Afghanistan - Fruit And Vegetable Export Project : Credit 0779 - Project Agreement - 1 - Conformed

CONFORMED COPY CREDIT NUMBER 779 AF First Project Agreement (Fruit and Vegetable Export Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and EXPORT PROMOTION BANK OF AFGHANISTAN and AFGHAN RAISIN INSTITUTE and AFGHAN SEEDS COMPANY and AFGHAN VEGETABLE EXPORT COMPANY Dated September 27, 1978 CREDIT NUMBER 779-AF PROJECT AGREEMENT AGREEMENT, dated September 27, 1978, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and EXPORT PROMOTION BANK OF AFGHANISTAN (hereinafter called EPB) and AFGHAN RAISIN INSTITUTE (hereinafter called ARI) and AFGHAN SEEDS COMPANY (hereinafter called ASC) and AFGHAN VEGETABLE EXPORT COMPANY (hereinafter called AVEC), EPB, ARI, ASC and AVEC each existing as separate legal entities under the laws of the Democra- tic Republic of Afghanistan. WHEREAS by the Development Credit Agreement of even date herewith between the Democratic Republic of Afghanistan (herein- after called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to eighteen million dollars ($18,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that EPB, ARI, ASC and AVEC agree to undertake such obligations toward the Association as herein- after set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and EPB (the First Subsidiary Loan Agree- ment), part of the proceeds of the credit (hereinafter called the Credit) provided for under the Development Credit Agreement will be made available to EPB on the terms and conditions therein set forth; WHEREAS by a subsidiary loan agreement to be entered into between EPB and ARI (the Third Subsidiary Loan Agreement), part of the proceeds of the Credit made available to EPB will, in turn, be made available to ARI on the terms and conditions therein set forth; WHEREAS by a subsidiary loan agreement to be entered into between EPB and ASC (the Fourth Subsidiary Loan Agreement), part of the proceeds of the Credit made available to EPB will, in turn, be made available to ASC on the terms and conditions therein set forth; WHEREAS by a subsidiary loan agreement to be entered into between EPB and AVEC (the Fifth Subsidiary Loan Agreement), part of the proceeds of the Credit made available to EPB will, in turn, be made available to AVEC on the terms and conditions therein set forth; and -2- WHEREAS EPB, ARI, ASC and AVEC, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, have agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "EPB subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, (i) by EPB or (ii) by any one or more subsidiaries of EPB or (iii) by EPB and one or more of its subsidiaries; (b) "ARI subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, (i) by ARI or (ii) by any one or more subsidiaries of ARI or (iii) by ARI and one or more of its subsidiaries; (c) "ASC subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, (i) by ASC or (ii) by any one or more subsidiaries of ASC or (iii) by ASC and one or more of its subsidiaries; (d) "AVEC subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, (i) by AVEC or (ii) by any one or more subsidiaries of AVEC or (iii) by AVEC and one or more of its subsidiaries; (e) "the Raisin Marketing Credit Program" means the pro- vision of Credit by EPB, in cooperation with ARI, to raisin producers whose raisins have been pre-cleaned and graded by ARI and are stored in ARI owned and operated stores. Such credit -3- in each and every case shall be limited to not more than 75% of the farmgate value of the raisins in store or such other amount as may be agreed upon between EPB and the Association, shall be secured by a lien on such raisins and shall be repaid in full, including all service charges, within twelve months or prior to removal of the raisins from the ARI store, whichever occurs first; and (f) "subsidiary" means any company or entity of which a majority of the outstanding, voting stock or other proprietary interest is owned, or which is effectively controlled, (i) by another company or other business entity or (ii) by any one or more subsidiaries of such other company or business entity or (iii) by another company or other business entity and one or more subsidiaries of such other company or business entity. ARTICLE II EPB's Obligations as to Parts A through E and Part G of the Project Section 2.01. (a) EPB shall carry out Parts B and E of the Project described in Schedule 2 to the Development Credit Agree- ment with due diligence and efficiency and in conformity with appropriate administrative and financial practices. (b) Without limitation or restriction on the provisions of paragraph (a) of this Section, EPB shall provide out of its own resources, by way of loan to ARI, on terms and conditions satis- factory to the Borrower and the Association, an amount of not less than Af 58,600,000 for the establishment and initial operation of ARI under the Project. Section 2.02. (a) EPB shall on-lend to ARI not less than the equivalent of 4,000,000 dollars out of the proceeds of the Credit received by EPB from the Borrower pursuant to Section 3.02 of the Development Credit Agreement under terms and