Nicaragua - Preinvestment Fund Project : Credit 1081 - Project Agreement - Conformed

D"Fu T AL CREDIT NUMBER 1081 NI Projeet Agreement (Preinvestment Fund Project) between INTERNATIONAL DEVELOPMENT ASSOC..ATION and FINANCIERA DE PREINVERSION Dated C-, 1980 CREDIT NUMBER 1081 NI PROJECT AGREEMENT AGREEMENT, dated , 1980, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and the FINANCIERA DE PREINVERSION (hereinafter called FINAPRI), established pursuant to Law No. 322, dated February 28, 1980, of the Republic of Nicaragua (hereinafter called the Borrower): WHEREAS by the Development Credit Agreement of even date herewith between the Borrower and the Association, the Association has agreed to lend to the Borrower, for relending to FINAPRI, through a Subsidiary Loan Agreement to be entered into between the Borrower and FINAPRI, an amount in various currencies equivalent to three million, nine hundred thousand Special Drawing Rights (SDR 3,900,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that FINAPRI agrees to undertake such obligations toward the Association as are hereinafter set forth; and WHEREAS FINAPRI, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has 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. ARTICLE II Execution of the Project Section 2.01. FINAPRI shall carry out the Project, described in Schedule 2 to the Development Credit Agreement with due dili- gence and efficiency and in conformity with appropriate economic, financial and investment standards and practices, with qualified and experienced management and in accordance with its Statutes and the Manual. -2- Section 2.02. FINAPRI shall: (a) make Sub-loans for purposes of the Project on the following terms and conditions: (i) interest on the principal amount outstanding of Sub-loans shall be at least eight per cent (8%) per annum; (ii) Sub-borrowers shall repay Sub-loans over a period of not more than 10 years, including a grace period of not more than 2 years; (iii) Sub-borrowers in the private sector shall pay a commitment charge of not less than one half of one percent (1/2%) per annum on the undisbursed balance of Sub-loans; and (iv) Sub-borrowers shall pay, in addition, a penalty charge on overdue service payments of not less than the penalty charge applicable in standard contracts with financial institutions in the territory of the Borrower. (b) review for each year the adequacy of the interest rate and the penalty charge to be charged to Sub-borrowers in accor- dance with Sections 2.02 (a) (i) and (iv) above, respectively. Section 2.03. In order to assist FINAPRI in carrying out the Project, FINAPRI shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to FINAPRI and the Association. Section 2.04. FINAPRI shall ensure that Sub-borrowers will procure consultants' services: (i) in accordance with the provisions of the Schedule to this Agreement in the case of a Sub-loan other than a Free-limit Sub-loan; and (ii) in accordance with the provisions of the Manual, in the case of a Free-limit Sub-loan. Section 2.05. (a) In accordance with and subject to the provisions of the Development Credit Agreement, FINAPRI shall submit all Sub-projects to the Association for approval or for authorization for withdrawals to be made from the Credit Account as the case may be according to paragraphs (b) and (c) of this Section. -3- (b) When submitting a Sub-loan (other than a Free-limit Sub-loan) to the Association for approval, FINAPRI shall furnish to the Association an application, in form satisfactory to the Association, together with: (i) a description of the Sub-borrower and of the Sub-project, including its costs and a description of the expenditures proposed to be financed out of the proceeds of the Credit; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan; (iii) a certificate issued by FINAPRI, stating that all conditions for the selection of the Sub-project have been met; and (iv) such other information as the Association shall reasonably request. (c) The first request by FINAPRI for authorization to make withdrawals from the Credit Account in respect of each Free-limit Sub-loan shall be for a Free-limit Sub-loan for a purpose approved, before such request is presented, by the Association and shall contain: (i) a summary description of the Sub-borrower and the Sub-project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; (ii) the terms and conditions of such Free-limit Sub- loan, including the schedule of amortization therefor; (iii) summary information on the consultants to be employed therefor in accordance with the pro- visions of the Manual; and (iv) a certificate issued by FINAPRI, stating that all conditions for the selection of the Sub-project have been met. (d) Except as the Association and FINAPRI shall otherwise agree, FINAPRI shall present applications for approval of Sub- loans pursuant to the provisions of paragraph (b) of this Section and requests for authorizations to withdraw from the Credit Account pursuant to the provisions of paragraph (c) of this Section on or before June 30, 1984. Section 2.06. (a) FINAPRI undertakes that unless the Associa- tion shall otherwise agree, any Sub-loan will be made on terms whereby FINAPRI shall obtain, by written agreement or other appropriate legal means, rights adequate to protect the interests of the Association and of FINAPRI, including, in the case of any such Sub-loan: (i) the right to require the Sub-borrower to carry out the Sub-project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) the right to require that the goods and services to be financed out of the proceeds of the Sub-loan be used exclusively in the carrying out of the Sub-project; (iii) the right to require the accounts to be opened in accordance with Section 3.01 (b) of this Agreement and financial statements of the Sub-borrowers to be audited by independent auditors in accordance with appropriate auditing principles consistently applied; (iv) the right to obtain all such information related to the Sub-project as FINAPRI or the Associa- tion, through FINAPRI, shall reasonably request relating to the foregoing, to the administration, operations and financial condi- tion of the Sub-borrower and the benefits to be derived from the Sub-project; (v) the right of FINAPRI to suspend or terminate the right of the Sub-borrower to the use of the proceeds of the Sub-loan upon failure by the Sub-borrower to perform its obliga- tions under its agreement with FINAPRI; and (vi) the right of the Association to inspect, by itself or jointly with