India - Industrial Development Bank Of India Project : Credit 0356 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 356 IN Project Agreement (Industrial Development Bank of India Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND INDUSTRIAL DEVELOPMENT BANK OF INDIA DATED FEBRUARY 9, 1973 CONFORMED COPY CREDIT NUMBER 356 IN Project Agreement (Industrial Development Bank of India Project) BETWEEN INTERNATIONAL DEVELOPMENT ASSOCIATION AND INDUSTRIAL DEVELOPMENT BANK OF INDIA DATED FEBRUARY 9, 1973 PROJECT AGREEMENT AGREEMENT, dated February 9, 1973, between INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association) and the INDUSTRIAL DEVELOPMENT BANK OF INDIA (hereinafter called IDBI). WHEREAS by a Development Credit Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower), and the Association, the Association has agreed to make available to the Borrower a credit in various currencies equivalent to twenty-five million dollars ($25,000,000), on the terms and conditions set forth in the Development Credit Agreement, but subject to IDBI agreeing to undertake such obligations toward the Association as are hereinafter set forth; and WHEREAS IDBI, 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 IDBI Section 2.01. (a) IDBI 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 accordance with sound administrative, economic, financial and investment standards and practices, with qualified and experienced management and personnel, and in accordance with the Industrial Development Bank of India Act, No. 18 of 1964. 4 (b) For the purpose of carrying out the Project, IDBI shall (i) enter into the Subsidiary Loan Agreement referred to in Section 3.02(a) of the Development Credit Agreement, (ii) utilize the proceeds of the Credit to refinance sub-loans upon terms and conditions satisfactory to the Association, including the principal terms set forth in Schedule 1 to this Agreement, subject to any amendments thereof which may be agreed upon from time to time with the Association and (iii) carry out supervision of, and assist, the SFCs as shall be necessary or desirable to ensure compliance with, and fulfillment of the objectives of, the operating guidelines and institutional development programs referred to in Section 2.02(b) of this Agreement. Section 2.02. (a) In accordance with and subject to the provisions of the Development Credit Agreement, IDBI shall request authorization by the Association to make withdrawals from the Credit Account in respect of the sub-loans proposed to be refinanced out of the proceeds of the Credit. (b) Except as the Association shall otherwise agree, IDBI shall not request authorization to make withdrawals from the Credit Account to provide refinancing to any SFC which (i) has not adopted the operating guidelines for SFCs drawn up by IDBI, in consultation with the Association, and dated November 29, 1972, or having adopted such guidelines shall have failed to implement the same, or (ii) has not agreed with IDBI to carry out the institutional development program for such SFC drawn up by IDBI, in consultation with the Association, and dated November 29, 1972, including measures to reduce arrears and to strengthen staff, appraisal and follow-up methods, or having so agreed shall have failed to implement the same, or (iii) has a ratio of net earnings plus repayments of loan principal by its debtors to debt service requirements on all of its indebtedness then outstanding, all of which calculated on the basis of actual figures for the preceding six months and of projected figures for the succeeding six months, of less than 1.0 to 1 as of October 1, 1973 or of less than 1.1 to I as of April 1, 1974 or of less than 1.25 to I as of April 1 in any succeeding year. For the purposes hereof: (i) the term "net earnings" means gross income less operating and administrative expenses, including provision for bad and doubtful debts and taxes, if any, but before provision for depreciation and interest and other charges on debt; and (ii) the term "debt service requirements" means the aggregate amount of amortization (including sinking fund contributions, if any), interest and other charges on debt. 5 (c) Each request by IDBI for authorization to make vithdrawals from the Credit Account in respect of a sub-loan shall contain a 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 the terms and conditions of such sub-loan, together with a certificate by IDBI that such request is in compliance with the requirements of paragraph (b) of this Section 2.02. The Association shall be entitled to require IDBI to submit to the Association for review the appraisal by the SFC proposing to make a sub-loan of the Investment Project for which authorization to make withdrawals from the Credit Account has been requested. (d) Except as the Association shall otherwise agree, requests made pursuant to this Section 2.02 shall be submitted to the Association on or before June 30, 1975. Section 2.03. IDBI shall furnish to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Credit, the Project, the Investment Enterprises, the Investment Projects, the sub-loans and the SFCs. Section 2.04. (a) IDBI shall exercise its rights in relation to each Investment Project refinanced out of' the proceeds of the Credit in such manner as to protect the interests of the Association and of IDBI, to comply with its obligations under this Agreement and the Subsidiary Loan Agreement and to achieve the purposes of the Project. (b) Except as the Association shall otherwise agree, IDBI shall exercise its right to call for prepayment of refinancing as provided under Schedule I to this Agreement. (c) Except as the Association shall otherwise agree, each sub-loan to be refinanced by IDBI out of the proceeds of the Credit shall be made in accordance with the operating guidelines referred to in Section 2.02(b)(i) of this Agreement and upon terms and conditions satisfactory to IDBI and the Association, including the principal terms set forth in Schedule 2 to this Agreement, subject to any amendments thereof which may be agreed upon from time to time with the Association, and the SFC making such sub-loan shall obtain rights adequate to protect the interests of IDBI and of said SFC, including the right of said SFC to: (i) 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; (ii) require that (A) the goods and services to be financed out of the proceeds of the sub-loan 6 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 and (B) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) visit the Investment Enterprise, by itself or jointly with representatives of IDBI and of the Association, if the Association shall so request, and study the operation thereof, the Investment Project, and any relevant records and documents; (iv) require that 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 and that, without any limitation upon the foregoing, such insurance shall cover marine, transit and other hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the sub-loan to the place of use or installation; (v) obtain all such information as the Association, IDBI or said SFC shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise; and (vi) 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 contract with said SFC. Section 2.05. IDBI shall duly perform all its obligations under