Ghana - Third Highway - Emergency Maintenance Project : Credit 1029 - Project Agreement - Conformed

OFFICIAL CREDIT NUMBER 1029 GH SDOCUMENTS Project Agreement (Third Highway - Emergency Maintenance - Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANK FOR HOUSING AND CONSTRUCTION Dated 22 , 1980 CREDIT NUMBER 1029 GH PROJECT AGREEMENT AGREEMENT, dated 4 4- L7 , 1980, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and BANK FOR HOUSING. AND CONSTRUCTION (herein- after called BHC), established pursuant to Bank for Housing and Construction Decree, 1972 (N.R.C.D. 135) of the Republic of Ghana (hereinafter called the Borrower): WHEREAS by the Development Credit Agreement of even date herewith between the Borrower and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to twenty-five million dollars ($25,000,000), on the terms and conditions set forth in the Development Credit Agree- ment, but only on condition that BHC agree to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS pursuant to the Subsidiary Loan Agreement to be entered into between the Borrower and BHC, BHC will carry out Part C of the Project for which four million dollars ($4,000,000) of the proceeds of the Credit have been currently allocated under the Development Credit Agreement; WHEREAS pursuant to the Administration Agreement to be entered into between the Borrower and BHC, BHC will carry out Part D of the Project for which six million dollars ($6,000,000) of the proceeds of the Credit have been currently allocated under the Development Credit Agreement; WHEREAS pursuant to this Agreement BHC will carry out Part E of the Project for which nine hundred thirty thousand dollars ($930,000) of the proceeds of the Credit have been currently allocated under the Development Credit Agreement; and WHEREAS BHC, 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 -2- the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of Parts C, D and E of the Project; Management and Operations of BHC Section 2.01. BHC shall carry out Parts C, D and E of the Project, described in Schedule 2 of the Development Credit Agree- ment, and continue to conduct its operations and affairs, with due diligence and efficiency and in conformity with appropriate administrative and financial standards and practices, with quali- fied and experienced management, and to that end, BHC shall cooperate closely with GHA. Section 2.02. In order to assist BHC in carrying out Part E of the Project, BHC shall employ consultants and experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association and the Borrower. Section 2.03. (a) For purposes of carrying out Part C of the Project, BHC shall enter into a Subsidiary- Loan Agreement, satisfactory to the Association, with the Borrower; and for purposes of carrying out Part D of the Project, BHC shall enter into an Administration Agreement, satisfactory to the Association, with the Borrower. (b) In accordance with and subject to the provisions of the Development Credit Agreement, BHC shall submit Investment Projects and Import Plans to the Association for approval or for authorization for withdrawals to be made from the Credit Account. (c) (i) When submitting a Sub-loan (other than a free-limit Sub-loan) or an Import Plan to the Association for approval, BHC shall furnish to the Association an application, in form satis- factory to the Association, together with 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 BHC and an appraisal of the Investment Project) and the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan, or, in the case of an Import Plan, the agreed list of goods to be financed thereunder, and such other information as the Association shall reasonably request; and (ii) appraisals of -3- Investment Projects will include an analysis of the operational performance, management and financial position of each Investment Enterprise in accordance with guidelines satisfactory to the Association. (d) Each request by BHC for authorization to make with- drawals from the Credit Account in respect of a free-limit Sub- loan shall contain a summary description of the Investment Enter- prise and the Investment 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, including the schedule of amortization therefor. (e) Except as the Association and BHC shall otherwise agree, BHC shall submit applications for approval of Investment Projects and Import Plans pursuant to the provisions of paragraph (c) of this Section and requests for authorizations to withdraw from the Credit Account pursuant to the provisions of paragraph (d) of this Section on or before June 30, 1983. Section 2.04. Except as the Borrower and the Association shall otherwise agree, BHC shall: (a) extend Sub-loans in accordance with the criteria set forth in Schedule 1 to this Agreement; and (b) administer the Special Import Facility in accordance with the policies and procedures set forth in Schedule 2 to this Agreement. Section 2.05. (a) BHC undertakes that unless the Association shall otherwise agree, any Sub-loan will be made or Import Plan will be entered into on terms whereby BHC shall obtain, by written agreement or other appropriate legal means, rights adequate to protect the interests of the Association, of the Borrower and of BHC including, in the case of any such Sub-loan or Import Plan: (i) the right to require the Investment Enterprise to carry out and operate the Investment Project, and the Motor Trading Company to carry out the Import Plan, 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 Sub-loans, or to be imported on the basis of Import Plans, be used on a priority basis in the carrying out of the Investment Project or Import Plan, respectively; (iii) the right of the Association, -4- of the Borrower and of BHC to inspect such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) the right to require that the Investment Enterprise or Motor Trading Company take out and maintain such insurance, against such risks and in such amounts, as shall be consistent with sound business practice and that, without any limitation upon the foregoing, such insurance cover hazards incident to the acquisi- tion, transportation and delivery of the goods financed out of the proceeds of the Credit to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usable by the Investment Enterprise or Motor Trading Company to replace or repair such goods; (v) the right to obtain all such information as the Association, the Borrower or BHC shall reason- ably request relating to the foregoing, to the administration, operations and financial condition of the Investment Enterprise; and (vi) the right of BHC to suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Sub-loan, or the right of the Motor Trading Company to the benefits of the Import Plan, upon failure by such Investment Enterprise or Motor Trading Company to perform its obligations under its respective agreement with BHC. (b) BHC shall exercise its rights in relation to each Investment Project and Import Plan in such manner as to: (i) protect the interests of the Association, of the Borrower and of BHC; (ii) comply with its obligations under this Agreement, the Subsidiary Loan Agreement and the Administration Agreement; and (iii) achieve the purposes of the Project. Section 2.06. BHC shall furnish to the Association all such information as the Association shall reasonably request concerning Parts C, D and E of the Project, the Investment Enterprises, the Investment Projects, the Sub-loans, the Special Import Facility, the Import Plans and the Motor Trading Companies. Section 2.07. BHC shall duly perform all its obligations under the Subsidiary Loan Agreement and Administration Agreement. Except as the Association shall otherwise agree, BHC shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving any provision of the Subsidiary Loan Agreement or the Administration Agreement. Section 2.08. Except as the Association, the Borrower and BHC shall otherwise agree, BHC: (i) shall not sell, lease, transfer or -5- otherwise dispose 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 2.09. BHC shall cause each of its Subsidiaries to observe and perform the obligations of BHC 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 Subsi- diaries. Section 2.10. Except as the Association shall otherwise agree, procurement of goods to be financed out of the proceeds of the Credit shall be governed by the provisions set forth or referred to in Schedule 3 to the Development Credit Agreement. ARTICLE III Financial Covenants Section 3.01. BHC shall maintain records adequate to record the progress of Parts C, D and E of the Project and of each Investment Project (including the cost thereof) and of each Import Plan and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of BHC and shall enable the Association's representa- tives to examine such records. BHC shall establish standards and practices on the basis of assistance received under Part E of the Project. Section 3.02. BHC 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 appropriate 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 fiscal year, (A) certified copies of its financial statements for such year as so audited in long form 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 Associa- tion such other information concerning the accounts and financial statements of BHC and the audit thereof as the Association shall from time to time reasonably request. -6- Section 3.03. Except as the Association and BHC shall other- wise agree, BHC shall not incur or permit any Subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of BHC and all its Subsidiaries then incurred and outstanding would exceed three times the consolidated capital and surplus of BHC and all its Subsidiaries. If such ratio shall, for reasons beyond BHC's control, be exceeded, BHC shall promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. The Association and BHC shall from time to time review the adequacy of such ratio. For the purpose of this Section: (a) The term "debt" means any debt incurred by BHC or any Subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by BHC 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. (c) Whenever in connection with this Section it shall be necessary to value in terms of BHC debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable in Cedis for the purposes of servicing such debt. (d) The term "consolidated debt of BHC and all its Subsi- diaries" means the total amount of debt of BHC and all its Sub- sidiaries excluding: (i) eighty per cent (80%) of the aggregate outstanding principal amount of loans made by BHC and secured by a real estate mortgage; and (ii) debt owed by BHC to any Subsidiary or by any Subsidiary to BHC or to any other Subsidiary. (e) The term "consolidated capital and surplus of BHC and all its Subsidiaries" means the aggregate of the total unimpaired paid-in capital, surplus and free reserves of BHC and of all its Subsidiaries after excluding therefrom such amounts -7- as shall represent equity interests of BHC in any Subsidiary, or of any such Subsidiary in BHC or in any other Subsidiary. Section 3.04. Except as the Association and BHC shall other- wise agree, BHC shall not make any repayment in advance of matu- rity in respect of any of its borrowings (other than deposits) having an original term exceeding one year. Section 3.05. BHC shall: (i) not later than December 31, 1980, formulate a program, satisfactory to the Association, to reduce arrears; and (ii) put into effect such program to reduce, within a period of time satisfactory to the Association, its loans outstanding affected by arrears of more than three months to a level not exceeding 30%. Section 3.06. BHC shall take such steps satisfactory to the Association 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. ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Association and BHC shall cooperate fully to assure that the purposes of the Credit will be accom- plished. To that end, the Association and BHC shall from time to time, at the request of either party, exchange views through their representatives with regard to the progress of Parts C, D and E of the Project, the performance by BHC of its obligations under this Agreement, the Subsidiary Loan Agreement, and the Administration Agreement, the administration, operations and financial condition of BHC, any BHC proposal to amend the BHC Decree or Bye-laws and other matters relating to the purpose of the Credit. (b) BHC shall furnish to the Association at regular inter- vals all such information as the Association shall reasonably request concerning the expenditures of the proceeds of the Credit, Parts C, D and E of the Project, the Investment Enterprises, the Investment Projects, the Sub-loans, the Special Import Facility, the Import Plans, the Motor Trading Companies and, where appropriate, the benefits to be derived from the foregoing. -8- (c) Within six months following the final withdrawal from the Credit Account, BHC shall prepare and furnish to the Asso- ciation a report, of such scope and in such detail as the Asso- ciation shall reasonably request, on the execution of Parts C, D and E of the Project, their costs and the benefits derived and to be derived from them, the performance by BHC and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. Section 4.02. BHC shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the maintenance of the service thereof or the performance by BHC of its obligations under this Agreement or the Subsidiary Loan Agreement or the Administration Agreement. Section 4.03. BHC shall enable the Association's representa- tives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. ARTICLE V Effective Date; Termination Cancellation and Suspension Section 5.