Afghanistan - Agricultural And Rural Development Project : Credit 0928 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 928 AF Project Agreement (Agricultural and Rural Development Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN Dated June 25, 1979 CREDIT NUMBER 928 AF PROJECT AGREEMENT AGREEMENT, dated June 25, 1979, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN, existing as a legal entity under the laws of the Borrower, (hereinafter called AGBANK). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Democratic Republic of Afghanistan (hereinafter called the Borrower) and the Association, the Asso- ciation has agreed to make available to the Borrower an amount in various currencies equivalent to sixteen million five hundred thousand dollars ($16,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that AGBANK agree to undertake such obligations toward the Associ- ation as are hereinafter set forth; (B) the Borrower has applied to the International Fund for Agricultural Development (hereinafter called the Fund) for a loan (hereinafter called the Fund Loan) in an amount equivalent to nine million eight hundred thousand Special Drawing Rights (SDR9,800,000) to assist in financing the Project on the terms and conditions set forth in an agreement (hereinafter called the Fund Loan Agreement) between the Borrower and the Fund; (C) the Fund has appointed the Association as Cooperating Institution to administer the Fund Loan in accordance with the provisions of the Development Credit Agreement and the Fund Loan igreement, and the Association has accepted such appointment; and (D) by a subsidiary loan agreement to be entered into between the Borrower and AGBANK, a part of the proceeds of the credit provided for under the Development Credit Agreement and of the Fund Loan will be made available to AGBANK on the terms and conditions therein set forth; and WHEREAS AGBANK, in consideration of the foregoing, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -2- 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 and the term "subsidiary" means any company or entity of which a majority of the outstanding voting stock or other proprietary interest is owned, or which is effectively controlled, by AGBANK or by any one or more subsidiaries of AGBANK or by AGBANK and one or more of its subsidiaries. ARTICLE II Execution of the Project Section 2.01. AGBANK shall carry out Part A (vi) of the Project described in Schedule 2 to the Development Credit Agree- ment with due diligence and efficiency and in conformity with appropriate administrative, financial and agricultural practices. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods to be financed out of the proceeds of the Credit and Fund Loan relent or made available, as the case may be, to AGBANK shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.03. (a) AGBANK undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Credit or the Fund Loan relent or made available, as the case may be, to it by the Bor- rower against 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 by AGBANK to replace or repair such goods. (b) Except as the Association may otherwise agree, AGBANK shall cause all goods and services financed out of the proceeds of the Credit or the Fund Loan relent or made available, as the case may be, to it by the Borrower to be used exclusively for the Project. - 3 - Section 2.04. (a) AGBANK shall furnish to the Associa- tion and the Fund, promptly upon their preparation, the plans, reports, contract documents and procurement schedules for Part A (vi) of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reason- ably request. (b) AGBANK: (i) shall maintain records and procedures adequate to record and monitor the progress of Part A (vi) of the Project (including its cost and, where appropriate, the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Credit and the Fund Loan, and to disclose their use in said part of the Project; (ii) shall enable the Association's and the Fund's accredited representatives to visit the facilities included in the Project and to examine the goods financed out of the proceeds of the Credit or the Fund Loan 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 Part A (vi) of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Credit and the Fund Loan and the goods and services financed out of such proceeds. (c) 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 the Borrower and the Association, AGBANK shall prepare and furnish to the Borrower, the Association and the Fund a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of Part A (vi) of the Project, its cost and the benefits derived and to be derived from it, the performance by AGBANK and the Association of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Credit and the Fund Loan. (d) AGBANK shall enable the Association's and the Fund's accredited representatives to examine all plants, installations, sites, works, buildings, property and equipment of AGBANK and any relevant records and documents. Section 2.05. AGBANK shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association and the Fund shall otherwise agree, AGBANK shall not take or concur in any action which would have the effect of amending, -4- abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) AGBANK shall at the request of the Associa- tion, exchange views with the Association with regard to the progress of Part A (vi) of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit and the Fund Loan. (b) AGBANK shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part A (vi) of the Project, the accomplishment of the purposes of the Credit or the Fund Loan, or the performance by AGBANK of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.07. The operating policies and procedures of AGBANK in respect of Part A (vi) of the Project shall be as set forth in Schedule 4 to the Development Credit Agreement, as the same may be modified by agreement between the Borrower and the Association in accordance with the provisions of the Development Credit Agreement, and, the terms and conditions applicable to AGBANK's sub-loans, under the