CONFORMED COPY

CREDIT NUMBER 269 ET

Development Credit

Agreement(Addis Ababa Dairy Development Project)

BETWEEN

EMPIRE OF ETHIOPIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED AUGUST 30, 1971

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CONFORMED COPY

CREDIT NUMBER 269 ET

Development Credit

Agreement(Addis Ababa Dairy Development Project)

BETWEEN

EMPIRE OF ETHIOPIA

AND

INTERNATIONAL DEVELOPMENT ASSOCIATION

DATED AUGUST 30, 1971

DEVELOPMENT CREDIT AGREEMENT

AGREEMENT, dated August 30, 1971, between EMPIRE OFETHIOPIA (hereinafter called the Borrower) and INTERNATIONALDEVELOPMENT ASSOCIATION (hereinafter called the Association).

WHEREAS (A) The Borrower has requested the Association to assist in thefinancing of the Project described in Schedule 2 to this Agreement by extendingthe Credit as hereinafter provided-

(B) Part A of the Project will be carried out by the Agricultural andIndustrial Development B?.nk with the assistance of the Dairy Development Agencyand the Borrower, and as part of such assistance the Borrower will make availableto the Agricultural and Industrial Development Bank and the Dairy DevelopmentAgency respectively, part of the proceeds of the Credit as hereafter provided;

(C) Parts B, C and D of the Project will be carried out by the DairyDevelopment Agency with the Borrower's assistance and, as part of such assistance,the Borrower will make available to the Dairy Development Agency a part of theproceeds of the Credit as hereinafter provided; and

(D) The Association is willing to make the Credit available upon the termsand conditions set forth hereinafter and in a project agreement of even dateherewith between the Association, the Dairy Development Agency and theAgricultural and Industrial Development Bank;

NOW THEREFORE the parties hereto hereby agree as follows:

ARTICLE I

General Conditions; Definitions

Section 1.01. The parties to this Agreement accept all the provisions of theGeneral Conditions Applicable to Development Credit Agreements of theAssociation, dated January 31, 1969, with the same force and effect as if theywere fully set forth herein, subject, however, to the following modifications thereof(said General Conditions Applicable to Development Credit Agreements of theAssociation, as so modified, being hereinafter called the General Conditions):

(a) Section 5.01 is deleted;

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(b) The following subparagraph is added to Section 2.01:

"13. The term 'Project Agreement' has the meaning set forth in Section1.02 of the Development Credit Agreement."

(c) The words "the Project Agreement" are added after the words "theDevelopment Credit Agreement" in Section 6.06; and

(d) The words "or the Project Agreement" are added after the words "theDevelopment Credit Agreement" in Section 8.02.

Section 1.02. Wherever used in this Agreement, unless the context otherwiserequires, 'he several terms defined in the General Conditions have the respectivemeanings therein set forth and the following additional terms have the followingmeanings:

(a) "Project Agreement" means the agreement between the Association,the Dairy Development Agency and the Agricultural and Industrial DevelopmentBank of even date herewith, as the same may be amended from time to time,and such term includes all schedules to the Project Agreement.

(b) "DDA Project Financing Agreement" means the agreement to beentered into between the Borrower, and the Dairy Development Agency pursuantto Section 3.01 (b) (ii) of this Agreement, as the same may be amended fromtime to time, and such term includes all schedules to that Project FinancingAgreement.

(c) "AIDB Project Financing Agreement" means the agreement to beentered into between the Borrower and the Agricultural and Industrial DevelopmentBank pursuant to Section 3.01 (b) (i) of this Agreement, as the same may beamended from time to time, and such term includes all schedules to that ProjectFinancing Agreement.

(d) "DDA" means the Dairy Development Agency established andoperating in accordance with Order No. 72 dated May 27, 1971 and ProclamationNo. 287 dated 29th July 1971.

