Somali - SDB Project : Credit 0698 - Credit Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 698 SO DEVELOPMENT CREDIT AGREEMENT (SDB Project) between SOMALI DEMOCRATIC REPUBLIC and INTL ERNATIONAL DEVELOPMENT ASSOCIATION Dated June 1, 1977 DEVELOPMENT CREDIT AGREEMENT AGREEMENT, dated June 1, 1977, between SOMALI DEMOCRATIC REPUBLIC (hereinafter called the Borrower) and INTERNATIONAL DEVELOPMENT ASSOCIATION (hereinafter called the Association). WHEREAS (A) the Borrower has requested the Association to assist in the financing of Parts A, B (ii), B (iv) and B (v) of the Project described in Schedule 1 to this Agreement by extending the Credit as hereinafter provided; (B) the Project will be carried out by the Somali Development Bank, a statutory body existing under the laws of the Borrower (hereinafter called SDB) with the Borrower's assistance and, as part of such assistance, the Borrower will make available to SDB the proceeds of the Credit as hereinafter provided; (C) the Borrower intends to contract from the Arab Fund for Economic and Social Development (hereinafter called the Arab Fund) a grant (hereinafter called the Arab Fund Grant) in an amount of 100,000 Kuwaiti Dinars equivalent to about $340,000 to be made available to SDB to assist it in financing Parts B (i), B (iii) and B (v) of the Project on the terms and conditions set forth in an agreement (hereinafter called the Arab Fund Grant Agreement) to be entered into between the Borrower and the Arab Fund; and -2- WHEREAS the Association has agreed, on the basis, inter alia, of the foregoing, to extend the Credit to the Borrower upon the terms and conditions hereinafter set forth and in the Project Agreement of even date herewith between the Association and SDB; NOW THEREFORE the parties hereto hereby agree as follows: -3- ARTICLE I General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Development Credit Agreements of the Association, dated March 15, 1974, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 2 to this Agreement (said General Conditions Applicable to Development Credit Agreements of the Association, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "SDB" means the Somali Development Bank established by Decree Law No. 2 of February 28, 1968, converted with amendments into law by Law No. 15 of May 30, 1968, operating pursuant and subject to Law No. 25 of April 30, 1970, of the Borrower; (b) "Project Agreement" means the agreement between the Association and SDB of even date herewith, as the same may be -4- amended from time to time, and such term includes all agreements supplemental to the Project Agreement; (c) "Subsidiary Loan Agreement" means the agreement to be entered into between the Borrower and SDB pursuant to Section 3.01 (a) of this Agreement, as the same may be amended from time to time, and such term includes all schedules to the Subsidiary Loan Agreement; (d) "sub-loan" means a loan or credit made or proposed to be made by SDB out of the proceeds of the Credit relent to SDB under the Subsidiary Loan Agreement to an Investment Enterprise for an Investment Project and "free-limit sub-loan" means a sub-loan, as so defined, which qualifies as a free-limit sub-loan pursuant to the provisions of Section 2.02 (b) of this Agreement; (e) "investment" means an investment other than a sub-loan made or proposed to be made by SDB out of the proceeds of the Credit relent to SDB under the Subsidiary Loan Agreement in an Investment Enterprise for an Investment Project; (f) "Investment Enterprise" means an enterprise to which SDB proposes to make or has made a sub-loan or in which it proposes to make or has made an investment; - 5 - (g) "Investment Project" means a specific development project to be carried out by an Investment Enterprise utilizing the proceeds of a sub-loan or investment; (h) "Somali Shilling" and "Sh" mean the currency of the Borrower; (i) "Foreign currency" means any currency other than the currency of the Borrower; (j) "SDB Law" means Law No. 25 of April 30, 1970, of the Borrower, as amended to the date of this Agreement; (k) "By-laws" means the by-laws of SDB issued under SDB Law; (1) "subsidiary" means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by SDB or by any one or more sub- sidiaries of SDB or by SDB and one or more of its subsidiaries; (m) "Statement of Policy" means the statement of lending, investments and financial policies adopted by the Directors of SDB pursuant to Section 6.01 (d) of this Agreement; and (n) "long-term" and "medium-term" sub-loans mean sub-loans with maturity of seven to twenty years and sub-loans with maturity of two to six years, respectively. -6- ARTICLE II The Credit Section 2.01. The Association agrees to lend to the