Nicaragua - Agricultural And Industrial Rehabilitation Project : Credit 0966 - Project Agreement - Conformed

CREDIT NUMBER 966 NI Project Agreement (Agricultural and Industrial Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANCO NACIONAL DE DESARROLLO Dated , 1980 CREDIT NUMBER 966 NI PROJECT AGREEMENT AGREEMENT, dated , 1980, between INTERNATIONAL DEVELOPMENT ASSOCIATI hereinafter called the Association) and BANCO NACIONAL DE DESARROLLO (hereinafter called BND). 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 equiva- lent to ten million dollars ($10,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that BND, for Fondo Especial de Desarrollo (herein- after called Fondo), agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by the Loan Agreement of even date herewith between the Borrower and International Bank for Reconstruction and Development (hereinafter called the Bank), the Bank 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 Loan Agreement, but only on condition that BND, for Fondo, agree to undertake such obliga- tions toward the Bank as are hereinafter set forth; and WHEREAS in consideration of the Association's entering into the Development Credit Agreement and the Loan Agreement with the Borrower, BND agreed for Fondo 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 Agricultural Credit and Technical Assistance Components (Parts A and C of the Project) Section 2.01. (a) Fondo shall carry out Parts A and C of the Project described in Schedule 2 to the Development Credit -2- Agreement, and conduct its operations and affairs, with due dili- gence and efficiency and in conformity with appropriate economic, agricultural, administrative and financial standards and prac- tices, with qualified and experienced management and in accordance with the Law. (b) Except as the Association shall otherwise agree, goods and services (other than services of consultants) required for Parts A and C of the Project shall be procured through regular commercial channels; provided that, whenever a contract for the purchase of goods by, or for the provision of services (other than services of consultants) to, a Sub-borrower is estimated to exceed the equivalent of fifty thousand dollars ($50,000), before the award of any such contract: (i) price quotations from at least three local suppliers or contractors, as the case may be; and (ii) the approval of such contract by the Participating Bank making the Agricultural Sub-loan, shall be obtained. Consultants' services under Part C (1) of the Project shall be procured on terms and conditions acceptable to the Association. Vehicles under Part C (2) shall be procured in group orders through regular commercial channels, provided that price quotations from at least three local suppliers are obtained. Section 2.02. Fondo shall lend the proceeds of the Credit allocated to Categories (1) and (2) of Schedule 1 to the Develop- ment Credit Agreement to Participating Banks in accordance with the provisions of Subsidiary Loan Agreements and of the Schedule to this Agreement, as such Schedule may be amended from time to time by agreement between the Association and the Borrower. Section 2.03. Fondo shall: (a) maintain and operate the Agricultural Project Unit with an adequate number of qualified personnel until the Closing Date; and (b) cause the Agricultural Project Unit to: (i) provide training as necessary to the staff of Participating Banks for purposes of Part A of the Project; (ii) monitor the progress of Parts A and C of the Project in accordance with Section 4.02 (a) of this Agreement; and (iii) prepare and furnish to the Association, not later than two months after the end of each calendar quarter, a report on the progress of Parts A and C of the Project during each such quarter, including the results of such monitoring and periodic evaluations of the success of Parts A and C of the Project in attaining their objectives. Section 2.04. Fondo shall cause the Participating Banks to provide, out of their own resources, additional financing, as necessary, to Sub-borrowers, in such amounts and for such time as shall be required under the applicable Agricultural Plans. Section 2.05. For the purposes of Section 2.02 of this Agreement, Fondo shall: (a) enter into a Subsidiary Loan Agreement with each Parti- cipating Bank, satisfactory to the Association, which shall include the terms and conditions set forth in Part I.B of the Schedule to this Agreement, and, except as the Association shall otherwise agree, Fondo shall not change or fail to enforce such Subsidiary Loan Agreement or any provision thereof, if such change or failure would materially and adversely affect the purpose of such Subsidiary Loan Agreement; (b) cause each such Participating Bank to make Agricultural Sub-loans to Sub-borrowers under Agricultural Sub-loan Contracts, on such terms and conditions as set forth in Part II.B of the Schedule to this Agreement; (c) exercise its rights under each Subsidiary Loan Agreement in such a manner as to protect its interests and those of the