Conformed Copy - C1952 - Third National Seeds Project - Project Agreement 1

Page 1 CONFORMED COPY CREDIT NUMBER 1952 IN (Third National Seeds Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT Dated December 22, 1988 CREDIT NUMBER 1952 IN PROJECT AGREEMENT AGREEMENT, dated December 22, 1988 between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (NABARD). WHEREAS (A) by the Development Credit Agreement of even date herewith between India, acting by its President (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred and eight million six hundred thousand Special Drawing Rights (SDR 108,600,000) on the terms and conditions set forth in the Development Credit Agreement, provided that NABARD agree to undertake such obligations toward the Association as are set forth in this Agreement; (B) by a Project Agreement of even date herewith between the Association and the States of Andhra Pradesh, Assam, Bihar, Gujarat, Karnataka, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh and West Bengal (collectively called the States) (the States Agreement) the said States have each agreed to undertake certain obligations in respect of the carrying out of the Project; Page 2 (C) by a subsidiary loan agreement to be entered into between the Borrower and NABARD, a part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to NABARD on the terms and conditions to be set forth in said Subsidiary Loan Agreement; and WHEREAS NABARD, in consideration of the Association's enter- ing 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 General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) NABARD declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Devel- opment Credit Agreement, and, to this end, shall carry out the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, engineering and agricul- tural practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. (b) NABARD shall take all such steps as shall be necessary to assist the Borrower, the States, NSC, SFCI and SSCs in the carrying out of their respective obligations under the Project. (c) NABARD shall on-lend the proceeds of the Credit made available to it by the Borrower under the Subsidiary Loan Agree- ment pursuant to Section 3.01 (d) of the Development Credit Agree- ment to, and shall otherwise undertake the financing of sub-loans made by, the Participating Banks in accordance with terms and conditions satisfactory to the Association including those set out in Schedule 5 to the Development Credit Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association. (d) NABARD shall exercise its rights under the arrangements referred to in paragraph (c) of this Section in such manner as to (i) protect the interests of the Borrower, the Association and NABARD; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. Section 2.02. Except as the Association may otherwise agree, NABARD shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. Section 2.03. Each sub-loan shall have been made by such Participating Banks as shall comply with criteria agreed between the Association and NABARD. Section 2.04. (a) NABARD shall take necessary steps to ensure that prior to any SSC receiving a sub-loan an Action Plan Implementation Agreement shall have been duly executed and delivered between such SSC, the concerned State and NSC (where NSC is a shareholder of such SSC) for strengthening the financial and organizational structure of such SSC. (b) NABARD shall take necessary steps to ensure that prior to NSC or SFCI receiving a sub-loan an Action Plan Implementation Page 3 Agreement shall have been duly executed and delivered between the Borrower and NSC or SFCI as the case may be. (c) The Action Plan Implementation Agreement referred to in Section 2.04 (a) and (b) above of this agreement shall be satisfactory to the Borrower and the Association, shall be based on the respective action plan developed pursuant to the review of the organizational and financial structure of the concerned sub- borrower by consultants engaged under the Project and shall duly incorporate the key principles set forth in Schedule 4 to the Development Credit Agreement. Section 2.05. Subject to Section 2.04 of this Agreement, each sub-loan financed by NABARD shall be in respect of sub-projects which: (a) shall first have been appraised by the concerned Participating Bank in accordance with procedures acceptable to the Association; and (b) satisfy criteria satisfactory to the Association including: (i) a projected financial rate of return on equity of at least twelve percent (12%); (ii) an investment cash flow supportable by the sub- borrower's existing and projected financial position; (iii) appropriate technical, managerial, financial and marketing arrangements; and (iv) appropriate arrangements for the insurance of facilities owned by the sub-borrower. Section 2.06. NABARD shall submit reports of such appraisals of sub-projects by Participating Banks as may reasonably be requested by the Association from time to time, for review by the Association. Section 2.07. (a) NABARD shall take necessary steps to cause sub-borrowers supported under the Project to: (i) have their 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 Association; (ii) furnish to NABARD as soon as available, and except as NABARD shall otherwise agree, not later than six months after the end of each such year certified copies of the reports of such audit of the financial statements of said sub-borrowers by said auditors, of such scope and in such detail as NABARD shall have reasonably requested. (b) NABARD shall furnish to the Association such information concerning the accounts and financial statements of sub-borrowers and the audit thereof as the Association shall from time to time reasonably request. Section 2.08. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for 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 2.09. NABARD 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 this Project Agreement and Part A of the Project. Section 2.10. NABARD shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, NABARD shall not take or concur in any action which would have the effect of amending, abrogating, Page 4 assigning or waiving the Subsidiary Loan Agreement or any provi- sion thereof. Section 2.11. (a) NABARD shall, at the request of the Asso- ciation, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) NABARD 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 NABARD of its obligations under this Agreement and the Subsidiary Loan Agreement. ARTICLE III Management and Operations of NABARD Section 3.01. NABARD shall carry on its operations and con- duct its affairs in accordance with sound administrative, finan- cial, agricultural and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. NABARD shall take out and maintain with respon- sible insurers, or make other provision satisfactory to the Asso- ciation for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) NABARD shall maintain records and accounts adequate to monitor and record the progress of the Project (and of each sub-project including its cost and the benefit derived from it) and to reflect in accordance with sound accounting practices its operations and financial condition in respect of the Project. (b) NABARD shall: (i) have its records and accounts referred to in para- graph (a) of this Section, 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 six months after the end of each such year, a certified copy 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 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 NABARD thereunder shall terminate on the Page 5 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 15 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 NABARD 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. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For NABARD: National Bank for Agriculture and Rural Development Sterling Center, Dr. Annie Besant Road Worli, Bombay-300018 Cable address: Telex: AGREFINANS 11-73770 NABIN BOMBAY, India 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 NABARD may be taken or executed by its Managing Director or such other person or persons as NABARD shall designate in writing, and NABARD 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 Page 6 written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ S. J. Burki Acting Regional Vice President Asia NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT By /s/ Anil Kumar Authorized Representative