Ghana - Second National Investment Bank : Credit 0901 - Project Agreement - 2 - Conformed

DOCUME~NTS CREDIT NUMBER 901 GH SPECIAL ACTION CREDIT NUMBER 7 GH Project Agreement (National Investment Bank Project) between .INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPEGIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY and NATIONAL INVESTMENT BANK Dated 26 , 1979 CREDIT NUMBER 901 GH SPECIAL ACTION CREDIT NUMBER 7 GH PROJECT AGREEMENT AGREEMENT, dated , 1979, between INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the Special Action Account established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY (hereinafter called the Administrator) and NATIONAL INVESTMENT BANK (herein- after called NIB). WHEREAS by the Development Credit Agreement of even date herewith between the Republic of Ghana (hereinafter called the Borrower) and the International Development Association (the Association), the Association has agreed to make available to the Borrower an amount in various currencies equivalent to nineteen million dollars ($19,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that NIB agree to undertake such obligations toward the Associa- tion as are hereinafter set forth; WHEREAS by the Special Action Credit Agreement of even date herewith (hereinafter called the Special Action Credit Agreement) between the Borrower and the Administrator, the Administrator has agreed to make to the Borrower a Special Action Credit (hereinafter called the Special Action Credit) on the terms and conditions set forth in the Special Action Credit Agree- ment, but only on condition that NIB agree to undertake such obligations towards the Administrator as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and NIB, part of the proceeds of the credit provided for under the Development Credit Agreement and the proceeds of the Special Action Credit will be made available to NIB on the terms and conditions therein set forth; and WHEREAS NIB, in consideration of the Association's entering into the Developm%ent Credit Agreement with the Borrower and the Administrator's entering into the Special Action Credit Agreement with the Borrower, has agreed to undertake the obligations herein- after set forth; NOW THEREFORE the parties hereto hereby agree as follows: IT - 2-- -2- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Preamble to this Agreement, in the Special Action Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project; Management and Operations of NIB Section 2.01. NIB shall carry out the Project, described in Section 3.01 of the Special Action Credit Agreement, and conduct its operations and affairs, with due diligence and efficiency and in conformity with appropriate economic, financial and investment standards and practices, with qualified and experienced manage- ment and in accordance with its Charter and By-Laws. Section 2.02. (a) In accordance with ana' subject to the provisions of the Special Action Credit Agreement, NIB shall submit Investment Projects to the Administrator for approval or for authorization for withdrawals to be made from the Credit Account. (b) When submitting a Sub-loan or a Working Capital Loan (other than a free-limit Working Capital Loan) or an Investment to the Administrator for approval, NIB shall furnish to the Adminis- trator an application, in form satisfactory to the Administrator, together with the following: (i) a description of the Investment Enterprise and of the Investment Project to be financed thereunder including a description of the expenditures for such Investment Project proposed to be financed by NIB and an appraisal of the Investment Project; (ii) the proposed terms and conditions of the Sub-loan, Working Capital Loan or Investment, including the schedule of amortization of the said Sub-loan, or of repayment to the Borrower of the amount to be used for the said Investment; and (iii) such other information as the Administrator shall reasonably request. rt -3- (c) The appraisals pursuant to (b) (i) above shall be form- ulated in accordance with guidelines acceptable to the Adminis- trator and shall include inter alia a calculation of the internal financial rate of return where the proposed Sub-loans and Working Capital Loans exceed fifty thousand dollars ($50,000) and the evaluation of economic rate of return on Sub-loans which exceed two hundred thousand dollars ($200,000). (d) Each request by NIB for authorization to make with- drawals from the Credit Account shall contain:.(i) in respect of a free-limit Sub-loan or free-limit Working Capital Loan, a summary description of the Investment Enterprise and the Invest- ment Project including a description of the expenditures proposed to be financed out of the proceeds of the Credit and the terms and conditions of such free-limit Sub-loan or free-limit Working Capital Loan including the schedule of amortization therefor; and (ii) in respect to a Working Capital Loan, sufficient evidence that the Borrower has committed not less than one-fifth of the foreign exchange requirement for an Investment Project to be finance under such Working Capital Loan. (e) The amortization schedule applicable to each Investment Project shall provide for an appropriate period of grace, and, unless the Administrator and the Borrower shall otherwise agree: (i) shall not extend beyond two years from the date of approval by the Administrator of such Investment Project or of authoriza- tion by the Administrator to make withdrawals fvom the Credit Account in respect of such Investment Project; ard (ii) shall provide for approximately equal quarterly aggregate payments of principal and interest or approximately equal quarterly payments of principal. (f) Except as the Administrator and NIB shall otherwise agree, NIB shall submit applications for approval of Investment Projects pursuant to the provisions of paragraph (b) of this Section and requests for authorizations to withdraw from the Credit Account pursuant to the provisions of paragraph (c) of this Section on or before December 31, 1980. Section 2.03. (a) NIB undertakes that unless the Admini- strator shall otherwise agree, any Working Capital Loan will be made on terms whereby NIB shall obtain, by written agreement or other appropriate legal means, rights adequate to protect the interests of the Administrator and of. NIB, including, in the case of any such Working Capital Loan: (i) the right to require -4- the Investment Enterprise to carry out and operate the Invest- ment