Borrower, on the terms and conditions in the Development Credit Agreement set forth or referred to, an amount in various currencies equivalent to five million dollars ($5,000,000). Section 2.02. (a) Subject to the provisions of other paragraphs of this Section, SDB, on behalf of the Borrower pursuant to Section 2.08 of this Agreement, shall be entitled to withdraw from the Credit Account: (i) in respect of the reasonable cost of goods and services required for the carrying out of the Investment Project in respect of which the withdrawals requested and to be financed out of the proceeds of a sub-loan or investment, up to the equivalent of four million seven hundred forty thousand dollars ($4,740,000): (A) amounts expended (or, if the Association shall so agree, such amounts as shall be required to meet expenditures to be made) in foreign currency for imported goods (except goods described in paragraph (B) of this Section) and services; -7- (B) amounts expended in Somali Shillings on account of not more than ninety-five per cent (95%), or such other percentage as shall be agreed between the Borrower and the Association of the invoice price paid for goods previously imported into the territories of the Borrower through normal channels; (C) amounts expended in Somali Shillings on account of not more than eighty-five percent (85%) (representing foreign exchange expenditures) of the invoice price paid for goods manufactured in the territories of the Borrower; (D) amounts expended in Somali Shillings on account of not more than seventy-five per cent (75%) (representing foreign exchange expenditures) of the contract price paid for civil works to be carried out in the territories of the Borrower; provided, however, that no amount shall be withdrawn from the Credit Account in respect of an Investment Project unless (1) the sub-loan or investment for such Investment Project shall have -8- been approved by the Association, or (2) the sub-loan shall be a free-limit sub-loan for which the Association shall have authorized withdrawals frim the Credit Account; and (ii) for Parts B (ii), B (iv) and B (v) of the Project, up to an amount equivalent of two hundred sixty thousand dollars ($260,000), the amounts expended (or, if the Association shall so agree, such amounts as shall be required to meet expenditures to be made) on account of the foreign currency cost of services and fellowships included under said Parts of the Project. (b) A free-limit sub-loan shall be a sub-loan for an Investment Project in an amount to be financed out of the proceeds of the Credit which shall not, except as the Borrower and the Association shall otherwise agree, exceed the sum of (i) $50,000 equivalent, when added to any other outstanding amounts financed for such Investment Project, or (ii) $1,500,000 equivalent, when added to all other free-limit sub-loans financed or proposed to be financed out of the proceeds of the Credit, the foregoing amounts being subject to change from time to time as determined by the Association. - 9 - (c) Except as the Association and SDB shall otherwise agree, no withdrawals shall be made on account of expenditures made by an Investment Enterprise in respect of a sub-loan subject to the Association's approval, or in respect of an investment, if such expenditures shall have been made before the date of this Agreement or more than ninety days prior to the date on which the Association shall have received in respect of such sub-loan or investment the application and information required by Section 2.03 (a) of the Project Agreement or, under a free-limit sub-loan, more than ninety days prior to the date on which the Association shall have received in respect of such free-limit sub-loan the request and information required by Section 2.03 (b) of the Project Agreement. (d) Notwithstanding the foregoing allocation of the amount of the Credit to each Part of the Project, if the Association has estimated that the amount of the Credit then allocated to one Part will be insufficient to finance the agreed percentages of expenditures under such Part, the Association may, by notification to the Borrower, reallocate to such Part to the extent required to meet the estimated shortfall proceeds of the Credit which are then allocated to the other Part and which are not needed to meet other expenditures. - 10 - (e) Without any limitations upon the generality of the provisions of paragraph (d) of this Section, in the event the Borrower and the Association shall, during any stage of the implementation of the Project, agree that the amount (or any part thereof) allocated for Parts B (ii), B (iv) and B (v) of the Project under Section 2.02 (a) (ii) of this Agreement is not required for purposes