Conformed Copy - L3196 - Cement Industry Restructuring Project - Project Agreement

Page 1 CONFORMED COPY LOAN NUMBER 3196 IN (Cement Industry Restructuring Project) among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED and INDUSTRIAL DEVELOPMENT BANK OF INDIA Dated June 13, 1990 LOAN NUMBER 3196 IN PROJECT AGREEMENT AGREEMENT, dated June 13, 1990, among INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT, INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED and INDUSTRIAL DEVELOPMENT BANK OF INDIA. WHEREAS (A) by the Loan Agreement of even date herewith between India and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to three hundred million dollars ($300,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that ICICI and IDBI agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by Subsidiary Loan Agreements to be entered into between the Borrower and ICICI and the Borrower and IDBI, a portion of the proceeds of the Loan provided for under Page 2 the Loan Agreement will be onlent to ICICI and IDBI respectively on the terms and conditions set forth in said Subsidiary Loan Agreements; and WHEREAS ICICI and IDBI, in consideration of the Bank's entering into the Loan Agreement with the Borrow- er, 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 Loan Agreement and the General Conditions (as so defined) have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. (a) ICICI and IDBI declare their commitment to the objectives of the Project as set forth in Schedule 2 to the Loan Agreement, and, to this end, shall cause the PCs to carry out Part A of the Project and conduct their respective operations and affairs in accordance with their respective constitutional docu- ments. (b) Without limitation upon the provisions of paragraph (a) of this Section and except as the Bank shall otherwise agree, ICICI and IDBI shall relend a portion of the proceeds of the ICICI Subsidiary Loan and the IDBI Subsidiary Loan respectively to the PCs, in accordance with the procedures and on the terms and conditions set forth or referred to in Part A of the Schedule to this Agreement, to enable them to carry out Sub-projects selected in accordance with the selection criteria laid down in Part B of Schedule 1 to this Agreement. Section 2.02. Except as the Bank shall otherwise agree, procurement of the goods and consultants' services required for Part A of the Project and to be financed out of the proceeds of the Sub-loans shall be governed by the provisions of Paragraph 4 (b) of the Schedule to this Agreement. Section 2.03. ICICI and IDBI shall carry out and cause to be carried out by the PCs the obligations set forth in Sections 9.04, 9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (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 A of the Project. Section 2.04. ICICI and IDBI shall duly perform all their respective obligations under the Subsidiary Loan Agreements. Except as the Bank shall otherwise agree, ICICI and IDBI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving their respective Subsidiary Loan Agreements or any provision thereof. Section 2.05. (a) ICICI and IDBI shall, at the request of the Bank, exchange views with the Bank with regard to the progress of Part A of the Project, the Page 3 performance of their respective obligations under this Agreement, their respective Subsidiary Loan Agreements, and other matters relating to the Sub-loans and Sub- projects. (b) ICICI and IDBI shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of Part A of the Project, the accom- plishment of the purposes of the Sub-loans and Sub- projects, or the performance by ICICI and IDBI of their obligations under this Agreement and under their respec- tive Subsidiary Loan Agreements. ARTICLE III Financial Covenants Section 3.01. (a) ICICI and IDBI shall maintain procedures and records adequate to monitor and record the progress of each Sub-project (including its cost and the benefits to be derived from it) and to reflect with consistently maintained sound accounting practices their respective operations and financial condition. (b) ICICI and IDBI shall: (i) have their respective records (referred to in Paragraph (a) hereof), accounts and financial statements (balance sheets, statements of income and expens- es and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consis- tently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as avail- able, but in any case not later than six months after the end of each such year: (A) certified copies of their respective 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other informa- tion concerning said records, accounts and financial statements as well as the audit thereof, as the Bank shall from time to time reasonably request. Section 3.02. Except as the Bank shall otherwise agree, ICICI and IDBI shall: (a) conduct their respective operations and affairs in such manner as shall be necessary to maintain, at all times, their respective debt/equity ratio within the limit referred