India - Refineries Rationalization Project : Loan 2123 - Project Agreement - Conformed

OWICIAL OAN NUMBER 2123 IN DOCUMENTS Project Agreement (Refineries Rationalization Project) between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT and BHARAT PETROLEUM CORPORATION LIMITED COCHIN REFINERIES LIMITED HINDUSTAN PETROLEUM CORPORATION LIMITED MADRAS REFINERIES LIMITED Dated 14LV) , 1982 LOAN NUMBER 2123 IN PROJECT AGREEMENT AGREEMENT, dated , 1982, between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank), on the one part, and BHARAT PETRO- LEUM CORPORATION LIMITED (hereinafter sometimes called BPCL), COCHIN REFINERIES LIMITED (hereinafter sometimes called CRL), HINDUSTAN PETROLEUM CORPORATION LIMITED (hereinafter sometimes called HPCL) and MADRAS REFINERIES LIMITED (hereinafter sometimes called MRL), on the other part (BPCL, CRL, HPCL and MRL being hereinafter sometimes called, collectively, the Refinery Companies or, individually, a Refinery Company). WHEREAS (A) 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 Borrower an amount in various currencies equivalent to two hundred million dollars ($200,000,000), on the terms and conditions set forth in the Loan Agreement, but only on condition that the Refinery Companies agree to undertake such obligations toward the Bank as are hereinafter set forth; (B) by subsidiary loan agreements to be entered into between the Borrower and each of the Refinery Companies, part of the proceeds of the loan provided for under the Loan Agreement will be made available to the Refinery Companies on the terms and condi- tions therein set forth; and WHEREAS the Refinery Companies, in consideration of the Bank's entering into the Loan Agreement with the Borrower, hav. agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: ARTICLE I Definitions Section 1.01. (a) Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Loan Agreement, the Preamble to this Agreement and the General Conditions (as so defined) have the respective meanings therein set forth; provided, however, that for the purposes of this Agreement the term "Refinery Companies" means exclusively -2- BPCL, CRL, HPCL and MRL, and the term "Refinery Company" means any one of BPCL, CRL, HPCL and MRL, individually. (b) Whenever reference is made in this Agreement to the Part or Parts of the Project of a Refinery Company, such reference shall have the following meaning: (i) in the case of BPCL: Part A of the Project; (ii) in the case of CRL: Part B of the Project; (iii) in the case of HPCL: Parts C and E of the Project; (iv) in the case of MRL: Part D of the Project; and (v) in addition to the foregoing, in the case of each Refinery Company: such investments to be financed out of the proceeds of the Loan under Part F of the Project as may be agreed between the Borrower, the Bank and such Refinery Company, in accordance with the provisions of the Loan Agree- ment. (c) The obligations of the Refinery Companies under this Agreement shall be several and not joint obligations. ARTICLE II Execution of the Project Section 2.01. (a) Each Refinery Company shall carry out its Part(s) of 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. (b) In order to carry out their obligations under paragraph (a) of this Section and without any limitation or restriction upon such obligations, the Refinery Companies shall provide from their own financial resources or secure from other sources, in addition to the proceeds of the Loan relent to them, the following amounts to meet expenditures for their respective Part(s) of the Project: (i) BPCL: the equivalent of $193,100,000, for Part A of the Project; -3- (ii) CRL: the equivalent of $152,800,000, for Part B of the Project; (iii) HPCL: the equivalent of $232,500,000, for Parts C and E of the Project; and (iv) MRL: the equivalent of $220,000,000, for Part D of the Project. Section 2.02. In order to assist the Refinery Companies in the design, engineering, procurement, installation and start-up of the equipment for their respective Project facilities, each Refinery Company shall employ engineering consultants whose selection, qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank, in accordance with the principles and procedures described in the "Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency" published by the Bank in August 1981. 