Project with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (ii) the right to require that the goods to be financed out of the proceeds of the Working Capital Loan be used exclusively in the carrying out of the Investment Project; (iii) the right of the Administrator and of NIB to inspect such goods and the sites, works, plants and cons- truction included in the Investment Project, the-operation thereof and any relevant records and documents; (iv) the.right to require that the Investment Enterprise take out and maintain such insur- ance, against such risks and in such amounts, as shall be consis- tent with sound business practice and that, without any limitation upon the foregoing, such insurance cover hazards incident to the acquisition, transportation and delivery of the goods financed out of the proceeds of the Working Capital Loan to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (v) the right to obtain all such information as the Administrator or NIB shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise; and (vi) the right of NIB to suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Working Capital Loan upon failure by such Investment Enterprise to perform its obligations under its agreement with NIB. (b) NIB shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Administrator and of NIB, (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement and (iii), achieve the purposes of the Project. Section 2.04. NIB shall furnish to the Administrator all such information as the Administrator shall reasonably request concern- ing the expenditure of the proceeds of the Working Capital Loans, the Project, the Investment Enterprises, the Investment Projects and the Working Capital Loans. Section 2.05. NIB shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Administrator shall otherwise agree, NIB shall not take or concur in any action which would have the effect of assigning, or amending, abrogating or waiving any provision of, the Subsidiary Loan Agreement. -5- Section 2.06. Except as the Administrator and NIB shall otherwise agree, NIB: (i) shall not sell, lease, transfer or otherwise dispo3e of any of its property or assets, except in the ordinary course of business; and (ii) shall take all action necessary to maintain its corporate existence and right to carry on operations and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 2.07. NIB shall cause each of its Subsidiaries (if any) to observe and perform the obligations of NIB under this Agreement to the extent to which the same may be made applicable thereto as though such obligations were binding upon each of such Subsidiaries. Section 2.08. NIB shall not amend its By-Laws except in agreement with the Administrator, and shall exchange views with the Administrator on any proposal to modify its Charter. Section 2.09. If NIB establishes or acquires any subsidiary, NIB shall cause such subsidiary to observe and perform the obli- gations of NIB hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations. were binding upon such subsidiary, Section 2.10. In evaluating all its lending operations, NIB shall apply the investment criteria specified in the Schedule to this Agreement. Section 2.11. With respect to the Project, NIB shall employ experts and consultants, with qualifications and on terms and conditions acceptable to NIB and the Administrator, to assist in strengthening NIB's project identification appraisal and supervi- sion activities and improving its staff training programs. Section 2.12. NIB shall maintain and administer the Revolving Import Fund referred to in Section 3.03 of the Special Action Credit Agreement in accordance with terms and conditions satis- factory to the Administrator. ARTICLE III Financial Covenants Section 3.01. NIB shall maintain records adequate to record the progress of the Project and of each Investment Project - 6 - (including the cost thereof) and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of NIB and shall enable the Administrator's representatives to examine such records. Section 3.02. NIB shall: (i) have its accounts and finan- cial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Administrator; (ii) furnish to the Administrator as soon as available, but in any.case not later.than five 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 Administrator shall have reasonably requested; and (iii) furnish to the Administrator such other information concern- ing the accounts and financial statements of NIB and the audit thereof as the Administrator shall from time to time reasonably request. Section 3.03. Except as the Administrator and NIB shall otherwise agree, NIB shall not incur or permit any Subsidiary to incur any debt if, after the incurring of such debt, the consoli- dated debt of NIB and all its Subsidiaries then incurred and outstanding would exceed five times the consolidated capital and surplus of NIB and all its Subsidiaries. For the purpose of this Section: (a) The term "debt" means any debt incurred by NIB or any Subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by NIB or by a Subsidiary. (b) Wherever reference is made in this Section to the incurring of debt, such reference shall include any modification of the terms of payment of such debt. Debt shall be deemed to be incurred: (i) under a loan contract or agreement on the date and to the extent the loan is drawn down pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent the guaranteed debt is outstanding. -7- (c) Whenever in connection with this Section it shall be necessary to value in terms of NIB debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange. (d) The term "consolidated debt of NIB and all its Subsidia- ries" means the total amount of debt of NIB and all its Subsidia- ries excluding: (i) debt owed by NIB to any Subsidiary or by any Subsidiary to NIB or to any other Subsidiary; and (ii) debt referred to in paragraph (e) (ii) of this Section. (e) The term "consolidated capital and surplus of NIB and all its Subsidiaries" means the aggregate of: (i) the total unimpaired paid-in capital, surplus and free reserves of NIB and of all its Subsidiaries after excluding therefrom such amounts as shall represent equity interests of NIB in any Subsidiary, or of any such Subsidiary in NIB or in any other Subsidiary; and (ii) such amount of any other loan which the Administrator may determine to be included in the consolidated capital and surplus of NIB. Section 3.04. Except as the Administrator