EXECUTION VERSION

PROGRAM IMPLEMENTATION AGREEMENT

BETWEEN

THE UNITED STATES OF AMERICA

ACTING THROUGH

THE MILLENNIUM CHALLENGE CORPORATION

AND

THE FEDERAL DEMOCRATIC REPUBLIC OF NEPAL

ACTING THROUGH

THE MINISTRY OF FINANCE

 TABLE OF CONTENTS

Page
ARTICLE 1. GENERAL RESPONSIBILITIES OF THE PARTIES ..................................... 1
Definitions. ............................................................................................... 1
Role of the Government............................................................................ 1
Role of MCA-Nepal. ................................................................................ 3
ARTICLE 2. IMPLEMENTATION FRAMEWORK ............................................................ 6
Implementation Plan. ................................................................................ 6
Fiscal Accountability Plan. ....................................................................... 7
M&E Plan. ............................................................................................... 7
Environmental and Social Performance Plans. .......................................... 7
Social Inclusion and Gender Integration. .................................................. 8
MCC Program Procurement Guidelines and MCC Approval of
Grants....................................................................................................... 8
Notice to Providers; Incorporation. ........................................................... 8
Reports; Notices. ...................................................................................... 9
Transactions Subject to MCC Approval. ................................................. 10
Role of Certain Entities in Implementation. ............................................ 12
Publicity and Transparency. .................................................................... 13
Branding and Enforcement. .................................................................... 14
Government Contribution. ...................................................................... 14
ARTICLE 3. DISBURSEMENT OF MCC FUNDING........................................................ 15
Disbursement Process. ............................................................................ 15
Conditions Precedent to Disbursement of Compact Development
Funding. ................................................................................................. 16
Conditions Precedent to the Initial Disbursement of Program
Funding. ................................................................................................. 16
Conditions Precedent to Each Disbursement of Program Funding. .......... 17
Authorized Expenditures. ....................................................................... 19
ARTICLE 4. EFFECTIVENESS OF THIS AGREEMENT; CONSEQUENCES OF
COMPACT TERMINATION, SUSPENSION AND EXPIRATION .............. 19
Entry into Force of this Agreement. ........................................................ 19
Consequences of Compact Termination, Suspension or Expiration.. ....... 19
ARTICLE 5. GENERAL PROVISIONS ............................................................................. 21
Representatives....................................................................................... 21
Communications..................................................................................... 21
Assignments. .......................................................................................... 22
Amendment; Waivers. ............................................................................ 22
Attachments.. ......................................................................................... 22
Inconsistencies. ...................................................................................... 22
Termination of this Agreement. .............................................................. 22
 Survival. ................................................................................................. 23
Information Provided to MCC. ............................................................... 23
Governing Law. ...................................................................................... 23
Counterparts; Electronic Delivery. .......................................................... 23

Schedule 1 Definitions
Schedule 2 Conditions Precedent to Program Funding
Schedule 3 Anticipated Government Contribution
Schedule 4 Principles for Management of the Government Contribution
 PROGRAM IMPLEMENTATION AGREEMENT

PREAMBLE

This PROGRAM IMPLEMENTATION AGREEMENT (this “Agreement”) is between

the United States of America, acting through the Millennium Challenge Corporation, a United
States government corporation (“MCC”), and the Federal Democratic Republic of Nepal, acting
through its Ministry of Finance (the “Government”) (individually, a “Party” and collectively, the
“Parties”).

Recalling that the Millennium Challenge Compact between the United States of America,
acting through MCC, and the Government signed on September 14, 2017 (the “Compact”), sets
forth the general terms on which MCC will provide assistance of up to US$500,000,000 to the
Government, and to which the Government will contribute up to US$130,000,000 for a program
to reduce poverty through economic growth in Nepal;

Recalling that the Government has designated MCA-Nepal to carry out certain rights and
obligations of the Government under the Compact and related agreements; and

Recognizing that the Parties wish to specify further the terms for implementing the
Compact and the Program;

The Parties hereby agree as follows:

ARTICLE 1.

GENERAL RESPONSIBILITIES OF THE PARTIES

Definitions.

Capitalized terms used in this Agreement and not defined in this Agreement have the meanings
provided in the Compact. All other capitalized terms have the meanings provided in Schedule 1.

Role of the Government.

(a) Government Responsibilities. The Government will promptly take all necessary
or appropriate actions to carry out all of its obligations under the Compact, this Agreement, and
any other Supplemental Agreement (including any post-Compact Term activities, audits or other
responsibilities), and to delegate its rights and responsibilities to entities, including MCA-Nepal,
adequate to enable them (each, a “Permitted Designee”) to oversee and manage the
implementation of the Program on behalf of the Government.

(b) Government Undertakings.

(i) Impoundment; Liens or Encumbrances. The Government will ensure that

(A) no Program Assets are subject to any impoundment, rescission, sequestration, liquidation, or
to any provision of law now or hereafter in effect in Nepal that would have the effect of allowing
any such impoundment, rescission or sequestration; and (B) no Program Asset is subject to any
lien, attachment, enforcement of judgment, pledge, or encumbrance of any kind (each, a “Lien”),
except with MCC’s prior written approval. In the event any Lien not so approved is imposed,
the Government will promptly seek the release of such Lien and, if such Lien is required by a
final and non-appealable court order, will pay any amounts due in order to obtain such release;
provided, however, that the Government will not use MCC Funding or any Program Assets to
satisfy any such obligation.

(ii) Disposal of Program Assets Consisting of Real Property. The

Government will ensure that no Program Asset consisting of real property is (A) subject to any
lease or sub-lease arrangement, in whole or in part, or (B) sold, donated or otherwise disposed of,
in whole or in part; except, in each of the foregoing cases, with MCC’s prior written approval.
In addition, any Program Asset consisting of real property that is retained by MCA-Nepal,
subject to the terms of the MCC Program Closure Guidelines, after the expiration or termination
of the Compact will be subject to a reversionary interest of MCC for a period of five (5) years
commencing on the last day of the closure period; and if at any time during that five-year period,
the Government wishes to sell the real property or use it for a purpose that is not related to the
Program or does not continue to further the Project Objectives, the Government will compensate
MCC for its interest in the real property by paying to MCC an amount equal to the fair market
value of MCC’s reversionary interest in the real property determined at such time.

(iii) Environmental and Social Performance. Unless MCC and the

Government agree otherwise in writing, the Government will ensure that all Projects and
Activities undertaken, funded or otherwise supported in whole or in part (directly or indirectly)
by MCC Funding under the Compact comply with the MCC Environmental Guidelines,
including the environmental and social performance standards set forth in the Performance
Standards on Environmental and Social Sustainability of the International Finance Corporation
(as in effect from time to time, the “IFC Performance Standards”) that have been incorporated
by reference into the MCC Environmental Guidelines. The Government also will ensure that the
Projects and Activities comply with all national environmental laws and regulations, licenses and
permits, except to the extent such compliance would be inconsistent with the Compact. Unless
MCC agrees otherwise in writing, the Government will fund all necessary costs of environmental
and social mitigation measures (including, without limitation, costs of resettlement) not
specifically provided for, or that exceed the MCC Funding specifically allocated for such costs,
in the Detailed Financial Plan for any Project or Activity.

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 (iv) Gender and Social Inclusion. Unless MCC and the Government agree
otherwise in writing, the Government will ensure that all Projects and Activities undertaken,
funded, or otherwise supported in whole or in part (directly or indirectly) by MCC Funding
comply with the MCC Gender Policy and the MCC Gender Integration Guidelines.

(v) Strategic Road Network. With regard to maintenance works under the
Strategic Road Maintenance Works Activity, the Government commits to:

(A) provide to MCC and annually update through the Compact Term, by
no later than October 31 each year after this Agreement has been signed, the Government’s
highway management information system with (1) deflection measurements on the entire
strategic road network per a schedule agreed upon with MCC, (2) the international roughness
index of the strategic road network, and (3) the surface distress index (SDI) of the strategic road
network; and

(B) continue to perform sufficient maintenance to prevent further

deterioration on the selected 305 km of the strategic road network, until the beginning of
maintenance works under the Strategic Road Maintenance Works Activity.

Role of MCA-Nepal.

(a) Designation of MCA-Nepal.

(i) Pursuant to Section 3.2(b) of the Compact, the Government has designated
MCA-Nepal, a development board, as the primary agent of the Government to implement the
Program and to exercise and perform the Government’s right and responsibility to oversee,
manage and implement the Program, including without limitation, managing the implementation
of Projects and Activities allocating resources, and managing procurements (the “Designated
Rights and Responsibilities”). The Parties note that the Government remains ultimately
responsible for the performance of the Government’s obligations under or in relation to the
Compact and this Agreement.

(ii) The Government will ensure that MCA-Nepal is and remains throughout
the Compact Term duly organized, sufficiently staffed and empowered to exercise the
Designated Rights and Responsibilities.

