India - Tamil Nadu Newsprint Project : Loan 2050 - Project Agreement - Conformed

LOAN NUMBER 2050 IN DOCUMENT Project Agreement (Tamil Nadu Newsprint Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and TAMIL NADU NEWSPRINT AND PAPERS LIMITED Dated ,1981 LOAN NUMBER 2050 IN PROJECT AGREEMENT AGREEMENT, dated , 1981, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank) and TAMIL NADU NEWSPRINT AND PAPERS LIMITED, a company registered under the Companies Act 1956 of the Borrower (hereinafter called TNPL). WHEREAS by the Loan Agreement of even date herewith between India, acting by its President (hereinafter called the Borrower) and the Bank, the Bank has agreed to make available to the Bor- rower an amount in various currencies equivalent to one hundred million dollars ($100,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that TNPL agree to undertake such obligations toward the Bank as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and Industrial Development Bank of India (hereinafter called IDBI), the proceeds of the Loan provided for under the Loan Agreement will be made available to IDBI for on-lending to TNPL on the terms and conditions therein set forth; WHEREAS by a Finance Agreement to be entered into between IDBI and TNPL, the proceeds of the Loan made available by the Borrower to IDBI will be relent to TNPL on the terms and condi- tions therein set forth; and WHEREAS TNPL, in consideration of the Bank's entering into the Loan 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 Loan Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. -2- ARTICLE II Execution of the Project Section 2.01. TNPL shall carry out the Project described in Schedule 2 to the Loan Agreement with due diligence and efficiency and in conformity with appropriate administrative, financial and engineering practices. Section 2.02. In order to assist TNPL in the implementation of the Project, TNPL shall employ consultants whose qualifica- tions, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 2.03. Except as the Bank shall otherwise agree, procurement of the goods and civil works to be financed out of the proceeds of the Loan, shall be governed by the provisions of the Schedule to this Agreement. Section 2.04. (a) TNPL undertakes to insure, or make adequate provision for the insurance of, the imported goods to be financed out of the proceeds of the Loan relent to it by IDBI against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insur- ance any indemnity shall be payable in a currency freely usable by TNPL to replace or repair such goods. (b) Except as the Bank may otherwise agree, TNPL shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively for the Project. Section 2.05. (a) TNPL shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for the Project, and any material modifications thereof or additions thereto, in such detail as the Bank shall reasonably request. (b) TNPL: (i) shall maintain records and procedures adequate to record and monitor the progress of the Project (including its cost and the benefits to be derived from it), to identify the goods and services financed out of the proceeds of the Loan, and to disclose their use in the Project; (ii) shall enable the Bank's accredited representatives to visit the facilities and construction sites included in the Project and to examine the goods financed out of the proceeds of the Loan and any relevant -3- records and documents; and (iii) shall furnish to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the Project, its cost and, where appropriate, the benefits to be derived from it, the expenditures of such proceeds and the goods and services financed out of such proceeds. (c) Upon the award by TNPL of any contract for goods, works or services to be financed out of the proceeds of the Loan, the Bank may publish a description thereof, the name and nationality of the party to whom the contract was awarded and the contract price. (d) Promptly after completion of the Project, but in any event not later than six months after the Closing Date or such later date as may be agreed for this purpose between TNPL and the Bank, TNPL shall prepare and furnish to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project, its cost and the benefits derived and to be derived from it, the performance by TNPL and the Bank of their respective obligations under the Project Agreement and the accomplishment of the purposes of the Loan. (e) TNPL shall enable the Bank's representatives to examine all plants, installations, sites, works, buildings, property and equipment of TNPL and any relevant records and documents. Section 2.06. TNPL shall duly perform all its obligations under the Finance Agreement. Except as the Bank shall otherwise agree, TNPL shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the Finance Agreement or any provision thereof. Section 2.07. (a) TNPL shall at the request of the Bank, exchange views with the Bank with regard to the progress of the Project, the performance of its obligations under this Agreement and under the Finance Agreement, and other matters relating to the purposes of the Loan. (b) TNPL shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of the Project, the