Ghana - Sugar Rehabilitation Project : Credit 0354 - Project Agreement - 2 - Conformed

CONFORMED COPY CREDIT NUMBER 354 GH Project Agreement (Sugar Rehabilitation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND GHANA SUGAR ESTATES LIMITED DATED JANUARY 29, 1973 CONFORMED COPY CREDIT NUMBER 354 GH Project. Agreement (Sugar Rehabilitation Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND GHANA SUGAR ESTATES LIMITED DATED JANUARY 29, 1973 GHASEL PROJECT AGREEMENT AGREEMENT, dated January 29, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) of the first part, and GHANA SUGAR ESTATES LIMITED (hereinafter called GHASEL) of the second part. WHEREAS by a development credit agreement of even date herewith (hereinafter called the Development Credit Agreement) between the Borrower and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to fifteen million six hundred thousand dollars ($15,600,000), on the terms and conditions set forth in th Development Credit Agreement, but only on condition that GHASFL agree to undertake such obligations towards the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and GHASEL, the Borrower proposes to lend to GHASEL an amount in various currencies equivalent to $14,433,000 out of the proceeds of the Credit and certain additional amounts out of its own resources; and WHEREAS GHASEL, in consideration of the Association's entering into the Development Credit 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 Development Credit Agreement, the GHASEL Subsidiary Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) GHASEL shall carry out Part A of the Project described in Schedule 2 to the Development Credit Agreement with due diligence and 4 efficiency and in conformity with sound agricultural, engineering, administrative and financial practices, and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. (b) GHASEL shall apply the proceeds of the GHASEL Subsidiary Loan exclusively to financing the cost of goods and services required to carry out the said Part A of the Project. Section 2.02. GHASEL shall take all action which shall be necessary on its part: (i) to implement the transfer to it pursuant to the GIHOC Transfer Decree of the sugar business carried on by the Sugar Division of GIHOC; and (ii) to complete the valuation referred to in Section 8.01(f) of the Development Credit Agreement by not later than June 30, 1973 or such later date as the Association shall agree. Section 2.03. In carrying out items (2), (3) and (4) of Part A of the Project, GHASEL shall employ contractors acceptable to the Association to the extent and upon terms and conditions satisfactory to the Association. Section 2.04. Except as the Association shall otherwise agree, the goods and services (other than services of consultants) required for the Project and to be financed out of the proceeds of the Credit, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972, and in accordance with, and subject to, the provisions set forth in the Schedule to this Agreement. Section 2.05. (a) GHASEL undertakes to insure the imported goods to be financed out of the proceeds of the Credit relent to it by the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable by GHASEL to replace or repair such goods. (b) Except as the Association may otherwise agree, GHASEL 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 2.06. (a) GHASEL shall furnish to the Association promptly upon their preparation, the plans, reports, specifications, contract documents and 5 construction and procurement schedules for Part A of the Project, and any material modifications thereof or additions thereto, in such detail as the Association shall reasonably request. (b) GHASEL: (i) shall maintain records adequate to record the progress of Part A of the Project (including the cost thereof) and to identify the goods and services financed out of the proceeds of the Credit relent to it by the Borrower, and to disclose the use thereof in Part A of the Project; (ii) shall enable the representatives of the Association to inspect Part A of the Project, the goods financed out of such proceeds and any relevant records and documents; and (iii) shall furnish to the Association all such information as it shall reasonably request concerning Part A of 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 2.07. GHASEL shall duly perform all its obligations under the Specified Agreements to which it is a party. Except as the Association shall otherwise agree, GHASEL shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving any of such Specified Agreements or any of the provisions thereof. ARTICLE III Management and Operations of GHASEL Section 3.01. GHASEL shall at all times carri on its operations, manage its affairs, maintain its financial position and plan the future expansion of its sugar business, all in accordance with sound business, agricultural, engineering, technical, administrative and financial principles and practices under the supervision of experienced and competent management and with the assistance of adequate, qualified and experienced staff. Section 3.02. Except as the Association shall otherwise agree, GHASEL shall engage the Management Company for a period of not less than eight years from the date hereof upon such terms and conditions as the Association shall approve. Section 3.03. GHASEL shall at all times employ qualified and experienced persons as the Managing Director and Financial Controller of GHASEL who, during the period of ten years from the date of this Agreement, shall be persons acceptable to the Association and shall be employed upon such terms and conditions as it shall approve. Section 3.04. GHASEL shall take out and maintain with responsible insurers insurance against such risks and in such amounts as shall be consistent with sound practice. 