Association; and (d) cause each Participating Bank to exercise its rights under the applicable Agricultural Sub-loan Contract in such a manner as to protect its interests and the interests of Fondo and the Association and, except as the Association and Fondo shall otherwise agree, cause such Participating Bank not to change or fail to enforce, such Agricultural Sub-loan Contract or any provision thereof, if such change or failure would materially and adversely affect the purpose of such Sub-loan Contract. Section 2.06. (a) Fondo undertakes to insure, or make ade- quate provision for the insurance of, the goods imported for purposes of Part C (2) of the Project and to be financed out of the proceeds of the Credit against hazards incident to the acqui- sition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency usable by Fondo to replace or repair such goods. (b) Except as the Association shall otherwise agree, all goods and services financed out of the proceeds of the Credit shall be used in the execution of the Project until its comple- tion. -4- Section 2.07. Fondo shall furnish to the Association, promptly upon their preparation, the terms of reference, bidding documents and procurement schedules as appropriate for Part C (1) and (2) of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reason- ably request. Section 2.08. BND shall: (a) cause MIDA to furnish to the Association for its approval, not later than March 31, 1980, a detailed budget and timetable for carrying out the livestock survey under Part C (3) of the Project; and (b) cause MIDA to carry out such survey in accordance with such approved budget and timetable. ARTICLE III Execution of the Industrial Rehabilitation Credit Component (Part B of the Project) Section 3.01. Fondo shall carry out Part B of the Project, described in Schedule 2 of the Development Credit Agreement, and conduct its operations and affairs, with due diligence and effi- ciency and in conformity with appropriate economic, industrial, financial and investment standards and practices, with qualified and experienced management and in accordance with the Law. Section 3.02. (a) When presenting an Industrial Sub-loan (other than a free-limit Industrial Sub-loan), Fondo shall furnish to the Association an application, in form satisfactory to the Association, together with (i) a description of the Investment Enterprise and an appraisal of the Investment Project, in accor- dance with Part II.A (1) (d) of the Schedule to this Agreement, including a description of the expenditures proposed to be financed out of the proceeds of the Credit, (ii) the proposed terms and conditions of the Industrial Sub-loan, including the schedule of amortization of the Industrial Sub-loan, and (iii) such other information as the Association shall reasonably request. (b) Each request by Fondo for authorization to make with- drawals from the Credit Account in respect of a free-limit Indus- trial Sub-loan shall contain: (i) a summary description of the Investment Enterprises and the Investment Project, including a description of the expenditures proposed to be financed out -5- of the proceeds of the Credit; and (ii) the terms and conditions of the Industrial Sub-loan, including the schedule of amortization therefor. (c) Except as the Association and Fondo shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Association on or before September 30, 1981. Section 3.03. Fondo shall lend the proceeds of the Credit allocated to Category (3) of Schedule 1 to the Development Credit Agreement to Participating Banks in accordance with the provisions of Subsidiary Loan Agreements and of the Schedule to this Ag re- ment, as such Schedule may be amended from time to time by agree- ment between the Association and the Borrower. Section 3.04. Fondo shall: (a) maintain and operate its Industrial Project Department with an adequate number of qualified personnel until the Closing Date; and (b) cause the Industrial Department to: (i) provide training as necessary to the staff of the Participating Banks for purposes of Part B of the Project; (ii) monitor the progress of Part B of the Project in accordance with Section 4.02 (a) of this Agreement; and (iii) prepare and furnish to the Association, not later than two months after the end of each calendar quarter, a report on the progress of Part B of the Project during each such quarter, including the results of monitoring and periodic evaluations of the success of Part B of the Project in attaining its objectives. Section 3.05. (a) Fondo undertakes that, unless the Associa- tion shall otherwise agree, it shall cause all Industrial Sub- loans to be made on terms whereby the Participating Banks shall obtain, on the basis of an Industrial Sub-loan Contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of Fondo and the Participating Banks including the right of the Participating Bank 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 stan- dards and to maintain adequate records; (ii) require that (A) the goods and services to be financed out of the proceeds