representa-tives of FINAPRI, all goods and things included in the Sub-project, and any relevant records and documents, and all the sites and facili- ties of the Sub-borrower related to the Sub-project. (b) FINAPRI shall exercise its rights in relation to each Sub-project in such manner as to (i) protect the interests of the Association and of FINAPRI, (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement and (iii) achieve the purposes of the Project. Section 2.07. FINAPRI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, FINAPRI shall not take or concur in any -5- action which would have the effect of assigning, or amending, abrogating or waiving any provision of, the Subsidiary Loan Agreement. Section 2.08. FINAPRI shall furnish to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Sub-loans, the Project, the Sub-borrowers, the Sub-projects and the Sub-loans, including (i) the periodic reports prepared by the consultants on each study included in the Project; (ii) semi-annual progress reports on the Project and on FINAPRI's operations, staffing and efficiency; and (iii) annual lists of studies for which applications have been made. Section 2.09. (a) FINAPRI shall, at the request of the Association, exchange views with the Association with regard to the progress of the Project, the Sub-projects, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) FINAPRI shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by FINAPRI of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.10. Until the Closing Date: (a) FINAPRI shall notify the Association prior to amending the Manual and shall allow the Association a reasonable period to comment on the proposed amendment; and (b) no provision of the Manual relating to the procurement procedures set forth therein, except the amendment referred to in Section 5.01 (c) of the Development Credit Agree- ment, shall be changed, amended, suspended or abrogated without prior approval by the Association. Section 2.11. In case of any discrepancy between the procedures set forth in this Agreement for the procurement of -6- consultants' services to be financed out the proceeds of a Sub- loan, other than a Free-limit Sub-loan, and the procedures set forth in the Manual, the provisions of this Agreement shall prevail. ARTICLE III Financial Covenants Section 3.01. (a) FINAPRI shall maintain procedures and records adequate to monitor and record the progress of the Project and of each Sub-project (including its cost and the benefits to be derived from it) and to reflect in accordance with consis- tently maintained appropriate accounting practices the operations and financial condition of FINAPRI and shall enable the Associa- tion's representatives to examine such records. (b) FINAPRI shall cause each of the Sub-borrowers to estab- lish and maintain separate accounts for the purposes of the Project, and shall cause each of the Sub-borrowers to record therein all receipts and payments for or in connection with the Project. Section 3.02. FINAPRI 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) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of FINAPRI and the audit thereof as the Association shall from time to time reasonably request. ARTICLE IV Effective Date; Termination Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. -7- Section 4.02. (a) This Agreement and all obligations of the Association and of FINAPRI thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date eight years after the date of this Agree- ment. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify FINAPRI of this event, and upon the giving of such notice, this Agreement and all obligations of the parties theretader shall forthwith terminate. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under Article VI of the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, 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 address 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) -8- For Financiera de Preinversion: Apartado Postal 316 Managua, Nicaragua Telex: 1064-FINAPRI Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under. this Agreement and under Section 2.03 of the Development Credit Agreement on behalf of or by FINAPRI may be taken or executed by its Executive Director, or by such other person or persons as FINAPRI shall designate in writing, and FINAPRI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement 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 /&/ B By 0Regional Vice President Latin America and the Caribbean FINANCIERA DE PREINVERSION By Authorized Representative -9- SCHEDULE Procurement of Consultants' Services by Sub-borrowers 1. Consultants' services for the purposes of Section 2.04 (i) of this Agreement will be procured by Sub-borrowers in accordance with the Manual and with the additional procedures set forth in this Schedule. 2. Before inviting any proposals for the study in question, FINAPRI shall request the Sub-borrower to furnish to FINAPRI and FINAPRI shall furnish to the Association (i) draft terms of reference for such study; (ii) a short list of qualified consul- tants (including consulting firms) (the List); and (iii) a draft invitation for proposals, to be sent to the consultants included in the List, which will include an estimate of the cost of the study. The draft terms of reference and the List shall be satis- factory to the Association. 3. Direct negotiations without prior invitation for competitive proposals shall only be undertaken with prior approval of the Association. 4. FINAPRI shall request the Sub-borrower to furnish to FINAPRI and FINAPRI shall furnish to the Association: (i) a copy of the proposal of the consultant selected, and the ranking of the proposals of the other consultants. (ii) the report of evaluation of such proposals; (iii) if the negotiations with the consultant selected are unsuccessful, a copy of the proposal next in ranking to be negotiated; and (iv) a copy of the negotiated draft consultant's con- tract to be concluded between such Sub-borrower and the consultant selected. The draft negotiated consultant's contract shall be satisfactory to the Association. - 10 - 5. Two conformed copies of each contract between a Sub-borrower and a consultant will be sent to the Association. The terms and conditions of the contract (including the termas of reference) will not materially differ from the draft approved by the Association. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify thajt the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of . 1980 FOR SECRETARY