conditions of an agreement between EPB and ARI (the Third Subsidiary Loan Agree- ment) satisfactory to the Borrower and the Association. (b) EPB shall on-lend to ASC not less than the equivalent of 1,160,000 dollars out of the proceeds of the Credit received by EPB from the Borrower pursuant to Section 3.02 of the Development Credit Agreement under terms and conditions of an agreement between EPB and ASC (the Fourth Subsidiary Loan Agreement) satis- factory to the Borrower and the Association. (c) EPB shall on-lend to AVEC not less than the equivalent of 1,000,000 dollars out of the proceeds of the Credit received by EPB from the Borrower pursuant to Section 3.02 of the Development Credit Agreement under terms and conditions of an agreement between EPB and AVEC (the Fifth Subsidiary Agreement) satisfactory to the Borrower and the Association. (d) Whenever in connection with the foregoing provisions of this Section it shall become necessary to value the proceeds of the CrediL in terms of Afghanis, the provisions of Section 3.04 of the Development Credit Agreement shall apply. Section 2.03. (a) EPB shall, through EPU, furnish to the Association, promptly upon their preparation, the plans, specifi- cations, reports, contract documents and work and procurement schedules for the credit program and facilities to be financed by EPB under Parts B and E of the Project, respectively, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) EPB shall: (i) maintain records and procedures satisfac- tory to the Association to record and monitor the progress of Parts B and E of the Project (including their costs and the benefits to be derived ther-efrom), to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose their use in the Project; (ii) without limitation upon the provisions of paragraph (c) of this Section, enable the Association's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) furnish to EPU at regular intervals all such information as EPU or the Association shall reasonably request concerning Parts B and E of the Project, their costs and, where appropriate, the benefits to be derived therefrom, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. (c) EPB shall enable the Association's accredited represen- tatives to examine all installations, sites, works, buildings, property and equipment of EPB and any relevant records and docu- ments. Section 2.04. EPB shall ensure that the obligations of ARI pursuant to Sections 3.05, 3.08 and 3.09 of this Agreement, the -5- obligations of ASC pursuant to Sections 4.05, 4.08 and 4.09 of this Agreement and the obligations of AVEC pursuant to Sections 5.03, 5.06 and 5.07 are complied with. Section 2.05. EPB shall duly perform all its obligations under the Subsidiary Loan Agreements. Except as the Association shall otherwise agree, EPB shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreements or any provision thereof. Section 2.06. (a) EPB shall employ not less than three suitably qualified and experienced Afghans to work as counterparts to the experts whose services are utilized pursuant to paragraph (b) (ii) of this Section. (b) EPB shall on terms and conditions acceptable to the Association: (i) establish and maintain a Financial Planning Depart- ment and an Internal Auditing Department; and (ii) utilize the services of three expatriate experts employed pursuant to the terms of the UNDP Project Document in the disciplines of bank credit, finan- cial planning and accounting, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and who shall serve as comanagers of the Cr2dit, Financial Planning and Internal Audit Departments of EPB, respectively. (c) By June 30, 1979 or such other date as may be acceptable to the Association, EPB shall on terms and conditions acceptable to the Association: (i) retain a qualified acc.unting firm to establish a computerized accounting system in EPB; (ii) develop, in cooperation with ARI, a suitable system and timetable for implementing the Raisin Marketing Credit Program and submit these to the Association for approval; and (iii) develop a training program in connection with its training fellowships and a timetable for the implementation thereof, submit such program and timetable to the Association for its approval and -6- carry out such program in accordance with such timetable immediately after the Association's approval thereof. (d) EPB shall select its trainees in consultation with the Association and wiLth the experts employed by EPB and shall arrange for the training of such trainees in accordance with the program as approved by the Association in accordance with paragraph (c) (iii) of this Section. Section 2.07. EPB shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 2.08. EPB shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors satisfactory to the Borrower and the Associ- ation; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) two certified copies of its financial statements for such year as so audited and (B) two copies of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of EPB and the audit thereof as the Associ- ation shall from time to time reasonably request. Section 