of the Industrial 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 avail- ability of maintenance facilities and spare parts therefor, and, -6- in the case of services, of their quality and the competence of the parties rendering them and (B) such goods and services shall *be used in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Associa- tion and Fondo if the Association shall so request, such goods and the sites, works, plants and construction included in the Invest- ment Project, the operation thereof, and any relevant records and documents;:(iv) require that 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 that such insurance cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Industrial Sub-loan to the place of use or installation, and that any indem- nity thereunder be made payable in a currency usable by the Investment Enterprise to replace or repair such goods; (v) obtain all such information as Fondo or the Participating Bank shall reasonably request relating to the foregoing and to the adminis- tration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the. Investment Project; and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Industrial Sub-loan upon failure by such Investment Enterprise to perform any of its obligations under its Industrial Sub-loan Contract with the Participating Bank. (b) Fondo shall, and shall cause each Participating Bank to, exercise its rights in relation to each Investment Project in such a manner as to: (i) protect the interests of the Association and Fondo; (ii) comply with its obligations in respect of the Indust- rial Sub-loan Contract; and (iii) achieve the purposes of Part B of the Project. ARTICLE IV Management and Operations of Fondo; Financial and Other Covenants Section 4.01. (a) Fondo shall establish and maintain separate accounts on its records to be used exclusively for Parts A and B of the Project and shall register in such accounts all receipts and payments for or in connection with Parts A and B of the Project, in accordance with appropriate accounting principles and procedures consistently applied, which are satisfactory to the Association. -7- (b) Fondo shall: (i) have its accounts referred to in paragraph (a) hereof 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 Borrower and the Association as soon as available, but in any case not later than four months after the end of Fondo's fiscal year, (A) certified copies of such accounts and related 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 related statements of Fondo and the audit thereof as the Association shall from time to time reason- ably request. Section 4.02. (a) Fondo: (i) shall establish and maintain, and cause the Participating Banks to establish and maintain, procedures adequate to monitor and record the progress of the Project, including the costs of Project inputs and activi- ties, and value of outputs, such procedures to permit identifica- tion of goods and services financed out of the proceeds of the Credit and disclosure of their use in the Project, the Agricul- tural Plans and the Investment Projects; (ii) shall enable, and cause the Participating Banks to enable, the Association's accredited representatives to visit the facilities and agricul- tural and construction sites included in the Project, the Agri- cultural Plans and the Investment Projects and to examine the goods financed out of the proceeds of the Credit and any relevant records and documents; and (iii) shall furnish, and cause the Participating Banks to furnish through Fondo, to the Association, at regular intervals, all such information as the Association shall reasonably request concerning the Project, the Agricultural Plans and the Investment Projects, including among others, the costs of Project inputs and activities and where appropriate, the value of outputs and effects to be derived from the Project, the expenditure of the proceeds of the Credit, the Subsidiary Loans and the Sub-loans, the goods and services financed out of such proceeds, and the administration, operations and financial condi- tion of Fondo, the Participating Banks and MIDA. (b) 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 Fondo and the Association, Fondo shall prepare and furnish to the Association a report, of such scope and in such detail as the Association -8- shall reasonably request, on the carrying out of the Project, including costs and estimates of the outputs and effects to be derived from the Project, the performance by Fondo, the Partici- pating Banks, MIDA, and the Sub-borrowers of their respec- tive obligations under the Credit Agreement, Subsidiary Loan Agreements and the Sub-loan Contracts, and the accomplishment of the purposes of the Credit. Section 4.03. Fondo shall: (i) have the accounts referred to in Section 4.01 of this Agreement and the accounts referred to in Part I.C of the Schedule to this Agreement, and financial statements (balance sheets, statements of income and expenses and related statements) corresponding thereto for each fiscal year audited in accordance