Sri Lanka - Tree Crop Diversification (Tea) Project : Credit 0819 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 819 CE Project Agreement (Tree Crop Diversification (Tea) Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and THE NATIONAL AGRICULTURAL DIVERSIFICATION AND SETTLEMENT AUTHORITY Dated July 12, 1978 CREDIT NUMBER 819 CE PROJECT AGREEMENT AGREEMENT, dated July 12, 1978, between INTERNATIONAL DEVEL- OPMENT ASSOCIATION (hereinafter called the Association) and THE NATIONAL AGRICULTURAL DIVERSIFICATION AND SETTLEMLNT AUTHORITY, established pursuant to the State Agricultural Corporations Act No. 11 of 1972 of Sri Lanka (hereinafter called NADSA). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Sri Lanka (hereinafter called the Borrower) and the Association, thE. Association has agreed to make available to the Borrower an amount in various currencies equiva- lent to four million five hundred thousand dollars ($4,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NADSA agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS NADSA, 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. NADSA shall, with the assistance of FD, PTU and SCD, carry out the Project described in Schedule 2 to the Develop- ment Credit Agreement with due diligence and efficiency and in conformity with appropriate agricultural, administrative, finan- cial and engineering practices. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods and civil works to be financed out -2- of the proceeds of the Credit shall be governed by the provisions of the Schedule to this Agreement. Section 2.03. (a) NADSA undertakes to insure, or make ade- quate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit made available to it by the Borrower against hazards incident to the acquisition, trans- portation and delivery thereof to the place of use or installa- tion, and for such insurance any indemnity shall be payable in a currency freely usable by NADSA to replace or repair such goods. (b) Except as the Association may otherwise agree, NADSA shall cause all goods and services financed out of the proceeds of the Credit made avai ble to it by the Borrower to be used exclusively for the Project. Section 2.04. (a) NADSA shall furnish to the Association, promptly upon their preparation, the plans, specifications, contract documents and work and procurement schadules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) NADSA: (i) shall maintain records adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it) and to identify the goods and services financed out of the proceeds of the Credit made available to it by the Borrower, and to disclose the use thereof in the Project; (ii) shall, without limitation upon the provisions of paragraph (c) of this Section, enable the Association's repre- sentatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association at regular intervals all such informa- tion as the Association shall reasonably request concerning the Project, its cost and, where appropriate, the benefits derived from it, the expenditures of the proceeds of the Credit so made available to it and the goods and services financed out of such proceeds. (c) NADSA shall afford reasonable opportunity for the Association's representatives to examine all plants, installa- tions, sites, works, buildings, property and equipment of NADSA and any relevant records and documents for purposes related to the Credit and this Agreement. -3- (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between NADSA and the Association, NADSA shall prepare and furnish to the Associa- tion a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by NADSA, the Borrower and the Association of their respective obligations under the Development Credit Agreement and the Project Agreement and the accomplishment of the purposes of the Credit. Section 2.05. (a) NADSA shall at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement, and other matters relating to the purposes of the Credit. (b) NADSA shall promptly inform the Association of any condition which affects or threatens to affect the progress of the Project, the accomplishment of the purposes of the Credit, or the performance by NADSA of its obligations under this Agreement. Section 2.06. In order to assist NADSA in carrying out the Project and especially in variety selection and the pro:essing and marketing of the most important spices grown in the Project Area, NADSA shall employ consultants whose qualifications, experi- ence and terms and conditions of employment shall be satisfactory to the Association. Section 2.07. NADSA shall collect data relating to the income of settlers in the Project Area at least twice a year in order to determine the income level of such settlers. ARTICLE III Management and Operations of NADSA Section 3.01. (a) NADSA shall at all times conduct its operations under competent and experienced management, in accor- dance with sound administrative, financial, engineering and agri- cultural practices and with the assistance of adequate qualified and experienced staff. (b) Except as the Association shall otherwise agree, NADSA shall at all times take all steps necessary on its part to acquire, -4- maintain and renew all rights, powers and privileges which are necessary or useful in its operations. (c) NADSA shall at all times operate, maintain, renew and repair its facilities, plant, equipment and machinery in accor- dance with sound agricultural, engineering and management prac- tices. (d) Except in the normal course of business, NADSA shall not, without the prior approval of the Association, sell, trans- fer, distribute or otherwise dispose of any of its property or assets which shall be required for its efficient operation or the sale, transfer, distribution or disposal of which would adversely affect NADSA's ability to carry out its obligations under this Agreement. Section 3.02. NADSA shall take out and maintain with respon- sible insurers, or make other provisions satisfactory to the Association for, insurance against such ricks and in such amounts as shall be consistent with appropriate