(iii) The “Accountable Entity” referenced in the Program Guidelines will be

deemed to refer to MCA-Nepal, and all obligations assigned to the “Accountable Entity” in the
Program Guidelines will be obligations of MCA-Nepal.

(b) Additional Government Undertakings with Respect to MCA-Nepal. The

Government hereby affirms to MCC as follows:

(i) Power and Authorization. MCA-Nepal has the power and authority to
(A) bind the Government to the full extent of the Designated Rights and Responsibilities, (B)

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execute and deliver each agreement, certificate, or instrument contemplated by this Agreement,
the Compact, any other Supplemental Agreement or the Program Guidelines, and (C) perform its
obligations under this and each such other agreement, certificate, or instrument contemplated by
this Agreement, the Compact, any other Supplemental Agreement or the Program Guidelines.

(ii) Government Responsibilities. MCA-Nepal (A) will carry out the

Designated Rights and Responsibilities (including all obligations specified as MCA-Nepal
obligations in the Compact, this Agreement, and the Amended and Restated Initial Engagement
Technical Assistance Grant Agreement between MCC and the Government signed on July 20,
2016 (the “CDF Agreement”) or any other Supplemental Agreement) with due care, efficiency
and diligence in conformity with sound technical, financial and management practices, and in
conformity with the Compact, this Agreement, the CDF Agreement, each other Supplemental
Agreement and the Program Guidelines, (B) except as provided in Section 2.10 or with respect to
a Project Partner, will not assign, delegate or otherwise transfer any of the Designated Rights and
Responsibilities without the prior written consent of MCC, and (C) will not undertake any
activities, duties or responsibilities other than the Designated Rights and Responsibilities without
the prior written consent of MCC.

(iii) Government Representations. MCA-Nepal will confirm each

representation that it makes on behalf of the Government in any agreement, certificate or
instrument delivered by MCA-Nepal with all necessary Permitted Designees prior to providing
such representation to MCC.

(iv) Autonomy. The Government will ensure that (A) no decision of MCA-
Nepal is modified, supplemented, unduly influenced or rescinded by any governmental authority,
except by a final and non-appealable judicial decision, and (B) the authority of MCA-Nepal will
not be expanded, restricted or otherwise modified, except in accordance with this Agreement and
the Compact.

(v) Governance of MCA-Nepal. MCA-Nepal will adopt internal rules and

regulations or bylaws, in form and substance satisfactory to MCC (the “Bylaws”). MCA-Nepal
will conduct its operations and management in accordance with the Governing Documents
(including the Bylaws) and the Governance Guidelines.

(vi) Funded Agreements; General Provisions Annex. MCA-Nepal will

provide the Fiscal Agent (and MCC if MCC so requests) a copy of each agreement that is funded
(directly or indirectly) with MCC Funding (each, a “Funded Agreement”), regardless of whether
MCC has approval rights with respect to such agreement. Unless otherwise instructed by MCC,
MCA-Nepal will include in each Funded Agreement: (A) a covenant that the counterparty to
such agreement (each, a “Counterparty”) will comply with (i) the General Provisions Annex and
(ii) any instruction received by such Counterparty from MCC regarding the performance by such
Counterparty of the terms of the General Provisions Annex notwithstanding any other
instructions given by MCA-Nepal; and (B) a right for MCA-Nepal to terminate such Funded
Agreement if such Counterparty fails to comply with the General Provisions Annex or any such
instruction of MCC.

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 (vii) Insurance; Performance Guaranties. MCA-Nepal will, to MCC’s
satisfaction, cause all Program Assets to be insured (including, without limitation, through self-
insurance) and will arrange such other appropriate insurance to cover against risks or liabilities
associated with the operations of the Program, including by requiring Providers to obtain
adequate insurance and to post adequate performance bonds or other guaranties. With MCC’s
prior consent, MCC Funding may be used to pay the costs of obtaining such insurance. MCA-
Nepal (or, as appropriate and with MCC’s prior approval, another entity) will be named as the
payee on any such insurance and the beneficiary of any such guaranty or bonds. If not already
named as the insured party, MCA-Nepal (and MCC, if it so requests) will be named as additional
insureds on any such insurance. The Government will promptly notify MCC of the payment of
any proceeds from claims paid under such insurance or guaranty, and will ensure that such
proceeds will be used to replace or repair any lost or damaged Program Assets; provided,
however, that, at MCC’s election, such proceeds will be deposited in a Permitted Account as
designated by MCA-Nepal or as otherwise directed by MCC.

(viii) MCA-Nepal Indemnity. If MCA-Nepal is held liable under any

indemnification or other similar provision of any agreement, then the Government will pay such
indemnity in full on behalf of MCA-Nepal and will not use MCC Funding or any Program
Assets to satisfy such obligation. In addition, the Government will indemnify and hold harmless
each member of MCA-Nepal’s Board of Directors (including each Observer), each member of
any Stakeholders’ Committee and each of MCA-Nepal’s Officers and employees from any
claim, loss, action, liability, cost, damage or expenses incurred by such person in the
performance of its duties on behalf of MCA-Nepal, provided, however, that the Government will
have no obligation to indemnify any such person if and to the extent that any such claims, losses,
actions, liabilities, costs, damages or expenses are attributable to the fraud, gross negligence or
willful misconduct of such person; and provided further, that the Government will not use MCC
Funding or any Program Assets to satisfy its obligations under this Section 1.3(b)(viii).

(ix) MCA-Nepal Hiring Practices. MCA-Nepal will hire all Officers and
employees through fair, competitive, and non-discriminatory procedures. Officers and
employees will be hired without regard to nationality or citizenship.

(x) Foreign Personnel. The Government agrees to: (A) arrange for any
foreign personnel (either individual consultants or personnel of firms) providing goods, works or
services under the Compact to be provided promptly with any necessary work visas and to
arrange for such foreign personnel and their family to be provided promptly with entry visas; and
(B) provide the foreign personnel (either individual consultants or personnel of firms) providing
goods, works or services under the Compact with work permits and such other documents as
shall be necessary to enable the foreign personnel to perform services and to remain in Nepal for
the duration of the Compact, without the need to exit the country for any period in the interim.

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 ARTICLE 2.

IMPLEMENTATION FRAMEWORK

Implementation Plan.

The framework for implementation of the Program will be further elaborated in a set of
documents, in form and substance approved by MCC, consisting of (i) a Work Plan, (ii) a
Detailed Financial Plan, (iii) an Audit Plan, and (iv) a Procurement Plan (each, an
“Implementation Plan Document” and collectively the “Implementation Plan”). MCA-Nepal
will submit its proposed Implementation Plan for review and approval by MCC before the initial
Disbursement of Program Funding and at least on an annual basis thereafter (or in such other
interval as may be required by the Program Guidelines). MCC will review the proposed
Implementation Plan and as necessary may request MCA-Nepal to submit clarifications or
adjustments. MCA-Nepal will submit an updated Implementation Plan or updated
Implementation Plan Document during any quarter in which significant changes or modifications
are made to a Project or to the Program, or when MCA-Nepal determines that the expected
results, targets and milestones for the specified year are not likely to be achieved; provided,
however, that an updated Detailed Financial Plan will be submitted each quarter. In such
instances, MCA-Nepal will submit to MCC for approval a proposed revised Implementation Plan
or updated Implementation Plan Document (as applicable) on the same date as the next Periodic
Report is due. MCA-Nepal will ensure that the implementation of the Program is conducted in
accordance with the Implementation Plan.

(a) Work Plan. MCA-Nepal will develop and implement a work plan, in form and
substance satisfactory to MCC, for the overall administration of the Program (the “Work Plan”).

(b) Detailed Financial Plan. The Multi-Year Financial Plan Summary for the
Program, which is set forth in Annex II to the Compact, shows the estimated annual contribution
of MCC Funding to administer, monitor and evaluate the Program and to implement each Project
(the “Multi-Year Financial Plan”). Except as MCC agrees otherwise in writing, MCA-Nepal
will develop and implement for each quarter for the upcoming year and on an annual basis for
each year of the remaining years of the Compact Term, a detailed financial plan consistent with
the U.S. fiscal year and in accordance with the Reporting Guidelines, setting forth funding
requirements for the Program (including administrative costs) and for each Project, broken down
to the sub-activity level (or lower, where appropriate), and projected both on a commitment and
cash requirement basis (each, a “Detailed Financial Plan”).

(c) Audit Plan. MCA-Nepal will develop and implement a plan, in accordance with
the Audit Guidelines, for the audit of the expenditures of the entities that are subject to audit
pursuant to the Audit Guidelines (the “Audit Plan”). The Audit Plan will be in form and
substance satisfactory to MCC and will be developed no later than sixty (60) days before the end
of the first period to be audited.

