CONFORMED COPY CREDIT NUMBER 662 YAR DEVELOPMENT CREDIT AGREEMENT (Livestock Credit and Processing Project) between YEMEN ARAB REPUBLIC and INTERNATIONAL DEVELOPMENT ASSOCIATION Dated November 15, 1976 0A DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated November 15, 1976, between YEMEN ARAB REPUBLIC (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) The Borrower has requested the Association to assist in the financing of the Project described in Schedule 2 to this Agreement by extending the Credit as hereinafter provided; (B) The Borrover intends to contract from the Kuwait Fund for Arab Economic Development (hereinafter called the Kuwait Fund) a loan (hereinafter called the Kuwait Fund Loan) in an amount equivalent to eleven million six hundred forty thousand dollars ($11,640,000) to assist in financing part of the Project on the terms and conditions set forth in an agreement (hereinafter called the Kuwait Fund Loan Agreement) to be entered into between the Borrower and the Kuwait Fund; (C) The Borrower intends to contract from the Kingdom of the Netherlands (hereinafter called the Netherlands) a loan (herein- after called the Netherlands Loan) in an amount equivalent to seven million five hundred thousand dollars ($7,500,000) to assist in financing part of the Project on the terms and conditions set forth in an agreement (hereinafter called the Netherlands Loan Agreement) to be entered into between the Borrower and the Netherlands; -2- (D) The Borrower intends to obtain from the Ministry of Overseas Development of the United Kingdom of Great Britain and Northern Ireland (hereinafter called ODM) a grant (hereinafter called the ODM Grant) in an amount equivalent to two million four hundred thousand dollars ($2,400,000) to assist in financing part of the Project on the terms and conditions set forth in an agree- ment (hereinafter called the ODM Grant Agreement) to be entered into between the Borrower and ODM; and WHEREAS the Association has agreed, on the basis inter alia of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth; NOW THEREvORE the parties hereto hereby agree as follows: 0111 -3- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein (said General Conditions Applicable to Development Credit Agree- ments of the Association being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the Gen- eral Conditions and in the Preamble to this Agreement have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "LDB" means the Livestock Development Board established pursuant to the provisions of Section 3.02 of this Agreement; (b) "LDC" means the Livestock Development Corporation estab- lished pursuant to the provisions of Section 3.03 of this Agree- ment; (c) "MSMD" means the Municipalities Slaughterhouse and Markets Division established pursuant to the provisions of Section 3.04 (a) of this Agreement; (d) "AHD" means the Animal Health Division established pursuant to the provisions of Section 3.04 (a) of this Agreement; (e) "LRID" means the Livestock and Range Improvement division established pursuant to the provisions of Section 3.04 (a) of this Agreement; (f) "VDA" means any Village Development Association estab- lished under Part D(2) of the Project; (g) "ACF" means the Agricultural Credit Fund Department established within the Central Bank of the Borrower in connection with the Development Credit Agreement (Credit No. 376 YAR) between the Borrower &nd the Association dated May 7, 1973; (h) "Project Unit" means the Project Implementation Unit established pursuant to the provisions of Section 3.01 (b) of this Agreement; (i) "Subsidiary Loan Agreement" means the Agreement to be entered into between the Borrower and its Central Bank pursuant to Section 3.09 (b) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; and (j) "sub-loan" means any loan or credit made or to be made under Part A, Part D (2) or Part E of the Project in accordance with the provisions of paragraph 2 of Schedule 4 to this Agreement, as such Schedule may be amended from time to time. -5- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equiva- lent to five million dollars ($5,000,000). Section 2.02. The amount of the Credit may be withdrawn from the Credit Account in accordance with the provisions of Schedule 1 to this Agreement, as such Schedule may be amended from time to time by agreement between the Borrower and the Association, for expenditures made (or, if the Association shall so agree, to be made) in respect of the reasonable cost of services and in respect of amounts disbursed under sub-loans required for the Project and to be financed out of the proceeds of the Credit. Section 2.03. The Closing Date shall be June 30, 1984 or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. 