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 Schedule 4 to the Loan Agreement. Section 2.04. (a) Each Refinery Company 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 the Borrower against hazards incident to the acquisition, transportation and delivery thereof to the place of use or in- stallation, and for such insurance any indemnity shall be payable in a currency freely usable by such Refinery Company to replace or repair such goods. (b) Except as the Bank may otherwise agree, each Refinery Company shall cause all goods and services financed out of the proceeds of the Loan relent to it by the Borrower to be used exclusively for its Part(s) of the Project. Section 2.05. (a) Each Refinery Company shall furnish to the Bank, promptly upon their preparation, the plans, specifications, reports, contract documents and construction and procurement schedules for its Part(s) of the Project, and any material modi- fications thereof or additions thereto, in such detail as the Bank shall reasonably request. -4- (b) Each Refinery Company: (i) shall maintain records and procedures adequate to record and monitor the progress of its Part(s) of the Project (including the cost thereof and the bene- fits to be derived therefrom), to identify the goods and services financed out of the proceeds of the Loan relent to it, and to disclose their use in such Part(s) of the Project; (ii) shall enable the Bank's accredited representatives to visit the facili- ties and construction sites included in such Part(s) of the Project and to examine the goods financed out of such proceeds of the Loan and any relevant 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 expenditure of the proceeds of the Loan relent to it and the goods and services financed out of such proceeds, including, without limitation to the foregoing, periodic progress reports on the execution of its Part(s) of the Project. (c) Upon the award by any Refinery Company of any contract for goods 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) Each Refinery Company shall assist the Borrower in the preparation of the report referred to in Section 3.05 of the Loan Agreement, with respect to its Part(s) of the Project. (e) Each Refinery Company shall enable the Bank's represen- tatives to examine all plants, installations, sites, works, buildings, property, equipment, records and documents of such Refinery Company relevant to the performance of such Refinery Company's obligations under this Agreement. Section 2.06. Each Refinery Company shall duly perform all its obligations under its Subsidiary Loan Agreement(s). Except as the Bank shall otherwise agree, the Refinery Companies shall not take or concur in any action which would have the effect of amending, abrogating, assigning or waiving their respective Subsidiary Loan Agreements or any provision thereof. Section 2.07. (a) Each Refinery Company shall, at the request of the Bank, exchange views with the Bank with regard to the progress of its Part(s) of the Project, the performance of its obligations under this Agreement and under its Subsidiary Loan -5- Agreement(s), and other matters relating to the purposes of the Loan. (b) Each Refinery Company shall promptly inform the Bank of any condition which interferes or threatens to interfere with the progress of its Part(s) of the Project, the accomplishment of the purposes of the Loan, or the performance by such Refinery Company of its obligations under this Agreement and under its Subsidiary Loan Agreement(s). Section 2.08. Each Refinery Company shall take all such action as shall be necessary to acquire as and when needed all such land and rights iT. respect of land as shall be required for the construction and operation of the facilities included in its Part(s) of the Project and shall promptly furnish to the Bank, upon its request, evidence satisfactory to the Bank that such land and rights in respect of land are available for purposes related to the Project. Section 2.09. Each Refinery Company shall ensure that the design and execution of the facilities included in its Part(s) of the Project are carried out with due regard to appropriate safety norms and ecological and environmental standards satisfactory to the Bank. ARTICLE III Management and Operations of the Refinery Companies Section 3.01. (a) Each Refinery Company shall at all times manage its affairs, maintain its financial position, plan its future expansion and carry on its operations, all in accordance with appropriate business, financial, administrative and engineer- ing practices and under the supervision of experienced and com- petent management assisted by competent staff in adequate numbers. (b) Without limitation to the generality of paragraph (a) of this Section, each Refinery Company shall at all times operate and maintain its plants, machinery, equipment and other property and, promptly as needed, make all necessary repairs and renewals thereof, in accordance with appropriate engineering practices and with due regard to the safety norms and environmental and ecologi- cal standards referred to in Section 2.09 of this Agreement. -6- Section 3.02. Each Refinery Company shall take out and maintain with responsible insurers, or make other