Colombia - Second Agricultural Credit Project : Loan 1357 - Loan Agreement - Conformed

77-4e7 CONFORMED COPY LOAN NUMBER 1357-CO LOAN AGREEMENT (Second Agricultural Credit Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BANCO DE LA REPUBLICA Dated February 4, 1977 LOAN AGREEMENT AGREEMENT, dated February 4, 1977, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and BANCO DE LA REPUBLICA (hereinafter called the Borrower). S - 2 - 0 ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guaran- tee Agreements of the Bank, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said Gen- eral Conditions Applicable to Loan and Guarantee Agreements of the Bank being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "DCA" means Departamento de Credito Agropecuario of the Borrower, established by a resolution of Junta Directiva of the Borrower, dated May 12, 1966; (b) "DCF" means Departamento de Cr9dito de Fomento of the Borrower, established by a resolution of the Jun6a Directiva of the Borrower, dated November 18, 1964; (c) "CAJA" means Cala de Cr4dito Agrario, Industrial y Minero; (d) "Participating Institution" means CAJA, or any public or private bank or institution, or a grouping of two or more of them, meeting the eligibility criteria set forth in Part B of Schedule 5 -3- to this Agreement, as such Schedule may be amended from time to time, to which the Borrower proposes to make or has made a Subsidiary Loan; (e) "Subsidiary Loan" means a loan made or proposed to be made by the Borrower to a Participating Institution for reimburse- ment of payments made under Sub-loans as provided in Section 3.02 of this Agreement; (f) "Subsidiary Loan Agreement" means the agreement for any Subsidiary Loan as provided in Section 3.02 of this Agreement; (g) "Investment Plan" means a specific investment plan to be financed in part by means of a Sub-loan and to be carried out by (i) a farmer for developing farm facilities, infrastructure, pas- ture and/or crops (with the exception of coffee), and/or for ex- panding livestock herd and/or increasing their productivity; or (ii) by an agro-industrial enterprise for establishing new, or ex- panding, modernizing and vertically integrating existing, agro- industrial plants and installations; (h) "Beneficiary" means a farmer, machinery contractor or agro-industrial enterprise to which a Participating Institution proposes to make or has made a Sub-loan; (i) "Small Commercial Farmer" means a Beneficiary who (i) derives at least seventy-five per cent (75%) of his income from farming activities, and (ii) has gross assets (including land) not exceeding the equivalent of $25,000, of which at least seventy-five per cent (75%) is invested in farming activities; 01 (j) "Sub-loan" means a medium- or long-term loan made or proposed to be made by a Participating Institution to be refinanced in part out of the proceeds of the Loan for an Investment Plan or a medium- or long-term loan made by a Participating Institution to a machinery contractor for the purchase of agricultural machinery and equipment to be used for agricultural production, all in ac- cordance with the lending and operating policies and procedures set forth in Schedule 5 to this Agreement, as such Schedule may be amended from time to time; (k) "Sub-loan Contract" means the contract for any Sub-loan; and (1) "pesos" and the sign "Col.$" mean pesos in the currency of the Guarantor. -5 - ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to sixty-four mil- lion dollars ($6)4,000,000). Section 2.02. Subject to the provisions of Section 3.04 (b) of this Agreement, the amount of the Loan may be withdrawn from the Loan Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Bank and the Borrower, for expendi- tures made (or, if the Bank shall so agree, to be made) in respect of the reasonable cost of goods and services required for the Proj- ect described in Schedule 2 to this Agreement and to be financed out of the proceeds of the Loan. Section 2.03. Except as the Bank shall otherwise agree, the goods, works and services (other than consultants' services) for the Project to be financed out of the proceeds of the Loan, shall be procured in accordance with the provisions of Schedule 4 to this Agreement. Section 2.04. The Closing Date shall be December 31, 1981 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower and the Guarantor of such later date. -6- Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. Section 2.06. The Borrower shall pay intere-t at the rate of eight and seventy hundredths per cent (8.70%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semi-annually on June 1 and December 1 in each year. Section 2.08. The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 3 to this Agreement. -7- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project, or cause the Project to be carried out, with due diligence and ef- ficiency and in conformity with appropriate