India - Cochin II Fertilizer Project : Credit 0264 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 264 IN Project Agreement (Cochin II Fertilizer Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND THE FERTILISERS AND CHEMICALS, TRAVANCORE LIMITED DATED JULY 30, 1971 CREDIT NUMBER 264 IN Project Agreement (Cochin II Fertilizer Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND THE FERTILISERS AND CHEMICALS, TRAVANCORE LIMITED DATED JULY 30, 1971 AGREEMENT, dated July 30, 1971, between INTER- NATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and THE FERTILISERS AND CHEMICALS, TRAVAN- CORE LIMITED (hereinafter called FACT). WHEREAS by a development credit agreement of even date herewith between INDIA, acting by its President (hereinafter called the Borrower) and the Association (hereinafter re- ferred to as the Development Credit Agreement), the Asso- ciation has agreed to make available to the Borrower an amount in various currencies equivalent to twenty million dollars ($20,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condi- tion -that FACT agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and FACT, the proceeds of the credit provided for under the Development Credit Agree- ment will be made available to FACT on the terms -and conditions therein set forth; and WHEREAS FACT, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations herein- after 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 de- fined in the Development Credit Agreement and in the 4 General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Executiou of the Project SECTION 2.01. FACT shall carry out the Project de- scribed in Schedule 2 of the Development Credit Agreement with due diligence and efficiency and in conformity with sound administrative, financial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the purpose. FACT will use its best efforts to carry out the Project by March 31,1974, in accordance with the Critical Path Schedules and, in that regard, will give special attention to critical equipment procurement times. SECTIoN 2.02. In order to assist FACT in process and engineering design, equipment selection, construction and start-up, FACT shall obtain process licenses, plant design and consultant services acceptable to the Association upon terms and conditions satisfactory to the Association. SECTION 2.03. (a) In carrying out the Project, FEDO shall act as managing contractor. In addition, FACT shall employ such outside competent and experienced contractors as are necessary to carry out the Project, after having ob- tained competitive bids whenever possible. At the request of the Association, FACT shall consult with it prior to employing outside contractors. (b) FACT agrees to employ, for the duration of the Project, an Assistant Project Manager and an Engineer, both of whom shall be acceptable to the Association, to assist FEDO in budget and schedule control and in general engi- neering, procurement, and construction duties. SECTION 2.04. (a) FACT undertakes to insure, or make adequate provision for the insurance of, the goods to be 5 financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, trans- portation and delivery thereof to the place of use or installa- tion, and for such insurance any indemnity shall be payable in a currency freely usable by FACT to replace or repair such goods. FACT shall keep the Association informed as to such insurance arrangements. (b) Except as the Association may otherwise agree, FACT shall cause all goods and services financed out of the proceeds of the Credit relent to it by the Borrower to be used exclusively for the Project. SECTION 2.05. (a) FACT shall furnish to the Association, promptly upon their preparation, the plans, reports, speci- fications, contract documents and construction and procure- ment schedules for the Project, and any material modifica- tions thereof or additions thereto, in such detail as the Association shall reasonably request. (b) FACT: (i) shall maintain records adequate to record the progress of the Project (including the cost thereof) and to identify the goods and services financed out of the pro- ceeds of the Credit relent to it by the Borrower, and to dis- close the use thereof in the Project; (ii) shall enable the Association's representatives to inspect the Project, the goods financed out of such proceeds and any relevant rec- ords and documents; and (iii) shall furnish to the Asso- ciation all such information as the Association shall reason- ably request concerning the Project, the expenditure of the proceeds of the Credit so relent to it and the goods and services financed out of such proceeds. SECTION 2.06. FACT shall duly perform all its obliga- tions under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, FACT -shall not take or concur in any action which would have the effect of amend- ing, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. 6 ARTICLE III Management and Operations of FACT SECTION 3.01. (a) FACT shall at all times manage its affairs, maintain its financial position, plan its future ex- pansion and carry on its operations, all in accordance with sound business, financial and engineering practices and under the supervision of experienced and competent man- agement assisted by adequate competent staff. (b) FACT agrees to fill any open positions in connection with the Project promptly as they become vacant by experi- enced, competent personnel. (c) FACT shall take all necessary steps, including in par- ticular limiting its indebtedness (excluding debt incurred in the ordinary course of business and payable on demand or not more than one year after the date of such determina- tion) in order to maintain a long-term debt equity ratio of 55/45 and to maintain an adequate liquidity position. For the purpose of this Section: (a) The term "long-term debt" shall mean all debt ma- turing after one year from the date of such determination; and (b) The term "equity" shall mean all unimpaired paid-in share capital plus accumulated earnings or losses from prior fiscal years not set apart for specific purposes. SECTION 3.02. Except as the Association shall otherwise agree: (a) FACT shall at all times take all steps which are necessary to maintain its existence and its right to carry on operations and to acquire and retain ownership of all lands and to maintain and renew all interests in land and other properties and all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of its business. 