of said Parts, the amount not so required shall then be reallocated by the Association to Part A of the Project. Section 2.03. The Closing Date shall be June 30, 1981, or such later date as the Association shall establish. The Association shall promptly notify the Borrower of such later date. Section 2.04. The Borrower shall pay to the Association a service charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Credit withdrawn and outstanding from time to time. Section 2.05. Service charges shall be payable semi-annually on June 1 and December 1 in each year. - 11 - Section 2.06. The Borrower shall repay the principal amount of the Credit in semi-annual installments payable on each June 1 and December 1 commencing June 1, 1987, and ending December 1, 2026, each installment to and including the installment payable on December 1, 1996, to be one-half of one per cent (1/2 of 1%) of such principal amount, and each installment thereafter to be one and one-half per cent (1-1/2%) of such principal amount. Section 2.07. The currency of the United States of America is hereby specified for the purposes of Section 4.02 of the General Conditions. Section 2.08. SDB is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Section 2.02 of this Agreement and Article V of the General Conditions. - 12 - ARTICLE III Use of Proceeds of the Credit Section 3.01. (a) The Borrower shall relend the proceeds of the Credit to SDB under a subsidiary loan agreement to be entered into between the Borrower and SDB containing terms and conditions which shall have been approved by the Association. Except as the Association shall otherwise agree, the said agreement shall provide, inter alia, that such proceeds will be made available to SDB for a term of fifteen years, including five years of grace, and for payment of interest by SDB at the rate of five per cent (5%) per annum on amounts withdrawn and outstanding from time to time. (b) The Borrower shall exercise its rights under the Subsidiary Loan Agreement in such manner as to protect the interests of the Borrower and the Association and to accomplish the purposes of the Credit, and except as the Association shall otherwise agree, the Borrower shall not assign, amend, abrogate or waive the Subsidiary Loan Agreement or any provision thereof. - 13 - ARTICLE IV Additional Covenants Section 4.01. The Borrower shall not take, or permit any of its political subdivisions, or any of its agencies or instrumentalities, or any agency or instrumentality of any political subdivision, to take, any action which would prevent or materially interfere with the performance by SDB of any of its obligations under the Project Agreement or the Subsidiary Loan Agreement, and shall take or cause to be taken all reasonable action which shall be required on its part in order to enable SDB to perform such obligations. - 14 - ARTICLE V Remedies of the Association Section 5.01. For the purposes of Section 6.02 of the General Conditions the following additional events are specified: (a) any part of the principal amount of any loan to SDB having an original maturity of one year or more shall, in accordance with its terms, have become due and payable in advance of maturity as provided in the relative contractual instruments, or any security for any such loan shall have become enforceable; (b) SDB Law or By-laws shall have been amended, suspended, abrogated, repealed or waived which will materially and adversely affect the financial condition or operations of SDB; (c) a resolution shall have been passed for the dissolution or liquidation of SDB; (d) a subsidiary or any other entity shall have been created or acquired or taken over by the Borrower, if such creation, acquisition or taking over would adversely affect the conduct of SDB's business or the financial situation, or the efficiency of SDB's management and personnel, or the carrying out of the Project; (e) SDB shall have failed to perform any covenant, agreement or obligation of SDB under the Project Agreement, or the Subsidiary Loan Agreement; - 15 - (f) any proceeding shall have been taken by SDB or by others whereby any of the property of SDB shall or may be distributed among its creditors; and (g) a change shall have been made in the Statement of Policy without the Association's consent. Section 5.02. For the purposes of Section 7.01 of the General Conditions the following additional events are specified: (a) the event specified in paragraph (a), or paragraph (b), or paragraph (c), or paragraph (f), or paragraph (g) of Section 5.01 shall occur; and (b) the event specified in paragraph (d) or paragraph (e) of Section 5.01 shall occur and shall continue for a period of sixty days after notice thereof shall have