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 (d) Procurement Plan. MCA-Nepal will prepare periodic procurement plans for
acquiring the goods, works, and consultant and non-consultant services needed to implement the
Compact (each, a “Procurement Plan”). Each Procurement Plan will be prepared and updated
in accordance with the MCC Program Procurement Guidelines. In addition, no later than six
months after the Compact enters into force as provided in Article 7 of the Compact, MCA-Nepal
will develop and implement a bid challenge system (“BCS”) that provides suppliers, contractors
and consultants that are interested parties the ability to seek review of procurement actions and
decisions. The organization, rules and procedures of such BCS will be subject to MCC approval.
Upon MCC’s approval of the BCS, MCA-Nepal will publish the BCS on the MCA-Nepal
website.

Fiscal Accountability Plan.

Except as MCC agrees otherwise in writing, MCA-Nepal will develop and implement a manual
(as approved by MCC) setting forth the principles, mechanisms and procedures (the “Fiscal
Accountability Plan”) that MCA-Nepal will use to ensure appropriate fiscal accountability for
the use of MCC Funding, including the process to ensure that open, fair, and competitive
procedures will be used in a transparent manner in the administration of grants or cooperative
agreements and in the procurement of goods, works and services. The Fiscal Accountability
Plan will also include, but not be limited to, requirements with respect to (a) budgeting,
(b) accounting, (c) cash management, (d) financial transactions (receipts and payments),
(e) opening and managing Permitted Accounts, (f) personnel and payroll, (g) travel and vehicle
use, (h) asset and inventory control, (i) audits, and (j) reporting. The Fiscal Accountability Plan
will be revised periodically, subject to review and approval by MCC.

M&E Plan.

Unless MCC agrees otherwise in writing, no later than ninety (90) days after the Compact enters
into force as provided in Article 7 of the Compact, MCA-Nepal will develop and implement an
M&E Plan that will serve as the primary governing document for monitoring and evaluation
activities for the Program over the Compact Term. The M&E Plan will be developed,
implemented and updated in accordance with the MCC M&E Policy.

Environmental and Social Performance Plans.

In accordance with Section 1.2(b)(iii), MCA-Nepal will ensure that activities undertaken, funded
or otherwise supported in whole or in part (directly or indirectly) by MCC Funding comply with
the MCC Environmental Guidelines, including the IFC Performance Standards that are
incorporated by reference therein. Specifically, MCA-Nepal will: (i) cooperate with or complete,
as the case may be, any ongoing Environmental and Social Impact Assessments and, if
necessary, undertake and complete any additional environmental and social assessments and
analyses, such as Environmental and Social Management Plans, environmental and social audits,
resettlement policy frameworks, and resettlement action plans required under the laws of Nepal,
the MCC Environmental Guidelines, this Agreement, the Compact, any other Supplemental
Agreement or the Program Guidelines, or as otherwise required by MCC, each in form and

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substance satisfactory to MCC; (ii) ensure that Project or Activity-specific Environmental and
Social Management Plans are developed and all relevant measures contained in such plans are
integrated into project design, the applicable procurement documents and associated finalized
contracts, in each case, in form and substance satisfactory to MCC; and (iii) implement to
MCC’s satisfaction appropriate environmental and social mitigation measures identified in such
assessments or plans or developed to address environmental and social issues identified during
Compact implementation.

Social and Gender Integration Plan.

To ensure social inclusion and gender integration across the Projects and Activities, address
human trafficking, and ensure compliance with the MCC Gender Policy and the MCC Gender
Integration Guidelines, MCA-Nepal will develop a comprehensive social and gender integration
plan (“Social and Gender Integration Plan”) that, at a minimum, (i) identifies approaches for
regular, meaningful and inclusive consultations with women and other vulnerable and/or
underrepresented groups; (ii) sets forth strategies for consolidating the findings and
recommendations of Project-specific social and gender analyses into final Project designs; (iii)
specifies actions to be taken during the Compact Term to meet the social inclusion and gender
equality objectives for the Projects; and (iv) ensures, through monitoring and coordination during
Compact implementation, that final Activity designs, construction tender documents and
implementation plans are consistent with and incorporate the outcomes of the social and gender
analyses. MCA-Nepal will, on an annual basis, review and update the Social and Gender
Integration Plan as needed to reflect lessons learned and Project-specific analysis.

MCC Program Procurement Guidelines and MCC Approval of Grants.

In accordance with Section 3.6 of the Compact:

(a) MCA-Nepal will comply with the MCC Program Procurement Guidelines in the
procurement (including solicitation) of all goods, works and services and the award and
administration of contracts in furtherance of the Compact. In addition, the Government will
ensure that any bid challenges are conducted in accordance with the MCC Program Procurement
Guidelines and the BCS; and

(b) Unless MCC otherwise consents in writing, MCA-Nepal will ensure that grants
awarded to any non-Government entity in furtherance of the Program are awarded and
administered pursuant to an open, fair, and competitive procedure administered in a transparent
manner.

Notice to Providers; Incorporation.

(a) MCA-Nepal will notify all Providers (and all other entities or individuals
receiving MCC Funding in connection with the Program) of the requirements of Section 2.7 of
the Compact and will include, or ensure the inclusion of, the requirements of Section 2.7 of the
Compact in all agreements with a Provider if MCC is not a party to such agreements.

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 (b) MCA-Nepal will include, or ensure the inclusion of, the requirements of:

(i) Sections 2.1(c) and 2.8(c) of this Agreement and Section 3.7 of the
Compact and paragraphs (b)(i) and (ii), (c), and (d) of Section 3.8 of the Compact in all
agreements financed with MCC Funding between the Government or any entity of the
Government, on the one hand, and a Covered Provider that is not a non-profit organization
domiciled in the United States, on the other hand;

(ii) Section 3.7 of the Compact and paragraphs (b)(i) and (ii) and (d) of
Section 3.8 of the Compact in all agreements financed with MCC Funding between the
Government or any entity of the Government, on the one hand, and a Provider that does not meet
the definition of a Covered Provider, on the other hand;

(iii) Section 3.7 of the Compact and paragraphs (b)(i) and (ii), (c), and (d) of
Section 3.8 of the Compact in all agreements financed with MCC Funding between the
Government or any entity of the Government, on the one hand, and a Covered Provider that is a
non-profit organization domiciled in the United States, on the other hand; and

(iv) Section 3.7 of the Compact and paragraphs (b)(iii), (c) and (d) of Section
3.8 of the Compact in all agreements financed with MCC Funding between the Government or
any entity of the Government, on the one hand, and a non-U.S. Covered Provider, on the other
hand.

Reports; Notices.

(a) Unless MCC agrees otherwise in writing, MCA-Nepal will periodically provide to
MCC, in form and substance satisfactory to MCC, the reports and information required by the
Reporting Guidelines (each, a “Periodic Report”). MCA-Nepal will provide the Periodic
Reports to MCC on the schedule specified in the Reporting Guidelines, and the Periodic Reports
will be consistent with the Reporting Guidelines in all respects.

(b) On October 30 of each year of the Compact Term (or within thirty (30) days of
any written request by MCC), MCA-Nepal will provide to MCC an annual supplemental report
containing the following information:

(i) the progress made by the Government toward achieving the Compact Goal
and Project Objectives;

(ii) additional information on accomplishments not presented in the Periodic

Reports;

(iii) developments in Compact implementation related to the consultative

process, donor coordination, and lessons learned; and

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 (iv) any report or document required to be delivered to MCC in connection
with the Program under the MCC Environmental Guidelines (including the IFC Performance
Standards that are incorporated by reference therein), any Audit Plan, or any Implementation
Plan Document.

(c) MCA-Nepal will furnish, or use its best efforts to furnish, to MCC an audit report
in a form satisfactory to MCC for each audit required under the Compact, other than audits
arranged for by MCC, no later than ninety (90) days after the end of the period under audit, or
such other time as may be agreed by MCC from time to time.

(d) If at any time during the Compact Term, the Government materially reallocates or
reduces the allocation in its national budget or any other governmental authority of Nepal at a
departmental, municipal, regional, or other jurisdictional level materially reallocates or reduces
the allocation in its budget of the normal and expected resources that the Government or such
governmental authority, as applicable would have otherwise received or budgeted, from external
or domestic sources, or fails to timely distribute an allocation budgeted for the activities
contemplated under the Compact or the Program, the Government, acting through MCA-Nepal,
must notify MCC in writing within thirty (30) days of such reallocation, reduction, or failure to
distribute, such notification to contain information regarding the amount of the reallocation,
reduction, or failure to distribute, the affected activities, and an explanation for the reallocation
or reduction.

(e) In addition to the Periodic Reports, MCA-Nepal will provide to MCC within
thirty (30) days of a written request by MCC, or as otherwise agreed by MCC and MCA-Nepal
in writing, such other reports, documents, or information as MCC may request from time to time
related to the Program, including any component of the Implementation Plan, the Fiscal
Accountability Plan, the Program Guidelines, or any Disbursement.

