Conformed Copy - C2093 - Agricultural Sector Adjustment and Investment Project - Project Agreement 1

Page 1 CREDIT NUMBER 2093 MAU UBD Project Agreement (Agricultural Sector Adjustment and Investment Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and UNION DES BANQUES DE DEVELOPPEMENT Dated February 26, 1990 CREDIT NUMBER 2093 MAU UBD PROJECT AGREEMENT AGREEMENT, dated February 26, 1990, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and UNION DES BANQUES DE DEVELOPPEMENT (UBD). WHEREAS (A) by the Development Credit Agreement of even date herewith between Islamic Republic of Mauritania (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million four hundred thousand Special Drawing Rights (SDR 19,400,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that UBD agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a subsidiary grant agreement to be entered into between the Borrower and UBD, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to UBD on the terms and conditions set forth in said UBD Subsidiary Grant Agreement; and WHEREAS UBD, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, the several terms defined in the Development Credit Agreement, the Preamble to this Agreement and in the Page 2 General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project and other Covenants Section 2.01. (a) UBD declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Parts A.7 and C.3 of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial and banking practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) Without limitations on the provisions of paragraph (a) of this Section, UBD shall: (i) provide agricultural credit on the basis of the criteria and principal terms and conditions set forth or referred to in the Schedule to this Agreement; and (ii) exercise its rights in relation to each credit so provided in such a manner as to protect the interests of the Association and UBD and comply with its obligations under this Agreement. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for Parts A.7 and C.3 of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.03. UBD shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the UBD Project Agreement and Parts A.7 and C.3 of the Project. Section 2.04. UBD shall duly perform all its obligations under the UBD Subsidiary Grant Agreement. Except as the Association shall otherwise agree, UBD shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the UBD Subsidiary Grant Agreement or any provision thereof. Section 2.05. UBD shall: (a) at the request of the Association, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the UBD Subsidiary Grant Agreement, and other matters relating to the purposes of the Credit; (b) 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 UBD of its obligations under this Agreement and under the UBD Subsidiary Grant Agreement; (c) not later than March 31 of each year the Project is carried out, prepare a report on its Page 3 agricultural credit operations during the previous calendar year including recommendations for any improvements to be made; (d) not later than April 30 of each year the Project is carried out, discuss said report with the Borrower and the Association; and (e) promptly thereafter take all measures agreed upon by UBD, the Borrower and the Association to improve UBD's agricultural credit operations. Section 2.06. UBD shall enter into an agreement with SONADER, acceptable to the Association, setting forth the parties, respective obligations with regard to provision of agricultural credit in the Project Area. Section 2.07. UBD shall refrain from supplying equipment and inputs to farmers. ARTICLE III Management and Operations of UBD Section 3.01. UBD shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and banking practices under the supervision of qualified and experienced management assisted by competent staff in. adequate numbers. Section 3.02. UBD shall at all times operate and maintain its facilities, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound banking practices. Section 3.03. UBD shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks, other than the risk of default under credit provided by UBD, and in such amounts as shall be consistent with appropriate practice. Section 3.04. UBD shall take appropriate security or maintain provisions for bad debts at such levels as shall be necessary to protect itself fully against risk of default under credit provided by UBD. Section 3.05. Except as the Association and UBD shall otherwise agree, UBD shall utilize all amounts received in repayment of agricultural credit provided under the Project to finance further private and cooperative credit in the Project Area. ARTICLE IV Financial Covenants Section 4.01. (a) UBD shall maintain records and accounts adequate to reflect in accordance with sound accounting practices, its operations and financial condition, and the expenditures financed out of the proceeds of the Credit to finance carrying out Parts A.7 and C.3 of the Project. (b) UBD shall: (i) have its records, 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 Page 4 independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than six 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 said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of UBD thereunder shall terminate 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) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify UBD of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions. ARTICLE VI Miscellaneous Provisions Section 6.01. 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 addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Page 5 Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For UBD: Union des Banques de Developpement P.O. Box 219 Nouakchott Islamic Republic of Mauritania Telex: 564 or 840 MTN Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of UBD, or by UBD on behalf of the Borrower under the Development Credit Agreement, may be taken or executed by its Director General or such other person or persons as UBD shall designate in writing, and UBD shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 By /s/ Edward V.K. Jaycox Regional Vice President Africa UNION DES BANQUES DE DEVELOPPEMENT By /s/ Abdellihi Ould Daddah Authorized Representative SCHEDULE Criteria and principal terms and conditions of agricultural credit For purposes of Section 2.01 (b) of this Agreement and except as the Association and UBD may otherwise agree, UBD shall provide agricultural credit in conformity with the criteria and principal terms and conditions set forth in this Schedule. A. Criteria Page 6 1. UBD shall finance goods and services required by farmers, small-scale fishermen and private investors (hereinafter called the beneficiaries) to carry out activities related to the development of the agricultural sector in the Project Area. 2. Short-term credit, provided by UBD and repayable within twenty-four months, shall be provided for agricultural inputs. Medium-term credit, repayable within eight years, with a grace period of one year, shall be provided for on-farm investment in farm equipment, livestock, fishing boats and equipment and small agro- industries. 3. Credit shall be provided only after it has been established, on the basis of a methodology determined by UBD and satisfactory to the Association, that the proposed beneficiary is creditworthy and the purpose for which credit is requested is technically, financially and economically feasible and environmentally sound. B. Principal terms and conditions of credit 1. Credit shall be made upon financial terms and conditions, adequate to cover the expenses and financial costs of UBD's operations. 2. Credit shall be provided by UBD on terms whereby UBD shall have obtained, by written contract or other appropriate legal means, rights adequate to protect its interests, including that each beneficiary shall undertake to: (a) use credit exclusively for the purposes for which it was provided by UBD; (b) disclose to UBD all information concerning the use of the credit; (c) enable the representatives of the Association and UBD to visit any facility and examine any item financed by UBD; and (d) ensure UBD's right to suspend or terminate the right of a beneficiary to use credit upon failure of the beneficiary to perform its obligations under its contract or arrangement with UBD.