2.09. Except as the Association shall otherwise agree, EPB shall: (i) conduct its operations and affairs in such manner as shall be necessary to maintain, at all times, its debt/equity ratio within the limit referred to in Section 2.11 of this Agreement; and (ii) if such ratio shall, for reasons beyond EPB's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 2.10. EPB shall not make any repayment in advance of maturity in respect of any outstanding debt of EPB which, in the judgment of the Association, would materially affect EPB's ability to meet its financial obligations. Section 2.11. Except as may otherwise be agreed between the Association and EPB, EPB shall not incur or permit any sub- sidiary of it to incur any debt if, after the incurring of such -7- debt, the consolidated debt of EPB and all its subsidiaries then incurred and outstanding would be greater than five times the consolidated capital and surplus of EPB and all its subsidiaries. For the purposes of this Section: (a) "debt" means any debt incurred by EPB or any subsidiary thereof maturing more than one year after the date on which it is originally incurred; (b) debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the First Subsidiary Loan Agree- ment) on the date and to the extent the amount of the loan is drawn down and outstanding pursuant to such loan contract or agreement, and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (c) whenever in connection with this Section it shall be necessary to value in terms of Afghanis debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by EPB for the purposes of servicing such debt; (d) "consolidated debt of EPB and all its subsidaries" means the total amount of debt of EPB and its subsidiaries, excluding any debt owed by EPB to any subsidiary or by any subsidiary to the Borrower or to any other subsidiary; and (e) "consolidated capital and surplus of EPB and all its subsidiaries" means the aggregate of the unimpaired paid-up capital, surplus and free reserves of EPB and its subsidiaries after excluding therefrom such amounts as shall represent equity interests of EPB in any subsidiary or of any subsidiary in EPB or any other subsidiary. Section 2.12. EPB shall take such steps satisfactory to the Association as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the currencies (including Afghanis) used in its lending and borrowing operationsv Section 2.13. The Association and EPB shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations - 8 - and financial condition of EPB and its subsidiaries, and EPB shall furnish to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of EPB and its subsidiaries. Section 2.14. The operating policies and procedures of EPB in respect of Parts A through E of the Project shall be as set forth in Schedule 1 to this Agreement, as the same may be amended from time to time by agreement between the Borrower, the Associa- tion and EPB. Section 2.15. EPB shall not establish, acquire or take over any EPB subsidiary except on terms and conditions satisfac- tory to the Borrower and the Association. ARTICLE III Obligations of ARI as to the Execution of Part A of the Project Section 3.01. ARI shall carry out Part A of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural, financial and engineering practices. Section 3.02. (a) By December 31, 1978 or such other date as may be acceptable to the Association, ARI shall utilize the services of an expatriate viticulturalist, an expatriate raisin processing and quality control specialist and an expatriate raisin marketing specialist, each of whom shall be employed pursuant to the terms of the UNDP Project Document and each of whose qualifi- cations, experience and terms and conditions of employment shall be satisfactory to the Association. (b) Starting on January 1, 1979 or such other date as the Association may agree, ARI shall, each year during four consecu- tive years for a period of three months, utilize the services of an accountant employed pursuant to the terms of the UNDP Proj- ect Document to develop an accounting and auditing system and to train ARI's staff in this field; the qualification, experience and terms and conditions of employment of such accountant shall be satisfactory to the Association. - 9 - Section 3.03. (a) By March 31, 1979 or such other date as may be acceptable to the Association, ARI shall submit to the Association for its approval: (i) a training program for Afghan personnel and a timetable for implementation thereof in connection with the ARI study tours and fellowships funded under Part G (iii) of the Project; and (ii) a program, including a timetable, for implementing raisin grading and certification programs at the farmgate and at the time of export. (b) Following notification to ARI of approval of the train- ing program and timetable under paragraph (a) (i) of this Section, ARI shall, in accordance with such timetable and in consultation with the Association, select the requisite number of trainees and place them abroad. Section 3.04. ARI undertakes to insure, or make adequate provisior. for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (a) of this