Conformed Copy - C2064 - Industrial Technology Development Project - Project Agreement 2

Page 1 CONFORMED COPY LOAN NUMBER 3119 IN (Industrial Technology Development Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and INDUSTRIAL DEVELOPMENT BANK OF INDIA Dated December 8, 1989 LOAN NUMBER 3119 IN IDBI PROJECT AGREEMENT AGREEMENT, dated December 8, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (the Bank) and INDUSTRIAL DEVELOPMENT BANK OF INDIA (IDBI). WHEREAS (A) by the Loan Agreement of even date herewith between India, acting by its President (the Borrower) and the Bank, the Bank has agreed to make available to the Borrower an amount in various currencies equivalent to one hundred forty-five million dollars ($145,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that IDBI agree to undertake such obligations toward the Bank as are set forth in this Agreement; (B) by the Development Credit Agreement of even date herewith between the Borrower and the International Development Association (the Association), the Association has agreed to make available 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. Page 2 (C) by an IDBI subsidiary loan agreement to be entered into between the Borrower and IDBI, an amount equivalent to $13,500,000 out of the proceeds of the Loan provided for under the Loan Agreement will be made available to IDBI on the terms and conditions set forth in said IDBI Subsidiary Loan Agreement; (D) by a CanBank Financial Agreement to be entered into between IDBI and CanBank, an amount equal to $5,250,000 out of the proceeds of the Loan made available by the Borrower to IDBI will be made available to CanBank on terms and conditions set forth in said CanBank Financial Agreement; (E) by an APIDC Financial Agreement to be entered into between IDBI and APIDC an amount equivalent to $3,000,000 out of the proceeds of the Loan made available by the Borrower to IDBI will be made available to APIDC on the terms and conditions set forth in said APIDC Financial Agreement; (F) by a GIIC Financial Agreement to be entered into between IDBI and GIIC an amount equivalent to $5,250,000 out of the proceeds of the Loan made available by the Borrower to IDBI will be made available to GIIC on the terms and conditions set forth in said GIIC Financial Agreement; and WHEREAS IDBI, in consideration of the Bank's entering into the Loan 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 Loan Agreement, the General Conditions (as so defined) and in the Development Credit Agreement have the respective meanings therein set forth. ARTICLE II Execution of the Project Section 2.01. IDBI 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 cause to be carried out Part A of the Project with due diligence and efficiency and in conformity with appropriate administrative, financial, and industrial 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. For the purpose of carrying out Part A of the Project, IDBI shall make available to CanBank, APIDC and GIIC the proceeds of the Loan made available by the Borrower to IDBI on the same terms and conditions as IDBI shall receive such proceeds from the Borrower in accordance with and subject to the provisions of Section 3.02 of the Loan Agreement, under the CanBank, APIDC and GIIC Financial Agreements to be entered into between IDBI and CanBank, APIDC and GIIC, respectively. Section 2.03. IDBI undertakes that, except as the Bank shall otherwise agree, Sub-loans and Investments under Part A of the Project will be made in accordance with the procedures and on terms and conditions set forth in the Schedule to this Agreement. Section 2.04. IDBI shall carry out or cause to be carried out 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 Page 3 IDBI Project Agreement and Part A of the Project. Section 2.05. IDBI shall duly perform all its obligations under the IDBI Subsidiary Loan Agreement and Financial Agreements. Except as the Bank shall otherwise agree, IDBI shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving the IDBI Subsidiary Loan Agreement or Financial Agreements, or any provision thereof. Section 2.06. (a) IDBI shall, at the request of the Bank, exchange views with the Bank with regard to progress of the Project, the performance of its obligations under this Agreement, under the IDBI Subsidiary Loan Agreement and under the Financial Agreements, and other matters relating to the purposes of the Loan. (b) IDBI 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 IDBI of its obligations under this Agreement, under the Subsidiary Loan Agreement and and under the Financial Agreements. ARTICLE III Management and Operations of IDBI Section 3.01. IDBI shall carry on its operations and conduct its affairs in accordance with sound administrative, financial and industrial practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. ARTICLE IV Financial Covenants Section 4.01. (a) IDBI shall maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition related to Part A of the Project. (b) IDBI shall: (i) have its records and accounts in respect of Part A of the Project 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 four months after the end of each such year: (A) certified copies of its accounts 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 said records and accounts as well as the audit thereof, as the Bank shall from time to time reasonably request. 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. Section 5.02. This Agreement and all obligations of the Bank Page 4 and of 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 IDBI 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 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 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) For IDBI: Industrial Development Bank of India IDBI Tower Cuff Parade Bombay 400005, India Cable address: Telex: INDBANKIND 011-2193 or Bombay 011-4812 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 IDBI, may be taken or executed by its Chairman and Managing Director or such other person or persons as IDBI shall designate in writing, and IDBI shall furnish to the Bank 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 BANK FOR RECONSTRUCTION AND DEVELOPMENT Page 5 By /s/ Attila Karaosmanoglu Regional Vice President Asia INDUSTRIAL DEVELOPMENT BANK OF INDIA By /s/ Anil Kumar Authorized Representative SCHEDULE Terms and Conditions for VCF 1. CanBank, APIDC and GIIC (the Beneficiaries) shall establish VC Funds in accordance with terms and conditions and operating guidelines satisfactory to the Bank. 2. The Beneficiaries shall raise from their own and/or other sources, twice the proceeds of the Loan made available to them by IDBI to constitute each VC Fund. 3. (a) The Beneficiaries shall carry on their operations and conduct their affairs in accordance with sound administrative, financial and industrial practices under the supervision of qualified and experienced management assisted by competent staff in adequate numbers. (b) The Beneficiaries shall maintain adequate staff of industrial, technical and financial experience, and carry on their management of VC Funds to promote technology development in industrial firms and maximize profitability for the VC Funds. 4. (a) The Beneficiaries shall ensure that, under arrangements satisfactory to the Bank, each VC Fund shall enter into a management contract with an acceptable company for the purpose of managing the VC Fund. (b) The Beneficiaries shall ensure that said company shall maintain operating guidelines satisfactory to the Bank, for the VC Fund. 5. Prior approval of the Bank will be required for each VCF in an amount equivalent to $900,000 or more for APIDC and $1,000,000 or more for CanBank and GIIC. 6. Notwithstanding the foregoing provisions of paragraph 5, first 5 VCFs in respect of each Beneficiary shall be subject to prior approval by the Bank. 7. (a) When presenting a VCF to the Bank for approval, and for information, Beneficiaries 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. The Beneficiaries shall require that: Page 6 (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) 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) 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 Investment Project; and (f) suspend or terminate the right of the Investment Enter- prise to the use of the proceeds of the Loan upon failure by such Investment Enterprise to perform its obligations under its con- tract with the Beneficiaries. 9. The Beneficiaries shall ensure that the VC Funds, and the accounts of the companies managing them, for each financial year, are audited in accordance with appropriate auditing principles consistently applied by independent auditors acceptable to the Bank and the Beneficiaries shall furnish to the Bank, as soon as available, but in any case not later than four months after the end of each year the report of such audit by said auditors, of such scope and in such detail as the Bank shall have reasonably requested.