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 principal amount of the Credit withdrawn and outstanding from time to time. Section 2.05. Service charges shall be payable semi-annually on January 1 and July 1 in each year. 0 -6- Section 2.06, The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each January 1 and July 1 commencing January 1, 1987, and ending July 1, 2026 each installment to and including the installment payable on July 1, 1996 to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.07. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the Gen- eral Conditions. * -7- ARTICLE III Execution of the Project Section 3.01. (a) The Borrower shall carry out the Project through the Project Unit with due diligence and efficiency and in conformity with appropriate agricultural, administrative and finan- cial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) The Borrower shall establish a Project Implementation Unit (hereinafter called the Project Unit), responsible to LDB and with headquarters located in Sana'a, for the execution ad manage- ment of the Project, with such organization, responsibilities and powers as are set forth in Schedule 3 to this Agreement, as such Schedule may be amended from time to time, and shall, not later than April 30, 1977, or such other date as shall be agreed with the Association, cause the Project Unit to be adequately staffed. (c) The equivalent of sixty per cent (60%) of the expendi- tures incurred in respect of Part A and Part D (2) of the Project shall be financed by the Borrower under sub-,.oans made through ACF to LDC and VDAs, respectively; the balance of such expendi- tures shall be financed by the Borrower through ACF in the form of equity contribution for LDC and of grant for VDAs. Section 3.02. For the purposes of overall responsibility of the Project and coordination of the Project activities with various Government departments and institutions and with bilateral aid organizations, the Borrower shall establish, within its Ministry 01 -8- of Agriculture, a livestock development board (LDB) under the chairmanship of the Minister of Agriculture or his designated representative and with representatives of the Borrower's Central Planning Organization, the Borrower's Ministry of Finance and Ministry of Public Works and Municipalities and the General Manager of ACF, and the Project Manager and Co-Manager. Section 3.03. For the purpose of operating and managing the facilities referred to in Part A of the Project, the Borrower shall establish a livestock development corporation (LDC), with headquarters located in Sana'a, as a semi-autonomous Government enterprise with such organization, responsibilities and powers and under such a charter as shall all be acceptable to the Asso- ciation. The Charter of LDC may be amended from time to time as may be agreed between the Borrower and the Association. Section 3.04. (a) In order to assist the Project Unit in the implementation of the Project and in the operation and management of the facilities under the Project, the Borrower shall, in con- sultation with the Association, establish within the Project Unit: (i) a Municipalities, Slaughterhouse and Markets Division (MSMD) for Part B of the Project; (ii) an Animal Health Division (AHD) for Part C of the Project; and (iii) a Livestock and Range Improve- ment Division (LRID) in Damar for Part D of the Project. (b) The Borrower shall take all such action as shall be necessary to ensure that, not later than six years from the date of this Agreement or such later date as shall be agreed with the Association, MSMD shall be transferred to the Borrower's Ministry of Public Works and Municipalities to be responsible for the 9 operation of all slaughterhouses and retail markets within the territories of the Borrower. Section 3.05. (a) The Borrower shall, not later than June 30, 1977 or such other date as shall be agreed with the Association, submit to the Association for approval by the Association proposals for such regulations as may be necessary to ensure that: (i) no animals shall be slaughtered except at the Borrower's slaughter- houses in any part of the territories of the Borrower where such slaughterhouses are available; (ii)-appropriate meat inspection procedures are enforced at said slaughterhouses; and (iii) all retail markets established within the territories of the Borrower shall be properly licensed and maintained in a sanitary manner. (b) The Borrower shall take all such action as shall be necessary to ensure that the regulations referred to in subsection (a) of this Section shall be applied to the respective areas within the territories of the Borrower where the said slaughterhouses and retail markets have commenced operation. Section 