provisions satisfactory to the Bank for, insurance against such risks and in such amounts as shall be consistent with appropriate practice. Section 3.03. (a) Each Refinery Company shall at all times take all steps necessary to maintain its corporate existence and the right to carry on its operations, and shall take all steps necessary to acquire and to retain such land, interests in land and properties, and to acquire, maintain and renew such powers, privileges, licenses, franchises or other rights as may be neces- sary or useful for the conduct of its business and the execution and operation of its Part(s) of the Project. (b) Except as the Bank may otherwise agree, the Refinery Companies shall not sell, lease, transfer or otherwise dispose of any of their property and assets except in the ordinary course of business. Section 3.04. Each Refinery Company shall make arrangements satisfactory to the Bank with the appropriate agencies and authorities for the provision of adequate supplies of power and water and adequate receiving and transport infrastructure facili- ties for the supply of crude oil, as required to ensure the timely availability of all such supplies in sufficient quantity for the full utilization of its refinery facilities included in the Project. ARTICLE IV Financial Covenants Section 4.01. Each Refinery Company shall maintain records adequate to reflect in accordance with consistently maintained appropriate accounting practices its operations and financial condition. Section 4.02. Each Refinery Company 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 six months after the end of each such year, (A) certified copies of its financial statements for such year as - 7 - 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 its accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03. (a) Except as the Bank may otherwise agree, each Refinery Company shall: (i) maintain a consolidated debt/equity ratio not greater than 65:35; provided, however, that CRL and MRL shall take all action required to achieve and thereafter maintain such ratio by December 31, 1987; (ii) maintain a ratio of consolidated current assets to consolidated current liabilities (hereinafter referred to as the current ratio) of at least: (A) 1.1:1, until December 31, 1985, and (B) 1.2:1, thereafter; (iii) not declare any dividend (except dividends pres- cribed to be paid, pursuant to its Articles of Association, formation agreement or other under- standings among its shareholders, as of Decem- ber 15, 1981) or prepay any debt, or make other cash distributions not related to such Refinery Company's own internal corporate operations, if after the payment of such dividend (assuming such payment is made on the date of such declaration) or the prepayment of such debt or the distribution of such cash, its current ratio would be less than 1.3:1; (iv) not incur, and not permit any of its Subsidiaries to incur, any additional debt in any fiscal year unless a reasonable forecast of such Refinery Company's revenues and expenditures shows that the projected consolidated net revenues of such Refinery Company and all its Subsidiaries for each fiscal year during the term of the debt to be incurred shall be at least 1.4 times the projected debt service requirements in such year on all consolidated debt of such Refinery Company and all its Subsidiaries, including the debt to be incur- red; and (v) until completion of its Part(s) of the Project, not make expenditures for investments in fixed assets, other than for the Project, for planned projects, and for maintenance purposes, in excess of the aggregate of $10,000,000 equivalent in any one fiscal year. (b) For the purposes of this Section: (i) the term "debt" of a Refinery Company means any debt of such Refinery Company or any of its Sub- sidiaries maturing by its terms more than twelve months after the date on which it is originally incurred; (ii) debt shall be deemed to be incurred: (A) under a loan contract or agreement or other instrument providing for such debt or for the modification of its terms of payment, on the date, and to the extent, the amount of such debt has become out- standing pursuant to such contract, agreement or instrument; and (B) under a guarantee agreement on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding; (iii) the term "consolidated debt" of a Refinery Company means the total amount of debt of such Refinery Company and all its Subsidiaries, but excluding debt owed by such Refinery Company to any of its Subsidiaries or by any of its Subsidiaries to such Refinery Company or any of its other Subsidiaries; (iv) the term "consolidated equity" of a Refinery Company means all unimpaired paid-in share capital plus accumulated net earnings from prior fiscal years not set apart for