agricultural, adminis- trative, economic and financial practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) In the carrying out of the Project, the Borrower under- takes that it will at all times follow, or cause to be followed, the lending and operating policies and procedures set forth in Part A of Schedule 5 to this Agreement, as such Schedule may be amended from time to time. (c) Without any limitation or restriction upon the provisions of paragraphs (a) and (b) above, the Borrower shall: (i) provide, on a basis acceptable to the Bank, such funds in pesos, in addition to the equivalent in pesos of the proceeds of the Loan and the Partici- pating Institutions' own resources, as shall be necessary to enable the Participating Institutions to disburse the full amount of Sub-loans (the funds to be provided by the Borrower and the Participating Institutions for medium- and long-term lending un- der the Project being on the date hereof estimated -8- to aggregate the equivalent of not less than seventy- three million eight hundred thousand dollars ($73,800,000); and (ii) require that Investment Plans are technically, fi- nancially and economically sound, and that the pro- ceeds of Sub-loans are used exclusively for the financing thereof. Section 3.02. (a) To assist in the financing of Sub-loans, the Borrower shall relend to the Participating Institutions the equivalent in pesos of the proceeds of the Loan under Subsidiary Loan Agreements satisfactory to the Bank which shall include, inter alia, the terms and conditions set forth in Part B of Schedule 5 to this Agreement, as such Schedule may be amended from time to time. (b) The Borrower shall exercise its rights under the Subsid- iary Loan Agreements in such manner as to protect the interests of the Bank and the Borrower and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive any of the Subsidiary Loan Agreements or any provision thereof. (c) The Borrower shall utilize all funds repaid by the Par- ticipating Institutions, which are not needed to make repayments of principal, and payments of interest and other charges under the Loan, for making additional Subsidiary Loans to Participating In- stitutions for Sub-loans. 9 Section 3.03. Within six months from the date of this Agree- ment or such other later date as the Bank shall agree, the Borrower shall establish a system, satisfactory to the Bank, for monitoring the progress of at least five per cent (5%) of the Investment Plans, and for collecting technical and financial data of sufficient quantity and quality to enable an evaluation of the effects of the Project. Section 3.04. (a) The Guarantor, the Bank and the Borrower shall, at the request of any one of them, review the appropriate- ness of the lending terms and conditions set forth in Schedule 5 to this Agreement whenever changes in the economic conditions in Colombia make it advisable to review such lending terms and condi- tions. (b) If by the expiration of sixty days from the initiation of any such review, the Guarantor, the Bank and the Borrower shall not have reached agreement on the lending terms and conditions on which the Project shall continue, the Borrower shall cause the Participating Institutions to discontinue making new commitments of Sub-loans until such time as the Guarantor, the Bank and the Borrower shall have reached agreement on such lending terms and conditions and on any consequential amendments of the terms and conditions of the Subsidiary Loan Agreements. - 10 - 0 ARTICLE IV Other Covenants Section 4.01. The Borrower shall conduct the operations of DCA and DCF in accordance with appropriate administrative and fin- ancial standards and practices, under the supervision of competent and experienced management and personnel. Section 4.02. The Borrower shall: (i) establish and maintain separate accounts to be used exclusively for the Project; and (ii) record in such accounts all receipts and payments for or in con- nection with the Project, all in accordance with sound accounting principles consistently applied. Section 4.03. The Borrower shall: (i) have the accounts re- ferred to in Section 4.02 of this Agreement for each fiscal year audited in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) fur- nish to the Bank, as soon as available but in no case later than four months after the end of each such year, (A) certified copies of such accounts for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning such accounts and the audit thereof as the Bank shall from time to time reasonably request. Section 4.04. (a) The Borrower shall cause each Participating Institution to: 0 - 11 - (i) establish and maintain separate accounts on its re- cords to be used exclusively for the Project and to register in such accounts all its receipts and pay- ments for or in connection with the Project, in ac- cordance with sound accounting principles consis- tently applied; (ii) have the accounts