Agreement against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ARI to replace or repair such goods. Section 3.05. ARI shall duly perform all its obligations under the Third Subsidiary Loan Agreement. Except as the Associ- ation shall otherwise agree, ARI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Third Subsidiary Loan Agreement or any provision thereof. Section 3.06. ARI shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 3.07. ARI shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to EPB and the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) two certified copies of its financial statements for such year as - 10 - so audited and (B) two copies of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Associ- ation such other information concerning the accounts and financial statements of ARI and the audit thereof as tne Association shall from time to time reasonably request. Section 3.08. (a) ARI shall, through EPU, furnish to the Association, promptly upon their preparation, the plans, specifi- cations, reports, contract documents and construction and procure- ment schedules for Part A of the Project, and any material modifi- cations thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ARI shall: (i) maintain records and procedures satisfac- tory to EPB and the Association to record and monitor the progress of Part A of the Project (including the cost and the benefits to be derived therefrom), to identify the goods and services financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (a) of this Agreement and to disclose their use in the Project; (ii) without limitation upon the provi- sions of paragraph (c) of this Section, enable the Association's accredited representatives to visit the facilities and construc- tion sites included in Part A of the Project and to examine the goods financed out of the aforesaid proceeds of the Credit and any relevant records and documents; and (iii) furnish to EPU at regular intervals all such information as EPU or the Association shall reasonably request concerning Part A of the Project, the cost and, where appropriate, the benefits to be derived therefrom, the expenditure of the aforesaid proceeds of the Credit made available to ARI and the goods and services financed out of such proceeds. (c) ARI shall enable the Association's accredited represen- tatives to examine all installations, sites, works, buildings, property and equipment of ARI and any relevant records and docu- ments. Section 3.09. ARI shall not establish, acquire or takeover any ARI subsidiary except on terms and conditions satisfactory to the Borrower and the Association. Section 3.10. The Association and ARI shall, from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of ARI and its subsidiaries, if any, and ARI shall furnish to the Association all such information as the - 11 - Association shall reasonably request concerning the administra- tion, operations and financial condition of ARI and its subsid- iaries, if any. Section 3.11. ARI shall cooperate with AGBANK in the carrying out of its obligations under Section 2.07 of the Second Project Agreement. ARTICLE IV Obligations of ASC as to the Execution of Part C of the Project Section 4.01. ASC shall carry out Part C of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appropriate administrative, agricultural, financial and engineering practices. Section 4.02. (a) ASC shall utilize the services of an expa- triate Technical Manager and an expatriate Seed Processing Techni- cian for ASC's Vegetable Seed Multiplication Division and an expatriate Pomologist for ASC's Fruit Rootstock and Seedling Divi- sion, each of whom shall be employed pursuant to the terms of the UNDP Project Document and each of whose qualifications, experience and terms and conditions of employment shall be satisfactory to ASC and the Association. (b) By December 31, 1978 or such other date as may be acceptable to the Association, ASC shall: (i) utilize the services of an expatriate Financial Manager for ASC who shall be employed pursuant to the terms of the UNDP Project Document and whose qual- ifications, experience and terms and conditions of employment shall be satisfactory to ASC and the Association; and (ii) employ a suitably qualified and experienced Afghan counterpart thereto. Section 4.03. By March 20, 1979 or such other date as may be acceptable to the Association, ASC shall: (a) establish an accounting system, acceptable to EPB and the Association, of separate accounts for ASC's activities in the following areas: (i) field seed; (ii) vegetable seed multiplica- tion; (iii) fruit rootstock and seedling production and marketing; and (b) establish separate operating divisions for (i) field seed, (ii) vegetable seed multiplication, (iii) fruit rootstock and seedling production, and (iv) marketing. - 12 - Section 4.04. (a) By March 31, 1979 or such other date as may be acceptable to the Association, ASC shall submit to the Association, for its approval, a training program for Afghan personnel together with a timetable of implementation thereof in connection with the ASC fellowships funded under Part G (iii) of the