CONFORMED COPY LOAN NUMBER 709 IS Project Agreement (Agricultural Credit Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND NIR LIMITED DATED OCTOBER 21, 1970 CONFORMED COPY LOAN NUMBER 709 IS Project Agreement (Agricultural Credit Project) BETWEEN INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND NIR LIMITED DATED OCTOBER 21, 1970 PROJECT AGREEMENT AGREEMENT, dated October 21, 1970, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and NIR LIMITED (hereinafter called NIR). WHEREAS by a loan agreement of even date herewith (hereinafter called the Loan Agreement) between Israel Bank of Agriculture Limited (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower a loan 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 NIR agrees to undertake certain obligations to the Bank as hereinafter in this Project Agreement set forth; and WHEREAS NIR, in consideration of the Bank's entering into the Loan 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 Loan Agreement shall have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) NIR shall participate in carrying out the Project with due diligence and efficiency, in conformity with sound agricultural, administrative and financial policies and practices, and under the supervision of competent and experienced management. (b) NIR shall exercise its rights in relation to each sub-loan in such manner as to protect the interests of the Bank and NIR. 0I 4 (c) NIR shall make adequate provision satisfactory to the Bank for the utilization, in NIR's agricultural credit program, of the proceeds of repayment to it of principal of sub-loans to the extent that such proceeds are not required for purposes of servicing the part of the Loan to be relent by the Borrower to NIR and the portion of the Government Loan to be received by NIR from the Guarantor. (d) Except as the Bank and NIR may otherwise agree, NIR shall ensure that (i) each sub-borrower receiving a sub-loan from NIR will contribute out of his own resources not less than twenty per cent (20%) of the total cost of the sub-lending project proposed by him (excluding land), (ii) in respect of each such sub-lending project NIR will provide financing of not less than a further such twenty per cent (20%) out of its own resources, as part of the sub-loan, in addition to the proceeds of the Government Loan representing a further such twenty per cent (20%) which will be made available by the Guarantor to NIR for such purpose pursuant to Section 2.02 (b) of the Guarantee Agreement, and (iii) the proceeds of the Loan to be included in any such sub-loan will not exceed forty per cent (40%) of such total cost. (e) Except as the Bank shall otherwise agree, NIR shall submit to the Borrower, for review and prior approval by the Bank, any sub-loan in excess of the equivalent of three hundred thousand dollars ($300,000) or which, together with any outstanding balance of such other sub-loan or sub-loans as shall have been made to the same sub-borrower, exceed in the aggregate such amount. Section 2.02. Pursuant to Section 2.01 of this Agreement, NIR, before making any sub-loan, will complete a thorough appraisal of the loan application and satisfy itself that the sub-borrower will follow sound agricultural practices, in accordance with agreed investment plans, and that estimated results will be adequate to ensure a reasonable return on investment and due and punctual service of the sub-loan. In particular, NIR shall satisfy itself regarding such technical aspects as adequacy and quality of water supply, ecological and climatological conditions affecting production, suitability of planting material, the introduction and use of such current inputs as shall be appropriate to the cropping program and soil conditions, and the adequacy of marketing arrangements. Section 2.03. (a) NIR shall at all times charge a yearly rate of interest on sub-loans made by NIR of nine per cent (9%) or such other rate as shall be agreed from time to time between the Bank and NIR. (b) Except as the Bank and NIR may otherwise agree, the repayment periods (including grace periods) for sub-loans will not exceed: 5 Total Repayment Grace Period (including Period Grace Period) (years) (years) (i) Greenhouses for flowers 2 10 (ii) Sub-tropical fruit plantations 7 15 (iii) Farmers' cooperative, kibbutzim and mosha- vim handling facilities 2 10 (iv) AGREXCO handling facilities 3 15 (v) Irrigation equipment and minor civil works 3 15 (c) NIR undertakes that, unless the Bank shall otherwise agree, any sub-loan by NIR will be made under the procedures described in Schedule 5 to the Loan Agreement and on terms whereby NIR shall obtain, by written agreement or by other appropriate legal means, rights adequate to protect the interests of NIR and rights which the Bank shall deem adequate to protect the interests of the Bank, including: (i) the right to require the sub-borrower to carry out and operate the sub-lending project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards, and to maintain adequate records; (ii) the right to require that the goods and services to be financed out of the proceeds of the sub-loan shall be used exclusively in the carrying out of the sub-lending project; (iii) the right of the Bank and NIR to inspect such goods and the farms, sites, works, and construction included in the sub-lending project, the operation thereof and any relevant records and documents; (iv) the right to require that the sub-borrower shall take out and maintain such insurance, against risks and in such amounts, as shall be consistent with sound agricultural and business practices and that, without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of the goods financed out of the proceeds of the sub-loan to the place of use or installation, and that any indemnity thereunder shall be payable in a currency freely usable by the sub-borrower to replace or repair such goods; 6 (v) the right to obtain all such information as the Bank and NIR shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the sub-borrower; and (vi) the right of N1R to suspend and terminate access by the sub-borrower to the use of the proceeds of the sub-loan upon failure by such sub-borrower to perform its obligations under its agreement with NIR. Section 2.04. Without the prior approval of the Bank, NIR shall not amend (i) its Memorandum or Articles of Association, provided, however, that such approval shall not be required for any amendment to increase the authorized capital of NIR or to create new classes of shares, or (ii) its security, lending and supervision procedures described in Schedule 5 to the Loan Agreement. Section 2.05. For the purpose of enabling NIR to participate in