Conformed Copy - C2064 - Industrial Technology Development Project - Project Agreement 1

Page 1 CONFORMED COPY CREDIT NUMBER 2064 IN LOAN NUMBER 3119 IN (Industrial Technology Development Project) among INTERNATIONAL DEVELOPMENT ASSOCIATION and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED and TECHNOLOGY DEVELOPMENT AND INFORMATION COMPANY OF INDIA LIMITED Dated December 8, 1989 CREDIT NUMBER 2064 IN LOAN NUMBER 3119 IN ICICI PROJECT AGREEMENT AGREEMENT, dated December 8, 1989 among the INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association), the INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank), THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED (ICICI), and the TECHNOLOGY DEVELOPMENT AND INFORMATION COMPANY OF INDIA LIMITED (TDICI). WHEREAS (A) by the Development Credit Agreement of even date herewith between India, acting by its President (the Borrower) and the Association, the Association has agreed to lend to the Borrower an amount in various currencies equivalent to forty- four million two hundred thousand Special Drawing Rights (SDR 44,200,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that ICICI and TDICI agree to undertake such obligations toward the Association Page 2 as are set forth in this Agreement; and (B) by the Loan Agreement of even date herewith between the Borrower and the Bank, the Bank has agreed to lend to the Borrower an amount in various currencies equivalent to $145,000,000 on the terms and conditions set forth in the Loan Agreement, but only on condition that ICICI and TDICI agree to undertake such obligations towards the Bank as set forth in the Loan Agreement. (C) by an ICICI subsidiary loan agreement to be entered into between the Borrower and ICICI, part of the proceeds of the Loan provided under the Loan Agreement and the proceeds of the Credit provided for under the Development Credit Agreement will be made available to ICICI on terms and conditions set forth in said ICICI Subsidiary Loan Agreement; (D) TDICI, as a managing agent for ICICI, will manage the VC Funds for venture capital financing under Part A of the Project; and WHEREAS ICICI and TDICI, in consideration of the Associa- tion's entering into the Development Credit Agreement with the Borrower and the Bank's entering into the Loan Agreement with the Borrower, have 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, the Loan Agreement and in the General Conditions (as so defined in the Development Credit Agreement and the Loan Agreement, respectively) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) ICICI 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 B of the Project and conduct its operations and affairs, in accordance with sound financial standards and practices, with qualified and experienced management and in accordance with its Charter. (b) TDICI 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 A of the Project and conduct its operations and affairs, in accordance with sound financial standards and practices, with qualified and experienced management and in accordance with its Memorandum and Articles of Association. Section 2.02. (a) ICICI undertakes that, unless the Association shall otherwise agree, Sub-loans under Part B of the Project, will be made in accordance with the procedures and on the terms and conditions set forth or referred to in Schedule 2 to this Agreement. (b) TDICI undertakes that, unless the Bank shall otherwise agree, venture capital financing under Part A of the Project will be made in accordance with the procedures and on terms and conditions set forth or referred to in Schedule 1 to this Agreement. (c) TDICI shall exercise its rights in relation to each VCF in such manner as to: (i) protect the interests of the Bank and of Page 3 ICICI; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. Section 2.03. Except as the Association shall otherwise agree, procurement of the goods and consultants' services required for Part B.1 of the Project and to be financed out of the proceeds of the Credit shall be governed by the provisions of Schedule 3 to this Agreement. Section 2.04. (a) ICICI shall carry out the obligations set forth in Sections 9.03, 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions applicable to the Development Credit Agreement (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the Project Agreement and Part B of the Project. (b) TDICI shall carry out the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions applicable to the Loan Agreement (relating to insurance, use of goods and services, plans and schedules, records and reports, maintenance and land acquisition, respectively) in respect of the ICICI Project Agreement and Part A of the Project. Section 2.05. ICICI shall duly perform all obligations under the ICICI Subsidiary Loan Agreement. Except as the Association and the Bank shall otherwise agree, ICICI shall not take or concur in any action which would have the effect of assigning, amending, abrogating or waiving the ICICI Subsidiary Loan Agreement or any provision thereof. Section 2.06. (a) ICICI and TDICI shall, at the request of the Association or the Bank, exchange views with the Association and the Bank with regard to the progress of the Project, the performance of their obligations under this Agreement