Project. (b) Following notification to ASC of approval of the train- ing program under paragraph (a) of this Section, ASC shall, in accordance with such timetable as approved by the Association, select the requisite number of trainees and place them abroad in consultation with the Association. Section 4.05. ASC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (b) of this Agreement against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by ASC to replace or repair such goods. Section 4.06. ASC shall duly perform all its obligations under the Fourth Subsidiary Loan Agreement. Except as the Associ- ation shall otherwise agree, ASC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Fourth Subsidiary Loan Agreement or any provision thereof. Section 4.07. ASC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.08. ASC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) two certi- fied copies of its financial statements for such year as so audited and (B) two copies of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Associ- ation such other information concerning the accounts and financial - 13 - statements of ASC and the audit thereof as the Association shall from time to time reasonably request. Section 4.09. (a) ASC shall, through EPU, furnish to the Association, promptly upon their preparation, the plans, specifi- cations, reports, contract documents and construction and procurement schedules for Part C of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) ASC shall: (i) maintain records and procedures satisfac- tory to EPB und the Association to record and monitor the progress of Part C of the Project (including the costs and the benefits to be derived therefrom), to identify the goods and services financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (b) of this Agreement and to disclose their use in the Project; (ii) without limitation upon the pro- visions of paragraph (c) of this Section, enable the Association's accredited represencatives to visit the facilities and construc- tion sites included in Part C of the Project and to examine the goods financed out of the aforesaid proceeds of the Credit and any relevant records and documents; and (iii) furnish to EPU at regular intervals all such information as EPU or the Association shall reasonably request concerning Part C of the Project, the cost and, where appropriate, the benefits to be derived therefrom, the expenditure of the aforesaid proceeds of the Credit made available to ASC and the goods and services financed out of such proceeds. (c) ASC shall enable the Association's accredited represen- tatives to examine all installations, sites, works, buildings, property and equipment of ASC and any relevant records and docu- ments. Section 4.10. ASC shall not establish, acquire or takeover any ASC subsidiary except on terms and conditions satisfactory to the Borrower and the Association. Section 4.11. The -Association and ASC shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of ASC and its subsidiaries, if any, and ASC shall furnish to the Association all such information as the - 14 - Association shall reasonably request concerning the administra- tion, operations and financial condition of ASC and its subsid- iaries, if any. ARTICLE V Obligations of AVEC as to the Execution of Part D of the Project Section 5.01. AVEC shall carry out Part D of the rroject described in Schedule 2 to the Development Credit Agreement with due diligence and efficiency and in conformity with appro- priate administrative, agricultural, financial and engineering practices. Section 5.02. AVEC shall utilize the services of an expa- triate Contracts and Sales Manager, an expatriate Production Manager, an expatriate Packing and Storage Manager, an expatriate Master Mechanic and an expatriate Hydrologist, each of whom shall be employed pursuant to the terms of the UNDP Project Document and each of whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 5.03. AVEC undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (c) of this Agreement against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by AVEC to replace or repair such goods. Section 5.04. AVEC shall duly perform all its obligations under the Fifth Subsidiary Loan Agreement. Except as the Associa- tion shall otherwise agree, AVEC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Fifth Subsidiary Loan Agreement or any provision thereof. Section 5.05. AVEC shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 5.06. AVEC shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance - 15 - with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon hs available, but in any case not later than four months after the end of each such year, (A) two certi- fied copies of its financial statements for such year as so audited and (B) two copies of the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Associa- tion such other information concerning the accounts and financial statements of AVEC and the audit thereof as the Association shall from time to time reasonably request. Section 5.07. (a) AVEC shall, through EPU, furnish to the Association, promptly upon their