3.06. The Borrower shall take all such action as shall be necessary to ensure that: (i) all animals to be slaugh- tered at the slaughterhouses referred to in Part B(l) of the Project shall oe slaughtered by MSMD slaughtermen; and (ii) all carcasses and offal of the animals so slaughtered shall be deliv- ered by the slaughterhouses to the retail markets. Section 3.07. In order to enable the slaughterhouses and retail markets referred to in Part B (1) and (2) of the Project to be operated on a sound financial basis, the Borrower shall - 10 - cause MSMD to operate said slaughterhouses and retail markets and to collect such fees for services rendered by said slaughterhouses and retail markets as may be required for the purpose. Section 3.08. In order to assist the Borrower in carrying out the Project, the Borrower shall employ: (a) for Part F (1) and (3) of the Project, fourteen veterin- arians and technicians, an expert to fill the position of General Manager of ACF, and a management consulting firm to provide the other experts referred to in Part F (1) of the Project and super- vision of the consultants to be employed pursuant to paragraph (b) of this Section; and 0 (b) for Part F (2) of the Project, livestock and dairy con- sultants, whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Kuwait Fund and the Association. Section 3.09. (a) The Borrower shall cause ACF, with the cooperation of the Project Unit, to act as the lending channel for all sub-loans extended under the Project. (b) Notwithstanding the provisions of Section 3.01 (a) of this Agreement, the Borrower shall, for the purpose of carrying out Parts A, D (2) and E of the Project, lend to its Central Bank an amount equivalent to nine million dollars ($9,000,000) out of the Proceeds of the Credit, the Kuwait Fund Loan, the Netherlands Loan, and the Borrower's own funds under a subsidiary loan agree- ment to be entered into between the Borrower and its Central Bank - 11 - upon terms and conditions (including those set forth in Schedule 4 to this Agreement) which shall have been approved by the Associa- tion. (c) The Borrower shall exercise its rights under this Sub- sidiary Loan Agreement in such manner as to protect the interests of the 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, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. (d) The Borrower shall cause its Central Bank to take all measures necessary: (i) properly to supervise, through ACF, the provision of sub-loans; (ii) to require that (1) the goods and services to be financed under a sub-loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and ef- ficiency and reliability of the goods and avail- ability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties render- ing them and (2) such goods and services shall be used exclusively in the carrying out of the sub- project for which the sub-loan is made; and 0 -12- (iii) otherwise to ensure the use of the proceeds of said sub-loans in an efficient manner. (e) The Borrower shall take all such action as shall be necessary for the transfer of the obligations, powers and re- sponsibilities of the Central Bank under this Agreement and the Subsidiary Loan Agreement to either (i) ACF if the Borrower decides, after consultation with the Association, to establish ACF as an independent national credit institution or (ii) an independent national credit institution if the Borrower decides, after con- sultation with the Association, to incorporate ACF into such an institution. Section 3.10. The Borrower shall cause ACF to act as the administrative channel for: (a) the Borrower's equity contribu- tion to LDC; and (b) the Borrower's grant contribution to the Project Unit. Section 3.11. The Borrower shall not later than fourteen months from the date of this Agreement, or such longer period of time as the Association may agree, formulate and implement a training program, acceptable to the Association, for local counterpart staff working on the Project, with the assistance of the consultants and experts specified in Section 3.08 of this Agreement. Section 3.12. Except as the Association shall otherwise agree, the Borrower shall cause all goods and services financed out of the proceeds of the Credit to be used exclusively for the Project. 