referred to in i) above and re- lated statements audited annually, in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (iii) furnish to the Borrower as soon as available, but in any case not later than three months after the end of its respective fiscal year, (1) certified copies of such accounts and related statements for such year as so audited, and (2) the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested to the Borrower; and (iv) furnish to the Borrower or the Bank such other in- formation concerning such accounts and related statements as the Bank shall from time to time rea- sonably request from the Borrower. (b) The Borrower shall furnish to the Bank as soon as avail- able, but in any case not later than one month after receipt from each Participating Institution, the certified copies and informa- tion referred to in (a) hereof. -12- ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified: (a) a default shall occur in the due and punctual payment of any amount payable by any Participating Institution to the Borrower under the respective Subsidiary Loan Agreement; (b) a default shall occur in the performance of any other obligation on the part of any Participating Institution under the respective Subsidiary Loan Agreement; (c) a Participating Institution shall have been unable to pay its debts as they mature or any action or proceeding shall have been taken by a Participating Institution or by cthers whereby any of the property of such Participating Institution shall or may be distributed among its creditors; (d) any loan or credit to a Participating Institution having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan or credit shall have become enforceable; and (e) any action for the dissolution, disestablishment or liquidation of a Participating Institution or for the suspension of its operations shall have been taken; -13- provided, however, that if any event referred to in this Section shall have occurred and be continuing, the Bank may, after exchang- ing views thereon with the Borrower, at its option suspend the right of the Borrower to make withdrawals from the Loan Account only in respect of amounts proposed to be relent to the Participating Institution or Participating Institutions, as the case may be, affected by any such event. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified, namely, that any of the events specified in Section 5.01 of this Agreement shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower. ARTICLE VI Effective Date; Termination Section 6.01. The following event is specified as an additional condition to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions, namely, that the Borrower has executed and delivered a Subsidiary Loan Agreement, satisfactory to the Bank, with CAJA. Section 6.02. The following is specified as an additional mat- ter, within the meaning of Section 12.02 (c) of the General Condi- tions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Subsidiary Loan Agreement referred to in Section 6.01 of this Agreement has been duly authorized or ratified by, and executed and delivered on behalf of the Borrower and CAJA, respectively, and is legally binding upon them in accor- dance with its terms. Section 6.03. The date June 6, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. -15 - ARTICLE VII Miscellaneous Section 7.01. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT), Washington, D.C. 248423 (RCA) or 64145 (wUl) For the Borrower: Banco de la Rep6blica Bogotf, Colombia Cable address: Telex: REDESBANCO 0044559 Bogot1 o456o - 16- IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment to be signed in their respective names and to be delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Suitbertus van der Meer Regional Vice President Latin America and the Caribbean BANCO DE LA REPUBLICA By /s/ Leonel Torres Authorized Representative -17- SCHEDULE 1 Withdrawal of the Proceeds of the Loan 1. The table below sets forth the Categories of items to be fi- nanced out of the proceeds of the Loan, the allocation of the amounts of the Loan to each Category and the percentage of expendi- tures for items so to be financed in each Category: Amount of the Loan Allocated % of (Expressed in Expenditures Category Dollar Equivalent) to be Financed (1) Sub-loans to Small 14,000,000 39% of amounts Commercial Farmers of Sub-loans (2) Sub-loans to farmers 23,000,000 37% of amounts other than Small Com- of Sub-loans mercial Farmers and to machinery contrac- tors (3) Sub-loans to agro- 19,000,000 60% of amounts industrial enter- of Sub-loans prises (4) Unallocated 8,000,00o TOTAL 64,000,000 - 18- 2. The disbursement percentages have been calculated in compli- ance with the policy of the Bank that no proceeds of the Loan shall be disbursed on account of payments for taxes levied by, or in the territory of, the Guarantor on goods or services, or on the impor- tation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Loan decreases or increases, the Bank may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Bank. 3. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of: (a) expenditures prior to the date of this Agreement; and (b) sub-loans made by any Participating Institution (other than CAJA) until: (i) a Subsidiary Loan Agreement, satisfactory to the Bank, between the Borrower and such Participating Institution has been duly executed and delivered in accordance with Section 3.02 (a) of the Loan Agreement; and (ii) there has been furnished to the Bank an opinion or opinions satisfactory to the Bank of counsel ac- ceptable to the Bank, showing that the Subsidiary Loan Agreement of the Participating Institution has -19 - been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and the ParticipaTing Institution and is legally binding upon the Borrower and the Participating Institution in accordace with its terms. 4. Notwithstanding the allocation of an amount of the Loan set forth in the table in paragraph 1 above, if the Bank has reasonably estimated that the amount of the Loan then allocated to any Category will be insufficient to finance the agreed percentage of all ex- penditures in that Category, the Bank may reallocate, at the request of the Borrower, to such Category, to the extent required to meet the estimated shortfall, proceeds of the Loan which are then allocated to another Category and which in the opinion of the Bank and the Borrower are not needed to meet other expenditures. 5. If the Bank shall have reasonably determined that the procure- ment of any item in any Category is inconsistent with the procedures set forth or referred to in this Agreement, no expenditures for such item shall be financed out of the proceeds of the Loan and the Bank may, without in any way restricting or limiting any other right, power or remedy of the Bank under the Loan Agreement, by notice to the Borrower, cancel such amount of the Loan as, in the Bank's reasonable opinion, represents the amount of such ex- penditures which would otherwise have been eligible for financing out of the proceeds of the Loan. -20 0 SCHEDULE 2 Description of the Project The Project is the development of agricultural and livestock resources, and agro-industries, in Colombia through the provision of medium- and long-term credit. It consists of the following Parts: Part A: Agricultural Credit Sub-loans to farmers for: (i) the purchase of agricultural machinery and, equipment and livestock, and (ii) land development and improvement, and on-farm build- ing construction. Part B: Machinery Contractor Credit Sub-loans to machinery contractors for the purchase of agricultural machinery and equipment to be used for ag- ricultural production. Part C: Agro-industrial Credit Sub-loans to agro-industrial enterprises for the financ- ing of the establishment of new, or the expansion, modern- ization and vertical integration of existing, plants and installations for agro-industries. -21- SCHEDULE 3 Amortization Schedule Payment of Principal Date Payment Due (expressed in dollars)* On each June 1 and December 1 Beginning December 1, 1980 through June 1, 1991 2,785,000 On December 1, 1991 2,730,000 To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.02), the figures in this column represent dollar equiva- lents determined as for purposes of withdrawal. -22- Premiums on Prepayment The following percentages are specified as the premiums pay- able on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.05 (b) of the General Conditions: Time of Prepayment Premium Not more than three years before maturity 1.75% More than three years but not more than six years before maturity 3.50% More than six years but not more than eleven years before maturity 6.4o% More than eleven years but not more than thirteen years before maturity 7.55% More than thirteen years before maturity 8.70% * -23- SCHEDULE 4 Procurement 1. Works for land development will be carried out by the Bene- ficiaries using their own equipment or by contractual arrangements with contractors. 2. Contracts for goods and services will be procured through regular commercial channels from responsible suppliers in countries which are members of the Bank and Switzerland, provided, however, that, whenever the cost of machinery and equipment to be procured for a single Investment Plan exceeds the equivalent of $150,000: (i) price quotations from at least three suppliers are obtained; and (ii) price quotations are permitted on the basis of one single global contract, a grouping of contracts or single contracts for each item to be procured. 