accomplishment of the purposes of the Loan, or the performance by TNPL of its obligations under this Agreement and under the Finance Agreement. -4- ARTICLE III Management and Operations of TNPL Section 3.01. TNPL shall take out and maintain with respon- sible insurers, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.02. TNFL shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations in accordance with appropriate business, financial and engineering practices and under the supervision of experienced and competent management assisted by adequate and competent staff. Section 3.03. Except as the Bank shall otherwise agree, TNPL shall: (a) at all times take all steps which are necessary to maintain its existence and its right to carry on operations and to acquire and retain ownership of all lands and to maintain and renew all interests in land and other properties and all rights, powers, privileges and franchises which are necessary or useful in the carrying out of the Project or in the conduct of its business; (b) at all times operate and maintain its plants, machinery, equipment and other property, and promptly make all necessary repairs and renewals thereof, in accordance with appropriate engineering practices; (c) not sell, lease, transfer or otherwise dispose of any of its property or assets which shall be required for the efficient operation of its business and undertaking; and (d) not alter its corporate structure or amend its Memoran- dum and Articles of Association or By-Laws in any way that will materially and adversely affect its abili'ty to perform its obliga- tions under this Agreement, or under the Finance Agreement. Section 3.04. TNPL shall maintain in effect a technical assistance agreement, satisfactory to the Bank, to provide it with experienced technical *and operational assistance for the first five years of its operations. -5- Section 3.05. TNPL shall: (i) ensure that the design, execu- tion and operation of the Project are carried out with due regard to appropriate safety norms and ecological and environmental standards satisfactory to the Bank; and (ii) establish and maintain adequate monitoring stations to gather information on meteorological conditions and base pollution levels. Section 3.06. TNPL undertakes to provide to the Bank, by December 31, 1982, a detailed report on the recruitment and training of staff for the mill operations. Section 3.07. TNPL undertakes to use its best endeavours to secure and maintain the supply to it of 340,000 and 425,000 tons per year of coal and bagasse, respectively, provided, however, that in the event of any shortage in the supply of said quantity of coal, TNPL shall use its best endeavours to procure lignite to cover the shortfall. ARTICLE IV Financial Covenants Section 4.01. TNPL shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. TNPL 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 Bank; (ii) furnish to the Bank as soon as available, but in any case not later than seven 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 Bank shall have reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of TNPL and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03 (a) Except as the Bank shall otherwise agree, after completion of the Project TNPL shall: (i) maintain a debt/equity ratio not greater than 65:35; -6 (ii) maintain a ratio of current assets to current liabilities (hereinafter referred to as the current ratio) of at least 1.2:1; (iii) not incur any additional debt in any fiscal year unless a reasonable forecast of TNPL's revenues and expenditures shows that the projected net revenues of TNPL for each fiscal year during the term of the debt to be incurred shall be at least 1.5 times the projected debt service requirements in such year on all debt of TNPL; (iv) not make investments in fixed assets other than for the Project and works already in progress, in excess of the aggregate of $5,000,000 equivalent in any one financial year. (b) For the purposes of this Section: (i) the term "debt" means any debt maturing by its terms more than twelve months after the date on which it is originally incurred; (ii) the term "equity" means all unimpaired paid-in share capital plus accumulated net earnings from prior fiscal years not set apart for specific purposes; (iii) the term "current assets" means cash (excluding advances to contractors for construction of the Project or any other capital investment), assets readily convertible into cash (excluding stocks of spares and advances from customers), and all other assets which could in the ordinary course of business be converted within one year into cash or assets readily convertible into cash; (iv) the term "current liabilities" means liabilities due and payable and all other liabilities which would be due and payable, or could be called for payment, within one year, including the portion of debt falling due within one year; -7- (v) debt shall be deemed to be incurred under a loan contract or agreement on the date the contract or loan agreement providing for such debt is entered into., and, in case of a guarantee, on the date of execution and delivery of the agreement providing for 'such guarantee; (vi) the term "net revenues" means gross revenue from all sources less operating and administrative expenses, including taxes, surcharges and other levies, if any, but before provision for deprecia- tion and interest and other charges on debt; (vii) the term "debt service requirements" means the aggregate amount of amortization, interest and other charges in respect of debt; (viii) the term "a reasonable forecast" means a forecast prepared by TNPL in the fiscal year in which the debt in question is proposed to be incurred and reviewed by the Bank which both TNPL and the Bank accept as reasonable and as to which the Bank has notified TNPL of its acceptability, provided no event has occured since the Bank's acceptance of such forecast which would have a material adverse effect on the financial condition or future operat- ing results of TNPL; and (ix) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuatio. shall be made on the basis of the rate of exchange at which such other cur- rency is obtainable by TNPL, at the time such valuation is made, for the purposes of servicing such debt or, if such other currency is not so obtainable, at such rate of exchange as shall be reasonably determined by the Bank. 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 Loan Agreement becomes effective. -8- Section 5.02. This Agreement and all obligations of the Bank and of TNPL thereunder shall terminate on the date on which the Loan Agreement shall terminate in accordance with its terms, and the Bank shall promptly so notify TNPL thereof. 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 herein- after 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: INTRAFRAD Washington, D.C. For TNPL: Tamil Nadu Newsprint and Papers Limited LLA Building, Anna Salai Madras 600002 India -9- Cable address: TNPL, Anna Salai Madras 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 TNPL may be taken or executed by its Managing Director or such other person or persons as TNPL shall designate in writing, and TNPL shall furnish to the Bank suf- ficient evidence of the authority and the authenticated specimen signature of each such person. Section 6.03. Th s Agreement may be executed in several counterparts, each of which shall be an original, and all collec- tively but one instrument. IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, 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 Regional Vice President South Asia TAMIL NADU NEWSPRINT AND PAPERS LIMITED By Authorized Representative - 10 - SCHEDULE Procurement A. International Competitive Bidding 1. Except as provided in Part C hereof, goods and civil works shall be procured under contracts awarded in accordance with procedures consistent with those set forth in the current edition of the "Guidelines for Procurement under World Bank Loans and IDA Credits" dated March 1977 (hereinafter called the Guidelines), on the basis of international competitive bidding as described in Part A of the Guidelines. 2. For goods and works to be procured on the basis of inter- national competitive bidding, in addition to the requirements of paragraph 1.2 of the Guidelines, TNPL shall prepare and forward to the Bank as soon as possible, and in any event not later than 60 days prior to the date of availability to the public of the first tender or prequalification documents relating thereto, as the case may be, a general procurement notice, in such form and detail and containing such information as the Bank shall reasonably request; the Bank will arrange for the publication of such notice in order to provide timely notification to prospective bidders of the opportunity to bid for the goods and works in question. TNPL shall provide the necessary information to update such notice annually so long as any goods or works remain to be procured on the basis of international competitive bidding. 3. For the purpose of evaluation and comparison of bids for the supply of goods to be procured on the basis of international competitive bidding: (i) bidders shall be required to state in their bid the c.i.f. (port of entry) price for the imported goods, or the ex-factory price or off-the-shelf price of other goods, offered in such bid; and (ii) customs duties and other import taxes levied in connection with the importation, or the sales and similar taxes levied in connection with the sale or delivery, pursuant to the bid, of the goods shall not be taken into account in the evaluation of the bids. B. Preference for Domestic Manufacturers In the procurement of goods in accordance with the procedures described in Part A of this Schedule, goods manufactured in India may be granted a margin of preference in accordance with, and subject to, the following provisions: - 11 - 1. All bidding documents for the procurement of goods shall clearly indicate any preference which will be granted, the information required to establish the eligibility of a bid for such preference and the following methods and stages that will be followed in the evaluation and comparison of bids. 2. After evaluation, responsive bids will be classified in one of the following three groups: (1) Group A: bids offering goods manufactured in India if the bidder shall have established to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes a value added in India equal to at least 20% of the ex-factory bid price of such goods. (2) Group B: all other domestic bids. (3) Group C: bids offering any other goods. 