0M - 13 - Section 3.13. (a) The Borrower shall furnish to the Asso- ciation promptly upon their preparation, the reports, contract documents and work schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) The Borrower: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods, works and services financed out of the proceeds of the Credit, and to disclose the use thereof in the Project; (ii) shall enable the Association's accredited represen- tatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the pro- ceeds of the Credit and any relevant records and documents; and (iii) shall furnish to the Association all such information as the Association shall reasonably request concerning the Project, the expenditure of the proceeds of the Credit and the goods, works and services financed out of such proceeds. Section 3.14. The Borrower shall take or cause to be taken all such action as shall be necessary to acquire as and when needed all such land and rights in respect of land as shall be required for carrying out the Project and shall furnish to the Association, promptly after such acquisition, evidence satisfactory to the Association that such land and rights in respect of land are avail- able for purposes related to the Project. ARTICLE IV Other Covenants Section 4.01. (a) The Borrower shall cause the Project Unit, ACF and LDC to maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of the Project Unit, ACF and LDC. (b) The Borrower shall cause the Project Unit, ACF and LDC to: (i) have their accounts and financial statements (balance sheets, statements of income and expenses and related statements) 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 their 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 the accounts and financial statements of the Project Unit, ACF and LDC and the audit thereof as the Association shall from time to time reasonably request. (c) The Borrower shall: (i) cause the Project Unit to pre- pare quarterly progress reports on the Project; and (ii) submit such reports to the Association not later than 3 months after the end of each quarter. - 15 - (d) The Borrower shall submit to the Association, not later than 3 months after the end of each fiscal year, a report evaluat- ing Project performance for said year. Section 4.02. The Borrower shall ensure that the facilities provided under the Project shall be operated and maintained, and that promptly as required all necessary repairs and renewals thereof shall be made, in accordance with appropriate administra- tive, financial, agricultural and meat processing practices. - 16 - ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional event is specified pursuant to paragraph (h) thereof: (a) Subject to subparagraph (b) of this paragraph: (i) the right of the Borrower to withdraw the proceeds of the Kuwait Fund Loan, the Netherlands Loan or the ODM Grant shall have been suspended, cancelled or terminated in whole or in part, pursuant to the terms of the Kuwait Fund Loan Agreement, the Netherlands Loan Agreement or the ODM Grant Agreement, respectively; or (ii) the Kuwait Fund Loan, the Netherlands Loan or the ODM Grant shall have become due and payable prior to the agreed maturity thereof. (b) Subparagraph (a) of thi paragraph shall not apply if the Borrower establishes to the satisfaction of the Association that: (i) such suspension, cancellation, termination or prematuring is not caused by the failure of the Borrower to perform any of its obligations under such agreement, and (ii) adequate funds for the Project are available to the Borrower from other sources on - 17 - terms and conditions consistent with the obligations of the Borrower under this Agreement. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional event is specified pursuant to paragraph (d) thereof, namely that the event specified in para- graph (a) (ii) of Section 5.01 of this Agreement shall occur. - 18 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01(b) of the General Conditions: (a) the Kuwait Fund Loan Agreement shall have been signed on behalf of the Borrower and the Kuwait Fund; (b) the Netherlands Loan Agreement shall have been signed on behalf of the Borrower and the Netherlands; (c) the ODM Grant Agreement shall have been signed on be- half of the Borrower and ODM; (d) the Borrower shall have approved a charter establishing LDC in accordance with the provisions of Section 3.03 of this Agreement; (e) the Borrower shall have appointed a management consult- ing firm in accordance with the provisions of Section 3.08 (a) of this Agreement; (f) the Borrower shall have appointed the Project Co-Manager referred to in paragraph 1 of Schedule 3 to this Agreement; and (g) the execution and delivery of the Subsidiary Loan Agreement on behalf of the Borrower and its Central Bank, re- spectively, shall have been duly authorized or ratified by all necessary corrporate and governmental action. -19- Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02(b) of the General Conditions, to be included in the opinion or opinions to be fur- nished to the Association, namely, that the Subsidiary Loan Agree- ment has been duly authorized or ratified by, and executed and delivered on behalf of the Borrower and its Central Bank, and is legally binding upon the Borrower and its Central Bank in accor- dance with its terms. Section 6.03. The date March 15, 1977 is hereby specified for the purposes of Section 12.04 of the General Conditions. S"xction 6.04. The obligations of the Borrower under Section 4.01 of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty five years after the date of this Agreement, which- ever shall be the earlier. 