DOCUME NTS LOAN NUMBER 2421 HO SANAA Project Agreement (Water Supply and Drainage Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and SERVICIO AUTONOMO NACIONAL DE ACUEDUCTOS Y ALCANTARILLADOS Dated ,1984 LOAN NUMBER 2421 HO SANA PROJECT AGREEMENT AGREEMENT, dated Net 7 1984, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (herein- after called the Bank) and SERVICIO AUTONOMO NACIONAL DE ACUEDUCTOS Y ALCANTARILLADOS (hereinafter called SANAA). WHEREAS (A) by the Loan Agreement of even date herewith between the Republic of Honduras (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million six hundred thousand dollars ($19,600,000), on the terms and conditions set forth in the Loan Agreement, .but only on condition that SANAA agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by a subsidiary loan agreement to be entered into between the Borrower and SANAA, a portion of the proceeds of the Loan, as provided for under the Loan Agreement, will be made available to SANAA on the terms and conditions therein set forth; and WHEREAS SANAA, 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, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. SANAA declares its commitment to the objectives of the Project as set forth in paragraph (c) of the Preamble to Schedule 2 to the Loan Agreement, and to this end - 2 - shall carry out Part H of the Project, described in Schedule 2 to the Loan Agreement, with due diligence and efficiency and in conformity with appropriate administrative, financial, engineer- ing and public utility practices. Section 2.02. In order to assist SANAA in carrying out Part H (1), (2) and (3) of the Project, SANAA shall employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, such consultants to be selected in accordance with principles and procedures satisfactory to the Bank on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency', published by the Bank in August 1981. Section 2.03. SANAA shall cause all services financed out of the proceeds of the Loan made available to it by the Borrower to be used exclusively for the purposes of Part H (1), (2) and (3) of the Project. Section 2.04. (a) SANAA shall furnish to the Bank, promptly upon their preparation, reports, contract documents and work schedules for Part H of the Project, and any material modifica- tions thereof or additions thereto, in such derail as the Bank shall reasonably request. (b) SANAA shall: (i) maintain records and procedures adequate to record and monitor the progress of Part H of the Project (including its cost and the benefits to he derived from it), to identify the services financed out of the proceeds of the Loan, and to disclose their use in such Part of the Project; (ii) enable the Bank's representatives to visit the facilities included in such Part of the Project and to examine any relevant records and documents; and (iii) furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning such Part of the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditure of the proceeds of the Loan and the goods and services financed out of such proceeds. (c) Upon the award by SANAA of any contract for services to be financed olt of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of Part H of the Project, but in any event not later than six months after the Closing Date or - 3 - such later date as may be agreed for this purpose between SANAA and the Bank, SANAA shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of such Part of the Project, its cost and the benefits derived and to be derived from it, the performance by SANAA and the Bank of their respective obligations under the SANAA Project Agreement and the accomplishment of the purposes of the Loan. (e) SANAA shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of SANAA and any relevant records and documents. Section 2.05. SANAA shall duly perform all its obligations under the SANAA Subsidiary Loan Agreement. Except as the Bank shall otherwise agree, SANAA shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the SANAA Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) SANAA shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part H of the Project, the performance of its obligations under this Agreement and under the SANAA Subsidiary Loan Agreement, and other matters relating to the purposes of the Loan. (b) SANAA shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part H of the Project, the accomplishment of the purposes of the Loan, or the performance by SANAA of its obligations under this Agreement and under the SANAA Subsidiary Loan Agreement. Section 2.07. SANAA shall, not later than February 28, 1985, employ a project manager whose qualifications and experience and terms and conditions of employment shall be satisfactory to the Bank. Section 2.08. SANAA shall, not later than February 28, 1985, establish a Steering Committee under the coordination of the General Manager of SANAA and consisting of one representative each of the Borrower's Ministry of Health, Ministry of Government and Justice, Ministry of Finance, Ministry of Natural Resources through its Water Resources Division, and the Consejo Superior de Planificacio'n Economica, such Committee to provide interministe- rial coordination and policy guidance for carrying out Part H of the Project. ARTICLE III Management and Operations of SANAA Section 3.01. SANAA shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and public utility practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Section 3.02. SANAA shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering, financial and public utility practices. ARTICLE IV Financial Covenants Section 4.01. (a) SANAA shall maintain records adequate to reflect, in accordance with consistently maintained appropriate accounting practices, its operations and financial condition, including, without limitation to the foregoing, separate accounts reflecting all expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure. (b) SANAA shall retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing the expenditures on account of which withdrawals are requested from the Loan Account on the basis of statements of expenditure, and shall enable the Bank's representatives to examine such records. Section 4.02. SANAA shall: (a) have its accounts and financial statements (balance sheets, statoments of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate -5- auditing principles consistently applied, by independent auditors acceptable to the Bank; (b) furnish to the Bank as soon as available, but in any case not later than four months after the end of each such year: (i) certified copies of its financial statements for such year as so audited; and (ii) the report of such audit by said auditors of such scope and in such detail as the Bank shall have reasonably requested, including, without limitation to the foregoing, separate opinions by said auditors in respect of the expenditures and records referred to in Section 4.01 (b) of this Agreement, as to whether the proceeds of the Loan made available to it and withdrawn from the Loan Account on the basis of statements of expenditure have been used for the purpose for which they were provided; and (c) furnish to the Bank such other information concerning said accounts, financial statements, records and expenditures, as well as the audit thereof, as the Bank 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 Loan Agreement becomes effective. Section 5.02. This Agreement and all obligations of the Bank and of SANAA thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify SANAA thereof. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For SANAA: Servicio Autonomo Nacional de Acueductos y Alcantarillados Apartado Postal 437 Tegucigalpa, D.C. Honduras Cable Address: SANAA Tegucigalpa, D.C. Honduras 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 SANAA may be taken or executed by the General Manager of SANAA or such other person or persons as the General Manager of SANAA shall designate in writing, and the General Manager of SANAA shall furnish to the Bank 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 counterparts, 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 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By . Regional Vice President Latin America and the Caribbean SERVICIO AUTONOMO NACIONAL DE ACUEDUCTOS Y ALCANTARILLADOS ByizedRepresentative Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this day ofj4 98-f. FOR SECRETARY