(f) MCA-Nepal will submit the Periodic Reports and any other reports required
hereunder electronically if requested by MCC or otherwise required by the Reporting Guidelines.

(g) MCA-Nepal will furnish MCC with a report, in form and substance satisfactory to
MCC, by no later than March 31 of each calendar year regarding the Government’s contribution
to the objectives of the Program required by Section 2.6(a) of the Compact. The report will
cover the calendar year just ended and the projected contributions for the current fiscal year.

Transactions Subject to MCC Approval.

Each of the following transactions, activities, agreements, and documents requires MCC’s prior
written approval:

(a) Disbursements;

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 (b) the Implementation Plan (including each element or component thereof), the
Fiscal Accountability Plan, the M&E Plan, and the Program Closure Plan and any modification
of any of the foregoing;

(c) agreements between the Government and MCA-Nepal, and agreements in which
any of the following are appointed, hired or otherwise engaged (each, a “Material Agreement”):

(i) Auditor or Reviewer;

(ii) Fiscal Agent;

(iii) Procurement Agent;

(iv) Bank;

(v) Project Partner; and

(vi) a member of the Board of Directors (including any Observer) or any

Officer of MCA-Nepal (including agreements regarding compensation for any such person);

(d) any modification, termination or suspension of a Material Agreement, or any

action that would have equivalent effect;

(e) any agreement or transaction of MCA-Nepal that is not arm’s-length;

(f) any pledge of any MCC Funding or any Program Assets, or any incurrence of
material indebtedness, or any guarantee, directly or indirectly of any indebtedness;

(g) any decree, legislation, regulation, charter, contractual arrangement or other

document establishing or governing (other than public laws of general application to all public
institutions), or relating to the formation, organization or governance of, MCA-Nepal (including
the Bylaws and any staffing plan) (each, a “Governing Document”);

(h) any disposition, in whole or in part, liquidation, dissolution, winding up,

reorganization or other change of MCA-Nepal;

(i) any change in character or location of any Permitted Account;

(j) (A) any change of any member of the Board of Directors (including any
Observer), of the member serving as the chairperson or in the composition or size of the Board of
Directors, and the filling of any vacant seat of any member of the Board of Directors (including
any Observer), (B) any change of any Officer of MCA-Nepal or in the composition or size of its
management unit, and the filling of any vacant position of any Officer of MCA-Nepal, and
(C) any material change in the composition or size of any Stakeholders’ Committee;

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 (k) any decision by MCA-Nepal to engage, accept or manage any funds in addition to
MCC Funding (including from the Government or any donor agencies or organizations) during
the Compact Term, or to engage in any activities or undertake any duties or responsibilities other
than the Designated Rights and Responsibilities;

(l) any agreement, transaction, decision or other action or document for which MCC
approval is required under any of the Program Guidelines; and

(m) any amendment, supplement, replacement, termination, revocation or other

change to any of the foregoing documents or arrangements.

Role of Certain Entities in Implementation.

(a) Fiscal Agent. MCA-Nepal will engage a Fiscal Agent, who will be responsible
for, among other things, (i) ensuring and certifying that Disbursements are properly authorized
and documented in accordance with established control procedures set forth in the Fiscal Agent
Agreement and the Bank Agreement, (ii) instructing the Bank to make Disbursements from a
Permitted Account or requesting Disbursement be made directly to a provider as payment for
goods, works, or services in accordance with the Common Payment System or any alternate
payment system approved by MCC, as the case may be, and in each case following applicable
certification by the Fiscal Agent, (iii) providing applicable certifications for Disbursement
Requests, (iv) maintaining proper accounting of all MCC Funding financial transactions, and (v)
producing reports on Disbursements in accordance with established procedures set forth in the
Fiscal Agent Agreement or the Bank Agreement. MCA-Nepal will enter into an agreement with
the Fiscal Agent, in form and substance satisfactory to MCC, which sets forth the roles and
responsibilities of the Fiscal Agent and other appropriate terms and conditions (the “Fiscal
Agent Agreement”). Unless MCC agrees otherwise in writing, the Fiscal Agent will be a third
party, independent of the Government.

(b) Auditors and Reviewers. MCA-Nepal will engage one or more auditors as
contemplated in the Audit Guidelines (each, an “Auditor”). As requested by MCC in writing
from time to time, MCA-Nepal will also engage an independent (i) reviewer to conduct reviews
of performance and compliance under the Compact, which reviewer will have the capacity to (1)
conduct general reviews of performance or compliance, (2) conduct reviews of environmental
and social performance, and (3) conduct data quality assessments in accordance with the M&E
Plan, as described more fully in Annex III to the Compact, and/or (ii) evaluator to assess
performance as required under the M&E Plan (each, a “Reviewer”). MCA-Nepal will select the
Auditor(s) and/or Reviewer(s) in accordance with the Audit Guidelines and the M&E Plan, as
applicable. MCA-Nepal will enter into an agreement with each Auditor or Reviewer, in form
and substance acceptable to MCC, that sets forth the roles and responsibilities of the Auditor or
Reviewer with respect to the audit, review or evaluation, including access rights, required form
and content of the applicable audit, review or evaluation and other appropriate terms and
conditions (the “Auditor / Reviewer Agreement”). The requirements of this Section 2.10(b) do
not preclude the Office of the Auditor General of Nepal from conducting audits of MCA-Nepal.

12
 (c) Procurement Agent. MCA-Nepal will engage a Procurement Agent to carry out
and/or certify specified procurement activities in furtherance of the Compact and this
Agreement. MCA-Nepal will enter into an agreement with the Procurement Agent, in form and
substance satisfactory to MCC, that sets forth the roles and responsibilities of the Procurement
Agent with respect to the conduct, monitoring and review of procurements and other appropriate
terms and conditions (the “Procurement Agent Agreement”). Unless MCC agrees otherwise in
writing, the Procurement Agent will be a third party, independent of the Government.

Publicity and Transparency.

(a) Subject to Section 2.12, MCA-Nepal will give appropriate publicity to the
Compact as a program to which the United States, through MCC, has contributed, including by
identifying Program Activity sites and marking Program Assets, all in accordance with MCC’s
Standards for Global Marking. Upon the termination or expiration of the Compact, the
Government, upon MCC’s request, will cause the removal of any such references and markings
on the MCA-Nepal Website or in any Government or MCA-Nepal publicity materials.

(b) MCA-Nepal will make information concerning implementation of the Compact

publicly available, including by posting the following documents in English, on the website
operated by MCA-Nepal (the “MCA-Nepal Website”), all to the extent contemplated by and in
accordance with the Governance Guidelines: (i) Compact, (ii) this Agreement, (iii) minutes of
the meetings of the Board of Directors and minutes of the meetings of the Stakeholders’
Committees as they relate to MCA-Nepal; (iv) the M&E Plan, along with periodic reports and
final evaluations on Program performance; (v) all Environmental and Social Impact Assessments
and Resettlement Action Plans for the Projects and supporting documents; (vi) all social and
gender assessments and the Social and Gender Integration Plan; (vii) all audit reports by an
Auditor and any periodic reports or evaluations by a Reviewer; (viii) all Disbursement Requests;
(ix) all reports required to be submitted to MCC under the terms of this Agreement (including the
reports required under Section 2.8(a)); (x) all procurement policies and procedures (including
standard documents, procurement plans, notice of contract award decisions and the BCS) and
any other procurement documents required to be made publicly available under the MCC
Program Procurement Guidelines; (xi) a copy of any legislation or other documents related to the
formation, organization or governance of MCA-Nepal (except to the extent classified), including
the Governing Documents and any amendments thereto; and (xii) such other materials as MCC
may request; provided, however, that any press release or announcement regarding MCC or the
fact that MCC is funding the Program or any other publicity materials referencing MCC will be
subject to MCC’s prior approval and must be consistent with any instructions provided by MCC
in relevant Implementation Letters.

(c) Notwithstanding Section 2.11(b), information relating to procurements prior to

the award of a contract and confidential information relating to MCA-Nepal’s agreements with
employees, contractors and consultants will be excluded from the information and documents
made publicly available; provided, however, that MCC and MCA-Nepal will mutually determine
whether any information to be excluded is confidential.

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 Branding and Enforcement.

(a) Subject to Section 4.2(g), MCC hereby grants MCA-Nepal a revocable, royalty-
free, fully paid and non-exclusive right and license to use MCC’s logo and the names
“Millennium Challenge Corporation,” “Millennium Challenge Account” and “MCC,” in each
case, solely in accordance with the MCC Standards for Global Marking. Any such use of the
logo and names will be solely for the benefit of MCC, and will not inure to the benefit of MCA-
Nepal. The use of MCC’s logo and names will not create any agency or legal representation, and
MCA-Nepal has no authority to bind MCC in any way.

