Ghana - Road Rehabilitation And Maintenance Project : Credit 1601 - Project Agreement - 1 - Conformed

OFFICIAL CREDIT NUMBER 1601 GR D0CUMENTS Project Agreement (Road Rehabilitation and Maintenance Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and BANK FOR HOUSING AND CONSTRUCTION Dated , 1985 CREDIT NUMBER 1601 GH PROJECT AGREEMENT AGREEMENT, dated k , 1985, between the INTERNATIONAL DEV PMENT ASSOCIATION (the Association) and BANK FOR HOUSING AND CONSTRUCTION (BHC). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Ghana (the Borrower) and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to forty million four hundred thousand Special Drawing Rights (SDR 40,400,000), 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 set forth in this Agreement; (B) by a subsidiary loan agreement to be entered into between the Borrower and BHC, part of the proceeds of the credit provided for under the Development Credit Agreement will be made available to BHC on terms and conditions set forth in said Subsidiary Loan 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 set forth in this Agreement; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. Unless the context otherwise requires, 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 BHC Section 2.01. BHC declares its commitment to the objectives of the Project as set forth in Schedule 2 to the Development Credit Agreement and, to this end, shall carry out Part C of the -2- Project in close cooperation with GHA and PMU 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 Decree and By-laws, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for Part C of the Project. Section 2.02. (a) In accordance with and subject to the provisions of the Development Credit Agreement, BHC shall submit Investment Projects to the Association for approval or for autho- rization for withdrawals to be made from the Credit Account. (b) When presenting an Investment Project (other than a free-limit Investment Project) to the Association for approval, BHC shall furnish to the Association an application, in form satisfactory to the Association, together with: (i) a description of the Investment Enterprise (including an analysis of the operational performance, management, and financial position in accordance with guidelines satisfactory to the Association) and an appraisal of the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; (ii) the proposed terms and conditions of the loan to the Investment Enterprise, including the schedule of amortiza- tion of said loan; and (iii) such other information as the Asso- ciation shall reasonably request. (c) Each request by BHC for authorization to make with- drawals from the Credit Account in respect of a free-limit Investment Project shall contain: (i) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit; and (ii) the terms and conditions of the loan to the Investment Enterprise, including the schedule of amortization therefor. (d) Except as the Association and BHC shall otherwise agree, applications and requests made pursuant to the provisions of paragraph (b) or (c) of this Section shall be presented to the Association on or before December 31, 1989. Section 2.03. (a) BHC undertakes that unless the Association shall otherwise agree, any loans on account of Investment Projects will be made on terms whereby BHC shall obtain, by -3- written agreement or other appropriate legal means, rights adequate to protect the interests of the Association and of BHC, including the rights set forth in Schedule 1 to this Agreement. (b) BHC shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association and of BHC; (ii) comply with its obligations under this Agreement and the Subsidiary Loan Agreement; and (iii) achieve the purposes of the Project. Section 2.04. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part C of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to the Development Credit Agreement. Section 2.05. BHC shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07 and 9.08 of the General Conditions (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition) in respect of the BHC Project Agreement and Part C of the Project. Section 2.06. BHC shall duly perform all its obligations under the Subsidiary Loan 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 the Subsidiary Loan Agreement or any provision thereof. Section 2.07. (a) BHC shall, at the request of the Associa- tion, exchange views with the Association with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) BHC shall furnish to the Association all such informa- tion as the Association shall reasonably request concerning the expenditure of the proceeds of the loans to Investment Enterprises, the Investment Enterprises, the Investment Projects, and the administration, operations and financial condition of BHC. (c) BHC shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part C of the Project, the accomplishment of the -4- purposes of the Credit, or the performance by BHC of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.08. BHC shall duly perform all its obligations in agreements under which funds have been lent or otherwise put at the disposal of BHC by the Borrower or its agencies or others for relending, investment or management. BHC shall promptly inform the Association of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. Section 2.09. BHC shall cause each of its Subsidiaries (if any) to observe and perform the obligations of BHC under this Agreement to the extent to which such obligations may be made applicable thereto as though such obligations were binding upon each of such Subsidiaries. Section 2.10. BHC shall not amend its Decree or By-laws except in agreement with the Association, and shall exchange views with the Association on any proposal to modify its Decree or By-laws. Section 2.11. Except as the Association shall otherwise agree, BHC: (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 its opera- tions and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 2.12. BHC shall cause Plant Pool to make available to GHA, DFR and contractors and quarry operators for the purposes of the Project equipment and materials financed out of the proceeds of the Credit through sale or hire on terms acceptable to the Association. Section 2.13. BHC shall, and shall cause Plant Pool to, take out and maintain with responsible insurers insurance against such risks and in such amounts as shall be consistent with appropriate practice, including reinsurance abroad for warehoused spare parts so as to ensure that any indemnity shall be payable in a freely usable currency. 