Nicaragua - Earthquake Reconstruction Project : Credit 0389 - Project Agreement - 4 - Conformed

CONFORMED COPY CREDIT NUMBER 389 NI Part D Project Agreement (Earthquake Reconstruction Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND INSTITUTO DE FOMENTO NACIONAL DATED JUNE 6, 1973 CONFORMED COPY CREDIT NUMBER 389 NI Part D Project Agreement (Earthquake Reconstruction Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND INSTITUTO DE FOMENTO NACIONAL DATED JUNE 6, 1973 PART D PROJECT AGREEMENT AGREEMENT, dated June 6, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and INSTITUTO DE FOMENTO NACIONAL (hereinafter called INFONAC). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Nicaragua (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to twenty million dollars ($20,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that INFONAC agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and INFONAC, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to INFONAC on the terms and conditions therein set forth; and WHEREAS INFONAC, 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 and the following additional terms have the following meanings: (a) "sub-loan" means a loan or credit made or proposed to be made by INFONAC to an Investment Enterprise for an Investment Project and to be financed in part out of the proceeds of the Credit relent by the Borrower to INFONAC. (b) "Investment Enterprise" means an enterprise to which INFONAC proposes to make or has made a sub-loan. 4 (c) "Investment Project" means a specific development project to be (i) located in a city or locality other than Managua and (ii) carried out by an Investment Enterprise utilizing the proceeds of a sub-loan; and (d) "subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by any Investment Enterprise or by any one or more subsidiaries of any Investment Enterprise or by any Investment Enterprise and one or more of its subsidiaries. ARTICLE II Execution of the Project Section 2.01. INFONAC shall carry out Part D of the Project described in Schedule 2 to the Development Credit Agreement and conduct its operations and affairs in accordance with sound financial and investment standards and practices, under the supervision of qualified and experienced management. Section 2.02. Except as the Association shall otherwise agree: (a) each sub-loan shall finance not more than 60% of the total cost of any Investment Project, after excluding from such cost the cost of acquiring land or rights thereon: (b) sub-loans shall be repaid in not me 2 than 10 years, including not more than 3 years of grace, and shall carry interest at the rate of 8.75% per year on outstanding amounts; (c) any sub-loan which by itself or together with any other sub-loan to the same Investment Enterprise or any subsidiary thereof would exceed the equivalent of $100,000, shall be made only with the prior approval of the Association; (d) no sub-loan shall be made to an Investment Enterprise or any subsidiary thereof if, when added to other sub-loan made or proposed to be made to the same Investment Enterprise or any subsidiary thereof, it would exceed the equivalent of $250,000; and (e) the equivalent of $300,000 shall be reserved for sub-loans to finance the development of industrial serviced sites, approved by the Association, in cities other than Managua. 5 Section 2.03. Promptly after making a sub-loan and before submitting to the Association a withdrawal application in respect of payments made thereunder, INFONAC shall submit to the Association a description of the Investment Enterprise and an appraisal of the Investment Project (including its technical, financial and marketing aspects, and a description of the expenditures to be financed out of the proceeds of the sub-loan), and such other information as the Association shall reasonably request. Section 2.04. (a) INFONAC undertakes that, unless the Association shall otherwise agree, any sub-loan will be made on terms whereby INFONAC shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association and INFONAC, including the right of INFONAC to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) require that (1) the goods and services to be financed out of the proceeds of the sub-loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (2) without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the sub-loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as the Association or INFONAC shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise: and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the sub-loan upon failure by such Investment Enterprise to perform any of its obligations under its contract with INFONAC. (b) INFONAC shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association and INFONAC: (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of Part D of the Project. 6 Section 2.05. INFONAC shall establish and maintain a separate account and shall record therein: (i) all amounts received from and payments made to the Borrower under the Part D Subsidiary Loan Agreement; (ii) amounts disbursed to and received from Investment Enterprises; and (iii) expenditures incurred in the carrying out of Part D of the Project. Section 2.06. INFONAC shall duly perform all its obligations under the Part D Subsidiary Loan Agreement and, except as the Association shall otherwise agree, INFONAC shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Part D Subsidiary Loan Agreement or any provision thereof. ARTICLE III Management and Operations of INFONAC Section 3.01. In order to assist INFONAC in improving its internal organization and accounting system, INFONAC shall employ management consultants, acceptable to the Association to an extent and upon terms and conditions satisfactory to the Association. ARTICLE IV Financial Covenants Section 4.01. INFONAC shall maintain records adequate to record the progress of Part D of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of INFONAC. Section 4.02. INFONAC 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 sound auditing principles consistently applied, by independent auditors acceptable to the Bank; (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 INFONAC and the audit thereof as the Association shall from time to time reasonably request. 7 Section 4.03. INFONAC 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 various currencies (including the currency of the Borrower) used in its operations. ARTICLE V Consultation, Information and Inspection Section 5.0 1. INFONAC shall furnish to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Credit relent by the Borrower to INFONAC, Part D of the Project, the Investment Enterprises, the Investment Projects and the sub-loans. Section 5.02. The Association and INFONAC shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and INFONAC shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the performance by INFONAC of its obligations under the Part D Subsidiary Loan Agreement, the administration, operations and financial condition of INFONAC and other matters relating to the purposes of the Credit. Section 5.03. The Association and INFONAC shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower or INFONAC of their respective obligations under the Part D Subsidiary Loan Agreement. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the Effective Date. Section 6.02. (a) This Agreement and all obligations of the Association and of INFONAC thereunder shall terminate on the earlier of the following two dates: 8 (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date when the Part D Subsidiary Loan, together with interest and all other charges thereon, shall have been paid. (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 INFONAC of this event, and, upon the giving of such notice, this Agreement and all obligations of the parties hereunder shall forthwith terminate. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. 9 For INFONAC: Instituto de Fomento Nacional Managua, D.N. Nicaragua, C.A. Cable address: INFONAC Managua Nicaragua Section 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of INFONAC may be taken or executed by the Gerente General of INFONAC or such other person or persons as he shall designate in writing. Section 7.03. INFONAC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of INFONAC, take any action or execute any documents required or permitted to be taken or executed by INFONAC pursuant to any of the provisions of this Agreement. Section 7.04. 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 representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / Gerald Alter Regional Vice President Latin America and the Caribbean INSTITUTO DE FOMENTO NACIONAL By /s/ Gustavo Escoto Goenaga Authorized Representative