the Subsidiary Loan Agreement. Except as the Association shall otherwise agree, IDBI 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 2.06. IDBI shall cause each of its subsidiaries (if any) to observe and perform the obligations of IDBI Lnder this Agreement to the extent to which the same shall or can be applicable thereto as though such obligations were binding upon each of such subsidiaries. ARTICLE III Financial Covenants Section 3.01. IDBI shall maintain or cause to be maintained records adequate to record the progress of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained sound accounting practices the operations and financial condition of IDBI. Section 3.02. IDBI shall: (a) have its accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, by independent and qualified auditors, in accordance with 7 sound auditing principles consistently applied; (b) ensure that the accounts and financial statements for each fiscal year of each SFC refinanced out of the proceeds of the Credit be audited, by independent and qualified auditors, in accordance with sound auditing principles consistently applied; (c) furnish to the Association, as soon as available but in any case not later than five months after the end of each such year, certified copies of its and said SFCs' audited financial statements for such year and an audit report by the said auditors of such scope and in such detail as the Association shall have reasonably requested; and (d) furnish to the Association such other information concerning the accounts and financial statements of IDBI and said SFCs and the audit thereof as the Association shall from time to time reasonably request. Section 3.03. IDBI shall not make any repayment in advance of maturity in respect of any of its outstanding debt which, in the judgment of the Association, would materially affect IDBI's ability to meet its financial obligations. ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Association and IDBI shall cooperate fully to ensure * that the purposes of the Credit will be accomplished. To that end, the Association and IDBI shall from time to time, at the request of either party, exchange views through their representatives with regard to the performance of their respective obligations under this Agreement and the Subsidiary Loan Agreement, the administration, operations and financial condition of IDBI, in respect of the Project, and of the SFCs, and other matters relating to the purpose of the Credit. (b) IDBI shall furnish to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of IDBI and its subsidiaries, in respect of the Project, and of the SFCs. Section 4.02. The Association and IDBI shall promptly inform each other of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of the Credit, the performance by either of them of its obligations Linder this Agreement or the performance by the Borrower and IDBI of their respective obligations tinder the Subsidiary Loan Agreement. Section 4.03. IDBI shall inform the Association, in sufficient time for its comments, of any proposed amendment to the operating guidelines referred to in Section 2.02(b)(i) of this Agreement or to any institutional development program referred to in Section 2.02(b)(ii) of this Agreement. 8 Section 4.04. IDBI shall inform the Association of each SFC's debt service coverage ratio, as determined in accordance with the provisions of sub-paragraph (iii) of Section 2.02(b) of this Agreement, within forty-five days after each date specified therein. Section 4.05. IDBI shall enable the Association's representatives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. 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. This Agreement and all obligations of the Association and of IDBI thereunder shall terminate on a date eighteen (18) years after the date of this Agreement, provided that if the Development Credit Agreement terminates in accordance with its terms before the aforementioned date, the Association shall promptly notify IDBI 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 the Development Credit Agreement. ARTICLE VI Miscellaneous Provisions Section 6.01. Any notice or request required or permitted tr, 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: 0 9 For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: INDEVAS Washington, D.C. For IDBI: Industrial Development Bank of India New India Centre 17, Cooperage Bombay 1 Cable address: INDBANKIND Bombay Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of IDBI may be taken or executed by its General Manager or such other person or persons as IDBI shall designate in writing. Section 6.03. IDBI shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of IDBI, take any action or execute any documents required or permitted to be taken or executed by IDBI pursuant to any of the provisions of this Agreement. Section 6.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. 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 and delivered in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s / I.P.M. Cargill Regional Vice President Asia INDUSTRIAL DEVELOPMENT BANK OF INDIA By /s/ L. K. Jha Authorized Representative SCHEDULE I Principal Terms of IDBI Refinancing 1. The SFC concerned shall pay interest at the rate of not less than six and one-half per cent (6-1/2%) per annum upon the foreign currency component of the principal amount of the refinancing withdrawn and outstanding from time to time. 2. The SFC concerned shall pay a commitment charge at a rate of one per cent (1%) per annum upon the unwithdrawn amount of the refinancing. 3. The principal amount of the refinancing shall be repaid by the SFC concerned in accordance with an amortization schedule to be agreed between IDBI and said SFC, but the period thereof shall not extend beyond fifteen (15) years and provision shall be made for prepayment in the event that a sub-loan or any part thereof shall be repaid by the Investment Enterprise in advance of maturity or if a sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of for value by the SFC concerned. 4. The SFC concerned shall agree to implement the operating guidelines and the institutional development program referred to in Section 2.02(b)(i) and (ii) of this Agreement, and to meet the debt service coverage ratio specified in Section 2.02(b)(iii) of this 4greement, and IDBI shall have the right, inter alia, to call for prepayment of the principal amount of the refinancing in the event that the SFC concerned will have ceased to be eligible for refinancing under the provisions of Section 2.02(b) of this Agreement. 12 SCHEDULE 2 Principal Terms of SFC Lending 1. The Investment Enterprise concerned shall pay interest at a rate of not less than nine per cent (9%) per annum upon the foreign currency component of the principal amount of the sub-loan withdrawn and outstanding from time to time. 2. iThe Investment Enterprise concerned shall pay a commitment charge at a rate of one per cent (1%) per annum upon the unwithdrawn amount of the sub-loan. 3. The principal amount of the sub-loan shall be repaid by the Investment Enterprise concerned in accordance with an amortization schedule to be agreed between the SFC and the Investment Enterprise concerned, but the period thereof (including any period of grace) shall not extend beyond fifteen (15) years.