(b) MCA-Nepal will create its own logo and will use such logo as well as the names
“Millennium Challenge Account -Nepal” and “MCA-Nepal,” in each case, solely in accordance
with the MCC Standards for Global Marking. Subject to Section 4.2(g), MCA-Nepal hereby
grants MCC an irrevocable, royalty-free, fully paid and non-exclusive right and license to use the
names “Millennium Challenge Account -Nepal” and “MCA-Nepal,” and MCA-Nepal’s logo.

(c) MCA-Nepal will take all reasonable steps to ensure that the names “Millennium
Challenge Account-Nepal” and “MCA-Nepal,” as well as its own logo, will enjoy maximum
protection under the laws now or hereafter in effect in Nepal throughout the term of this
Agreement. This includes the registration of the names and the logo as a trademark, if
appropriate, the monitoring of unauthorized use by third parties, and, in case of detection of
unauthorized use, the enforcement of such rights. MCA-Nepal will inform MCC as soon as
practicable if it becomes aware of any infringement, threat of infringement, or any other use by a
third party that has not been authorized by MCC of any of: (i) the names “Millennium Challenge
Account-Nepal” and “MCA-Nepal,” and/or MCA-Nepal’s logo; or (ii) the names “Millennium
Challenge Corporation” and “MCC,” and/or MCC’s logo. MCA-Nepal will provide MCC
assistance to enforce MCC’s rights to the names “Millennium Challenge Corporation” and
“MCC,” as well as to MCC’s logo.

Government Contribution.

(a) In accordance with Section 2.6(a) of the Compact, the Government will make an
appropriate contribution toward meeting the objectives of the Compact. Such contribution will
be in addition to the Government’s spending allocated toward such objectives in its budget for its
fiscal year 2019. The Government’s anticipated contributions from its national budget for fiscal
years 2020 through 2024 are set forth in Schedule 3 to this Agreement. Such contributions
remain subject to any legal requirements in Nepal for the budgeting and appropriation of such
contributions, including approval of the Government’s annual budget by Nepal’s legislature.
The Government’s contribution may include in-kind and financial contributions (including
obligations of the Government on any debt incurred toward meeting the objectives).

(b) Unless otherwise agreed by the Parties in writing, contributions denominated in

the local currency of Nepal or other foreign currency will be recorded and converted to U.S.
dollars at the exchange rate on the date the contribution payment is made or using an average

14
rate over the period of contribution, in each case, using the exchange rates published by the
central bank of Nepal or such other source acceptable to MCC.

(c) The Government further agrees to adhere to the principles and procedures for
managing the Government’s contribution as specified in Schedule 4 to this Agreement.

ARTICLE 3.

DISBURSEMENT OF MCC FUNDING

Disbursement Process.

(a) Disbursement Requests. MCA-Nepal may request Disbursements to be made

under the Compact by submitting a request in accordance with the Reporting Guidelines (each, a
“Disbursement Request”), duly completed, to MCC not later than twenty (20) days (or such
other period of time as may be agreed by MCC) prior to the commencement of each
Disbursement Period. Requests for Disbursement of Program Funding and Compact
Development Funding for any Disbursement Period will be made by separate Disbursement
Requests using the applicable form. Unless MCC agrees otherwise in writing, MCA-Nepal may
submit only one Disbursement Request for Program Funding and one Disbursement Request for
Compact CDF for each quarter (such quarter, or any other period of time as agreed by MCC, the
“Disbursement Period”). Each Disbursement Request submitted must be accompanied by the
Periodic Reports covering the corresponding Disbursement Period.

(b) Approval of Disbursement Requests; Release of Proceeds.

(i) Upon receipt of a Disbursement Request, MCC will determine the

appropriate amount of the Disbursement to be made based on, among other things, (A) the
progress achieved under the Implementation Plan, (B) the amount of funds required to complete
the activities described in the accompanying Periodic Reports during the corresponding
Disbursement Period, and (C) the satisfaction, waiver or deferral of applicable conditions to such
Disbursement. MCC may, in its sole discretion, disapprove any Disbursement completely or
reduce the amount of any Disbursement below that proposed in a Disbursement Request based
on its determination of any of the factors set forth in this Section 3.1(b)(i).

(ii) Upon MCC’s approval of a Disbursement Request, the proceeds of the

Disbursement may be transferred, at MCC’s sole election, (A) to a Permitted Account, or (B)
directly to a provider as payment for goods, works or services received by MCA-Nepal in
accordance with the Common Payment System or any alternate payment system approved by
MCC; provided, however, that expenditures of such proceeds (including amounts transferred
directly to a provider) are authorized by MCA-Nepal, and the related payment complies, as
certified by the Fiscal Agent, with the most recently approved Detailed Financial Plan and the
standards and procedures set forth in the Fiscal Agent Agreement and the Fiscal Accountability
Plan.

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 (c) Permitted Accounts.

(i) Any MCC Funding to be disbursed to a bank account must be deposited in

an account established by MCA-Nepal in the local currency of Nepal (the “Local Account”) at a
financial institution acceptable to MCC, such Local Account to be interest-bearing to the extent
practicable. The Local Account will be a Permitted Account. MCC and MCA-Nepal also may
mutually agree in writing to the establishment of additional Permitted Accounts from time to
time at financial institutions acceptable to MCC. MCA-Nepal will notify MCC promptly if any
account information for a Permitted Account changes during the Compact Term and provide
MCC with the updated information.

(ii) Unless otherwise authorized by MCC in writing, no funds will be co-

mingled in a Permitted Account other than MCC Funding and accrued interest and earnings
thereon. MCC will have the right, among other things, to view any Permitted Account
statements and activity directly online, and where such viewing is not feasible, MCA-Nepal will
provide copies of such written statements to MCC upon MCC’s request. Before any MCC
Funding is deposited into a Permitted Account, MCA-Nepal will enter into an agreement, in
form and substance satisfactory to MCC, with the financial institution approved by MCC to hold
such Permitted Account (the “Bank”) that sets forth the signatory authority, access rights, anti-
money laundering and anti-terrorist financing provisions, and other terms related to such
Permitted Account (the “Bank Agreement”). The Fiscal Agent, and in certain specified cases in
the Bank Agreement, designated representatives of MCC, will be the sole signatories on each
Permitted Account.

(iii) MCC Funding held in a Permitted Account will accrue interest or other
earnings in accordance with the Bank Agreement. On a quarterly basis and upon the termination
or expiration of the Compact or the Bank Agreement, MCA-Nepal will ensure the transfer of all
accrued interest on the United States Dollar Permitted Accounts to MCC.

(iv) Unless MCC agrees otherwise in writing, MCC Funding will be held in an
authorized Permitted Account. To the extent that any amount of MCC Funding held in U.S.
Dollars must be converted into the currency of Nepal for any purpose, MCA-Nepal will ensure
that such amount is converted consistent with the requirements of the Bank Agreement or any
other applicable Supplemental Agreement.

Conditions Precedent to Disbursement of Compact Development Funding.

Prior to the initial Disbursement of Compact Development Funding or any subsequent

Disbursement of Compact Development Funding, the applicable conditions set forth in Annex
IV to the Compact must have been met to MCC’s satisfaction.

Conditions Precedent to the Initial Disbursement of Program Funding.

16
Unless waived or deferred by MCC, the conditions of this Section 3.3 and the conditions set
forth in Section 3.4 must have been met to MCC’s satisfaction prior to the initial Disbursement
of Program Funding:

(a) Entry into Force. The Compact has entered into force as provided in Article 7 of
the Compact.

(b) Officers. Each of the Officers has been selected and engaged by MCA-Nepal and
approved by MCC.

(c) Fiscal Accountability Plan. MCA-Nepal has developed the Fiscal Accountability
Plan (or an interim version), and the plan has been approved by MCC.

(d) M&E Plan. In the event Initial Disbursement occurs on or after 90 days following
entry into force of the Compact, MCA-Nepal has developed the M&E Plan, and the plan has
been approved by the Board of Directors and MCC.

(e) Implementation Plan. MCA-Nepal has developed a complete Implementation

Plan.

(f) Governing Documents. MCA-Nepal delivers to MCC a copy of the official

bulletin publishing the formation order creating MCA-Nepal.

Conditions Precedent to Each Disbursement of Program Funding.

Unless waived or deferred by MCC, the following conditions must have been met to MCC’s
satisfaction prior to each Disbursement of Program Funding (including the initial Disbursement
of Program Funding):

(a) Deliveries. MCA-Nepal has delivered to MCC the following documents, reports
and information in form and substance satisfactory to MCC:

(i) a completed Disbursement Request, together with the Periodic Reports

covering the related Disbursement Period;

(ii) copies of any reports from any technical (including environmental)

auditors engaged by MCA-Nepal for any Activity delivered since the previous Disbursement
Request;

(iii) a certificate of MCA-Nepal, dated as of the date of such Disbursement

Request, substantially in the form provided by MCC (the “MCA Disbursement Certificate”);

(iv) a certificate of the Procurement Agent, substantially in the form provided

by MCC (the “Procurement Agent Disbursement Certificate”); and

17
 (v) a certificate of the Fiscal Agent, substantially in the form provided by
MCC (the “Fiscal Agent Disbursement Certificate”).