and in respect of ICICI, under the ICICI Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit and of the Loan. (b) ICICI and TDICI shall promptly inform the Association and the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Credit or of the Loan, or the performance by ICICI and TDICI of their obligations under this Agreement and of ICICI under the ICICI Subsidiary Loan Agreement. Section 2.07. TDICI shall maintain adequate staff of industrial, technical and financial experience, and carry on its management of the VC Funds to promote technology development in industrial firms and to maximize profitability for the VC Funds. Section 2.08. ICICI shall staff its technology group with adequate numbers and appropriate technical background, and maintain organization and management guidelines satisfactory to the Bank. Article III Financial Covenants Section 3.01. (a) ICICI and TDICI shall maintain in respect of Parts B and A (including VC Funds) of the Project, respectively, procedures and records adequate to monitor and record the progress of the 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 ICICI and of TDICI (and VC Funds). (b) ICICI and TDICI (including VC Funds) shall: (i) have their records, accounts and financial statements (balance sheets, statements of income Page 4 and expenses and related statements) related to Parts B and A of the Project, respectively, for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association and the Bank; (ii) furnish to the Association and the Bank, as soon as available but in any case not later than four months after the end of each such year, (A) certified copies of their 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 and the Bank shall have reasonably requested; and (iii) furnish to the Association and the Bank such other information concerning said records, accounts and financial statements as well as the audit thereof as the Association and the Bank shall from time to time reasonably request. ARTICLE IV Effective Date; Termination Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which both the Development Credit Agreement and the Loan Agreement become effective. Section 4.02. (a) This Agreement and all obligations of the Association, the Bank, of ICICI and of TDICI thereunder shall terminate on the earlier of the following two dates: (i) the date on which both the Development Credit Agreement and the Loan Agreement shall have terminated in accordance with their terms; or (ii) a date twenty (20) years after the date of this Agreement. (b) If the Development Credit Agreement or the Loan Agreement or both of said Agreements terminate in accordance with their respective terms before the date specified in paragraph (a) (ii) of this Section, the Association and the Bank shall promptly notify ICICI and TDICI of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Conditions applicable to the Development Credit Agreement or the Loan Agreement. 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 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 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: Page 5 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 the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For ICICI: Industrial Credit and Investment Corporation of India Limited 163 Backbay Reclamation Bombay 400020 India Cable address: Telex: CREDCORP 11-3062 ICICI IN Bombay FOR TDICI: Technology Development and Information Company of India Limited 44-45 Residency (Cross) Road, Leo Complex Bangalore 560025 Karnataka India Telex: 0845-2947-TDIC-IN 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 ICICI and TDICI, may be taken or executed by its Chairman and Managing Director, or by such other person or persons as ICICI and TDICI shall designate in writing, and ICICI and TDICI shall furnish to the Association and the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 5.03. As long as the Bank has not given notice to the contrary to ICICI and TDICI and so long as the Development Credit Agreement shall not have terminated prior to the termination of the Loan Agreement: (a) the obligations of ICICI and TDICI to consult with, and to furnish information, documents, plans, reports, records and statements to, the Bank shall be satisfied to the extent performance in respect of such obligations is rendered to the Association; Page 6 (b) the obligations of the Bank to consult with, and to furnish information to, ICICI and TDICI shall be satisfied to the extent such obligations are fulfilled by the Association; and (c) all actions taken (including the giving of approvals or granting of waivers) by the Association pursuant to the Development Credit Agreement shall be deemed to be taken pursuant to both the Development Credit Agreement and the Loan Agreement, and in the name and on behalf of both the Association and the Bank. Section 5.04. 