGOs to assist in financing the Project. 32. "NGO Subsidiary Agreement" means any one or more of the agreements referred to in Section I.A. 1 of Schedule 2 to this Agreement, pursuant to which the Recipient shall make part of the proceeds of the Financing available to NGOs. 33. "Operating Costs" means the incremental operating costs arising under the Project on account of local contractual support staff salaries, employment benefits, travel expenditures and other travel-related allowances; equipment -30- rental and maintenance; vehicle operation, maintenance and repair; office rental and maintenance, materials and supplies; and utilities, media information campaigns and communications' expenses. 34. "Original Financing" means the financing provided under the Original Financing Agreement. 35. "Original Financing Agreement" means the Development Grant Agreement for a Third Environment Program Support Project between the Recipient and the Association, dated May 21, 2004, as amended and restated pursuant to the Agreement Providing for the Amendment and Restatement of the Development Grant Agreement, dated April 1, 2008 (Grant No. H087-MAG). 36. "Original Project" means the Project described in the Original Financing Agreement. 37. "Permitted Law Enforcement Activities" means the set of activities acceptable to the Association, described in, and implemented in compliance with the provisions of, Section I.G of Schedule 2 to this Agreement. 38. "PPP" means public/private partnership. 39. "Process Framework" or "PF" means the Process Framework (Cadre Fonctionnel de Procidure de Sauvegarde), dated November 24, 2003, as subsequently updated and approved by the Recipient as of August 1, 2007, giving details of the policies and procedures governing compensation, rehabilitation and resettlement assistance in favor of Displaced Persons under the Project, as such PF may be amended from time to time, subject to compliance with the same approval formalities as applied to the adoption of the PF. 40. "Process Framework Action Plan" or "PFAP" means a Process Framework Action Plan (Plan d'Action pour la Mise en Oeuvre du Cadre Fonctionnel De Procedure De Sauvegarde) acceptable to the Association and deemed consistent with the PF, and adopted for the purposes of a specific component or subcomponent of the Project, giving details of specific actions and measures required to give effect to the PF, along with the relevant procedural and institutional measures applicable, as such PFAP may be amended from time to time, subject to compliance with the same approval formalities as applied to the adoption of the PFAP. 41. "Procurement Guidelines" means the "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" published by the Bank in January 2011. -31- 42. "Procurement Plan" means the Recipient's procurement plan for the Project, dated May II, 2011, and referred to in paragraph 1.18 of the Procurement Guidelines and paragraph 1.25 of the Consultant Guidelines, as the same shall be updated from time to time in accordance with the provisions of said paragraphs. 43. "Program" means the program of actions, measures and objectives designed to promote the sustainable management of natural resources, protection of the environment and biodiversity conservation, as set forth in the Recipient's development strategy for 2007 - 2012 ("Madagascar Action Plan" or "MAP"). 44. "Project Coordination Unit" or "PCU" means the Project Coordination Unit referred to in Section I.D. I (b) of Schedule 2 to this Agreement. 45. "Project Implementation Plan" means the Project Implementation Plan referred to in Section I.E. 1 (a) of Schedule 2 to this Agreement, as same may be amended from time to time in agreement with the Association, and such term includes any schedules to the Project Implementation Plan. 46. "Project Implementing Entity" means MNP or the Foundation; and "Project Implementing Entities" means more than one Project Implementing Entity. 47. "Project Implementing Entity's Legislation" means legislation establishing a Project Implementing Entity or governing its operations. 48. "Project Steering Committee" or "PSC" means the Project Steering Committee referred to in Section I.D. 1 (a) of Schedule 2 to this Agreement 49. "Protected Area" or "PA" means a geographical area of the Recipient's territory, whether land-based or marine or both, which, for environmental, ecological or other reasons, enjoys protection from adverse human activity, whether a traditional PA under the control or management of MNP ("MNP-PA") or a newly-established PA under the control or management of an NGO ("N-PA"). 50. "Safeguard Instruments" means any one or more of the ESMF, PF and IPDP, along with any PFAP or EMP. 51. "Selected PAs" means Eligible MNP-PAs and Eligible N-PAs. 52. "Service Contract" means the contract referred to in Section I.A.5 of Schedule 2 to this Agreement, as such contract may be amended from time to time, and such term includes all schedules to the Service Contract. 53. "Subproject" means any activity or package of activities financed or to be financed out of the proceeds of a Grant under the Project. -32- 54. "Subsidiary Agreement" means the MNP Subsidiary Agreement or FPAB Subsidiary Agreement, or both. 55. "Training" means training and training-related activities under the Project, including seminars, workshops and study tours, together with all costs associated with travel and subsistence allowances for training participants, trainers' fees, rental of training facilities, preparation and reproduction of training materials and other activities reasonably incidental to the preparation and implementation of training activities. 56. "VOI" means Vondron 'Olona Ifototra, a community forestry management group. 57. "WCS" means Wildlife Conservation Society. 58. "WWF" means World-Wide Fund for Nature. Section II. Amendments to Original Financing Agreement The Original Financing Agreement is amended as set forth below. 1. Schedule 2 thereof (Project Description) is amended to read as shown in Schedule 1 to this Agreement. 2. Schedule 6 thereof (Outcome Indicators) is deleted in its entirety. 3. References in the Original Financing Agreement to indicators shall be construed as references to indicators agreed with the Association for purpose of this Project and set forth in the Project Implementation Plan.