Uganda - Industrial Rehabilitation Project : Credit 1248 - Project Agreement - 1 - Conformed

OPC E1TS CREDIT MBER 1248 UG Project Agreement (Industrial Rehabilitation Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and UGANDA DEVELOPMENT BANK Da , 1982 CREDIT NUMBER 1248 UG JECT AGREEMENT AGREEMENT, dated & , 1982, between the INTERNATIONAL DEVEL NT ASSOCIATION (hereinafter called the Association) and the UGANDA DEVELOPMENT BANK (hereinafter called UDB), established pursuant to the Uganda Development Bank Decree (Decree 23) of 1972 of the Republic of Uganda (hereinafter called the Borrower). WHEREAS by the Development Credit Agreement of even date herewith between the Borrower and the Association, the Associa- tion has agreed to lend to the Borrower an amount in various currencies equivalent to thirty-one million five hundred thousand Special Drawing Rights (SDR 31,500,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that UDB agrees to undertake such obligations toward the Association as are hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and UDB, part of the proceeds of the Credit provided for under the Development Credit Agreement will be made available to UDB on the terms and conditions therein set forth; and WHEREAS UDB, 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. -2- ARTICLE II Execution of the Project; Managenent and Operations of UDB Section 2.01. (a) UDB shall carry out Part A of 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 conformity with appropriate economic, financial and investment standards and practices, with qualified and experienced management and in accordance with the UDB Decree and the UDB Statement of Policy. (b) For the purposes of carrying out Part A of the Project, UDB shall: (i) apply the appraisal and selection criteria agreed upon between UDB and the Association in selecting Investment Enterprises; and (ii) make Investments and Sub-loans on terms and conditions set forth in this Agreement applicable to Investments and Sub-loans, including, inter alia, those set forth in the Schedule to this Agreement, provided, however,that the interest rates to be charged on Sub-loans shall be adjusted from time to time in accordance with the provisions of Section 4.02 of the Development Credit Agreement. Section 2.02. (a) In accordance with and subject to the pro- visions of the Development Credit Agreement, UDB shall submit Investment Projects to the Association for approval for with- drawal to be made from the Credit Account. (b) When submitting a Sub-loan or an Investment to the Association for approval, UDB shall furnish to the Association an application, in form satisfactory to the Association, together with a description of the Investment Enterprise and of the Investment Project to be financed thereunder (including a description of the expenditures for such Investment Project pro- posed to be financed by UDB and an appraisal of the Investment Project) and the proposed terms and conditions of the Sub-loan or Investment, including the schedule of amortization of the Sub- loan or of repayment to UDB of the amount to be used for the -3- Investment, and such other information as the Association shall reasonably request. (c) The amortization schedule applicable to each Sub-loan and the schedule of repayment to the Borrower in respect of each Investment shall provide for an appropriate period of grace and, unless the Association and UDB shall otherwise agree: (i) shall not extend beyond fifteen years from the date of approval by the Association of such Sub-loan or Investment; and (ii) shall pro- vide for approximately equal semiannual, or more frequent, aggre- gate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal. (d) Except as the Association and UDB shall otherwise agree, UDB shall submit applications for approval of Investment Projects pursuant to the provisions of paragraph (b) of this Section on or before June 30, 1984. Section 2.03. (a) UDB undertakes that unless the Associa- tion shall otherwise agree, any Sub-loan or Investment will be made on terms whereby UDB shall obtain, by written agreement with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association, the Borrower and of UDB, including, in the case of any such Sub-loan and to the extent that it shall be appropriate in the case of any such Investment: (i) the right to require the Investment Enter- prise 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) the right to require that the goods and services to be financed out of the proceeds of the Sub-loan or Investment be used exclusively in the carrying out of the Investment Project; (iii) the right of the Association and of UDB to inspect such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) the right to require that the Invest- ment Enterprise take out and maintain such insurance, against such risks and in such amounts, as shall be consistent with sound business practice and that, without any limitation upon the fore- going, such insurance shall cover hazards incident to the acqui- sition, transportation and delivery of the goods financed out of the proceeds of the Sub-loan or Investment to the place of use or installation, and that any indemnity thereunder be payable in a currency freely usuable by the Investment Enterprise to replace or repair such goods; (v) the right to obtain all such inform- ation as the Association or UDB shall reasonably request relating to the foregoing, to the administration, operations and financial condition of the Investment Enterprise and the benefits to be derived from the Investment Project; and (vi) the right of UDB to 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 agree- - ment with UDB. (b) UDB shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the inter- ests of the Association, the Borrower and of UDB; (ii) comply with its obligations under this Agreement and the UDB Subsidiary Loan Agreement; and (iii) achieve the purposes of Part A of the Project. Section 2.04. UDB shall furnish to the Association all such information as the Association shall reasonably request concern- ing the expenditure of the proceeds of the Sub-loans and Invest- ments under Part A of the Project, the Investment Enterprises, the Investment Projects, the Sub-loans and the Investments under Part A of the Project. Section 2.05. UDB shall duly perform all its obligations under the UDB Subsidiary Loan Agreement. Except as the Associa- tion shall otherwise agree, UDB shall not take or concur in any action which would have the effect of assigning, or amending, abrogating or waiving any provision of, the UDB Subsidiary Loan Agreement. Section 2.06. Except as the Association and UDB shall other- wise agree, UDB: (i) shall not sell, lease, transfer or otherwise dispose of any of its property or assets, except in the ordinary course of business; and (ii) shall take all action necessary to maintain its corporate existence and right to carry on its opera- tions and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. Section 2.07. UDB shall not amend the UDB Statement of Policy except in agreement with the Association. -5- Section 