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 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 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ Attila Karaosmanoglu Regional Vice President Asia THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED TECHNOLOGY DEVELOPMENT AND INFORMATION COMPANY OF INDIA LIMITED By /s/ Anil Kumar Authorized Representative SCHEDULE 1 Terms and Conditions for VCF under Part A of the Project 1. ICICI shall establish and maintain VC Funds in accordance with terms and conditions and operating guidelines satisfactory to the Bank. 2. ICICI shall raise from their own and/or other sources twice the proceeds of the Loan made available to ICICI by the Borrower to constitute each VC Fund. 3. ICICI shall ensure that, under arrangements satisfactory to the Bank, each VC Fund shall enter into a management contract with TDICI for the purpose of managing such VC Fund. 4. TDICI shall maintain operating guidelines satisfactory to the Bank for each VC Fund. 5. Prior approval of the Bank will be required for each VCF in an aggregate amount equivalent to $1,500,000 or more. 6. Notwithstanding the foregoing provisions of paragraph 5, Page 7 first 5 VCFs shall be subject to prior approval by the Bank. 7. (a) When presenting a VCF to the Bank for approval or information, TDICI shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the Investment Enterprise and an appraisal of the VCF, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the VCF; and (iii) such other information as the Bank shall reasonably request. (b) Commitments for VCFs shall be made on or before December 31, 1992. 8. TDICI shall require that: (a) the Investment Enterprise shall carry out its affairs with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) the goods and services to be financed out of the proceeds of the Loan shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; (c) it may inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods, works and plants of the Investment Enterprise, the operation thereof, and any relevant records and documents; (d) the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice. Without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; (e) it may obtain all such information as the Bank 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 VCF; and (f) it may suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Loan upon failure by such Investment Enterprise to perform its obligations under its agreement with TDICI. SCHEDULE 2 Terms and Conditions for Sub-loans under Part B of the Project Technology Services Revolving Fund ICICI shall manage on behalf of the Borrower a Technology Services Revolving Fund (TSRF) of an amount equivalent to $55,000,000 of the proceeds of the Credit in accordance with operating guidelines satisfactory to the Association. Part I: Sub-loans to Technical Institutions 1. Funds from TSRF shall be relent by ICICI to six Technical Institutions previously appraised by ICICI and the Association. Additional institutions will be selected and appraised by ICICI according to selection guidelines included in the Operating Page 8 Guidelines of TSRF approved by the Association. 2. ICICI shall collect a service charge of 1% per annum on the amount of each Sub-loan withdrawn and outstanding from time to time. 3. ICICI shall charge a 1/4% per annum commitment fee on the principal amount of the Sub-loan not withdrawn from time to time. 4. Repayments shall be made by the Technical Institutions in maximum 15 years, including therein a grace period of 4 years. 5. All Sub-loans in an amount of $4,000,000 equivalent or more, and the first two Sub-loans, not previously appraised by the Association, irrespective of its amount, shall be subject to prior review by the Association. 6. No expenditures for goods or services required for a Sub-loan shall be eligible for financing out of the proceeds of the Credit unless: (a) the Sub-loan shall have been approved by the Association; or (b) the Sub-loan shall have been a free-limit Sub- loan for which the Association has authorized withdrawals from the Credit Account. For the purposes of this Agreement and the Development Credit Agreement, a free-limit Sub-loan shall be a Sub-loan for which prior approval of the Association is not required in accordance with the provisions of this Schedule. 7. (a) When presenting a Sub-loan (other than a free-limit Sub- loan) to the Association for approval, ICICI shall furnish to the Association an appraisal report, in form satisfactory to the Association, and such other information as the Association shall reasonably request. (b) Each request by ICICI for authorization to make withdrawals from the Credit Account in respect of a free-limit Sub-loan shall include a copy of the appraisal report and the Sub- loan agreement. (c) Applications and requests made pursuant to the provisions of sub-paragraphs (a) and (b) of this paragraph shall be presented to the Association on or before June 30, 1992. 