(e) "farm development plan" means any plan prepared by DDA and anapplicant for a Dairy loan (i) for investment in land clearing, fencing, stock handlingfacilities, machinery, watering facilities, pasture establishment, dairy cattle, artificialinsemination, pasture and dairy management equipment and tools, farm structuresor any combination thereof, and (ii) for the provision of working capital andtechnical services in connection therewith.

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(f) "Dairy loan" means a sub-loan by AIDB for a period exceeding oneyear for investments under a farm development plan approved in accordance withthe lending policies and procedures as set forth in Schedule 2 to the ProjectAgreement.

(g) "participating farmer" means any farmer who has received a Dairyloan.

(h) "UNICEF" means the United Nations Childrens Fund.

(i) "UNICEF Agreement" means the Plan of Operation between theBorrower, UNICEF and FAO dated December 27, 1961 as amended onJuly 5, 1963 and September 23, 1966.

(j) "Order" means Order No. 72 of 1971 providing for the establishmentof DDA.

(k) "Proclamation" means Proclamation No. 287 of 29th July 1971defining the powers of DDA.

(1) "Eth $" means the currency of the Borrower.

(m) "IAR" means the Institute for Agricultural Research.

(n) "AIDB" means the Agricultural and Industrial Development Bank, ashare compafiy established and operating pursuant to Decree No. 55 of 1970 andthe Commercial Code Proclamation of 1960 (Proclamation No. 166 of 1960), andshall include any successor or successors thereto.

ARTICLE II

The Credit

Section 2.01. The Association agrees to lend to the Borrower, on the termsand conditions in the Development Credit Agreement set forth or referred to, anamount in various currencies equivalent to four million four hundred thousanddollars ($4,400,000).

Section 2.02. The amount of the Credit may be withdrawn from the CreditAccount in accordance with the provisions of Schedule 1 to this Agreement, assuch Schedule shall be amended from time to time, for expenditures made (or,if the Association shall so agree, to be made) in respect of the reasonable costof goods and services required for the Project and to be financed under the

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Deveiopment Credit Agreement; provided, however, that, except as the Association

shall otherwise agree, no withdrawal shall be made on account of expendituresin the territories of any country which is not a member of the Bank (other than

Switzerland) or for goods produced in, or services supplied from, such territories.

Section 2.03. Except as the Association shall otherwise agree, the goods andservices (other than consultants' services) to be financed out of the proceeds of

the Credit shall be procured in accordance with the provisions of Section 2.02

(a) of the Project Agreement.

Section 2.04. The Closing Date shall be December 31, 1977 or such otherdate as shall be agreed between the Borrower and the Association.

Section 2.05. The Borrower shall pay to the Association a service charge

at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principalamount of the Credit withdrawn and outstanding from time to time.

Section 2.06. Service charges shall be payable semi-annually on January 1

and July 1 in each year.

Section 2.07. The Borrower shall repay the principal amount of the Creditwithdrawn from the Credit Account in semi-annual installments payable on each

January I and July 1 commencing July 1, 1981 and ending January 1, 2021,each installment to and including the installment payable on January 1, 1991 tobe one-half of one per cent (1/2 of 1%) of such principal amount, and eachinstallment thereafter to be one and one-half per cent (1-1/2%) of such principal

amount.

Section 2.08. The currency of the United States of America is herebyspecified for the purposes of Section 4.02 of the General Conditions.

ARTICLE III

Execution of the Project

Section 3.01. (a) The Borrower shall carry out Parts E and F of the Projectand shall cause (i) AIDB, with the assistance of DDA, to carry out Part A ofthe Project and (ii) DDA to carry out Parts B, C and D of the Project with duediligence and efficiency and in conformity with sound administrative, financial,economic, engineering and agricultural practices, and shall provide, promptly as

needed, the funds, facilities, services and other resources required for the purpose.

