Madagascar - Industrial Development Bank Project : Credit 0977 - Project Agreement - Conformed

EOFFICIAL DOCTMNTS CREDIT NUMBER 977 MAG Project Agreement (Industrial Development Bank Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANKIN'NY INDOSTRIA (National Industrial Development Bank) Dated , 1980 CREDIT NUMBER 497 MAG PROJECT AGREEMENT AGREEMENT, dated -V ? , 1980, between the INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and BANKIN'NY INDOSTRIA, the Borrower's National Industrial Development Bank (hereinafter called BNI), established pursuant to Ordonnance No. 76-047, dated December 27, 1976, of the Democratic Republic of Madagascar (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, for relending to BNI, an amount in various currencies equivalent to five million dollars ($5,000,000), on the terms and conditions set forth in the Devel- opment Credit Agreement, but only on condition that BNI agree to undertake such obligations toward the Association as are herein- after set forth; and WHEREAS BNI, 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 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 BNI Section 2.01. (a) BNI shall carry out the Project, described in Section 3.01 of the Development 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 management and in accordance with its Statutes and Rules of Operations. -2- (b) Sub-loans and Investments shall be restricted to the financing of Investment Projects: (i) with total costs not ex- ceeding FMG500 million and (ii) except for Small-scale Investment Projects, which show an economic rate of return of at least 10%, or such lower rate as the Association may accept, and the amount of any Sub-loan or Investment shall not exceed the equivalent of $750,000 for any one Investment Project. Sub-loans shall carry interest at no less than 8.5% per annum. Section 2.02. (a) In accordance with and subject to the provisions of the Development Credit Agreement, BNI shall submit Investment Projects to the Association for approval or for autho- rization for withdrawals to be made from the Credit Account. (b) (i) When submitting a Sub-loan (other than a free-limit Sub-loan) or an Investment to the Association for approval, BNI shall furnish to the Association an application, in form satisfactory 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 BNI and an appraisal of the Investment Project) and the proposed terms and conditions of the Sub-loan or Investment, including the schedule of amortization of the Sub-loan, or of repayment to the Borrower of the amount to be used for the Investment, and such other information as the Association may reasonably request; and (ii) such appraisals will include a calculation of the internal finan- cial rate of return and, in any case other than that of a Small- scale Investment Enterprise, an evaluation of the economic rate of return, established in accordance with guidelines satisfactory to the Association. (c) Each request by BNI for authorization for withdrawals to be made 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. (d) The amortization schedule applicable to each Investment Project shall provide for an appropriate period of grace, and, unless the Association and the Borrower shall otherwise agree, (i) shall not extend beyond fifteen years from the date of approval by - 3 - the Association of such Investment Project or of authorization by the Association to make withdrawals from the Credit Account in respect of such Investment Project, and (ii) shall provide for approximately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semi- annual, or more frequent, payments of principal. (e) Except as the Association and BNI shall otherwise agree, BNI shall submit applications for approval of Investment Projects pursuant to the provisions of paragraph (b) of this Section and requests for authorizations for withdrawals to be made from the Credit Account pursuant to the provisions of paragraph (c) of this Section on or before December 31, 1982. Section 2.03. (a) BNI undertakes that unless the Association shall otherwise agree, any Sub-loan or Investment will be made on terms whereby BNI shall obtain, by written agreement or other appropriate legal means, rights adequate to protect the interests of the Association and of BNI, including, in the case of any such Sub-loan and to the extent that it shall be appropriate in the case of any such Investment: (i) the right to require the Invest- ment Enterprise to carry out and operate the Investment 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 and services to be financed out of the proceeds of the Sub-loan or Investment be used exclusively in the carrying out of the Invest- ment Project; (iii) the right of the Association and of BNI 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 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 acquisition, transportation and delivery of the goods financed out of the proceeds of the Sub-loan or Investment 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 Association or BNI shall reasonably request relating to the foregoing, to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Projects; and (vi) the right of BNI to suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Sub-loan upon failure by such Investment Enterprise to perform its obligations under its agree- ment with BNI. (b) BNI shall exercise its rights in relation to each Investment Project in such manner as to (i) protect the interests of the Association and of BNI, (ii) comply with its obligations unuer this Agreement and the Subsidiary Loan Agreement and (iii) achieve the purposes of the Project. Section 2.04. BNI shall furnish to the Association all such information as the Association may reasonably request concerning the expenditure of the proceeds of the Sub-loans and Investments, the Project, the Investment Enterprises, the Investment Projects, the Sub-loans and the Investments. Section 2.05. BNI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, BNI 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. Section 2.06. Except as the Association and BNI shall other- wise agree, BNI: (i) shall not sell, lease, transfer or 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 2.07. BNI shall cause each of its Subsidiaries (if any) to observe and perform the obligations of BNI 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. BNI shall exchange views with the Association on any proposal to modify its Statutes or Rules of Operations. Section 2.09. (a) In order to assist BNI in carrying out: (i) the studies referred to in Section 3.01 (a) (ii) of the Develop- ment Credit Agreement; and (ii) that part of the Project described in Section 3.01 (a) (iv) of the Development Credit Agreement, BNI shall