8. Sub-loans shall be made on terms whereby ICICI shall obtain, by written contract with each Technical Institution or by other appropriate legal means, rights adequate to protect the interests of the Association and the Borrower, including the right to: (a) require the Technical Institutions to carry out and operate their affairs with due diligence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate records; (b) require that: (i) the goods and services to be financed out of the proceeds of the Credit shall be procured in accordance with the provisions of Schedule 3 to this Agreement; and (ii) such goods and services shall be used exclusively in the carrying out of the Project; (c) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods and the sites, works, plants and construction included in the Project, the operation thereof, and any relevant records and documents; (d) require that: (i) the Technical Institutions shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice; and (ii) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely Page 9 usable by the Technical Institutions to replace or repair such goods; (e) 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 Technical Institutions and to the benefits to be derived from the Project; and (f) suspend or terminate the right of the Technical Institutions to the use of the proceeds of the Credit upon failure by such Technical Institutions to perform its obligations under its contract with ICICI. 9. ICICI shall ensure that: (i) the Technical Institutions already appraised introduce cost-accounting systems satisfactory to ICICI by December 31, 1990; (ii) said Technical Institutions shall not be disbursed any funds unless ICICI is satisfied that the institutional goals set up by the Institutions are being substantially met for financial year 1989/90; (iii) the additional Technical Institutions which are selected for participation in the Project will introduce cost-accounting practices satisfactory to ICICI within one year of first disbursement by ICICI; and (iv) all research institutions participating in Part B.1 of the Project will not be disbursed any funds unless they have appointed a Senior Technical Officer for laboratory safety and a safety protocol has been issued. Part II: Sponsored Research and Development Promotion 1. Funds equivalent to $15 million from the proceeds of the Credit will be relent by ICICI to industrial firms for research and development in and/or with Technical Institutions. 2. Sponsored research and development promotion under Part B.2 of the Project will be carried out in accordance with operating guidelines satisfactory to the Association. 3. For each sponsored research and development promotion Sub- loan, ICICI shall furnish to the Association an appraisal report in a format satisfactory to the Association and the Sub-loan agreement, provided, however, that first five Sub-loans shall be subject to prior review by the Association. 4. The goods and services shall be procured in accordance with the standard procedures of ICICI. SCHEDULE 3 Procurement and Consultants' Services Section I: Procurement of Goods and Works Part A: International Competitive Bidding Except as provided in Part B hereof, goods shall be procured under contracts awarded through limited international bidding procedures on the basis of evaluation and comparison of bids invited from a list of at least three qualified suppliers eligible under the "Guidelines for Procurement under IBRD Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines) and in accordance with the procedures set forth in Sections I and II of the Guidelines (excluding paragraphs 2.8, 2.9, 2.55 and 2.56 thereof). Part B: Other Procurement Procedures Contracts for items estimated to cost the equivalent of $200,000 each or less may be procured following the standard procedures prescribed by ICICI for such procurement. Page 10 Part C: Review by the Association of Procurement Decisions 1. Review of invitations to bid and or proposed awards and final contracts: (a) With respect to each contract estimated to cost the equivalent of $500,000 or more, the procedures set forth in paragraphs 2 and 4 of Appendix 1 to the Guidelines shall apply, provided, however, that such procedures shall in any case apply to the first five packages. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract required to be furnished to the Association and the Bank pursuant to said paragraph 2 (d) shall be furnished to the Association and the Bank prior to the making of the first payment out of the Special Account in respect of such contract. (b) With respect to each contract not governed by the preceding paragraph, the procedures set forth in paragraphs 3 and 4 of Appendix 1 to the Guidelines shall apply. Where payments for such contract are to be made out of the Special Account, such procedures shall be modified to ensure that the two conformed copies of the contract together with the other information required to be furnished to the Association and the Bank pursuant to said paragraph 3 shall be furnished to the Association and the Bank as part of the evidence to be furnished pursuant to paragraph 4 of Schedule 3 to the Development Credit Agreement. (c) The provisions of the preceding sub-paragraph (b) shall not apply to contracts on account of which the Association has authorized withdrawals from the Credit Account on the basis of statements of expenditure. Such contracts shall be retained in accordance with Section 4.01 (a) (ii) of the Development Credit Agreement. 2. The figure of 15% is hereby specified for purposes of paragraph 4 of Appendix 1 to the Guidelines. Section II. Employment of Consultants In order to assist the Technical Institutions in carrying out of the Project, consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association, shall be employed. Such consultants shall be selected in accordance with principles and procedures satisfactory to the Association on the basis of the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981.