specific purposes of such Refinery Company and all its Subsidiaries, after excluding therefrom such items as shall represent equity interests of such Refinery Company in any Subsidiary or of any Subsidiary in such Refinery Company or any of its other Subsidiaries; (v) the term "current assets" means cash, assets readily convertible into cash (excluding stocks of -9- spares) and all other assets which would in the ordinary course of business be converted within one year into cash or assets readily convertible into cash; (vi) 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; (vii) the terms "consolidated current assets" and "con- solidated current liabilities" of a Refinery Company mean the aggregate of current assets and liabilities of such Refinery Company and all its Subsidiaries after eliminating all inter-company items and all other items which should be elimi- nated in accordance with appropriate accounting practices; (viif) the term "consolidated net revenues" of a Refinery Company and all its Subsidiaries means gross revenues from all sources of such Refinery Company and all its Subsidiaries less operating and admin- istrative expenses of such Refinery Company and all its Subsidiaries, including taxes, surcharges and other levies, if any, but before provision for depreciation and interest and other charges on debt; (ix) the term "debt service requirements" of a Refinery Company and all its Subsidiaries means the aggre- gate amount of amortization, interest and other charges in respect of the consolidated debt of such Refinery Company; (x) the term "a reasonable forecast" of a Refinery Company's revenues and expenditures means a fore- cast prepared by such Refinery Company in the fiscal year in which the debt in question is proposed to be incurred and reviewed by the Bank, which both such Refinery Company and the Bank accept as reasonable and as to which the Bank has notified such Refinery Company of its accept- ability, provided no event has occurred since the Bank's acceptance of such forecast which would have - 10 - a material adverse effect on the financial condi- tion or future operating results of such Refinery Company; (xi) the term "Subsidiary" of a Refinery Company means any company of which a majority of the outstanding voting stock or other proprietary interest is owned or effectively controlled by such Refinery Company or by any one or more Subsidiaries of such Refinery Company or by such Refinery Company and one or more of its Subsidiaries; and (xii) whenever it shall be necessary to value in the currency of the Borrower debt payable in another currency, such valuation shall be made on the basis of the rate of exchange at which such other cur- rency is obtainable by the Refinery Company con- cerned, 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. Section 5.02. This Agreement and all obligations of the Bank and of the Refinery Companies 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 each Refinery Company 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. - 11 - 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: Telex: INTBAFRAD 440098 (ITT) Washington, DC. 248423 (RCA) or 64145 (WUI) For BPCL: Bharat Petroleum Corporation Limited Bharat Bavan Ballard Estate Bombay 400038, India Cable address: Telex: KEROPET 2468 or Bombay 3834 For CRL: Cochin Refineries Limited Ambalamugal 682302, Kerala, India - 12 - Cable address: Telex: COCHREFINE 214 Cochin For HRPCL: Hindustan Petroleum Corporation Limited Petroleum House 17 Jamshedji Tata Road Bombay 400020, India Cable address: Telex: HINDPECTOR 2414 Bombay For MRL: Madras Refineries Limited Refinery House Manali Madras 600068, India Cable address: Telex: MAREFIN 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 any of the Refinery Companies may be taken or executed by the person hereinafter specified for such Refinery Company or such other person or persons as the person so specified shall designate in writing, and the respective Refinery Company shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. The persons so specified are: (a) For BPCL: the Chairman and Managing Director. (b) For CRL: the Managing Director. (c) For HPCL: the Chairman and Managing Director. (d) For MRL: the Chairman and Managing Director. -13- Section 6.03. This Agreement may be executed in several counterparts, each of which shall be an original, and all col- lectively 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 BHARAT PETROLEUM CORPORATION LIMITED By Authorized Representative COCHIN REFINERIES LIMITED By Authorized Representative HINDUSTAN PETROLEUM CORPORATION LIMITED By Authorized Representative MADRAS REFINERIES LIMITED By Authorized Representative 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 \,fv day of <" , 198 . FOR SECRETARY