(b) Other Conditions Precedent. MCC has determined in its sole discretion that:

(i) all applicable conditions precedent in Schedule 2 have been duly satisfied,
deferred or waived as provided in this Agreement;

(ii) no material default or breach of any covenant, obligation or responsibility

by the Government, MCA-Nepal or any Government entity has occurred and is continuing under
the Compact, this Agreement or any other Supplemental Agreement;

(iii) the activities to be funded with such Disbursement will not violate any
applicable law or regulation;

(iv) the Implementation Plan Documents and Fiscal Accountability Plan are
current and updated and are in form and substance satisfactory to MCC, and there has been
progress satisfactory to MCC on the components of the Implementation Plan for any relevant
Projects or Activities related to such Disbursement;

(v) there has been progress satisfactory to MCC on the M&E Plan and Social
and Gender Integration Plan for the Program, relevant Project or Activity and substantial
compliance with the requirements of the M&E Plan and Social and Gender Integration Plan
(including the targets set forth therein and any applicable reporting requirements set forth therein
for the relevant Disbursement Period);

(vi) all Government entities involved in the implementation of the Program,

including the Project Partners, are coordinating successfully with MCA-Nepal and dedicating the
necessary staff and other resources to ensure successful implementation of the Program;

(vii) there has been no material negative finding in any financial audit report
delivered in accordance with the Compact and Audit Plan, for the prior two quarters (or such
other period as the Audit Plan may require);

(viii) any Taxes paid with MCC Funding through the date ninety (90) days prior
to the start of the applicable Disbursement Period have been reimbursed by the Government in
full in accordance with Section 2.8(c) of the Compact;

(ix) the Government has satisfied all of its payment obligations, including any
insurance, indemnification, tax payments or other obligations, and contributed all resources
required from it, under the Compact, this Agreement and any other Supplemental Agreement;

(x) MCC does not have grounds for concluding that any matter certified to it
in the related MCA Disbursement Certificate, Procurement Agent Disbursement Certificate or
Fiscal Agent Disbursement Certificate is not as certified;

18
 (xi) no act, omission, condition, or event has occurred that would be the basis
for MCC to suspend or terminate, in whole or in part, the Compact or MCC Funding in
accordance with Section 5.1 of the Compact;

(xii) each of the Officers remains engaged, or if a position is vacant, MCA-

Nepal is actively engaged, to MCC’s satisfaction, in recruiting a replacement;

(xiii) MCA-Nepal has complied in all material respects with its obligations set
forth in Section 2.1(d) with respect to the establishment of a BCS and its obligations set forth in
Section 2.3 with respect to the establishment of an M&E Plan; and

(xiv) the Government has complied in all material respects with its obligations
set forth in Section 2.13 with respect to the making of its contributions in accordance with the
projected timeline set forth in Schedule 3, and the implementation structure set forth in Schedule
4.

Authorized Expenditures.

Except as MCC agrees otherwise in writing, a Disbursement or financial commitment involving

MCC Funding may be made, and a Disbursement Request may be submitted, only if the related
expense is provided for in the Detailed Financial Plan and sufficient uncommitted funds exist in
the Detailed Financial Plan for the relevant period.

ARTICLE 4.

EFFECTIVENESS OF THIS AGREEMENT; CONSEQUENCES OF COMPACT

TERMINATION, SUSPENSION AND EXPIRATION

Entry into Force of this Agreement.

This Agreement will enter into force upon the later of (a) the signing of this Agreement by each
of the Parties to this Agreement and (b) the date that the Compact enters into force as provided in
Article 7 of the Compact; provided, however, that the Parties agree that upon signature of this
Agreement, and until this Agreement enters into force, the Parties will provisionally apply the
terms of this Agreement.

Consequences of Compact Termination, Suspension or Expiration.

(a) Upon the suspension, in whole or in part, of the Compact or any MCC Funding,
all applicable Disbursements will be suspended, and MCC may request the Government to return
any MCC Funding (or portion thereof) on deposit in any Permitted Account; provided, however,
MCC Funding may be used, in compliance with the Compact and this Agreement and with
written consent of MCC, to pay for (i) reasonable expenditures for goods, works or services that
were properly incurred under or in furtherance of the Program before the suspension of the

19
Compact or any MCC Funding; and (ii) reasonable costs incurred in connection with the
suspension of the Compact or any MCC Funding.

(b) Upon the termination, in whole or in part, of the Compact or any MCC Funding,
all applicable Disbursements will cease; provided, however, MCC Funding may be used, in
compliance with the Compact and this Agreement and with written consent of MCC, to pay for
(i) reasonable expenditures for goods, works or services that were properly incurred under or in
furtherance of the Program before termination of the Compact or any MCC Funding, and (ii)
reasonable expenditures (including administrative expenses) properly incurred in connection
with the winding up of the Program (or any part thereof) within 120 days after the termination of
the Compact or any MCC Funding.

(c) Upon expiration of the Compact, all Disbursements will cease; provided,
however, MCC Funding may be used, in compliance with the Compact and this Agreement, to
pay for (i) reasonable expenditures for goods, works or services that were properly incurred
under or in furtherance of the Program before expiration of the Compact, and (ii) reasonable
expenditures (including administrative expenses) properly incurred in connection with the
winding up of the Program within 120 days after the expiration.

(d) Subject to Sections 4.2(b) and (c), upon the expiration or termination of the
Compact or MCC Funding, the Government will return to MCC any amounts of MCC Funding
on deposit in any Permitted Account but not expended before the expiration or termination, plus
accrued interest thereon, within thirty (30) days after the Government receives MCC’s request
for such return; provided, however, that if the Compact is terminated in part, only the amount of
MCC Funding allocated to the terminated portion will be subject to return.

(e) Upon the full or partial termination of the Compact or any MCC Funding, MCC
may, at its expense, direct that title to any Program Assets be transferred to MCC if such
Program Assets are in a deliverable state, and the Government will promptly effect such transfer
upon such direction; provided, however, that, for any Program Asset not in a deliverable state
and any Program Asset partially purchased or funded with MCC Funding, the Government, upon
MCC’s request, will reimburse MCC in United States Dollars the cash equivalent of the fair
market value of such Program Asset or portion thereof, as such is determined by MCC.

(f) Prior to expiration or upon termination of the Compact, the Parties will consult in
good faith with a view to reaching an agreement in writing on (i) the post-Compact Term
treatment of MCA-Nepal, (ii) the process for ensuring the refunds of Disbursements that have
not yet been released from a Permitted Account or committed in accordance with Sections 4.2(b)
and (c), and (iii) any other matter related to the winding up of the Program and the Compact.

(g) No later than 120 days after the expiration or termination of the Compact, unless
MCC agrees otherwise in writing, (i) the licenses granted to MCA-Nepal in Section 2.12(a) will
terminate with immediate effect, (ii) the Government will ensure that MCA-Nepal ceases to be
named “Millennium Challenge Account-Nepal” and/or “MCA-Nepal,” and (iii) the Government
will take reasonable steps to ensure that such names and any associated logo, as well as the

20
names “Millennium Challenge Corporation” and “MCC,” as well as any logo associated
therewith, are no longer used by MCA-Nepal or any other entity for any purpose not authorized
by MCC. Furthermore, upon expiration or termination of the Compact, MCA-Nepal will assign
and hereby assigns and transfers to MCC all right, title, and interest to the names “Millennium
Challenge Account-Nepal,” “MCA-Nepal,” “Millennium Challenge Corporation,” “MCC,” as
well as MCA-Nepal’s logo and MCC’s logo that it might have acquired during the term of this
Agreement.

(h) MCC and the Government recognize that the effects of the Compact will be long-
ranging and its impact on reducing poverty may not be measurable for several years after the
Compact ceases to be in force. Accordingly, MCC and the Government agree to cooperatively
monitor the results and evaluate the impacts of the Compact on reducing poverty through
economic growth in Nepal after the Compact ceases to be in force. As part of this cooperation,
prior to expiration or upon termination of the Compact and in addition to the actions described in
Section 4.2(f), the Parties will develop a post-Compact monitoring and evaluation plan that
describes the future monitoring and evaluation activities, the individuals and organizations that
will undertake these activities, and a budget framework for future monitoring and evaluation;
provided, however, that nothing in this Section 4.2(h) will be construed as committing MCC to
provide any assistance to the Government after the Compact ceases to be in force. The
Government agrees to provide all resources necessary (including both financial and personnel) to
fulfill the tasks undertaken by the Government under the post-Compact monitoring and
evaluation plan.

ARTICLE 5.

