India - Agricultural Aviation Project : Credit 0230 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 230 IN Project Agreement (Agricultural Aviation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION DATED JANUARY 28, 1971 CONFORMED COPY CREDIT NUMBER 230 IN Project Agreement (Agricultural Aviation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND AGRICULTURAL REFINANCE CORPORATION DATED JANUARY 28, 1971 PROJECT AGREEMENT AGREEMENT, dated January 28, 1971, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL REFINANCE CORPORATION (hereinafter called ARC). WHEREAS by a development credit agreement of even date herewith between India (hereinafter called the Borrower) and the Association (hereinafter referred to as the Development Credit Agreement), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to $6,000,000, on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ARC agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement between the Borrower and ARC, an amount equivalent to $3,300,000 out of the proceeds of the credit provided for under the Development Credit Agreement will be made available to ARC on terms approved by the Association; and WHEREAS ARC, 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. ARC shall carry out or cause Participating Commercial Banks to carry out Part A of the Project described in Schedule 2 to the Development 4 Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and agricultural lending practices and shall for the purpose follow and obtain the agreement of Participating Commercial Banks to follow the operating and appraisal policies and procedures set forth in Schedules 1 and 2 to this Agreement. Section 2.02. ARC shall (i) enter into a Subsidiary Loan Agreement with the Borrower under terms and conditions which shall have been approved by the Association and (ii) except as the Association shall otherwise agree, relend the amount borrowed under the Subsidiary Loan Agreement to Participating Commercial Banks, pursuant to agreements containing terms and conditions including, inter alia, those set forth in Schedule 2 to this Agreement, approved by the Association. ARC shall exercise its rights under the Subsidiary Loan Agreement and its agreements with Participating Commercial Banks in such a manner as to protect the interests of the Borrower and the Association, and shall not, except as the Association may otherwise agree, take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any provision of the Subsidiary Loan Agreement or any agreement with a Participating Commercial Bank entered into pursuant to provision (ii) above. Section 2.03. (a) Except as the Association shall otherwise agree, the goods required for Part A of the Project and to be financed out of the proceeds of the Credit relent to ARC by the Borrower shall be procured in accordance with the procedures set forth in Schedule 3 to the Development Credit Agreement. (b) ARC undertakes to cause to be insured, or cause that adequate provision be made for the insurance of, the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against marine, transit and other 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 to replace or repair such goods. (c) Except as the Association may otherwise agree, ARC 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 2.04. (a) ARC shall furnish to the Association, promptly upon their preparation, the plans and contract documents for the Project, in such detail as the Association shall reasonably request. (b) ARC: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods financed out 5 of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall enable the Association's representatives to inspect the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods financed out of such proceeds. ARTICLE III Management and Operations of ARC Section 3.01. ARC shall appoint a qualified and experienced senior officer to be in charge of its operations in respect of the Project until Part A of the Project is completed. Section 3.02. ARC shall cause to be taken out and maintained with responsible insurers, insurance of the goods financed out of the proceeds of the Credit relent to it by the Borrower against such risks and in such amounts as shall be consistent with sound practice. For such insurance any indemnity shall be payable in a currency freely usable to repair or replace the insured goods. ARTICLE IV Financial Covenants Section 4.01. ARC shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition in respect of the Project. Section 4.02. ARC shal: (i) establish separate accounts in respect of all funds disbursed and received on account of the Project; (ii) have such accounts audited annually in accordance with sound auditing principles consistently applied, by independent auditors acceptable to the Association; (iii) 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 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 (iv) furnish to the Association such other information concerning the accounts and financial statements of ARC and the audit thereof as the Association shall from time to time reasonably request. 6 ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and ARC shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and ARC 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 administration, operations and financial condition of ARC and other matters relating to the purpose of the Credit. Section 5.02. The Association and ARC 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, the performance of ARC and the Borrower under the Subsidiary Loan Agreement, and the performance of Participating Commercial Banks in respect of the Project. Section 5.03. ARC shall cause the Association's representatives to be entitled to inspect all properties and equipment financed in whole or in part out of the proceeds of the Subsidiary Loan Agreement and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension Section 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 6.02. (a) This Agreement and all obligations of the Association and of ARC 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) a date ten 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 ARC of this event and, upon the giving of such 7 notice, this Agreement and all obligations of the parties thereunder 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. For ARC: Managing Director Agricultural Refinance Corporation Garment House Dr. Annie Besant Road Worli, Bombay, 18 WB India Cable address: Agricultural Refinance Corporation Garment House Bombay 8 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 ARC may be taken or executed by its Managing Director or such other person or persons as ARC shall designate in writing. Section 7.03. ARC 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 ARC, take any action or execute any documents required or permitted to be taken or executed by ARC 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/ J. Burke Knapp Vice President AGRICULTURAL REFINANCE CORPORATION By /s / L. K. Jha Authorized Representative 9 SCHEDULE 1 Operating Policies and Procedures Private operators will present their loan applications directly to the Participating Commercial Banks (hereinafter PCBs). PCBs will process them according to their normal standards and procedures, and will forward those they are willing to accept to ARC for review and approval, which will be done in consultation with DAA. PCBs will assume the entire commercial risk involved in loans to private operators. They will require private operators to (a) mortgage the aircraft to be financed by the loan; (b) carry and assign to the PCBs an adequate insurance policy on such aircraft; and (c) maintain appropriate project accounts which will be audited and certified by independent auditors. PCBs will fix the term of their loans in accordance with the operators' repayment ability. These terms may range up to 9 years, including a grace period, if any, of up to 4 years. Interest rates will be in line with prevailing commercial rates for medium- and long-term loans at the time loans to operators are made and not less than 8.5% per year. PCBs will supervise their loans and promptly report to ARC any measures they propose against possible defaulters. ARC shall promptly advise DAA of the proposed measures. ARC will refinance aircraft and equipment loans made by the PCBs under the Project. ARC, assisted by DAA for technical and operational assessments, will apply sound financial, appraisal and supervision standards for loans made by PCBs, and will supervise the administration, disbursement and recovery of the proceeds of the Credit under the lending program to private operators. 10 SCHEDULE 2 Additional Conditions to be Met by Participating Commercial Banks In addition to the principal terms enumerated under paragraph 2, Schedule 5, of the Development Credit Agreement, the following conditions shall be met in ARC lending to Participating Commercial Banks (hereinafter PCBs). 1. The PCBs will be required to open on their books a separate account through which these funds shall flow. Such accounts shall (i) identify each loan made by the PCB; (ii) identify the goods financed o-ut of such loans; and (iii) reflect in accordance with consistently maintained sound accounting practices the administration of such account and of each such loan. 2. The PCBs will be required to have the accounts referred to in paragraph 1 audited annually by independent auditors acceptable to ARC and to transmit to ARC, promptly after their preparation and not later than three months after the close of the PCBs' financial year to which they relate, certified copies of the financial statements relating to such accounts and a signed copy of the auditors' report. 3. The PCBs will be required to ensure that all procurement of goods financed out of the loans they will make to private aircraft operators and to be refinanced by ARC be made pursuant to the procedures set forth in Schedule 3 to the Development Credit Agreement, and that the proceeds of such loans be used exclusively for the purposes for which they shall have been granted.