employ consultants and other experts whose qualifications, experience and terms and conditions of employment shall be satis- factory to the Association. -5- (b) Any consultants or experts employed by BNI in order to assist BNI in carrying out the training included in Section 3.01 (a) (iii) of the Development Credit Agreement shall have cualifi- cations and experience and conditions and terms of employment satisfactory to the Association. Section 2.10. By December 31, 1982 or such later date as may be acceptable to the Association, BNI shall, pursuant to terms of reference acceptable to the Association, complete the studies of the feasibility of the industrial, agro-industrial and tourism projects selected by BNI referred to in Section 3.01 (ii) of the Development Credit Agreement. ARTICLE III Financial Covenants Section 3.01. BNI shall maintain procedures and records adequate to monitor and record the progress of the Project and of each Investment Project (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of BNI and shall enable the Association's representatives to examine such records and relevant documents. Section 3.02. BNI 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 six 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 BNI and the audit thereof as the Association may from time to time reasonably request. Section 3.03. Except as the Association and BNI shall other- wise agree, BNI shall not incur or permit any Subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of BNI and all its Subsidiaries then incurred and outstanding would exceed four times the consolidated capital and surplus of BNI and all its Subsidiaries. For the purpose of this Section: -6- (a) the term "debt" means any debt incurred by BNI or by any Subsidiary maturing more than one year after the data on which it is originally incurred, including debt assumed or guaranteed by BNI or by a Subsidiary; (b) wherever reference is made to the incurring of debt, such reference shall include any modification of the terms of payment of such debt and 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 it shall be necessary to value in terms of Malagasy francs 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, obtain- able in Antananarivo for the purposes of servicing such debt; (d) the term "consolidated debt of BNI and all its Subsid- iaries" means the total amount of debt of BNI and all its Subsid- iaries excluding (i) debt owed by BNI to any Subsidiary or by any Subsidiary to BNI or to any other Subsidiary and (ii) debt referred to in paragraph (e) (ii) and (iii) of this Section; and (e) the term "consolidated capital and surplus of BNI and all its Subsidiaries" means the aggregate of (i) the total unimpaired paid-in capital, surplus and free reserves of BNI and of all its Subsidiaries after excluding therefrom such amounts as shall represent equity interests of BNI in any Subsidiary, or of any such Subsidiary in BNI or in any other Subsidiary, (ii) the amount of Subordinated Loans and (iii) such amount of any other loan which the Association may determine to be included in the consolidated capital and surplus of BNI. Section 3.04. Except as the Association and BNI shall other- wise agree, BNI 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, including, without limitation, the loan provided for in the Subsidiary Loan Agree- ment. -7- Section 3.05. (a) BNI 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 variuas currencies (including Malagasy francs) used in its borrowing, lending and guarantee operations. (b) Pursuant to paragraph (a) of this Section, BNI shall (i) ensure that Borrowers under Sub-loans for Investment Projects other than those of small-scale enterprises assume the risk of losses due to foreign exchange fluctuations and (ii) make arrange- ments with th: Borrower whereby the Borrower will assume such risk on behalf of Small-scale Investment Enterprises against payment to the Borrower of a fee of 1% per annum on the outstanding balances of Sub-loans for such enterprises. ARTICLE IV Consultation and Information Section 4.01. (a) The Association and BNI shall cooperate fully to assure that the purposes of the Credit will be accom- plished. To that end, the Association and BNI shall from time to time, at the request of either party, exchange views through their representatives with regard to the progress of the Project, the performance by BNI of its obligations under this Agreement and the Subsidiary Loan Agreement, the administration, operations and financial condition of BNI and other matters relating to the purpose of the Credit. (b) BNI 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, the Project, the Investment Enterprises, the Investment Projects, the Sub-loans and Investments and, where appropriate, the benefits to be derived from the foregoing. (c) Within six months following the last withdrawal from the Credit Account, BNI shall prepare and furnish to the Association a report, of such scope and in such detail as the Association ,zhall 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 BNI and the Association of their respective obligations under this Agreement and the accomplishment of the purposes of the Credit. - 8 - Section 4.02. BNI 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 BNI of its obligations under this Agreement or the Subsidiary Loan Agreement. 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 BNI thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) the date upon which full repayment shall have been made by BNI to the Borrower of the loan provided for in the Subsidiary Loan Agreement, together with all interest and charges accrued thereon. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify BNI of this event, and upon the giving of such notice, this Agreement and all obligations of the parties thereunder shall forthwith terminate. 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. - 9 - 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. 24423 (RCA) or 89658 (WUI) For BNI: Bankin'ny Indostria (B.N.I.) B.P. 174 Antananarivo Republique Democratique de Madagascar Cable address: Telex: BENIBANK 22205 Antananarivo 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 2.03 of the Development Credit Agreement on behalf of or by BNI may be taken or executed by its Director General, or by such other person or persons as BNI shall designate in writing, and BNI shall furnish to the Association sufficient evidence cf the authority and the authenticated speci- men signature of each such person. - 10 - 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 )S ).U - Regional Vice President Eastern Africa BANKIN'NY INDOSTRIA By / Authorized Representative 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 L day of FOR SECRETARY