with sound 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 four months after the end of each such year, (A) certified copies of Fondo's 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 state- ments and the audits thereof as the Association shall from time to time reasonably request. Section 4.04. The Association and the Borrower shall, from time to time, or at the request of either of them, review the lending terms and conditions set forth in the Schedule to this Agreement and shall make such adjustments as agreed between them. Section 4.05. (a) Fondo undertakes that, except as the Association shall otherwise agree, all funds repaid to Fondo by each Participating Bank under a Subsidiary Loan Agreement (on or before the maturities agreed thereunder) which are not required for the repayment of principal of, or any other charges on, the Credit shall be used for additional lending under Parts A and B of the Project. (b) The terms of such additional lending shall be reviewed by the Association and the Borrower not later than three (3) years from the date of this Agreement, and changed as agreed between them. -9- Section 4.06. In order to assist Fondo in carrying out Parts A and B of the Project, Fondo shall: (a) not later than Febru- ary 29, 1980, furnish to the Association for approval the terms of reference for agricultural credit and financial management consul- tants; and (b) not later than April 30, 1980, appoint such consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 4.07. (a) The Association and Fondo shall cooperate fully to assure that the purposes of the Credit will be accom- plished. To that end, the Association and Fondo shall from time to time, at the request of any party, exchange views through their representatives with regard to the progress of the Project, the performance by Fondo of its obligations under this Agreement, the administration, operations and financial condition of Fondo and other matters relating to the purpose of the Credit. (b) Fondo shall furnish to the Association all such informa- tion as the Association shall reasonably request concerning the administration, operations and financial condition of Fondo. Section 4.08. Fondo shall duly perform all its obligations under the contractual arrangements referred to in Section 3.01 (b) of the Credit Agreement. Except as the Association shall otherwise agree, Fondo shall not change such arrangements without the Association's consent. Section 4.09. Fondo shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by Fondo of its obligations under this Agreement. 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 BND, for Fondo, thereunder shall terminate on the earlier of the following two dates: - 10 - (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 accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify BDN 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 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 Banco Nacional de'Desarrollo: Fondo Especial de Desarrollo Edificio Banco Nacional de Desarrollo Apartado Postal No. 328 Managua, Nicaragua - 11 - Cable address: Telex: BANADES BNDCM-1035 Managua 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 BND may be taken or executed by the Director of Fondo or such other person or persons as BND shall designate in writing, and BND shall furnish to the Association sufficient evidence of the authority and the authenticated speci- men signature of each such person5 Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively 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 Regional Vice President Latin America and the Caribbean BANCO NACIONAL DE DESARROLLO By Authorized Representative - 12 - SCHEDULE Part I. Lending and Operating Policies and Procedures with Respect to Parts A and B of the Project: A. Eligibility Criteria for Participating Banks Participating Banks will meet the following criteria: (i) past experience and good performance in agricultural or industrial enterprise lending; (ii) suitable financial condition and management, including compliance with auditing requirements established by the laws of the Borrower; (iii) adequate managerial and technical capabilities; and (iv) adequate number and qualifi- cations of technical staff. B. Terms and Conditions 1. Subsidiary Loans will finance 80% of Agricultural Plan costs and Investment Project costs. 2. The principal amount of each Subsidiary Loan-outstanding from time to time will bear interest of: (i) not less than 9% pe annum nor more than 11% per annum for lending under Part A (1) of the Project; (ii) not less than 7% per annum for small-scale farmers and not less than 8.25% per annum for medium-scale farmers for lending under Part A (2) of the Project; and (iii) not less than 9% per annum nor more than 12% per annum for lending under Part B of the Project, which rates may be amended from time to time by the Borrower after consultation with the Association. 