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 5.02. (a) This Agreement and all obligations of the Association and of BHC thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date ten years after the date of this Agreement. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify BHC of this event, and upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. -9- Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under Article VI of the General Conditions. 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 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 herein- after 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 Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For BHC: Bank for Housing and Construction P.O. Box Ml Accra Ghana Cable address: Telex: BANKHOUSE Accra 2096 - 10 - Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement or under Section 2.02 of the Development Credit Agreement on behalf of or by BHC may be taken or executed by the Managing Director of BHC, or by such other person or persons as the Managing Director of BHC shall designate in writing, and BHC shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. 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 By / -, Regional Vice President . Western Africa BANK FOR HOUSING AND CONSTRUCTION By Authorized Representative - 11 - SCHEDULE 1 Sub-loan Lending Criteria A. Eligibility Sub-loans may be made to: (1) local contractors who have entered into contracts with GHA for the purpose of carrying out road maintenance works; and (2) quarry operators who are supplying materials to GHA and contractors for the Road Main- tenance Program. B. Terms and Conditions of Sub-loans Sub-loan contracts will include, inter alia, the followiig terms and conditions: 1. Repayment (a) The repayment period is not to exceed five years. (b) The amortization schedule applicable to each Sub-loan will provide for a grace period of not more than one year. (c) The amortization schedule applicable to each Sub-loan will provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of prin- cipal. (d) No Sub-loan may be repaid in advance of maturity during the first two years of the term of such Sub-loan. 2. Interest Rate Interest on the principal amount of each Sub-loan outstanding from time to time will be payable at a rate of 18-1/2% per annum, which rate shall be subject to review and modification from time to time upon agreement between the Borrower, BHC and the Asso- ciation. - 12 - 3. Other Conditions (a) A commitment fee of not more than one per cent per annum may be charged to Investment Enterprises by BHC on the undisbursed principal amount of each Sub-loan. (b) Investment Enterprises shall bear any foreign exchange risk. (c) All contractors' equipment to be financed out of the proceeds of a Sub-loan is to be acquired in accordance with the provisions of the Borrower's Hire-Purchase Decree, 1974 (N.R.C.D. 292). - 13 - SCHEDULE 2 Special Import Facility Operating Policies and Procedures A. Administration BHC, with the assistance of Plant Pool, and on behalf of the Borrower, will administer the Special Import Facility and take full responsibility for its timely and effective implementation. B. Import Stage (1) Eligibility Any local motor trading company which imports the most widely used brands of contractors equipment and trucks and provides reputable service facilities throughout Ghana is eligible to apply for participation in the program to import spare parts, tools and materials under the Facility. (2) Selection In order to be considered for selection for the program, a motor trading company will prepare and submit to BHC a list of the spare parts, tools and materials for which there has been a strong demand and which such motor trading company has been unable to meet. Each list will set forth the c.i.f. cost of the goods and the estimated delivery date. BHC shall select, on a competitive basis, up to a maximum of ten motor trading companies for parti- cipation in the program with the aim of providing selected companies with balanced inventories of supplies consistent with their respective traditional services. Selection shall be further based on the number and distribution of facilities and outlets of each company, its service capabilities and the competitivenesss and cost effectiveness of its price quotations. (3) Import Plan BHC will enter into an Import Plan with each approved Motor Trading Company, the terms and conditions of which plan will include, inter alia: (a) a description, the volume and the c.i.f. price of goods to be ordered; - 14 - (b) the proposed delivery schedules; (c) a commitment by the Motor Trading Company to distribute and sell the goods imported only to contractors and truck operators who have been certified in accordance with paragraph C of this Schedule; (d) a provision limiting the imports to not less than two bulk consignments; (e) an advance payment to the Borrower in Cedis equivalent to the c.i.f. amount of each shipment; and (f) an agreement that the Motor Trading Company will sell the goods at the official retail price. C. Distribution Stage (1) Eligibility Any contractor currently executing a GHA road maintenance contract and any small-scale local private truck operator engaged in agricultural transport, with priority given to truck operators having not more than three trucks, is eligible to be considered for participation in the program. BHC and Plant Pool will jointly select up to about 45 contractors in consultation with GHA and about 200 truck operators. (2) Certificate of eligibility BHC will issue to each approved participant a certificate of eligibility which authorizes the purchase of goods in generally predetermined quantities from approved Motor Trading Companies. The goods will be held by the approved Motor Trading Companies and sold in Cedis only to certified contractors and truck operators. (3) Price of Goods The end-user price of the goods will consist of the official retail price to be paid to the Motor Trading Company, and a fee, satisfactory to the Association, to be paid to BHC and the Bor- rower at the time of certification. 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 J day of 198 . FOR SECRETARY