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(b) Without limitation on the generality of the provisions of paragraph(a) of this Section, the Borrower shall (i) make available to AIDB the equivalentof that part of the proceeds of the Credit as shall be required in order for AIDBto carry out Part A of the Project under the AIDB Project Financing Agreementon terms and conditions (including inter alia those set forth in Schedule 4 to thisAgreement as such Schedule may be modified from time to time by agreementbetween the Borrower and the Association) satisfactory to the Association: (ii)make available to DDA the equivalent of that part of the proceeds of the Creditas shall be required in order for DDA to carry out Parts B, C and D of the Projectunder the DDA Project Financing Agreement on terms and conditions (includinginter alia those set forth in Schedule 3 of this Agreement as such Schedule maybe modified from time to time by agreement between the Borrower and theAssociation) satisfactory to the Association; and (iii) make or cause to be madeavailable to DDA, promptly as needed, funds at a level sufficient to enable DDAto meet its own working capital requirements.

(c) The Borrower shall exercise its rights under the DDA and AIDB ProjectFinancing Agreements respectively in such manner as to protect the interests ofthe Borrower and the Association and to accomplish the purposes of the Credit,and except as the Association shall otherwise agree, the Borrower shall not assign,nor amend, suspend, terminate, abrogate or waive either the DDA or the AIDBProject Financing Agreements or any provision thereof.

(d) The Borrower shall take and shall cause all its departments and agenciesto take all action which shall be necessary on their part to enable DDA and AIDBto perform all of thei: obligations under the Project Agreement and their respectiveProject Financing Agreements with the Borrower under this Agreement and shallnot take or permit to be taken any action which might interfere with suchperformance.

Section 3.02. Except as the Association shall otherwise agree, the Borrowershall cause all goods and services financed out of the proceeds of the Credit tobe used exclusively for the Project.

Section 3.03. (a) The Borrower shall cause to be furnished to the Association,promptly upon their preparation, the plans, specifications, contract documents andwork schedules for the Project, and any material modifications or amplificationsthereof, in such detail as the Association shall reasonably request.

(b) The Borrower shall or shall cause DDA and AIDB to: (i) maintainrecords adequate to record the progress of the Project (including the cost thereof),

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to identify the goods and services financed out of the proceeds of the Credit,and to disclose the use thereof in the Project; (ii) enable the Association'srepresentatives to inspect the Project, the goods financed out of the proceeds ofthe Credit and any relevant records and documents; and (iii) furnish to theAssociation all such information as the Association shall reasonably requestconcerning the Project, the expenditure of the proceeds of the Credit and thegoods and services financed out of such proceeds.

Section 3.04. In carrying out Part F of the Project the Borrower shall employconsultants acceptable to the Association on terms and conditions satisfactory tothe Association.

Section 3.05. In carrying out Part E of the Project, the Borrower shall, inconsultation with DDA and IAR, draw up a plan mutually acceptable to theBorrower and the Association of the field studies to be undertaken and thedemonstration plots to be established.

ARTICLE IV

Other Covenants

Section 4.01. The Borrower shall maintain or cause to be maintained recordsadequate to reflect in accordance with consistently maintained sound accountingpractices the operations, resources and expenditures, in respect of Parts E and Fof the Project, of the departments or agencies of the Borrower responsible forcarrying out Parts E and F of the Project or any part thereof.

Section 4.02. The Borrower shall take all necessary steps to ensure that DDAacquires title to or rights satisfactory to the Association in respect of the landson which the milk purchasing, processing and marketing facilities included in theProject are situated or are to be established and title satisfactory to the Associationto all other land required for the purposes of the Project and the operations ofDDA.