been given by the Bank to the Borrower and SDB. - 16 - ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as additional conditions to the effectiveness of the Development Credit Agreement within the meaning of Section 12.01 (b) of the General Conditions: (a) the execution of the Project Agreement on behalf of SDB has been duly authorized or ratified by all necessary corporate and governmental action; (b) the execution of the Subsidiary Loan Agreement on behalf of the Borrower and SDB, respectively, has been duly authorized or ratified by all necessary corporate and govern- mental action; (c) all conditions precedent to the Borrower's right to obtain funds under the Arab Fund Grant have been fulfilled; (d) SDB shall have adopted a statement for its lending, investments and financial policies satisfactory to the Association; and (e) SDB shall have appointed duly qualified and competent persons to the positions of Agricultural Economist, Engineer and Legal Advisor in addition to two graduates in Economics. - 17 - Section 6.02. The following are specified as additional matters, within the meaning of Section 12.02 (b) of the General Conditions, to be included in the opinion or opinions to be furnished to the Association: (a) that the Project Agreement has been duly authorized or ratified by SDB, and is legally binding upon SDB in accordance with its terms; and (b) that the Subsidiary Loan Agreement has been duly authorized or ratified by the Borrower and SDB, and is legally binding upon the Borrower and SDB in accordance with its terms. Section 6.03. The date August 30, 1977, is hereby specified for the purposes of Section 12.04 of the General Conditions. Section 6.04. The obligations of the Borrower under Article V of this Agreement shall cease and determine on the date on which the Development Credit Agreement shall terminate or on a date twenty years after the date of this Agreement, whichever shall be the earlier. - 18 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Minister of Finance of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purpose of Section 11.01 of the General Conditions: For the Borrower: Ministry of Finance Government of the Somali Democratic Republic Mogadiscio, Somalia Cable address: MINFIN Mogadiscio For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 19 - 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. SOMALI DEMOCRATIC REPUBLIC By /s/ Abdullahi Ahmed Addou Authorized Representative INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa - 20 - SCHEDULE 1 Description of the Project The Project consists of the following parts: (A) The financing by SDB of specific development projects through loans to and investments in productive enterprises in Somalia. (B) Assistance to SDB in: (i) financial planning and financial control through the provision of services of a Financial Advisor; (ii) establishing appropriate appraisal and follow-up techniques through the provision of services of an Investment Advisor; (iii) the carrying out of technical appraisal of industrial projects through the provision of services of an Industrial Engineer; (iv) appraising applications for financial assistance from farmers and agricultural cooperatives and to assist the Borrower in organizing cooperatives through the provision of services of an Agricultural Advisor; and (v) training abroad of SDB staff in financial management (including audit) and project appraisal and follow- up techniques. - 21 - SCHEDULE 2 Modifications of General Conditions For the purpose of this Agreement, the provisions of the General Conditions are modified as follows: (1) The words "Investment Projects" are substituted for the words "the Project" at the end of Section 5.03. (2) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Association. If (a) the right of the Borrower to make withdrawals from the Credit Account shall have been suspended with respect to any amount of the Credit for a continuous period of thirty days, or (b) by the date specified in Section 2.03 (f) of the Project Agreement no applications or requests permitted under paragraph (b) or paragraph (c) of such Section shall have been received by the Association in respect of any portion of the Credit, or having been so received, shall have been denied, or (c) after the Closing Date an amount of the Credit shall remain unwithdrawn from the Credit Account, the Association may by notice to the Borrower terminate the right of SDB to submit such applications or requests or to make withdrawals from the Credit Account on behalf of the Borrower, as the case may be, - 22 - with respect to such amount or portion of the Credit. Upon the giving of such notice such amount or portion of the Credit shall be cancelled."