200 - 20 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Agriculture of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministry of Agriculture Sana'a Yemen Arab Republic Cable address: MINISTRY OF AGRICULTURE Sana'a For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. - 21 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agree- ment 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. YEMEN ARAB REPUBLIC By /s/ Yahya Al-Mutawakel Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By Is! Martijn J.W.M. Paijmans Acting Regional Vice President Europe, Middle East and North Africa - 22 - SCHEDULE 1 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 the amounts of the Credit to each Category and the percentage of ex- penditures for items so to be financed in each Category: Credit Allocated % of (Expressed in Expenditures Categx'rE Dollar Equivalent) to be Financed (1) Consultants' Ser- 3,500,000 100% of foreign vices and Techni- expenditures cal Assistance of expert staff for the Project Unit, ACF and LDC (2) Supervised Credit 1,100,000 27% of amounts disbursed under sub-loans made by ACF (3) Unallocated 400,000 TOTAL 5,000,000 0 - 23 - 2. For the purposes of this Schedule, the term "foreign expendi- tures" means expenditures in the currency of any country other than the Borrower and for goods or services supplied from the ter- ritory of any country other than the Borrower. 3. The disbursement percentages have been calculated in compli- ance with the policy of the Association that no proceeds of the Credit shall be disbursed on account of payments for taxes levied by, or in the territory of, the Borrower on goods or services, or on the importation, manufacture, procurement or supply thereof; to that end, if the amount of any such taxes levied on or in respect of any item to be financed out of the proceeds of the Credit decreases or increases, the Association may, by notice to the Borrower, increase or decrease the disbursement percentage then applicable to such item as required to be consistent with the aforementioned policy of the Association. 4. Notwithstanding the provisions of paragraph 1 above, no with- drawals shall be made in respect of payments made for expenditures prior to the date of this Agreement except that withdrawals, in an aggregate amount not exceeding the equivalent of $150,000 may be made in respect of Category (1) on account of payments made for such expenditures before that date but after Algust 1, 1)76. 5. Notwithstanding the allocation of an amount of the Credit or the disbursement percentages set forth in the table in para- graph 1 above, if the Association has reasonably estimated that the amount of the Credit then allocated to any Category will be insufficient to finance the agreed percentage of all expenditures in that Category, the Association may, by notice to the Borrower: - 24 (i) reallocate to such Category, to the extent required to meet the estimated shortfall, proceeds of the Credit which are then allocated to another Category and which in the opinion of the Associption are not needed to meet other expenditures, and (ii) if such reallocation cannot fully meet the estimated shortfall, reduce the disbursement percentage then applicable to such expen- ditures in order that further withdrawals under such Category may continue until all expenditures thereunder shall have been made. -25 - SCHEDULE 2 Description of the Project The Project forms the initial phase of a long-term program of the Borrower to expand and improve livestock development and production, and consists of the following parts: Part A: The Establishment within LDC of the following: (1) A Dairy division comprising about eight commercial dairy units and about 5 associated milk colonies. (2) A Livestock Finishing Farm division comprising an irrigated livestock finishing farm with a com- mercial dairy farm in the Tihama area. (3) A Poultry-Feed Processing division comprising a poultry unit in the Taiz area and a small feed mill. Part B: Slauhterhouse and Retail Markets (1) Construction of new slaughter facilities in Taiz and Hodeidah and completion of the abbatoir in Sanala. -26- (2) Construction of retail meat market stalls in Sana'a, Taiz and Hodeidah and provision of the necessary supporting facilities. (3) Establishment of a hides and skins improvement