and NIB shall' otherwise agree, NIB shall not make any repayment in advance of maturity in respect of any of its borrowings (other than deposits) having an original term exceeding one year. Section 3.05. NIB shall charge Working Capital Loan Sub- borrowers interest rate of 18-1/2% per annum which shall be. subject to review and modification, from time to time upon agree- ment between NIB, the Borrower and the Administrator. Investment Enterprises receiving Working Capital Loans shall assume the full foreign exchange risk thereof. Section 3.06. NIB shall take such steps satisfactory to the Administrator as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the various currencies (including Cedis) used in its borrowing and lending operations. Section 3.07. NIB shall take all measures satisfacatory to the Administrator to maintain the amount of its arrears outstanding for a period of three months or more at below 30% the aggregate of its outstanding Loans. ti. -8- ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Administrator and NIB shall cooperate fully to assure that the purposes of the Special Action Credit will be accomplished. To that end, the Administrator and NIB shall from time to time, at the request of either party, exchange views through their representatives- with regard to he progress of the Project, the performance by NIB of its 2.-igations under this Agreement and the Subsidiary Loan AL-eement, the administration, operations and financial condi- tion of NIB and other matters relating to the purpose of the Credit. (b) NIB shall furnish to the Administrator all such infor- mation as the Administrator shall reasonably request concerning the administration, operations and financial condition of NIB and its Subsidiaries, if any. (c) Within five years of the project completion report prepared in respect of Loan 1180-GH, NIB shall prepare and furnish to the Administrator a report, of such scope and in such detail as the Administrator shall reasonably request, on the execution and initial operation of the Investment Projects, their costs and the benefits derived and to be derived from them, the performance by NIB and the Admin- istrator of their respective obligations under this Agree- ment and the accomplishment of the purposes of the Special Action Credit. Section 4.02. NIB shall promptly inform the Administrator of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Special Action Credit, the maintenance of the service thereof or the performance by NIB of its obligations under this Agreement or .the Subsidiary Loan Agreement. Section 4.03. NIB shall enable the Administrator's repre- sentatives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. -9- ARTICLE V Effective Date; Termination; Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which either the Development Credit Agreement or the Special Action Credit Agreement becomes effective, whichever shall be the earlier. Section 5.02. (a) This Agreement and all obligations of the Association and of the Administrator and of NIB thereunder shall terminate on the earlier of the following two dates: (i) the earliest date on which both the Development Credit Agreement and the Special Action Credit Agreement shall have terminated in accordance with their respective terms; or (ii) a date 15 years after the date of this Agreement. (b) If either the Development Credit Agreement, or the Special Action Credit Agreement, terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association, or the Administrator, shall promptly notify NIB of this event, and if then the other Credit Agree- ment remains in force all obligations under this Project Agreement of NIB and of the lender under that Credit Agreement shall remain in force. Section 5.03. 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 Special Action Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by this Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hind or by mail, telegram, - 10 - 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 Administrator: Administrator of the Special Action Account (International Developlent Association) 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For NIB: National Investment Bank P.O. Box 3726 Accra, Ghana Cable address: Telex: INVESTBANK INVESTOR Accra 2161 Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of NIB may be taken or executed by its Managing Director or such other person or persons as the Managing Director shall designate in writing, and NIB shall furnish to the Association and the Administrator sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all 6ollec- tively but one instrument. *A - 11 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION as ADMINISTRATOR of the SPECIAL ACTION ACCOUNT established with funds contributed by the MEMBER STATES of the EUROPEAN ECONOMIC COMMUNITY By Regional Vice President Western Africa NATIONAL INVESTMENT BANK By Authorized Representative Vh-1 - 12 - SCHEDULE Investment Criteria A. For the purposes of the Project Agreement, NIB shall review Investment Projects in accordance with the following evaluation guidelines consistent with the Borrower's economic priorities and the requirements for foreign exchange allocations. B. For Sub-loans, Working Capital Loans and Investment financing under the Credit, Investment Projects shall be screened and reviewed in accordance with criteria favoring enterprises which would efficiently earn or save foreign exchange and, as such, would support the following: (i) export-oriented projects in which incremental foreign exchange earnings are proven to be significantly in excess of foreign exchange used in production; (ii) utilization of indigenous raw materials: preference will be given to projects utilizing at least 40% local raw materials in production; (iii) maximization of installed industrial capacity will be favored in credit allocation, so long as other economic and financial efficiency standards are met; and (iv) import substitution schemes shall be screened to ensure net foreign exchange savings in subsectors not experi- encing excess capacity. C. In general, NIB shall give priority to Investment Projects whose production output contains not less than 40% domestic value added. In certain firms which offer other economic advantages, such as high export earnings, employment creation or linkages within the economy, NIB shall accept a minimum of 30% local value added. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 1974 FOR SECRETARY