practice. Section 3.03. NADSA shall cooperate with the Borrower in order to achieve the purposes of Section 3.03 of the Credit Agreement. Section 3.04. NADSA shall continue to organize and remunerate settlers for training of pepper vines and necessary weeding, fer- tilizing and pruning for all crops on settlement farms in the Project Area during the fifth and sixth year after the date of this Agreement. ARTICLE IV Financial Covenants Section 4.01. (a) NADSA shall maintain records adequate to reflect in accordance with consistently mafi7tained appropriate accounting practices its operations and financial condition. (b) NADSA shall maintain separate accounts in respect of its income and expenditures for the Project, summary accounts in re- spect of all income and expenditures for the Project and a record of all disbursement applications submitted to the Association. Section 4.02. (a) NADSA shall: (i) have the accounts and financial statements (balance sheets, statements of income and -5- expenses and related statements) in respect of the Project for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors accept- able 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 such 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 such accounts and financial statements and the audit thereof as the Association shall from time to time reasonably request. (b) The audit of the separate accounts referred to in Section 4.01 (b) of this Agreement shall include, inter alia, a statement that funds disbursed against statements of expenditure have been used for the purpose for which they have been provided. 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 NADSA 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 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accor- dance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify NADSA of this event. Section 5.03. All the provisions of this Agreement shall con- tinue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. -6- 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 herein- after 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 NADSA: National Agricultural Diversification and Settlement Authority Peradeniya Road Peradeniya, Republic of Sri Lanka Cable address: NADSA Peradeniya Section 6.02. Any actioa required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of NADSA may be taken or executed by the Chairman of NADSA or such other person or persons as such Chairman shall designate in writing, and NADSA shall furnish to the Asso- ciation sufficient evidence of the authority and the authenticated specimen signature of each such person. -7- Section 6.03. This Agreement may be executed in several coun- terparts, 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 Agree- ment 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/ Manfred G. Blobel Acting Regional Vice President South Asia THE NATIONAL AGRICULTURAL DIVERSIFICATION AND SETTLEMENT AUTHORITY By /s/ Wijesinghe Sugathadasa Karunaratne Authorized Representative -8- SCHEDULE 1 Procurement A. Procurement Procedures 1. Tractors, trailers and vehicles shall be procured through competitive bidding procedures acceptable to the Association after local advertisement. 2. Small tools and survey and office equipment shall be procured through prudent shopping in accordance with the standard proce- dures of the Borrower, satisfactory to the Association. 3. Dairy cattle shall be procured after bids have been invited from three countries free from foot-and-mouth disease capable of supplying cattle of the type required and in accordance with procedures acceptable to the Association. 4. Planting material shall be procured directly by negotiated purchases after quutations have been solicited from at least two suppliers. B. Procurement Without Contracting Construction of access roads, housing and water supply, soil conservation and planting of homesteads, farms and forests shall be carried out by NADSA using the prospective settlers as the labor force, and skilled labor requirements for such purposes shall be procured by contracting local craftsmen. C. Review of Procurement Decisions by the Association 1. Review of invitations to bid and of proposed awards and final contracts. (a) With respect to all tenders for vehicles, equipment and dairy cattle estimated to cost the equivalent of $100,000 or more, before bids are invited, NADSA shall furnish to the Associa- tion, for its comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said docu- ments or procedures as the Association shall reasonably request. Any further modification to the bidding documents shall require -9- the Association's concurrence before it is issued to the prospec- tive bidders. (b) With respect to all individual contracts for goods estimated to cost the equivalent of $100,000 or more: (i) After bids have been received and evaluated, NADSA shall, before a final decision on the award is made, inform the Association of the name of the bidder to which it intends to award the contract and shall furnish to the Association, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Association shall reasonably request. The Association shall, if it determines that the intended award would be incon- sistent with the Guidelines or this Schedule, promptly inform NADSA and state the reasons for such determination. (ii) The terms and conditions of the contract shall not, without the Association's concurrence, mate- rially differ from those on which bids were asked. (iii) Two conformed copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for with- drawal of funds from the Credit Account in respect of such contract. 2. With respect to all individual contracts for goods to be financed out of the proceeds of the Credit other than those referred to in the preceding paragraph, NADSA shall furnish to the Association, promptly after its execution and prior to the submis- sion to the Association of the first application for withdrawal of funds from the Credit Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform NADSA and the Borrower and state the reasons for such determination.