ARTICLE V

Consultation, Information and Inspection

Section 5.01. The Borrower and the Association shall cooperate fully toassure that the purposes of the Credit will be accomplished. To that end, theBorrower and the Association shall from time to time, at the request of eitherparty:

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(a) exchange views through their representatives with regard to theperformance of their respective obligations under the Development CreditAgreement, the performance by DDA and AIDB of their obligations under theProject Agreement and their respective Project Financing Agreements with theBorrower under this Agreement, the administration, operations and financialcondition of DDA and AIDB and. in respect of the Project, of the dej3artmentsor agencies of the Borrower responsible for carrying out the Project or any partthereof, and other matters relating to the purposes of the Credit; and

(b) furnish to the other all such information as it shall reasonably requestwith regard to the general status of the Credit. On the part of the Borrower, suchinformation shall include information with respect to financial and economicconditions in the territories of the Borrower, including its balance of payments,and the external debt of the Borrower, of any of its political subdivisions andof any agency of the Borrower or of any such political subdivision.

Section 5.02. (a) The Borrower shall furnish or cause to be furnished tothe Association all such information as the Association shall reasonably requestconcerning the operations and financial condition of DDA and, in respect of theProject, of the departments or agencies of the Borrower responsible for carryingout the Project or any part thereof.

S (b) The Borrower shall promptly inform the Association of any conditionwhich interferes with, or threatens to interfere with, the accomplishment of thepurposes of the Credit, the maintenance of the service thereof or the performanceby the Borrower of its other obligations under the Development Cre;."t Agreementor the performance by DDA or AIDB of their obligations und. 2 ProjectAgreement, the DDA and AIDB Project Financing Agreements respectively.

Section 5.03. The Borrower shall afford all reasonable opportunity foraccredited representatives of the Association to inspect all plants, sites, works,property and equipment of DDA and AIDB and to visit any part of the territoriesof the Borrower for purposes related to the Credit.

ARTICLE VI

Taxes and Restrictions

Section 6.01. The principal of, and service charges on, the Credit shall bepaid without deduction for, and free from, any taxes imposed under the laws ofthe Borrower or laws in effect in its territories.

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Section 6.02. The Development Credit Agreement and the Project Agreementshall be free from any taxes on or in connection with the execution, deliveryor registration thereof, imposed under the laws of the Borrower or laws in effectin its territories.

Section 6.03. The payment of the principal of, and service charges on, theCredit shall be free from all restrictions, regulations, controls and moratoria ofany nature imposed under the laws of the Borrower or laws in effect in itsterritories.

ARTICLE VII

Remedies of the Association

Section 7.01. If any event specified in Section 7.01 of the General Conditionsor in Section 7.03 of this Agreement shall occur and shall continue for the period,if any, therein set forth, then at any subsequent time during the continuancethereof, the Association, at its option, may by notice to the Borrower declarethe principal of the Credit tlin outstanding to be due and payable immediatelytogether with the service charges thereon and upon any such declaration suchprincipal and service charges shall become due and payable immediately, anythingto the contrary in the Development Credit Agreement notwithstanding.

Section 7.02. For the purposes of Section 6.02 of the General Conditions,the following additional events are specified:

(a) A default shall occur in the performance of any obligation on thepart of DDA under the Project Agreement or the DDA Project FinancingAgreement.

(b) A default shall occur in the performance of any obligation on thepart of AIDB under the Project Agreement or the AIDB Project FinancingAgreement.

(c) DDA or AIDB shall have become unable to pay its debts as they matureor any action or proceeding shall have been taken by DDA or AIDB, or by otherswhereby any of the property of DDA or AIDB shall or may be distributed amongits creditors.

(d) The Borrower or any other authority having jurisdiction shall havetaken any action for the dissolution or disestablishment of DDA or AIDB or forthe suspension of either of their individual operations without the approval ofthe Association.

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(e) The Order or the Proclamation or any provision thereof or a;n -therlegislation presently in force and effect and governing the organizaticr ,ndoperations of DDA shall have been amended, suspended, modified or repealedwithout the Association's prior agreement so as, in the opinion of the Association,to materially and adversely affect DDA's operations or financial condition or DDA'sability to perform its obligations under the Project Agreement or the ProjectFinancing Agreement.