6 Section 3.05. GHASEL shall enter into an agreement with ADB on terms and conditions satisfactory to the Association for the purchase by GHASEL of the sugarcane output of farms at Asutsuare and Komenda financed by ADB and for the provision by GHASEL to ADB or to such farms of technical appraisal, administrative, extension and other technical services. Section 3.06. (a) Not later than November 1973, GHASEL, in conjunction with ADB an. in consultation with the Association, shall formulate and submit to the Association a detailed program for the development of sugarcane production by farms financed or to be financed by ADB under Part B of the Project with a view to ensuring that the total quantity of sugarcane available to GHASEL from such farms, together with the sugarcane available to it from its estates at Asutsuare and Komenda, will be sufficient to meet the capacity from time to time of its sugarcane factories at Asutsuare and Komenda. (b) Upon formulation of such program, GHASEL, in conjunction with ADB and in consultation with the Association, shall take such steps as shall be required on its part for the implementation thereof in the manner and on the basis of the time schedule therein provided. Section 3.07. GHASEL shall purchase all of its sugarcane requirements for its factories at Asutsuare and Komenda, other than sugarcane supplied from its estates thereat, on terms and conditions (other than as to purchase price) approved by the Association and shall not vary the purchase price of such sugarcane as prevailing at the date of this Agreement unless it shall first have notified the Association of any such proposed variation; provided that variations in such terms, conditions or purchase price remaining in effect for an aggregate of not more than 30 days shall be permitted without such approval or prior notification when circumstances so require. ARTICLE IV Financial Covenants Section 4.01. GHASEL shall maintain records adequate to reflect in accordance with consistently maintained sound accounting practices its operations and financial condition. Section 4.02. GHASEL shall: (i) have its 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 7 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 its 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 GHASEL and the audit thereof as the Association shall from time to time reasonably request. Section 4.03. (a) GHASEL shall take such measures as may be necessary and appropriate, including the adjustment of prices for the sale of its products, to yield a rate of return on its capital employed of at least eight per cent (8%) as from and including its financial year commencing on October 1, 1978. (b) For the purposes of this Section: (i) the rate of return in respect of any financial year shall be calculated by relating GHASEL's net income from operations for that year to the value of capital employed at the beginning of that year; (ii) the term "net income from operations" means gross operating revenues from the sale of sugar, alcohol and other by-products less all operating, administrative and overhead expenses charged to income in accordance with sound accounting principles consistently applied, including adequate maintenance and straight-line depreciation, taxes, duties and levies, if any, or any payments in lieu thereof, but without deduction of interest or other charges on debt: (iii) the term "capital employed" means the sum of the value of fixed assets in operation (less accumulated depreciation) and of the value of current assets (less current liabilities). Section 4.04. (a) Except as the Association shall otherwise agree, GHASEL shall not incur: (i) prior to the Closing Date any debt other than the amounts to be lent by the Borrower to GHASEL under Sections 2.01 and 4.01 of the GHASEL Subsidiary Loan Agreement; and 8 (ii) after the Closing Date any debt unless the net revenue of GHASEL for the financial year of GHASEL next preceding such incurrence, or for any later twelve month period ending prior to such incurrence, whichever is the greater, shall be not less than 1.5 times the maximum debt service requirement for any succeeding financial year of GHASEL on all debt including the debt to be incurred. (b) For the purposes of Section 4.03(b)(ii) hereof and of this Section: (i) the term debt shall include the assumption and guarantee of debt and shall mean all indebtedness of GHASEL maturing by its terms more than one year after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred on the date of execution and delivery of the contract or agreement providing for such debt; (iii) the term "net revenue" shall mean gross revenue from all sources adjusted to take account of selling prices in effect at the time of incurrence of debt, even though such prices were not in effect during the financial year or twelve month period to which such revenue relates, less all operating, administrative and overhead expenses and taxes, duties and levies, if any, but before provision for depreciation, interest or other charges on debt; (iv) the term "debt service requirement" shall mean the aggregate amount of amortization (including sinking fund payments, if any), interest and other charges on debt; (v) debt service payable in a currency other than the currency of the Borrower shall be valued at the prevailing official rate of exchange at which such other currency is obtainable on the date the additional debt is proposed to be incurred for the purpose of servicing such debt, or, if such currency is not so obtainable, at the rate of exchange as reasonably determined by the Association. Section 4.05. (a) Except as the Association shall otherwise agree, GHASEL shall not incur: 9 (i) prior to the Closing Date any short-term debt; (ii) after the Closing Date any short-term debt unless the aggregate amount of all short-term debt outstanding at any time shall be less than 20% of the gross revenues from all sourccb of GHASEL for the financial year of GHASEL next preceding such incurrence, or for any later twelve-month period ending prior to such incurrence, whichever is greater. (b) For the purposes of this Section: (i) the term short-term debt shall mean all indebtedness of GHASEL, other than liability to trade