program. (4) Training of local butchers in livestock slaughtering and skinning techniques. Part C: Animal Health Services Expansion of animal health services of the Directorate of Animal Health at the Borrower's Ministry of Agricul- ture through: (1) Staffing and construction of facilities re- quired by the Directorate of Animal Health to establish field centers equipped by adequate diagnostic and veterinary investigation facil- ities. (2) Enlargement of the diagnostic laboratory facilities in Sana'a. (3) Establishment of a regional veterinary center in Sana'a, Taiz and Hodeidah. (4) Construction of a quarantine station in Hodeidah. - 27 - Part D: Livestock and RanEe Improvement (1) Establishment of an agricultural improvement sta- tion with a range improvement center near Damar, and provision of the necessary facilities, equip- ment and vehicles to the station and the center. (2) Establishment of pilot village development associations (VDA) for livestock production improvement and range improvement, including the provision of the necessary facilities, equipment, vehicles and livestock. Part E: Servised Credit (1) Provision of sub-loans to farmers for the purchase of sheep, goat, dairy and poultry and for financing investments to increase livestock production for on-farm infrastructure investment. (2) Provision of sub-loans to butchers for purchase of equipment and tools. Part F: Project Staffin, Studies_an nin (1) Provision of the following expert services: (a) Project Unit Manager; (b) Financial Expert; - 28 - (c) for LDC, an LDC Manager, a Dairy Division Manager, a Poultry-Feed Mill Division Manager, a Livestock Finishing Division Manager, a Master Mechanic and an Irrigation Crop Manager; (d) for AHD, a Manager and about 13 veterinarians and technicians. (e) for LRID, a Livestock Production Specialist and a Range Improvement Expert; (f) for MSMD, a Manager and a Hides and Skins Specialist; and (g) for ACF, a General Manager in year 3 of the Project, a Livestock Credit Officer, a Farm Management Extension Officer and the neces- sary local staff. (2) Studies for the selection of suitable sites for the livestock finishing farm and the dairy farms and for a farm development plan for the purpose of continuing the operation of the Wadi Surdud farm and reviewing the characteristics and tenure status of selected sites and the possible effects of relocation on farmers. (3) In-service and overseas Training and Fellowships. The Project is expected to be completed by June 30, 1983. - 29 - SCHEDULE 3 The Project Unit 1. The Project Unit shall be headed by a qualified and experienced Project Manager assisted by a Co-Manager who shall both be gradu- ates in agriculture. A qualified financial specialist shall also be employed. 2. The Project Unit shall have the following divisions: MSMD, AHD and LRID. 3. The Project Unit shall have the following responsibilities and powers: (a) procurement of goods and services and formulation of accounting and audit procedures; (b) selection of staff and terms and conditions of their employment; (c) selection of staff for overseas training and fellowships and coordination of internal training programs; (d) initiation and supervision of studies for selection of sites for the dairy farms, the livestock finishing farm and a farm development plan for the purpose of continuing the operation of the Wadi Surdud farm; - 30 - (e) approval (by the Project Manager) of all loan applica- tions by LDC and VDA prior to their submission to ACF; and (f) formulation by the Project Manager, in cooperation with the division Managers, of operating and administrative procedures for LDB's approval. 4. The Project Unit and LDC head offices will be in Sana'a and LRID will be located in Damar. * - 31- SCHEDULE 4 Principal Terms and Conditions of the Credit Arrangements 1. Lending terms - the Borrower to its Central Bank: (a) Period: repayment within 20 years including a 7 year grace period. (b) Interest: 4% per annum on outstanding balance. 2. Lending terms - the Central Bank to LDC, VDA and traditional sector sub-borrowers: (a) Terms: (i) maturities will not exceed the life of the assets financed; (ii) maximum repayment periods for the various subloans shall be as follows: - 32- Investment Category Grace RepayMent Total Years (1) LDC Livestock Finishing Farm 5 5 10 Dairy Farms 4 7 11 Milk Colonies 5 4 9 Poultry-Feed Mill 4 8 12 (2) VDA 6 5 11 (3) Supervised Credit Landowner 2 4 6 Tenant Farmer 3 4 7 Smallholder Poultry Farms 1 6 7 Butchers 1 1 2 (iii) for LDC and VDA investments the Subloan portion shall be 60% of the investment cost. (iv) the minimum contribution of farmers under the supervised credit shall be 20% of the investment cost. (b) Interest: 9% per annum on outstanding balance.