(f) The DDA Project Financing Agreement, the AIDB Project FinancingAgreement, or any material provision thereof shall have been assigned, amended,suspended, terminated, abrogated or waived without the prior approval of theAssociation.

Section 7.03. For the purposes of Section 7.01 of the General Conditions,the following events are specified:

(a) The event specified in Section 7.02 (a), (b) or (f) of this Agreementshall occur and shall continue for a period of sixty days after notice thereof shallhave been given by the Association to the Borrower and DDA.

(b) Any event specified in Section 7.02 (c), (d) or (e) of this Agreementshall occur.

ARTICLE VIII

Effective Date; Termination

Section 8.01. The following events are specified as additional conditions tothe effectiveness of the Development Credit Agreement within th meaning ofSection 10.01 (b) of the General Conditions:

(a) The execution and delivery of the Project Agreement on behalf ofDDA and AIDB have been duly authorized or ratified by all necessary corporateand governmental action.

(b) The DDA and AIDB Project Financing Agreements shall have beenduly executed and delivered on behalf of the Borrower, DDA and AIDBrespectively, and shall have been duly authorized or ratified by all necessarycorporate and governmental action.

(c) The Borrower shall have provided DDA with initial working capitalin an amount of not less than $100,000, on terms and conditions satisfactoryto the Association.

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(d) DDA shall have appointed a General Manager, a Production Manager,a Financial Manager, a Processing and Marketing Manager, and a Chief Veterinary

Officer, all in accordance with the provisions of Section 3.03 of the ProjectAgreement.

(e) AIDB shall have appointed the Senior Officer as provided for in Section

4.02 of the Project Agreement.

(f) The Borrower and UNICEF shall have entered into a revised UNICEF

Agreement on terms and conditions satisfactory to the Borrower, UNICEF and

the Association.

Section 8.02. The following are specified as additional matters within the

meaning of Section 10.02 (b) of the General Conditions, to be included in theopinion or opinions to be furnished to the Association:

(a) That the Project Agreement has been duly authorized or ratified by,and executed and delivered on behalf of, DDA and AIDB and constitutes a valid

and binding obligation of DDA and AIDB in accordance with its terms.

(b) That the DDA and AIDB Project Financing Agreements have been dulyauthorized or ratified by, and executed and delivered on behalf of, the Borrower,DDA and AIDB respectively, and constitute a valid and binding obligation of the

Borrower, DDA and AIDB in accordance with their terms.

Section 8.03. The date December 15, 1971 is hereby specified for the

purposes of Section 10.04 of the General Conditions.

Section 8.04. The obligations of the Borrower under Section 4.01 of this

Agreement and the provisions of Section 7.02 of this Agreement shall cease anddetermine on the date on which the Development Credit Agreement shall terminate

or on a date twenty years after the date of this Agreement, whichever shall be

the earlier.

ARTICLE IX

Representative of the Borrower; Addresses

Section 9.01. The Minister of Finance of the Borrower is designated as

representative of the Borrower for the purposes of Section 9.03 of the General

Conditions.

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Section 9.02. The following addresses are specified for the purposes olSection 9.01 of the General Conditions:

For the Borrower:

Ministry of FinanceAddis AbabaEthiopia

Cable address:

Ministry of FinanceAddis Ababa

For the Association:

International Development Association1818 H Street, N.W.Washington, D.C. 20433United States of America

Cable address:

IndevasWashington, D.C.

IN WITNESS WHEREOF, the parties hereto, acting through theirrepresentatives thereunto duly authorized, have caused this Agreement to be signedin their respective names and to be delivered in the District of Columbia, UnitedStates of America, as of the day and year first above written.

