Conformed Copy - C2266 - Transport Sector Adjustment/Investment Credit - Project Agreement

Page 1 CONFORMED COPY CREDIT NUMBER 2266 SE (Transport Sector Adjustment/Investment Credit) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOCIETE NATIONALE DE CHEMINS DE FER DU SENEGAL Dated July 22, 1991 CREDIT NUMBER 2266 SE PROJECT AGREEMENT AGREEMENT, dated July 22, 1991, between INTERNATIONAL DEVELOPMENT ASSOCIATION (the Association) and SOCIETE NATIONALE DE CHEMINS DE FER DU SENEGAL (SNCS). WHEREAS (A) by the Development Credit Agreement of even date herewith between the Republic of Senegal (the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to forty-nine million nine hundred thousand Special Drawing Rights (SDR 49,900,000) on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SNCS 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 SNCS, the proceeds of the credit provided for under the Development Credit Agreement will be made available to SNCS on the terms and conditions set forth in said Subsidiary Loan Agreement; and Page 2 WHEREAS SNCS, 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, the Preamble to this Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. "FY" means the fiscal year of SNCS which is the calendar year. ARTICLE II Execution of the Project Section 2.01. SNCS 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 with due diligence and efficiency and in conformity with appropriate administrative, financial, commercial and engineering practices, and shall provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project. Section 2.02. Except as the Association shall otherwise agree, procurement of the goods, works and consultants' services required for 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 2.03. SNCS 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, respectively) in respect of the Project Agreement and Part B of the Project. Section 2.04. SNCS shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, SNCS shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Subsidiary Loan Agreement or any provision thereof. Section 2.05. (a) SNCS shall, at the request of the Association, exchange views with the Association with regard to the progress of Part B of the Project, the performance of its obliga- tions under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. (b) SNCS shall promptly inform the Association of any condition which interferes or threatens to interfere with the progress of Part B of the Project, the accomplishment of the purposes of the Credit, or the performance by SNCS of its obligations under this Agreement and under the Subsidiary Loan Agreement. ARTICLE III Management and Operations of SNCS Section 3.01. SNCS shall carry on its operations and conduct its affairs in accordance with sound administrative, financial, commercial and engineering practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. Page 3 Section 3.02. SNCS shall at all times operate and maintain its plant, machinery, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound engineering and financial practices. Section 3.03. SNCS shall take out and maintain with responsible insurers, or make other provision satisfactory to the Association for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. ARTICLE IV Financial Covenants Section 4.01. (a) SNCS shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition. (b) SNCS shall: (i) have its records, 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 said records, accounts and financial statements as well as the audit thereof, as the Association shall from time to time reasonably request. Section 4.02. (a) Except as the Association shall otherwise agree, SNCS shall maintain, for each FY, a ratio of total working expenses to total operating revenues not higher than 0.7. (b) Before September 30 during each FY, SNCS shall, on the basis of forecasts prepared by SNCS and satisfactory to the Association, ascertain whether it would meet the requirements set forth in paragraph (a) in respect of such FY and the next following FY, and shall furnish to the Association the results of such review upon its completion. (c) If any review shows that SNCS would not meet the requirements set forth in paragraph (a) for SNCS's FY covered by such review, SNCS shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates) in order to meet such requirements. (d) For the purposes of this Section: (i) the term "total working expenses" means all expenses related to labor, fuel and other materials and services by third parties except those contributing to creation of fixed assets; and (ii) the term "total operating revenues" means revenues from all sources related to operations. Section 4.03. (a) Except as the Association shall otherwise Page 4 agree, the Borrower shall maintain a ratio of current assets to current liabilities of not less than 0.7 during FY 1991, 0.8 during FY 1992 and 1 thereafter. (b) Before September 30 during each FY, SNCS shall, on the basis of forecasts prepared by SNCS and satisfactory to the Association, review whether it would meet the requirements set forth in paragraph (a) in respect of such FY and the next following FY and shall furnish to the Association the results of such review upon its completion. (c) If any such review shows that SNCS would not meet the requirements set forth in paragraph (a) for SNCS's FY covered by such review, SNCS shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of its rates in order to meet such requirements). (d) For the purposes of this Section: (i) the term "current assets" means cash, all assets which could in the ordinary course of business be converted into cash within twelve months, in- cluding accounts receivable, marketable securi- ties, inventories and pre-paid expenses properly chargeable to operating expenses within the next FY; (ii) the term "current liabilities" means all liabilities which will become due and payable or could under circumstances then existing be called for payment within twelve months, including accounts payable, customer advances, debt service requirements, taxes and payments in lieu of taxes, and dividends; (iii) the term "debt service requirements" means the aggregate amount of repayments of (including sinking fund payments, if any), and interest and other charges on, debt; and (iv) whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of the Borrower, 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 purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.04. (a) Except as the Association shall otherwise agree, SNCS shall not incur any debt, if after the incurrence of such debt the ratio of debt to equity shall be greater than 45 to 55. (b) For purposes of this Section: (i) the term "debt" means any indebtedness of SNCS 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 of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; (iii) the term "equity" means the sum of the total un-impaired paid-up capital, retained earnings and reserves of SNCS not allocated to cover specific liabilities; and (iv) whenever for the purposes of this Section it Page 5 shall be necessary to value, in terms of the currency of the Borrower, 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 purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. Section 4.05. (a) Except as the Association shall otherwise agree, SNCS shall not incur any debt unless a reasonable forecast of the revenues and expenditures of SNCS shows that the estimated net revenues of SNCS for each FY during the term of the debt to be incurred shall be at least 1.4 times the estimated debt service requirements of SNCS in such FY on all debt of SNCS including the debt to be incurred. (b) For the purposes of this Section: (i) the term "debt" means any indebtedness of SNCS 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 of such contract, agreement or instrument; and (B) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into; (iii) the term "net revenues" means the difference between: (A) the sum of revenues from all sources related to operations and net non-operating income; and (B) the sum of all expenses related to opera- tions including administration, adequate maintenance, taxes and payments in lieu of taxes, but excluding provision for depreciation, other non-cash operating charges and interest and other charges on debt; (iv) the term "net non-operating income" means the difference between: (A) revenues from all sources other than those related to operations; and (B) expenses, including taxes and payments in lieu of taxes, incurred in the generation of revenues in (A) above. (v) the term "debt service requirements" means the aggregate of repayments of (including sinking fund payments, if any), and interest and other charges on, debt; (vi) the term "reasonable forecast" means a forecast prepared by SNCS not earlier than twelve months prior to the incurrence of the debt in question, which both the Association and SNCS accept as reasonable and as to which the Association has notified SNCS of its acceptability, provided that no event has occurred since such notification which has, or may reasonably be expected in the future to have, a material adverse effect on the financial condition or future operating results of SNCS; and Page 6 (vii) whenever for the purposes of this Section it shall be necessary to value, in terms of the currency of SNCS, 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 purposes of servicing such debt, or, in the absence of such rate, on the basis of a rate of exchange acceptable to the Association. 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 SNCS thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) the date 20 years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SNCS of this event. Section 5.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under 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 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 Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 197688 (TRT), Washington, D.C. 248423 (RCA), 64145 (WUI) or 82987 (FTCC) For Societe Nationale de Chemins de Fer du Senegal: Page 7 B.P. 175-A Thies Senegal Cable address: Telex: FERSENEGAL 0906-77129 Thies FERSENTH-SG Section 6.02. Any action required or permitted to be taken, and any document required or permitted to be executed, under this Agreement on behalf of SNCS may be taken or executed by the Director General or such other person or persons as the Director General shall designate in writing, and SNCS shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. 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 DEVELOPMENT ASSOCIATION By /s/ Callisto Madavo Acting Regional Vice President Africa SOCIETE NATIONALE DE CHEMINS DE FER DU SENEGAL By /s/ Ibra Degucne KA Authorized Representative