preparation, the plans, specifi- cations, rep(,rts, contract documents and work and procurement schedules for Part D of the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Asso- ciation shall reasonably request. (b) AVEC shall: (i) maintain records and procedures satis- factory to EPB and the Association to record and monitor the progress of Part D of the Project (including the cost and the benefits to be derived therefrom), to identify the goods and services financed out of the proceeds of the Credit made available to it by EPB pursuant to Section 2.02 (c) of this Agreement, and to disclose their use in the Project; (ii) without limitation upon the provisions of paragraph (c) of this Section, enable the Association's accredited representatives to visit the facilities and construction sites included in Part D of the Project and to examine the goods financed out of the aforesaid proceeds of the Credit and any relevant records and documents; and (iii) furnish to EPU at regular intervals all such information as EPU or the Association shall reasonably request concerning Part D of the Project, the cost and, where appropriate, the benefits to be derived therefrom, the expenditure of the aforesaid proceeds of the Credit made available to AVEC and the goods and services financed out of such proceeds. (c) AVEC shall enable the Association's accredited represen- tatives to examine all installations, sites, works, buildings, property and equipment of AVEC and any relevant records and documents. Section 5.08. AVEC shall not establish, acquire or takeover any AVEC subsidiary except on terms and conditions satisfactory to the Borrower and the Association. - 16 - Section 5.09. The Association and AVEC shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of AVEC and its subsidiaries, if any, and AVEC shall furnish to the Association all such information as the Association shall reasonably request concerning the administra- tion, operations and financial condition of AVEC and its subsid- iaries, if any. Section 5.10. AVEC shall cooperate fully with AGBANK for the purposes of preparing the program mentioned in Section 2.06 of the Se,ond Project Agreement. Section 5.11. AVEC shall not assign, transfer, lease or otherwise dispose of the land or of any part thereof made avail- able to it by the Borrower pursuant to Section 3.09 of the Devel- opment Credit Agreement. ARTICLE VI Obligations of EPB, ARI, ASC and AVEC Section 6.01. EPB, ARI, ASC and AVEC shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 6.02. (a) The Association, EPB, ARI, ASC and AVEC shall from time to time, at the request of any party, exchange views through their representatives with regard to the progress of Parts A through E and Part G of the Project, the performance of their respective obligations under this Agreement, the performance by EPB, ARI, ASC and AVEC of their respective obligations under the Subsidiary Agreements and other matters relating to the purposes of the Credit. (b) EPB, ARI, ASC and AVEC shall promptly inform the Asso- ciation, through EPU, of any condition which interferes or threatens to interfere with, the progress of Parts A through E and Part G of the Project, the accomplishment of the purposes of the Credit, or the performance by EPB, ARI, ASC and AVEC of their respective obligations under this Agreement and under the Subsid- iary Agreements. - 17 - Section 6.03. Except as the Association may otherwise agree, EPB, ARI, ASC and AVEC shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. Section 6.04. EPB, ARI, ASC and AVEC shall take all such action as may be required to assist and cooperate with EPU in the carrying out of the Project. ARTICLE VII Effective Date; Termination; Cancellation and Suspension Section 7.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 7.02. (a) This Agreement and all obligations of the Association and of EPB, ARI, ASC and AVEC thereunder shall termi- nate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify EPB, ARI, ASC and AVEC of this event. Section 7.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VIII Miscellaneous Provisions Section 8.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, - 18 - cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address hereinafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For EPB: Export Promotion Bank of Afghanistan Kabul Afghanistan Cable address: Export Promotion Bank of Afghanistan Kabul For ARI: Afghan Raisin Institute Kabul Afghanistan Cable address: Afghan Raisin Institute Kabul - 19 - For ASC: Afghan Seeds Company Kabul Afghanistan Cable address: Afghan Seeds Company Kabul For AVEC: Afghan Vegetable Export Company Herat Afghanistan Cable address: Afghan Vegetable Export Company Herat Section 8.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of EPB may be taken or executed by the President of EPB or such other person or persons as the said President shall designate in writing. Section 8.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of ARI may be taken or executed by the Pr%si- dent of ARI or such other person or persons as the said President shall designate in writing. Section 8.04. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of ASC may be taken or executed by the Presi- dent of ASC or such other person or persons as the said President shall designate in writing. Section 8.05. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of AVEC may be taken or executed by the - 20 - President of AVEC or such other person or persons as the said President shall designate in writing. Section 8.06. EPB, ARI, ASC and AVEC shall furnish to the Association sufficient evidence of the authority and the authenti- cated specimen signature of the person or persons who will, on behalf of EPB, ARI, ASC and AVEC, take any action or execute any documents required or permitted to be taken or executed by EPB, ARI, ASC and AVEC pursuant to any of the provisions of this Agreement. Section 8.07. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. 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 in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Munir P. Benjenk Regional Vice President Europe, Middle East and North Africa EXPORT PROMOTION BANK OF AFGHANISTAN By /s/ Abdul Wahab Assefi Authorized Representative AFGHAN RAISIN INSTITUTE By Is/ Abdul Wahab Assefi Authorized Representative - 21 - AFGHAN SEEDS COMPANY By /s/ Abdul Wahab Assefi Authorized Representative AFGHAN VEGETABLE EXPORT COMPANY By /s/ Abdul Wahab Assefi Authorized Representative - 22 - SCHEDULE I Operating Policies of EPB Under Parts A through E of the Project 1. General: Sub-loans to be made under Parts A, B, C, D and E of the Project by EPB shall be made in accordance with the EPB Charter as the same may be amended from time to time with the prior consul- tation of the Association. 2. Appraisal: Before granting a sub-loan, EPB shall evaluate the sub- borrower's credit worthiness for such sub-loan, its ability to execute the project to be financed out of the proceeds of such sub-loan and its ability to meet the repayment of such sub-loan in accordance with its amortization schedule. For sub-loans under Parts B and E of the Project exceeding $20,000 equivalent, EPB shall submit to the Association prior to approving such sub-loans a copy of the sub-borrower application to EPB for such a sub-loan, a copy of EPB's appraisal of the sub-borrower and of the project to be financed out of the proceeds of such sub-loan and a report of the sub-borrower's credit worthiness, all to be in such detail as the Association may reasonably request. Each appraisal shall further contain a financing plan for working capital to be made available by EPB to all agroindustry sub-borrowers as and when required. 3. Security Requirements: (a) For its sub-loans under Parts C, D and E of the Project, EPB shall take as security either (i) mortgages on real estate the market value of which is equivalent to not less than 133% of the principal amount of each sub-loan to be made or (ii) other security on assets the market value of which is equivalent to not less than 133% of the principal amount of each sub-loan to be made. (b) For its sub-loans under Part A of the Project, EPB may accept security similar to the one described in subparagraph 3 (a) of this Schedule or alternatively such security referred to in Section 3.11 (1) of the Development Credit Agreement provided such security is acceptab2e to EPB and the Association. - 23 - 4. Conditions Precedent to Making Sub-loans: EPB will prepare and adopt detailed lending terms (including security arrangements) satisfactory to the Borrower and the Asso- ciation relating to Parts A, B, C, D and E of the Project. 5. Terms and Conditions of Sub-loans: (a) The minimum annual interest rate, the contribution of each sub-borrower, the maximum permissible grace period and the period of repayment for sub-loans made by EPB are set forth below: Interest Sub-borrowers' Rate Contribution Repayment Grace Category of (Percen- (% of Invest- Period Period Sub-loans tage) ment Cost) (Years) (Years) Sub-loans under Parts: (i) Part A of the Project 10% 0 17 5 (ii) Part B of the Project 10 0 1 0 (iii) Part C of the Project 10 0 15 8 (iv) Part D of the Project 10 20 15 6 (v) Part E of the Project 10 20 15 5 (b) It is understood that EPB may allow rebates to coopera- tives not exceeding one percentage point of the applicable inter- est rates. (c) Unless the Borrower guarantees the repayment to EPB of any loan (including any sub-loan) by EPB on terms and conditions satisfactory to the Association, EPB's loans (including sub-loans) shall not exceed 20% of its net worth when made to any business - 24 - entity or 10% of . its net worth when made to any business entity which has a subsidiary or subsidiaries or which is a subsidiary of a business entity. 6. EPB shall enter into a written agreement with each of its sub-borrowers whereby, in addition to defining the terms of the sub-loan, EPB shall receive from each of its sub-borrowers under Part E of the Project an annual progress report on the financial and physical progress of the Project financed out of the proceeds of said sub-loan. 7. EPB shall take appropriate steps to supervise adequately the execution of the sub-projects financed out of the proceeds of sub-loans.