EMPIRE OF ETHIOPIA

By /s/ Ato Mekbib GebeyehuAuthorized Representatihe

INTERNATIONAL DEVELOPMENT ASSOCIATION

By /s/ J. Burke KnappVice President

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SCHEDULE I

Withdrawal of the Proceeds of the Credit

1. The table below sets forth the categories of items to be financed out of

the proceeds of the Credit, the allocation of amounts of the Credit to each category

and the percentage of eligible expenditures so to be financed in each category:

Amount of. the

Credit Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

I. Dairy loans in amounts 1,870,000 100% of disburse-

not exceeding 90% of ments under each

investment on a farm Dairy loan

development plan fi-

nanced thereunder

II. Dairy loans in amounts 470,000 90K of disburse-

exceeding 901/ of in- ments under each

vestment on a farm de- Dairy loan

velopment plan financed

thereunder

III. Expenditure for purchase

(including installationwhere applicable) of

machinery, equipment,

vehicles and veterinarysupplies for the milk

collecting marketing

and processing facilities,technical services and

feasibility studies

(a) Imported 100% of foreign

485,000 expenditures

(b) Locally procured 70% of local ex-

penditures

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Amount of theCredit Allocated % of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

IV. Expenditure for con- 120,000 80% of total ex-struction of milk collec- penditurpsting, marketing and pro-cessing facilities andinvestment on farmsoperated by DDA

V. DDA administrative and 630,000 100% of foreigntechnical staff and expendituresconsultants servicesfor Shola Dairy Plantexpansion

VI. Field studies and demon- 100,000 80% of total ex-stration plots penditures

VII. Feasibility studies for 210,000 100% of foreignfuture livestock develop- expendituresment projects

VIII. Exploration drillings for 115,000 70% of total ex-water for purposes of pendituresfeasibility studies forfuture livestock devel-opment projects

IX. Unallocated 400,000

TOTAL 4,400,000

2. For the purposes of this Schedule:

(a) the term "foreign expenditures" means expenditures for goodsproduced in, or services supplied from, the territories, and in the currency, ofany member of the Bank (other than the Borrower) or of Switzerland;

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(b) the term "local expenditures" means expenditures in the currency of

the Borrower, or for goods produced in, or services supplied from, the territories

of the Borrower; and

(c) the term "total expenditures" means the aggregate of foreign and local

expenditures.

3. Notwithstanding the provisions of paragraph I above, no withdrawals shall

be made in respect of:

(a) expenditures prior to July 6, 197 1, except that withdrawals may be

made in respect of Categories V, VII and VIII on account of expenditures incurred

after January 1, 1971 in an aggregate amount not exceeding $100,000 equivalent;

(b) payments for taxes imposed under the laws of the Borrower or laws

in effect in its territories on goods or services, or on the importation, manufacture,

procurement or supply thereof. To the extent that the amount represented by

the percentage set forth in the third column of the table in paragraph I above

would exceed the amount payable net of all such taxes, such percentage shall be

reduced to ensure that no proceeds of the Credit will be withdrawn on account

of payments for such taxes;

(c) expenditures under Category V for an administrative or technical staff

member unless and until the terms and conditions of his employment shall have

been approved by the Association; and

(d) expenditures under Category VI prior to the approval by the

Association of a plan for the field studies to be undertaken and the demonstration

plots to be established.

4. Notwithstanding the allocation of an amount of the Credit set forth in the

second column of the table in paragraph I above:

(a) if the estimate of the expenditures under any Category shall decrease,

the amount of the Credit then allocated to such Category and no longer required

therefor will be reallocated by the Association by increasing correspondingly the

unallocated amount of the Credit;

(b) if the estimate of the expenditures under any Category shall increase,

the percentage set forth in the third column of the table in paragraph 1 above

in respect of such expenditures shall be applied to the amount of such increase,

and a corresponding amount will be allocated by the Association, at the request

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of the Borrower, to such Category from the unallocated amount of the Credit,subject, however, to the requirements for contingencies, as determined by theAssociation, in respect of any other expenditures.