3. The Borrower will: (i) make available to Beneficiaries, at its offices and at the offices of the Participating Institutions, a catalog of suppliers of agro-industrial machinery and equipment from countries which are members of the Bank and Switzerland, in- . cluding a list of the agents or representatives of such suppliers in Colombia; and (ii) inform all representatives in Colombia of countries which are members of the Bank and Switzerland of the de- tails of the agro-industrial component of the Project, including broad particulars of the types of machinery and equipment likely to be required by Beneficiaries. - 24- SCHEDULE 5 Lending and Operating Policies and Procedures A. Sub-loans 1. Eligibility and procedures Participating Institutions will process all applications for Sub-loans in accordance with their normal administrative procedures and will evaluate the creditworthiness of the Beneficiaries and, in accordance with procedures satisfactory to the Borrower, the technical, financial and economical aspects of the Investment Plans. Sub-loans to farmers and agro-industrial enterprises will be based on detailed Irvestment Plans which will include cash flow projections and estimates of expected changes in key production coefficients. Small Commercial Farmers will be assisted by the technical staff of the Participating Institutions in the preparation of their Investment Plans. After approval of the Sub-loans, the tech- nical staff of the Participating Institutions will continue to advise Small Commercial Farmers and will supervise the progress of the farm development undertaken. Sub-loans to farmers other than Small Commercial Farmers and to agro-industrial enterprises will be supported by feasibility studies prepared to the satisfaction of the Participating Institu- tions concerned. * -25 - The staff of the Participating Institutions, or the staff of the Borrower on their behalf, will regularly visit the farms or agro-industrial enterprises where Investment Plans are being carried out to ensure that Beneficiaries are effectively and punctually carrying out their Investment Plans and complying with the provi- sions of their respective Sub-loan Contracts. Purchase of livestock may be included in an Investment Plan carried out by a Small Commercial Farmer provided that the live- stock purchased is breeding stock and that the price of such pur- chase does not exceed 75% of the cost of the Investment Plan. Investment Plans carried out by farmers other than Small Commercial Farmers may include: (i) the purchase of dairy cattle provided that the cattle purchased is breeding stock and that the price of such purchase does not exceed 75% of the cost of the Investment Plan; or (ii) the purchase of livestock, other than dairy cattle, provided that the livestock purchased is breeding stock and that the price of such purchase does not exceed 60% of the cost of the Investment Plan. The purchase of fattening animals will not be included in any Investment Plan. - 26- 2. Terms and conditions Sub-loan Contracts will include, inter alia, the following terms and conditions: (a) Sub-loans to Small Commercial Farmers (i) Sub-loans will be made and will be repayable in pesos; (ii) interest on the outstanding principal of each Sub-loan will be payable at the rate of not less than 15% per annum exclusive of all appli- cable commissions, taxes, charges or fees of any kind whatsoever; (iii) the repayment terms will reflect the capacity of the Beneficiary to repay and the cash flow position of the Investment Plan and will be for not less than two years and not more than fifteen years, including a grace period of not less than one year and not more than five years; (iv) the amount of Sub-loans will not exceed the equivalent of 85% of the estimated cost of the investments to be financed therewith; * -27- (v) a Small Commercial Farmer will not be entitled to borrow under Sub-loans in excess of an amount aggregating the equivalent of $10,000; groups of Small Commercial Farmers will be entitled to borrow under Sub-loans up to an amount aggre- gating the equivalent of $10,000 multiplied by the number of members of the group; (vi) the goods and services financed out of the pro- ceeds of the Sub-loan will be used exclusively for the purposes approved by the Borrower; (vii) the right of the Bank and the Borrower to inspect the premises, the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any rele- vant records and documents; (viii) the right to obtain all such information as the Bank or the Borrower will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; (ix) the requirement that the goods, works and services (other than consultants' services) to be financed out of the proceeds of the Loan will be procured in accordance with the provisions of Section 2.03 and Schedule 4 of the Loan Agreement; - 28 - 0 (x) the requirement that the Beneficiary carry out his Investment Plan, as approved, and carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricul- tural, comercial and financial practices and standards, and to maintain adequate records; (xi) the requirement that the Beneficiary insure, or make adequate provision for the insurance of, any imported goods to be financed out of the pro- ceeds