3. Each Participating Bank will repay the principal of, and pay interest on, the Subsidiary Loan not later than 15 calendar days after the dates on which repayment of principal of, and payment of interest on, the Sub-loan fall due. 4. Each Subsidiary Loan Agreement will include such other terms and conditions as shall be satisfactory to the Association, and shall provide, inter alia: (a) that the Participating Bank will assist in the carrying out of Part A of the Project by providing additional credit to Sub-borrowers on terms and in amounts necessary to ensure adequate financing of the respective Agricultural Plans, in accordance with the lending and operating policies and proce- dures set forth in Part II hereof; - 13 - (b) that the Participating Bank will conduct its business and operations in accordance with appro- priate financial and administrative practices and under the supervision of competent and experienced management; (c) that Subsidiary Loans will be made and will be repayable in c6rdobas; (d) that the Participating Bank will establish and maintain a Sub-loan Account, and have the Account and related statements audited as required by Part I.C of this Schedule; and (e) that the Participating Bank will assist with its own technical staff, or cause assistance to be furnished to, Sub-borrowers for the preparation and supervision of Agricultural Plans under Part A (2) of the Project. C. Disbursements and Records 1. Each Participating Bank will: (i) establish and main- tain separate accounts in respect of its Subsidiary Loan Agree- ment and of each Sub-loan made; (ii) have each of its Sub-loan Accounts for each fiscal year and the financial statements (including balance sheets, statements of income and expenses and related statements) corresponding thereto, audited, in accordance with sound auditing principles consistently applied, by indepen- dent auditors acceptable to the Association; (iii) furnish to the Association through Fondo as soon as available, but in any event not later than four months after the end of its fiscal year, (A) certified copies for such financial statements and of such sepa- rate accounts for such year as so audited and (B) the reports of such audits by said auditors, of such scope and in such detail as the Association and Fondo shall request; and (iv) furnish to the Association and Fondo such other information concerning the financial statements and Sub-loan Accounts and the audits thereof as the Association or Fondo shall request. Part II. Lending and Operating Policies and Procedures of the Participating Banks with Respect to Parts A and B of the Project A. Eligibility of Sub-borrowers 1. (a) The Participating Banks will process all applications for Sub-loans in accordance with their normal administrative - 14 - procedures. The evaluation of the creditworthiness of applicants and the analysis of the Agricultural Plans under Part A (2) of the Project will be carried out by the Participating Banks. (b) The technicians of the Participating Banks referred to in paragraph B.4 (e) of Part I of this Schedule will assist applicants in the preparation of Agricultural Plans under Part A (2) of the Project. (c) Approval of Industrial Sub-loans will be made on the basis of appraisal reports prepared by the Participating Banks showing, inter alia, that the proposed Sub-borrower had previously operated as a financially viable enterprise, that such proposed Sub-borrower's need for rehabilitation was a result of recent economic events in the Borrower's country, that the proposed Investment Project is technically feasible and financially viable, that the capability of current management is adequate and that the prospects for marketing the products of such proposed Sub-borrower are favorable. (d) An applicant for an Industrial Sub-loan will not be required to meet a minimum capitalization requirement, unless the total outstanding short- and long-term debt of the enterprise exceeds 90% of the real value of its total assets, in which case the applicant will be required to furnish to the Participating Bank a specific plan for recapitalization of the enterprise. 2. (a) A Sub-borrower will be eligible to receive Agricltural Sub-loans under Part A (2) of the Project to finance renovation of a maximum of 70 hectares of coffee farmland. (b) An Industrial Enterprise will be eligible for In- dustrial Sub-loans in an aggregate amount of not more than $2,500,000 equivalent. B. Terms and Conditions 1. The amount of a Subsidiary Loan will not exceed 80% of the estimated costs of the Agricultural Plan and Investment Project to be financed thereby. 