7 (b) FACT shall at all times operate and maintain its plants, machinery, equipment and other property, and promptly make all necessary repairs and renewals thereof, in accordance with sound engineering practices. (c) FACT shall not sell, lease, transfer or otherwise dis- pose of any of its property or assets which shall be required for the efficient operation of its business and undertaking. (d) FACT shall not alter its corporate structure or amend its Memorandum of Association in any way that will materially and adversely affect its ability to perform its obligations under this Agreement. SECTION 3.03. FACT 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 sound practice, and keep the Association informed as to such insurance arrange- ments. SECTION 3.04. FACT shall develop and implement a com- prehensive program for establishing a market for the fertilizer grades to be produced from the Cochin II Plant, which shall be satisfactory to the Association and which shall be based on fertilizers, which shall be imported, if necessary, in the following minimum amounts: Fiscal Year Ending March 31 Amount (in tons per year) 1972 25,000-50,000 NPK 1973 100,000-150,000 NPK 1974 200,000-250,000 NPK 1975 As necessary to supple- ment production SECTION 3.05. Except as the Association shall otherwise agree, FACT shall not make expenditures or commitments for expenditures for fixed or capital assets, other than for the Project, the Udyogamandal Rationalization Scheme and 8 construction of the Cochin I Plant, which would result in estimated aggregate capital expenditures exceeding the equivalent of $1,000,000 in any fiscal year. SECTION 3.06. FACT agrees to consult with the Associa- tion before bidding for, accepting and scheduling outside work for FEDO where the fees to be received by FEDO for engineering services will exceed $200,000 for any one con- tract, until the engineering work for the Project is com- pleted, with the exception of any bids outstanding on the date of this Agreement. ARTICLE IV Financial Covenants SECTIoN 4.01. FACT shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices, its operations and financial condition. SECTION 4.02. FACT shall (i) have an annual audit satis- factory to the Association, prepared by independent and competent auditors in accordance with sound auditing prin- ciples consistently applied, (ii) furnish to the Association certified copies of said audit in such scope and detail as the Association shall have reasonably requested as soon as available but in any case not later than four months after the end of each fiscal year, (iii) furnish to the Association as soon as available, but in any case not later than 30 days after the end of each of the four quarters unaudited finan- cial statements (balance sheet, statement of income and ex- penses and related statements) as of the end of the quarter, and (iv) furnish to the Association such other information concerning the accounts and financial statements of FACT and the audit thereof as the Association shall from time to time reasonably request. SECTION 4.03. Except as the Association shall otherwise agree, FACT -shall not declare dividends or pre-pay any debt if, after the payment of such dividend (assuming such 9 payment was made on the date of such declaration) or debt, the ratio of FACT's current assets to current liabilities is less than 1.5/1. For the purpose of this section: (i) The term "current assets" shall mean cash, assets readily convertible into cash, and all other assets which would in the ordinary course of business be converted within one year into cash or assets readily convertible into cash. (ii) The term "current liabilities" shall mean liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment, within one year including -the portion of long-term indebtedness falling due within one year. (iii) The term "debt" shall not include debt payable on demand or maturing not more than one year after its date. SECTION 4.04. FACT agrees to establish and carry out a program satisfactory to the Association for improving its accounting system and management information system and to put the program into operation not later than January 1, 1972. ARTICLE V Consultation, Information and Inspection SECTION 5.01. The Association and FACT shall coop- erate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and FACT shall from time to time, at the request of either party, exchange views through their representatives with regard to the per- formance of their respective obligations under this Agree- ment, the administration, operations and financial condition of FACT and other matters relating to the purposes of the Credit. SECTION 5.02. The Association and FACT shall promptly inform each other of any condition which interferes with, 10 or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations under this Agreement or the performance by the Borrower and FACT of their respective obligations under the Subsidiary Loan Agreement. SECTION 5.03. FACT shall enable the Association's rep- resentatives to inspect all plans, sites, works, properties and equipment of FACT and any relevant records and documents. ARTICLE VI Effective Date; Termination; Cancellation and Suspension SECTION 6.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. SECTION 6.02. (a) This Agreement and all obligations of the Association and of FACT thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agree- ment shall terminate in accordance with its terms; or (ii) a date 16 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in para- graph (a) (ii) of this Section, the Association shall promptly notify FACT of this event and, upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. SECTION 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any can- cellation or suspension under the Development Credit Agreement. 11 ARTICLE VII Miscellaneous Provisions SECTION 7.01. Any notice or request required or per- mitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agree- ment 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 radio- gram to the party to which it is required or permitted to be given or made at such party's address hereinafter speci- fied or at such other address as such party shall have desig- nated 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: Indevas Washington, D.C. For FACT: The Fertilisers and Chemicals, Travancore Limited Udyogamandal P.O. via Alwaye Kerala State India Cable address: FACT Udyogamandal via Cochin Kerala State India For Managing Director 12 SECTION 7.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of FACT may be taken or execued by its Managing Director or such other person or persons as FACT shall designate in writing. SECTION 7.03. FACT shall furnish to the Association sufficient evidence of the authority and the authenticated specimen iignature of the person or persons who will, on behalf of FACT, take any action or execute any documents required or permitted to be taken or executed by FACT pursuant to any of the provisions of this Agreement. SEcTIoN 7.04. This Agreement may be executed in sev- eral 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 and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT AssoCIATIoN By /s/ S. ALDEWERELD Vice President THE FERTILISERS AND CHEMICALS, TRAVANCORE LIMITED By /s/ M. RASGOTRA Authorized Representative