of such Sub-loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; and (xii) the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obligations under the Sub-loan Contract and, in appropriate cases, to premature the Sub-loan. (b) Sub-loans to farmers other than Small Commercial Farmers (i) Sub-loans will be made and will be repayable in pesos; (ii) interest on the outstanding principal of each Sub-loan will be payable at the rate of not less than 15% per annum exclusive of all com- missions, taxes, charges or fees of any kind whatsoever; -29- (iii) the repayment terms will reflect the capacity of the Beneficiary to repay and the cash flow position of the Investment Plan and will be for not less than two years and not more than fifteen years, including a grace period of not less than one year and not more than five years; (iv) the amount of Sub-loans will not exceed 75% of the estimated cost of the investments to be financed therewith; (v) a farmer other than a Small Commercial Farmer will not be entitled to borrow under Sub-loans in excess of an amount aggregating the equivalent of $100,000; (vi) the goods and services financed out of the proceeds of the Sub-loan will be used exclusively for the purposes approved by the Borrower; (vii) the right of the Bank and the Borrower to inspect the premises, the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any rele- vant records and documents; (viii) the right to obtain all such information as the Bank or the Borrower will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; - 30 0 (ix) the requirement that the goods, works and services (other than consultants' services) to be financed out of the proceeds of the Sub-loan will be procured in accordance with the provisions of Section 2.03 and Schedule 4 of the Loan Agreement; (x) the requirement that the Beneficiary carry out his Investment Plan, as approved, and carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricul- tural, commercial and financial practices and standards, and to maintain adequate records; (xi) the requirement that the Beneficiary insure, or make adequate provision for the insurance of, any imported goods to be financed out of the pro- ceeds of the Sub-loans against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; and (xii) the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obli- gations under the Sub-loan Contract and, in appro- priate cases, to premature the Sub-loan. (c) Sub-loans to Machinery Contractors (i) Sub-loans will be made and will be repayable in pesos; -31 - (ii) interest on the outstanding principal of each Sub- loan will be payable at the rate of not less than 15% per annum exclusive of all commissions, taxes, charges or fees of any kind whatsoever; (iii) the repayment terms will reflect the capacity of the Beneficiary to repay and will be for not less than two years and not more than fifteen years, including a grace period of not less than one year and not more than five years; (iv) the amount of Sub-loans will not exceed 75% of the estimated cost of the agricultural machinery and equipment to be financed therewith; (v) a machinery contractor, regardless of whether he borrows directly or through an association of machinery contractors of which he is a member, will not be entitled to borrow through or benefit from Sub-loans in excess of an amount aggregating the equivalent of $100,000; (vi) the agricultural machinery and equipment financed out of the proceeds of the Sub-loan will be used exclusively for agricultural production purposes; (vii) the right of the Bank and the Borrower to inspect the machinery and equipment financed by the Sub- loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents; - 32 - (viii) the right to obtain all such information as the Bank or the Borrower will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; (ix) the requirement that the goods, works and services (other than consultants' services) to be financed out of the proceeds of the Sub-loan will be pro- cured in accordance with the provisions of Section 2.03 and Schedule 4 of the Loan Agreement; (x) the requirement that the Beneficiary carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricultural, commercial and financial practices and standards, and to maintain adequate records; (xi) the requirement that the Beneficiary insure, or make adequate provision for the insurance of, any imported goods to be financed out of the proceeds of the Sub-loans against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; and (xii) the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obligations under the Sub-loan Contract and, in appropriate cases, to premature the Sub-loan. -33 - (d) Sub-loans to Agro-industrial enterprises (i) Sub-loans will be made and will be repayable in pesos; (ii) interest on the outstanding principal of each Sub-loan will be payable at not less than the rates applicable pursuant to the Schedule in