to in Section 3.03 of this Agreement; and (b) if such ratio shall, for reasons beyond the control of ICICI and IDBI, be exceed- ed, promptly take all such reasonable actions as shall be necessary or advisable to bring such ratio within such limit. Section 3.03. (a) Except as the Bank shall otherwise agree, ICICI and IDBI shall: (i) not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of ICICI and IDBI, respectively, and all their respective subsidiaries then in- curred and outstanding, would be greater Page 4 than twelve times the consolidated capi- tal and surplus of ICICI and IDBI re- spectively and all their respective subsidiaries; and (ii) ensure that at all times their respec- tive consolidated internal cash genera- tion for each year shall be at least 1.2:1 times the consolidated debt ser- vice requirements of their respective consolidated debt for that year. (b) For purposes of this Section: (i) The term "debt" means any debt incurred by ICICI and IDBI or any subsidiary thereof maturing more than one year after the date on which it is originally incurred; provided, however, that cur- rent repayments of such debt due and payable within one year shall be exclud- ed therefrom. (ii) Debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instru- ment providing for such debt or for the modi- fication of its terms of payment on the date, and to the extent, the amount of such debt has become outstanding pursuant to such loan contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee 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, retained earnings and reserves of ICICI and IDBI respectively not allocated to cover specific liabilities. (iv) Whenever for the purposes of this Section it shall be necessary to value, in terms of Rupees, 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 accept- able to the Bank. (v) The term "consolidated debt of ICICI and IDBI, respectively, and all their re- spective subsidiaries" means the total amount of debt of ICICI and IDBI, re- spectively, and all their respective subsidiaries, excluding any debt owed by ICICI and IDBI, respectively, to any subsidiary or by any subsidiary to ICICI and IDBI, respectively, or to any other subsidiary. (vi) The term "consolidated capital and sur- plus of ICICI and IDBI, respectively and all their respective subsidiaries" means the aggregate of the total unimpaired paid-up capital, surplus and free re- serves of ICICI and IDBI respectively and all their respective subsidiaries Page 5 after excluding therefrom such amounts as shall represent equity interests of ICICI and IDBI respectively in any sub- sidiary or of any such subsidiary in ICICI and IDBI respectively or in any other subsidiary. Section 3.04. ICICI and IDBI shall not make any repayment in advance of maturity in respect of any outstanding debt of ICICI and IDBI which materially affect the ability of ICICI and IDBI to meet their respective financial obligations. Section 3.05. The Bank and ICICI and IDBI shall, from time to time, at the request of any party, exchange views through their respresentatives with regard to the administration, operations and financial condition of ICICI or IDBI, and ICICI or IDBI shall furnish to the Bank all such information as the Bank shall reasonably request concerning the administration, operations and financial condition of ICICI or IDBI. 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 Loan Agreement becomes effective. Section 4.02. This Agreement and all obligations of the Bank and of ICICI and IDBI thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly notify ICICI and IDBI thereof. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the General Condi- tions. 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 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 Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 197688 (TRT) Washington, D.C. 248423 (RCA) 64145 (WUI) Page 6 or 82987 (FTCC) For ICICI: Industrial Credit and Investment Corporation of India Limited 163, Backbay Reclamation Road No. 3 Bombay - 400 020 Cable address: Telex: CREDCORP 011-3062 ICIC IN Bombay For IDBI: Industrial Development Bank of India IDBI Tower Cuffe Parade Bombay - 400 005 Cable address: Telex: INDBANKIND 011-2193 Bombay 011-4812 Section 5.