Project, shall be as set forth in the Schedule to this Agreement. ARTICLE III Management and Operations of AGBANK Section 3.01. AGBANK shall at all times manage its affairs and conduct its business in an efficient manner under capable management and with competent staff and in accordance with appropriate administrative, financial and agricultural credit practices. Section 3.02. AGBANK shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Association, for insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.03. (a) AGBANK shall at all times operate and maintain its equipment and property and promptly make all neces- sary repairs and renewals thereof, in accordance with appropriate engineering and agricultural practices. -5- (b) Except in the normal course of its business, AGBANK shall not, without the agreement of the Borrower and the Associa- tion, sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking. Section 3.04. (a) AGBANK shall not establish, acquire or take over any subsidiary except on terms and conditions satis- factory to the Borrower and the Association. (b) AGBANK shall cause each of its subsidiaries, if any, and each of the subsidiaries established, acquired or taken over, after the date of this Agreement, if any, to observe and perform, as appropriate, the obligations of AGBANK under this Agreement to fh extent to which such obligations shall be appli- cable to such bsidiary, as though such obligations were binding upon each of st , subsidiaries. ARTICLE IV Financial Covenants Section 4.01. (a) AGBANK shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. (b) AGBANK shall establish and maintain separate accounts for Part A (vi) of the Project and shall record in such accounts all amounts disbursed or received for or in connection with said Part of the Project. (c) Without limitation upon the generality of paragraphs (a) and (b) of this Section, AGBANK shall ensure that, until one year after the Closing Date, all records (orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Credit and Fund Loan on the basis of certificates of expenditure are retained, and shall make such records available to the Associ- ation's and Fund's accredited representatives upon their request for inspection. Section 4.02. AGBANK shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) and its records supporting - 6 - certificates of expenditure referred to in Se-tion 4.01 (c) for each fiscal year audited, in accordance w --h appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association and the Fund as soon as available, but in any case not later than four months after the end of each su-h year, (A) certified copies of its 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 includ- ing a separate opinion by said auditors in respect of such certi- ficates of expenditure showing whether the proceeds of the Credit and Fund Loan withdrawn by AGBANK on the basis of certificates of expenditure have been used for the purpose for which they were provided; and (iii) furnish to the Association and the Fund such other information and 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 AGBANK thereunder shall terminate on the earlier of the following two dates: (i) the earliest date on which both the Development Credit Agreement and the Fund Loan Agreement shall have terminated in accordance with their respective 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 AGBANK of this event. (c) If either the Development Credit Agreement, or the Fund Loan Agreement, terminates in accordance with its terms before the - 7 - date specified in paragraph (a) (ii) of this Section and the other Agreement reL,ains in force, all obligations under this Project Agreement of AGBANK and of the lender under that other Agreement shall remain in force. (d) If the Association shall notify AGBANK that its appoint- ment as Cooperating Institution under the Fund Loan Agreement has terminated, all references in this Agreement to the Fund, to the Fund Loan and to the Fund Loan Agreement shall be deemed to be deleted. 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) -8- For AGBANK: Agricultural Development Bank of Afghanistan P.O. Box 414 Kabul, Afghanistan Cable address: AGBANK Kabul, Afghanistan 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 AGBANK may be taken or executed by its President or such other person or persons as the said President shall designate in writing, and AGBANK shall furnish to the Association sufficient evidence of the authority and the authenti- cated 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 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 in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Is/ M. P. Benjenk Regional Vice President Europe, Middle East and North Africa AGRICULTURAL DEVELOPMENT BANK OF AFGHANISTAN By /s/ A. G. Farahi Authorized Representative - 9 - SCHEDULE Terms and Conditions for AGBANK Sub-loans 1. General AGBANK sub-loans under the Project shall be made in accor- dance with its Charter and the Policy Statement and Loan Regula- tions dated October 18, 1970, as the same may be amended from time to time with the prior agreement of the Association. 2. Security Requirements AGBANK will continue to take security for its sub-loans under the Project in accordance with the said Policy Statement and Loan Regulations. 3. Terms and Conditions of Sub-loans (a) The minimum interest rate and contribution of farmers and the maximum permissible grace period and the period of repayment ior AGBANK sub-loans are set forth below: Category of Interest Sub-borrowers' Repayment Grace Sub-loans Rate Contribution Period Period (A) On-farm deve- lopment, small machinery and equipment 8 20 12 4 (B) Fertilizer and other inputs 10 0 1 0 (b) It is understood that AGBANK shall allow rebate to cooperatives not exceeding one percentage point of the applicable interest rates. (c) The terms and conditions of sub-loans to: (i) coopera- tives under the Project; (ii) Project staff for the purchase of motorcycles and bicycles, if applicable; and (iii) village work- shop owners for purchase of tools and spare parts, shall be satisfactory to the Association.