effect on November 30, 1976 for a loan for an equivalent purpose made by the Fondo para Inversiones Privadas (FIP) of the Borrower or by the Fondo Financiero Industrial (FFI) of the Borrower; (iii) the repayment terms will reflect the capacity of the Beneficiary to repay and the cash flow position of the Investment Plan and will be for not less than two years and not more than fifteen years, including a grace period of not less than one year and not more than five years; (iv) the amount of Sub-loans will not exceed 75% of the estimated cost of the investments to be financed therewith or $500,000 equivalent, which- ever is the lower; (v) the goods and services financed out of the proceeds of the Sub-loan will be used exclusively for the purposes approved by the Borrower; -34- (vi) the right of the Bank and the Borrower to inspect the premises, the improvement of which is financed by the Sub-loan, any equipment, materials or inputs financed by the Sub-loan, the business of the Beneficiary, the operation thereof, and any relevant records and documents; (vii) the right to obtain all such information as the Bank or the Borrower will reasonably request relating to the foregoing and to the operations and financial condition of the Beneficiary; (viii) the requirement that the goods, works and services (other than consultants' services) to be financed out of the proceeds of the Sub-loan will be pro- cured in accordance with the provisions of Section 2.03 and Schedule 4 of the Loan Agreement; (ix) the requirement that the Beneficiary carry out his Investment Plan, as approved, and carry on his business, with due diligence and efficiency and in accordance with appropriate technical, agricultural, industrial, commercial and financial practices and standards, and to maintain adequate records; (x) the requirement that the Beneficiaries insure, or make adequate provision for the insurance of, any imported goods to be financed out of the proceeds * -35- of the Sub-loans against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation; and (xi) the right to suspend or terminate access by the Beneficiary to the use of the proceeds of the Sub-loan upon failure by him to perform his obli- gations under the Sub-loan Contract and, in appro- priate cases, to premature the Sub-loan. B. Subsidiary Loans 1. Eligibility CAJA and such public or private banks or institutions as will be selected by the Borrower to participate in the carrying out of the Project on the basis of their (i) past experience and perfor- mance in agricultural lending; (ii) favorable financial condition; (iii) managerial capabilities; (iv) adequacy of the number and qualifications of the technical staff; and (v) existence of branch network outside Bogotg. 2. Terms and Conditions Subsidiary Loan Agreements will include, inter alia, the following terms and conditions: (a) Subsidiary Loans for the financing of Sub-loans to Small Commercial Farmers (i) Subsidiary Loans will be made and will be repayable in pesos; - 36 - 0 (ii) Subsidiary Loans will finance not less than 39% of the amount of Sub-loans; (iii) interest on the outstanding principal of each Subsidiary Loan will be payable at the rate of not more than 13% per annum; (iv) the Participating Institution will repay the principal of and pay the interest on Subsidiary Loans on the dates that repayments of principal and payments of interest of the Sub-loans financed with such Subsidiary Loans fall due; (v) the Participating Institution will assume the risk of non-payment for Sub-loans made by it; (vi) the Participating Institution will provide, out of its own resources and on commercial lending terms, short-term loans to Beneficiaries to cover their working capital and other short-term finan- cial requirements, in such amounts and for such periods as will be required under the respective Investment Plans; (vii) the Participating Institution will take the action necessary on its part to enable the Borrower to fulfill its commitments under Sections 3.04 and 4.04 of the Loan Agreement; -37 - (viii) the right to suspend or terminate access by the Participating Institution to the use of the pro- ceeds of the Subsidiary Loan upon failure by it to perform its obligations under the Subsidiary Loan Agreement and, in appropriate cases, to premature the Subsidiary Loan; and (ix) the Subsidiary Loan Agreement will contain all other provisions necessary to ensure that the Participating Institution includes in the corres- ponding Sub-loan Contract the terms and conditions referred to in Part A of this Schedule. (b) Subsidiary Loans for the financing of Sub-loans to farmers other than Small Commercial Farmers (i) Subsidiary Loans will be made and will be repayable in pesos; (ii) Subsidiary Loans will finance not less than 37% of the amount of Sub-loans; (iii) interest on the outstanding principal of each Subsidiary Loan will be payable at the rate of not more than 13% per annum; - 