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of ICICI and IDBI, or by ICICI and IDBI on behalf of the Borrower under the Loan Agreement, may be taken or executed by the Chairman and Managing Director or such other person or persons as Chairman and Managing Director shall designate in writing, and ICICI and IDBI shall furnish to the Bank sufficient evidence of the authority and the authenticat- ed 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 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT By /s/ A. Karaosmanoglu Regional Vice President Asia INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED By /s/ Anil Kumar Authorized Representative Page 7 INDUSTRIAL DEVELOPMENT BANK OF INDIA By /s/ Anil Kumar Authorized Representative SCHEDULE Procedures for and Terms and Conditions of Sub-loans and Sub-projects Part A: Sub-loans 1. Main terms and conditions of Sub-loan shall include: (a) relending rate = prevailing ICICI and IDBI local currency term lending rate, presently at 14% per annum; (b) maximum amortization = repayment over 15 years; including a maximum grace period of 5 years; and (c) undertaking to remedy measures identi- fied by the environmental assessment including source emission standards acceptable to the Bank. 2. No expenditures for goods or services required for a Sub-project shall be eligible for financing out of the proceeds of the Sub-loan unless: (a) the Sub-loan for such Sub-project shall have been approved by the Bank and such expenditures shall have been made not earlier than ninety days prior to the date on which the Bank shall have received the applica- tion and information required under paragraph 3 (a) of this Schedule in respect of such Sub-loan; or (b) the Sub-loan for such Sub-project shall have been a free-limit Sub-loan for which the Bank has authorized withdrawals from the ICICI and IDBI Subsidiary Loan Account and such expenditures shall have been made not earlier than ninety days prior to the date on which the Bank shall have received the request and information required under paragraph 3 (b) of this Schedule in respect of such free-limit Sub-loan. For the purposes of this Agreement, a free-limit Sub-loan shall be a Sub-loan for a Sub-project in an amount to be financed out of the proceeds of the ICICI Subsidiary Loan or the IDBI Subsidiary Loan which shall not exceed the sum of $20,000,000 equivalent, when added to any other out- standing amounts financed or proposed to be financed out of the proceeds of the Subsidiary Loan. 3. (a) When presenting a Sub-loan (other than a free- limit Sub-loan) under Part A of the Project to the Bank for approval, ICICI and IDBI shall furnish to the Bank an application, in form satisfactory to the Bank, together with (i) a description of the PC and an appraisal of the Sub-project, including a description of the expenditures proposed to be financed out of the proceeds of the Subsidiary Loan; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan; (iii) an enviromental impact assessment report relating to the Sub-project; and (iv) such other information as the Bank shall reasonably request. (b) Each request by ICICI and IDBI for authoriza- tion to make withdrawals from their respective Subsidiary Loan Accounts in respect of a free-limit Sub-loan shall Page 8 contain (i) a summary description of the PC and the Sub- project and environmental impact assessment thereof, including a description of the expenditures proposed to be financed out of the proceeds of the Sub-Loan, and (ii) the terms and conditions of the Sub-loan, including the schedule of amortization therefor. (c) Applications and requests made pursuant to the provisions of sub-paragraphs (a) and (b) of this para- graph shall be presented to the Bank on or before June 30, 1994. 4. Sub-loans shall be made on terms whereby ICICI and IDBI shall obtain, by written contract with the PC or by other appropriate legal means, rights adequate to protect the interests of the Bank and ICICI and IDBI, including, in the case of any Sub-loan the right to: (a) require the PC to carry out and operate the Sub-project 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 Sub-loan shall be purchased in accordance with Schedule 4 of the Loan Agreement, and (ii) such goods and services shall be used exclusively in the carrying out of the Sub-project; (c) inspect, by itself or jointly with representa- tives of the Bank if the Bank shall so request, such goods included in the Sub-project, and any relevant records and documents; (d) require that: (i) the PC 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 Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the PC to replace or repair such goods; (e) obtain all such information as the Bank or ICICI and IDBI shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the PC and to the benefits to be derived from the Sub-project; and (f) suspend or terminate the right of the PC to the use of the proceeds of the Sub-loan upon failure by such PC to perform its obligations under its contract with ICICI or IDBI. Part B: Sub-projects Unless otherwise agreed to by the Bank, all Sub- projects shall satisfy the following eligibility criteria and environmental assessment requirements: (a) minimum economic rate of return = 12%; (b) minimum financial rate of return = 15%; (c) the PCs shall have an acceptable capital structure such that with the proposed Sub-loan, the debt:equity ratio would not normally exceed 2.5:1; (d) proposed Sub-project is designed and all equipment required thereunder is specified to meet the Page 9 environmental protection standards applicable in India and acceptable to the Bank; and (e) completion of environmental impact assessment satisfactory to the Bank.