2.08. In order to improve the effectiveness of UDB as a major development bank in the Borrower's economy, UDB shall not enter into any new commitments in respect of lending to commerce and small industries after December 31, 1985. Article III Financial Covenants Section 3.01. UDB shall maintain procedurgs and records adequate to monitor and record the progress of Part A of the Pro- ject and of each Investment Project thereunder (including its cost and the benefits to be derived from it) and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of UDB and shall enable the Association's representatives to examine such records. Section 3.02. UDB 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 Association; (ii) furnish to the Association as soon as available, but in any case not later than nine 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 the accounts and financial state- ments of UDB and the audit thereof as the Association shall from time to time reasonably request. Section 3.03. Except as the Association and UDB shall other- wise agree, UDB shall not incur any debt if, after the incurring of such debt, the debt of UDB then incurred and outstanding would exceed four times the capital and surplus of UDB. For the purpose of this Section: (a) The term "debt" means any debt incurred by UDB maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by UDB. (b) Wherever reference is made in this Section to the incurring of debt, such reference shall include any modification -6- of the terms of payment of such debt. Debt shall be deemed to be incurred: (i) under a loan contract or agreement, on the date and to the extent the loan is drawn down pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on ' date the agreement providing for such guarantee has been ei,-ered into but only to the extent the guaranteed debt is out- standing. (c) Whenever in connection with this Section it shall be necessary to value in terms of Uganda Shillings debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable in Uganda for the purposes of servicing such debt. (d) The term "debt of UDB" means the total amount of debt of UDB excluding debt referred to in paragraph (e) (ii) of this Section. (e) The term "capital and surplus of UDB" means the aggre- gate of (i) the total unimpaired paid-in-capital, sarplus and free reserves of UDB; and (ii) such amount of any other loan which the Association may determine to be included in the capital and surplus of UDB. Section 3.04. Except as the Association and UDB shall other- wise agree, UDB shall not make any repayment in advance of maturity in respect of any of its borrowings (other than deposits) having an original term exceeding one year. Section 3.05. UDB shall take such steps satisfactory to the Association as shall be necessary to protect itself against risk of loss resulting from changes in the rates of exchange between the various currencies (including Uganda Shillings) used in its borrowing and lending operations. Section 3.06. UDB shall take all steps necessary to increase its authorized capital to one billion five hundred million Uganda Shillings (Ush 1,500,000,000). -7- ARTICLE IV Consultation, Information and Inspection Section 4.01. (a) The Association and UDB shall cooperate fully to ensure that the purposes of Part A of the Credit will be accomplished. To that end, the Association and UDB shall from time to time, at the request of either party, exchange views through their representatives with regard to the progress of Part A of the Project, the performance by UDB of its obligations under this Agreement and the UDB Subsidiary Loan Agreement, the administration, operations and financial condition of UDB and other matters relating to the purpose of the Credit. (b) UDB shall furnish to the Association at regular inter- vals all such information as the Association shall reasonably request concerning the expenditures of the proceeds of the Credit withdrawn in respect of Part A of the Project, the Investment Enterprises, the Investment Projects, the Sub-loans and Investments under Part A of the Project and, where appropriate, the benefits to be derived from the foregoing. (c) Within six months following the last withdrawal from the Credit Account for its purposes of Part A of the Project, UDB shall prepare and furnish to the Association a report, of such scope and in such detail as the Association shall reasonably request, on the execution and initial operation of the Investment Projects under Part A of the Project, their costs and the bene- fits derived and to be derived from them, the performance by UDB and the Association of their respective obligations under this Agreement and the accomplishment if the purposes of Part A of the Credit. Section 4.02. UDB shall promptly inform the Association of any condition which interferes with, or threatens to interfere with, the accomplishment of the purposes of Part A of the Credit, the maintenance of the service thereof or the performance by UDB of its obligations under this Agreement or the UDB Subsidiary Loan Agreement. -8- ARTICIE 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 UDB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate; or (ii) a date 15 years after the date of this Agreement. (b) If the Development Credit Agreement terminates before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify UDB 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 Article VI of 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 or telex 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 addresses as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: -9- 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) For UDB: Uganda Development Bank P.O. Box 7210 Kampala Uganda Cable address Telex: DEVBANK 61103 Kampala Section 6.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement or under Section 2.03 of the Development Credit Agreement on behalf of or by UDB may be taken or executed by its General Manager, or by such other person or persons as the General Manager shall designate in writing, and UDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of each such person. - 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 in the District of Colombia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By Regional Vice President Eastern Africa UGANDA DEVELOPMENT BANK By Authorized Representative - 11 - SCHEDULE On-lending Terms and Conditions for Sub-loans to Investment Enterprise 1. Interest rate: At least 14% per annum, subject to adjustment in accordance with the provisions of Section 4.02 of the Development Credit Agreement. 2. Foreign Exchange 1% per annum on the principal amount Risk Fee: of Sub-loan withdrawn from time to time. 3. Amortization: Maximum of 15 years, including an appropriate period of grace. 4. Maximum Total Sub-loan or Investment in any one Investment Enterprise: $4,000,000 equivalent. INTERNATIONAL DEVELOPMENT ASSOCIATION CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Development Association. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Association thereunto the day of 198 A ' FOR SECRETARY