38 0 (iv) the Participating Institution will repay the prin- cipal of and pay the interest on Subsidiary Loans on the dates that repayments of principal and payments of interest of the Sub-loans financed with such Subsidiary Loans fall due; (v) the Participating Institution will assume the risk of non-payment for Sub-loans made by it; (vi) the Participating Institution will provide, out of its own resources and on commercial lending terms, short-term loans to Beneficiaries to cover their working capital and other short-term finan- cial requirements, in such amounts and for such periods as will be required under the respective Investment Plans; (vii) the Participating Institution will take the action necessary on its part to enable the Borrower to fulfill its commitments under Sections 3.04 and 4.04 of the Loan Agreement; (viii) the right to suspend or terminate access by the Participating Institution to the use of the pro- ceeds of the Subsidiary Loan upon failure by it to perform its obligations under the Subsidiary Loan Agreement and, in appropriate cases, to premature the Subsidiary Loan; and -39 - (ix) the Subsidiary Loan Agreement will contain all other provisions necessary to ensure that the Participating Institution includes in the corres- ponding Sub-loan Contract the terms and conditions referred to in Part A of this Schedule. (c) Subsidiary Loans for the financing of Sub-loans to Machinery Contractors (i) Subsidiary Loans will be made and will repayable in pesos; (ii) Subsidiary Loans will finance not less than 37% of the amount of Sub-loans; (iii) interest on the outstanding principal of each Subsidiary Loan will be payable at the rate of not more than 13% per annum; (iv) the Participating Institution will repay the prin- cipal of and pay the interest on Subsidiary Loans on the dates that repayments of principal and payments of interest of the Sub-loans financed with such Subsidiary Loans fall due; (v) the Participating Institution will assume the risk of non-payment for Sub-loans made by it; (vi) the Participating Institution will provide, out of its own resources and on commercial lending terms, short-term loans to Beneficiaries to cover their working capital and other short-term finan- cial requirements, in such amounts and for such periods as will be required under the respective Investment Plans; (vii) the Participating Institution will take the action necessary on its part to enable the Borrower to fulfill its commitments under Sections 3.04 and 4.04 of the Loan Agreement; (viii) the right to suspend or terminate access by the Participating Institution to the use of the proceeds of the Subsidiary Loan upon failure by it to perform its obligations under the Subsidiary Loan Agreement and, in appropriate cases, to premature the Subsid- iary Loan; and (ix) the Subsidiary Loan Agreement will contain all other provisions necessary to ensure that the Participating Institution includes in the corres- ponding Sub-loan Contract the terms and conditions referred to in Part A of this Schedule. * -41 - (d) Subsidiary Loans for the financing of Sub-loans to Agro-industrial enterprises (i) Subsidiary Loans will be made and will be repayable in pesos; (ii) Subsidiary Loans will finance not less than 60% of the amount of Sub-loans; (iii) the outstanding principal of each Subsidiary Loan will bear interest at a rate not higher than that applicable as of November 30, 1976 to the rediscounting of loans for similar purposes made by the Fondo para Inversionas Privadas (FIP) of the Borrower or by the Fondo Financiero Industrial of the Borrower; (iv) the Participating Institution will repay the prin- cipal of and pay the interest on Subsidiary Loans on the dates that repayments of principal and payments of interest of the Sub-loans financed with such Subsidiary Loans fall due; (v) the Participating Institution will assume the risk of non-payment for Sub-loans made by it; - 42 - (vi) the Participating Institution will provide, out of its own resources and on commercial lending terms, short-term loans to Beneficiaries to cover their working capital and short-term financial requirements, in such amounts and for such periods as will be required under the respective Investment Plans; (vii) the Participating Institution will take the action necessary on its part to enable the Borrower to fulfill its commitments under Sections 3.04 and 4.04 of the Loan Agreement; (viii) the right to suspend or terminate access by the Participating Institution to the use of the pro- ceeds of the Subsidiary Loan upon failure by it to perform its obligations under the Subsidiary Loan Agreement and, in appropriate cases, to premature the Subsidiary Loan; and (ix) the Subsidiary Loan Agreement will contain all other provisions necessary to ensure that the Participating Institution includes in the corresponding Sub-loan Contract the terms and conditions referred to in Part A of this Schedule.