Conformed Copy - C2093 - Agricultural Sector Adjustment and Investment Project - Project Agreement 3

Page 1 CONFORMED COPY CREDIT NUMBER 2093 MAU UNCACEM Project Agreement (Agricultural Sector Adjustment and Investment Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and UNION DES COOPERATIVES AGRICOLES DE CREDIT ET D'EPARGNE DE MAURITANIE (UNCACEM) Dated April 26, 1994 CREDIT NUMBER 2093 MAU UNCACEM PROJECT AGREEMENT AGREEMENT, dated April 26, 1994, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and UNION DES COOPERATIVES AGRICOLES DE CREDIT ET D'EPARGNE DE MAURITANIE (UNCACEM). WHEREAS (A) by a Development Credit Agreement (Agricultural Sector Adjustment and Investment Project), signed on February 26, 1990, between the Islamic Republic of Mauritania (the Borrower) and the Association, (Credit No. 2093-MAU) (the Development Credit Agreement) as amended through a first exchange of letters dated September 11, 1992 and October 19, 1992; a further exchange of letters dated July 6, 1993 and August 5, 1993; and a third agreement of even date herewith (the Third Amendment), amending and restating the Development Credit Agreement, 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 Union des Banques de Developpement (UBD), UNCACEM's predecessor in the field of agricultural credit, agree to undertake such obligations toward the Association as had been set forth in its respective Project Agreement; and Page 2 (B) by a Subsidiary Loan Agreement referring to agricultural credit, entered into between the Borrower and UNCACEM on August 12, 1993, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to UNCACEM on the terms and conditions set forth in said Subsidiary Loan Agreement; and WHEREAS UNCACEM, in consideration of the Association's having entered 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 and other Covenants Section 2.01. (a) UNCACEM 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 Part A.7 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 limitation upon the provisions of paragraph (a) of this Section, UNCACEM 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 UNCACEM 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 Part A.7 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. UNCACEM 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 UNCACEM Project Agreement and Part A.7 of the Project. Section 2.04. UNCACEM shall duly perform all its obligations under the UNCACEM Subsidiary Loan Agreement. Except as the Association shall otherwise agree, UNCACEM shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the UNCACEM Subsidiary Loan Agreement or any provision thereof. Section 2.05. UNCACEM shall: (a) at the request of the Association, exchange views with the Association with regard to the progress of Part A.7 of the Project, the performance of its obligations under this Agreement and under the UNCACEM Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit; (b) promptly inform the Association of any condition which Page 3 interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by UNCACEM of its obligations under this Agreement and under the UNCACEM Subsidiary Loan Agreement; (c) not later than March 31 of each year during which Part A.7 of the Project is carried out, prepare a report on its 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 during which Part A.7 of the Project is carried out, discuss said reports with the Borrower and the Association; and (e) promptly thereafter take all measures agreed upon by UNCACEM, the Borrower and the Association to improve UNCACEM's agricultural credit operations. Section 2.06. UNCACEM shall not supply equipment and inputs to farmers. ARTICLE III Management and Operations of UNCACEM Section 3.01. UNCACEM 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. UNCACEM shall at all times operate and maintain its facility, equipment and other property, 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. UNCACEM 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 UNCACEM, and in such amounts as shall be consistent with appropriate practice. Section 3.04. UNCACEM 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 UNCACEM. Section 3.05. Except as the Association and UNCACEM shall otherwise agree, UNCACEM 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) UNCACEM 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 the carrying out of Part A.7 of the Project. (b) UNCACEM 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 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 Page 4 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 Third Amendment to the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of UNCACEM 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 12 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 UNCACEM 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 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For UNCACEM: Union des Cooperatives Agricoles de Credit et d'Epargne de Mauritanie P.O. Box 5635 Nouakchott Islamic Republic of Mauritania Page 5 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 UNCACEM, or by UNCACEM 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 UNCACEM shall designate in writing, and UNCACEM 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 COOPERATIVES AGRICOLES DE CREDIT ET D'EPARGNE DE MAURITANIE By /s/ Mohamed Fall Ainina 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 UNCACEM may otherwise agree, UNCACEM shall provide agricultural credit in conformity with the criteria and principal terms and conditions set forth in this Schedule. A. Criteria 1. UNCACEM shall refinance agricultural credit cooperatives, active in the Project Area and acceptable to the Association, (the Recipient) for credits granted to 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. Refinancing shall be provided: (a) as short term credit, repayable within twelve months, for agricultural imports; and (b) as medium term credit, repayable within eight years with a grace period of one year, for on-farm investment in farm equipment, livestock, fishing boats and equipment and small agro-industries. 3. Refinancing shall be provided by UNCACEM only after the Recipient has agreed to abide by the provision of: (a) Article IV of this Agreement, giving UNCACEM the same rights as the Association; and (b) Section 2.03 of this Agreement, mutatis mutandis. Page 6 4. Refinancing shall be provided only after it has been established, on the basis of a methodology determined by UNCACEM in common accord with the Recipient 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. Refinancing shall be provided and credit shall be extended to beneficiaries under financial terms and conditions adequate to cover the expenses and financial costs of UNCACEM's and the Recipient's operations, respectively. 2. Refinancing shall be provided by UNCACEM on terms whereby UNCACEM shall have obtained, by written contract or other appropriate legal means, rights adequate to protect its interests, including assurances by the Recipient that each beneficiary shall undertake to: (a) use credit exclusively for the purposes for which it was provided by the Recipient; (b) disclose to the Recipient all information concerning the use of the credit; (c) enable the representatives of the Association, UNCACEM and the Recipient to visit any facility and examine any item financed by the Recipient and refinanced by UNCACEM; and (d) ensure the Recipient'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 the Recipient.