5. Notwithstanding the percentages set forth in the third column of the tablein paragraph 1 above, if the estimate of total expenditures under Category IVor VI shall increase and no proceeds of the Credit are available for reallocationto such Category, the Association may, by notice to the Borrower, adjust thepercentage then applicable to such expenditures in order that further withdrawalsunder such Category may continue until all expenditures thereunder shall havebeen made.

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SCHEDULE 2

Description of the Project

The Project is part of the Borrower's program of livestock development andconsists of the following Parts:

Part A

Provision of sub-loans for farm development and purchase of dairy cattleto approximately 350 dairy farmers in the Addis Ababa area and to about sixowners of ranches for breeding dairy-type cattle.

Part B

Investment in farm development and purchase of dairy cattle for farmsoperated by DDA to breed or hold dairy cattle.

Part C

Construction of additional milk-collecting centers and milk-marketing centersin the Addis Ababa region; extensions to Shola Dairy Plant, including installationof additional equipment and machinery and consultants' services incident thereto;and purchase of vehicles for transport of milk.

Part D

(i) Provision of administrative and technical services within DDA,including employment of specialists to provide services to farmers in relation todairy cattle husbandry and dairy production, disease control and artificialinsemination.

(ii) Purchase of vehicles and equipment required for such services.

Part E

Planning and execution of field studies and establishment of demonstrationplots of improved pastures or fodder crops.

Part F

Employment of consultants to carry out feasibility studies and assist in the

preparation of livestock development projects.

The Project is expected to be completed by August 31, 1977.

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SCHEDULE 3

Terms and Conditions of DDA ProjectFinancing Agreement

1. Relending: For expenditures to be made by DDA under Categories III andIV of Schedule 1 to this Agreement, the Borrower shall on-lend the equivalentof the proceeds of the Credit to DDA at an interest rate of 6-1/2% per annumfor a period of 20 years, including a grace period of six years.

2. Grant: For expenditures under Category V of Schedule 1 to this Agreement,the Borrower shall make the proceeds of the Credit available to DDA as a grant.

3. Short-term Requirements of DDA: Without limitation of the obligations ofthe Borrower under Section 3.01 of this Agreement, to the extent that sufficientfunds cannot be borrowed by DDA from the banking system to meet therequirements of Section 3.01 (b) (iii) of this Agreement, the required funds willbe lent to DDA by the Borrower promptly as needed at a rate not to exceed9-1/2% or such other rate as may be agreed between the Borrower and theAssociation.

4. Exchange Risk: The Borrower shall bear the exchange risk.

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SCHEDULE 4

Terms and Conditions of AIDB Project Financing Agreement

1. The Borrower shall open a Project Account in the National Bank of Ethiopia,into which it shall deposit 10 days after signature of the AIDB Project FinancingAgreement and thereafter quarterly in advance such amounts as are required tobring the Project Account to the level which AIDB estimates to be necessary tomake disbursements on Dairy loans in the quarter immediately following.

2. Unless the Borrower, the Association and AIDB shall otherwise agree, fundsin the Project Account shall be lent by AIDB in the name and on behalf of theGovernment for carrying out Part A of the Project, in accordance with the policies

and procedures set forth in Schedule 2 of the Project Agreement.

3. AIDB shall make disbursements for Dairy loans from the Project Account,and shall at a frequency of not less than once per month submit withdrawal requeststo the Association for the reimbursement of the eligible amounts of any suchdisbursements, for deposit into the Project Account.

4. Dairy loans will be made at an interest rate of 9-1/2% per annum of which2% will be retained by DDA, 1% by AIDB, and 6-1/2% will be repaid to theProject Account.

5. AIDB will deposit repayments of principal on Dairy loans into the ProjectAccount. In case of any default by participating farmers in repayment of principalor interest, AIDB will itself pay the required amount of principal and interestat 6-1/2% into the Project Account, and shall collect 50% of such amounts fromDDA.

6. Dairy loans shall be denominated in Ethiopian dollars. The Borrower willbear the exchange risk.