5- Section 2.14. BHC shall, in cooperation with the Borrower: (i) adopt an action program acceptable to the Association by September 30, 1985 for strengthening its financial condition and operational and financial management capabilities; and (ii) thereafter carry out such action program with due diligence and efficiency. Article III Financial Covenants Section 3.01. (a) BHC shall maintain procedures and records adequate to monitor and record the progress of Part C 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 sound accounting practices the operations and financial condition of BHC, including, without limitation to the foregoing, separate accounts reflecting the operations, resources and expenditures in respect of Part C of the Project, and shall enable the Association's representatives to examine such records. (b) 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 year, (A) certified copies of its financial statements for such year as so audited (including copies of Management/Internal Control Letters); and (B) the report of such audit by said auditors, of such scope and in such format and detail as the Association shall have reason- ably requested; and (iii) furnish to the Association such other information concerning said accounts and financial statements as well as the audit thereof and said records as the Association shall from time to time reasonably request. -6- (c) For all expenditures with respect to which withdrawals are requested from the Credit Account on the basis of statements of expenditure, BHC shall, and shall cause Plant Pool to: (i) maintain, in accordance with paragraph (a) of this Section, separate records and accounts reflecting such expenditures; (ii) retain, until one year after the Closing Date, all records (contracts, orders, invoices, bills, receipts and other documents) evidencing such expenditures; (iii) enable the Association's representatives to examine such records; and (iv) ensure that such separate accounts are included in the annual audit referred to in paragraph (b) of this Section and that the report thereof contains, in respect of such separate accounts, a separate opinion by the said auditors as to whether the proceeds of the Credit withdrawn in respect of such expenditures have been used for the purpose for which they were provided. Section 3.02. Except as the Association shall otherwise agree, BHC shall not make any repayment in advance of maturity in respect of any of its debt which, in the judgment of the Associa- tion, would materially affect BHC's ability to meet its financial obligations. Section 3.03. 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 lending and borrowing operations. Section 3.04. (a) Except as the Association shall otherwise agree, BHC shall not incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 10 to 1. (b) For purposes of this Section: - 7 - (i) The term "debt" means any indebtedness of BHC 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: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become out- standing pursuant to such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such gua- rantee has been entered into but only to the extent that the guaranteed debt is outstanding. (iii) The term "equity" means the sum of the total unimpaired paid-up capital, quasi equity, retained earnings and reserves of BHC not allocated to cover specific liabilities. (iv) The term "quasi equity" means the special assistance provided to BHC by the Bank of Ghana pursuant to the special assistance agreement referred to in the letter dated March 4, 1985 by the Bank of Ghana to the World Bank, or any similar arrangement. (v) Whenever for the purposes of this Section it shall be necessary to value, in Cedis, debt payable in another currency, such valuation shall be made on the basis of the prevailing lawful rate of exchange at which such other currency is, at the time of such valuation, obtainable for the pur- poses of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. ARTICLE IV Effective Date; Termination Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. -8- Section 4.02. (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 12 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. Section. 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancella- tion or suspension under the General Conditions. ARTICLE V Miscellaneous Provisions Section 5.01. 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 rhall 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 addresses 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) -9- For BHC: Bank for Housing and Construction P. 0. Box M Accra Ghana Cable address Telex: BANKHOUSE 2096 Accra Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of BHC, may be taken or executed by its Managing Director, or by such other person or persons as 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. Section 5.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively b,xt one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized representatives, 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 ~ 4 ~ o a Regional Vice President Western Africa BANK FOR HOUSING AND CONSTRUCTION By Authorized Representative - 10 - SCHEDULE I Loans on Account of Investment Projects A. Terms and Conditions of Loans on Account of Investment Projects 1. Loans to Investment Enterprises will include, inter alia, the following terms and conditions: (i) Repayment (a) The repayment period is not to exceed 12 years, including a grace period not exceeding 2 years. (b) The amortization schedule applicable to each loan will provide for a grace period of not more than 3 years. (c) Investment Enterprises shall carry the foreign exchange risk.. (d) No loan may be repaid in advance of maturity during the first two years of the term of such loan. (ii) Interest Rate Interest on the principal amount of each loan outstanding from time to time will be parable at a rate of 20% per annum, which rate shall be subject to review and modifir!ation from time to time upon agreement between the Borrower, BHC and the Association. (iii) 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 loan. (b) Equipment and materials financed by BHC shall only be used for the purposes of the Project. - 11 - 2. Except as the Association shall otherwise agree, BHC shall obtain, inter alia, in respect of loans to Investment Enterprises the right to: (a) require the Investment 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; (b) inspect, by itself or jointly with representatives of the Association i the Association shall so request, such goods, works, and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (c) obtain all such information as the Association or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise and to the benefits to be derived from the Investment Project; and (d) suspend or terminate the right of the Investment Enter- prise to the use of the proceeds of the Credit upon failure by such Investment Enterprise to perform its obligations under its agreement with BHC. B. Plant Pool BHC shall cause Plant Pool to obtain, as a condition of loans for Investment Projects, insurance for warehoused spare parts against such risks and in such amounts as shall be consistent with appropriate practice, including reinsurance abroad so as to ensure that any indemnity shall be payable in a freely usable currency to replace or repair such goods. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interne- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198 S FOR SECRETARY