GENERAL PROVISIONS

Representatives.

The provisions of Section 4.2 of the Compact are incorporated herein by reference as if fully set
forth herein.

Communications.

The provisions of Section 4.1 of the Compact are incorporated herein by reference as if fully set
forth herein, provided that documents or communications submitted to MCA-Nepal will be
submitted at the following address:

Millennium Challenge Account Nepal (MCA-Nepal)

Attention: Executive Director
Yak & Yeti Complex, Durbar Marg
Kathmandu, Nepal

Tel: +977-1-4238353
Fax: +977-1-4238392

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 Assignments.

The Government may not assign, delegate or contract implementation of its rights or obligations
under this Agreement without MCC’s prior written consent. The Government agrees, upon
request by MCC, to execute an assignment to MCC of any contractual right or cause of action
which may accrue to the Government or MCA-Nepal in connection with or arising out of the
contractual performance or breach of performance by a party to a contract financed in whole or
in part by MCC Funding.

Amendment; Waivers.

The Parties may amend this Agreement only by a written agreement signed by the Parties. Such
agreement will provide how it enters into force; provided, however, that the Government and
MCC may by written agreement, signed by the Principal Representative or any Additional
Representative of each Party and which will enter into force upon signature, modify any
schedule hereto. The Parties understand that any modification of this Agreement may be entered
into by the Government without the need for further action by the Government (including any
parliamentary action), or satisfaction of any additional domestic requirements of Nepal. Any
waiver of a right or obligation arising under this Agreement will be effective only if provided in
writing.

Attachments.

Each exhibit, schedule, and annex attached to this Agreement constitutes an integral part of this
Agreement.

Inconsistencies.

In the event of any conflict or inconsistency between this Agreement and the Compact, the terms
of the Compact will prevail. In the event of any conflict or inconsistency between this
Agreement and any other Supplemental Agreement or any Implementation Plan Document, the
terms of this Agreement will prevail.

Termination of this Agreement.

(a) MCC may terminate this Agreement, in whole or in part, without cause by giving
the Government thirty (30) days’ written notice. This Agreement will terminate simultaneously
with the termination of the Compact by the Government in accordance with Section 5.1(a) of the
Compact.

(b) MCC may immediately terminate this Agreement, in whole or in part, by written
notice to MCA-Nepal and the Government if MCC determines that any event that would be a
basis for termination or suspension of the Compact or MCC Funding under Section 5.1(b) of the
Compact has occurred.

22
 (c) Unless terminated earlier in accordance with the terms hereof, this Agreement
will cease to be in force simultaneously with the expiration or termination of the Compact;
provided, however, that, if MCC determines, consistent with Section 4.2 (b) or (c), that
obligations incurred (and previously approved by MCC in a Disbursement Request) prior to the
expiration or termination of the Compact remain to be paid, then the provisions of this
Agreement will apply until such date as such obligations are satisfied.

Survival.

Notwithstanding any expiration, suspension or termination of this Agreement, the following

provisions of this Agreement will survive: Sections 1.2(b)(i), 1.2(b)(ii), 2.11, 4.2, 5.1, 5.2, 5.3,
5.8, 5.9 and 5.10.

Information Provided to MCC.

MCC may use or disclose any information in any Disbursement Request, report or document
developed or delivered in connection with the Program: (a) to its employees, contractors, agents
and representatives, (b) to any United States inspector general or the United States Government
Accountability Office or otherwise for the purpose of satisfying MCC’s own reporting
requirements, (c) by posting on the MCC Website for the purpose of making certain information
publicly available and transparent, (d) in connection with publicizing MCC and its programs, or
(e) in any other manner.

Governing Law.

The Parties acknowledge and agree that this Agreement is an international agreement entered
into for the purpose of implementing the Compact and as such will be interpreted in a manner
consistent with the Compact and will be governed by the principles of international law.

Counterparts; Electronic Delivery.

Signatures to this Agreement and to any amendment to this Agreement will be original
signatures appearing on the same page or in an exchange of letters or diplomatic notes.

Signature Page Follows on the Next Page

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 IN WITNESS WHEREOF, each Party, by its duly authorized representative, has signed
this Program Implementation Agreement.

Done at Kathmandu, Nepal, this 29th day of September, 2019, in the English language only.

FOR THE UNITED STATES OF FOR THE FEDERAL DEMOCRATIC

AMERICA, acting through THE REPUBLIC OF NEPAL, acting through
MILLENNIUM CHALLENGE THE MINISTRY OF FINANCE
CORPORATION

/s/ /s/

Name: Anthony Welcher Name: Dr. Yuba Raj Khatiwada

Title: Vice President, Compact Operations Title: Minister of Finance

SIGNATURE PAGE TO PROGRAM IMPLEMENTATION AGREEMENT

BETWEEN THE UNITED STATES OF AMERICA
ACTING THROUGH THE MILLENNIUM CHALLENGE CORPORATION
AND THE FEDERAL DEMOCRATIC REPUBLIC OF NEPAL, ACTING THROUGH THE MINISTRY OF FINANCE
 Schedule 1

DEFINITIONS

Agreement has the meaning provided in the preamble to this Agreement.

Audit Plan has the meaning provided in Section 2.1(c).

Auditor has the meaning provided in Section 2.10(b).

Auditor / Reviewer Agreement has the meaning provided in Section 2.10(b).

Bank has the meaning provided in Section 3.1(c)(ii).

Bank Agreement has the meaning provided in Section 3.1(c)(ii).

BCS has the meaning provided in Section 2.1(d).

Bylaws has the meaning provided in Section 1.3(b)(v).

CDF Agreement has the meaning provided in Section 1.3(b)(ii).

Common Payment System means the system pursuant to which payments of MCC Funding are
made directly to vendors as further described in the Fiscal Accountability Plan.

Compact has the meaning provided in the first recital to this Agreement.

Contribution Account has the meaning provided in Schedule 4.

Counterparty has the meaning provided in Section 1.3(b)(vi).

Designated Rights and Responsibilities has the meaning provided in Section 1.3(a)(i).

Detailed Financial Plan has the meaning provided in Section 2.1(b).

Disbursement Period has the meaning provided in Section 3.1(a).

Disbursement Request has the meaning provided in Section 3.1(a).

Environmental and Social Impact Assessment or ESIA means a process for predicting,
identifying, and assessing the potential environmental and social impacts of a proposed business
activity or project, evaluating alternatives and designing appropriate mitigation, management and
monitoring measures.

Environmental and Social Management Plan or ESMP means a plan or strategy specifying the
measures that will be taken to ensure that social and environmental impacts, risks and liabilities
identified during the ESIA process are effectively managed during the construction, operation and
closure of the proposed project.

Environmental and Social Management System or ESMS means a set of policies, procedures,
tools and internal capacity to identify and manage an institution's exposure to the environmental
and social risks of its clients, investees or stakeholders.

Fiscal Accountability Plan has the meaning provided in Section 2.2.

Fiscal Agent Agreement has the meaning provided in Section 2.10(a).

Fiscal Agent Disbursement Certificate has the meaning provided in Section 3.4(a)(v).

Funded Agreement has the meaning provided in Section 1.3(b)(vi).

General Provisions Annex means the annex titled General Provisions posted from time to time on
the MCC Website or otherwise made available to the Government.

Governance Guidelines means the MCC Guidelines for Accountable Entities and Implementation
Structures.

Governing Document has the meaning provided in Section 2.9(g).

Government has the meaning provided in the preamble to this Agreement.

IFC Performance Standards has the meaning provided in Section 1.2(b)(iii).

Implementation Plan has the meaning provided in Section 2.1.

Implementation Plan Document has the meaning provided in Section 2.1.

Lien has the meaning provided in Section 1.2(b)(i).

Local Account has the meaning provided in Section 3.1(c)(i).

Matching Fund has the meaning provided in part C of Schedule 2.

Material Agreement has the meaning provided in Section 2.9(c).

MCA Disbursement Certificate has the meaning provided in Section 3.4(a)(iii).

MCA-Nepal Website has the meaning provided in Section 2.11(b), with the following address as
of the date hereof: https://mcanp.org.

MCC has the meaning provided in the preamble to this Agreement.

MCC Gender Integration Guidelines means the guidelines on the operational procedures and
milestones for gender integration in all stages of MCC program development and implementation.

Schedule 1-2
Multi-Year Financial Plan has the meaning provided in Section 2.1(b).

Observer has the meaning provided in the Governance Guidelines.

Officer has the meaning provided in the Governance Guidelines.

Party and Parties have the meaning provided in the preamble to this Agreement.

Periodic Report has the meaning provided in Section 2.8(a).

Permitted Designee has the meaning provided in Section 1.2(a).

Procurement Agent Agreement has the meaning provided in Section 2.10(c).

Procurement Agent Disbursement Certificate has the meaning provided in Section 3.4(a)(iv).