sub-lending operations to be carried out under the Project, a Subsidiary Loan Agreement in form and substance satisfactory to the Bank shall be entered into between the Borrower and NIR providing, inter alia, for relending by the Borrower to NIR out of the proceeds of the Loan, at the same rate of interest as that payable by the Borrower to the Bank in terms of Section 2.06 of the Loan Agreement. Section 2.06. NIR shall, from time to time, select a representative to be appointed by the Guarantor to the Project Coordination Committee pursuant to Section 3.05 of the Guarantee Agreement, and cooperate fully with the said Committee in such manner as to enable it to fulfill its functions effectively. Section 2.07. NIR shall cause each of its subsidiaries, if any, and each of the subsidiaries established or acquired after the date of this Agreement, if any, to observe and perform the obligations of NIR hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon each of such subsidiaries. Section 2.08. Except as the Bank shall otherwise agree, the goods and services to be financed under Category II (b) of the allocation of the proceeds of the Loan as set out in Schedule 1 to the Loan Agreement shall be procured on the basis of international competitive bidding in accordance with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969, and in accordance with such other procedures supplementary thereto as shall be agreed between the Bank and NIR. Section 2.09. NIR shall maintain or cause to be maintained a separate and special Government Loan Account for the Project (hereinafter called the Government Loan Account) and records thereof adequate to reflect, in accordance with consistently maintained sound accounting practices, the status of the portion of the Government Loan received by NIR. 7 ARTICLE III Records Section 3.01. (a) NIR shall maintain records adequate to record the progress of each sub-lending project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of NIR. NIR shall enable the Bank's representatives to examine such records. (b) NIR shall: (i) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year, audited by independent auditors acceptable to the Bank in accordance with sound auditing principles consistently applied; (ii) furnish to the Bank, as soon as available but in any case not later than three months after the end of each such year, certified copies of its audited financial statements for such year, and an audit report by the said auditors of such scope and in such detail as the Bank shall reasonably request; (iii) furnish to the Bank such other information concerning the accounts and financial statements of NIR and the audit thereof as the Bank shall from time to time reasonably request. (c) Whenever so requested by the Borrower, NIR shall make available to the Borrower its books and records relating to sub-lending transactions within the framework of the Project, to enable the Borrower to fulfill its obligation to maintain the Project Account referred to in Section 4.01 (d) of the Loan Agreement and for the audit thereof. ARTICLE IV Consultation; Information Section 4.01. NIR shall furnish to the Bank all such information as the Bank shall reasonably request concerning the sub-loans, the sub-borrowers, the sub-lending projects, and the administration, operations and financial condition of NIR. Section 4.02. The Bank and NIR shall cooperate fully to assure that the purposes of the Loan will be accomplished. To that end, the Bank and NIR 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 relating to the carrying out of the Project, the administration, operations and financial condition of NIR and the sub-borrowers, and other matters relating to the purpose of the Loan. 8 Section 4.03. The Bank and NIR shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Loan or the performance by either of them of its obligations under this Agreement or the performance by the Borrower or NIR of its obligations under the Subsidiary Loan Agreement to be entered into between the Borrower and NIR or the perf-rmance by any party to a Government Loan Agreement or a sub-loan agreeme, . of its obligations thereunder. ARTICLE V Effective Date; Termination Section 5.01. This Project Agreement shall enter into force and effect on the Effective Date. If the Loan Agreement shall terminate pursuant to Section 7.01 of the General Conditions, the Bank shall promptly notify NIR of this event and, upon the giving of such notice, this Project Agreement and all obligations of the parties hereunder shall forthwith terminate. Section 5.02. This Project Agreement shall terminate and all obligations of the parties hereunder shall determine upon termination of the Loan Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. No delay in exercising, or omission to exercise, any right, power, or remedy accruing to either party under this Project Agreement upon any default shall impair any such right, power or remedy or be construed to be a waiver thereof or an acquiescence in such default; nor shall the action of such party in respect of any default or any acquiescence in any default, affect or impair any right, power or remedy of such party in respect of any other or subsequent default. Section 6.02. Any notice, demand or request required or permitted to be given or made under this Project 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 band or by mail, telegram, cable or radiogram to the party to which it is required or permitted to be given or made at its 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 demand or request. The addresses so specified are: 9 For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Intbafrad Washington, D.C. For NIR: NIR Limited 28 a Rothschild Blvd. Tel Aviv, Israel Cable address: NIR Tel Aviv Section 6.03. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Project Agreement on behalf of NIR may be taken or executed by its General Manager or such other person or persons as he shall designate in writing. Section 6.04. NiR shall furnish to the Bank sufficient evidence of the authority of the person or persons who will, on behalf of NIR, take any action or execute any documents required or permitted to be taken or executed by NIR pursuant to any of the provisions of this Agreement and the authenticated specimen signature of each such person. Section 6.05. This Agreement may be executed in several counterparts, each of which shall be an original and all collectively but one instrument. 10 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 to be delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ J. E .rke Knapp Vice President NIR LIMITED By /s/ Ralph Cohen Authorized Representatibe