2. The principal amount outstanding of each Agricultural Sub- loan will: - 15 - (a) bear interest at a rate of not less than 14% per annum for lending under Part A (1) of the Project, and not less than 10% per annum for small-scale farmers and not less than 11% per annum for medium-scale farmers for lending under Part A (2) of the Project (exclusive of all applicable commissions, taxes, charges or fees of any kind whatsoever), which rates may be amended from time to time by the Borrower after consultation with the Associa- tion; and (b) be repaid (i) in the case of short-term credits under Part A (1) of the Project, to finance seasonal expenditures of crop production and expenditures related to the maintenance of permanent crops and livestock, in not more than 18 months, such repayment period to be based on budgets for crop or livestock activities utilized by BND, (ii) in the case of medium-term credits under Part A (1) of the Project, to finance the purchase of machinery, equipment, stock and other on-farm investment, in not more than 5 years, taking into account the Sub-borrower's ability to repay, as estimated on the basis of the Sub-borrower's cash-flow projections, and (iii) in the case of credits to small- and medium-scale farmers under Part A (2) of the Project, in not more than 9 years, including a grace period of 4 years. 3. The principal amount outstanding of each Industrial Sub- loan will: (a) bear interest at a rate of not less than 15% per annum (exclusive of all applicable commissions, taxes, charges or fees of any kind whatsoever), which rate may be amended from time to time by the Borrower after consultation with the Association; and (b) be repaid (i) in the case of Industrial Sub-loans to finance current production requirements, in not more than 5 years, and (ii) in the case of Industrial Sub-loans for repair or replacement of fixed installations, in not more than 15 years, including a grace period of 3 years. 4. Each Sub-loan Contract will provide, inter alia, for the following: (a) the Sub-borrower's obligation to keep records of the expenditures under a Sub-loan under Part A (2) or B of the Project; - 16 - (b) the Sub-borrower's obligation to insure goods to be imported against hazards incident to the acquisition, transporta- tion and delivery to the place of use or installation; (c) the Sub-borrower's obligation to enable the appli- cable Participating Bank to comply with its obligations under the applicable Subsidiary Loan Agreement; (d) that the Sub-loans will be repayable in c6rdobas; (e) that the goods and services for an Agricultural Plan will be procured in accordance with the provisions of Section 2.01 (b) hereof, and will be used exclusively in the carrying -out of such Plan; (f) the right of the Participating Bank to require the Sub-borrower to: (i) carry out the respective Agricultural Plan under Part A (2) of the Project or Investment Project as such Plan or Project may be changed by agreement between the Participating Bank and the Sub-borrower; and (ii) operate the sites and facili- ties included in the Agricultural Plan under Part A'(2) of the Project or Investment Project with due diligence and efficiency and in accordance with sound agricultural, technical, financial and managerial standards, and to maintain adequate records; (g) the right of the Participating Bank to inspect the goods, land, sites, works and construction included in the Agricultural Plan and Investment Project, the operation thereof and any relevant records and documents; (h) the right of the Participating Bank to suspend and terminate access by the Sub-borrower to the use of the pro- ceeds of any Sub-loan under Part A (2) or B of the Project upon non-performance of obligations under the applicable Sub-loan Contract, and in appropriate cases, to premature such Sub-loan; and (i) all such other provisions as necessary to enable the Borrower to fulfill its obligations under the Development Credit Agreement and to enable Fondo and the Participating Bank to fill their obligations under the applicable Subsidiary Loan Agreement, and to protece their interests and those of the Association. 5. Each Participating Bank will also make available to its Sub-borrowers under Part A of the Project the financing provided in Section 2.04 of this Agreement. - 17 - C. Disbursements and Records 1. Whenever any goods or services to be financed out of the proceeds of a Sub-loan are procured or paid for by any Partici- pating Bank, the Participating Bank must promptly inform its Sub-borrower of the amounts charged to the Sub-loan accounts for such goods or services. 2. The Participating Bank will furnish periodic statements to the Sub-borrower, showing the amounts withdrawn from the Sub-loan Account, including interest, disbursements and outstanding balance. D. Supervision 1. The Participating Bank will ensure that amounts withdrawn from the Sub-loan Account are applied exclusively to expenditures made for the respective Agricultural Plan or Investment Project. 2. The staff of the Participating Bank and Fondo, or the staff serving in the Agricultural Project Unit and in the Indus- trial Project Department referred to in Sections 2.03 and 3.04, respectively, of this Agreement on their behalf, will regularly visit the farms and enterprises where Agricultural Plans and Investment Projects, respectively, are being carried out to ensure that Sub-borrowers are effectively and punctually carrying them out and complying with the provisions of the applicable Sub-loan Contracts. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the e4& day of VM/4 , 19W. FOR SECRETARY