creditors incurred in the ordinary course of business, maturing by its terms on demand or one year or less after the date on which it is originally incurred; (ii) short-term debt shall be deemed to be incurred on the date it is drawn down pursuant to the contract or agreement providing for such short-term debt. ARTICLE V Consultation, Information and Inspection Section 5.01. The Association and GHASEL shall cooperate fully to assure that the purposes of the Credit will be accomplished. To that end, the Association and GHASEL shall from time to time, at the request of any party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement, the administration, operations and financial condition of GHASEL and other matters relating to the purpose of the Credit. Section 5.02. The Association and GHASEL shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, or the performance by either of them of its obligations under this Agreement or the performance by the Borrower and GHASEL of their respective obligations under the GHASEL Subsidiary Loan Agreement or the performance by GHASEL of its obligations under any of the other Specified Agreements to which it is a party. Section 5.03. GHASEL shall enable the representatives of the Association to inspect all estates, factories, plants, sites, works, buildings, properties and equipment of CHASEL and any relevant records and documents. 10 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 GHASEL hereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date 30 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify GHASEL of this event. Section 6.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement or the GHASEL Subsidiary Loan Agreement. ARTICLE VII Miscellaneous Provisions Section 7.01. 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America I 11 Cable address: INDEVAS Washington, D.C. For GHASEL: The Managing Director Ghana Sugar Estates Limited c/o P.O. Box M39 Accra Ghana Cable address: GHASEL Accra 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 GHASEL may be taken or executed by the Managing Director of GHASEL or such other person or persons as GHASEL shall designate in writing. Section 7.03. GHASEL shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of GHASEL, take any action or execute any documents required or permitted to be taken or executed by GHASEL pursuant to any of the provisions of this Agreement. Section 7.04. 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 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/ Roger Chaufournier Regional Vice President Western Africa GHANA SUGAR ESTATES LIMITED By /s / H. R. Amonoo Authorized Representative 12 SCHEDULE Procurement All contracts for the procurement of civil works, equipment or materials in excess of $5,000 in value will be awarded on the basis of international competitive bidding, according to the following procedures: (a) With respect to any contract estimated to cost the equivalent of $25,000 or more: (i) If bidders are required to prequalify GHASEL shall, before qualification is invited, inform the Association in detail of the procedure to be followed and shall introduce such modifications in said procedure as the Association shall reasonably request. The list of prequalified bidders, together with a statement of their qualifications and of the reasons for the exclusion of any applicant for prequalification, shall be furnished by GHASEL to the Association for their comments before the applicants are notified and GHASEL shall make such additions or deletions from the said list as the Association shall reasonably request. (ii) Before bids are invited, GHASEL shall furnish to the Association, for their comments, the text of the invitations to bid and the specifications and other bidding documents, together with a description of the advertising procedures to be followed for the bidding and shall make such modifications in the said documents or procedure as the Association shall reasonably request. Any further modification to the bidding documents shall require the concurrence of the Association before it is issued to the prospective bidders. (iii) After bids have been received and evaluated, GHASEL shall, before a final decision on the award is made, inform the Association of the name of the bidder to whom it intends to award the contract and shall furnish to the Association, in sufficient time for their review, a detailed report on the evaluation and comparison of the bids received, together with the recommendations for award and the reasons for the intended award. The Association shall, if it determines that the intended award would be inconsistent with the procedures set forth or 13 referred to in Section 2.04 of this Agreement or with the Development Credit Agreement, promptly inform GHASEL and state the reasons for such determination. (iv) If the contract shall be awarded over the reasonable objection of the Association, or if its terms and conditions shall, without the concurrence of the Association, materially differ from those on which bids were asked, no expenditure thereunder shall be financed out of the proceeds of the Credit. (v) Two copies of the contract shall be furnished to the Association promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract. (b) With respect to any contract estimated to cost less than the equivalent of $25,000, GHASEL shall furnish to the Association, promptly after its execution and prior to the submission to the Association of the first application for withdrawal of funds from the Credit Account in respect of any such contract, two conformed copies of such contract, together with the analysis of bids, recommendations for award and such other information as the Association shall reasonably request. The Association shall, if it determines that the award of the contract is not consistent with the procedures set forth or referred to in Section 2.04 of this Agreement or with the Development Credit Agreement, promptly inform GHASEL and state the reasons for such determination.