3. In order to determine the lowest evaluated bid of each group, all evaluated bids in each group shall first be compared among themselves, without taking into account customs duties and other import taxes levied in connection with the importation, and sales and similar taxes levied in connection with the sale or delivery, pursuant to the bids, of the goods. Such lowest eva- luated bids shall then be compared with each other, and if, as a result of this comparison, a bid from group A or group B is the lowest, it shall be selected for the award. 4. If, as a result of the comparison under paragraph 3 above, the lowest bid is a bid from group C, all group C bids shall be further compared with the lowest evaluated bid from group A after adding to the evaluated bid price of the imported goods offered in each group C bid, for the purpose of this further comparison only, an amount equal to: (i) the amount of customs duties and other import taxes which a non-exempt importer would have to pay for the importation of the goods offered in such group C bid; or (ii) 15% of the c.i.f. bid price of such goods if said customs duties and taxes exceed 15% of such price. If the group A bid in such further comparison is the lowest, it shall be selected for the award; if not, the bid from group C which as a result of the comparison under paragraph 3 is the lowest evaluated bid shall be selected. - 12 - C. Other Procurement Procedures Contracts: (i) for items proprietary to the design; (ii) for items with limited sources of availability whose timely supply is critical to the efficient execution of the Project; and (iii) estimated to cost the equivalent $100,000 or less, may be let through limited international tendering, as appropriate, from qualified suppliers, provided, however, that prior approval of the Bank is obtained for the list of all said items and suppliers, and the aggregate of contracts procured under the provisions of this paragraph C shall not exceed the equivalent of $5,000,000. D. Review of Procurement Decisions by the Bank 1. Review of invitations to bid and of proposed awards and final contracts: With respect to all contracts estimated to cost the equi- valent of $500,000 or more: (a) Before or on the date bids are invited, TNPL shall furnish to the Bank, for its comments, the text of the invitations to bid and the specifications and other bidding documents, to- gether with a description of the advertising procedures to be followed for the bidding, and shall make such modifications in the said documents or procedures as the Bank shall reasonably request. Any further modification to the bidding documents shall require the Bank's concurrence before it is issued to the prospective bidders. (b) After bids have been received and evaluated, TNPL shall, before a final decision on the award is made, inform the Bank of the name of the bidder to which it intends to award the contract and shall furnish to the Bank, in sufficient time for its review, a detailed report on the evaluation and comparison of the bids received, and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the intended award would be inconsistent with the Guidelines or this Schedule, promptly inform TNPL and state the reasons for such determination. (c) The terms and conditions of the contract shall not, without the Bank's concurrence, materially differ from those on which bids were asked or prequalification invited. - 13 - (d) Two conformed copies of the contract shall be furnished to the Bank promptly after its execution and prior to the sub- mission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract. 2. With respect to each contract not governed by the preceding paragraph, TNPL shall furnish to the Bank, promptly after its execution and prior to the submission to the Bank of the first application for withdrawal of funds from the Loan Account in respect of such contract, two conformed copies of such contract, together with the analysis of the respective bids, recommendations for award and such other information as the Bank shall reasonably request. The Bank shall, if it determines that the award of the contract was not consistent with the Guidelines or this Schedule, promptly inform TNPL and state the reasons for such determination. 3. Before agreeing to any material modification or waiver of the terms and conditions of a contract, or granting an exten- sJon of the stipulated time for performance of such contract, or issuing any change order under such contract (except in cases of extreme urgency) which would increase the cost of the contract by more than 15% of the original price, TNPL shall inform the Bank of the proposed modification, waiver, extension or change order and the reasons therefor. The Bank, if it determines that the proposal would be inconsistent with the provisions of this Agreement, shall promptly inform TNPL and state the reasons for its determination. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this -day of , 198 . FOR SECRETARY