Procurement Plan has the meaning provided in Section 2.1(d).

Program Closure Plan means the closure plan developed under the Program Closure Guidelines.

Resettlement Action Plan or RAP means a plan designed to mitigate the negative impacts of the
physical displacement of persons caused by project implementation.

Reviewer has the meaning provided in Section 2.10(b).

Social and Gender Integration Plan has the meaning provided in Section 2.5.

Strategic Road Maintenance Works Activity means the activity described in part B.2(a)(ii) of the
Annex I to the Compact.

Transmission Lines Activity means the activity described in part B.1(a)(i) of the Annex I to the
Compact.

Work Plan has the meaning provided in Section 2.1(a).

Schedule 1-3
 Schedule 2

CONDITIONS PRECEDENT TO PROGRAM FUNDING

PART A. Conditions Precedent for All Projects

(i) Prior to the initial Disbursement of Program Funding to occur on or after

90 days following the Compact’s entry into force, for all Projects, MCA-Nepal will have
developed and approved a comprehensive Social and Gender Integration Plan and the M&E
Plan, both in form and substance satisfactory to MCC.

(ii) Prior to the initial Disbursement of Program Funding for a particular

works or construction contract for a given Project or Activity, MCA-Nepal will have submitted
to MCC evidence, in form and substance satisfactory to MCC, that MCA-Nepal has established
all necessary components of the Environmental and Social Management System (“ESMS”).

(iii) Prior to each Disbursement of Program Funding for payment under a

particular works or construction contract for a given Project or Activity, MCA-Nepal must have
submitted to MCC evidence, in form and substance satisfactory to MCC, that:

(A) MCA-Nepal or the appropriate Government entity has established an

Environmental and Social Impact Assessment (“ESIA”), an Environmental and Social
Management Plan (“ESMP”), and/or a Resettlement Action Plan (“RAP”) (as
appropriate) with respect to such Activity, each of which must be in form and substance
satisfactory to MCC; and

(B) MCA-Nepal or the appropriate Government entity is implementing

the requirements of each ESIA, ESMP, forest clearance plan, Health and Safety
Management Plan, RAP or other ESMS component, as appropriate, in all material respects
and consistent with the MCC Environmental Guidelines (including the IFC Performance
Standards that are incorporated by reference therein).

(iv) Prior to any Disbursement of Program Funding on or after the

commencement of year five (5) of the Compact Term, the Government must have submitted to
MCC an initial draft Program Closure Plan in accordance with the MCC Program Closure
Guidelines.

(v) Prior to the initial Disbursement for each Activity, MCA-Nepal and all
appropriate Government entities will have signed any Project Cooperation Agreements relevant
for the specific Activity receiving funds.

PART B. Conditions Precedent for the Electricity Transmission Project

(i) Prior to any Disbursement of Program Funding for the Electricity

Transmission Project, the Government will have provided evidence, in form and substance
satisfactory to MCC, of a schedule and procedures, for the disbursement of the Government
Contribution as set forth in Annex II of the Compact and Schedule 3 to this Agreement, and the
Government shall be in compliance with such schedule.
 (ii) Prior to any Disbursement of Program Funding for the transmission line
from New Butwal to the Nepal-India border as part of the Transmission Lines Activity, the
Government will have provided evidence, in form and substance satisfactory to MCC, that steps
necessary to ensure that the construction of the transmission line between the Nepal-India border
and Gorakhpur are on track to be completed on or about the Compact End Date.

(iii) Prior to the initial disbursement for payment under a particular works or
construction contract for the Electricity Transmission Project, the Government will have
provided evidence, in form and substance satisfactory to MCC, that approval has been issued for
forest clearance for proposed MCC funded projects in alignment with domestic regulation and
MCC standards.

(iv) Prior to the initial disbursement for payment under a particular works or
construction contract for the Electricity Transmission Project, the Government must have
committed financing for and submitted a plan, in form and substance acceptable to MCC,
establishing a timeline for construction of the substation upgrades required to accommodate
400kV operation at Hetauda and Lapsephedi.

PART C. Conditions Precedent for the Road Maintenance Project

(i) Prior to the initial Disbursement of Program Funding for the matching
fund component of the Strategic Road Maintenance Works Activity (the “Matching Fund”), the
Government will have provided evidence, in form and substance satisfactory to MCC, of the
Government having budgeted at least US$47,500,000 for road maintenance works for the
upcoming year.

(ii) Prior to the Disbursement of Program Funding for the second tranche of
funding for the Matching Fund (i) the Government will have provided evidence, in form and
substance satisfactory to MCC, of the Government having budgeted at least US$55,000,000 for
road maintenance works, reflecting a priority for routine, recurrent and periodic maintenance
works, for the upcoming year; and (b) the Government will have provided evidence of actually
expending the previous year’s US$47,500,000 budget. If the Government has not spent its
previously allocated budget, then it shall make up the difference between the amount actually
spent and US$47,500,00, on top of the US$55,000,000.

(iii) Prior to the Disbursement of Program Funding for the third tranche of
funding for the Matching Fund (i) the Government will have provided evidence, in form and
substance satisfactory to MCC, of the Government having budgeted at least US$62,500,000 for
maintenance works, reflecting a priority for routine, recurrent, and periodic maintenance works,
for the upcoming year; and (b) the Government will have provided evidence of actually
expending the previous year’s US$55,000,000 budget. If the Government has not spent its
previously allocated budget, then it shall make up the difference between the amount actually
spent and US$55,000,000, on top of the US$62,500,000.

Schedule 2-2
 Schedule 3

Anticipated Government Contribution

($US)
Period prior
Component to Compact Year 1 Year 2 Year 3 Year 4 Year 5 Total
entry into
force
Electricity 40,000,000 30,000,000 23,400,000 27,500,000 120,900,000
Transmission
Project

Road 1,100,000 1,000,000 2,100,000

Maintenance
Project

Program 2,300,000 1,300,000 1,900,000 1,500,000 7,000,000

Management
and
Administration

Grand Total 40,000,000 33,400,000 25,700,000 29,400,000 1,500,000 130,000,000

 Schedule 4

Principles for Management of the Government Contribution

A. General Principles.

1. Except as the Parties may otherwise agree in writing, the Government Contribution will
conform to the requirements and provisions of the Compact and this Agreement, just as if
they were MCC Funding. For the avoidance of doubt, any activities undertaken, in whole
or in part, with the Government Contribution will adhere to, among other things, the
Program Procurement Guidelines, the MCC Environmental Guidelines, and the Social
and Gender Integration Plan.

2. The Government Contribution will be provided by the Government of Nepal as an

unconditional grant, and may be used for any expenditures allowable under the Compact
for the Compact Term.

3. The Government Contribution will begin to be disbursed to the Permitted Designee in the
year listed in Schedule 3. Any funds not used in the appropriated year will be rolled over
to the next year and be immediately available for Compact use. MCC and the
Government intend that in the event any portion of the Government Contribution has not
been expended by the end of the Compact Term, the Government will use the remaining
portion of the Government Contribution to ensure sustainability of the Project Objectives.

B. Disbursement Principles for the Government Contribution.

1. In order to properly manage and account for the Government Contribution, prior to
receiving the first disbursement of the Government Contribution, the Permitted Designee,
will open a separate, segregated account under the Bank Agreement (the “Contribution
Account”) for disbursements of the Government Contribution. No other accounts are
authorized to receive or hold disbursements of the Government Contribution.

2. Upon proper request by the Permitted Designee, the Government will disburse the
Government Contribution to the Contribution Account on a quarterly basis, beginning in
July 2018.

3. The Permitted Designee will request all disbursements of the Government Contribution
from Nepal’s Treasury Office under Nepal’s Financial Comptroller General Office by
submitting: (i) an approved programmatic spending submission; and (ii) a progress
report for activity since the previous quarter’s disbursement. The primary criterion for
the Government to disburse the Government Contribution is that the Permitted Designee
has spent the previous quarter’s disbursement. A future quarter’s requested disbursement
amount may be decreased to account for the corresponding amount of funding still
available from the previous disbursement.
 4. Following submission of the relevant documents for disbursement from the Permitted
Designee, Nepal’s Treasury Office will not unreasonably withhold its approval of the
Permitted Designee’s disbursement request.

5. Upon approval of the Permitted Designee’s submission, Nepal’s Treasury Office will
cause the next quarter’s disbursement of funds to the Contribution Account.

6. Any funding not expended from the previous quarter will continue to remain available for
the Permitted Designee to spend throughout the Compact Term.

7. Any and all interest accrued on Government Contribution received and held in the
segregated account will be accounted for by the Permitted Designee. All accrued interest
will be reverted to the Government quarterly after it is made available in the segregated
account.

C. Oversight of the Government Contribution.

1. MCA-Nepal will ensure to MCC’s satisfaction that the Government Contribution is fully
and timely incorporated in the Implementation Plan Documents.